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Dell - Strategy Analysis

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Dell - Strategy Analysis

  1. 1. U20467 Student No. 483563 Page 1 of 26 Strategic Management Unit Code: U20467 Student Number: 483563 Strategic Review
  2. 2. U20467 Student No. 483563 Page 2 of 26 Table of Contents Executive Summary........................................................................................................................... 3 1. Environmental Analysis ............................................................................................................. 4 1.1 PESTEL Analysis ............................................................................................................... 4 1.2 Porter’s Five Forces........................................................................................................... 4 1.3 Industry Life Cycle.............................................................................................................. 5 1.4 Strategic Group Analysis................................................................................................... 5 2. Resource and Competence Analysis ...................................................................................... 6 2.1 Value Chain Analysis......................................................................................................... 6 2.2 VRIO Analysis..................................................................................................................... 6 2.3 SWOT Analysis................................................................................................................... 7 3. Recommendation for Future Development............................................................................. 8 4. Recommendation Conclusion................................................................................................. 10 Appendices ....................................................................................................................................... 11 Appendix 1 .................................................................................................................................... 11 Appendix 2 .................................................................................................................................... 12 Appendix 3 .................................................................................................................................... 13 Appendix 4 .................................................................................................................................... 14 Appendix 5 .................................................................................................................................... 15 Appendix 6 .................................................................................................................................... 17 Appendix 7 .................................................................................................................................... 18 Appendix 8 .................................................................................................................................... 19 Appendix 9 .................................................................................................................................... 20 Appendix 10.................................................................................................................................. 20 Appendix 11.................................................................................................................................. 21 Bibliography ...................................................................................................................................... 22
  3. 3. U20467 Student No. 483563 Page 3 of 26 Executive Summary This report was commissioned to examine the strategic options of Dell Incorporated (Dell) and Dell’s position in the global personal computer (PC) industry. The research draws attention to vary environmental factors which influences the company; internally and externally. Currently, the PC industry is in decline but the level of rivalry amongst firms is high, attempting to dominate the saturating markets. The reduction in global PC sales can be contributed by the recent economic downturn and the recent shift towards alternative products, such as tablets and mobile phones. With Dell’s recent take-over by founder Michael Dell, internal aspects have been analysed, identifying internal aspects, such as Dell’s direct sales model, leadership, partnerships and supply chain management (SCM) strategies, assisting the development of recommended strategies. The report utilises a number analytical tools and frameworks, to gain an understanding of the environment, resources and competencies of Dell’s PC disciplines. A TOWS and Ansoff matrix have been constructed to help formulate different strategic options. These strategies have then been implemented through a suitability, acceptability and feasibility evaluation criteria to assess their viability. Three strategies are highlighted to be critically analysed to see their viability for Dell. Once analysed, the most achievable was selected; Dell to further develop their tablets. This strategy was selected based on many factors, such as meeting stakeholders’ criteria. In addition, the strategy allows Dell to move their attention to a developing market, allowing them to re-asses the declining PC market. Also, Dell would be able to access the increased demand in tablet technology, potentially gaining larger financial benefits for the market. Furthermore, with Dell’s current resources and capabilities, this strategy would be best suited for implementation. .
  4. 4. U20467 Student No. 483563 Page 4 of 26 1. Environmental Analysis 1.1 PESTEL Analysis [Appendix 1] The PESTEL analysis looks at the external influences which impact Dell. An important factor to consider when looking at the PESTEL analysis is the rapid change of technology. Many computing companies have encountered huge success and then failed because they could not keep up with the rapid change of new technology. The newest technological advancement in the industry is the introduction of “cloud storage,” which have brought varying interest from competition from all industries One of the greatest influences in the industry is the social shifts in lifestyle and buyer behaviour, with the global preferences shifting to online platforms and more tablet and mobile based devices, (Wingfield, 2013). It has been argued that, ‘mobile internet devices will outnumber humans this year,’ (Arthur, 2013). Another external influential l aspect is the global economy. With the computer industry dependant on consumers and businesses, the global economy has a large impact on the performance of Dell. For example, the recent global recession caused a dramatic decrease in global shipments of personal computers around the world, (Sherr, 2011). 1.2 Porter’s Five Forces [Appendix 2] Porter’s Five Forces identifies the potential threats of new entrants into the market. In the PC industry, there is a reduced threat of new competition breaking into the market, due to the high capital costs and the high risk of a declining industry life cycle (Appendix 3). The analysis of Dell’s supplier power suggests a moderate to high stake of control. Due to the complex components used to construct a PC unit, only limited numbers of suppliers are able to provide crucial items, due to the technologically advanced processes of research and design (R&D) and high costs of manufacturing. For example, Dell sources their PC processor chips from Intel, which historically have held negotiations to increase supply price, widening their leverage gained by Intel, demonstrating the power of suppliers, (Hesseldahl, 2009; Hill et. al, 2014). With the power of supplier rising, the bargaining power of the buyer is building and mounting. High competition has resulted in the vulnerability of PC manufactures, allowing consumers a large range of relatively similar products from various companies. In relation to buyer power, the threat of substitutes can still be determined as “moderate.” There is a strong presence of computers throughout society and will continue to be in the coming years. However, the PC industry is being transformed by the development of substitutes. The current substitutes are Tablets, Smart phones, gaming consoles and Smart TVs, which are all growing in popularity, (King, 2009).
  5. 5. U20467 Student No. 483563 Page 5 of 26 1.3 Industry Life Cycle [Appendix 3] Sales of PCs, once on a seemingly unstoppable upward curve, are now on a downward spiral because of squeezed consumer spending and the development of alternative products, (Titcomb, 2013). Currently, the PC business is in 7 quarterly slump, decreasing year-on-year. The situation is a long way from the “boom” times of the late 1990s, which saw 20%-plus quarterly growth, (Arthur, 2014). The deterioration indicates the industry’s placement within the industry lifecycle, moving past the “maturity” and into the “declining” stages. The industry is highly competitive, with multiple corporations fighting to yield the highest market share. The market is so competitive that large companies are considering exiting the market entirely. Most recently, “LG are considering quitting the traditional Windows PC business,” (Arthur, 2014). 1.4 Strategic Group Analysis [Appendix 4] The main competitors - based on Windows operating systems - in the market are currently Lenovo, HP, Acer and Asus, (Hardy, 2014). The intense competition in the PC industry has led to fluctuating market leaders over the past 15 years. Some competitors have exited the market recently, “Sony has recently exited the market,” (Vincent, 2014). The graph, “Strategic Group Analysis 1,” shows the comparison between the global top five PC companies, based on their market share. The variables of “Price” and “Sales” were selected based on the relevance to the industry and Dell. Dell’s direct model incorporates a penetrating cost strategy, gaining a cost advantage versus its competitors by selling direct, (Black Book, 2004, pg.31-40). In 2000, after the Dot Com Crash, some competitors were forced to adapt their strategies, trying to mimic Dell’s pricing concepts. The graph suggests that pricing products higher might lead to a larger market share, as seen by Lenovo. In addition, lowering product prices too much might lead to lower total sales, seen by Acer. “Strategic Group Analysis 2,” determines the correlation between “Product Range” and “Sales.” The graph identifies that corporate product portfolio suggests a relationship with the amount of sales. Lenovo having the largest market share, highest sales figures and a large product range, (Yu, 2013).
  6. 6. U20467 Student No. 483563 Page 6 of 26 2. Resource and Competence Analysis 2.1 Value Chain Analysis [Appendix 5] To create a competitive advantage, Dell distanced itself from the rest of the PC- manufacturing field not only by the adoption of the direct-sales strategy, JIT inventory management and lean production concept, but by the recognition of the internet in the mid- 1990s, (Ireland et.al, 2009; Vecchio, 2013). The manufacturing process has an extremely low transfer time, “it can be just 90 minutes from the time the order is placed for the computer, to the time it begins its journey through the factory.” (Dell, 2012). This capability enables Dell to gain a competitive advantage on competitors, producing units quickly and of high quality. To further strengthen the company’s SCM disciplines, progression in technological development has seen the introduction of such systems as, “i2 TradeMatrix” and “Agile,” (Dell, 2001; Chou et. al, 2004). These new SCM systems enable the company to operate more efficiently, promoting better communication between suppliers. As a result, these systems help lower production and distribution costs, adding value to the company and customer satisfaction, (Chou et. al, 2004). In regards to marketing, to enter into already existing market with new products, Dell has to carry out series of promotional sales and advertisements to make customers aware of its new products. The marketing aspect of Dell claims it has a larger database on their customers than their competitors, allowing them to connect and market more efficiently, whilst utilising their strong brand name, (Kaye, 2013). 2.2 VRIO Analysis [Appendix 6] Dell’s direct model allows the company to yield a superior cost advantage versus its competitors. Dell’s direct customer interaction generates an almost equal financial benefit as the cost advantages of the company’s direct business model, (Black Book, 2004, pg.31-40). Dell’s SCM strategies enable them to gain a temporary advantage over competitors. Dell’s rivals, such as HP, are trying to imitate Dell with their own schemes to slash production time and boost service, (McWilliams, 1997). Currently, Dell’s competitors have not yet adopted the full JIT and Lean production strategies Dell has managed to implement so effectively.
  7. 7. U20467 Student No. 483563 Page 7 of 26 2.3 SWOT Analysis [Appendix 7] Currently, Dell has one of the best SCM strategies in the industry. Adopting a JIT methodology, Dell uses their strong SCM process to give them a competitive edge on competition, (Kimble & Bourdon, 2013,pg. 58-68). However, the threat of competition imitating their processes is already taking place. The I.T industry is highly competitive- with all firms fighting to gain market share- possibly leading to Dell becoming vulnerable if they are not able to keep up or beat competition. As result of the low R&D spending on PCs, Dell may leave themselves exposed for competition to push them out the market. In addition, one of their primary strengths, Dell operates a Direct Sales business model, resulting in the reduction of processes their product needs to travel before reaching the end consumer. Integrating their sales systems with the internet and website, has formulated a strong position for Dell in regards to an online presence, (Kapuscinski et. al, 2004; Kelleher, 2013). In relation, as a result of their pioneering online sales and e-commerce systems, Dell reduces their potential costs of having to operate retail stores to sell products. It can be argued that the privatisation of Dell can be seen as strength to the company Previously, Dell’s slow performance was attributed to their “poisonous culture,” (Satterwhite, 2013). With the re-introduction of Michael Dell, Dell’s corporate strategy is likely to develop, helping the firm progress into a pioneering I.T leader, as it historically was under the leadership of Michael Dell in the past. Dell operates with a very large product portfolio; PCs, laptops, storage devices, servers, services, tablets and phones. With such a large diverse portfolio, Dell has a large opportunity to exploit growing markets, such as tablets. Dell’s product diversification enables the firm to sustain operating in the PC industry. For example, “Dell’s servers and networking and enhanced services sales grew 35% in the past five years, offsetting a $2 billion decline in PC sales,” (Matthews, 2013). One of the greater opportunities is the new emerging markets in various developing countries such as Brazil, Russia, India and China. The emerging markets makes up half the world economy, (Evans-Pritchard, 2014). However, Dell has a significant number of debts, with analysts predicting the company to take on billions of dollars more in debt, (Ferguson & Balassi, 2013). These amounting debts may act as a threat to Dell’s strategies, possibly preventing them from further expanding into new markets.
  8. 8. U20467 Student No. 483563 Page 8 of 26 3. Recommendation for Future Development [Appendix 8/9/10/11] The TOWS Analysis helps generate plausible strategic options Dell could implement, gaining a form of direction and competitive advantage from the analysis. To analyse which strategies would be most suitable for Dell, TOWS matrix, Ansoff matrix, SAF analysis and stakeholder mapping have been formulated to highlight the viability of each strategic option. 1. Develop pricing strategies to increase sales in developing economies and emerging markets. This strategy enables Dell to counter act some of the key issues which effects Dell’s PC performance (Appendix 3). With the PC industry currently in decline in existing markets, Dell would have the opportunity to extend their product lifecycle in various emerging economies. Developing economies are one of the main contributors of sales for PC manufacturers, with an increase in demand from these nations. Dell would have to review their pricing strategies in growing foreign markets, possibly using a penetration strategy to out-price competitors. Dell already has their foundations in various emerging economies, such as China, India and various African nations which would make this strategy more feasible. With a penetrative pricing strategy, Dell could possibly gain an increase in sales and market share by lowering their product costs for their PCs. Using their strong brand image, Dell could attempt to capitalise on the increase in sales from this price reduction. Furthermore, Dell could benefit from their expansive product portfolio, such as servers, storage and services adopting a pricing strategy to support the sales of Dell PCs. In addition, Dell has superior SCM strategies over main rivals, enabling them an advantage in being able to distribute products more effectively and efficiently to different regions on the globe. According to Ansoff matrix, this strategy would be placed in the “market penetration” and “market development” stages (Appendix 10). Referring to the stakeholders and acceptability, developing pricing strategies carry severe risks (Appendix 9). Key players may not be in favour for this strategy as it may involve a possible loss of profits. Lowering the price of a product will decrease the profit margin for each unit. If there is not an increase in sales, Dell would suffer from a decrease in profits. However, if the pricing strategy is effective, Dell can see an increase in sales, resulting in larger profits and larger market share in the PC market. 2. Focus attention on the development of Dell tablets. With the PC industry in decline, the tablet market is still in the growth stage, growing exponentially in recent years. Forecasters estimated the worldwide tablet shipments to have grown up to 54 percent by the end of 2013, (Harjani, 2013). The increase in interest in tablets can be reflected in the business sector – one of Dells primary markets and sources of revenue – with businesses’ discovering the advantages in the industry, (Arthur, 2013).
  9. 9. U20467 Student No. 483563 Page 9 of 26 Having already built a strong foundation with business clients, Dell may be able to develop relationships and corporate alliances, selling and catering tablets specifically to current business client’s specifications. In relation, main competitors, such as Lenovo, are attempting to enter this market, with some already seeing a growth of 30 percent in sales, partly due to their recent ventures into the global tablet market, (McDonald, 2014). With this in mind, Dell could differentiate by strategically targeting their strong relationships with business, which limited competitors currently adopt, enabling Dell to potentially increase their total sales and value. In regards to stakeholders, most of the key players would agree with further penetration into the tablet market. The Ansoff matrix identifies a high risk with diversification, which may cause hesitation amongst stakeholders (Appendix 10). However, Dell have already invested into their current tablet range, which means the costly, fundamental resources such as manufacturing processes have already be established. Furthermore, Dell has already established a relationship with key stakeholders, Microsoft. Microsoft -one of the worlds most advanced technology based company- would possibly support and promote the development of Dell’s tablets, which primarily use Microsoft’s operating system, Windows 8, (Shah, 2013). It is projected that tablets using Microsoft’s Windows 8 systems will grow, with main competition using different operating systems, such as Apple, HP, Lenovo and Samsung, rapidly losing market share by 2017, (Harjani, 2013; Turner, 2014). However, Dell has previously experience poor performance of their previous range, previous to their Microsoft partnership. Dell originally loaded Android operating systems onto previous tablets, which failed to excite the marketplace when introduced, (Kolakowski, 2012). Taking that in consideration, some stakeholders may be hesitant to invest considerable money into tablets. 3. Invest in more R&D for the PC range. Dell still has a significant leash on the PC market with their competitive market share and products. Previously, Dell has been reluctant to invest into their R&D for their PC products, only spending roughly 2 percent of their overall sales, (Markowitz, 2013). By comparison, most of Silicon Valley's PC companies last year, spent over 10 percent on R&D, (Financial Review, 2013). This strategy purposes an increase in R&D spending, attempting to develop superior products in comparison to competition. According to a "Dell Special Committee Investor Presentation" compiled by the Boston Consulting Group, it suggests that Dell has not made significant investments in R&D, (SEC, 2012). Furthermore, the R&D investment –along with Michael Dell’s leadership and PC expertise – can help rebuild and re-establish Dell in the PC industry. Investments in R&D for the PC products is widely considered essential for companies to stay on the cutting edge of
  10. 10. U20467 Student No. 483563 Page 10 of 26 technology, being able to gain that competitive advantage and entering markets with new products. With this in mind, Dell, for example, could exploit the growth in the PC gaming industry. Whilst the overall PC industry is in decline, the PC gaming market is increasing. With online revenues set to reach US$30bn in 2017, (PWC, 2013). Dell, along with their gaming subsidiary Alienware Corporation, could invest into producing a more superior product for the growing gaming market. This strategy may be favoured by key stakeholders due to the lower risk, according to Ansoff matrix due to the lower risk involved (Appendix 10). Also, Dell has experience in the industry and having the founder Michael Dell leading again, may see stakeholders put their faith into the re-development of the PC industry. However, due to the declining nature of the industry, stakeholders may consider not investing valuable profits into PCs, choosing to use the finances to pay off debt or into different products. 4. Recommendation Conclusion [Appendix 11] Once the SAF analysis stakeholder mapping have been taking into consideration, a score and value have been placed on each option to show the strategies viability. The best suggested strategy is for Dell to increase their development of Dell Tablets. Strategy Suitability Acceptability Feasibility Average 1 3 4 5 4 2 4 5 4 4.3 3 3 3 4 3.3 2. Focus attention on the development of Dell tablets. With the PC industry in decline, the tablet market is still in the growth stage, growing exponentially in recent years. This strategy would enable Dell to possibly gain higher market in the tablet market and growth in overall revenue, benefiting from their direct sales model and their strengths.
  11. 11. U20467 Student No. 483563 Page 11 of 26 Appendices Appendix 1 PESTEL ANALYSIS POLITICAL ECONOMICAL  Trade Barriers /Trade control/ Import restrictions.  Political insecurities with changing governments/ Government stability and likely changes  Tax policy (rates and incentives)  Competition regulation  Financial Recession o Dot Com Crash  Exchange Rates  The growth of developing economies o Brazil, Russia, India, China. SOCIAL TECHNOLOGICAL  Change in buyer behavior – moving towards tablets  A growth in online shopping.  Customers expect High performance pcs – change in consumer in developed countries there is a high expectation on better performing units.  Lifestyle changes.  Attitudes toward “green” or ecological products  Increase in touch screen laptops.  Cloud storage – Being able to store information on-line not on your phone this could become a necessity for all phones to have.  Rapid change of technology – The changes in technology is rapid, which can make a winning brand a losing brand overnight.  New products (Ultra Books)  Digital viruses: with the advancement in technology, issues with hackers and viruses are following the growth trend.  Compatibility against cross platforms, with different software being able to run on different systems. ENVIRONMENTAL LEGAL  Recycling materials – It is becoming the normal for large companies to have their own environmental policies and give back to communities.  Pollution  Governmental Policies, David Cameron wants all busy to think GREEN.  Environmental Laws  Patents, copyrights, design o PC companies have to make sure they are not infringing on any other companies patents or designs, which many have and cost companies millions.
  12. 12. U20467 Student No. 483563 Page 12 of 26 Appendix 2 PORTER’S 5 FORCES (Adapted: Johnson et. al, 2008) Bargaining Power of Suppliers: MODERATE/HIGH Moderate – due the number components within PC construction, some suppliers have limited bargaining power due to the saturated supplier market. High- Items in computer and laptop construction are extremely important and usually sourced from trusted partners. For example, there are only two main suppliers of processors; Intel and AMD. With this, partnerships and relationships have to be built in confidence for both parties, giving the supply considerable bargaining power. Threat of New Entrants: LOW Capital requirement – A large amount of capital is required to be able to enter the mobile phone market, as technological and R&D costs are extremely high. Economies of scale – It would be extremely difficult for new entrants to be able to compete with current large brands in the mobile phone market as it is highly saturated and they would not be able to compete with the large scale that the main competitors of the mobile phone market are operating at. Product differentiation - There are hundreds of mobile phone handsets and the main competitors in the mobile phone market rely on brand recognition and customer loyalty to sell their products. Bargaining Power of Buyer: HIGH High Competition- The personal computer industry is somewhat vulnerable against the bargaining power of buyers. In recent years customers have more and more alternative options to the personal computer. Alternative products are suggested to be taking the majority of consumers’ spending that might have otherwise gone to laptop or desktop computers, (Wingfield, 2013).
  13. 13. U20467 Student No. 483563 Page 13 of 26 Large Market – The large target market gives them a greater influence and buyer power. High competition has resulted in the vulnerability of PC manufactures, allowing consumers a large range of relatively similar products from various companies. Threat of Substitute products and services: MODERATE There is a strong presence of computers throughout society and will continue to be in the coming years. However, the PC industry is being influenced by the development of substitutes, possibly resulting in future sale. The current substitutes are Tablets, Smart phones and Smart TVs, which are all growing in popularity. Currently, these substitutes still do not have the computing power in comparison to PCs or laptops, which may change in the near future. Rivalry: HIGH High concentration – there is fierce competition between the top manufacturers in the personal computer industry. Competitions are contending to produce the most effective platform at the best price for their consumers. Industry - Due to the previous profitability of the industry, competition are using all their available resource to become the market leaders. Appendix 3 INDUSTRY LIFE CYCLE (Adapted: Sharplin , 1985) Personal Computers (PCs)
  14. 14. U20467 Student No. 483563 Page 14 of 26 Appendix 4 STRATEGIC GROUP ANALYSIS Product Range Sales ($ million) Market Share Lenovo 38 13,774,828 17.6 HP 23 13,532,449 17.1 Dell 27 9,218,063 11.6 Acer 22 8,615,940 8.3 Asus 20 6,354,096 6.1 0 2,000,000 4,000,000 6,000,000 8,000,000 10,000,000 12,000,000 14,000,000 16,000,000 18,000,000 0 10 20 30 40 50 Sales($)Q32013 Product PC & Laptop Range Strategic Group Analysis 2 Lenovo HP Dell Acer Asus 0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 18.0 0 2 4 6 8 10 12 Sales($Millions)Q32013 Price Strategic Group Analysis 1 Lenovo HP Dell Acer Asus Low Moderate High (Source: Gartner, 2013)
  15. 15. U20467 Student No. 483563 Page 15 of 26 Appendix 5 VALUE CHAIN ANALYSIS Primary Activities Inbound Logistics  Material handling.  Transportation.  Purchasing.  Supplier partnerships.  Supply chain management (SCM)  Valuechain.dell.com enables communication between suppliers and Dell. Operations  Just in Time (JIT) manufacturing.  Full Product customisation.  Quality Control. Outbound Logistics  Developed global distribution channels.  Introductions of free shipping. Sales & Marketing  Direct sales model.  Pioneering online sales & e-commerce.  Advertising & Public Relation in Medias such as television, the Internet, magazines, catalogues and newspapers.  Customer& market research.  Relationship marketing strategy.  Business to Business sales.  Brand reputation. Service  Providing good customer service both before and after the sales.  Keeps its research customer-focused and towards suppliers. (Adapted: Grant & Jordan, 2012)
  16. 16. U20467 Student No. 483563 Page 16 of 26 Support Activities Firm Infrastructure  Based in Texas, United States: developing, sales, repairs and supports computers and related products and services on site.  Strong communication between business disciplines. Human Resource Management  Formal code of conduct, emphasising on high ethical standards.  Individual coaching.  Mentoring.  On the job training.  3 step program to improvise on core skills of employees which involves orientation, technical leadership and development training. Technology Development  Development of the “i2” supply chain systems.  Limited R&D on PC but higher spending on other products in company portfolio. Procurement  Dell’s Worldwide Procurement organization is committed to responsible sourcing.  Quality control & compliance to regulations. (Adapted: Grant & Jordan, 2012)
  17. 17. U20467 Student No. 483563 Page 17 of 26 Appendix 6 VRIO ANALYSIS Direct Sales Model Valuable? Rare? Costly to Imitate? Organised to Capture Value? Yes Yes Yes Yes Sustained Competitive Advantage Valuable- Dell operates a direct sales strategy which has formed their supply chain management strategies. By removing the “middle man” of retailers, Dell are cutting costs dramatically and can ship products straight from the warehouse to the consumer. Rare- The concept of online sales and e-commerce are not rare, however, the adoption of this strategy by a PC manufacturer is uncommon. Dell uses their strong reputation for quality and brand, obtaining a cost advantage over competition which have retailers and stores containing physical merchandise. Costly to Imitate- This model is costly to imitate for existing competition, due to the fact they would have to re-organise their entire business model and assets. Organised to Capture Value- With over 7000 workers specialized in sales and the Direct2Dell blog giving one-to-one interactive help with a trained dell employee. Supply Chain Management Valuable? Rare? Costly to Imitate? Organised to Capture Value? Yes No Yes Yes Temporary Competitive Advantage Valuable- Dells majority sales derive from online sales, enabling the company to reduce costs, whilst maximising the full potential of the internet. Rare- Similar to the direct sales model, Dell’s SCM and distribution systems are not rare in other industries. However, Dell’s competition are currently developing their own SCM strategies, trying to imitate Dell’s models and systems.
  18. 18. U20467 Student No. 483563 Page 18 of 26 Costly to Imitate- This model is costly to imitate for existing competition, the initial capital costs would be extremely high. However, once strategies such as JIT and Lean production are adopted, firms can actually reduce costs. Organised to Capture Value- Dell has incorporated their SCM strategies to all aspects of the company, using various technologies and research to maximise the value added to the business. Appendix 7 SWOT ANALYSIS Strength Weakness  Direct sales business model & Online sales.  Product customisation.  Supply chain management (SCM).  Inorganic growth structure.  Business to Business sales (B2B).  Providing good customer service both before and after the sales.  Brand name & global presence.  Leadership & Management & Privatisation.  Diverse product portfolio.  Relatively large market share.  Partnerships (Microsoft)  Customer Service o “Direct 2Dell”  Low R&D spending on PCs. o Lack of competitive edge & product innovation.  Leadership & Management.  Financial debt.  Dell’s sales revenue from educational institutions such as colleges and universities only accounts for a merely 5% of the total PC sales.  Customers cannot go to retailers because Dell has very limited retailers. Buyers cannot physically touch or see the tangible product they want to purchase.  Opportunity  Threat  The growth of developing economies o Brazil, Russia, India, China.  Growth in online sales.  Development of new technologies o Cloud storage o Tablets o Mobile Phones o Business Servers  Patents, copyrights, design.  Financial Recession. o Dot Com Crash.  Online dependence.  Industry life cycle  Competition. o Lenovo, HP, Acer and Asus. (Adapted: Mintzberg et. al, 2005)
  19. 19. U20467 Student No. 483563 Page 19 of 26 Appendix 8 TOWS MATRIX Strengths Weaknesses 1. Direct sales business model & Online sales. 2. Product customisation. 3. Supply chain management (SCM). 4. Inorganic growth structure. 5. B2B sales. 6. Providing good customer service both before and after the sales. 7. Brand name & global presence. 8. Leadership & Management & Privatisation. 9. Diverse product portfolio. 10. Relatively large market share. 11. Partnerships (Microsoft) 1. Low R&D spending on PCs. a. Lack of competitive edge & product innovation. 2. Leadership & Management. 3. Financial debt. 4. Dell’s sales revenue from educational institutions such as colleges and universities only accounts for a merely 5% of the total PC sales. 5. Customers cannot go to retailers because Dell has very limited retailers. Buyers cannot physically touch or see the tangible product they want to purchase. Opportunities Strengths – Opportunities Weakness- Opportunities 1. The growth of developing economies a. Brazil, Russia, India, China. 2. Growth in online sales. 3. Development of new technologies a. Cloud storage b. Tablets c. Mobile Phones d. Business Servers  Strategies to enter/ develop the growing number of developing economies. (S1,S3,S4,S5,S7,O1)  Utilise Dell’s customisation ability and integrate into all possible products. (S1,S6,S9)  Using a strong brand name and global presence, Dell has the ability to continue to develop their product portfolios. (S7,O3)  Increase R&D spending on PC development & other product portfolio. (W1,O3)  Continue to reduce costs and increase sales, by continuing to implement their online platform. With an increase in online retail, Dell could continue to increase their sales, whilst operating a more cost effective online strategy. (W3,O2)  However, to overcome the issues of no retailers, Dell could implement a few more retailers in developing markets, overcoming the issues of consumers buying without seeing a tangible item. (W5, O1) Threats Strengths – Threats Weakness – Threats 1. Patents, copyrights, design. 2. Financial Recession. a. Dot Com Crash. 3. Online dependence. 4. Industry life cycle 5. Competition.  Use previously adopted inorganic growth to expand, taking over possible competition and/or acquiring firms in different industries. (S4,T4,T5)  Using the strong brand image and partnership with Microsoft to develop tablet portfolio and other I.T products such as servers. (S7,S11,T4,T5)  Review their pricing strategy against competition, gaining competitive advantage. (W3,T4,T5)  Target educational institutions, building a larger client base and gaining a large market share.
  20. 20. U20467 Student No. 483563 Page 20 of 26 Appendix 9 STAKEHOLDER MAPPING Appendix 10 ANSOFF MATRIX Existing Products New Products Existing Market New Market Market Development Minimal Effort (Monitor)  Competitors Keep Informed  Employee’s  Pressure Groups  Local Communities  Governments  Investors Keep Satisfied  Media  End User (Consumer) Key Players  Shareholders  Executives  Business Partners Level of InterestLow Power High Low High Market Penetration Diversification Increasing Risk STRATEGY 2STRATEGY 1 STRATEGY 3 Product Development (Adapted: Swords & Turner, 1997)
  21. 21. U20467 Student No. 483563 Page 21 of 26 Appendix 11 SAF RECOMMENDATIONS Suitability Acceptability Feasibility 1 This strategic option is suitable because it address’s a number of key issues in the external environment such as the maturing stage of the PC industry. Being able to access new markets would allow the extension of the product life cycle and industry (Appendix 3). This is also suitable as Dell already has a strong established supply chain network (Appendix 5). The strategy would out price competition. Eg. In China, Lenovo still have the majority of market share, selling ever one in three PCs, (Einhorn et. al, 2013). This strategy may not be seen as being acceptable to key player stakeholders (Appendix 6). This strategy may lower the profit margins per unit, which could possibly result in lower profits. However, there may be an increase in sales and reducing in competitor market share. The strategy might enable them to gain a competitive advantage, gaining a large market share in the relatively unsaturated and new markets. Dell has an advantage over some competitors, having already established themselves in a number of emerging markets; Africa, Asia and South America. Dell can use their strong brand image, good supply chain and online platform to offer a wide range of affordable PCs to meet all varying consumer needs. 2 This strategic option is suitable because it address’s a number of key issues in the external environment such the changing consumer behaviour, preferring to purchase tablets over PCs (Appendix 1) Statistics show that tablet sales are rising, whilst PC purchases are in decline. The tablet industry has been proven to be successful. This strategy would be seen as being acceptable to key player stakeholders (Appendix 6). The production and development of Dell’s tablet range could possibly lead to the company accessing large revenue streams from that industry. Business partners such as Microsoft would promote this strategy, allowing Microsoft to continue to supply their operating system to Dell’s tablets. Initial capital costs have already been incurred, making it less risky for Dell to continue to progress with their tablets compared to if they had to start the strategy from the beginning. Dell already invests in the development of their tablet range, meaning re-allocating more resources to the development would not be as costly as starting up from having no product. They have partnerships with Microsoft, helping fund and develop the tablet with access to considerable I.T knowledge. Strategies: 1. Develop pricing strategies to increase sales in developing economies and emerging markets. 2. Focus attention on the development of Dell tablets. 3. Invest in more R&D for the PC range.
  22. 22. U20467 Student No. 483563 Page 22 of 26 SAF SCORING 1 : LOW 5 : HIGH Strategy Suitability Acceptability Feasibility Average 1 3 4 5 4 2 4 5 4 4.3 3 3 3 4 3.3 3 Investing more into PC R&D could possibly enabled Dell to extend their presence in the declining industry. Already the maturity stage, a new generation of PCs might be able to extend the industry. (Appendix 3) This development may enable Dell to achieve a higher market share, possibly placing it further away from their competitors reach, seen in the Strategic Group Analysis. (Appendix 4). Stakeholders and key players would accept this strategy due to the less risky approach. Already established in the PC industry, Dell has set their foundations in the market place. However, the declining nature of the industry may prevent stakeholders – such as executives -from encouraging funds being wasted on a failing industry. This strategy is slightly less risky, involving a more predicted approach due to the fact Dell have been in the industry for a long duration. For Dell to invest in R&D for the PC industry, they have to mitigate against higher costs.
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