Dell Strategic Management Final Paper

Dell, Inc.

A Strategic Management Case Study
October 8, 2013
Sophie Yanez
University of the Incarnate Word

Dell Inc., Strategic Management Case Study
Sophie Yanez

Table of Contents
I. Introduction
II. Dell’s Strategy
a. Vision Statement
b. Mission Statement
c. Strategies and Objectives
III. Recommended Vision and Mission Statements
IV. External Assessment
a. Porter’s Five Forces Model
b. External Factor Evaluation
c. Competitive Profile Matrix
V. Internal Assessment
a. Value Chain
b. Internal Factor Evaluation
VI. Porter’s Five Generic Strategy
VII. SWOT Analysis
a. SPACE Matrix
b. Boston Consulting Group Matrix
c. Internal-External Matrix
VIII. Strategy and Objective Recommendations
IX. Recommended Implementation Plan
X. Strategy Review and Evaluation
References
Appendixes

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I. Introduction
Dell was founded in 1985 under the name, PCs Limited by Michael Dell who
at the time was a college student of the University of Texas. In 1988 the company’s
name was changed to Dell Computer Corporation. The company is headquartered in
Round Rock, Texas and is the world's #3 supplier of Personal Computers (PC)
behind HP who ranks as #2 and Lenovo who ranks as #1 (According to IDC
worldwide quarterly PC tracker). Dell provides a broad range of technology
products for the consumer, education, enterprise, and government sectors. In
addition to its line of desktop and notebook PCs, Delloffers network servers, data
storage systems, printers, ethernet switches, and peripherals, such as displays and
projectors. It also markets third-party software and hardware. The company's
services unit provides asset recovery, financing, infrastructure consulting, support,
systems integration, and training, as well as hosted IT services. On September 12,
2013, Dell announced that it would begoing private in a deal valued at nearly $25
billion dollars. (Hoovers, 2013)
Their purpose as an organization is to deliver technology solutions that
enable people to grow and thrive. Over the past 26 years Dell has built a solid
worldwide company with:
• 100,000+ team members in over 180 countries
• 400,000 solutions in classrooms worldwide
• #1 healthcare IT services provider in the world
• 3.5 million connections via our social web community

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Dell can attribute much of its success to their customer service offerings,
global expansion and financial performance. The growing requirement for
efficiently managing support related costs among medium and large businesses is a
concern that is increasing in relevance in today’s IT environments. The company has
been struggling with the long-term decline in the personal computer business, while
at the same time trying to transform itself into a bigger player in enterprise
hardware, software and services. But those efforts at transformation have been
uneven, and the majority of Dell’s revenue is either derived directly from PCs or
from ancillary products like desktop displays and accessories (Hesseldahl, 2013).
Dell has been taking in quite some scrutiny in the past few months since their
CEO, Michael Dell, decided to take the company private with the help of Silver Lake
Venture Capitalist. To many this may seem as a sign of weakness or downturn for
Dell but in actuality this may give the personal computer company a fighting chance
to regain it’s #1 position in the market. By going private the company will initially
see an increase in operating expenses, but in the long run Michael Dell will be able
to take control of company processes and management changes without theinquiry
of shareholders and financial analysts.
II. Dell’s Mission, Visionand Strategy
The following information was retrieved from Dell.com:
Dell’s Vision Statement: 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

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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.
Dell’s 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. In doing so, dell will meet customer expectations of highest quality; leading
technology; competitive pricing; Individual and company accountability; superior
corporate citizenship; financial stability.
Strategies and Objectives:With the recent buyout and Silver Light partnership,
Dell is able to take the company forward in a direction that isn’t hindered by
stockholder opinions and market analysts.
According to a Forbes article written by Patrick Moorhead, Dell plans to be a
volume, “in it to win it” PC player. This statement comes from a keynote speech that
Jeff Clarke,Dell’s Vice Chairman and President of Global Operations and End User
Computing stated at the Industry Analyst conference in Austin Texas in 2013. Dell’s
“end user computing” growth plan is based on four primary elements:(1) simplify
their product and services portfolio, (2)obtain new customers, (3) win with industry
leading solutions and (4) scale alternative computing solutions(Moorhead, 2013).
Dell’s goal of simplifying its offerings is encapsulated in a program called
“Smart Selection”. With Smart Selection, Dell pre-builds what they it believe
will be the most popular configurations, or SKUs, and will ship them within
24 hours. This can be considered ‘build to order,’ which is something HP and
previously Compaq have been doing for a while.

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Dell now plans to be competitive in more price bands and says they it won’t
be walking away from business like it had in the past. To help accomplish this,
it plans on developing specific SKUs for specific markets, broaden its
portfolio with tablets, and better optimizing its channels of distribution.
Win with industry-leading end-user computing solutions by investing in
what they call “sales makers.” This is its fancy name for salespeople. Dell
plans on aggressively pursuing new commercial customers to take business
from Hewlett-Packard and Lenovo.
Dell’s Wyse business is on a $1B run rate. This is the cloud-client computing
business, which includes thin clients, but it’s a lot more than hardware. It’s
an entire chain of hardware, software and services that goes from the end
point to the servers, networking, storage and security in the cloud
(Moorhead, 2013).
III.Recommended Mission and Vision
I recommend that Dell revise their vision statement to answer what type of
company they want to become instead of their current ‘it’s the way we do business’
response. My recommendation is to shift the statement to something more powerful,
something the employees and consumers can relate to and be inspired by, such as:
“To become the world’s first choice when it comes to computing needs.”
With the recent strategy shift to take the company private, I feel it is fitting to
revamp the company’s mission statement to identify the scope of Dell’s operations
on how they will achieve the leading position in the PC technology industry. Their
mission statement is on the right track, I would simply change the “how we are

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going to get there” declarations and remove generalized statements such as
corporate citizenship and financial stability. I would remove those because if the
first objectives are met such as quality products, good services and competitive
pricing, then corporate citizenship and financial statements will be achieved
naturally. I recommend the following revision to the mission statement:
“Dell’s mission is to be the most successful computer company in the world by
delivering the best customer experience in themarkets we serve. We will
achieve this by delivering the highest quality products to the every day
consumer and any size businesses, as well as developing innovative
technologies and maintaining competitive prices.”
IV. External Analysis
According to Hoovers, the demand in the PC market is driven by
technological advances, disposable income in the consumer market and corporate
spending cycles. The profitability of individual companies depends on supply chain
efficiency and ancillary products and services. This makes it to where large
companies, such as Dell, HP and Lenovo have advantages in leveraging extensive
marketing budgets and sales channels, securing component discounts, and
manufacturing efficiencies and small companies can compete by offering unique
products or localized service and support (Hoovers, 2013).
Porter’s Five Forces Model (Appendix A)
There are on-going actions by all of the major players as they work to
increase market share. There seems to be two approaches depending on the
attributes of the company. The U.S. companies (Dell and HP) are launching efforts to

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diversify into higher margin operations. The Chinese competitors (Acer and Lenovo)
seem to be willing to compete on a low-cost basis. There is almost no hope of
differentiating the products since all of them, with the exception of Apple, have to
run the current Microsoft Operating System. Additionally, there isfull penetration in
all dealer networks by almost all brands, and significant Internet sales as well. Apple
seems more forward-looking and is working to maintain its niche market while
expanding into the mobile market.
This market is completely saturated, and market growth, in terms of units
sold, is almost stagnate. The players now face a zero-sum game. This may explain
why IBM chose to exit the field.
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. According to IDC, the industry shipped a total of 76.3 million units
between January and March, a 13.9 percent decline over last year’s first quarter.The
PC industry continues to suffer from the rise of smartphones and tablets, which are
gradually replacing PCs as the primary computing device for many consumers
(Prafulla, 2013). Below you can see the decline in personal computer orders across
all competitors:

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In terms of customer loyalty, there is almost no brand loyalty in this largely
commoditized market. This means that anyone can enter and make a convincing
marketing pitch. They will have to understand that this pitch will be primarily on
the basis of price. Luckily, to actually manufacture PCs requires a significant amount
of capital investment. When coupled with the low net margins and high risks
inherent in this industry, raising such capital seems unlikely.
The suppliers in this industry are in an interesting position. There are
onlytwo major players in the processor market, Intel and AMD, and all
manufacturers support both brands. Additionally, there are no major functional
differences between them. This leaves the PC manufacturer agnostic with respect to
processors. The other components of the PC are largely commodity items, so there
can be no pressure from these suppliers either.Since the PC has become a largely
commoditized item with almost no switching cost or brand loyalty, the buyers tend
to buy based on price. Buyers will buy almost any brand that matches their price
point.
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External Factor Evaluation
Dell is a technology company that has the opportunity to power the cloud
revolution that is taking place in the industry. With increasing technology
capabilities that allow for the development of applications and products from
anywhere in the world due to the cloud, Dell needs to find a way to become the
premier supplier for businesses and developers.
The more technically inclined the population gets, the more opportunity Dell
will have to sell their products. This is not just limited to large businesses. Education
has been revolutionized by technology, students are being asked to access
information through the Internet as opposed to libraries and books,which was the
case 20 years ago. The individual consumer still represents a large opportunity for
the PC industry.
Some of the threats affecting Dell’s future include the rapid change of
customer needs due to the introduction of smart phones and tablets. Consumers
that have been exposed to technology are intrigued by the ‘newness’ of it. As soon as
a product is introduced, there are 5 different variations that will follow with feature
upgrades from competitors. Dell needs to start innovating and stay in front of the
technology in order to remain competitive. For a more in depth view at the analysis
taken to reflect these statements, review Appendix B.
Competitive Profile Matrix
Dell’s top competitors include HP and Lenovo. Lenovo is gaining market
share over HP and Dell and now hold the number one position in PC sales (LPTPS,
2013). After reviewing these three company’s advertising campaigns, product

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quality reviews, market share position and financials, Dell’s position in the market
reflects their #3 ranking in the Competitive Profile Matrix in Appendix C.
Advertising:Lenovo’s brand campaign, "For Those Who Do" repositions
them not as a provider of devices, but as an enabler of the DOER lifestyle and DO
mindset of the consumer."For Those Who Do" is the global brand umbrella theme. It
was created by Saatchi & Saatchi Publicist Group and is intended to appeal to young
consumers. "The youth market values most what they're doing with technology. If
you look at the ads, you'll see that the focus is not on the product or even on the
users, but what they're doing with it," Mr. Roman said(Bulik, 2012).
Dell’s recent commercial launch features a girl named Annie who dreams of
flying. “The power to do more” commercial campaign is meant to celebrate the way
Dell technology helps enable interests that people pursue outside of their work life
(Thielman, 2013).
HP launched their “make it matter campaign” and partnered with multiple
enterprise organizations such as Nascar and Beats Headphones.HP wanted to
refresh “The Computer is Personal Again” campaign that had been running
successfully for several years, and asked Liquid to focus on the diversity of new
systems that that the company was introducing. Liquid focused on the idea that the
new systems were designed for specific types of audiences and they developed the
campaign on the concept of a consumer’s “personality” (Liquid Agency).
All of the campaigns surround themselves around the individual consumer so
there wasn’t much differentiation between the campaigns. Dell scored a higher

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rating in this category based on the creativity and diversity of their commercials as
well as brand recognition.
Product Quality: Ratings for product quality were considered based on
Laptop World’s recent 2013 top laptop list. HP was ranked #3, Lenovo #5 and Dell
#9, all were trailing behind Apple’s Macbook which came in at #1(LPTPS, 2013).”
The following excerpts from the article say it best:
“Dell surely is among the top brands that manufactures best notebooks and
has time to care about their customers. Their customer support is so far the
best and in case something happens to your laptop their service centers
won’t take much time to fix it. Dell is an old brand when it comes to
computers and other electronics, but recently they started manufacturing
laptops and they have grown so fast that today they have more models than
one can remember (LPTPS, 2013).”
“HP is one of the oldest laptop brands and after merging with Compaq
they’ve become a lot more known than before. This brand is mostly known
for manufacturing standard laptops and all they care about is delivering
quality. Laptops from HP can be a little expensive but surely they are worthy
of their price. Recently they’ve also started producing netbooks that can
easily compete with ASUS and Acer netbooks and most of them cost less than
$500. They usually focus more on their sound and graphics section because
these days that’s all most of naive people care about (LPTPS, 2013).”

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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%. Acer Group and Asus are ranked among the top 5 brands in personal
computers. The market share rankings usedin the Competitive Profile Matrix
determined the 1-4 ratings the companies received.

V. Internal Analysis
Value Chain Analysis
The Company’s value chain analysis is standard to the rest of the PC industry
and can be reviewed in Appendix D.
Internal Factor Evaluation
Michael Dell’s recent company buyout held a weight of 13% in the company’s
strategy factors. The company’s pace of internal transformation should quicken with
the company going private because any proposed strategy will no longer be subject
to shareholders. Michael Dell has argued that revamping his company into a

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provider of enterprise computing services in the mold of IBM is a complex
undertaking that is best performed outside of public markets (Gupta, 2013). Going
private gives Dell, Inc. the opportunity to do everything they have hoped for.
Dells’ plans to expand globally into emerging technological markets such as
India and China are strengths the organization has within their strategy. Dell plans
to double its store count and beef up its sales force in China during the next few
years. They also plan to expand their reach into smaller cities as it looks to offset the
harsh impact of rapidly falling personal-computer sales worldwide. Dell, which has
10,000 sales outlets in China, will also focus on developing its tablet business (Smart
Brief, 2013).
“India has been a great growth story for Dell. We have quite a large presence
there and I personally visit the country few times a year. We have a great team there
and about 27,000 people,” the Company’s Global Chief Michael Dell told PTI in an
interview (Davos, 2013). Dell, who was at the World Economic Forum Annual
Meeting, said the company’s plant and the operations and staff size in the country
would continue to expand as per the size of the business (Davos, 2013). Lenovo and
HP have also targeted China and India as part of their global expansion strategy so it
makes perfect sense for Dell to focus their expansion in these regions as well in
order to maintain market share.
One of the challenges that Dell faces in its current market is their
followership strategy. Dell invests far less in technology than its competitors, which
means they will always be one step behind from the industry. As competition
increases and PC’s become more of a commodity, differentiation through innovation

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becomes more difficult (Baker & Walsh, 2011). In the Internal Factor Evaluation
(IFE), the innovation of new products held the highest rating for the industry. Dell
will need to find a way to re-invent the PC standard and develop features that keep
it relative to consumers. The balance between the high cost to innovate and
lowering Dell’s current debt ratio will serve as a large challenge for the company.
Appendix E has a more comprehensive look at the IFE Matrix and reasoning to the
company’s 2.36 score.
VI. Porter’s Five Generic Strategies
Dell falls into Porter’s Type 2: Cost Leadership- Best Value strategy, because
along with HP and Lenovo, the company is focused on offering products and services
to a wide range of customers at the best prices available in the market(see Appendix
F). With the exception of Apple, the majority of the PC market falls within this
category. It is difficult to differentiate in the PC industry since the standard of the PC
has been determined for many years. While consumers are interested in a low cost
product, the quality of the product is still extremely important to them. Substitute
products such as smart phones and tablets are differentiation enough in this market
and would fall in the Type 3 category. Apple is focused on a more specialized
consumer that is considered price insensitive, which is why it falls in Type 3 as well.
In order to employ the Best Value strategy, Dell should perform value chain
activities more efficiently than HP and Lenovo. Such activities would include
restricting the plant layouts, mastering newly introduced technologies such as cloud
computing, using common parts and simplifying the design of their computers.

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VII. SWOT Analysis
From the detailed SWOT analysis referenced in Appendix G, I would recommend
Dell implement the following strategies:
The SO strategies are (1) Dell should promote the efficiency of their Dell
servers in Green capable datacenters. Dell has the opportunity to set the standard
for powering the world’s cloud with Dell servers. They should partner with Amazon,
Google and Rackspace to build a more efficient, green energy powered server. By
partnering with hosting companies such as these, Dell has the ability to be
recognized as the only ‘green efficient’ server hosted in the world’s top data-centers.
Dell will also have the opportunity to sell their PC’s to employees housed at these
company headquarters and satellite offices. (2) With increasing global Internet
usage, Dell has the opportunity to provide a premier level of online customer service.
Dell should invest in their current chat support and online knowledge center
platforms.
The WO strategies are (1) Dell needs to remove itself from its current
followership strategy and invest more in R&D. 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. (2) They should focus
expansion efforts in the Education sector. With younger generations becoming more
technologicallysaavy, Dell has the opportunity to create brand loyalty with students
and teachers that will eventually become consumers. Consumer’s that would be

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used to working with their products thus making it more likely for them to stick
with Dell.
The ST strategies are: (1) Leverage theBoomi acquisition to create a better
integration of cloud apps and on-premise apps. Boomi has the opportunity to
become the choice of cloud application dashboards if built properly and priced
competitively. (2) Dell needs to seek out partnerships with hosting companies and
colocation datacenters around the world. This will help to gain cloud computing
market share in global regions such as China and India.
The WT strategies are: (1) creating a new tablet or smart phone that can
compete with the likes of Apple and Android systems and ensure that it is
competitively priced. (2) Dell needs to start manufacturing it’s own PC parts. This
will lower the cost for supply chain, improve quality production and reduce
manufacturing dependency.
The Space, Boston Consulting Group (BCG) and Internal-External matrixes
helped with the building of these recommendations because it reflects that the
strategies recommended by the SWOT analysis are in line with the competitive
profiles of the Company. Dell falls under the Defensive category in the Space matrix
(Appendix H). It reflects that Dell has a very weak competitive position in a negative
growth industry. With PC sales decreasing industry wide and their #3 market share
ranking, the Space matrix reflects Dell accurately.
The BCG matrix reflects that Dell competes in a Cash Cow division in
Quadrant III. It has a high relative market share position, ranked third at 12.2%, but
competes in a low growth industry. According to this matrix, product development

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or diversification are two attractive strategies that Dell can adopt based on their
position (Appendix I).The IDC estimates that 2012 portable PC shipments were 202
million in 2012 and will only grow 0.9% in 2013. Then from 2013 to 2017 portable
PC shipments will grow to 241 million or a rate of 18.3% over the four years with
the bulk of the growth coming from emerging markets (Jones, 2013).
The Internal- External (IE) matrix positioned Dell in division II of the nineblock cell display (Appendix J). The IFE score of 2.36 and EFE score of 3.13 were
used to plot the graph and determine the positioning for Dell. Based on the
information used for the IE, Dell is in a Grow and Build state, which recommends
that backward, forward and horizontal integration, market penetration, or market
and product development strategies are put in place.
VIII.Strategy and Objective Recommendations
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. I would suggest they focus on the
quality of the products they are building and not so much the quantity that is being
produced. While market share is important, the quality of the products that are

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being produced reflect the Dell Brand. The company’s brand is an asset they need to
keep in order to get ahead.
In Dell’s vision statement they state their interactions with the community
will include the future of technology, however when I read about their current R&D
strategy, they aren’t staying true to that statement. In order to be the most
successful company in the world and in order to deliver the best customer service
experience, they have to be innovative in technology. If they don’t, their competitors
will always be 2 to 3 years ahead of them. I would recommend they invest additional
resources into their recent acquisitions, Boomi and Perot systems, so they can stay
ahead of the curve in the hardware and software needs of the cloud computing
industry.The low risk, low innovation (follower) strategy that Dell currently has
isn’t necessarily turning out to be a high return investment for them. For example,
Dell’s Streak 7 did not dominate the tablet industry or make a dent in tablet market
share. Also, it resulted in bad reviews for its poor quality, which hurts the
company’s brand. The consumer and business markets are moving towards a ‘we
want the newest and best product’ mentality in all of their technological devices and
services. Dell will continue to lose traction and customer loyalty if they do not keep
up with their competitors and innovate. Based on the recent buy out from Michael
Dell and Silverlight and the recent I assume that Dell is aware of a need for a new
strategy or they would not have acquired cloud computing and software
development companies.
IX:Recommended Implementation Plan

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I recommend Dell implements the previously discussed strategies by changing
their spending practices and reviewing their budget and current investments. Dell
needs to focus on reducing company debt and reducing the manufacturing cost of
their hardware products. With the recent influx of capital and privatization of the
company, I assume that Michael Dell already has plans like this in place or he would
not have worked so hard to gain back control of the company from it’s previous
shareholders.
Some possible risks to be aware of include the demand for Dell PC’s can grow too
fast to keep up with supply and demand or demand can decrease due to the
expansion of their competitor’s presence in the global markets. Dell will also need to
increase marketing and advertising spending in order to compete with market
saturation and market traction of Asus and Acer, which are not too far behind from
Dell.Dell could avoid these problems by diversifying the countries they expand their
datacenters in, by focusing on the quality of their products to ensure they are
superior to their competitors, and continually analyzing their market needs to
ensure their strategy is aligned with what consumers are asking for.
X.Strategy Review and Evaluation
Since stock price will no longer be available as measure of success for Dell,
the evaluation method I recommend to determine whether or not these proposed
strategies (global expansion, improved product quality and robust customer
service) are successful is to continuously review and measure:
1. Global PC sales trends

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2. Potential improvements in market share percentage for Dell and it’s
competitors
3. Product quality reviews from consumers
4. Customer service reviews
The strategy recommendation around the innovation of new products is
more challenging to measure than the others. The simple release of a product
doesn’t determine its success. Dell will need to determine a new products success
based on reviews from analysts and customers, as well as sales and profit margins.

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References
Baker, M. & Walsh, A.M. (2011). Case 26- Dell, Inc. In Strategic Managements: A
Competitive Advantage Approach. La Salle University (pp-252-261).
Bulik, B.S. (January 9, 2012). What do you do when your business outpaces your
brand? Lenovo may soon have an answer. In Ad Age- CMO Strategy, retrieved
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Davos. (January 30, 2013). Dell expands operations, headcount in India: Global Chief.
In The Hindu Business, retrieved in October 2013 from,
http://www.thehindubusinessline.com/companies/dell-to-expandoperations-headcount-in-india-global-chief/article4361350.ece
Gupta, P. (September 12, 2013). Dell to Lavish more on PC’s, tablets after $25 billion
buyout win. In Reuters, retrieved in October 2013 from,
http://www.reuters.com/article/2013/09/12/us-dell-buyoutidUSBRE98B0FC20130912
Hoovers, A D&B Company (n.d.), Retrieved October 2013
from,http://www.hoovers.com/company-information/cs/revenuefinancial.Dell_Inc.3d10a81e8e6a6d30.html
Hesseldahl, Arik (September 12, 2013). Dell Shareholders Approve $25 Billion
Buyout to Go Private. In All Things D, retrieved October 2013
from,http://allthingsd.com/20130912/dell-shareholders-approve-25billion-buyout-to-go-private/
IDC- Press Release. (July 2013). Lenovo Overtakes HP as the Top PC Vendor While
US Shipments stabilize in the Second Quarter of 2013. In IDC, retrieved on
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http://www.idc.com/getdoc.jsp?containerId=prUS24213513
Jones, C. (March 4, 2013). PC Market to Shrink in 2013 and Exhibit Low growth
through 2017. In Forbes, retrieved on October 2013 from,
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Liquid Agency (n.d), Here are our latest success stories. In Liquid Agency, retrieved
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LPTPS.com (2013) Top 10 Best Laptop Brands in 2013. In LPTPS, retrievedon
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Moorhead, P. (June 21, 2013). Dell’s PC Growth Strategy- In it to Win it. In
Forbes,retrieved October 2013 from,
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Prafulla.net, (n.d.) The Global PC Market is Collapsing (Infographic). In Prafulla.net,
retrieved on October, 2013 from, http://prafulla.net/interestingcontents/world-interesting-contents/the-global-pc-market-is-collapsinginfographic/
Smart Brief. (April 12, 2013). Dell maps China expansion to offset falling global PC
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http://www.smartbrief.com/04/12/13/dell-maps-china-expansion-offsetfalling-global-pc-sales#.UlL7hSTFZ99
Thielman, S. (February 20, 2013). Ad of the Day: Dell Y&R dreams up an alternate
universe in its latest spot for the computer maker. In AdWeek, retrieved on
October 2013 from, http://www.adweek.com/news/advertisingbranding/ad-day-dell-147420

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Appendixes
A. Porter’s Five Forces Model
§

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

§

SUPPL IERS

SUBSTITUTE PRODUCTS
§

§

§

§
§

§

132 different key supply
chain markets that include
A M D, Intel Corp. EM C,
M icrosoft, Toshiba,
L ogitech. L exmark, 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, RA M )
High cost of supply chain
churn

§

§
§

§
§

Hewlett Packard, L enovo, A SUS, and ACER
L arge 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:
M icrosoft)

S

Porter’s Five-Forces
Model

B. External Factor Matrix (EFE)

External Factor Evaluation
Dell, Inc.
Key External Factors
Opportunities
The Green Movement: The want for more environment friendly products. Such as
computer Recyling 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

24

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

0.05
3.13

1

Sophie Yanez
C. Competitive Profile Matrix

Competitive Profile M atrix
HP

Competitive Profile Matrix
Critical Success Factors

Lenovo

Dell

Weight

Rating

Score

Rating

Score

Rating

Score

Adver sing

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 compe

0.21

4

0.84

4

0.84

4

0.84

Management

0.09

3

0.27

3

0.27

4

0.36

Financial posi on

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

on

1.00

3.51

3.35

2.82

D. Value Chain Analysis (VCA)

Value Chain A nalysis

Supplier Costs
• Raw M aterials
• M erchandise
• Transportation
• Shipping Costs
• Component parts
• Inspection
• Warehouse Storage

25

Production Costs
• Inventory System
• Receiving Costs
• Plant L ayout
• R& D
• Cost accounting
• M erchandise
tracking system
• Quality Control

Distribution Costs
• L oading
• Shipping
• Budgeting
• Personnel- Trucks,
Ships, Plane
• Internet System
• Fuel
• M aintenance

Sales & M arketing
Costs

Customer Service
Costs

• Sales reps
• Dell.com website
• A dvertising and
publicity
• Transportation
• Promotions and
sponsorships

• Shipping
• Phone Support
• Online Email
Support
• Online Chat
Support
• Internet K nowledge
Base
• Warranty

Sophie Yanez
E. Internal Factor Evaluation (IFE)

Internal Factor Evaluation
Dell, Inc.
Key Internal Factors

Weight Rating

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

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

F. Porter’s Five Generic Strategies

Porter’s Five Generic Strategies
Generic Strategies
Focus

Small

26

Differentiation

L arge

Size of M arket

Cost L eadership

Sophie Yanez
G. SWOT Matrix

SWOT M atrix
STRENGTHS-S

WEAKNESSES-W

List Internal Strengths
1.
2.
3.
4.
5.
6.
7.

OPPORTUNITIES-O
List External Opportunities
1.
2.
3.
4.
5.

The Green Movem ent
Global Market internet usage
Improving technologies
Younger generations are tech
saavy.
Changing standard of
comm unication through
technology.

2.

THREATS-T

2.
3.
4.
5.
6.
7.

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

Global Recycling Program
Boomi and Perot system acquisitions
Client Reinvention Initiative
M ichael Dell taking the company private
Re-org towards a more customer centric
model.
Customized product focus
Global expansion to India and China

1.
2.
3.
4.
5.

SO STRATEGIES
1.

1.

2.

Followership Strategy
High manufacturer dependency
Price Wars with other competitors
Dell’s current debt to income ratio
L osing M arket Share

WO STRATEGIES

Promote the efficiency of Dell computers
in Green Datacenters. Set the standard
for powering the worlds cloud with Dell
Servers.
Increasing Global Internet usage means
there will be more of a need for online
customer service. Improve Chat support
and online knowledge center.

1.

2.

ST STRATEGIES

List External Threats
1.

List Internal weaknesses

With the improving technologies in the
market place, this is Dell’s opportunity
to remove itself from the Followership
strategy and innovate something.
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

L everage Boomi acquisition to create a
better integration of cloud apps and on
premise apps. M ake Boomi the choice of
cloud application dashboard.
With the Cloud Computing market
expanding in China and India- seek out
partnerships with hosting company’s and
colocation Datacenters around the world.

1.

2.

Create a new tablet or smart phone that
can compete with the likes of A pple
and A ndroid systems. One that is
competitively priced.
Start manufacturing own PC parts. This
will lower the cost for supply chain,
improve quality production and reduce
manufacturing dependency.

Source: Fred R. David, Strategic Management Concepts & Cases: A Competitive Advantage Approach , (2013), 14th ed.

H. Space Matrix

Space M atrix
FP

Financial Posi on (FP)
Return on investment
Leverage
Liquidity
Working Capital
Cash Flow
Compe ve Posi on (CP)
Market Share
Product Quality
Customer Loyalty
Tech know How
Control over suppliers

CP

IP

SP

27

Stability Posi on (SP)
2 Rate of Infla on
2 Technological Changes
3 Price Elas city
4 Compe ve Pressure
4 Barriers to Entry
3
Industry Posi on (IP)
-3 Growth poten al
3 Financial stability
-7 Ease of entry to market
0 Profit poten al
-7 Resource U liza on
-2.8

-2
-7
-3
-7
-4
-4.6
3
2
-7
3
-4
-0.6

Sophie Yanez
I. Boston Consulting Group (BCG) Matrix

BCG M atrix
Relative M arket Share Position
High 1.0

Low 0.0

M ed. 5.0

Industrial Sales Growth Rate

High
20+
Stars

Question M arks

M ed.
0

Cash Cows
Low
-20

-

Product Development
Diversification
Retrenchment
Diverstiture

Dogs

J. Internal- External (IE) Matrix

IE M atrix

L ow

M edium

High

Strong

28

Average

II
Product Development
Backward, Forward and
Horizontal Integration

Weak
IFE 2.36
EFE 3.13

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