Dell, Inc. Case Study
Presented by Sophie Yanez
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
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
132 different key supply
chain markets that include
AMD, Intel Corp. EMC,
Logitech. Lexmark, etc..
By working with multiple
suppliers, you are able to
get a lower price for parts.
Supplier monopolies such
Inability to substitute
necessary hardware (hard
drives, processors, RAM)
High cost of supply chain
Hewlett Packard, Lenovo, ASUS, Apple and
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
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
customizable PC options.
They purchase what they
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
Customers have the ability
to change between
different types of PC
brands that use the same
software (ex: Microsoft)
External Factor Evaluation
Key External Factors
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
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?
Competitive Profile Matrix
Competitive Profile Matrix
Critical Success Factors
Value Chain Analysis
Sales & Marketing
Internal Factor Evaluation
Key Internal Factors
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
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
Porter’s Five Generic
Size of Market
List Internal Strengths
List Internal weaknesses
Global Recycling Program
Boomi and Perot system acquisitions
Client Reinvention Initiative
Michael Dell taking the company
5. Re-org towards a more customer
6. Customized product focus
7. Global expansion to India and China
List External Opportunities
The Green Movement
Global Market internet usage
Younger generations are tech saavy.
Changing standard of communication
List External Threats
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.
High manufacturer dependency
Price Wars with other competitors
Dell’s current debt to income ratio
Losing Market Share
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.
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
of cloud application dashboard.
is competitively priced.
2. With the Cloud Computing market
2. Start manufacturing own PC parts.
expanding in China and India- seek out
This will lower the cost for supply
partnerships with hosting company’s
chain, improve quality production and
and colocation Datacenters around the
reduce manufacturing dependency.
Source: Fred R. David, Strategic Management Concepts & Cases: A Competitive Advantage Approach , (2013), 14 th ed.
It advancements are taking place at a
Price Wars with competitors
Introduction of smart phones and
Changing customer needs
Cloud Computing movement
Financial Position (FP)
Return on investment
Competitive Position (CP)
Tech know How
Control over suppliers
Stability Position (SP)
2 Rate of Inflation
2 Technological Changes
3 Price Elasticity
4 Competitive Pressure
4 Barriers to Entry
Industry Position (IP)
-3 Growth potential
3 Financial stability
-7 Ease of entry to market
0 Profit potential
-7 Resource Utilization
Relative Market Share Position
Industrial Sales Growth Rate
Backward, Forward and
S Dell needs to remove itself from its current followership
strategy and invest more in R&D so they can innovate
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.
External Opportunities &
Software Development needs
Low Cost Global Substitutes
Cloud Computing- Boomi
Cloud Computing- Consumer
Needs are changing
Green Technology is improving
Strengths & Weaknesses
Advertising- Global Recycling
Product Quality- Increased
Brand Recognition- #2 Market
Share for PC’s
Current debt ratio 29% higher
than industry average
Improving & Diversifying portfolioBoomi & Perot Systems
Client Reinvention Programreduce supply chain cost
S Dell is valued at $9.8 billion
S Dell has $5.14 billion in debt (They hold a 39.9% long term
S Retained Earnings increased from $22,110 to $24,744 (in the
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
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
Current Strategies &
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.
Current Strategies &
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.
S Slow DC Expansion
S Reduce Manufacturing Spending
S Start Innovating!
Dell is the sixth largest company in Texas by total revenue, according to Fortune magazine.
Representation of the company’s evolution from the birth of the company in 1984, to going public in 1988 where Dell completes its initial public offering, raising $30 million and increasing market capitalization from $1,000 to $85 million.In 1992 Dell debuts on the Fortune 500. Michael becomes the youngest CEO to lead a company that receives this honor.In 1996 Dell.com launches, generating $1 million in sales per day just six months after the site went live. In 2004 Dell is China's third largest provider of computer systems and services, with shipment growth near 60 percent — or four times that of the industry. In 2006 Direct to Dell launches making Dell the first company in their industry to offer free product recycling for consumers worldwide. In 2010, Dell enters the tablet arena with the Streak, a 5-inch device meant to compete directly with the Ipad and other tablets in the market.In 2013 Michael Dell and Silver Light VC win a buyout deal to privatize the company.
Rivalry among competitors:Dell produces and markets PC’s and a broad range of technology products for the consumer, education, enterprise and government sectors.Substitute products: 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. Bargaining power of buyers: In terms of customer loyalty, there is almost no brand loyalty in this largely commoditized market. Bargaining power of the supplier: The suppliers in this industry are in an interesting position. There are only two major players in the processor market, Intel and AMD, and all manufacturers support both brands. Additionally, there are no major functional differences between them. Recommendation: lower number of supplier in order to keep a better quality control
The Highest weights listed here are towards the global markets increased internet usage, the improving technologies such as software and applications that are in high demand from consumers and the more technical saavy generations coming in. These are all listed under Opportunities.For Threats we have The introduction of tablets and smart phones
Advertising:HP: Make it MatterLenovo: For those who doDell: The power to do moreAll of the campaigns surround themselves around the individual consumer so there wasn’t much differentiation between them. Dell scored a higher rating in this category based on the creativity and diversity of their commercials as well as brand recognition. 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%. The market share rankings used in the Competitive Profile Matrix determined the 1-4 ratings the companies received.
Additional information to support and show the recent decline in PC orders worldwide
The value chain analysis was standard to other companies in the PC industry. You can see a representation listed here.
Bullet point 1: 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. Bullet 2: With younger generations becoming more technologically saavy, Dell has the opportunity to create brand loyalty with students and teachers that will eventually become consumers…. Consumer’s that would be used to working with their products thus making it more likely for them to stick with Dell. Bullet 3: This will lower the cost for supply chain, improve quality production and reduce manufacturing dependency. Bullet 4: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.
Decrease in Sales, Saturated market and failure to innovate.