This was a group project for the Strategic Management class on our MBA, the presentation is based on a case study regarding changes in Dell's business model on the various stages of company's development.

1. Dell Inc.: Changing the
Business Model(Mini Case)
Karolina Barańska Salmoon Bashir Giorgi Nadareishvili
Nino Tsintsadze Tako Azariashvili Ana Shilakadze

2. About Dell
DELL INC. was founded in 1984 by Michael Dell at age 19 while he
was a student living in a dormitory at the University of Texas. The
original name of the company was PC’s limited.
DELL TECHNOLOGS Net Sales or Revenues for the year 2016-2017
was 61.64B while the Gross profit in this year was 12.96B.

3. Objectives
The specification of the process map supports the quality of the products manufactured
and the flexibility of Dell towards its customers through sales representative or its
website that enables a range of variety of products for their customer to choose from.
Added more Quality to the products manufactured by Dell.
Made Dell a little more flexible to the demands of its customers.
Made Dell more dependable to its customers

4. Mission
Statement
"Dell's mission is to be the most successful computer company in the
world at delivering the best customer experience in markets we serve.
Dell Inc. listens to customers and delivers innovative technology and
services that give them the power to do more.
In doing so, Dell will meet customer expectations of:
Highest quality
Leading technology
Competitive pricing
Individual and company accountability
Best-in-class service and support
Flexible customization capability
Superior corporate citizenship
Financial stability

5. Current
Performance
Dell maintained its No. 2 share position in the global x86 server market
Dell Software registered double-digit revenue growth year-over-year
Dell grew PC shipments by nearly 10 percent year over year
Dell is ranked by Gartner No. 1 in Worldwide IT Services for Healthcare Providers
Dell delivers year-over-year growth across every region globally
With a market share of 15.9%, Dell was the third largest PC vendor in the world in the first quarter of 2017
after Lenovo and HP Inc.

6. Dell provides a classic example of how the principles of
strategic management have been used to translate an
innovative vision into a successful and sustainable
enterprise. Their vision statement basically tells the way
they do their business. They want to be successful in
the digital world for this they rely on latest technology.
Dell provides quality products to cater the needs of the
people. In intend to build good relationship with their
customers and suppliers
Strategic
Posture

8. ISSUES
Rapidly changing market
Centralized structure
Positioning of the company
Transition between business models
Supply chain issues
Pros and Cons of direct sales

9. The main issues:
• The industry’s focus shifts from desktop PCs to mobile computing, software
and technology services – areas of relative weakness at Dell;
• Dell abandons its original business model based on direct sales and value
chain efficiencies have been abandoned;
• Cost reductions and competitive pricing led to fall in customer service
rating – previously a strength of the company.

10. The Dilemma:
Should Dell continue with its current strategy of
following the consumer market down in price and
adjusting its costs accordingly or, like IBM, should it
change its focus to more profitable business services,
or, like HP, should it try to do both?

11. External Environment Analysis

13. External environment
PESTEL
Political–Legal
• Regional trade pacts provide access to other markets with great potential (O)
• Law regulations individual for every market (T)
• Unstable political situation in increasing parts of the world (T)
• Developing environmentalism – laws on pollution, energy usage and waste
management policies (T)

14. External environment
PESTEL
Economic
• Unstable, but recovering economy after crisis; demand is growing (O)
• Accelerating process of globalization (O)
• Changing economic ratios: inflation, currency fluctuation (T)

15. External environment
PESTEL
Socio-cultural
• Developing nations becomes better educated – need computers and accessories (O)
• Changing lifestyle – more people from different social groups need computers (O)
• Demographics – the age group of people who need computers is increasing (O)
• Consumer desires attractive, high-quality and technologically advanced appliances (O)
• Customers’ trends are changing very quickly. (O/T)
• More and more customers expect ecofriendly products (O/T)

16. External environment
PESTEL
Technological
• Computers and information technology increasingly important (O)
• Rapid technological improvements in PC industry (O)
• Outsourcing (O)

17. External environment
PESTEL
Environmental
• Energy and water availability (T)
• Visible climate change, natural catastrophes (T)

18. External environment
PESTEL
Political–Legal
•Regional trade pacts
provide access to
other markets with
great potential (O)
•Law regulations
individual for every
market (T)
• Unstable political
situation in increasing
parts of the world (T)
•Developing
environmentalism –
laws on pollution,
energy usage and
waste management
policies (T)
Economic
• Unstable, but
recovering
economy after
crisis; demand is
growing (O)
• Accelerating
process of
globalization (O)
• Changing
economic ratios:
inflation, currency
fluctuation (T)
Socio-cultural
•Developing nations
becomes better
educated – need
computers and
accessories (O)
•Changing lifestyle –
more people from
different social groups
need computers (O)
•Demographics – the
age group of people
who need computers is
increasing (O)
•Consumer desires
attractive, high-quality
and technologically
advanced appliances
(O)
•More and more
customers expect
ecofriendly products
(O/T)
•Customers’ trends are
changing very quickly.
(O/T)
Technological
• Computers and
information
technology
increasingly
important (O)
• Rapid
technological
improvements in
PC industry (O)
• Outsourcing (O)
Environmental
• Energy and water
availability (T)
• Visible climate
change, natural
catastrophes (T)

19. PORTER’SFIVE
FORCES

20. External environment - Porter’s Five Forces
Rivalry High
• Gateway, Acer,
Toshiba, and
Lenovo, HP, IBM,
Oracle have
competitive
advantages, big
resources &
global brand
awareness (T)
Bargaining Power
of Buyers High
• Because there is
a lot of players in
the market (T)
Bargaining Power
of Suppliers
Moderate
• Dell has a large
number of
suppliers that
varies from
hardware,
software and
services
suppliers.
However,
because of just-
in-time approach
it’s very
dependent on
suppliers (T)
Threat of
Substitutes High
• Smartphones and
tablets (T)
Entry Barriers
High
• Entering this
market requires a
lot of resources. It
is hard to
compete with
existing
companies,
because they
operate on the
basis of economy
of scales and
brand awareness
(O)

22. Internal Environment
Analysis

23. A. Corporate Structure
• Divisional Corporate Structure – Dell is the CEO (s)
• Centralized decision-making: major decisions made by Dell (also, he owned the
largest block of stock and continued to be the “Heart and Soul” of the firm (s/w);
B. Corporate Culture
• Company’s overall philosophy: high emphasis on customer support and
service(s).
• Company’s Main focus on manufacturing – Dell becomes the master of
engineering (s)
• Lack of R&D– Dell spent 1% of sales on R&D VS 5% typically invested by other
companies(w)
Note: Dell had Efficiency Business model
Internal
Environment

24. c. Corporate Resources
• Market posture: efforts focus on four global business units based on
customers: Large Enterprise, Public, Small & Medium Business, and
Consumer(s)
• Finance: a. Dell’s tock falls 42% since January 2007 (w)
b. Decrease in revenue, as well as, operational income (w)
c. Current and quick ratios look better than the industry average, as well as,
debt to equity ratio (s)
d. Financial leverage tends to decrease from 2009 to 2010 (s)
Internal
Environment

25. Financials
USD in Millions 2010 2009 2008 2007 2006 2005 2004
Revenue 52,902 61,101 61,133 57,420 55,788 49,121 41,444
Operating
income
2172 3190 3440 3070 4382 4206 3544
Net Income 1,433 2,478 2,947 2,583 3,602 3,018 2,645
Earnings per
share
0.73 1.25 1.31 1.14 1.47 1.18 1.01
Source: http://financials.morningstar.com/direct/ratios/r.html?t=XNAS%3ADELL&region=usa&culture=en-
US&productcode=MLE&cur

26. Financials - profitability
2010 2009 2008 2007 2006 2005 2004
Financial
leverage (av.)
5.97 6.2 7.38 5.92 5.6 3.58 3.08
Return on
equity %
28.91 61.9 73.1 61.09 67.31 47.68 47.43
Return on
invested capital
19.32 45.51 55.27 47.11 61.46 44.18 43.65
Source: http://financials.morningstar.com/direct/ratios/r.html?t=XNAS%3ADELL&region=usa&culture=en-
US&productcode=MLE&cur

27. Financials – Liquidity/Financial Health
Source: http://financials.morningstar.com/direct/ratios/r.html?t=XNAS%3ADELL&region=usa&culture=en-
US&productcode=MLE&cur
Dell Industry Dell Industry
2010 2010 2009 2009
Quick ratio 1.03 0.63 1.05 0.60
Debt/equity 0.61 0.42 0.44 0.46
Dell 2010 2009 2008 2007 2006 2005
Current ratio 1.28 1.36 1.07 1.12 1.11 1.2

28. c. Corporate Resources
• R&D: the company invests only 1% of its sales in R&D (w)
• Operations: a. Dell had its own assembly line in various countries,
including the US; though some operations, such as component production
and express shipping were outsourced (s) b. Dell became the master of
process engineering and supply chain management (s);
• Human resources: due to Dell’s retrenchment strategy, the company
cut 10,000 jobs since 2007 (even though there is no mentioning about
employee relationships, the drastic cuts might have caused dissatisfaction
of a lot of people) (unclear);
• Information System: Dell made a 3.6 billion purchase of a Perot
Systems, an IT service company; it allowed the company to expand into
higher-margin computing services (s).
Internal
Environment

29. VRIO Framework
1. Value: Does it provide customer value and
competitive advantage?
2. Rareness: Do no other competitors possess it?
3. Imitability: Is it costly for others to imitate?
4. Organization: Is the firm organized to exploit the
resource?

30. Analysis of strategic factors

31. Internal Factors (IFAS)ExternalFactors(EFAS)
TOWS
Strengths (S)
- Functional Structure (S)
- Centralized structure: major decisions made by Dell(s)
- Master of process engineering and supply chain management (s)
- Marketing: efforts focus on four global business units based on customers:
Large Enterprise, Public, Small & Medium Business, and Consumer(s)
- High emphasis on customer support and service(s)
- Its own assembly line in various countries, including the US(s)
- - Information System: Dell made a 3.6 billion purchase of a Perot Systems, an IT
service company; it allowed the company to expand into higher-margin computing
services (s).
Opportunities (O)
- Unstable, but recovering economy after crisis; demand is growing (O)
- Accelerating process of globalization (O)
- Computers and information technology increasingly important (O)
- Rapid technological improvements in PC industry (O)
- Outsourcing (O)
- Regional trade pacts (O)
- Tax exemptions for conducting business in special economic zones (O)
- Developing nations become better educated (O)
- Changing lifestyle (O)
- The age group of people who need computers is increasing (O)
- Consumer desires attractive, high-quality and technologically advanced
appliances (O)
- Customers’ trends are changing very quickly (O/T)
- More and more customers expect ecofriendly products (O/T)
SO Strategies
- Ability to respond quickly to changing environment
Own assembly lines - chance of producing whatever is required
Best engineering and supply chain - opportunity to quickly
produce new products
- Great contact with costumers - ability to receive information
regarding their wishes first on the market
Opportunity to develop new products for the changing market
by being first to receive information and quickly start
developing
- Special business units for each type of costumer - ability to
offer products and services required for each of them and
choose the most profitable markets

32. Internal Factors (IFAS)ExternalFactors(EFAS)
TOWS
Weaknesses (W)
- Centralized structure: One man show (w)
- Dependant on costumer views (w).
- Lack of R&D (W)
Opportunities (O)
- Unstable, but recovering economy after crisis; demand is growing (O)
- Accelerating process of globalization (O)
- Computers and information technology increasingly important (O)
- Rapid technological improvements in PC industry (O)
- Outsourcing (O)
- Regional trade pacts (O)
- Tax exemptions for conducting business in special economic zones
(O)
- Developing nations become better educated (O)
- Changing lifestyle (O)
- The age group of people who need computers is increasing (O)
- Consumer desires attractive, high-quality and technologically
advanced appliances (O)
- Customers’ trends are changing very quickly (O/T)
- More and more customers expect ecofriendly products (O/T)
WO Strategies
- Market is changing fast and requires new products, R&D
must become a priority to deal with this issue
- Dell must create a team of experts who will participate in
decision making and reduce threat of mistakes
- Costumers always demand low prices, but they also want
innovative products. Understand costumers rather than just
listen to them. Train direct sales reps in research to get the
right idea from costumers
- Announce the new product lines and services to get the
market excited and deal with the stock falling issue

33. Internal Factors (IFAS)ExternalFactors(EFAS)
TOWS
Strengths (S)
- Functional Structure (S)
- Centralized structure: major decisions made by Dell(s)
- High emphasis on customer support and service(s)
- Marketing: efforts focus on four global business units based on
customers: Large Enterprise, Public, Small & Medium Business, and
Consumer(s)
- Its own assembly line in various countries, including the US(s)
- Master of process engineering and supply chain management (s)
- Information System: Dell made a 3.6 billion purchase of a Perot
Systems, an IT service company; it allowed the company to expand
into higher-margin computing services (s).
Threats (T)
- Changing economic ratios: inflation, currency
fluctuation (T)
- Law regulations individual for every market (T)
- Unstable political situation in parts of the world (T)
- Developing environmentalism (T)
- Quickly changing trends (O/T)
- More and more customers expect ecofriendly products
(O/T)
- Visible climat change, Natural catastrophes (T)
ST Strategies
- Receive feedback from the costumer to be prepared for
upcoming changes on the market
- Quickly changing trends can be delt with better R&D
- Own assembly line and centrilized structure could be core
values in case of requiring quick response in rapidly changing
environment
- Dell is master of process engineering, which can be altered equally
professionally to respond to the new trends of environmentalism,
climate change and etc.

34. Internal Factors (IFAS)ExternalFactors(EFAS
TOWS
Weaknesses (W)
- Centralized structure: One man show (w)
- Dependant on costumer views (w).
- Lack of R&D (W)
- Finance – Dell’s stock falls 42% since January 2007 (w)
Threats (T)
- Changing economic ratios: inflation, currency fluctuation
(T)
- Law regulations individual for every market (T)
- Unstable political situation in parts of the world (T)
- Developing environmentalism (T)
- Quickly changing trends (O/T)
- More and more customers expect ecofriendly products
(O/T)
- Visible climat change, Natural catastrophes (T)
WT Strategies
- In case of quick changes for political reasons centralized
structure can react faster
- Financial review is required to free up money in order to
invest more in R&D, on the other hand ongoing operations
cannot be hulted to maintain position on the market

35. Strategic Alternatives and
Recommended Strategy

36. Growth through concentric diversification – Market requires new and innovative products
Dell can use its strengths to learn about costumers needs faster than its competitors and is in position to quickly offer new
products based on the feedback
This will require more investment in R&D and thus additional funds
Growth through horizontal diversification – Expanding to new less developed countries as Dell’s
outdated cheap products could be more interesting for them
Establishing itself on new markets; additional income
Unstable political environment in some countries, requiring new supply chains, additional marketing costs
Strategic Alternatives

37. Retrenchment through sell out/divestment – closing down less profitable product line Storage (4%)
Freeing up more money for R&D and additional marketing costs
Loosing a specific part of the market
R&D Strategy – Dell should produce more innovative products
This will respond to the market needs; Dell is in position to provide
Completely changing the current strategy; new additional costs
Strategic Alternatives

38. Recommended
Strategy
• Combination of Several Strategies
1
• Final goal - R&D Strategy, market requires new and
innovative products2
• Free up money for working on new projects
3
• Should remain in its field of expertise
4
• The company has to find new markets with more
interest in its products5
• Retrenchment through sell out/divestment; combination of
Growth through concentric and horizontal diversifications, in
order to finally arrive at the R&D Strategy.6

39. Implementation
Create a new department
for R&D and bring in
professional from outside,
but the same field:
- Dell was not concentrated
on R&D and might not have
a strong enough team
- New team should be
created to develop this part
of the company
1
Hire an international sales
manager:
- Dell needs someone to
lead entrance in different
markets
- Preferably someone with
the experience of dealing
with less developed
countries
2

40. Evaluation&
Control
New and stricter reporting
system:
- Monitor new people Dell
himself doesn’t know
- Control work in the
unaccustomed field
1
Strengthen HR
involvement and establish
new system of team
building and sharing of
corporate culture:
- New employees locally and
internationally, who are not
accustomed to corporate
culture
- New executives who, while
implementing new ideas,
must become part of the
company
2

41. Thanks for the Attention