INSTRUCTOR: PROF. STEVE LACHOWSKI

SUBMISSION DATE: TUESDAY 12, JULY 2011

Presented By

Ainabe Eseohe Philo

300633042

Aseeb Mushtari

821821651

Dalbir Singh

300638591

Preetinder Kaur

300633211

Rhoda I. Gyang-Gyang

300598502

Rohan Castelino

300639954

Kevin Pariag822793378

Table of Contents

Sr. No. Topic Page No.

INTRODUCTION

Dell Computers was founded by Michael Dell in 1984, head quartered in Austin, Texas, Dell is

the world's No. 1 computer systems company, and is a premier provider of products and

services required for customers to build their information-technology and Internet

infrastructures. Company revenue for the last four quarters totaled $32.6 billion.

Dell is No. 1 worldwide in market share and consistently the leader in liquidity, profitability and

growth among all major computer systems companies, with approximately 38,300 employees

around the globe. The company is a leading supplier of servers and computer products to

business customers, government agencies, educational institutions and consumers. Dell's climb

to market leadership is the product of a persistent focus on delivering the best possible customer

experience by directly selling computing products and services based on industry-standard

technology.

EXECUTIVE SUMMARY

Dell’s core competency has not been in assembling computers, but computer assembly activities

in moderation coupled with a constant effort of discovering new value in the face of changing

customer demands and evolving market. Dedication towards the customer, increased customer

attention by segmenting based upon sales to forge stronger relationships, build trust, loyalty and

to sense customer needs to predict demand. Integrating the supply chain into a value network – a

network of trust and reliability built by sharing demand forecasts and nurturing a sense of

partnership – blurring the corporate boundaries.

In this report we look at the strategies adopted by Michael Dell to revolutionize sale of

computers and compete with other players in the competitive market. We also give an insight of

the company’s financial standings, SWOT analysis and innovative ways to dominate the IT

market in order to be the Numero Uno.

1. What is your evaluation of Michael Dell’s performance in his roles as Dell’s CEO and

Chairman? How well has he performed the five tasks of crafting and executing strategy

that were discussed in Chapter 2?

In his role as CEO, his performance was excellent. Through his innovative way for marketing

computers, he guided Dell from a small, start-up company into a global leader in PCs and IT

Products and Services. He was very accessible CEO and a role model for young executives

because he knew how to delegate the authorities to subordinates. He believed that the best results

come from the talented people who can be relied upon to do what they are supposed to do.

Michael Dell was also the chief architect of the company's direct sales approach and build-to-

order approach. Furthermore, he had spent a lot of time travelling to company operation and meeting

with customers, listening to their demands and trying to carry out strategies that can bring

satisfaction to the customers. And as a CEO, he always has timely and appropriate solutions for

difficulties that company faced to. Moreover, he also displays social responsibility by turning Dell

to be energy efficient, PVC free and using recycled materials.

In summary, Michael Dell is the excellent CEO of Dell, and his role in Dell cannot be replaced. The clearest

evidence is in 2006, when Michael Dell transferred his title of CEO to Kevin Rollins, the company immediately

got a decrease in performance in the next year.

Michael Dell justified his excellent performance by performing well in all the five areas of Crafting & Executing

Strategy. He formed a strategic vision for Dell which is very simple - personal computer (PCs)

could be built to order and sold directly to customers. This strategic vision contained four tenets, which

described the vision of having a strong and direct relationship to customer, allowing customer to purchase custom

built product, creating non-proprietary and efficient technology and supply chain and company should endeavour

to deliver added value to customers. These four tenets were the key to delivering a superior customer values. The

strategy that he set for Dell had seven core elements which were consistent to company’s vision and developed

the business model which uses the company's strong capabilities in supply chain management, low cost

manufacturing and direct sales capabilities to expand into product categories where Dell could provide added

values to its customer in the form of lower prices. In implementing, he made clearly acts to follow

the company’s vision and strategy and he also always catches up with the executing of the strategies and

makes appropriate and timely adjustment. Under his leadership, Dell has become the low-cost leader using his

business model and strategy and become one of the top 3 PCs companies in the worlds.

2. What are the elements of Dell’s strategy? Which one of the five generic competitive

strategies is Dell employing? How well do the different pieces of Dell’s strategy fi t

together? In what ways is Dell’s strategy evolving?

The elements of Dells strategy includes:

1. Cost-Efficient Build-To-Order Manufacturing: this involves customers purchase products

and services in a custom tailored way. Customers could order custom-equipped servers and

workstations according to the needs of their applications. This gave them a competitive

advantage

2. Partnerships with Suppliers; this provided the company with a very effective supply chain

that helped achieve its objective thereby strengthening the weakness of the company. This made

better sense than backward integration because they could capitalize on the strengths of the

suppliers.

3. Dell's Direct Sales Strategy: this involved the company selling directly to customers

thereby eliminating whole sale and retail dealers. With this the company could know what was

actually going on in the market so if there is any change it would know how to react to the

change.

4. Expanding into additional products and services; this was done to capture a larger market

share. They expanded into manufacturing data storage hardware, switches, handheld PCs,

printers, printer cartridges, and software products.

5. Providing good customer’s service and technical support: they listened to customers and

this helped them know their expectations and emerging needs.

6. Research and development activities which helped deliver added value to customers.

7. The use of efficient and standardised technology to provide its best for its customers at the

same time achieving organisations goals and objectives.

Which one of five generic competitive strategies is Dell employing? How well do the different

pieces of Dell’s strategy fit together?

The low cost strategy; they strive to provide great services at low cost by eliminating the cost of

supply chain so as to deliver high quality products at low costs. All the differ strategies pulled

together helps Dell in achieving its overall objective and achieving greater quality at a minimal

cost

In what way is Dell’s strategy evolving?

Dells strategy is evolving by expanding its market by creating new plants in India, Poland,

Brazil, etc. Enhancing its products by creating flexible computer, simplify IT and providing

quality service.

3. Does Dell’s expansion into other IT products and services make good strategic sense?

Why or why not?

Yes Dells expansion into other IT products and services make good strategic sense because IT is

no longer a luxury it is now a necessity. Dell provides value added services to meet the needs of

consumers. If they had only continued producing P.C their sales growth would have declined. By

expanding and using their low cost strategy, high quality products, taking advantage of

standardized technology, they have gained a competitive advantage Dell can then apply its skills

in discipline, speed, and efficiency and can drop prices faster than any other companies and

prompt demand to soar.

4. Is Dell’s strategy working? What is your assessment of the financial performance that

Dell’s strategy has delivered during fiscal years 2000-2008? Use the financial ratios

presented in Table 4.1 of Chapter 4 (pages 104-105) as a basis for doing your calculations

and drawing conclusions about Dell’s performance?

Net revenue:

1. Gross Profit Margin:

2. Net Income:

3. Total Net Revenue in different parts of the world:

Looking at these graphs, we can say that the strategy used by Dell is perfect. It is continues

growing. It is customer oriented. This strategy is able to attract a lot of desired customer.

5. What does a SWOT analysis reveal about the attractiveness of Dell’s situation in 2008?

1. Strength:

Provide custom made products.

Reach directly to the customer without any intermediary.

Great customer care and technical support departments.

Bigger range of products.

More focused on creating new products.

Use of standardized technology in all product offering.

Unique sales system.

Cost cutting techniques.

2. Weakness:

The company has such a huge range of products and components from many

suppliers from a plethora of countries, that there is the occasional product recall

that can cause Dell some embarrassment.

Dell is a computer maker, not a computer manufacturer.

There are less big suppliers around the world.

3. Opportunity:

Kevin Rollins replaced Michael Dell in 2004 as Dell's Chief Executive Officer.

Dell remained the company's Chairman. Despite founder Dell's massive success,

new blood and a change in management thinking could lead the company into a

new, even more profitable period. 

Dell is pursuing a diversification strategy by introducing many new products to its

range. This initially has meant good such as peripherals including printers and

toners, but now also included LCD televisions and other non-computing goods.

So Dell competed against iPod and other consumer electronics brands.

4. Threats:

The single biggest problem for Dell is the competitive rivalry that exists in the PC

market globally. As with all profitable brands, retaliation from competitors and

new entrants to the market pose potential threats. Dell sources from Far Eastern

nations where labor costs remain low, but there is nothing stopping competitors

doing the same - even sourcing the same or similar components from the same or

similar suppliers. Remember, Dell is a PC maker, not a PC manufacturer.

The growth rate of the computer industry is also slowing down.

Technological advancement is a double-edge sword. It is an opportunity but at the

same time a threat. Low-cost leadership strategy is no longer an issue to computer

companies therefore it is important for computer companies to stand out from the

rest.

Technology dictates that the most up-to-date and fastest products are always the

most popular. Dell has to always keep up with technological advancements to be

able to compete.

.

6. Which company is competitively stronger—Dell or Hewlett-Packard? Use the weighted

competitive strength assessment methodology shown in Table 4.4 of Chapter 4 to support

your answer.

Considering the various key success factors as mentioned below in Exhibit A and B, Dell and HP

are very close competitors.

In the acquisitions category, Dell is stronger as whether it was acquiring the Converge Net

Technologies in 1999 or Equal logic in 2007 or Perrot Systems they have been better than HP

Compaq acquisition in 1999. Dell has been competitively stronger with relative costs systems

because of their continuous pursuit of cost reduction initiative and also when it comes to

customer service capabilities due to (1) providing online services to shoppers (2) always

listening to customers (3) spending on customer driven R&D and (4) giving value added services

with large IT operations. Dell has been slightly better than HP on two occasions, one in the

manufacturing capabilities with their lean approaches and second with technological skills with

their white box pc segment. Quality and product performance had been Dell’s forte by constantly

improving in assembly efficiencies also because they urged their suppliers to participate in

quality certification programs.

HP has been strong with human capital for their simple strategy to hire expertise for their key

accounts. HP has been ahead of Dell in dealer network and in market share too. HP revenue for

2006 and 2007 was $91.76 and $104.3 million respectively whilst Dell stood at $55.8 and $57.4

million for the same two years. Product innovation has been HP competitive advantage with the

acquisition of more than a dozen software and technical services to capitalize on the 3 big

opportunities of (1) next gen (2) mobile computing and (3) digital printing.

To conclude Dell and HP have been neck to neck most times. If Dell is strong in US and UK, HP

holds a good position in Europe and Asia pacific. Dell boasts about laptops and HP about

refurbished PCs and printers.

Exhibit A - UNWEIGHTED COMPETITIVE STRENGTH ASSESSMENT

KEY SUCCESS FACTORS/STRENGTH MEASURE DELL HP

Quality/product performance 8.5 9

Reputation/ image 9 8

Market share and profitability 7 9

Manufacturing capability 9.5 8

Technological skills 9 8

Dealer network/distribution capability 6 9

New product innovation capability 8 9

Human capital 6 8

Acquisitions and successful integration 8 5

Relative cost position 10 6

Customer service capabilities 9 7

  90 86

Exhibit B-UNWEIGHTED COMPETITIVE STRENGTH ASSESSMENT

  DELL HP

KEY SUCCESS Importanc Strengt Score Importanc Strengt Score

FACTORS e Weight

h

Rating e Weight

h

Rating

Quality 0.10 9 0.85 0.10 9 0.90

Reputation/ image 0.10 9 0.90 0.10 8 0.80

Market share 0.03 7 0.18 0.03 9 0.23

Manufacturing

capability 0.10 10 0.95 0.10 8 0.80

Technological skills 0.05 9 0.45 0.05 8 0.40

Dealer network 0.05 6 0.30 0.05 9 0.45

New product

innovation capability 0.05 8 0.40 0.05 9 0.45

Human capital 0.10 6 0.60 0.10 8 0.80

Acquisitions 0.03 8 0.20 0.03 5 0.13

Relative cost position 0.25 10 4.83 0.25 6 4.95

Customer service 0.15 9 1.35 0.15 7 1.05

      11.00     10.95

Q7. In what respects, if any, is Hewlett-Packard’s strategy in PCs more appealing or better

than Dell’s strategy?

HP strategic focus is the technology research and development. Every year HP will work out a

budget, so it masters a lot of the core technology in the IT industry. In addition this company also

focuses on building retailers network all over the world. It brings to HP a lot of advantages in the

product distribution and introduction of new products.

Strategies for both DELL and HP are very different from each other. They have their own

advantages and disadvantages. In recent years commercial competition tended to be competition

of strategic alliances and in long-term development. HP’s core technology will guide the market.

So HP has more opportunities and possibilities than Dell Company to set up strategic alliance

and become leader in the PC industry. Furthermore; because HP has stronger retail network and

distribution capacity, so its products can reach customers everywhere and all over the world. In

the trend of globalization nowadays this may be the key advantage to gain market share beyond

rivals.

Q8. What issues and problems does Michael Dell need to address?

The most important issue that Dell must address is how to raising sales and market share position

in a very strong competitive conditions. HP currently the main rival of Dell and it is much

competitively stronger than Dell with their retailing prowess. HP’s sales are increasing

continuously even in the crisis period. Moreover; there are many emerging competitors such

Acer and Asus who are compute fiercely with Dell. Besides, the lack of innovation in product

developing another issue is that the international expansion of Dell. In order to reach

international customers more effectively, Dell must incur more costs as it expands into retail

distribution a move that will further eat away at Dell’s cost advantage. Moreover Dell two key

advantages supply chain efficiency and customized direct sales model do have much advantage

in competition as before. In addition the economic condition and technology changes rapidly also

effect Dell’s product development.

Q9. What actions and strategy would you recommend to Michael Dell to boost the

company’s performance and its prospects for overtaking HP in global sales?

Dells present strategy issues are:

Slow growth of its main products

Declining customer service

Inability to serve all market needs because of its strategy of limited vendors in the supply

chain

Recommendations for strategy improvement are:

Adding a PC and server product line based on AMD microprocessors

This will enable Dell to serve the entire market of PC users; its exclusive use of Intel

processors has limited its ability to match high end products being offered by competitors.

Developing a showroom style store in developing markets

Lack of credit cards in developing countries and the tendency for buyer to want to touch and

feel before purchasing has placed Dells strategy at a disadvantage. Developing showrooms

will give it increased advantage

Expanding consulting services to include business services.

This includes business consulting services; this will help to open potentially new revenue

streams. Dells manufacturing and value chain efficiencies will give it an edge of respected

reputation as a consultant.

Focus on innovation

By putting more emphasis on research and development and strive to develop the technology

for the next generation and establish first mover advantage instead of relying on recreating

technology.

Reinvent differentiation advantage

Dell could improve its core competencies which gave it differentiation in the beginning;

these include enhancement of customer service, addition of suppliers, new market

campaigns, modification of retail sales and the expansion of turn-key solutions. i.e. widen

the company’s competitive advantage through the refinement of its existing core

competencies; improvement of value chain management.

CONCLUSION

Dell which made its name selling low cost computers has seen its competitive advantages

eroded. The company which bases its foundation on being successful regardless of location

believes what works in the U.S will work anywhere else. This strategy gave Dell an advantage in

previous years but with emerging market it has become necessary for Dell to re-invent and refine

its strategy to cater to the changes in the business environment and to help it regain the

advantages it one enjoyed. The business approach used by Dell alongside its customer relations

is a great combination for competitive advantage for the company. The company should be

looking at how to add marginal value through design or technological changes to its PCs and

core competencies. On the whole Dells strategy is sound and in line with the vision but it must

be revisited to help the company take advantage of changes in the business environment, enable

it to compete favorably and give it competitive advantage.

BIBLIOGRAPHY

1. Referred Chapter 4 – Evaluating a Company’s Resources and Competitive Position from

the Book “Crafting and Executing Strategy” by Jai Goolsarran Text and Readings, 17 th

Edition and the Case studies text both Printed by The McGraw- Hill Companies

2. Melenovsky, M.and Humphreys, J. Maximizing Flexibility and Minimizing Costs:

Dell's Enterprise Computing Strategy. An IDC White Paper.

http://www.dell.com/downloads/global/solutions/idc_enterstrategy.pdf