Michael Dell, born in February 1965, is the chairman of the Board of Directors and chief executive officer of Dell, the company was founded in 1984 with $1,000 on a simple concept : by selling computer systems directly to customers, they could best understand their needs and efficiently provide the most effective computing solutions to meet those needs. Their evolving business strategy combines their revolutionary direct customer

model with new distribution channels to reach commercial customers and individual consumers around the world. In 1992, Mr. Dell became the youngest CEO ever to earn a ranking on the Fortune 500.

MIn our report, we will try to analyze the crafting and executing strategy of Dell Incorporated, by answering

to the following questions :

What is our assessment of the job M.Dell has done as the company’s leader?What grade we’d we give him for his leadership of the company?What are the elements of Dell’s strategy?What does a SWOT analysis reveal about the attractiveness of Dell’s situation? What is our assessment of the job Mr. Dell has done as the company's leader?As the leader of the Company, M. Dell has developed a new style of management based on both technical

knowledge and marketing know-how.He had lot of good marketing ideas that allow the company to be a strong competitor on the I.T. especially

in PCs, internet and e-commerce practices.As he was the youngest CEO, he worked very hard to be able to overpass his weaknesses.So he became familiar with all parts of the business, he overcame his shyness and learned to control his

ego.He was very clever when he choose to use a social strategy that allow him to motivate people winning

their loyalty and respect. He was also considered as a very accessible CEO because he chooses to delegate authority to subordinates.

I think that being a risk taker and meeting customers all over the world was very helpful for the company to be a big competitor in PCs industry.

What are the elements of Dell’s strategy?Dell’s executives believe that five tenets were the key to delivering superior customer value:A direct relationship is the most efficient path to the customer;Allowing customers to purchase custom built products and custom-tailored services is the most effective

way to meet customer needs;Non proprietary, standardized technologies deliver the best value to customersSearching a low-cost structure where cost savings can be passed along to customers in the form of lower

prices;Dell should endeavor to deliver added value to customers by: researching all the technological options,

trying to determine which ones are "optimal", and being accountable to customers' for helping them obtain the highest return on their investment in information technology (IT) products and services.

In accordance with these tenets, Dell's strategy had seven core elements: a cost-efficient approach to build-to-order manufacturing, partnerships with suppliers aimed at squeezing cost savings out of the supply chain, direct sales to customers, award-winning customer service and technical support, customer-driven R&D, emphasis on using standardized technologies, and product-line expansion aimed at capturing a bigger share of the dollars, its customers spent for IT products and services.

Cost-Efficient Build-To-Order Manufacturing Dell built its computers, workstations, and servers to order; none were produced for inventory. Dell

customers could order custom-equipped servers and workstations according to the needs of their applications. Dell was regarded as a world-class manufacturing innovator and a pioneer in how to mass-produce a

customized product. Dell's build-to-order strategy meant that the company had no in-house stock of finished goods inventories and that, unlike competitors using the traditional value chain model; it did not have to wait for resellers to clear out their own inventories before it could push new models into the marketplace-resellers typically operated with 30 to 60 days inventory of prebuilt models. Equally important was the fact that customers who bought from Dell got the satisfaction of having their computers customized to their particular liking and pocketbook.

All assembly plants had the capability to run testing and quality control process on components, parts, and subassemblies obtained from suppliers, as well as on the finished products Dell assembled.

Partnerships with SuppliersMichael Dell believed that it made much better sense for the company to partner with reputable suppliers

of PC parts and components than to integrate backward and get into parts and components manufacturing on its own.

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Dell management evaluated the various makers of each component; picked the best one or two as suppliers; and then stuck with them as long as they maintained their leadership in technology, performance, quality and cost.

Dell just-in-time inventory emphasis yielded major cost advantages and shortened the time it took for Dell to get new generations of its computer models into the marketplace. New advances were coming so fast in certain computer parts and components (particularly microprocessors, disk drives, and wireless devices) that any given item in inventory was obsolete in a matter of months, sometimes quicker.

Dell's Direct Sales Strategy and Marketing EffortsWith thousands of phone, fax, and Internet orders daily and ongoing field sales force contact with

customers, the company kept its finger on the market pulse, quickly detecting shifts in sales trends, design problems, and quality glitches. Management believed Dell's ability to respond quickly gave it a significant advantage over PC makers that operated on the basis of large production runs of variously configured and equipped PCs and sold them through retail channels. Dell saw its direct sales approach as a totally customer-driven system, with the flexibility to transition quickly to new generations of components and PC models.

Dell's Customer-Based Sales and Marketing Focus whereas many technology companies organized their sales and marketing efforts around product lines, Dell was organized around customer groups. Dell had placed managers in charge of developing sales and service programs appropriate to the needs and expectations of each customer group.

Customer Service and Technical SupportService became a feature of Dell's strategy in 1986 when the company began providing a year's free onsite

service with most of its PCs after users complained about having to ship their PCs back to Austin for repairs. Dell contracted with local service providers to handle customer requests for repairs: onsite service was provided on a four-hour basis to large customers and on a next day basis to small customers. Dell was aggressively pursuing initiatives to enhance its online technical support tools and reduce the number and cost of telephone support calls. The company was adding Web-based customer service and support tools to make customers' online experiences pleasant and satisfying.

Customer-Driven Research and Development and Standardized TechnologyDell's R&D focus was to track and test new developments in components and software, as certain which

ones would prove most useful and cost-effective for customers, and then design them into Dell products. Management's philosophy was that it was Dell's job on behalf of its customers to sort out all the new technology coming into the marketplace and help steer customers to options and solutions most relevant to their needs. The company talked to its customers frequently about "relevant technology," listening carefully to customers' needs and problems and endeavoring to identify the most cost-effective solutions.

Studies conducted by Dell indicated that, over time, products incorporating standardized technology delivered about twice the performance per dollar of cost as products based on proprietary technology. The company's R&D unit also studied and implemented ways to control quality and to streamline the assembly process.

Expansion into New ProductsDell's recent expansion into data storage hardware, switches, handheld PCs, printers, and printer

cartridges represented an effort to diversify the company's product base and to use its competitive capabilities in PCs and servers to pursue revenue growth opportunities.

Michael Dell tends to look at what is the next big opportunity all the time. They can't take on too many of these at once, because it kind of overloads the system. But they believe fundamentally that if you think about the whole market, it's about an $800 billion market, all areas of technology over time go through a process of standardization or commoditization. And they try to look at those, anticipate what's happening, and develop strategies that will allow Dell to get into those markets.

Other Elements of Dell’s Business StrategyDell's strategy had three other elements that assisted the company's drive for industry leadership: the use

of the Internet and e-commerce technologies, entry into the white-box segment of the PC industry, and advertising.Pioneering Leadership in Use or the Internet and E-Commerce Technology Dell was a leader in using the

Internet and e-commerce technologies to squeeze greater efficiency out of its supply chain activities, to streamline the order-to-delivery process, to encourage greater customer use of 1ts Web site, and to gather and use all types of information.

Dell's Entry into the White-Box PC Segment Dell's thinking in entering the white-box PC segment was that it was cheaper to reach many small businesses through the white-box dealers that already served them than by using its own sales force and support groups to sell and service businesses with fewer than 100 employees. Dell believed its low-cost supply chain and assembly capabilities would allow it to build generic machines cheaper than white box resellers could buy components and assemble a customized machine.

Advertising Michael Dell was a strong believer in the power of advertising and frequently espoused its importance in the company's strategy.

What does a SWOT analysis reveal about the attractiveness of Dell’s situation?Presentation of the SWOT analysis: “SWOT” analysis is a strategic planning tool used to evaluate the Strengths, Weaknesses, Opportunities,

and Threats involved in a project or in a business venture. It involves specifying the objective of the business venture or project and identifying the internal and external factors that are favorable and unfavorable to achieving

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that objective. The technique is credited to Albert Humphrey, who led a research project at Stanford University in the 1960s and 1970s.

Strengths: attributes of the organization which are helpful to achieve the objective.Weaknesses: attributes of the organization which are harmful to achieve the objective. Opportunities: external conditions which are helpful to achieve the objective.Threats: external conditions which are harmful to achieve the objective.Also, a SWOT analysis is a simple and a flexible framework for generating strategic alternatives from a

situation analysis. However, it could be applicable to either the corporate level or the business unit level and frequently appears in marketing plans. Because it concentrates on the issues that potentially have the most impact, the SWOT analysis is useful when a very limited amount of time is available to address a complex strategic situation.

Indeed, it can serve as an interpretative filter to reduce the information to a manageable quantity of key issues. The SWOT analysis classifies the internal aspects of the company as strengths or weaknesses and the external situational factors as opportunities or threats. “Strengths” can serve as a foundation for building a competitive advantage, and “weaknesses” may hinder it; while “opportunities” can arise when changes occur in the external environment, and many of these changes can be perceived as “threats”. By understanding these four aspects of its situation, a firm can better leverage its strengths, correct its weaknesses, capitalize on golden opportunities, and deter potentially devastating threats.

The following diagram shows how a SWOT analysis can be profiled:

The SWOT analysis of Dell’s situation:

Strengths Weaknesses

Direct business model: Just-in-time manufacturing and Build to customer order

Competitive pricingCost/ differentiation strategyHighest quality and technologyBest-in class service and supportFlexible customization capabilitySuperior corporate citizenshipReal time adaptation to environmental

changesEffective leverage of skills, technologies

and core competencies while competing against rivals

Highly qualified and professional employees

Overall operating and cost efficiency

High dependency on component suppliers and manufacturers of subassemblies and other devices (drivers, printers, scanners, modems, memory cards, data storage, etc…)

Opportunities ThreatsMass customizationPotential growth in overseas marketsPerpetual expansion of Pc’s industry

market

Fierce competition (prices and market shares)

Emerging of new competitive forcesTariffs, taxes and trade barriersCurrency fluctuationPolitical instability in some countries

Dell’s attractiveness analysis:

Looking at the SWOT analysis of the company’s business, it is evident that Dell does still hold a very strong competitive position. The key factor of the company’s success is its “Direct Business Model” concept, in addition to the close relationship both with customers and supply partners, but definitely a better understanding of its business and the ways to keep it efficient everlasting.

Indeed, Dell’s business model proved its efficiency and its attractiveness since the company entered to the “Fortune Global 500”, and especially when its major competitors started copying it, but never succeed in implementing Dell’s innovative concept correctly: they didn’t realize that it’s a matter of a whole different way of operating.

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Finally, Dell Incorporation should profit from all the different opportunities of expansion and growth to make its business more profitable, and should try to reduce as much as possible the negative impacts of the weaknesses and the threats revealed by the SWOT analysis on its business.

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