Dell Corporation SWOT Analysis

SWOT Analysis

Dell Computer Corporation was founded by Michael Saul Dell in 1984 with their simple premise as the basic foundation that personal computers could be built and sold directly to customers and by doing this, Dell could address their specific needs and provide the best computing solutions that meet those customers needs. (Cuizon G., 5 March 2009)

Basically, Dell is using Direct Method which provides two advantages: 1. reducing marketing and sales cost by eliminating markups of distributors and retailers and 2. building to order reduced inventory costs and risks of retaining inventories. (Cuizon G., 5 March 2009)

Dell’s Direct Model is the main reason why Dell has achieved its high status in business today. This tactical model enables Dell to interact with customers directly providing them with fast, reasonably-priced and friendly means of production and distribution. (Cuizon G., 5 March 2009)

(S)trengths

Dell is one of the largest technological corporations (PC maker) in the world that develops, manufacture, sell and support personal computer, laptops and other computer peripherals. (Mba tutorials, 22 December 2009) Dell is ranked at number 38 on the Fortune 500 in 2010. Fortune also ranks it as the Number 5 most admired company in computer industry. Dell has large acquisitions and mergers. For example acquisition of Perot Systems in 2009 and Alienware in 2006. (Mbalectures, 20 October 2010) Besides that, The Dell brand is one of the best known and renowned computer brands in the World. (Marketing Teacher, 2010) Dell has experienced management and leadership. For example Michael Dell who is presently the computer industry’s longest-tenured (CEO) chief executive officer. Dell is also a highly inventive company in its industry and has very strong E-commerce and supply chain management. Dell is the biggest firm in the Austin and second biggest non-oil corporation in Texas and fifth largest in Texas by revenue. (Mbalectures, 20 October 2010)

As we know, Dell is using Direct Model which contributed the success to Dell by enabling the company to offer direct relationships with customers such as corporate and institutional customers. Their strategic method also provides other forms of products and services such as internet and telephone purchasing, customized computer systems; phone and online technical support and next-day, on-site product service. (Cuizon G., 5 March 2009) Now, in a market that is ever changing, competitors are challenging Dell with new and unique products in an effort to overcome the superiority of the Direct Model. (Docstoc, 2010) This extensive choice of products and services is absolutely one of Dell’s strengths to compete with its competitors. (Cuizon G., 5 March 2009) The growth and development of laptop computers is a primary area in which Dell can work for continued success, despite the threats posed by its competitors. (Docstoc, 2010)

Clearly, many of the Dell’s strengths come as results of the Direct Model. The model itself could be considered one of the company’s greatest assets. However, a few specific advantages are gained from through the Direct Model relative to the laptop market. (Docstoc, 2010)

First of all, the Direct Model allows the consumers to fully customize their laptops. The market is becoming more educated, now more than ever individuals want a product that can target their specific needs. In the case of laptops, this means that customers want more choices in terms of both performance and profitability. (Docstoc, 2010) By understanding customers’ needs and preferences is important strength of the company, Dell has cut out the retail seller and sells directly to the customers with no use of a middle man.

Dell has made it possible for all customers to have the chance to fully customize their product. (Docstoc, 2010) In term of capture data on its loyal consumers, Dell is using information technology and Customer Relationship Management (CRM) approaches. Thus, a customer could selects a generic PC model, and then adds items and upgrades until the PC is kitted out to the customer’s own specification. Components are made by suppliers, never by Dell. (Oppapers, 2010)

In addition to this customization, the Direct Model benefits the customers with fast delivery of products. This allows customers to place their order, and receive their customized computer often within days. Both these advantages are the greatest assets in targeting the home-user market segment. (Docstoc, 2010)

Besides the fast delivery, Dell also offer their customers the ability to track their delivery. (Quality Assurance Solutions, ND) Customers can keep track of their delivery by contacting customer services which is based in India. The finished goods are then dropped off with the customer by courier. Dell has total command of its supply chain. (Oppapers, 2010)

Dell also has an advantage in their inventory turnover time, and in their well established relationship with their suppliers. (Docstoc, 2010) These just-in-time (JIT) producing approach creates huge cost savings by minimize the costs, which Dell can pass on to its customers. (Mbalectures, 20 October 2010) As a result, Dell produces the products which is customized, low-priced and deliver to the customer’s door within days. (Docstoc, 2010)

Dell has differentiated itself from competitors by providing potent systems to the customers at competitive prices. (Mbalectures, 20 October 2010) By low assembly costs by using relatively cheap labour(Oppapers, 2010), low manufacturing costs(Quality Assurance Solutions, ND), and also boasts the industry’s most efficient procurement, manufacturing, and distribution system allow Dell to offer the customers powerful systems at competitive prices. (Cuizon G., 5 March 2009)

Besides that, Dell has strong customer base too. Dell is targeting the business executive category by approximately two-third of Dell’s sales is generated from government agencies, large corporations and educational institutions. (Mbalectures, 20 October 2010) In other words, Dell has already created long-term relationship with large companies, and this provides most of their business. These companies, in turn, pass the relationship on through their employees, providing them with Dell products. (Docstoc, 2010)

(W)eaknesses

The significant weaknesses of Dell is fail to attract the market of college student segment. (Docstoc, 2010) Dell’s sales revenue from educational institutions such as colleges only average of 5% in total. Due to much focuses on business customers, it affected its ability to form relationships with educational institutions. (Cuizon G., 5 March 2009) And, as many students purchase their PC’s through their school, Dell is clearly not in a position to take advantage of the college market. (Docstoc, 2010)

Dealing with huge amount of supplies of products and components from many different countries can causes Dell some embarrassment when products are recalled. (Oppapers, 2010) For example, great troubles in quality, manufacturing and services. (Mbalectures, 20 October 2010) Dell. In 2004 Dell had to recall 4.4 million laptop adapters because of a fear that they could overheat, causing electric shocks or fires. (Oppapers, 2010)

Another weakness of Dell is there is no diversification and the company is only focusing on the PCs business. (Mbalectures, 20 October 2010) Dell is a computer maker, not a computer manufacturer. (Oppapers, 2010) In other words, they build computers, not develop them. (Quality Assurance Solutions, ND) Dell buys from a group of concentrated hi-tech component producers. Whilst this is a great advantage in terms of business processes, allowing Dell to focus on marketing and logistics, the company is reliant on a number of large suppliers, and to an extent is locked in for periods of time. For example, due to the lack of large suppliers in the World, Dell unable to switch supply. (Oppapers, 2010)

In term of home users, Dell have the serious problem on its direct method and customization approach. (Cuizon G., 5 March 2009) First, customers cannot go to retailers, try a few different products, and walk home with a computer all in a single trip because of Dell does not use distribution channels. (Docstoc, 2010) The very differentiates thing if Dell from its competitors, customization also creates a problem in that customers just can’t buy Dell as simply as other brands. It is because each product is custom-built according to their specifications and this might take days to finish. (Cuizon G., 5 March 2009) And due to this, many computer buyers are wary of a product that they cannot personally examine it before purchasing. In addition, some of the anxious buyers would have no patient to wait for their products to deliver for a number of days. (Docstoc, 2010)

Moreover, Dell also has weakness on its technology. (Mbalectures, 20 October 2010) It  have no proprietary technology to offer the market , Dell is currently using the technology which are shared by the other major competitors. (Mba tutorials, 22 December 2009) Besides that, it changes its technology at very fast rate. (Mbalectures, 20 October 2010)

(O)pportunities

Personal computers are becoming a necessity nowadays. Demand for laptops is also growing much faster than desktop computers. As a matter of fact, demand for laptop has overtaken the demand for desktops. This is create a great opportunity for Dell to grow in all other segments. (Cuizon G., 5 March 2009)

Besides that, the trend toward more educated buyers also provide great opportunity for Dell by increasing the number of second-time buyers. (Docstoc, 2010) Second-time buyers would most likely avail of Dell’s custom-built computers because as they have purchased computers in the past know what they want, so do their need to experiment or use some additional computer features. (Cuizon G., 5 March 2009) Here, Dell makes use of the Direct Model which can provide the framework for customers to make truly personalized computers in a relatively hassle-free environment. (Docstoc, 2010)

Furthermore, improvement in technology will help Dell to introduce efficient-manufacturing systems which will decrease the production cost. (Mbalectures, 20 October 2010) For example, increased communication and technological integration, such as Internet create good opportunity for Dell because all the customers can now go to visit Dell’s website to place their order or to get information. Since Dell does not have retail stores, the online stores would surely make up for its absence. It is not only benefits to Dell, but all the customers. It gives the customers convenience to shop online than to actually drive and do purchase at a physical store. (Cuizon G., 5 March 2009)

Another opportunity for Dell would be maintain the excellent lead that was taken by the founder of Dell, Michael Dell will be challenging. (Quality Assurance Solutions, ND)Kevin Rollins replaced Michael Dell in 2004 as Dell’s Chief Executive Officer. Dell remained the company’s Chairman. Despite founder Dell’s massive success, new blood and a change in management thinking could lead the company into a new and more profitable time. Dell was born in 1965, and founded Dell in 1984 with $1000 whilst studying at the University of Texas. He became the youngest Fortune 500 CEO in 1992, and will be a tough act to follow. (Marketing Teacher, 2010)

Diversification in related and unrelated business, such as softwares, broadband, security devices, and PC software are some of the rapid growing segments in Dell company. (Mbalectures, 20 October 2010) Besides, innovation makes Dell to introduce many new products to its range which includes printers, toners, LCD televisions and other non-computing goods in order to respond to the rapid changing industry. Thus, Dell is competing against iPod and other consumer electronics brands. (Marketing Teacher, 2010)

Furthermore, sustaining low-cost leadership is also an important opportunity for Dell. (Mbalectures, 20 October 2010) Dell is branding and selling low-cost, low-price computers to PC retailers throughout the world in order to open other avenues of branding opportunities. (Quality Assurance Solutions, ND)The PC’s are unbranded and should not be recognised as being Dell when the consumer makes a purchase. Rebranding and rebadging for retailers, although a departure for Dell, gives the company new market segments to attack with the associated marketing costs. (Marketing Teacher, 2010) Thus, Dell has opportunity to sell computer directly to retailers. (Mba tutorials, 22 December 2009)

(T)hreats

The single biggest problem of Dell is the competitive rivalry that exists in the PC market globally. (Marketing Teacher, 2010) Dell is facing strong competition in the industry, such as IBM and Intel to sustain its market share. (Mbalectures, 20 October 2010) As with all profitable brands, retaliation from competitors and new entrants to the market pose potential threats. As we know, Dell sources from Far Eastern nations because of the low labor costs, but there is nothing stopping competitors to follow what Dell is doing, such as sourcing the same or similar components from the same or similar suppliers. Remember, Dell is a PC maker, not a PC manufacturer. (Marketing Teacher, 2010)

In a volatile market such as personal computers, threats abound. Computers change in a constant sometime daily basis. New software, new hardware and computer accessories are introduced at a lightning speed. Thus, the innovation is essential for Dell by always looking out for new things or introducing new computer systems to the market. The threat to become outmoded is a pulsating reality in computer industry. Not only that, companies are also facing the challenge to produce products that are high in quality but low in price. (Cuizon G., 5 March 2009)

Therefore, one of the biggest external threats to Dell is the increasingly lower prices for products amount their competitors (Quality Assurance Solutions, ND) and make the price difference among brands is getting smaller. Although Dell’s Direct Model attracts customers because it saves cost, other companies are also able to offer their products at low costs which could threaten Dell’s price-conscious growing customer base. Since the prices of the brands are identical, price difference is no longer an issue for a customer. Therefore, they would choose other brands rather than waiting for the delivery of Dell’s customized computers. (Cuizon G., 5 March 2009)

Due to the growth rate of the computer industry is slowing down, Dell which has the biggest share of the market has also slows down the demand of its products. If the demand slows down, the competition will become stiffer in the process. Dell has to work doubly hard to differentiate itself from its substitutes, such as Ipad which introduced by Apple Corporation in order to continue holding a significant market share. (Cuizon G., 5 March 2009)

Technological advancement is a double-edge sword. It provides an opportunity but at the same time a threat for Dell because advancement in technology outmoded the manufacturing facilities as well as the company. (Mbalectures, 20 October 2010) Low-cost leadership strategy is no longer an issue to computer companies therefore it is important for computer companies to stand out from the rest of competitors. Therefore, in order to compete with others, Dell has to always keep up with its technological advancements. (Cuizon G., 5 March 2009)

Besides that, due to being global in its marketing and operations, Dell 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 company size or value. (Marketing Teacher, 2010) Changes in exchange rates could make the company’s global business exposed to potential losses in certain parts of its supply chain. (Quality Assurance Solutions, ND)