Dell Strategic Management Presentation

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  • Dell is the sixth largest company in Texas by total revenue, according to Fortune magazine.[9]
  • Representation of the company’s evolution from the birth of the company in 1984, to going public in 1988 where Dell completes its initial public offering, raising $30 million and increasing market capitalization from $1,000 to $85 million.In 1992 Dell debuts on the Fortune 500. Michael becomes the youngest CEO to lead a company that receives this honor.In 1996 Dell.com launches, generating $1 million in sales per day just six months after the site went live. In 2004 Dell is China's third largest provider of computer systems and services, with shipment growth near 60 percent — or four times that of the industry. In 2006 Direct to Dell launches making Dell the first company in their industry to offer free product recycling for consumers worldwide. In 2010, Dell enters the tablet arena with the Streak, a 5-inch device meant to compete directly with the Ipad and other tablets in the market.In 2013 Michael Dell and Silver Light VC win a buyout deal to privatize the company.
  • Rivalry among competitors:Dell produces and markets PC’s and a broad range of technology products for the consumer, education, enterprise and government sectors.Substitute products: Tablets and smart phones are affecting consumers’ needs for a personal computer. Worldwide PC shipments suffered the steepest decline ever in the first quarter of 2013. Bargaining power of buyers: In terms of customer loyalty, there is almost no brand loyalty in this largely commoditized market. Bargaining power of the supplier: The suppliers in this industry are in an interesting position. There are only two major players in the processor market, Intel and AMD, and all manufacturers support both brands. Additionally, there are no major functional differences between them. Recommendation: lower number of supplier in order to keep a better quality control
  • The Highest weights listed here are towards the global markets increased internet usage, the improving technologies such as software and applications that are in high demand from consumers and the more technical saavy generations coming in. These are all listed under Opportunities.For Threats we have The introduction of tablets and smart phones
  • Advertising:HP: Make it MatterLenovo: For those who doDell: The power to do moreAll of the campaigns surround themselves around the individual consumer so there wasn’t much differentiation between them. Dell scored a higher rating in this category based on the creativity and diversity of their commercials as well as brand recognition. Market Share: The IDC preliminary results show that Lenovo has taken the #1 spot for personal computer market share with 16.7%, HP trails at 16.4% and Dell at 12.2%. The market share rankings used in the Competitive Profile Matrix determined the 1-4 ratings the companies received.
  • Additional information to support and show the recent decline in PC orders worldwide
  • The value chain analysis was standard to other companies in the PC industry. You can see a representation listed here.
  • Bullet point 1: With the improving technologies in the market place, this is Dell’s opportunity to innovate something that its competitors haven’t thought of. This opportunity would allow Dell a temporary market share increase while its competitors work to catch up. Bullet 2: With younger generations becoming more technologically saavy, Dell has the opportunity to create brand loyalty with students and teachers that will eventually become consumers…. Consumer’s that would be used to working with their products thus making it more likely for them to stick with Dell. Bullet 3: This will lower the cost for supply chain, improve quality production and reduce manufacturing dependency. Bullet 4:I recommend that Dell continue with their plans for global expansion. Since almost 50% of Dell’s PC sales come from outside of the US so it makes sense for them to continue down this path and expand in China and India. I would however, recommend that they slow down the rate of expansion of their new data centers. They don’t want to take on more than they can handle. The current debt to capital ratio is hurting Dell from making all of the investments they need to make in order to innovate. If they balance their investments between global expansion and innovation, they have a better opportunity of meeting their goals to deliver great products and services to their PC consumers.
  • Decrease in Sales, Saturated market and failure to innovate.
  • Dell Strategic Management Presentation

    1. 1. Dell, Inc. Case Study Presented by Sophie Yanez S
    2. 2. Dell Inc. S Dell produces and markets PC’s and a broad range of technology products for the consumer, education, enterprise and government sectors. S Founded by Michael Dell in 1984 S Based out of Round Rock, Texas. S Michael Dell developed his ―direct model‖ based upon a built to order process that allowed customization of the personal computer.
    3. 3. Dell’s History 1988-1991 1984-1987 1996-1999 20002004 1992-1995 20052008 20092012
    4. 4.   Tablets and smart phones are reducing the need for personal computers in homes and certain businesses Cloud Drives are changing the storage needs for the personal computer SUPPLIERS SUBSTITUTE PRODUCTS       132 different key supply chain markets that include AMD, Intel Corp. EMC, Microsoft, Toshiba, Logitech. Lexmark, etc.. By working with multiple suppliers, you are able to get a lower price for parts. Supplier monopolies such as Intel Inability to substitute necessary hardware (hard drives, processors, RAM) High cost of supply chain churn      Hewlett Packard, Lenovo, ASUS, Apple and ACER Large number of competitors currently in the market- with declining sales, the market saturation is increasing. There is little power in the market place for product differentiation Price is a high determining factor       High start up cost leads to barriers to entry the market There is almost no brand loyalty in this largely commoditized market. This means that anyone can enter and make a convincing marketing pitch. Economies of scale lead to continued advantages PC industry is a unique business model Customers prefer customizable PC options. They purchase what they need. Customers dictate product pricing since there is a large selection of PC brand alternatives for them to choose from There is a size of order – single to large- preference for large custom orders in order to drive down costs. (ex: Schools and Businesses) Customers have the ability to change between different types of PC brands that use the same software (ex: Microsoft) S Porter’s Five-Forces Model
    5. 5. External Factor Evaluation Dell, Inc. Key External Factors Opportunities The Green Movement: The want for more environment friendly products. Such as computer Recycling Programs and energy efficient products The global market Internet usage is increasing which means there is more need for computers and technology adoption Improving Technologies such as software and applications are creating a high demand for consumers Younger generations are tech saavy There is a changing standard of communicating and sharing information. Ex: Text messages, email and Instant messages Threats IT advancements are taking place at a rapid pace- ex: Windows 8 release Price Wars with competitors Introduction of Tablets and Smart Phones Changing Customer Needs Cloud Computing movement is replacing how customers use PC's Trade barriers and hurdles affect the position of the company in multiple countries that decline growth NSA scares- Government checking in on me through my computer? Total Weight Rating Weighted Score 0.03 1 0.03 0.12 4 0.48 0.11 4 0.44 0.11 0.09 3 2 0.33 0.18 0.09 0.07 0.11 0.1 0.08 0.04 4 3 3 4 3 2 0.36 0.21 0.33 0.4 0.24 0.08 0.05 1 1 0.05 3.13
    6. 6. Competitive Profile Matrix Competitive Profile Matrix Critical Success Factors HP Lenovo Dell Weight Rating Score Rating Score Rating Score Advertising 0.11 3 0.33 3 0.33 4 0.44 Product Quality 0.17 4 0.68 3 0.51 2 0.34 Price competition 0.21 4 0.84 4 0.84 4 0.84 Management 0.09 3 0.27 3 0.27 4 0.36 Financial position 0.15 3 0.45 3 0.45 2 0.3 Market Share 0.14 3 0.42 4 0.56 2 0.28 Global Expansion 0.13 4 0.52 3 0.39 2 0.26 1.00 3.51 3.35 2.82
    7. 7. PC Sales
    8. 8. Value Chain Analysis Supplier Costs •Raw Materials •Merchandise •Transportation •Shipping Costs •Component parts •Inspection •Warehouse Storage Production Costs •Inventory System •Receiving Costs •Plant Layout •R&D •Cost accounting •Merchandise tracking system •Quality Control Distribution Costs •Loading •Shipping •Budgeting •Personnel- Trucks, Ships, Plane •Internet System •Fuel •Maintenance Sales & Marketing Costs •Sales reps •Dell.com website •Advertising and publicity •Transportation •Promotions and sponsorships Customer Service Costs •Shipping •Phone Support •Online Email Support •Online Chat Support •Internet Knowledge Base •Warranty
    9. 9. Internal Factor Evaluation Dell, Inc. Key Internal Factors Strengths Creating a Global Recyling program Boomi and Perot system acquisitions will diversify product portfolio Client Reinvention Initiative launched in 2011 Re-org towards a more customer centric model Michael Dell taking the company private in 2013 Focusing on customized products for businesses Global Expansion to India abd China- two large technology markets Weight Rating Weighted Score 0.07 0.08 0.04 0.05 0.13 0.04 0.08 3 4 3 3 4 3 4 0.21 0.32 0.12 0.15 0.52 0.12 0.32 0.14 1 0.14 0.08 1 0.08 0.07 0.09 1 2 0.07 0.18 0.13 1 0.13 Weaknesses Followership Strategy into Market- Low investments in R&D Dell is highly reliant on the increase of outside manufacturers producing their hardware products Dell's current debt to income ratio poses as a financial weakness. Price Wars with other competitors Dell is losing market share to new competitors such as Acer, Asus and Lenovo Total 1 2.36
    10. 10. Porter’s Five Generic Strategies Focus Large Small Size of Market Cost Leadership Generic Strategies Differentiation
    11. 11. SWOT Matrix STRENGTHS-S WEAKNESSES-W List Internal Strengths List Internal weaknesses 1. 2. 3. 4. Global Recycling Program Boomi and Perot system acquisitions Client Reinvention Initiative Michael Dell taking the company private 5. Re-org towards a more customer centric model. 6. Customized product focus 7. Global expansion to India and China OPPORTUNITIES-O List External Opportunities 1. 2. 3. 4. 5. The Green Movement Global Market internet usage Improving technologies Younger generations are tech saavy. Changing standard of communication through technology. THREATS-T List External Threats SO STRATEGIES 1. Promote the efficiency of Dell computers in Green Datacenters. Set the standard for powering the worlds cloud with Dell Servers. 2. Increasing Global Internet usage means there will be more of a need for online customer service. Improve Chat support and online knowledge center. ST STRATEGIES 1. 2. 3. 4. 5. Followership Strategy High manufacturer dependency Price Wars with other competitors Dell’s current debt to income ratio Losing Market Share WO STRATEGIES 1. With the improving technologies in the market place, this is Dell’s opportunity to remove itself from the Followership strategy and innovate something. 2. With younger generations becoming more tech saavy, ensuring that Dell leads in the education market, will get these younger consumers used to using their products. WT STRATEGIES 1. Leverage Boomi acquisition to create a 1. Create a new tablet or smart phone better integration of cloud apps and on that can compete with the likes of premise apps. Make Boomi the choice Apple and Android systems. One that 2. of cloud application dashboard. is competitively priced. 3. 2. With the Cloud Computing market 2. Start manufacturing own PC parts. 4. expanding in China and India- seek out This will lower the cost for supply 5. partnerships with hosting company’s chain, improve quality production and 6. and colocation Datacenters around the reduce manufacturing dependency. 7. world. Source: Fred R. David, Strategic Management Concepts & Cases: A Competitive Advantage Approach , (2013), 14 th ed. 1. It advancements are taking place at a faster change Price Wars with competitors Introduction of smart phones and tablets Changing customer needs Cloud Computing movement Trade barriers NSA scares
    12. 12. Space Matrix FP Financial Position (FP) Return on investment Leverage Liquidity Working Capital Cash Flow Competitive Position (CP) Market Share Product Quality Customer Loyalty Tech know How Control over suppliers CP Stability Position (SP) 2 Rate of Inflation 2 Technological Changes 3 Price Elasticity 4 Competitive Pressure 4 Barriers to Entry 3 Industry Position (IP) -3 Growth potential 3 Financial stability -7 Ease of entry to market 0 Profit potential -7 Resource Utilization -2.8 IP SP -2 -7 -3 -7 -4 -4.6 3 2 -7 3 -4 -0.6
    13. 13. BCG Matrix Relative Market Share Position High 1.0 Low 0.0 Med. 5.0 Industrial Sales Growth Rate High 20+ Stars Question Marks Med. 0 Cash Cows Low -20 - Product Development Diversification Retrenchment Diverstiture Dogs
    14. 14. IE Matrix Low Medium High Strong Average II Product Development Backward, Forward and Horizontal Integration Weak IFE 2.36 EFE 3.13
    15. 15. Recommendations S Dell needs to remove itself from its current followership strategy and invest more in R&D so they can innovate new products. S They should focus expansion efforts in the Education sector. With younger generations becoming more. S Dell needs to start manufacturing it’s own PC parts. S Continue global expansion strategy into China and India.
    16. 16. Thank You!
    17. 17. Additional Information
    18. 18. External Opportunities & Threats Opportunities S Threats S S Software Development needs hardware S Low Cost Global Substitutes S Cloud Computing- Boomi acquisition Economic Recession S Cloud Computing- Consumer Needs are changing S Market Saturation Green Technology is improving
    19. 19. Strengths & Weaknesses Strengths Weaknesses S Advertising- Global Recycling Program S Product Quality- Increased outside manufacturers S Brand Recognition- #2 Market Share for PC’s S Current debt ratio 29% higher than industry average S Improving & Diversifying portfolioBoomi & Perot Systems S Client Reinvention Programreduce supply chain cost
    20. 20. Financial Condition S Dell is valued at $9.8 billion S Dell has $5.14 billion in debt (They hold a 39.9% long term debt/capital ratio) S Retained Earnings increased from $22,110 to $24,744 (in the millions) S In the last 5 years, Dell’s sales growth rates were 1.97% in comparison to the industry’s growth rate of 33.38% S Dell has reported negative average net income during the past 5 years.
    21. 21. While Dell has a large amount of capital and is seen as a profitable organization, I would not consider them a financially stable company due to the recent increase in company debt. S
    22. 22. Current Strategies & Objectives S Company Vision: It’s the way we do business. It’s the way we interact with the community. It’s the way we interpret the world around us—our customer needs, the future of technology, and the global business climate. Whatever changes the future may bring, our vision—Dell Vision--- will be our guiding force. S Company Mission: Dell’s mission is to be the most successful computer company in the world at delivering the best customer experience in markets we serve. In doing so, Dell will meet customer expectations of highest quality; leading technology; competitive pricing; individual and company accountability; superior corporate citizenship; financial stability.
    23. 23. Current Strategies & Objectives S Dell’s R&D strategy is to enter the market during the mature phase of a products’ life cycle. S They believe in a low risk and low innovation approach.
    24. 24. Competitors
    25. 25. My Recommendations S Slow DC Expansion S Reduce Manufacturing Spending S Start Innovating!

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