Economics project (business repot.by usama shehzad sr ii-s) (1)
Submitted By : Usama Shehzad
Dell Computer Corporation was established in 1984 and today
ranks among the world's largest computer systems companies. Dell
pioneered the concepts of selling personal computer systems
directly to customers; offering build-to-order computer systems; and
providing direct, toll-free technical support and next-day, on-site
service. The company designs and customizes products and
services to end-user requirements, and offers an extensive
selection of peripherals and software
Dell's complete range of high-performance computer systems
include: Dell Dimension and OptiPlex desktop computers, Latitude
notebook computers, and PowerEdge network servers. The
company's products and services are sold in more than 140
countries and territories to customers extending from major
corporations, government agencies and medical and educational
institutions to small businesses and individuals. The company
employs approximately 11,000 people. Headquarters are located in
Round Rock, Texas, with manufacturing facilities in Austin, Texas;
Limerick, Ireland; and Penang, Malaysia
The value chain also chain as value chain analysis is a concept
from business management that was first described and
populated by Michael Porter in 1985. A value chain is a chain of
activities for activities for a firm operating in a specific industry.
The chain of activities gives the products more added values
then the sum of added values of all activities and also said that,
value chain is an interrelated series of process that produce a
service on product to the satisfaction of customer. The concept
of value chain also focus esattention on the types of processes
in the value chain
Founded by Michael Dell in 1984
The single concept: Selling computer systems directly to
Designed and built the first computer system of its own
Was one of the first computer companies to send a
technician to homes to service personal computers in 1985
Introduced the 316LT, the company's first notebook
computer in 1989
Joined the top-five computer system makers worldwide in
Earning approximately $1 million per day 7 months after the
launch of dell.com in 1996
For the first time, Dell achieves No. 1 ranking in global
market share in 2001
Activities of DELL:
All those activities concerned with receiving and strong externally
Just in time ordering.
Close to suppliers.
The manufacture of products and services- the way in which
resources inputs are converted to outputs
All those activities associated with getting finished goods and
Close to customers.
The monitor example.
Room for improvement.
Marketing and sales:
Essentially an information activity-informing buyers and
customers about products and services.
China/ credit cards/shops essential.
Improve a lifestyle brand
All those activities associated with maintaining product
performance after the product has been sold.
Service a poor.
People don't like offshore support, usually stressed when
they call and this adds to their stress.
If something goes wrong then pc has to return in the past.
Sourcing and negotiating with materials suppliers.
Lowering the bargaining power of Intel and Microsoft.
Human Resource Management:
Those activities concerned with recruiting, developing,
motivating and rewarding the work force of a business.
Potential for spinning it off as a separate business unit.
Activities concerned with managing information processing
and the development and protection of knowledge in a
Lagging behind in technology research and development.
Concerned with a wide range of support systems and
functions such as finance, planning, quality control and
general senior management.
Reacting to problems by change in senior management.
Steps of Dell:
Dell is approaching some steps in operation to meet adding
value, improve quality, add efficiency & increase profit.
Receiving & distributing raw material.
Converting raw material into a finished product.
Identifying customers & distributing the product.
Dell is an American multinational information technology
corporation based in Round Rock, Texas, and United States
that develops, sells and supports computers and related
products and services. Bearing the name of its founder,
Michael Dell, the company is one of the largest technological
corporations in the world, employing more than 96,000 people
worldwide. Dell had 46,000 employees as of Jan. 30. About
22,200 of those, or 48.3 percent, were in the United States,
while 23,800 people, or 51.7 percent, worked in other countries,
according to a filing with the Securities and Exchange
Commission. Citation needed] Dell is listed at #38 on the
Fortune 500 (2010). Fortune also lists Dell as the #5 most
admired company in its industry. Dell has grown by both
organic and inorganic means since its inception—notable
mergers and acquisitions including alien ware (2006) and Perot
Systems (2009). As of 2009, the company sold personal
computers, servers, data storage devices, network switches,
software, and computer peripherals. Dell also sells HDTVs,
cameras, printers, MP3 players and other electronics built by
other manufacturers. The company is well known for its
innovations in supply chain management and electronic
commerce. On May 3, 2010, Fortune Magazine listed Dell as
the 38th largest company in the United States and the 5th
largest company in Texas by total revenue. It is the 2nd largest
non-oil company in Texas (behind AT&T) and the largest
company in the Austin area.
One of DELL’s biggest threats is involving the fourth element of
the external environment, the political/legal environment. The
Chinese government prefers to promote national PC vendors to
foreign companies. There is a lot of red tape involved in
securing government contracts. The Chinese government not
only favors local firms but also local companies. Government
control of internet usage in China is another threat to the
growth of the internet.
The economic environment refers to the nature and direction of
the economy in which a firm competes or may compete. A
primary threat that computer companies encounter in China is
the problem of software piracy. China has a shortage of skilled
labor, even though the country has many economic
opportunities. Computer companies have to acknowledge that
the average consumer could not afford the investment and very
few had a bank account. DELL is aware that Chinese
customers go for the cheapest System.
The socio-cultural segment is concerned with a society’s
attitudes and cultural values. The potential for Internet growth is
huge in China, giving foreign computer companies, DELL the
opportunities to expand into a new market. Computer
companies have to acknowledge that in the Chinese culture,
people are still unsure about card sales because of the huge
expense of computers in China. DELL has to invest in door-to-
door or face-to-face operations to gain consumers’ faith and
consumers’ trust in the company and product.
The technological segment includes the institutions and
activities involved with creating new knowledge into products,
processes and materials. In the computer industry, technology
continues to be smaller and faster than ever. Providing access
to technologies developed by institutions has proven a key
government resource. It was observed that by the year 2000,
mainland China’s annual PC production would reach 7.6 million
making it the third largest in the world. The internet is a great
opportunity for companies to get their name into the public
domain as well as a fast way to tailor services to its customer
segments. A threat in the technological segment to DELL’s
business in China is that access to the Internet is costly.
Porters Five Forces
The bargaining power of suppliers
According to common assumption, power is high where the
brand is powerful. Therefore, Dell is assumed to have far higher
bargaining power than the suppliers. Dell has been successfully
managing its competitors in terms of getting the needed supply
of inventories and get them produce the inventories according
to the specifications of the company. And the CEO of the
company, Michael Dell also mentioned that Dell Company
never sticks to one supplier forever, as they always change the
suppliers if the suppliers are not meeting the demands of Dell.
And the company always goes to the supplier which is
innovative and cost competitive among other rival suppliers.
Therefore, it again indicates that Dell has higher bargaining
power than its suppliers. Another indication of Dell to be in
better position than its suppliers is that Dell got most of its
suppliers locate their businesses and manufacturing units close
to Dell’s manufacturing and assembly units. By getting the
suppliers near its manufacturing units, inventory is down to an
incredible four days and efficiency is the key ingredient.
Moreover, suppliers can regularly supply their inventories to
Dell within hours of assembling the computers which indicates
a strong corporate understanding of both Dell and its suppliers.
Bargaining power of Customers
One of the competitive advantages Dell has gained has been
through offering in-person relationships with corporate and
institutional customers. This is done by telephone; internet
purchasing, customized computer systems where corporate
clients can go to Dell’s special website called Premier Dell.com
and configure computer systems in regard to the price and
specifications. Moreover, they have post sales online supports
which are online and in some cases the company engineers
can even visit the customer sites.
As long as the company has been serving giant companies
such as governments, and huge companies such as Cox
communications, EDS and etc., they tend to be permanent
customers as it costs massive money for the customers to
switch from Dell to another company. Moreover, as the
company has been diversifying its product ranges from simply
computers to other products such printers, storage services;
this indicates that the company will be serving all type of
customers, not only corporate clients. Therefore, Dell has to
focus on improving its customer service to small business and
individual customers as well to gain their lifetime loyalty.
Threat of new Entrants
As it has been stated by Michael Dell, his only fear about his
business empire is the possibility of new entrants to the market
who could adversely affect his business. And moreover, Dell’s
new strategy is the product diversification; therefore, almost all
electronic companies are potential entrants to this new market.
The threat of substitutes in the computer hardware is low in the
computer hardware industry. As we know so far, the customers
have two choices for PC which is Apple environment and
windows environment. In additional, there is big different in the
cost between these competitors. In the other hand, high price
and lack of software support prevent people from switching to
rivalry:The intensity of competitive
The level of competition is exceptionally high. In the PC market,
the largest vendors are IBM (although its PC business is now
owned by Lenovo), HP, and Dell. And then, smaller vendors
like Gateway and Toshiba. However, there are another group of
manufacturers whom selling unbranded computers that they
have assembled or purchased from a local assembler. Since
white boxes increasingly use the same components as branded
computers, their functionality differs little from those sold by the
largest and smaller original vendors. The rivalry in PC industry
is high due to the decreases in component prices. The
computer companies including Dell need to decrease the
profitability from their operations. The growth of unbranded
market will require Dell and the other companies as well to
maintain competitive prices. However, the midst of competition,
Dell can still gain market share from other competitors which
proves that Dell’s business strategies have been successful.
Dell's Direct Model approaches of enables 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. This extensive range of products and services is
definitely one of Dell’s strengths.
Dell Computer's award-winning customer service, industry-
leading growth and consistently strong financial performance
differentiate the company from competitors for the following
Price for Performance – Dell boasts a very efficient
procurement, manufacturing and distribution process allowing it
to offer customers powerful systems at competitive prices.
Customization - Each Dell system is built to order to meet each
Reliability, Service and Support – Dell’s direct customer allows
it to provide top-notch customer service before and after the
Latest Technology – Dell is able to introduce the latest relevant
technology compared to companies using the indirect
distribution channels. Dell turns over inventory for an average
of every six days, keeping inventory costs low.
The company's application of the Internet to other parts of the
business --including procurement, customer support and
relationship management -- is growing at a rate of 30 percent.
The company's Web site received at least 25 million visits at
more than 50 country-specific sites.
Dell’s biggest weakness is attracting the college student
segment of the market. Dell’s sales revenue from educational
institutions such as colleges only accounts for a measly 5% of
the total. Dell’s focus on the corporate and government
institutional customers somehow affected its ability to form
relationships with educational institutions. Since many students
purchase their PCs through their schools, Dell is obviously not
popular among the college market yet. For home users, Dell’s
direct method and customization approach posed problems.
For one, customers cannot go to retailers because Dell does
not use distribution channels. Customers just can’t buy Dell as
simply as other brands because each product is custom-built
according to their specifications and this might take days to
Personal computers are becoming a necessity now more than
ever. Customers are getting more and 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. Demand for laptops is also growing. As a matter of
fact, demand for laptop has overtaken the demand for
desktops. This is another opportunity for Dell to grow in other
segments. The internet also provides Dell with greater
opportunities since all they have to do now is 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 also more convenient for customers to
shop online than to actually drive and do purchase at a physical
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. It is essential for Dell therefore
to be always on the lookout for new things or introduce new
computer systems. The threat to become outmoded is a
pulsating reality in a computer business. Not only that,
companies must produce products that are high in quality but
low in price. This is one challenge that Dell contends with. 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
The growth rate of the computer industry is also slowing down.
Today, Dell has the biggest share of the market. 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 to be able to continue holding a significant market
share. Technological advancement is a double-edge sword. It
is an opportunity but at the same time a threat. 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. Technology dictates that the most up-
to-date and fastest products are always the most popular. Dell
has to always keep up with technological advancements to be
able to compete.
Dell is one of the leading Consumer durables brand. The
marketing mix of dell talks about the way in which dell has
improvised to gain a competitive position.
Dell believes that, ‘Marketing is not about providing products
or services it is essentially about providing
changing benefits to the changing needs and demands of the
Dell provides a wide variety of both business class and
home/consumer class products and services.
Dell designs, develops, manufactures, markets, sells, and
supports a wide range of products that in many cases are
customized to individual customer requirements.
A few examples of products for individual and professional
customers are Dell Precision workstations, OptiPlex
desktops, Dimension desktops, and Inspiron and Latitude
Pricing strategies usually change as the product passes
through its life cycle, because there is constrains on the
company’s freedom to price a product at different stage.
The main objective of Dell is to produce the low price and
profitable PC for the customers.
For the above reason Dell’s product pricing reflects the
affordability of the local consumers.
Because Dell products are so customizable, the price is
largely dependent on the options and services added to the
Dell is undercutting competitors in price to rapidly gain
Place is also known as channel, distribution, or intermediary.
It is the mechanism through which goods and/or services are
moved from the manufacturer / service provider to the user
Dell has been able to affect the location strategy aspect of its
As Dell’s products are always available at the nearest
dealer’s customers develop trust for the “local Dell” thereby
achieving the objective of gaining their trust in Dell products
and services, and forming a large and diversified consumer
Another one of the 4 P’s is promotion. This includes all the
tools available to the marketer for ‘marketing communication.
Dell in the past have not concentrated on extensive
marketing campaigns but these revolutionaries in 1999 when
Dell changed its tactics by engaging in extensive marketing
Dell markets its products primarily by advertising on
television and the Internet, advertising in a variety of print
media, and mailing or emailing a broad range of direct
marketing publications, such as promotional materials,
catalogs, and customer newsletters.
Dell has recently started promoting its products through
retailers like Best Buy, Staples, Wal-Mart, GOME, and