This presentation was delivered at UIW Fall 2013 Semester
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1. Dell, Inc. Case Study Presented by Sophie Yanez S
2. Dell Inc. S Dell produces and markets PCs and a broad range
of technology products for the consumer, education, enterprise and
government sectors. S Founded by Michael Dell in 1984 S Based out
of Round Rock, Texas. S Michael Dell developed his direct model
based upon a built to order process that allowed customization of
the personal computer.
3. Dells History 1988-1991 1984-1987 1996-1999 20002004
1992-1995 20052008 20092012
4. Tablets and smart phones are reducing the need for personal
computers in homes and certain businesses Cloud Drives are changing
the storage needs for the personal computer SUPPLIERS SUBSTITUTE
PRODUCTS 132 different key supply chain markets that include AMD,
Intel Corp. EMC, Microsoft, Toshiba, Logitech. Lexmark, etc.. By
working with multiple suppliers, you are able to get a lower price
for parts. Supplier monopolies such as Intel Inability to
substitute necessary hardware (hard drives, processors, RAM) High
cost of supply chain churn Hewlett Packard, Lenovo, ASUS, Apple and
ACER Large number of competitors currently in the market- with
declining sales, the market saturation is increasing. There is
little power in the market place for product differentiation Price
is a high determining factor High start up cost leads to barriers
to entry the market There is almost no brand loyalty in this
largely commoditized market. This means that anyone can enter and
make a convincing marketing pitch. Economies of scale lead to
continued advantages PC industry is a unique business model
Customers prefer customizable PC options. They purchase what they
need. Customers dictate product pricing since there is a large
selection of PC brand alternatives for them to choose from There is
a size of order single to large- preference for large custom orders
in order to drive down costs. (ex: Schools and Businesses)
Customers have the ability to change between different types of PC
brands that use the same software (ex: Microsoft) S Porters
Five-Forces Model
5. External Factor Evaluation Dell, Inc. Key External Factors
Opportunities The Green Movement: The want for more environment
friendly products. Such as computer Recycling Programs and energy
efficient products The global market Internet usage is increasing
which means there is more need for computers and technology
adoption Improving Technologies such as software and applications
are creating a high demand for consumers Younger generations are
tech saavy There is a changing standard of communicating and
sharing information. Ex: Text messages, email and Instant messages
Threats IT advancements are taking place at a rapid pace- ex:
Windows 8 release Price Wars with competitors Introduction of
Tablets and Smart Phones Changing Customer Needs Cloud Computing
movement is replacing how customers use PC's Trade barriers and
hurdles affect the position of the company in multiple countries
that decline growth NSA scares- Government checking in on me
through my computer? Total Weight Rating Weighted Score 0.03 1 0.03
0.12 4 0.48 0.11 4 0.44 0.11 0.09 3 2 0.33 0.18 0.09 0.07 0.11 0.1
0.08 0.04 4 3 3 4 3 2 0.36 0.21 0.33 0.4 0.24 0.08 0.05 1 1 0.05
3.13
8. Value Chain Analysis Supplier Costs Raw Materials
Merchandise Transportation Shipping Costs Component parts
Inspection Warehouse Storage Production Costs Inventory System
Receiving Costs Plant Layout R&D Cost accounting Merchandise
tracking system Quality Control Distribution Costs Loading Shipping
Budgeting Personnel- Trucks, Ships, Plane Internet System Fuel
Maintenance Sales & Marketing Costs Sales reps Dell.com website
Advertising and publicity Transportation Promotions and
sponsorships Customer Service Costs Shipping Phone Support Online
Email Support Online Chat Support Internet Knowledge Base
Warranty
9. Internal Factor Evaluation Dell, Inc. Key Internal Factors
Strengths Creating a Global Recyling program Boomi and Perot system
acquisitions will diversify product portfolio Client Reinvention
Initiative launched in 2011 Re-org towards a more customer centric
model Michael Dell taking the company private in 2013 Focusing on
customized products for businesses Global Expansion to India abd
China- two large technology markets Weight Rating Weighted Score
0.07 0.08 0.04 0.05 0.13 0.04 0.08 3 4 3 3 4 3 4 0.21 0.32 0.12
0.15 0.52 0.12 0.32 0.14 1 0.14 0.08 1 0.08 0.07 0.09 1 2 0.07 0.18
0.13 1 0.13 Weaknesses Followership Strategy into Market- Low
investments in R&D Dell is highly reliant on the increase of
outside manufacturers producing their hardware products Dell's
current debt to income ratio poses as a financial weakness. Price
Wars with other competitors Dell is losing market share to new
competitors such as Acer, Asus and Lenovo Total 1 2.36
10. Porters Five Generic Strategies Focus Large Small Size of
Market Cost Leadership Generic Strategies Differentiation
11. SWOT Matrix STRENGTHS-S WEAKNESSES-W List Internal
Strengths List Internal weaknesses 1. 2. 3. 4. Global Recycling
Program Boomi and Perot system acquisitions Client Reinvention
Initiative Michael Dell taking the company private 5. Re-org
towards a more customer centric model. 6. Customized product focus
7. Global expansion to India and China OPPORTUNITIES-O List
External Opportunities 1. 2. 3. 4. 5. The Green Movement Global
Market internet usage Improving technologies Younger generations
are tech saavy. Changing standard of communication through
technology. THREATS-T List External Threats SO STRATEGIES 1.
Promote the efficiency of Dell computers in Green Datacenters. Set
the standard for powering the worlds cloud with Dell Servers. 2.
Increasing Global Internet usage means there will be more of a need
for online customer service. Improve Chat support and online
knowledge center. ST STRATEGIES 1. 2. 3. 4. 5. Followership
Strategy High manufacturer dependency Price Wars with other
competitors Dells current debt to income ratio Losing Market Share
WO STRATEGIES 1. With the improving technologies in the market
place, this is Dells opportunity to remove itself from the
Followership strategy and innovate something. 2. With younger
generations becoming more tech saavy, ensuring that Dell leads in
the education market, will get these younger consumers used to
using their products. WT STRATEGIES 1. Leverage Boomi acquisition
to create a 1. Create a new tablet or smart phone better
integration of cloud apps and on that can compete with the likes of
premise apps. Make Boomi the choice Apple and Android systems. One
that 2. of cloud application dashboard. is competitively priced. 3.
2. With the Cloud Computing market 2. Start manufacturing own PC
parts. 4. expanding in China and India- seek out This will lower
the cost for supply 5. partnerships with hosting companys chain,
improve quality production and 6. and colocation Datacenters around
the reduce manufacturing dependency. 7. world. Source: Fred R.
David, Strategic Management Concepts & Cases: A Competitive
Advantage Approach , (2013), 14 th ed. 1. It advancements are
taking place at a faster change Price Wars with competitors
Introduction of smart phones and tablets Changing customer needs
Cloud Computing movement Trade barriers NSA scares
12. Space Matrix FP Financial Position (FP) Return on
investment Leverage Liquidity Working Capital Cash Flow Competitive
Position (CP) Market Share Product Quality Customer Loyalty Tech
know How Control over suppliers CP Stability Position (SP) 2 Rate
of Inflation 2 Technological Changes 3 Price Elasticity 4
Competitive Pressure 4 Barriers to Entry 3 Industry Position (IP)
-3 Growth potential 3 Financial stability -7 Ease of entry to
market 0 Profit potential -7 Resource Utilization -2.8 IP SP -2 -7
-3 -7 -4 -4.6 3 2 -7 3 -4 -0.6
13. BCG Matrix Relative Market Share Position High 1.0 Low 0.0
Med. 5.0 Industrial Sales Growth Rate High 20+ Stars Question Marks
Med. 0 Cash Cows Low -20 - Product Development Diversification
Retrenchment Diverstiture Dogs
14. IE Matrix Low Medium High Strong Average II Product
Development Backward, Forward and Horizontal Integration Weak IFE
2.36 EFE 3.13
15. Recommendations S Dell needs to remove itself from its
current followership strategy and invest more in R&D so they
can innovate new products. S They should focus expansion efforts in
the Education sector. With younger generations becoming more. S
Dell needs to start manufacturing its own PC parts. S Continue
global expansion strategy into China and India.
16. Thank You!
17. Additional Information
18. External Opportunities & Threats Opportunities S
Threats S S Software Development needs hardware S Low Cost Global
Substitutes S Cloud Computing- Boomi acquisition Economic Recession
S Cloud Computing- Consumer Needs are changing S Market Saturation
Green Technology is improving
19. Strengths & Weaknesses Strengths Weaknesses S
Advertising- Global Recycling Program S Product Quality- Increased
outside manufacturers S Brand Recognition- #2 Market Share for PCs
S Current debt ratio 29% higher than industry average S Improving
& Diversifying portfolioBoomi & Perot Systems S Client
Reinvention Programreduce supply chain cost
20. Financial Condition S Dell is valued at $9.8 billion S Dell
has $5.14 billion in debt (They hold a 39.9% long term debt/capital
ratio) S Retained Earnings increased from $22,110 to $24,744 (in
the millions) S In the last 5 years, Dells sales growth rates were
1.97% in comparison to the industrys growth rate of 33.38% S Dell
has reported negative average net income during the past 5
years.
21. While Dell has a large amount of capital and is seen as a
profitable organization, I would not consider them a financially
stable company due to the recent increase in company debt. S
22. Current Strategies & Objectives S Company Vision: Its
the way we do business. Its the way we interact with the community.
Its the way we interpret the world around usour customer needs, the
future of technology, and the global business climate. Whatever
changes the future may bring, our visionDell Vision--- will be our
guiding force. S Company Mission: Dells mission is to be the most
successful computer company in the world at delivering the best
customer experience in markets we serve. In doing so, Dell will
meet customer expectations of highest quality; leading technology;
competitive pricing; individual and company accountability;
superior corporate citizenship; financial stability.
23. Current Strategies & Objectives S Dells R&D
strategy is to enter the market during the mature phase of a
products life cycle. S They believe in a low risk and low
innovation approach.
24. Competitors
25. My Recommendations S Slow DC Expansion S Reduce
Manufacturing Spending S Start Innovating!