This paper discusses the different business strategies that companies undergo to become globally recognized multi-national corporations. We use Dell Computers throughout this paper as an example to amplify such a success. Michael Dell's pioneering leadership and model to the strategies used to create one of the leading multinational computer corporations in the world. We take a look the business strategy used by Dell and we use a SWOT analysis approach to understand the various dimensions of competitive advantage the firm has obtained using the latest research. We then take a look at the financial statements and numbers of Dell to see where it stands. After which we take a look at the potential for future growth and provide recommendations for their current situation.
Several companies we see around us nowadays have started as small businesses. Expansion and creating new strategies in business drive success and creating a solid strategic vision allows corporations to foresee uncertain events and use their competitive advantages to maintain market shares. Business strategies depending on market scenarios are vital for such success. Understanding strategic management concepts has also become important for both leaders and entrepreneurs as they assist them in formulating the foundation of their core businesses. Throughout this paper we will use Dell Computers as an example to reflect the managerial concepts that are academically taught in educational institutions to relate theory to practice.
2.0 Concepts in Business Strategies
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Business strategies are made up of fundamental concepts such as business units, competitive advantages, generic strategies and strategic groups. Business units are comprised of organizational entities that have a mission, vision, competitors and are competing in an industry. Competitive advantages are states of businesses whereas emulating such advantages are not possible. Generic strategies on the other hand are a classification of competitive advantages while strategic groups are businesses that use the same generic strategy (Parnell 2009).
According to Michael Porter, there are three main generic strategies: low cost strategies focus strategies and differentiation strategies and that depends on emphasis of a business on the entire market or a niche market. Furthermore, a multiple strategy can include a combination of these three according to the diversification extent of large corporation and the product ranges and different markets it has on hand. Low-cost strategies include the production of high volumes of similar products allowing the firm to become vulnerable to price competition from others. On the other hand, focus-low-cost strategies produce large amounts of the product but just for a certain segment of the market and usually such industries or markets do not have that much players in it. Differentiation strategies produce products that are tailor made to serve a market in the sense that products are heavily distinguishable from others currently available (Porter 1998).
3.0 How Are Visions Formulated?
Visions are formulated as part of the strategic planning phase of creating a company. Such approaches started in the 1950s and have changed drastically due to changing technological, political, economic and social aspects. Choosing the correct strategy must allow a firm to focus its activities from top down to achieve its mission. To develop a company strategy a vision must be created. Visions allow companies to see where their placement and objectives will take them in the long run. They depend on a thoughtful understand of the firm's mission by analyzing the environment and assessing how the different business units within the firm will interact with one another to reach its strategic objective. Visions take into account the markets that are to be pursued, future technology focuses for product development and the type of company the management is intending to form (Peppard & Ward 2002).
Michael Dell came up with the concept for the business and had guided the evolution of Dell computer's business model. Dell has stayed faithful to their original business models, which combine direct sales and build-to-order production. This model is simple in concept, but is quite complex in execution, and other PC makers rely on resellers, retailers and other agent to carry much of the burden of marketing and sales. Dell has to reach customer specifications, a process, which puts heavy demand on shop floor employee, suppliers, and delivery systems. A concept and philosophy of Michael Dell and other firms had difficulties in trying to imitate his philosophy.
4.0 How Are Strategies Executed?
Always on Time
Marked to Standard
Strategies go through several phases: crafting strategies, implementing strategies and taking corrective actions. Crafting strategies includes picking new markets and industries to enter and taking decisions on how to enter them. Furthermore, it is important that firms seek opportunities to "leverage cross-business value chain relationships into competitive advantage" by diverting company resources into appealing business units. Implementing strategies include vertical integration, horizontal integration, and diversification, acquiring weak competitors, retrenching, liquidating, divesting and portfolio restructuring (Hunger & Wheelen 2006).
In 1990, Michael Dell set an objective for the company to become one of the top three PC companies. By 1997, Dell Computer has net sales of $1,759 million and net income of $518 million and had a market share of 5.8%. Dell computer became the third largest PC Company in the world at the end of 1997. Dell's philosophy and practice includes
Michael Dell believed the Dell's biggest challenge was to gain the acceptance outside the US. The company also renovated its design, manufacturing, procurement and logistic process to reduce costs and speed up the entire supply chain. "It also expanded its markets internationally and developed successful notebook and server product lines." The result has been an extraordinary run of growth in revenue, profit and market value for the company. Sales reached $18.2 billion in 1998, with profit of 41.46 billion, and Dell's share of the worldwide PC market grew from 3% in 1995 to 9.2% 1999. Dell's stock price grew by over 40 times from 1994 to 1999, and the company's market capitalization topped $100 billion.
4.1 Crafting Strategy:
The direct sales approach and the build-to-order approach are both Michael Dell's contribution. Dell brought in Lee Walker, a venture capitalist as a president as chief operating officer in 1986, to provide the company with financial and managerial experience. Dell learned from him a lot about business and also learned in and out of managing a fast-growing enterprise. Walker helped Dell to turn into a fascinating executive with a character for motivating people and winning their loyalty and respect. Walker also helped Dell to select distinctive and talented people to serve on the board of directors when the company went public.
Michael Dell has pushed the company to revamp the traditional industry value chain, shortening it and slashing out cost-producing activities. For example, in 1994 when Dell knew that its margins on PC selling through the distribution channels was less, he withdrew from selling to retailers and other middleman to focus on direct sales. He also push the company in the concept of 'virtual integration' and Dell's strategy revolved around some main elements: build-to-order manufacturing, partnership with supplies, just-in-time components inventories, direct sell to customers, award-winning customer service and technical support, and pioneering use of the Internet and E-commerce technology.
Dell chooses few outside vendors as a partner and tries to stay with them long period as long as they maintained their leadership in technology, performance and quality.
4.2 Implementing Strategy:
Dell was active in pushing for better execution of the just-in-time inventory concept and reduction in the number of days of parts inventories. As Michael Dell explained what delivery capabilities expected from its suppliers.
Dell improved and refined its inventory tracking process, working relationships with partners and suppliers and its method of operating with small inventories. In two years Dell's average inventory turn ratio decreased by 75%. Dell was running its operation with an average of 6 days of supply in inventories and it had a long-term goal of running in 3 day of average supply.
The direct approach allowed Dell to build a relationship, which makes it quick and easy for customers to do business with Dell. IT staffs at Boeing reported that Dell had adapted its IT system, user interfaces and procurement processes to Boeing's, making it easy and familiar for Boeing employees to buy Dell computers. By selling direct, incorporating the right technology as it becomes available, and timing the changeover well, Dell can take advantage of falling prices on components. Michael Dell was involved in making sure the company's advertisements were communicative and forceful, not soft and fuzzy.
Michael Dell's philosophy included not only good planning and good strategy but also the execution of good strategy. The company had established a number of policies and operating practices to encourage successful strategy execution.
4.3 Leading Corrective Adjustments:
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Selling direct to customers gave Dell first hand intelligence about customer's preferences and needs, as well as immediate feedback on design problems and quality. While Dell chose to operate the assembly line in the traditional fashion till 1997, with each worker doing a single operation, Dell shift its operation to "cell manufacturing" method after 1997, where a team of workers assembled an entire PC according to customers specification which reduced Dell's assembly time by 75 percent and the productivity per square foot of assembly space was doubled.
Dell followed the Compaq's lead by creating a financial services group to help customers with financing their PC networks, which was considered a good effort to add value for its customers. Dell has also responded to change in the PC marketplace by pursuing greater and greater market segmentation. In the second half of 1996, Dell introduced a low-end PC server costing under $25,000 to the market.
Dell introduced a new line of PC's revealed in three different models, which had new features and equipped for easy, quick Internet access price ranging from $999 to 2,349. These new Web PC could be plugged in and made internet ready, and they also came with a monitor, printer, technical support options and one-year subscription to Dell's Internet service, Dell Net.
In conclusion, it should be clear that Michael Dell in an effective CEO and has performed the tasks of strategic management quite well. Michael Dell should be given the credit for the success of Dell Computer Corporation.
5.0 Examples of Business Strategies
Dell's business strategy fuses its direct customer model, also known as "direct business model", with a highly proficient manufacturing and supply chain management organization and an emphasis on standards-based technologies. Dell's strategy allows its customers to purchase high-quality products that are up-to-date with the latest technology, are customizable, come with quick and accurate customer service and support, and are easy to purchase especially when it comes to online purchasing.
5.1 Build-to-Order Manufacturing
One of the main elements in Dell's business model was manufacturing and selling their products for direct sale only and none for inventory. Customers can customize their own products, order them, the closest factory to their location would have their request built as quickly as possible and shipped out to them. In 2000, Dell had six factories in every corner of the world that assembled their products.
At one point demand for Dell's PCs, laptops and servers increased highly. This called for a hastier rate of production and capacity. Dell's traditional assembly line in which every person in one assembly line was told what to do using flashes of red and green lights was transformed into a cell manufacturing technique in which a group of assemblers formed a cell and assembled according to the required specifications. This increased productivity by 50% and reduced 75% of the time required to assemble per square foot of rented space. In addition, Dell had a solid quality control program in which it ran tests on most of its products and asked its supplier to get quality certified in order to continue their long lasting relationships with them.
5.2 Strategic Alliances
Choosing Dell's suppliers was one of the main tasks that contributed to the success of Dell. Dell believed integrating backwards was a bad idea. Managers at Dell saw four main advantages in long-term contracting with reputable suppliers. First, using reputable name-brand components meant more to end-users than the brand of the overall system itself, keeping in mind that Dell's customers are mostly "tech-heads". Second, the contracts yielded supplier loyalty to Dell in which they always delivered no matter the market condition of such components. Third, the relationship was close enough that engineers from component suppliers were assigned on the Dell designing team, this helped in beta testing of new products and in early design-related problem detection situations. Finally, Dell's long-term commitment to its suppliers laid the basis for just-in-time delivery of suppliers' products to Dell's assembly plants.
5.3 Supply Chain Strategies
Just-in-time inventories are inventories that have short cycle times and comply to stock according to the demand. Dell always practiced such an approach because it saved them money and time. It also helped prevent the stocking of old generation components that might become out of date in a short period of time. According to Michael Dell, inventory is a great risk in the PC industry because the cost of materials involved in the assembly of computers goes down an average of 50% per year.
The key to such a success was collaborating closely with suppliers. Dell was attached with their suppliers using management information systems and inventory software that gave hourly updates of what components were needed for the current demand. For example, using data exchange systems Dell worked with its shippers (Airborne Express and UPS) to pick up the monitor desktop component from one plant and the CPU from the original assembly plant match up orders of customers and deliver directly to the customer.
5.4 Direct Sales
Dell monitored market conditions mainly through the eyes of their customers. Due to high demand on their products any signal of a new trend of market conditions alteration was detected directly. This gave Dell the ability to respond quickly to changes and gain first-mover advantages. Their direct sales were totally customer-driven. Even though not all of their sales were direct almost 10% of their sales were generated by resellers. Dell sometimes offered incentives to their resellers by providing some sorts of discounts that went up to 20%.
Dell studied its market and customer base closely throughout the years. Its market segmentation became narrowed down several times throughout the 90s. In 1994 Dell segmented its market as large or small customers. In 2000, Dell divided its market into 9 segments and 65% of its sales came from large corporations, government agencies and educational institutions. Dell had hundreds of sales representatives calling up such corporations and institutional accounts. Dell's call centers were carefully studied and built. Calls were diverted through a call routing system to the nearest call center as to accommodate cultural differences between the caller and the representative in the call center. In 1995, Dell began sales on its web site (www.dell.com). This allowed customer service and feedback to become an easy and quick process. In 2000, around 43% of sales were web-enabled and the rate was on the rise.
5.5 Servicing Strategies
Customer service and technical support was part of Dell's strategy ever since 1986. Dell used its customer driven direct sales system to research develop methods that will help improve customer satisfaction and provide feedback and support whenever and wherever needed to each and every customer in their base. Such was the creation of its value added services, premier pages, the web site itself, on-site service and support and customer forums.
Dell carefully followed up on customer preferences and needs due to high demand on its products. It always aimed at pleasing its customers more and more. That is one of the reasons why Dell provides value added services with its products. For example, customers could request Dell to install particular software in their ordered product. Dell would provide such a service for a very low cost compared to the time and money value that would have and most probably would've dissatisfied the customer.
Dell also provided online solutions for their customers. Premier pages are basically dell web pages made for large corporations, government and institutional customers to update their orders, place any technical requests etc. Dell currently has over 40,000 premier pages for their large customers. The web site itself provided solutions for small customers such as individual end-users that helped find solutions to their technical difficulties. Some of Dell's online solutions include: e-Support, Dell Talk and Ask Dudley. Ask Dudley was a huge success because customers were able to ask customer service representatives online any question they desired.
Dell also provided on-site service and support. This meant that Dell would send their teams of technicians and programmers to a particular corporation for a project or on a timely or permanent basis to provide continuous support and monitor any technical difficulties faced by the customer. No doubt such customers were large corporations and governments.
Dell also created customer forums in which teams of beta-testers and developers from all around the world met several times a year. Such teams formed one of the main backbone components to Dell's research and development. Also, such meetings didn't just include technical elements but business related elements where managers of all Dell branches around the world including Michael Dell would meet and discuss future plans, suggestions and corporate strategies.
5.6 Technological Strategies
Dell lead changes in the use of the internet and e-commerce technology in the business model. Michael Dell said that a company that was willing to make use of the power of the internet it had to provide customers with a better experience online than offline, execute efficiently and recognize that compressing time and distance in business relationships with suppliers and customers to enhance the velocity of business transactions is the ultimate source of competitive advantage.
5.7 Other Elements
There are several other elements that contributed to the success of Dell's business strategy. Such are demand forecasting, research and development, advertising, dell's increased emphasis on servers and storage devices and their introduction of a WebPC
Dell's management believed that demand forecasting would help accomplish lower costs and inventories hence saving the company millions of dollars. Dell worked closely to its large corporate and government clients to realize their preferences and needs. In addition, Dell's market segmentation strategy helped contribute to their forecast by providing real-time information on each segment's new trends and needs. Dell trained their sales-account managers how to discuss deals with clients and figure out whether purchases were virtually certain or was contingent at some point.
The R&D and marketing departments at Dell contributed greatly to Dell's success. The R&D departments had over 1600 engineers working on product development and design including incorporating the latest designs and features. The R&D units also found ways to control quality and help improve the assembly process. As for the marketing department, advertising was used to emphasize the low prices of Dell compared to its competitors such as Compaq. Compaq sued Dell at some point and did win but Michael Dell never apologized for the particular ad that sparked the legal battle.
Dell also stressed on selling storage devices and servers to large corporations, governments and institutions. Dell teamed up with Electronic Data Systems because of their expertise. The use of such products was on the surge and profit margins were huge. Dell's competitors such as Compaq used such margins to subsidize the price cuts on desktops and laptops but Dell didn't need to hence keeping their prices down and gaining yet another competitive advantage in that sect of the market. Dell also was a pioneer in introducing one of the first (December 1999) web-enabled PCs that is, a laptop that can connect to the internet in a quick manner without the hassle of setting up anything.
4.0 SWOT Analysis
SWOT analysis is a tool used to point out where a firm currently stands. The following table depicts our example's SWOT analysis:
Direct to Customer Business Model.
No Inventory Build Up.
Customized/ Standardized Products.
Customer Service and Support.
Lack of Proprietary Technology.
Unsuccessful Direct Sales Approach.
Dell Direct Store Kiosks.
Explore Emerging Markets.
Huge opportunities to enter the derivation of the PC market.
A- Direct to Customer Business Model:
One of the core elements in Dell's rise to global prominence was its cost-efficient approach to build-to-order manufacturing. This allowed customers to purchase custom-built products and custom-tailored services, which was the most effective ways to meet customer needs so; customers could order whatever configuration of microprocessor speed, random-access memory, hard disk capacity etc they preferred.
B- No Inventory Build Up:
Dell was regarded as a world class-manufacturing innovator and using the Just-in-Time inventory system yielded major cost advantages and shortened lead times.
Dell shifted to cell manufacturing techniques where a team of workers assembled an entire PC to customers' specifications. This reduced assembly times by 75% and doubled productivity per sq ft of assembly space So Dell's implementation of Just-in-Time practices brought it to a new level of faster assembly. Dell partnered with reputable suppliers of PC parts and components. This close partnership allowed Dell to operate with no more than two hours of inventory and newly assembled PCs could be boxed and shipped to customers the same day.
C- Customized/ Standardized Products:
It was a strong advocate of incorporating standardized components into its products so as not to tie either it or the consumer to one company's proprietary technology and components. Standardization was evident in Dells servers, storage, networking and high performance computing.
D- Customer Service and Support:
The direct sales model also enables closer customer integration. Dell has built strong and stable relationships with both large corporations and smaller enterprises that are its core customers also; Dell is seeking to enhance its online technical support tools reducing number and cost of telephone costs.
E- Internet Sales:
The company was ideally positioned to take advantage of the Internet because of its distinctive supply chain i.e. no distributors or retailers unlike rivals had. Customers could easily configure their own product online just like they were already doing over the phone. Through the use of the Internet and e-commerce technologies, Dell aimed to squeeze greater efficiency out of its supply chain becoming a low cost provider. By 1998, its Internet sales had accounted for more that half of the firm's total revenues, which had surged to more that US$20 bn. Dell had used its Website as a powerful sales and technical support tool. Few companies could match Dell competencies and capabilities in the use of Internet technology to improve operating efficiency and gain new sales in a cost-efficient manner.
A- Lack of Proprietary Technology:
Dell lacks proprietary technology. These are products and components that Dell buys from manufacturers and market as their own e.g. CRT monitors were manufactured by Sony. Dell is highly dependent on component suppliers and is primarily a computer maker and not a manufacturer.
B- Unsuccessful Direct Sales Approach:
The direct sales approach is perhaps not the best way to access first-time buyers. Nowadays, many people are PC savvy individuals but Dell must not ignore those new to the technology age. People like to test the product in-store and get advice from sales assistant making sure they know exactly what they are getting before a purchase is made.
A- Dell Direct Store Kiosks:
One of the main drawbacks many people had about buying Dell computers in the past, was that you could only get them from Dell direct and their online website. This didn't appeal to many first-time buyers and as a results Dell introduced Dell Direct Store Kiosks.
B- Explore Emerging Markets:
Dell is searching for Global leadership and must consider competing in emerging markets. The business risks are considerable but the opportunities for growth are huge.
C- Huge opportunities to enter the derivation of the PC market:
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. Dell started off their product range with PCs then laptop and later on introduced servers and online storage devices.
A- Competitive Rivalry:
Dell will have to keep at watchful eye on its competitors in the race for global leadership. Michael Dell hasn't been too worried about competitors trying to copy Dell's business strategy but he must not become complacent.
B- Component Suppliers:
A weakness of Dell is that it is heavily reliant on component suppliers and lacks proprietary technology. There is a danger that some of Dell's key component suppliers will decide to form strategic partnerships with Dell's rivals to supply them with PC components. Dell's whole strategy is built on the fact they do not manufacture but get the necessary components from specialist suppliers.
C- Currency Exchange:
Dell, being global in its marketing and operations, is exposed to fluctuations in the World currency markets. Although it is a very lean organization, orders do have to be placed some time ahead due to their size or value. Changes in exchange rates could leave the company exposed to potential losses in parts of its supply chain.
7.0 What is a Competitive Source of Strength?
Strengths of corporations that give them competitive advantage come from several sources such as the amount of skill or expertise that the firm's manpower has acquired as leaders of an industry through time. In addition, such competitive edge can originate from organizational assets such as quality control systems and plants allowing low-cost leadership and utilizing economies of scale to eliminate competition. Other sources of competitive strength can be valuable intangible assets such as customer loyalty, brand name as well as competitive capabilities such as shorter development times, the ability o customize and differentiate and a solid framework of integrated supply chain participants leading in delivery and productivity (Thompson & Strickland 2001).
Weighted Competitive Strength Assessment
(Rating Scale: 1 = Very Weak; 10 = Very Strong
Key Success Factor/
Quality and Performance
Weighted Overall Strength
7.1 Competitive Strength Assessment Matrix
From the data found above we can conclude that Dell has the most competitive strength amongst its competitors followed by Compaq then HP then IBM and finally Gateway. The data suggests that Dell outweighs all other competitors in technology, manufacturing capability, distribution system and financial resources.
On the other hand Dell must create some sort of defensive strategies especially against Compaq when it comes to product innovation and customer service. Even though Dell does possess one of the best online support and help solution compared to other competitors in the PC industry it still lacks Compaq's real-time customer service stations geographically dispersed all over the world. Dell's defensive strategy perhaps can include launching customizable laptops with not only different hardware and software specifications but also designs too.
8.0 Gaining a Competitive Advantage
Focusing on cost leadership has allowed Dell to sustain a competitive advantage in the PC market for the last few years. The primary method Dell uses in order to realize and sustain their competitive advantage is a distinctive, direct to consumer business model. The model is known as Dell Direct, this refers to their relations with their customers as being "direct". This model helps Dell focus on the price for performance, customization, service and support. Additionally, Dell is able to differentiate itself from its competitors with its customized just-in time manufacturing. With this customization, Dell is able to offer customers more value for their money by abolishing intermediaries in their procurement, manufacturing and distribution processes.
Dells primary resources include the most up-to-date technology and IT tools that allow it to effectively move along their advanced supply chain and attain the value they are reaching for. Dell's value chain allows Dell and its suppliers to exchange information and interact with each other. The Internet, Dell's key IT factor in its success, results in lower costs to customers than other retailers because customers tell Dell precisely what they want and Dell builds PCs for the customer without experiencing inefficient resources in production.
It is obvious that Dell's competitive advantage is due to its direct model success. Through Dell's IT performance, which combines its resources, its relationship with suppliers and its consumer communication capabilities, Dell has developed a big advantage over its competitors. So in order to purchase a Dell you must deal with them directly, there is no going to an outside retailer to buy a Dell. By doing this Dell can save the consumer a whole lot of money. Because of this competitive advantage Dell has been able to grow tremendously over the past few years.
Even as other PC makers such as HP are squeezing suppliers in order to become more competitive on price, Dell still can sustain its distribution advantage. This distribution advantage will allow it to capture extra margin instead of sharing it with distributors and retailers. Because of its just-in-time manufacturing it can maintain much lower inventories than its competitors; which cuts costs down. So by limiting cost in distribution and inventories, Dell can pass the savings on to the consumer.
Dell's competitive advantage creates a barrier for new entrants, in that it would be very costly to imitate Dell in its cost leadership strategy. For this reason Dell has been able to stay on top of the PC market for the last few years. Even though Dell's competitive advantage as a low cost producer is shrinking; it is still there, and from it come other advantages as mentioned earlier. The distribution advantage will probably be sustained for Dell until other PC makers make similar deals with suppliers. In analyzing Dell's competitive advantage one can see that its distribution advantage will probably be the last to wear away. Most competitive advantages are short lived as competitors find ways to imitate a strategy. With Dell their competitive advantage is tied to many different factors within the company, from distribution to low inventories and direct selling to consumers. But, it all ties in to being the low cost leader of PCs.
To ensure Dell remains a low cost strategy it has adopted a cost-conscious corporate culture and also persists on benchmarking its costs with the contribution of its own employees. To do so, Dell uses daily facts and data in making its decisions. The company develops loss and profit statements for each part of its business and managers were expected to base their decisions on such statements.
Dell Computer chooses its employees not only based on their intelligence and results-orientation personalities but also on the fact that they are ready for to learn and try something new. Once the employees are faced with new problems no matter if they were faced in the past or not, employees are expected to come up with innovative and unexpected solutions. The HR department at Dell plays a vital role in choosing among hundreds of candidates every week. The newly hired employees were trained to learn and become part of the Dell corporate culture because Dell looks at its employees in such a way as that of father to his son, a long-term relationship.
How long Dell will maintain its competitive advantage will be determined by how quick competitors are able to imitate Dell's direct to consumer model. HP appears to be offering its consumers a way of customizing a PC to the needs of the specific consumer. This of course is a way to offer HP customers what Dell customers have been enjoying for quite a few years. Of course competitors will still need to try and imitate Dell's supply chain management which could prove costly for Dell's competitors.
9.0 How are Firms Evaluated Financially?
The following indicators which are heavily used in academically in finance and by professional in the financial market and financial institutions include gross profit margins, earnings per share, working capital and operating profit margins. The following chart depicts our example, Dell, financial performance during a five year period from 1996 to 2000.
Gross Profit Margin
Earning Per share
Operating Profit Margin
9.1 Gross Profit Margin:
Gross Profit Marginal is a financial ratio tells us how much money a company makes from spending 1 dollar on the cost of its goods sold. It must be kept in mind that such a ratio does not take into account administrative costs hence making gross profit margins higher than net profit margins (BizEd 2010).
In Dell's case it has shown that the percentage of revenue in order to cover the expenses has increased whereas its revenue over the last five years increased in way that it could cover its expenses sufficiently which lead this ratio to increase from 1,067 in 1996 to 5,218 in 2000.
9.2 Earnings Per share:
Earning per share reveal how much investors get in return per year from investing one dollar into a company's stock. Earnings per share take into account the profits for a financial period available for equity order in ratio the average number of issued stock by the listed firm.
Because of the good business Dell has experienced during the last five years the Earning per share of each stockholder increased and is shown from 0.19 in 1997 to 0.56 in 1998 and a better surge in 2000 to 0.66.
10.0 When is a Corporation Ready to Go International?
Prior to entering a foreign market corporations usually conduct intense research with foreign research firms with an international reputation to understand attractiveness factors such as the size of the market and its potential growth as well as intensity of competition as it may be a great barrier to entry. Furthermore, a PEST environmental scan is undertaken that will allow the firm to understand the social, political, economic and technological environments. Resource requirements and start up costs are significant elements as they tell the company whether it is financially feasible to start up a branch in the foreign market or have a joint venture with a domestic firm abroad. Risk assessment is important and can be foreseen in the degree of uncertainty (Hunger & Wheelen 2006).
After taking a deep look into Dell's strategy and analyzing it we have come with several recommendations that will allow Dell to increase its market share and overcome threats from its growing competitors. Dell is looking at a sudden change in market conditions after the year 2000 which is quite challenging. In the past 8 years competitors have found it easier to imitate Dell's direct business model. Several competitors as we have mentioned earlier now allow customers to directly order PCs and laptops straight from their factories. Dell must drastically change its strategy while keeping all its costs low.
We recommend that Dell uses a differentiation strategy as the world prices are increasing and developing nations are becoming wealthier they do possess strong emerging markets such as China. Differentiating would allow Dell to accommodate the low-income classes that are getting richer year after year. Another strategy is broadly diversifying into related businesses such as the peripherals industry. Companies such as HP already have invested into the peripherals industry and are doing well especially in the MP3 industry.
Another suggestion we would like to recommend to Dell is formulating defensive strategies when it comes to product innovation. Dell should invest more into R&D in order to understand people of other cultures, how they think, what they like, what their margin of consumption is etc. Such information will allow Dell to innovate its products according to the regional markets it has a piece of the pie in. For instance, if Dell were to create white laptops that are heat resistant many people living in the Middle East, which is a very hot region, might perhaps grab a Dell instead of other products. Other than innovating design Dell has to be more considerate towards people that aren't very tech-savvy. That is, launch products are simple for customers to understand without going into specific details.