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Dellgroup 9
Jo s h u a To l m a n M at t Mo r r e l lBr a d r o B e r t s S a m Ne l S o N S c o t t A S h t o n
G r o u p 9M at c h i n g D e l l Bu sM 481 9 –21–2010
Dell has experienceD Dramatic growth in recent years, largely through their Direct selling moDel. this growth has attracteD imitation by competitors.
G r o u p 9M at c h i n g D e l l Bu sM 481 9 –21–2010
Competitor Program - Year
IBM Netfinity Direct Program – 1998
Compaq DirectPlus - 1998
HP HP Shopping Village - 1998
Gateway Always sold direct
G r o u p 9M at c h i n g D e l l Bu sM 481 9 –21–2010
how can Dell aDapt to the changing pc market?
Maintain cost advantage
Dell must further develop and leverage competitive
advantages
Cost competitiveness is
vital
Industry price is converging
Focus on key market segments
Emphasize Differentiation
Identify Key Markets
Seek growth opportunities
International Expansion
Increase product offering
I II III
G r o u p 9M at c h i n g D e l l Bu sM 481 9 –21–2010
maintain cost aDvantage: inDustry price is converging
as prices of pc’s converge, cost competitiveness is essential. companies with lower costs than Dell will be able to price Dell out of the market.
-1000
-800
-600
-400
-200
0
200
400
600
800
1996 1997 1998
Price Di�erential From Industry Average
Dell Compaq Gateway HP IBM
I
G r o u p 9M at c h i n g D e l l Bu sM 481 9 –21–2010
maintaining cost aDvantage: cost competitiveness is vital
Dell’s overall cost aDvantage is Disappearing, though their inventory management aDvantage remains strong.
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
Dell Gateway Compaq IBM HP
Investory Management Costs % of COGS
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
18.0%
20.0%
22.0%
1996 1997 1998
Competitors' Gross Margins Have Caught Up
Dell Compaq Gateway
G r o u p 9M at c h i n g D e l l Bu sM 481 9 –21–2010
focus on key market segments
since competing on price is no longer viable, Dell must finD other areas of Differentiation.
Business PC’s generate higher margins •than consumer PC’s
Government and Business is the largest •market segment
Dell is ideally situated to serve these •markets
II
G r o u p 9M at c h i n g D e l l Bu sM 481 9 –21–2010
focus on key market segments
business pc’s retail for an average of 19% more than consumer pc’s, but cost about the same to make
Critical components are the
same in business and consumer
models. The cost of bundled
software, speakers, and a
modem offset the cost of the
LAN card—both classes of
machines cost about the same
to make. Dell’s business PC’s
are priced 24.3% higher than
consumer models.
Consumer PC Business PC
Processor Pentium II 400 MHz Pentium II 400 MHz
Memory 64 MB 64 MB
Hard Drive 8+ GB 8+ GB
Monitor size 17” 17”
Bundled Software? Y N
LAN card? N Y
CD-ROM 32x+ 32x+
Modem? Y N
Speakers? Y N
average price $1,650 $1,960
s o u r c e : e x h i b i t s 10 a , 10 b
G r o u p 9M at c h i n g D e l l Bu sM 481 9 –21–2010
focus on key market segments
as the pc market has grown, government anD large/small business have consistently been 2/3 of the market in both units anD Dollar value
-
5
10
15
20
25
30
35
40
1994 1995 1996 1997 1998
Mill
ions
of U
nits
Market Share by Units
Large Business &Government
Small Business
Consumer
Education
-
10
20
30
40
50
60
70
80
1994 1995 1996 1997 1998
Billi
ons
of D
olla
rs
Market Share by Dollar Value
Large Business &Government
Small Business
Consumer
Education
G r o u p 9M at c h i n g D e l l Bu sM 481 9 –21–2010
focus on key market segments
currently, 80% of Dell’s revenue comes from government anD business market segments.
$-
$2
$4
$6
$8
$10
$12
$14
$16
$18
Total All Business &Government
Large Businessand Government
Small Business Consumer Education
Billi
ons
of D
olla
rs
Dell Sales per Market Cateogry
G r o u p 9M at c h i n g D e l l Bu sM 481 9 –21–2010
focus on key market segments: Differentiation
businesses buy from Dell because of speeD of Delivery anD customization. Dell can use these aDvantages to continue to grow its market share among large businesses anD government.
Speed of Delivery• : Dell’s customers have access to the
most advanced computers several months before they
would with other PC providers as a result of their speed
of delivery. Dell’s supplier relationships make it diff icult for
competitors to imitate their speed of delivery.
customization• : Dell’s customized computers save their
customers time and money because they arrive with pre-
installed software and ready for employee use.
G r o u p 9M at c h i n g D e l l Bu sM 481 9 –21–2010
seek growth opportunities
introDucing new proDucts to existing markets or expanDing into new markets with existing proDucts effectively leverages Dell’s core competencies to ensure future growth.
Markets
Products
Old New
Old
New
III
G r o u p 9M at c h i n g D e l l Bu sM 481 9 –21–2010
seek growth opportunities: increase proDuct offering
existing network of business customers proviDe opportunities for increasing revenue through expanDeD proDuct anD service offerings
product example:
Servers - Dell has hardware
supplier networks already in place
Service example:
IT - Many large business may be
interested in bundling IT service
with their PC provider
Markets
Products
Old New
Old
New
G r o u p 9M at c h i n g D e l l Bu sM 481 9 –21–2010
seek growth opportunities: new global markets
continue increasing market share by finDing new customers in strategic regions of the growing global market.
Markets
Products
Old New
Old
New
Leverage existing customer relationships •in new regions
Identify markets with cultural and •economic similarity with the US
Seek joint ventures in areas where Dell •does not have strong brand recognition
0
20
40
60
80
100
82 84 86 88 90 91 92 93 94 95 96 97 98
PC Market Size in Units (Millions)
Us (millions) Worldwide
G r o u p 9M at c h i n g D e l l Bu sM 481 9 –21–2010
key takeaways
Dell has a sustainable advantage in inventory •cost management
PC sales to businesses makes up roughly 80% of Dell’s •revenue, and have higher margins than consumer PC sales
Customization and speed of delivery have been and •should continue to be successful differentiators for Dell
Expanding products and services offered to current •corporate customers is a possible growth opportunity
Expansion of current products and services into •international markets is an attractive growth opportunity
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