This presentation was delivered at UIW Fall 2013 Semester

1. Dell, Inc. Case Study
Presented by Sophie Yanez
S

2. Dell Inc.
S Dell produces and markets PC’s and a broad range of
technology products for the consumer, education, enterprise
and government sectors.
S Founded by Michael Dell in 1984
S Based out of Round Rock, Texas.
S Michael Dell developed his ―direct model‖ based upon a built to
order process that allowed customization of the personal
computer.

3. Dell’s History
1988-1991
1984-1987
1996-1999
20002004
1992-1995
20052008
20092012

4. 

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
SUPPLIERS
SUBSTITUTE PRODUCTS






132 different key supply
chain markets that include
AMD, Intel Corp. EMC,
Microsoft, Toshiba,
Logitech. Lexmark, 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, RAM)
High cost of supply chain
churn





Hewlett Packard, Lenovo, ASUS, Apple and
ACER
Large 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: Microsoft)
S
Porter’s Five-Forces
Model

5. External Factor Evaluation
Dell, Inc.
Key External Factors
Opportunities
The Green Movement: The want for more environment friendly products. Such as
computer Recycling 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
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
1
0.05
3.13

6. Competitive Profile Matrix
Competitive Profile Matrix
Critical Success Factors
HP
Lenovo
Dell
Weight
Rating
Score
Rating
Score
Rating
Score
Advertising
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 competition
0.21
4
0.84
4
0.84
4
0.84
Management
0.09
3
0.27
3
0.27
4
0.36
Financial position
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
1.00
3.51
3.35
2.82

7. PC Sales

8. Value Chain Analysis
Supplier Costs
•Raw Materials
•Merchandise
•Transportation
•Shipping Costs
•Component parts
•Inspection
•Warehouse
Storage
Production Costs
•Inventory System
•Receiving Costs
•Plant Layout
•R&D
•Cost accounting
•Merchandise
tracking system
•Quality Control
Distribution Costs
•Loading
•Shipping
•Budgeting
•Personnel- Trucks,
Ships, Plane
•Internet System
•Fuel
•Maintenance
Sales & Marketing
Costs
•Sales reps
•Dell.com website
•Advertising and
publicity
•Transportation
•Promotions and
sponsorships
Customer Service
Costs
•Shipping
•Phone Support
•Online Email
Support
•Online Chat
Support
•Internet
Knowledge Base
•Warranty

9. Internal Factor Evaluation
Dell, Inc.
Key Internal Factors
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
Weight Rating
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

10. Porter’s Five Generic
Strategies
Focus
Large
Small
Size of Market
Cost Leadership
Generic
Strategies
Differentiation

11. SWOT Matrix
STRENGTHS-S
WEAKNESSES-W
List Internal Strengths
List Internal weaknesses
1.
2.
3.
4.
Global Recycling Program
Boomi and Perot system acquisitions
Client Reinvention Initiative
Michael Dell taking the company
private
5. Re-org towards a more customer
centric model.
6. Customized product focus
7. Global expansion to India and China
OPPORTUNITIES-O
List External Opportunities
1.
2.
3.
4.
5.
The Green Movement
Global Market internet usage
Improving technologies
Younger generations are tech saavy.
Changing standard of communication
through technology.
THREATS-T
List External Threats
SO STRATEGIES
1. Promote the efficiency of Dell
computers in Green Datacenters. Set
the standard for powering the worlds
cloud with Dell Servers.
2. Increasing Global Internet usage
means there will be more of a need for
online customer service. Improve Chat
support and online knowledge center.
ST STRATEGIES
1.
2.
3.
4.
5.
Followership Strategy
High manufacturer dependency
Price Wars with other competitors
Dell’s current debt to income ratio
Losing Market Share
WO STRATEGIES
1. With the improving technologies in the
market place, this is Dell’s opportunity
to remove itself from the Followership
strategy and innovate something.
2. 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
1. Leverage Boomi acquisition to create a
1. Create a new tablet or smart phone
better integration of cloud apps and on
that can compete with the likes of
premise apps. Make Boomi the choice
Apple and Android systems. One that
2.
of cloud application dashboard.
is competitively priced.
3.
2. With the Cloud Computing market
2. Start manufacturing own PC parts.
4.
expanding in China and India- seek out
This will lower the cost for supply
5.
partnerships with hosting company’s
chain, improve quality production and
6.
and colocation Datacenters around the
reduce manufacturing dependency.
7.
world.
Source: Fred R. David, Strategic Management Concepts & Cases: A Competitive Advantage Approach , (2013), 14 th ed.
1.
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

12. Space Matrix
FP
Financial Position (FP)
Return on investment
Leverage
Liquidity
Working Capital
Cash Flow
Competitive Position (CP)
Market Share
Product Quality
Customer Loyalty
Tech know How
Control over suppliers
CP
Stability Position (SP)
2 Rate of Inflation
2 Technological Changes
3 Price Elasticity
4 Competitive Pressure
4 Barriers to Entry
3
Industry Position (IP)
-3 Growth potential
3 Financial stability
-7 Ease of entry to market
0 Profit potential
-7 Resource Utilization
-2.8
IP
SP
-2
-7
-3
-7
-4
-4.6
3
2
-7
3
-4
-0.6

13. BCG Matrix
Relative Market Share Position
High 1.0
Low 0.0
Med. 5.0
Industrial Sales Growth Rate
High
20+
Stars
Question Marks
Med.
0
Cash Cows
Low
-20
-
Product Development
Diversification
Retrenchment
Diverstiture
Dogs

14. IE Matrix
Low
Medium
High
Strong
Average
II
Product Development
Backward, Forward and
Horizontal Integration
Weak
IFE 2.36
EFE
3.13

15. Recommendations
S Dell needs to remove itself from its current followership
strategy and invest more in R&D so they can innovate
new products.
S They should focus expansion efforts in the Education
sector. With younger generations becoming more.
S Dell needs to start manufacturing it’s own PC parts.
S Continue global expansion strategy into China and India.

16. Thank You!

17. Additional Information

18. External Opportunities &
Threats
Opportunities
S
Threats
S
S
Software Development needs
hardware
S
Low Cost Global Substitutes
S
Cloud Computing- Boomi
acquisition
Economic Recession
S
Cloud Computing- Consumer
Needs are changing
S
Market Saturation
Green Technology is improving

19. Strengths & Weaknesses
Strengths
Weaknesses
S
Advertising- Global Recycling
Program
S
Product Quality- Increased
outside manufacturers
S
Brand Recognition- #2 Market
Share for PC’s
S
Current debt ratio 29% higher
than industry average
S
Improving & Diversifying portfolioBoomi & Perot Systems
S
Client Reinvention Programreduce supply chain cost

20. Financial Condition
S Dell is valued at $9.8 billion
S Dell has $5.14 billion in debt (They hold a 39.9% long term
debt/capital ratio)
S Retained Earnings increased from $22,110 to $24,744 (in the
millions)
S In the last 5 years, Dell’s sales growth rates were 1.97% in
comparison to the industry’s growth rate of 33.38%
S Dell has reported negative average net income during the past 5
years.

21. While Dell has a large
amount of capital and is seen
as a profitable organization, I
would not consider them a
financially stable company
due to the recent increase in
company debt.
S

22. Current Strategies &
Objectives
S Company Vision: 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 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.
S Company Mission: 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.

23. Current Strategies &
Objectives
S Dell’s R&D strategy is to enter the market during the
mature phase of a products’ life cycle.
S They believe in a low risk and low innovation approach.

24. Competitors

25. My Recommendations
S Slow DC Expansion
S Reduce Manufacturing Spending
S Start Innovating!