1. Dell Computer's Strategy
Dell Computer's strategy was built around a number of core elements: build-to-order manufacturing, mass
customization, partnerships with suppliers, just-in-time components inventories, direct sales, market
segmentation, customer service, and extensive data and information sharing with both supply partners
and customers. Through this strategy, the company hoped to achieve what Michael Dell called "virtual
integration"�a stitching together of Dell's business with its supply partners and customers in real time
such that all three appeared to be part of the same organizational team.5
Michael Dell founded Dell Computer with a simple vision and business concept—that personal
computers could be built to order and sold directly to customers.Bypassing distributors and retail
dealers eliminated the markups of resellers, and (2) building to order greatly reduced the costs and risks
associated with carrying large stocks of parts, components, and finished goods.
the direct-to-the-customer strategy gave the company a substantial cost and profit margin advantage
over rivals that manufactured various PC models in volume and kept their distributors and retailers
stocked with ample inventories.
ion
The organization’s mission statement is as follows: “Dell's mission is to be the mostsuccessful computer
company in the world at delivering the best customer experience in themarkets we serve”
A.3.
Organizational
Vision
While not specifically stated, it has been surmised that Dell’s vision is “… to lead in allregions we serve.
The foundation of our success is the same in the United Kingdom and France,China and Japan, Canada
and other countries. Customers want technology products that arerelevant to them, offer great value
and can be easily purchased and used. That’s what our teamaround the globe consistently delivers”
(Fiscal 2005 in Review, 2005). Dell’s vision is quitefocused and assumes customer needs to be somewhat
homogenous throughout the world.

2. 47
have internet access (but may own a computer) cite high costs as the main reason. As the cost
of internet access decreases, this capability will become available to more of the population.2003 U.S.
census data on computer and internet usage at home correlates closely withincome and educational
level (U.S. Department of Commerce, 2005). This data suggests that asthe prices of computers and
internet access decreases areas of market growth remain for computer hardware companies,
particularly among lower income consumers.
Computer
At
Home
Internet
at
home
Family
Income
(annual)

3. Total families75.7% 66.2%Less than $25,00047.2% 33.0%$25,000-$49,99974.3% 62.1%$50,000-
$74,99988.1% 82.2%$75,000-$99,99993.6% 90.4%$100,000 or more97.1% 94.8% Not reported72.6%
60.0%
Computer
At
Home
Internet
at
home
Educational
Attainment
Less than high school75.7% 66.2%
of
Householder
High school graduate47.2% 33.0%Some college74.3% 62.1%Bachelor's degree88.1% 82.2%Advanced
degree93.6% 90.4%

4. Additionally, computer hardware companies should target less educated consumers on the benefits of
computer and internet use including comparative shopping opportunities, ease of household finance
management, etc.
Computer
At
Home
Computer
Use
by
Race
White alone, non-Hispanic 80.3%
and
Hispanic
Origin
Asian alone 75.3%Black alone 47.3%Hispanic (any race) 49.5%
Race and age is also a factor in computer usage, according to the U.S. Census Bureaureport. Blacks and
Hispanics have the lowest rates of computers at home of any U.S. racialgroup—providing a market

5. opportunity for computer hardware companies which target thesegroups. Further, people 65 and older
had the lowest rates of computer (28%) and internet (25%)

14. 48
use of all age groups. As the baby boomers age, this demographic is likely to increase its use of both
technologies, partially due to exposure at younger ages. However, the current 65 and older population
is also a market opportunity for computer hardware companies.
G.3.
Technological
Forces

15. Technological change is critically important to the computer hardware business,contributing specifically
to the perilously short product life cycle for computers. A phenomenonknown as the “upgrade cycle”
continues to be one of the most influential macro forces in thecomputer industry. For example, the
replacement of the floppy disk by the compact disk andcolor monitors drove new waves of purchases as
did additional technological change that madecomputer hardware faster and more efficient. In 2006,
Microsoft is expected to release its new“Vista” operating system—spurring an upgrade cycle. Some
industry analysts argue that 50% of a computer hardware product profit is created during the first 3 – 6
months of sales.An additional technological trend impacting the computer industry is that
customers prefer to use a single vendor for all of their computing platforms (Graham-Hackett, 2005).
Fromthe customer’s perspective, this simplifies technology upgrades and one company is
accountablefor all of its needs. For a computer hardware company to remain competitive, it must be
able tosatisfy all of its customers’ needs in a timely manner.
G.4.
Government
Forces
Governments around the world also represent an opportunity for the computer hardwareindustry. They
are likely to continue to invest in internet infrastructure in order to improve thestandards of living of
their respective populations as well as to become more globallycompetitive (Graham-Hackett, 2005). In
2002, the U.S. federal government relaxed restrictionson computer exports of computers which have
190,000 Mtops to China, Russia, India, Pakistan,and other areas—providing a needed boost to the
computer industry (The Gale Group, 2006).

16. 49G.5.
Social
Forces
Seasonal factors influence the sales of computer hardware manufacturers. Specifically,these factors
include the retail cycle for home PCs, the year-end sales push for corporatehardware, and differences in
customs and business practices in other parts of the world (Graham-Hackett, 2005). Holiday and back-
to-school seasonal sales are also a key influence on the socialforces of this industry which drives sales.
Similarly, a summer business slowdown in Europeregularly results in decreased computer sales to this
region during this period.In the computer hardware industry, the fourth quarter is the most important
revenue andearnings period. This is due to two important factors (Graham-Hackett, 2005). First,
most businesses close their books in December and managers try to deplete their capital

17. spending budgets in order to avoid funding cutbacks in the next year. Second, the industry’s
salesrepresentatives are often offered substantial financial incentives to meet year-end sales goals.
G.6.
Physical
Environment
Physical resources, environmental issues, and weather has little impact on the computer industry given
that all computer parts are artificially manufactured. However, weather issuesmay affect the ability of a
computer company’s supply chain to operate efficiently. Adverseweather can negatively impact the
competitive edge of a company such as Dell which relies on“just in time” inventory methods as well as
direct sales to its customers.
G.7.
National
Factors
National factors are increasingly important in a computer company’s ability to maintainits competitive
edge, both in terms of the manufacturing process as well as improving sales.According to the Wall Street
Journal:
“Scores of Western companies have been cutting costs by shifting soft
Recommended
Strategy

18. It is recommended that the final alternative, in which Dell reinvigorates its differentiationstrategy, be
implemented. With this strategy, existing organizational resources and wherewithalcan be leveraged to
develop a clear differentiation advantage. This strategy does not makeunnecessary or drastic
operational changes which have the potential to disrupt the successfulcorporate culture and structure.
Rather, the recommended strategy identifies and improvesseveral existing competencies which have
made the company so successful.
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Dell considers customer service and support to be a key differentiator. The company,which prides itself
on this segment of business, has consistently ranked #1 in the industry. Notsurprisingly, this segment
represents a significant and expanding revenue stream for the firm.However, Dell’s lead in customer
service and support has declined in recent years. Decliningtraining and the outsourcing of customer
service and support has damaged its reputation. Torectify this problem, Dell must improve its customer
service representatives’ selection process,ensuring they are easily understood and well trained. By
improving this segment of businessDell can once again clearly differentiate itself from rivals HP and
IBM.Dell’s hugely successful direct sales model has allowed its products to be customized bycustomers.
However, Dell maintains a single source relationship with chip maker Intel whichlimits consumer choice.

19. Those that prefer to have PCs powered with AMD chips are currentlyunable to do so. To strengthen
Dell’s customization position, the firm must offer increasedconfiguration choices through the
establishment of additional supplier relationships. There ishowever, one significant caveat. Dell must
pursue relationships with only those suppliers thatare able to integrate seamlessly with Dell’s supply-
chain. This strategy will allow Dell to offer additional choices for its customers while maintaining
production efficiencies.This strategy also recommends that Dell revitalize its marketing efforts to
targetunderserved markets within the U.S. while expanding its marketing abroad into emerging
andgrowing international markets. As noted, the first tactic is domestic. Recent surveys show that ahigh
percentage of U.S. homes have PCs. However, there is a stark discrepancy in computer useamong
ethnicities. Whites and Asians are much more likely to use and own computers than their Black or
Hispanic counterparts. This high ownership among Whites and Asians makes itdifficult for Dell to grow in
this demographic segment. However, the low ownership among