Dell Computer Corporation C A S E:

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Questions How has the PC industry evolved overtime? How did Dell get started in this business? What is Dell direct model? What are its advantages and disadvantages? Limitations? Who are Dell’s customers? Why do these customers buy from Dell? What should Dell do as regards the entry laptop and servers? Who are Dell’s main competitors What about two failures? What went wrong? How should Dell handle the international strategy? How do you evaluate the financial performance of Dell?

How has the PC industry evolved overtime? How did Dell get started in this business?

What is Dell direct model? What are its advantages and disadvantages? Limitations?

Who are Dell’s customers? Why do these customers buy from Dell?

What should Dell do as regards the entry laptop and servers?

Who are Dell’s main competitors

What about two failures? What went wrong?

How should Dell handle the international strategy?

How do you evaluate the financial performance of Dell?

Progressing of PCs Industry overtime In July 1974, Radio-Electronics promoted the mark 8 and Popular Electronics promoted the Altair computer In 1977 Intel, Zilog, and Commodore launched 8-bit microprocessor that offered significant improvement over the previous generation of Intel 8080 microprocessor. Development of a standard operating system, CP/M-80, a wider variety of application software became usable in the microcomputer Shugart developed a 51/4 disk drive for data storage Finally rapid improvements in the cost per bit of random access memory (RAM)2 and read only memory (RAM)3 microcomputers could offer computing power at affordable cost.

In July 1974, Radio-Electronics promoted the mark 8 and Popular Electronics promoted the Altair computer

In 1977

Intel, Zilog, and Commodore launched 8-bit microprocessor that offered significant improvement over the previous generation of Intel 8080 microprocessor.

Development of a standard operating system, CP/M-80, a wider variety of application software became usable in the microcomputer

Shugart developed a 51/4 disk drive for data storage

Finally rapid improvements in the cost per bit of random access memory (RAM)2 and read only memory (RAM)3 microcomputers could offer computing power at affordable cost.

Progressing of PCs Industry overtime In 1977, Apple joined the microcomputers market. Offered a unique operations system with an intuitive and easy Graphical User Interface  enabled application to be driven by a simple point-and-click menu system rather than typing in commands In 1981 IBM entered the market and introduced a new operating system standard, PC-DOS, that was available to all PC manufactures

In 1977, Apple joined the microcomputers market. Offered a unique operations system with an intuitive and easy Graphical User Interface  enabled application to be driven by a simple point-and-click menu system rather than typing in commands

In 1981 IBM entered the market and introduced a new operating system standard, PC-DOS, that was available to all PC manufactures

How did Dell start the business Michael Dell started the business in 1983: Pre-formatting hard disk for upgrading the capabilities of IBM compatible PCs. Buy PCs from retail  upgrade them  than sell them and get margin. In 1985: Grew from nothing to $6 million by simply upgrading IBM compatibles. Michael Dell decide to create own brand “Dell” Set up in-house team for product, marketing, advertising, market research and sales support. In 1990: Dell had a broad for product line of desktop and portable computers based on the most recent Intel microprocessors.

Michael Dell started the business in 1983:

Pre-formatting hard disk for upgrading the capabilities of IBM compatible PCs.

Buy PCs from retail  upgrade them  than sell them and get margin.

In 1985:

Grew from nothing to $6 million by simply upgrading IBM compatibles.

Michael Dell decide to create own brand “Dell”

Set up in-house team for product, marketing, advertising, market research and sales support.

In 1990:

Dell had a broad for product line of desktop and portable computers based on the most recent Intel microprocessors.

Dell Direct Model Dell direct Model  a high-velocity, low-cost distribution system characterized by direct customer relationships, build-to-order manufacturing, and products and services targeted at distinct customer segments. Meaning: Starts and ending with the customers Crossing retails and distributors

Dell direct Model  a high-velocity, low-cost distribution system characterized by direct customer relationships, build-to-order manufacturing, and products and services targeted at distinct customer segments.

Meaning: Starts and ending with the customers

Crossing retails and distributors

Advantages and Disadvantages Advantages Historical sales records to assist customers in choosing a system that fit their prior purchase pattern Customer could choose from a menu of disk drives, monitor, memory sizes, network cards, and other hardware options (customized) Quickly of order fulfillment which is typically 3-5 days Excellent “after selling services” by providing inside and outside sales reps if there are problems come to the customers and also deliver information to compatible the customers’ needs Disadvantages Add cost distribution Add cost labor Management complexity Limitations Cost of inventory stocks Limited of time to produce in high volume Lack of services to indirect channel

Advantages

Historical sales records to assist customers in choosing a system that fit their prior purchase pattern

Customer could choose from a menu of disk drives, monitor, memory sizes, network cards, and other hardware options (customized)

Quickly of order fulfillment which is typically 3-5 days

Excellent “after selling services” by providing inside and outside sales reps if there are problems come to the customers and also deliver information to compatible the customers’ needs

Disadvantages

Add cost distribution

Add cost labor

Management complexity

Limitations

Cost of inventory stocks

Limited of time to produce in high volume

Lack of services to indirect channel

Dell’s Customers Dell segmented the customers into 2 part Relationship customers were Fortune 2000 companies, government and educational institution. Transaction customers were medium and small business, and home office customers.

Dell segmented the customers into 2 part

Relationship customers were Fortune 2000 companies, government and educational institution.

Transaction customers were medium and small business, and home office customers.

Why they buy from Dell? Excellent “after selling service” Deliver information to compatible the customers needs Ability to custom the product Physical security, that mean can protect valuable system components Technology secure, that mean Design Dell system with software and physical security features keeps your system safe Internet/wireless security, Dell wireless system include option for connecting to wireless network with WEP (Wired Equivalent Protocol ) Software security, This product Can help protect you from viruses, worm, spy ware, hackers Security Training, to help hide your PC from hackers on the Internet, block pop-up ads, protect your system from viruses and spy ware

Excellent “after selling service”

Deliver information to compatible the customers needs

Ability to custom the product

Physical security, that mean can protect valuable system components

Technology secure, that mean Design Dell system with software and physical security features keeps your system safe

Internet/wireless security, Dell wireless system include option for connecting to wireless network with WEP (Wired Equivalent Protocol )

Software security, This product Can help protect you from viruses, worm, spy ware, hackers

Security Training, to help hide your PC from hackers on the Internet, block pop-up ads, protect your system from viruses and spy ware

What should Dell do as regards the entry laptop and servers? Allocate the capital budget for the new product segment. Determine a new model of doing business. Because this customer segment may need different or certain approach. The ability to using latest technology to deliver more features and excellent products. The ability of the company to produce world class product that matched or exceed the level of quality offered in the desktop.

Allocate the capital budget for the new product segment.

Determine a new model of doing business. Because this customer segment may need different or certain approach.

The ability to using latest technology to deliver more features and excellent products.

The ability of the company to produce world class product that matched or exceed the level of quality offered in the desktop.

Dell’s competitors Competitors of Relationship Customers: Compaq, HP, IBM Competitors of Transaction Customers: Gateway 2000

Competitors of Relationship Customers:

Compaq, HP, IBM

Competitors of Transaction Customers:

Gateway 2000

What about two failures? What went wrong? Focus on develop retail channel In some country likes Japan (Asia country) its compatible but in America not necessary. When Dell develop retail channel in America, Gateway 2000 became largest direct marketer.  Global decentralize The laptop setback Performance of laptop isn’t good as desktop did, including in capacity of memory and disk. In other hand buyers need more because rapid advance in technology.  Lower ability to take opportunities of rapid advance technology

Focus on develop retail channel

In some country likes Japan (Asia country) its compatible but in America not necessary. When Dell develop retail channel in America, Gateway 2000 became largest direct marketer.  Global decentralize

The laptop setback

Performance of laptop isn’t good as desktop did, including in capacity of memory and disk. In other hand buyers need more because rapid advance in technology.  Lower ability to take opportunities of rapid advance technology

How should Dell handle the international strategy? Understanding the information technology environment and services needs. Understanding the culture of each country, by understanding the culture, Dell has ability to develop approach whether using Direct Model or others. Provide head office in some regional (America, Asia, Europe) Global centralization  each regional has approach to services the customers needs.

Understanding the information technology environment and services needs.

Understanding the culture of each country, by understanding the culture, Dell has ability to develop approach whether using Direct Model or others.

Provide head office in some regional (America, Asia, Europe)

Global centralization  each regional has approach to services the customers needs.

How do you evaluate the financial performance of Dell? Scenarion of sales growth rate: 40% $18,691.00 $13,350.71 $9,536.22 $6,811.59 $4,865.42 $3,475.30 $2,873.20 Net Sales 1999 1998 1997 1996 1995 1994 1993 Year Forecast 4 -1.3 5 5.7 5 1.3 5.6 5.9 3.1 Net Income 3,475.30 2,873.2 2,014 889.9 546.2 388.6 257.8 159 69.5 Net Sales 1994 1993 1992 1991 1990 1989 1988 1987 1986 Year

How do you evaluate the financial performance of Dell? According to the financial performance of Dell Computer Company from 1986 till 1994, we can see that net sales growing surely every years but net income isn’t to high, it caused because cost of sales and operating expense are high. Based on forecast, the next years will be better on net sales. All of it show, the performance Dell is quite good.

According to the financial performance of Dell Computer Company from 1986 till 1994, we can see that net sales growing surely every years but net income isn’t to high, it caused because cost of sales and operating expense are high.

Based on forecast, the next years will be better on net sales.

All of it show, the performance Dell is quite good.

Thank You