Dell, strategic management,strategy


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Dell, Strategic management, Marketing, Marketing strategy, Project portfolio management, SWOT analysis,

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  • 4. Dell was labeled as a “mail order company” , but less than 5% of sales actually came from individual consumers . Most sales were to business customers through its direct sales force, with 50% of sales going to large corporate accounts and the other 4 5% of sales going to medium and small businesses.
  • Dell's competitors shifting their business models to build-to-order manufacturing to reduce their inventories and speed new models to market , but all found it hard to duplicate Dell's approach
  • Software, datacenter, cloud _ computing, storage, virtualization to reduce dependence on the desktop and notebook market where profit margin are typically lower & to better compete in market. While primarily known as a hardware provider, Dell is not new to professional services as it acquired Alienware (2006), Perot Systems (2009), Software-as-a-Service (SaaS) (2010) , helping both the hardware and service side of Dell. Customers getting more educated about computers. Second-time buyers would most likely avail of Dell’s custom-built computers because as their knowledge grows, so do their need to experiment or use some additional computer features.
  • Dell's corporate computer business slowed gradually, forcing the company to increase its efforts to attract personal computer users. Also, personal computers have become more affordable to consumers over the past several years which have decreased the profit margins for major manufacturers.
  • Dell's strategy was to partner with as few outside vendors as possible and to stay with those vendors as long as they maintained their leadership in technology, performance, and quality. Second, because Dell committed to purchase a specified percentage of its requirements from each of its long-term suppliers, Dell was assured of getting the volume of components it needed on a timely basis even when overall market demand for a particular component temporarily exceeded the overall market supply. Dell's formal partnerships with key suppliers made it feasible to have some of their engineers assigned to Dell's product design teams and for them to be treated as part of Dell. Dell's long-run commitment to its suppliers laid the basis for just-in-time delivery of suppliers' products to Dell's assembly
  • In the early 1990s Dell products were available through Best Buy, Costco, and other retailers, but the company stopped this distribution in 1994 due to low profit margins. Advantage from customizing computers and selling them directly to consumers, but the market for such offerings has shrunk that includes the centralized channel for wider variety and the retail channel to more popular standardized PCs and other products. Other model involves the retailer’s performing the final product configuration, thus decreasing inventory costs—because supplies are maintained in component form—but increasing assembly capacity costs. This model has been used successfully in India, where customization is valued and technicians inexpensive to employ. In early years, targeted its marketing efforts at medium and large businesses that needed to purchase numerous highly customized computers fitting seamlessly with their business processes 6. Recently, Dell's marketing efforts have been less focused on product features and customizability and more focused on low price as the defining feature of Dell computers.
  • Dell, strategic management,strategy

    1. 1. Vikas Kumar Tyagi
    2. 2. Do you think personal computer sales will increase in the near future? Or do you think expanding to the information services is inevitable for survival for companies like Dell? If not by direct selling which channel Dell could have distributed its systems efficiently, suggest any? Vikas Kumar Tyagi
    3. 3. Vikas Kumar Tyagi
    4. 4.  DELL sells personal computers, servers, data storage devices, network switches, software, and computer peripherals HDTVs, cameras, printers, MP3 players  1984 -age of 19- Michael Dell (youngest CEO to guide a company to a Fortune 500 ranking ) founded under brand name PCs Limited  With simple vision—that personal computers could be built to order and sold directly to customers bypassing intermediaries & reduction costs and risks associated with carrying large inventories.  Struggled during its early years  But later declared stock of the decade in 90’s. Vikas Kumar Tyagi
    5. 5. …….Always listen to the customer ……Never sell indirect ……Disdain inventory Vikas Kumar Tyagi
    6. 6.  Monitoring Customer preferences.  Extremely fast services i.e. 36 hour turnaround  Sensing Market Changes  Internet Model-50%-2000.  Server market in 1996, and within 3 years, servers accounted for 12% of its sales.  Workstation market - 1997 by 2000 worldwide market leader.  Direct Model approach for major markets, Distributors for smaller markets Vikas Kumar Tyagi
    7. 7. Vikas Kumar Tyagi
    8. 8.  Lowest operating cost 11.5%.  Consumers valued the ability to customize their computers and purchase them directly from the manufacturer.  Uses telephone and internet in selling model. Internet sales leadership.  Nearly two-thirds of Dell's sales are to large corporations, government agencies and educational institutions. Customer list included Toyota, Boeing, Microsoft, Unilever, Deutsche Bank, Sony, and Wal-Mart.  Retail concept may have instantly available products and offer more comprehensive support, but cannot profitably stock as many different products as direct sellers.  Difficult to copy SCM model. Vikas Kumar Tyagi
    9. 9.  Lower facility and inventory costs but higher transportation costs.  Technology follower.  High dependency on component suppliers.  The company has such a huge range of products and components from many suppliers from a plethora of countries, that there is the occasional product recall that can cause Dell some embarrassment.  Dell’s focus on the corporate and government institutional customers somehow affected its ability to form relationships with individual customers.  Retail format not developed fully. Vikas Kumar Tyagi
    10. 10.  Expansion into Service Sector.  After smart phones i.e. Venue & pro, is planning to come in made to order smart phones.  Strong potential market in Europe, China and India.  Growth in business, education and government markets.  SecondTime buyers.  More and more people are moving for online shopping , giving added advantage to Dell’s established internet model. Vikas Kumar Tyagi
    11. 11.  Slowdown of corporate computer business.  Saturated PC market.  New products are coming out all the time, the competition is brutal, and customers are changeable, and technology obsoletes overnight.  More affordable personnel computers- reduced profit margin.  IBM sold its laptop business in 2005 to focus more on customized IT solutions  Hewlett-Packard purchased Electronic Data Systems  Entry of new players like Samsung and HCL. Vikas Kumar Tyagi
    12. 12.  Dell sources from Far Eastern nations where labour costs remain low, but there is nothing stopping competitors doing the same - even sourcing the same or similar components from the same or similar suppliers.  New software, new hardware and computer accessories are introduced at a lightning speed.  One of the biggest external threats to Dell is that price difference among brands is getting smaller. Dell’s Direct Model attracts customers because it saves cost. Since other companies are able to offer computers at low costs, this could threaten Dell’s price- conscious growing customer base.With almost identical prices, price difference is no longer an issue for a customer.They might choose other brands instead of waiting for Dell’s customized computers. Vikas Kumar Tyagi
    13. 13. Vikas Kumar Tyagi
    14. 14. Vikas Kumar Tyagi Indirect PC Value Chain Dell Value Chain
    15. 15. Vikas Kumar Tyagi CMs/OEMs Dell Distributors Logistic Companies Final Customer Component Suppliers Repair & Support Co. Third party H/W & S/W supplier System Integrators Physical flow Including Goods & Services Information Flow
    16. 16.  Dell selected i2 technologies for its SCM system.  i2 serves almost 70% of the SCM market.  Every 20 seconds the software aggregates orders, analyzes material requirements, compare Dell’s on hand inventory with its supplier’s inventory and then creates a supplier bill of material to meet its order needs.  Instead of forecasting the daily supply needed, Dell receives the exact material every two hours to fulfill actual customer order while industry average is 40-70 days. Vikas Kumar Tyagi
    17. 17.  Acquired Alienware in 2006-Gaming.  Acquired Perot Systems for $3.9 billion in 2009.  Acquired Boomi (SaaS) in 2010.  Acquired CompellentTechnologies for $960 million in 2010. Vikas Kumar Tyagi
    18. 18.  Feedback from Customers, Retailers and Suppliers.  Focus on specific customer types as narrowly as you can afford. Higher segmentation leads to more customized programs and solutions for that segment, at added cost.  Centralize database, where practical, to more fully understand your customers.  Take inventory of every customer touch point. Every interaction with a customer makes an impression or leads to learning Vikas Kumar Tyagi
    19. 19.  Long term relationship with vendors.  No effect of market demand and supply.  Dedicated Engineers to 0Dell.  Just inTime. Vikas Kumar Tyagi
    20. 20. Vikas Kumar Tyagi
    21. 21.  Globalized business with integrated R & D, marketing and sales.  Focus on “Killer” products, next generation materials, shorter development cycle, solutions and advantaged costs.  Build portfolio for long term growth by adding new capabilities.  1 to 2 partners in the top 20 markets – with 10,000 stores by year end. Vikas Kumar Tyagi
    22. 22. Vikas Kumar Tyagi • Lead in customer segments most important design and features to create brand lust. • Lead in next generation WiMAX, 4G. • Tailor mobile devices for customer segments. • Bring products to customers 40-50% faster. • Expand the range of products sold globally.
    23. 23.  Dell Inc plans to cut more jobs than the 8,800 it had targeted as it seeks to reduce expenses by at least $3 billion annually by 2011  Build-to-Order Manufacturing and Mass Customization.  Direct Sales  Market Segmentation  Customer Service  Virtual Integration and Information-Sharing  Demand Forecasting  Research and Development  Comparative Advertising  Work towards employee satisfaction as happy employees lead to satisfied customers. Vikas Kumar Tyagi
    24. 24. Vikas Kumar Tyagi
    25. 25. Vikas Kumar Tyagi
    26. 26. Company Market Cap Net Income P/E Ratio EPS Apple 309.64 16.64b 18.77 17.91 HP 99.69b 8.76b 12.33 3.69 Dell 25.38b 1433.00m 12.64 0.95 Lenovo 5.729b 129.4 26.91 0.44 Vikas Kumar Tyagi
    27. 27. Vikas Kumar Tyagi
    28. 28. Vikas Kumar Tyagi
    29. 29.  Dell altered its direct approach by selling computers in CompUSA and Sam’s Club in 1992, but entry into retail channels was not successful  In 2007, Dell partnered with computer retailers, includingWal- Mart, Best Buy, Gome Electrical Appliances &Tata Croma, also started opening its own retail stores starting from Russia. Dell stock price, October 2005 to October 2007 Vikas Kumar Tyagi
    30. 30.  Dell still enjoy competitive advantage.  Hybrid model includes both direct and reseller channels.  Retailer Model.  Medium and Large business as target model.  24-hour technical support services , customizability and ease of ordering.  Leasing PCs to individuals, financing PCs on low monthly payment.  Low price marketing strategy. Vikas Kumar Tyagi
    31. 31.  Impressed many in early years with distinct model of supply chain management, selling customized computers directly to customers to meet burgeoning PC demand.  By using this innovative sales model, Dell became an industry and shareholders’ darling, a high-tech pioneer with seemingly limitless growth. But later Dell’s profits and shares dropped considerably from their peaks. Vikas Kumar Tyagi