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"No other technology company listens to customers, collaborates with partners adds its own significant layer of innovation and delivers relevant technology more efficiently and effectively than Dell" (Michael Dell).
The word's of Michael Dell points out how the company has managed to be a global leader in the computer industry. From a small company that was founded in 1984 by an undergraduate student at the University of Texas, Dell's headquarters are located in Round Rock, Texas, which is now developed into a huge corporation with more than 75000 employees and an annual turnover of nearly more than $61 billion.
At the beginning dell sold upgraded computers of IBM. In 1985 Dell starts sold its own brand of PC's based on basic business model i.e. sold directly to the final customer and built PC's to users' specification. This model of business has not changed over the years, even though few modification and revivification has been done as the company grown.
Due to the recent downturn in the market Dell's business has slowed that create negative impact on its core business that leads Dell to make a decision to change its Direct business Model, In the year 2007 Dell change its Direct Model into Mixed Model that involves whole sale and Direct Sale, as in Whole sale Model Dell make a partnership with the major computer retailer that give access the mass distribution channel.
Dell has been world's largest direct-sale computer vendor and also the leading seller of computer systems, capturing a global market share of more than 15 percent. Dell's market place is desktop personal computers, notebook computers, workstations, network servers, handled computers, monitors, printers, high-end storage products, and a variety of computer peripherals and software.
Dell also moved into the consumer electronics arena, offering wide range of LCD televisions, projectors, and other products. Most of the products sell by Dell made in its own manufacturing facilities. Dell maintaining six production facilities worldwide located in Austin, Texas; Nashville, Tennessee, Eldovado do sul Brazil, Penang in Malaysia, Xiamen in China, and Limerick in Ireland.
Dell in broad sense become the company that is dynamic and involved organization because of its proven best quality services, products and being committed in serving the world with its management values that has kept them to be one of the best and most prominent in the computer industry business.
Situation analysis in which Political-legal, Economic, Socio-Cultural and Technological factors are examined to chart out the company long run plans.
From political point of view Dell have several threats that involves the external surrounding, the political and legal environment. The first threat is from Chinese government that favors to promote national PC dealers and small firms to foreign companies. This means that Dell have to share all the business strategic information with its local partners that can expose the companies weaker side. Having full control over the internet by the Government in China Dell cannot flow freely in the Chinese market causes slow growth. This political factor influence the way in which the Dell is operating in this country which force Dell to think and this is the reason that Dell to take more initiatives in China for safer environment.
This environment refers to the nature and direction of the economy in which the company has to compete or may compete.
The level at which Dell is competing in India is very critical and hard environment. Dell faces several threats, the worst threat Dell faces in India is the software piracy. No doubt in India there is shortage of skilled labors but the country has many economic opportunities. Dell has acknowledged this fact but the common customers could not manage to pay for investment and very few had bank account the reason behind this is that common customer does not have the confidence and trust for internet transactions.
This environment relates with a society's attitude and cultural values.
In India there is enormous potential growth for internet, furnishing Dell the opportunities to inflate into a new market. However it must be noted that in Indian culture, people are still insecure about card sales because of the enormous expensive computers. In order to gain the market Dell has to made investments in face-to-face or door-to-door operations so that Dell can gain not only market but also customer faith and trust in the company and its products.
There are barely a few industries that are characterized by a more rapidly technological development than the computer industry. Increased Research and Development have caused everlasting innovation processes which direct to short product life cycles consequential in a faster depreciation of the products.
The key resource for government is providing access to technologies developed by institutions. In the year 2000 it was observed that in mainland China's annual PC production reached 7.6 million making it the third largest in the world. In China there is enormous opportunity for Dell to acquire their name into the public domain as well as a fast way to mold services to its customer segments; but for the Dell's business in technological segment the main threat in China is that access to the internet is costly.
SWOT analysis help in analyzing the situation faced internally, Strengths Weaknesses, and external Opportunities, Threats by the company.
Dell have been in the market from more than 20years having the knowledge of computer and industry. Such vast knowledge and experience helps Dell to perform better from its competitors.
The most important part in Dell's strategy is the Direct Sales that allows consumers to fully customize their laptops. The market is becoming more educated, and now more than ever customers want a product that can achieve their specific needs. In case of laptops, this means that customers want more choice in both performance and portability.
In addition to this customization, the Direct Sales helps Dell to deliver the product relatively fast. With the Direct Sales allows the customers to place their order, and receive their customized computer frequently within days. Both of these Direct Sales benefits are great assets for Dell in targeting the home-user market segment.
The inventory turnaround time and Dell's well-controlled relationships with suppliers also give an advantage over its competitors. These business advantages help Dell create large cost savings, which Dell utilize very effectively and pass on to its customers. The final outcome of this advantage is a customized, low-priced computer delivered to the customers' door within days.
The products manufactured by the Dell of highest quality and have highest level of technology are used. This helps Dell to be very agile in the market from its competitors.
Dell's greatest strength is targeting the business executives' category nearly 75% of all sales revenue comes from large businesses and government sectors. This means that Dell has already created relationship with larger companies, and this provides the majority of their business. These business and government sectors in turn, pass the relationship on through their employees, providing them with Dell products. At this juncture again, Dell has the ability to customize their products to furnish whatever needs the business or individual may have. This help Dell put in good position to target the business executive segment with new products.
Dell does not design or manufacture any hardware's or software's, it has high dependency on its suppliers which can create problems if the supplier does not meet the market demand. This means that Dell can only built PC's but not able to develop them.
As a global computer industry Dell supplies large quantity of products around the world can cause problem if the products are recalled. This was happen in 2004 Dell recall nearly 4.4 million laptop adapters as there is fear that they could overheat, causing fire or electric shocks.
Dell does not have its own technology, the technology using by Dell is also available to its major competitors, and this means that dell is using shared technology.
In the Education sector Dell was not able to target the students in large numbers because most of the company focuses is towards corporate and public sectors that cause Dell only able to create as low as 5% market in this segment, In other words Dell was not able to create vast relationship with the educational institutions.
In terms of the home user is that Dell cannot provide buyers physical touch or see the product before they want to purchase. No doubt Dell Direct Sales provides many great opportunities, but its greatest weakness is that customers can't go to a retailer, or try a few different products, and in single trip walk home with a computer.
For some customers customization can create problems because customers can't go out to buy a Dell as simply as they could do with other brands. Even some customers are wary of a product that they can't personally examine before purchasing. More ever customers have to wait for the product number of days before it delivered. If the products received by the customers are faulty that can create more frustration and bad impression of company.
In recent years Dell's business has slowed, that force the Dell to increase its efforts to attract personal computer users. In the year 2007 Dell make a decision of making partnerships with major computer retailers, that including Wal-Mart, Best buy and Office works. With partnerships ends Dell's historical Direct-to-consumer channel, this allows the company to access the mass distribution channel, which creates large number of business opportunities for the Dell Company.
There is growing demand for the personal computers and used more than ever before. In particular the growing demand for laptops in the market is much faster than that of desktop computers. This general inclination lends itself as a great opening for Dell's laptop business to grow up in all segments.
Dell put forward the strategic approach towards the educational markets that can lead Dell significant market share in this segment.
With the increasing communication and technological combination that are also create enormous opportunities because Dell always put forward new innovation in the field of technology with its products. Customers can now go online to customize their computer, place an order or even just to get the information. One of the assistance for Dell is that customer to go an ''online'' can, in some respects, make up for Dell's lack of physical retail stores. The continuous improvement in these technologies will surely bring similar opportunities.
Dell's lack of Research and development creates big problems, most of the Research and Development taken place by its suppliers like AMD, NVIDIA and ATI, as a result the new products equally available to its competitors. This will create more problems for Dell making headway from its competitors in servers and networking infrastructure.
Another threat for Dell is the price difference between brands getting lesser however Dell's direct Sales gives an advantage to the company by forwarding the benefit to the consumer leading to lower price in comparison to the price offered by competitors. Other companies are also finding ways to combat the low price degree of difference. With the result many of Dell's competitors are becoming closer substitutes.
As Dell has large corporate and public customers that mean these segments have high buying power this could lead to squeeze its profit margin.
PORTER'S FIVE FORCES AND ANALYSIS
The model develop by Michael E. Porter identifies and analyze five competitive forces determine the industry's weaknesses and strengths that help in shapen the industry.
Barriers to Entry:
Least stores in the market help in Low capital investment.
Product differentiation is very low.
Scale in economies is low.
There are no legal or Government barriers.
With new Entrants in the market shows decrease in the profit.
With the present situation in the market this is not an easy task for new business to get involved in the competition, with every step take by new company involves huge risk. Dell Company is enough mature in this field and likely have fair risk.
Threat of Substitutes:
PC's are present everywhere in the society.
There is only one substitute for PC's, is apple but because of its high price and lack of software support prevent people to buy it.
Dell has major dominance in the computer business that leads it to low risk from other PC's brand.
Bargaining Power of Buyer:
Price awareness by the customer.
Durability and customer service become more important parts.
Dell's Customer service and the products are very efficient because of these two important reasons Dell was able to create certain brand royalty, but the basic reason for this is that Dell set very low price. If Dell was not able to keep low prices then customers easily change to other brand.
Bargaining Power of Suppliers:
Suppliers are available in large numbers for hardware and software.
Major Supplier is Microsoft and Intel.
Cost is very high for Swap.
For Dell most valuable division in its manufacturing process is suppliers that plays very vital role in the customer satisfaction, switching from one supplier to another creates extra cost burden on the company and have high risk.
Concentration is very high.
There are price war cause low Margin.
Profitability is decreasing.
Differentiation is also very Low.
However, in the middle of sever competition; Dell can still gain more market shares from other competitors. That proves Dell's business strategies have been successful. However it must be noted that there are some computer manufacturing giants like IBM, HP always explore new trend for business in the market, this indicate that Dell involves high risk in rivalry.
It is a Strategy tool designed, that is focused on customers and helps the business to be more focused on their customers' needs. (Vandermerwe)
Customer activity cycle enable the company to see the customer progresses through a process of discovering its product, getting all the necessary information of product, sure to buy, Using product, and getting the support for it.
Dell plays the dominant role in the computer industry. Dell has achieved the brand royalty. Choosing product by the customer is not an easy task in the market where numbers of brands are available but the image developed by the Dell in market attracts the customer towards its brands because of its competitive price, durable product, and provide efficient customer support 24*7.
Dell should be remain very agile toward its customer ordering process so that the customer satisfaction and the image of the brand should be remain very notable that can create more opportunity for Dell that leads more recommendation by one customer to another.
Once the product received by customer Dell should maintain constant communication with the user during installation, so that any problems arise can be rectify very quickly without creating problems in the working system, this would help Dell to create close relationship with its customers and help to understand its working condition and needs.
Efficiency of product play very vital role for customer satisfaction once the product starts its operation it will let the customer know about its durability. During operation phase Dell should provide proper technical support to its customers constantly so that the customer could work effectively and efficiently. Achieving constant communication with its customer helps Dell to improve its future business IT strategy for the market.
As the technologies grow new innovations taken place and the need of the customer also emerges Dell should offer better and very attractive packages to its existing customers for replacing their products which can attract the new customers and help Dell to maintain its business with existing ones.
Dell has dominant role in the computer industry with its direct sale model, Dell's know how in businesses, having updated information regarding current and possible future policies, practices, trends and information that can affecting the business, full aware of competition help the company for proper implementation of strategies and tactics that works in the market place.
Dell's core competency not only involves the assemble of computer but the activities for assembling the computer that involves new improved technology with heavy doses of a constant effort of discovering new trends in the face of changing customer demands and high growing market which is done by the Dell's highly sophisticated team.
Dell's dedication towards to the customer's service increases the attention of customers that leads to the increase in sales and develops confidence within the customers for its products and services. Due to this fact Dell able to develop stronger relationship, built trust, loyalty and sense to determine the customer need and demand in the market. Incorporate the supply chain into a value network dell able to develop the network of trust and reliability by sharing demand forecasts. Dell's constant efforts develop a sense of partnership that shapes the corporate boundaries.
Dell's minimum working capital in the production process helps to develop high reliable products at competitive prices and best manufacturing quality.
It seems to be Dell has strong, effective and efficient management, organization, and structure and this should be maintained. Dell's market share national and internationally needs to be increased. Dell's national market seems to be in excellent growth but it hasn't able to match the same growth internationally. Dell have open market in India, Japan, and China, and it should find the opportunities for joint ventures, mergers, or acquisitions of firms that presently have an established presence in these international countries.
Dell should apply its strengths and resources into the sale of servers and development of new products outside of the PC scope to become more concentrically diversified. As a result from these strategic managerial decisions and actions will help Dell Company to maintain their established competitive advantage and help in achieve above-average returns, leading to larger shareholder wealth.
Dell should increase its R&D effort in order to achieve patent technology that will help to lesser dependency on its developers that increase its supply chain efficiency.
Lesser prices offered by Dell which is result of e-business strategy consists of outsourcing almost all the value chain activities, but this is the short term tactical cost view and may not have impact in the long run as competitors are getting closer and closer in providing lower-priced products.
Dell should rethink the ''make or buy'' strategy focus basically on activities and components that are potentially introduce future technological breakthroughs in PC industry.
The key differentiator from other companies for Dell is customer service and support. The company which is on top in this segment prides itself, not surprisingly, this segment of business provide a significant and increasing revenue flow for the company. However, Dell's lead in customer service and support has declined in recent years due to reduction in training and the outsourcing of customer service and support damaged its reputation. In order to rectify this problem, Dell must improve its customer service and support representative selection process must ensuring they are easily understood and well trained. Improving this segment of business Dell once again clearly differentiates itself from rivals HP and IBM.
From past few years Dell experience growth, but in some market where Dell is active become mature and saturated. In order to achieve above average incomes Dell must take into account following key strategic issues:
First mover advantage.
Virtual integration of the supply chain.
Just in time inventories.