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INSTRUCTOR: PROF.

STEVE LACHOWSKI
SUBMISSION DATE: TUESDAY 12, JULY 2011

Presented By
Ainabe Eseohe Philo 300633042 Preetinder Kaur 300633211 Kevin Pariag 822793378 Aseeb Mushtari 821821651 Rhoda I. Gyang-Gyang 300598502 Dalbir Singh 300638591 Rohan Castelino 300639954

Table of Contents
Sr. No. Topic Page No.

INTRODUCTION

Dell Computers was founded by Michael Dell in 1984, head quartered in Austin, Texas, Dell is the world's No. 1 computer systems company, and is a premier provider of products and services required for customers to build their information-technology and Internet infrastructures. Company revenue for the last four quarters totaled $32.6 billion.

Dell is No. 1 worldwide in market share and consistently the leader in liquidity, profitability and growth among all major computer systems companies, with approximately 38,300 employees around the globe. The company is a leading supplier of servers and computer products to business customers, government agencies, educational institutions and consumers. Dell's climb to market leadership is the product of a persistent focus on delivering the best possible customer experience by directly selling computing products and services based on industry-standard technology.

EXECUTIVE SUMMARY Dells core competency has not been in assembling computers, but computer assembly activities in moderation coupled with a constant effort of discovering new value in the face of changing customer demands and evolving market. Dedication towards the customer, increased customer attention by segmenting based upon sales to forge stronger relationships, build trust, loyalty and to sense customer needs to predict demand. Integrating the supply chain into a value network a network of trust and reliability built by sharing demand forecasts and nurturing a sense of partnership blurring the corporate boundaries. In this report we look at the strategies adopted by Michael Dell to revolutionize sale of computers and compete with other players in the competitive market. We also give an insight of the companys financial standings, SWOT analysis and innovative ways to dominate the IT market in order to be the Numero Uno.

1. What is your evaluation of Michael Dells performance in his roles as Dells CEO and Chairman? How well has he performed the five tasks of crafting and executing strategy that were discussed in Chapter 2?

In his role as CEO, his performance was excellent. Through his innovative way for marketing computers, he guided Dell from a small, start-up company into a global leader in PCs and IT Products and Services. He was very accessible CEO and a role model for young executives because he knew how to delegate the authorities to subordinates. He believed that the best results come from the talented people who can be relied upon to do what they are supposed to do. Michael Dell was also the chief architect of the company's direct sales approach and build-to-

order approach. Furthermore, he had spent a lot of time travelling to company operation and meeting with customers, listening to their demands and trying to carry out strategies that can bring satisfaction to the customers. And as a CEO, he always has timely and appropriate solutions for difficulties that company faced to. Moreover, he also displays social responsibility by turning Dell to be energy efficient, PVC free and using recycled materials. In summary, Michael Dell is the excellent CEO of Dell, and his role in Dell cannot be replaced. The clearest evidence is in 2006, when Michael Dell transferred his title of CEO to Kevin Rollins, the company immediately got a decrease in performance in the next year. Michael Dell justified his excellent performance by performing well in all the five areas of Crafting & Executing Strategy. He formed a strategic vision for Dell which is very simple - personal computer (PCs) could be built to order and sold directly to customers. This strategic vision contained four tenets, which described the vision of having a strong and direct relationship to customer, allowing customer to purchase custom built product, creating non-proprietary and efficient technology and supply chain and company should endeavour to deliver added value to customers. These four tenets were the key to delivering a superior customer values. The strategy that he set for Dell had seven core elements which were consistent to companys vision and developed the business model which uses the company's strong capabilities in supply chain management, low cost manufacturing and direct sales capabilities to expand into product categories where Dell could provide added values to its customer in the form of lower prices. In implementing, he made clearly acts to follow the companys vision and strategy and he also always catches up with the executing of the strategies and makes appropriate and timely adjustment. Under his leadership, Dell has become the low-cost leader using his business model and strategy and become one of the top 3 PCs companies in the worlds.

2. What are the elements of Dells strategy? Which one of the five generic competitive strategies is Dell employing? How well do the different pieces of Dells strategy fi t together? In what ways is Dells strategy evolving? The elements of Dells strategy includes: 1. Cost-Efficient Build-To-Order Manufacturing: this involves customers purchase products

and services in a custom tailored way. Customers could order custom-equipped servers and workstations according to the needs of their applications. This gave them a competitive advantage 2. Partnerships with Suppliers; this provided the company with a very effective supply chain

that helped achieve its objective thereby strengthening the weakness of the company. This made better sense than backward integration because they could capitalize on the strengths of the suppliers. 3. Dell's Direct Sales Strategy: this involved the company selling directly to customers

thereby eliminating whole sale and retail dealers. With this the company could know what was actually going on in the market so if there is any change it would know how to react to the change. 4. Expanding into additional products and services; this was done to capture a larger market

share. They expanded into manufacturing data storage hardware, switches, handheld PCs, printers, printer cartridges, and software products. 5. Providing good customers service and technical support: they listened to customers and

this helped them know their expectations and emerging needs.

6. 7.

Research and development activities which helped deliver added value to customers. The use of efficient and standardised technology to provide its best for its customers at the

same time achieving organisations goals and objectives. Which one of five generic competitive strategies is Dell employing? How well do the different pieces of Dells strategy fit together? The low cost strategy; they strive to provide great services at low cost by eliminating the cost of supply chain so as to deliver high quality products at low costs. All the differ strategies pulled together helps Dell in achieving its overall objective and achieving greater quality at a minimal cost In what way is Dells strategy evolving? Dells strategy is evolving by expanding its market by creating new plants in India, Poland, Brazil, etc. Enhancing its products by creating flexible computer, simplify IT and providing quality service.

3. Does Dells expansion into other IT products and services make good strategic sense? Why or why not? Yes Dells expansion into other IT products and services make good strategic sense because IT is no longer a luxury it is now a necessity. Dell provides value added services to meet the needs of consumers. If they had only continued producing P.C their sales growth would have declined. By expanding and using their low cost strategy, high quality products, taking advantage of

standardized technology, they have gained a competitive advantage Dell can then apply its skills in discipline, speed, and efficiency and can drop prices faster than any other companies and prompt demand to soar. 4. Is Dells strategy working? What is your assessment of the financial performance that Dells strategy has delivered during fiscal years 2000-2008? Use the financial ratios presented in Table 4.1 of Chapter 4 (pages 104-105) as a basis for doing your calculations and drawing conclusions about Dells performance? Net revenue:

1. Gross Profit Margin:

2. Net Income:

3. Total Net Revenue in different parts of the world:

Looking at these graphs, we can say that the strategy used by Dell is perfect. It is continues growing. It is customer oriented. This strategy is able to attract a lot of desired customer.

5. What does a SWOT analysis reveal about the attractiveness of Dells situation in 2008? 1. Strength: y Provide custom made products. y Reach directly to the customer without any intermediary. y Great customer care and technical support departments. y Bigger range of products.

y More focused on creating new products. y Use of standardized technology in all product offering. y Unique sales system. y Cost cutting techniques. 2. Weakness: The company has such a huge range of products and components from many suppliers from a plethora of countries, that there is the occasional product recall that can cause Dell some embarrassment. Dell is a computer maker, not a computer manufacturer.

There are less big suppliers around the world.

3. Opportunity: Kevin Rollins replaced Michael Dell in 2004 as Dell's Chief Executive Officer. Dell remained the company's Chairman. Despite founder Dell's massive success, new blood and a change in management thinking could lead the company into a new, even more profitable period. Dell is pursuing a diversification strategy by introducing many new products to its range. This initially has meant good such as peripherals including printers and toners, but now also included LCD televisions and other non-computing goods. So Dell competed against iPod and other consumer electronics brands. 4. Threats: The single biggest problem for Dell is the competitive rivalry that exists in the PC market globally. As with all profitable brands, retaliation from competitors and new entrants to the market pose potential threats. Dell sources from Far Eastern nations where labor costs remain low, but there is nothing stopping competitors doing the same - even sourcing the same or similar components from the same or similar suppliers. Remember, Dell is a PC maker, not a PC manufacturer. The growth rate of the computer industry is also slowing down. Technological advancement is a double-edge sword. It is an opportunity but at the same time a threat. Low-cost leadership strategy is no longer an issue to computer

y y

companies therefore it is important for computer companies to stand out from the rest. Technology dictates that the most up-to-date and fastest products are always the most popular. Dell has to always keep up with technological advancements to be able to compete. . 6. Which company is competitively strongerDell or Hewlett-Packard? Use the weighted competitive strength assessment methodology shown in Table 4.4 of Chapter 4 to support your answer. Considering the various key success factors as mentioned below in Exhibit A and B, Dell and HP are very close competitors. In the acquisitions category, Dell is stronger as whether it was acquiring the Converge Net Technologies in 1999 or Equal logic in 2007 or Perrot Systems they have been better than HP Compaq acquisition in 1999. Dell has been competitively stronger with relative costs systems because of their continuous pursuit of cost reduction initiative and also when it comes to customer service capabilities due to (1) providing online services to shoppers (2) always listening to customers (3) spending on customer driven R&D and (4) giving value added services with large IT operations. Dell has been slightly better than HP on two occasions, one in the manufacturing capabilities with their lean approaches and second with technological skills with their white box pc segment. Quality and product performance had been Dells forte by constantly improving in assembly efficiencies also because they urged their suppliers to participate in quality certification programs.

HP has been strong with human capital for their simple strategy to hire expertise for their key accounts. HP has been ahead of Dell in dealer network and in market share too. HP revenue for 2006 and 2007 was $91.76 and $104.3 million respectively whilst Dell stood at $55.8 and $57.4 million for the same two years. Product innovation has been HP competitive advantage with the acquisition of more than a dozen software and technical services to capitalize on the 3 big opportunities of (1) next gen (2) mobile computing and (3) digital printing. To conclude Dell and HP have been neck to neck most times. If Dell is strong in US and UK, HP holds a good position in Europe and Asia pacific. Dell boasts about laptops and HP about refurbished PCs and printers. Exhibit A - UNWEIGHTED COMPETITIVE STRENGTH ASSESSMENT KEY SUCCESS FACTORS/STRENGTH MEASURE Quality/product performance Reputation/ image Market share and profitability Manufacturing capability Technological skills Dealer network/distribution capability New product innovation capability Human capital Acquisitions and successful integration Relative cost position Customer service capabilities DELL HP 8.5 9 7 9.5 9 6 8 6 8 10 9 90 9 8 9 8 8 9 9 8 5 6 7 86

Exhibit B-UNWEIGHTED COMPETITIVE STRENGTH ASSESSMENT DELL Strengt KEY FACTORS Quality Reputation/ image Market share Manufacturing capability Technological skills Dealer network New product 0.05 0.10 0.03 0.25 0.15 8 6 8 10 9 0.40 0.60 0.20 4.83 1.35 11.00 0.05 0.10 0.03 0.25 0.15 9 8 5 6 7 0.45 0.80 0.13 4.95 1.05 10.95 0.10 0.05 0.05 10 9 6 0.95 0.45 0.30 0.10 0.05 0.05 8 8 9 0.80 0.40 0.45 SUCCESS Importanc e Weight 0.10 0.10 0.03 h Rating 9 9 7 Score 0.85 0.90 0.18 Importanc e Weight 0.10 0.10 0.03 Strengt h Rating Score 9 8 9 0.90 0.80 0.23 HP

innovation capability Human capital Acquisitions Relative cost position Customer service

Q7. In what respects, if any, is Hewlett-Packards strategy in PCs more appealing or better than Dells strategy? HP strategic focus is the technology research and development. Every year HP will work out a budget, so it masters a lot of the core technology in the IT industry. In addition this company also focuses on building retailers network all over the world. It brings to HP a lot of advantages in the product distribution and introduction of new products. Strategies for both DELL and HP are very different from each other. They have their own advantages and disadvantages. In recent years commercial competition tended to be competition of strategic alliances and in long-term development. HPs core technology will guide the market. So HP has more opportunities and possibilities than Dell Company to set up strategic alliance and become leader in the PC industry. Furthermore; because HP has stronger retail network and distribution capacity, so its products can reach customers everywhere and all over the world. In the trend of globalization nowadays this may be the key advantage to gain market share beyond rivals. Q8. What issues and problems does Michael Dell need to address? The most important issue that Dell must address is how to raising sales and market share position in a very strong competitive conditions. HP currently the main rival of Dell and it is much competitively stronger than Dell with their retailing prowess. HPs sales are increasing continuously even in the crisis period. Moreover; there are many emerging competitors such Acer and Asus who are compute fiercely with Dell. Besides, the lack of innovation in product developing another issue is that the international expansion of Dell. In order to reach international customers more effectively, Dell must incur more costs as it expands into retail distribution a move that will further eat away at Dells cost advantage. Moreover Dell two key

advantages supply chain efficiency and customized direct sales model do have much advantage in competition as before. In addition the economic condition and technology changes rapidly also effect Dells product development. Q9. What actions and strategy would you recommend to Michael Dell to boost the

companys performance and its prospects for overtaking HP in global sales? Dells present strategy issues are: Slow growth of its main products Declining customer service Inability to serve all market needs because of its strategy of limited vendors in the supply chain Recommendations for strategy improvement are: Adding a PC and server product line based on AMD microprocessors

y y y

This will enable Dell to serve the entire market of PC users; its exclusive use of Intel processors has limited its ability to match high end products being offered by competitors. y Developing a showroom style store in developing markets

Lack of credit cards in developing countries and the tendency for buyer to want to touch and feel before purchasing has placed Dells strategy at a disadvantage. Developing showrooms will give it increased advantage y Expanding consulting services to include business services.

This includes business consulting services; this will help to open potentially new revenue streams. Dells manufacturing and value chain efficiencies will give it an edge of respected reputation as a consultant. y Focus on innovation

By putting more emphasis on research and development and strive to develop the technology for the next generation and establish first mover advantage instead of relying on recreating technology. y Reinvent differentiation advantage

Dell could improve its core competencies which gave it differentiation in the beginning; these include enhancement of customer service, addition of suppliers, new market campaigns, modification of retail sales and the expansion of turn-key solutions. i.e. widen the companys competitive advantage through the refinement of its existing core competencies; improvement of value chain management. CONCLUSION Dell which made its name selling low cost computers has seen its competitive advantages eroded. The company which bases its foundation on being successful regardless of location believes what works in the U.S will work anywhere else. This strategy gave Dell an advantage in previous years but with emerging market it has become necessary for Dell to re-invent and refine its strategy to cater to the changes in the business environment and to help it regain the advantages it one enjoyed. The business approach used by Dell alongside its customer relations is a great combination for competitive advantage for the company. The company should be looking at how to add marginal value through design or technological changes to its PCs and core competencies. On the whole Dells strategy is sound and in line with the vision but it must

be revisited to help the company take advantage of changes in the business environment, enable it to compete favorably and give it competitive advantage.

BIBLIOGRAPHY 1. Referred Chapter 4 Evaluating a Companys Resources and Competitive Position from the Book Crafting and Executing Strategy by Jai Goolsarran Text and Readings, 17th Edition and the Case studies text both Printed by The McGraw- Hill Companies 2. Melenovsky, M.and Humphreys, J. Maximizing Flexibility and Minimizing Costs: Dell's Enterprise Computing Strategy. An IDC White Paper. http://www.dell.com/downloads/global/solutions/idc_enterstrategy.pdf

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