SM Group5 Dell

STRATEGIC MANAGEMENT

Dell Inc.in 2008

Case Analysis & Decision (Case 2)

PREPARED AND SUBMITTED BY GROUP

ELMAHI ELSHIKH ELAJAB ELSHIKH MR081123

LIu XIA MR081157

MOHAMAD AZRAAI AHMAD SHUHOD MR 081107

KHAIRUL ANUAR MOHAMAD MR091076

HAJIR ROHANI MR081093

SUBMITTED TO:

DR. LAI YENG CHAI

December 31-12-2009

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1. STRATEGIC MATTERS

2. ISSUES

In order to address each of the strategic matters, the most important things to do are:

3. ALTERNATIVES

Generated alternatives for the identified issue are:

A. TO CHALLENGE AND COUNTER ATTACK HEWLETT-PACKARD STRATEGIES:-

HEWLETT-PACKARD STRATEGIES

Sales 1. Sales made through distributors, retailers and other channels. These included retailers that sold HP product through internet stores, value- added product and services, smaller retailer, customer segments, software vendors, system integrators etc.

Costs- efficient

2. Scrutinize supply chains, streamline the organization structure, trimming corporate overheads and site worldwide.

IT utilization

3. Simplified complicated IT operations; to engineer HP’s IT architectures and operations.

Provision of PCs and servers.

4. Outsourcing to assemble PCs and servers (e.g. x86) by contract manufacturers throughout various part of the world.

New 5. Introduce new products and services and capitalize data centre

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DELL INCORPORATION LOOSE WORLDWIDE LEADERSHIP IN PERSONAL COMPUTERS TO HEWLETT-PACKARD (HP).

TO REGAIN GLOBAL MARKET LEADER IN PERSONAL COMPUTERS.

Products architecture, mobile computing and digital printing.

Customer services

6. Assembled of orders according to customers’ specifications with maximize manufacturing efficiency by contract manufacturers.

Acquisition 7. Acquire software-technology and services companies such as Compact ($7bil), Electronic Data System (EDS)($13.25bil), 1000 salespeople

B. TO CONTINUE THE EXISTING DEL STRATEGY INORDER TO OVERTAKE HEWLETT-PACKARD

DELL STRATEGIES

Sales 1. Bypassing distributors and retail dealers eliminated the markups of resellers via direct sales and build-to order business model.

2. Customer-based sales and marketing focus at corporate, government, household and individual buyers segments.

3. Supplementing the direct sale strategy with sales at the retail stores of select partners.

4. Installing direct store kiosks as a hands-on complement to internet and phone sales (e.g.; Japan and U.S.). Entry into the white-box PC segment (i.e., unbranded).

Costs- efficient

5. Making build-to-order manufacturing and partnering with reputable key suppliers of PC parts and components.

6. Ongoing improvement in assembly efficiency by making innovations and redesigning the PCs.

7. Commitment to just-in-time inventory practices into market place.

8. Continuous pursuit of cost-reduction initiatives, organizing operations more efficiently across company value chain-design, supply, logistic, materials, manufacturing, labor etc.

IT utilization

9. Web site strategy via incorporating e-commerce technology and internet and use of IT into everyday business practices, value-added services for customer with large IT operations.


10. Produce standard technology of PCs and servers (e.g. x86) via seismic shift in server technology.

11. Outsourcing the full assembly of some laptop models to Asian contract manufacturers (e.g. Taiwan’s Foxconn Group)

New 12. Expansion into new products offerings to include data storage 3

Products hardware, switches, handheld PCs, printers, and printer cartridges.

Customer services

13. Provide custom-built products and custom-tailored services, on-site services, on-line training program, customer service centers, premier pages web sites, product design services, enhance services and support for large enterprises, online shoppers with customer reviews of Dell products, customer-driven research and development and standardized technology.

Acquisition 14. Acquire software-related companies such as; Ever dream corporation (SaaS), SilverBack Technologies Inc (IT infrastructure), MassageOne Inc (e-mail services), EqualLogic (storage area network), ASAP Software, Network Storage Company.

Quality control

15. Quality control processes on components, parts, and subassemblies internal and from suppliers.

Advertising 16. Advertising through leading computer publication such as PC World, PC Magazine, Wall Street Journal.

C. TO ESTABLISH NEW STRATEGY TO OVERTAKE HEWLETT-PACKARD

DELLS’ NEW STRATEGIES

New product concepts

1. Introducing new concepts of products with diversify multiple dimensions in term of products with servers, storage, printing and services.

Market share

2. Grow market share outside the U.S which Dell Corporation currently has at 10%.

Sell computer factories

3. Sell its worldwide network computer factories in an effort to stabilize financial and reduce production costs.

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4. CRITICAL FACTOR


CRITICAL FACTORS

CURRENT SITUATION

FUTURE SITUATION LOGICAL ASSUMPTION

Sales Bypassing distributors and retail dealers eliminated the markups of resellers via direct sales and build-to order business model.

Sales made through distributors, retailers and other channels included retailers that sold products through internet stores, value- added product and services.

More attraction from corporate, government, household and individual buyers segments.

Costs - efficient High cost of operation in supply chain, organization structure and corporate overheads compared to rivals.

Scrutinize supply chains, streamline the organization structure, trimming corporate overheads and site worldwide.

Offer higher quality of product but with lower cost.

New Products and technology innovations.

Products offerings include data storage hardware, switches, handheld PCs, printers, and printer cartridges.

Introduce new products and services and capitalize data centre architecture, mobile computing and digital printing.

New generation of customers want more high-tech, glitzy, fashionable and more customizable products.


Produce standard technology of PCs and servers via seismic shift in server technology.

Outsourcing to assemble PCs and servers by contract manufacturers throughout various part of the world.

High productivity of product for customers and fast supply chain.

Customer services Provide custom-built products and

Assembled of orders according to

It encourages new customers and loyal

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custom-tailored services, on-site services

customers’ specifications with maximize manufacturing efficiency by contract manufacturers.

customers to buy more.

Supporting industrySuch as IT, component supplier, raw materials.

Limitation of supporting industry such as IT, component supplier, raw materials etc.

Increase number of supporting industries with large IT operation.

High productivity of product and fast supply chain.

Change in consumerPreferences.

Mostly younger customer and partly old fashion customer.

Differentiation from the Rivals.

Satisfying and increasing number of IT conscience consumers willDistinguish the firm from its rivals.


CRITICAL FACTORS

CURRENT SITUATION


Capturing a new customer segment

Mostly loyal customersfrom urban areas

Enhance services and support for large enterprises, online shoppers with customer reviews of Dell products, customer-driven research and development and standardized technology.

Younger generation tend to do everything online, hence attracting younger and new customers from urban and rural area.

Promotion gift/discount

Only a “thank you” letter along with catalogue

Giving gift/discount after a certain amount of buying

It encourages customers to buy more

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Aggressive e-Marketing

Moderate E-Marketing activities.

Higher brand image due to aggressive e-Marketing activities

Aggressive E-Marketing is a branding tool that keeps Dell on customers' minds.

Customer loyalty Minimal customer loyalty program.

More program such as; giving gift, bonus, discount, and free delivery charges to keep the customers loyalty.

More new customers and loyal online customers programs.


CRITICAL FACTORS

CURRENT SITUATION


New product concepts

Products offerings include data storage hardware, switches, handheld PCs, printers, and printer cartridges.

Introducing new concepts of products with diversify multiple dimensions in term of products with servers, storage, printing and services.

Satisfying numbers of consumers would grow globally.

Market share Most of market share within US.

Capturing a broaderMarket by growing market share outside the U.S

Faster ability to gain share in new markets versus limitation market.

Sell computer factories

Higher overhead costs of worldwide network computer factories compared to rivals.

Sell its worldwide network computer factories by entering into agreement with contract manufacturers to produce in PCs.

Ability to offer competitive price as reduction of production costs.

Increase Sales 15% and 5% worldwide market share of PCs and printing products

The leader in sales worldwide market share of PCs and printing products.

Both on line sale and retail shops are able to sell more PCs and printing products

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respectively.

Brand awareness Moderate well-known brand outside the US. Also, some reps cannot present the brand adequately.

More brand awarenessoutside the region via well trained and more committed employees

Well trained and more dedicated employees enable to present theBrand adequately and appropriately sell it outside the region.

5. EVALUATION OF ALTERNATIVES


CRITICAL FACTORS BASED ON FUTURE

SCENARIO

ALTERNATIVES

To challenge and counter attack Hewlett-Packard strategies

Not to challenge and counter attack Hewlett-Packard strategies

Sales made through distributors, retailers and other channels included retailers that sold products through internet stores, value- added product and services.

Yes; increase in sales and better services for customers and capable to offer competitive price.

No; decrease in sale because customer will prefer better service at nearest stores.

Scrutinize supply chains; streamline the organization structure, trimming corporate overheads and site worldwide.

Yes; production costs will reduce significantly and consequently lower the price.

No; production costs maintain high and unable to offer competitive price.

Introduce new products and services and capitalize data centre architecture, mobile computing and digital printing.

Yes; attract new generation customers with different preferences.

No; poor customer interaction due to outdated products.

Outsourcing to assemble PCs and servers by contract manufacturers

Yes; reduces operation costs effectively.

No; high operation costs

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throughout various part of the world.

Assembled of orders according to customers’ specifications with maximize manufacturing efficiency by contract manufacturers.

Yes; capable to offer competitive price at higher quality of products and satisfy customers.

No; poor competition due to limited offer to customers.

Increase number of supporting industries with large IT operation.

Yes; reduces operation costs effectively.

No; high operation costs

Differentiation from the Rivals.

Yes; attract new generation customers with different preferences.

No; poor customer interaction due to outdated products.



SCENARIO

ALTERNATIVES

To continue the existing Del strategy in order to overtake Hewlett-Packard

To discontinue the existing Del strategy

Enhance services and support for large enterprises, online shoppers with customer reviews of Dell products, customer-driven research and development and standardized technology.

Yes; better growth in market demand with appropriate customer approach strategy.

No; poor market demand due to poor customer service approach.

Giving gift/discount after a certain amount of buying

Yes; satisfying and increasing number of consumers and loyal customers.

No; poor customer attractions owing to poor incentives offered to customers.

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Higher brand image due to aggressive e-Marketing activities

Yes; encourage customers to buy more and attract the others.

No; poor customer promotion

More program such as; giving gift, bonus, discount, and free delivery charges to keep the customers loyalty.

Yes; more attraction tool that keeps Dell on customers' minds.

No; poor customer attractions due to minimal programs and activities



SCENARIO

ALTERNATIVES

To establish new strategy to overtake Hewlett-Packard

To maintain with old strategy.

Introducing new concepts of products with diversify multiple dimensions in term of products with servers, storage, printing and services.

Yes; increase in sales and revenue with the multiple choice of product.

No; decrease in sales due to limited product offered.

Capturing a broaderMarket by growing market share outside the U.S

Yes; more segmentation customers and product categories

No; limited customer in local market.

Sell its worldwide network computer factories by entering into agreement with contract manufacturers to produce in PCs.

Yes; Increase in cash flow and reduce production costs resulting in more competitive in global market.

No; Unstable financial High production costs.

The leader in sales worldwide market share of PCs and printing products.

Yes; more aggressive in marketing globally

No; poor in marketing locally and globally.

More brand awareness Yes; Increase in sales and No; poor customer

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outside the region via well trained and more committed employees

revenue globally with the brand awareness program domestically and outside the region.

attractions due to poor brand awareness.

6. STRATEGIC DECISION

6.1. Dell Incorporation is capable to address both of its aforementioned strategic matters via the following steps decisions processes:-

6.1.1. First and foremost, Dell Incorporation is to challenge and counter attack Hewlett-Packard strategies by making sales through distributors, retailers and other channels included retailers that sold products through internet stores, value- added product and services. Scrutinize supply chains; streamline the organization structure, trimming corporate overheads and site worldwide. Introduce new products and services and capitalize data centre architecture, mobile computing and digital printing. Outsourcing to assemble PCs and servers by contract manufacturers throughout various part of the world. Assembled of orders according to customers’ specifications with maximize manufacturing efficiency by contract manufacturers. Increase number of supporting industries with large IT operation. Differentiation from the Rivals.

6.1.2. The second step, Dell Incorporation is to continue the existing Del strategy in order to overtake Hewlett-Packard by enhance services and support for large enterprises, online shoppers with customer reviews of Dell products, customer-driven research and development and standardized technology. Giving gift/discount after a certain amount of buying. Higher brand image due to aggressive e-Marketing activities. More program such as; giving gift, bonus, discount, and free delivery charges to keep the customers loyalty.

6.1.3. The third step, Dell Incorporation is to establish new strategy to overtake Hewlett-Packard by introducing new concepts of products with diversify multiple dimensions in term of products with servers, storage, printing and services. Capturing a broader market by growing market share outside the U.S. Sell its worldwide network computer

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factories by entering into agreement with contract manufacturers to produce in PCs. The leader in sales worldwide market share of PCs and printing products. More brand awareness outside the region via well trained and more committed employees

7. IMPLEMENTATION ACTION PLAN

7.1. Owing to numerous internal organization issues, Dell Incorporation should address these issues by implementing integrated production planning and operation control systems as soon as possible. It needs a watchful eye to analyze each and every function in order to find out the best way of doing the job. This is a teamwork job under direct supervision of the CEO.

7.2. Dell Incorporation should take the opportunity of change in consumer preferences by introducing new concepts of products development in order to differentiate the firm from its rivals and to attract diverse group of customers.

7.3. Marketing RND and consumer preferences survey should be conducted in order to find out what exactly consumers need. This strategy should be implemented right after finishing the previous one.

7.4. On the “customer’s loyalty” issue, moreover, today people tend to do everything online! Therefore, expanding online selling system and e-marketing couple with service back-up centre/shop will help the firm to capture a broader market as well as younger generation customer.

7.5. Dell Incorporation is to develop an easy to navigate, multi lingual website and doing aggressive e-Marketing activities as well as to try to take the highest rank in pioneer search engines. Dell can implement this strategy simultaneously with the previous with the help of Marketing VP and a reliable IT counselor.

7.6. Dell Incorporation should be ready for expanding its global sales market. Analysis and records prove that this is the best strategy to take advantage of the growing market. Expanding global market sales for the Dell Incorporation should carry out two steps:-

7.6.1. In the first phase, Dell should sell its worldwide network computer factories in an effort to reduce production costs. After one year, positive results of the previous implemented strategies and after gaining the projected ROI will be ready for more expansion.

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7.6.2. Second phase, Dell is to presence in a wider market and taking more advantage of the growing market, Dell should continue its expansion through grow its market share outside the U.S globally.

7.7. Dell implementation action plan has been summarized in the following table:

ImplementationActions

STRATEGIC DECISION MADE

1. Production planning andoperation control systems

2. Diversify multiple dimensions in term of products

3. Expanding online sellingsystem and e-marketing

4. Expanding global market

4.1 Within the region

4.2 Globally

WHATTo implement?

Production planning andoperation control systems

New product development andpromotion

Expanding online sellingsystem and e-marketing

Expanding sales after service.

Expanding multiple product and functional

WHYTo implement?

To gain a control over thebusiness

To differentiate and attractdiverse group of customers

To capture a broader market & attract younger customers

To presence within the region market but with higher growth rate

To presence in a wider market & higher growth rate

HOWTo implement?

Engineering all functions tofind out how resources are to be utilized

Based on consumerspreferences survey, producingPCs products with moreContemporary high-tech products.

Easy to navigate, multi lingualwebsite and aggressive e-Marketing

Expanding sales after service centre/ shops with long term lease agreement

Through acquiringSoftware-related services such as Ever dream Corporation, Silver Black Tech etc.

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WHERETo implement?

Inside the organization


Dell’s website US, Europe market

Global market

WHENTo implement?

ASAP, and should be finished atthe end of year 2010

Right after the 1st strategy

Simultaneously with theprevious strategy

After finishing the 2ndstrategy

After finishing the 3rdstrategy

WHOTo implement?

CEO, with assistance of VPs of all functions

CEO + Marketing VP

CEO + Marketing VP + reliable IT counselor

CEO + Mktg. VP

CEO + Mktg. VP

8. POTENTIAL PROBLEM ANALYSIS

ImplementationActions

STRATEGIC DECISION MADE

1. Production planning andoperation control systems

2. Diversify multiple dimensions in term of products

3. Expanding online sellingsystem and e-marketing

4. Expanding retail system

4.1 Within the region

4.2 Globally

PotentialProblem

Negative reactions andresistances

Shift in consumers preferences

a. Threat of entryb. Cost of shipments

Not gaining theprojected return

Intense competition

ContingencyPlan

Frequently informative andpersuasive speeches andmeetings

Continuous marketing research

a. Customer loyalty program and aggressive e-Marketingb. Free or discountedDelivery.

Strong marketingcampaign andbranding activities

a. Brand awarenessactivitiesb. New productdevelopment (NPD)

WHAT

To implement?

A series of informative andpersuasive speeches andmeetings to manage resistances

Continuous marketing research

a. Customer loyalty activitywith aggressive e-Marketingb. Free or discounteddelivery

Graduallyimplementation along with marketingcampaign

a. Brand awarenessactivitiesb. New productdevelopment (NPD)

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WHYTo implement?

To prevent and reduceresistances and encourageemployees to participate

To make the firm up to date interms of consumer preferences

a. To keep customers loyaland to reach to as much aspossible customersb. To increase online sales

To back to theprojected growth rateand minimize loss

To prevent of losingmarket share

HOWTo implement?

Showing befits and positiveoutcomes to employees throughfrequent meetings

Continuous marketing researchand online surveying

Cutting cost of inefficientactivities to offer more free or with discount delivery

a. Well trained staff should adequatelypresent the brandb. Strong marketingcampaign

a. Well trained staff should adequatelypresent the brandb. Intensively NPD

WHERETo implement?


Online survey and throughoutthe market

Throughout the Dell’s website

In stores & inside theorganization

Externally & outside theorganization

WHENTo implement?

Starts before implementationand will be continued

Starts before implementationand will be continued

Proactive strategy

Proactive strategy

Proactive strategy

WHOTo implement?

CEO with assistance of VPs

CEO + Marketing VP

CEO + Marketing VP

CEO + Mktg. VP

CEO + Mktg. VP +Retail staff

9. CONCLUSION

9.1. With regards to the internal organizational issues, first and foremost, Dell’s CEO should address these issues by implementing integrated production planning and operation control systems to gain a proper control over the business.

9.2. While projected growth rate for Dell Incorporation, surveys shows that change in consumer’s preferences seems to be one of the reasons the firm’s slowdown. Dells’ should take this opportunity by introducing new concepts of products development in order to differentiate the firm from its rivals and to attract diverse group of customers.

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9.3. In facing with “customers loyalty” issue Dell Incorporation should expanding online selling system and e-marketing in order to help the firm to capture a broader market as well as younger generation customers.

Appendix 2:

Mission, Objectives, Strategies:

HISTORY:

Dell Company was established in 1984. Dell operation involves dosing, building and customizing hi-tech product. Their product line today includes Desktops, Servers, Laptops, Peripherals and

Workstation.

Mission:

Dell is a company leader in delivering the latest technology in computer systems to customers, and a broad range of products that enhance the service. The main concept is to sell directly to customers without intermediaries to better understand their needs and provide personalize assistance to take customers to the next level of service.

Strategy:

Dell combines direct customer model which is our initial goal, with relevant technologies and solutions, efficient manufacturing and logistics, and strive to find new distribution channels amongst businesses and individuals around the world. Within the customer experience, superior value, high quality, relevant technology, and customized systems set us apart from our competitors. Also, product differentiation, and new acquisitions are a part of the widening of the business.

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10. BIBLIOGRAPHY

10.1. Lai, Y. C. (Director) (2009, July 12). Case Analysis and Decision. Strategic Management (MRB 3012), IBS, UTM City Campus, Kuala Lumpur.

10.2. Gamble J., J., A., Thompson, A., & Strickland, I. (2009). Crafting & Executing Strategy: The Quest for Competitive Advantage: Concepts and Cases. Boston: McGraw-Hill College.

10.3. David, F. (1986). Fundamentals of Strategic Management. New York: Macmillan Pub Co.

Bibliography

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