In the political environment, DELL has to face some restraints. For instance, DELL is issue to laws that regulate almost all aspects of their business, including health safety, pollution, advertising and label requirements. Besides that's, troubles can occur in countries where political constancy is not guaranteed, despite companies operate production facilities or exports. Many countries still have restriction policies which are maintain to protect domestic manufacturers and production. Therefore, such policies often obstruct foreign companies from enter into these markets; the only chance to do business in those countries is to set up partnerships with local companies, where they are also forced to accept alternative shares and to provide money and technological.
Exchange rate of the home currency is affected Dell Company which is products are imported, and fluctuation changes of their prices. Next, economic down turn, will make the Dell lose their home users markets, and if the income increase, consumers are like to purchase more quality products rather simple purchase.
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Based on the consumer behaviour, Dell start to invest door to door, and face to face operation to gain more customers, such as Dell realize that's, customers like to touch, and comparable prices of other competitors, Dell are start to distribute in supermarket, like Walmart. Secondly, the higher education for children today is get familiar of the computers, they are representing the generation that hardly live without computer, so Dell are offering wide range of product line, and create the strong brand name.
Dell keep on improve their technology and spend many money in research and development department, so they are leading technologies in the markets, such as Alienware which is high end design with exclusive multimedia capacity, and has highly performance. Internet is an immense opportunity for companies more easily to enter markets as well as a rapid way to adapt services to its customer segments. But, this also is a threat of the Dell which wants to access in China via Internet, because is cost Dell expensive compare with other country.
The strength Dell is to provide the low prices with high performance of products for the customers. Dell is also providing the high level of customer services when delivering the end of product. Besides, Dell is launching technologically advanced products to compete with the competitors. Dell uses the direct sales model in order to rapidly reach the customers preference earlier than competitors.
The weakness of Dell is no physical stores. Thus, it leads the customer's lack of immediate gratification and the customers can't compare the multiple models and the prices of the computers. Besides, the price war also leads the price cut of Dell.
The opportunity of Dell is to diversify the distribution channel in order to reach more customers. Dell also launched the region-specific products to satisfy the needs of BRIC countries. Besides, Analysts suggest small and medium business will growth with 4 to 7 percent is the fastest growing of opportunity.
The threat of Dell is the direct competitors from Japanese. They are offers the low prices-high performance of products to customers. Besides, the economic downturn was leads the supplier products delay and customer reduced demand.
Porter 5 Forces
Threat of new entrance of Dell is high. It is because many competitors continue entering into the computer manufacturing market such as Japan, Taiwan, and etc.
The bargaining power of buyer is low as there are many of competitors in the computer industry. Nowadays, customers are more prefer the technology advanced products. Thus they can comparison Dell products with the competitors.
The bargaining power of supplier of Dell is high. The Intel and Microsoft are the main suppliers of microprocessors and operating systems. The majority of computers components are offer by the Intel and Microsoft.
Threat of substitution of Dell is high since the products from Dell are similar with the competitor's products, such as HP, Acer and Toshiba. Thus, Dell is easily substitutes by the competitors.
The rivalry of competitors is high. There are many of direct competitors with Dell. Besides, they are also competes with the low cost high performance products for the same target market.
Value Chain analysis
Always on Time
Marked to Standard
Just in time manufacturing process, without inventory, and goods don't have keep in warehouse.
Dell has computer customization and direct sales model.
Dell has self-delivery system, no intermediaries involved.
Marketing & Sales
Dell has direct sales to competitors, and mail-order Company.
Warranty, user support, 30days money back guarantee, free on-site, maintenance and repair services.
Dell has manufacturing plant in Malaysia, China, United States, Europe, Middle East, Africa, and etc.
Dell Concentrate in R&D development to invent more products.
When dell received order, supplier should provide materials to Dell, and makes it, such as Eagle Global Logistics, Cerqa Copyright, Intel, Microsoft, Linux, and etc.
Long term objectives
According to Pearce and Robinson (2011), a long term objective is helping Dell Company to achieve long-term prosperity in area:
The first area is profitability of Dell Company long-term objective is "To increase in market share and sales."
Second area technological leadership is "To be an innovator leadership in hardware and software product industry."
Third area public responsibility is "To become more "green" and energy efficient"
The fourth area long term object Dell productivity is "To create a whole new business, build customer product for those customer."
The last area found is competitive position. "Dell Inc.'s competitive position is improving in the global PC market."
Generic and Grand Strategy
From the case, we can analyse that Dell was categorized under cost leadership. According to IDC for Q1 2009, Dell's standardized desktops and laptops were the top leader and most popular in North American and European enterprises over HP and Lenovo. Small and Medium business do not have large amount of resources for IT needs. Small and medium business will not like to spend too much on IT and they will more sensitive about the price. For the public sector, they just required standardized and simplified solution to satisfy their IT requirements.
Dell was also categorized in differentiation focus. Large enterprises need to customize their corporate servers. Dell provided technologically advanced differentiated products with a premium price in order to increase profit margins. Besides, Dell targeted consumer who are technology savvy and willing to pay premium price for latest and best technologies product. Dell has increased research and development spending to facilitate the development of differentiated products. Dell direct sales model was the strategic advantages for them. Dell is seeking to detect shift in consumer preferences earlier than competitors to reduce new product development time. It increases Dell's pricing power and competitive advantage.
Dell has used market development as their grand strategy. In the past, Dell targeted their business mainly within the regional but now there are trying to target globally. Dell strengthened their market position by opening a manufacturing plant in Malaysia. Dell diversified their sales channels by introducing their products in large computer retail stores. Dell is also diversified its distribution channel beyond direct sales to remain competitive as consumers like to shop in retailers and compare the model directly. Dell had expanded the retail outlets to worldwide in Year 2009.
Dell has used concentrated growth as their strategy. Dell focuses on providing region-specific products to meet the needs of emerging markets, Brazil, Russia, India and China. These markets need a low-cost PC that provides the basic functions. Dell introduced Vostro-A line of desktop and laptop computers that focused on the needs of price-sensitive customers in these markets. Dell efforts have led to 20 percent sales growth within the BRIC market.
Dell also used concentric diversification to maintain their strong competitive position in the market. Dell expanded its product portfolio to include peripherals such as printers, projectors and displays.
Dell also came out with innovation strategy. Dell is finding to be an innovator in hardware and software products that enable Net 2.0 companies such as Microsoft, Amazon.com and Google initiatives where companies deliver hosted servers over the internet. These companies need massive computer network to support their businesses. Supporting these companies with technologically advanced solutions is important for Dell to maintain its leadership in this market. Other than that, Dell introduced cameras and microphones into external monitors.
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Dell also used horizontal integration as their strategy. In 2006, Dell acquired computer hardware manufacturer Alienware. Besides, Dell also has used vertical integration. In 2008, Dell acquired both ASAP Software Express Inc and EqualLogic. Dell executives expect it will allow them to offer a wider array of storage products specifically tailored for this market.
Short term objective (Balance scorecard)
The balanced scorecard is set of four measures that are directly linked to the Dell's Strategy. The first measure financial performance objective of Dell Inc. is expanding revenue opportunities measures sales growth by segment and each segment in 25% sales growth.
Second is measure customer knowledge. Object of Dell Inc. is keep customer loyalty by using partner with customer to provide customized solution and building long-term relationship with customer.
Third is measure internal business process. Object of Dell Inc. is innovation product measures quality and performance rating. Dell is target increase product line in each category by using strategic initiatives increasing the research and development spending 39.1% and the technological innovation of product to meet leadership in the market.
Last, learning & growth in Dell is listening to customer needs and provides fully customizable on desktop, laptop, server, and support services for market. Also, Dell keeps innovative to come out new product.
According to Pearce and Robinson (2011), functional tactics is undertaken in area:
Dell marketing should identify what customer need in each segment. Moreover, Dell should highly differentiated product and service in marketing program. And also provides different price for different target segment.
The finance of Dell should expanding revenue opportunities and remain a fiscally stable company. Finance should maintain a sale is growth by 25% in each target segment.
R&D should continue innovation and expand their product line. For example, increase the function to meet customer needs and maintain the leadership in technology.
The Dell production line should maintain good quality product and seek the market trend such as the market going to using laptop. Therefore, Dell should reduce the desktop production and increase the laptop production.
Polices found in the case is changes in U.S. monetary policy also economic polices around the world lead to volatile exchange rate. Therefore, Dell is facing risks despite its foreign currency hedging program.
Organizational structure, leadership, and culture
First of all, Dell is functional structure which is one on which the tasks, people, and technologies necessary to do the employ of the business are divided into different groups with enlarge formal procedures for coordinate and integrate their activities to present the business product and services. For example, Steven Schuckenbrock is the CIO in the DELL, and responsible into support service, Ronald G. Garriques is president of Global Consumer Group, which responsible consumer's desktops and Alan Lafley which is marketing group of Dell.
Besides that's, Dell also is virtual organization, because suppliers, customers, and subcontractors are link mainly by information technology contribute to skill, access to markets, and costs. For instance, Dell is directly serve to customer via network, using information technology to contract suppliers when it need to supply they materials, and contribute to skill to other manufacturing plant in another county, such as Malaysia, Taiwan, London, Canada, and etc.
Michael Dell is a leadership of the Dell Company, he founded in 1984, and the he realize that direct business with customer is the best way to establish and sustain global leadership. For example, the vision that he realize is direct customer sales business model, which is provide it with deeply customer knowledge so that solution can be successfully adapted to meet customers' needs.
Other than that's, Michael Dell has perseverance, principles, and passion to build an organization. Perseverance, because in 1984, he name only are $1,000, he refuse to studies and he came out the first computer Turbo. Principles means he honesty, ethical behavior, and integrity to customers who purchase Dell computer, he provide excellent customer service to maintain the relationship. Therefore, passion of Michael Dell is he doesn't satisfy the successful of Dell, and he always improves an organization, and provided strategy to improve sales profit. For example, Dell realizes the distribution channel is a weakness of the company, then he distributes more channel.
Michael Dell has sources of personal influence which is referent influence. Most of the people have tough desire to be Michael Dell, because they admire, gain reputation or a sense of purpose by association, and believe Michael Dell motivation is ethics, and good. For example, in 2007, Michael Dell is returned as CEO, since the unfortunate performance and scandal with accounting practices of Kevin Rollins.
Lastly, the organizational culture of Dell is direct customer business model, low cost leadership, and company must keep pace with changing consumer attitude, and market condition. A customer is made Dell on great place in the market, they need to smart and quick to understand and a listen customer need, that is the culture Dell Company are success.
Strategic control is defined as management efforts to track a strategy as it is being implemented, detect problems or changes in its underlying premises, and make necessary adjustments. Question "are we moving in the proper direction" and "how are we performing?" can apply to drive the strategic control. There are 4 types of strategic control which are premise control, strategic surveillance, special alert control and implementation control.
The mission of Dell is to be the successful computer company in the world at delivering the best customer experience in markets that's Dell serve. Thus, the control is conducted to ensure the mission is still valid for the strategies to base on. Besides that, the changing environments also have examined by the premise control to examine whether the base for formulation of strategies is valid. For example, technologies factor has the significant affect on Dell since Dell is selling IT related products. Thus, the control examines the technology factor to see whether that it is valid for Dell to formulate strategies.
For example, Dell can grab the opportunity which in the technological front, the trend was going toward mobile computing. It is an opportunity for Dell to grab more market. Dell introduced Dell Inspiron Mini series in the netbook market.
Special alert control
During the economic downturn, changes in US monetary policy lead to the volatile exchange rate and Dell was exposing to the currency risks since it is global company. Dell has to formulate some strategies to face the currency risks. Besides that, when government and environmental groups called the corporations to be more "green", Dell as the industry leader quickly announced that it has achieve the more "green" goal by becoming 'carbon neutral' and being more energy efficient. On the other hand, the suppliers of Dell, Microsoft and Intel fined for anti-competitive practices and this will affect the Dell's price arrangements with suppliers. Dell has to solve the problems to stabilize the prices of the materials.
Dell primarily operates on a direct customer sales business model and very successful to gain market share and revenue growth. Well, when the economic downturn and Dell's market is impacted, Dell reorganized its business units into 4 globally operated areas which are large enterprise, public sector, small and medium businesses, and global consumer to better align with the customer needs.
Strategic issue and recommendations
Low cost leaderships
Dell should not maintain low cost leadership; they need to invest more high-tech technologies with premium prices, and suitable customers' needs.
Effectiveness of direct sales model
Customers prefer to compare computer models in retail stores.
Slow growth in business and corporate level business
Dell should invest more in R&D to develop new technology.
Dell should be differentiates its products from its competitors' products. For example, the Alienware with high gaming specs for ultimate gamers.
Expanded distribution outlets
Close down outlets which are unprofitable.
In a nutshell, we have analysis of external and internal environment issues, key issues identified, and strategy recommendation of Dell, and we appreciated of our lecturer and tutorial gives this chance to understand Dell situation.