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Dell Strategic Management Final Paper


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Final Paper for Strategic Management Course at UIW. Presented December 2013.

Published in: Technology, Business
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Dell Strategic Management Final Paper

  1. 1. Dell, Inc. A Strategic Management Case Study October 8, 2013 Sophie Yanez University of the Incarnate Word
  2. 2. 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 2
  3. 3. Dell Inc., Strategic Management Case Study Sophie Yanez 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 3
  4. 4. Dell Inc., Strategic Management Case Study Sophie Yanez 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’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 4
  5. 5. Dell Inc., Strategic Management Case Study Sophie Yanez 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. 5
  6. 6. Dell Inc., Strategic Management Case Study Sophie Yanez 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 6
  7. 7. Dell Inc., Strategic Management Case Study Sophie Yanez 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 7
  8. 8. Dell Inc., Strategic Management Case Study Sophie Yanez 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: 8
  9. 9. Dell Inc., Strategic Management Case Study Sophie Yanez 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. 9
  10. 10. Dell Inc., Strategic Management Case Study Sophie Yanez 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 10
  11. 11. Dell Inc., Strategic Management Case Study Sophie Yanez 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 11
  12. 12. Dell Inc., Strategic Management Case Study Sophie Yanez 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).” 12
  13. 13. Dell Inc., Strategic Management Case Study Sophie Yanez 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 13
  14. 14. Dell Inc., Strategic Management Case Study Sophie Yanez 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 14
  15. 15. Dell Inc., Strategic Management Case Study Sophie Yanez 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. 15
  16. 16. Dell Inc., Strategic Management Case Study Sophie Yanez 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 16
  17. 17. Dell Inc., Strategic Management Case Study Sophie Yanez 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 17
  18. 18. Dell Inc., Strategic Management Case Study Sophie Yanez 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 18
  19. 19. Dell Inc., Strategic Management Case Study Sophie Yanez 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 19
  20. 20. Dell Inc., Strategic Management Case Study Sophie Yanez 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 20
  21. 21. Dell Inc., Strategic Management Case Study Sophie Yanez 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. 21
  22. 22. Dell Inc., Strategic Management Case Study Sophie Yanez 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 in October 2013 from, Davos. (January 30, 2013). Dell expands operations, headcount in India: Global Chief. In The Hindu Business, retrieved in October 2013 from, 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, Hoovers, A D&B Company (n.d.), Retrieved October 2013 from, Hesseldahl, Arik (September 12, 2013). Dell Shareholders Approve $25 Billion Buyout to Go Private. In All Things D, retrieved October 2013 from, 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 October 2013 from, Jones, C. (March 4, 2013). PC Market to Shrink in 2013 and Exhibit Low growth through 2017. In Forbes, retrieved on October 2013 from, Liquid Agency (n.d), Here are our latest success stories. In Liquid Agency, retrieved on October 2013 from, (2013) Top 10 Best Laptop Brands in 2013. In LPTPS, retrievedon October 2013 from 22
  23. 23. Dell Inc., Strategic Management Case Study Sophie Yanez Moorhead, P. (June 21, 2013). Dell’s PC Growth Strategy- In it to Win it. In Forbes,retrieved October 2013 from,, (n.d.) The Global PC Market is Collapsing (Infographic). In, retrieved on October, 2013 from, Smart Brief. (April 12, 2013). Dell maps China expansion to offset falling global PC sales. In Smart Brief, retrieved on October 2013 from, 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, 23
  24. 24. Dell Inc., Strategic Management Case Study Sophie Yanez 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
  25. 25. Dell Inc., Strategic Management Case Study 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 • website • A dvertising and publicity • Transportation • Promotions and sponsorships • Shipping • Phone Support • Online Email Support • Online Chat Support • Internet K nowledge Base • Warranty
  26. 26. Dell Inc., Strategic Management Case Study 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
  27. 27. Dell Inc., Strategic Management Case Study 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
  28. 28. Dell Inc., Strategic Management Case Study 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