1. PRODUCT DEVELOPMENTAT DELL COMPUTERCORPORATIONPRESENTED TO:PRESENTED BY:Dr. Sanjai Parahoo Mohamed AL Hendasi & Obaid Al keebali & Saif Aleisaei

2. EXECUTIVE SUMMARYThis case is all about dell computer which in spite of taking a good start got stuck into cash crunch in 1993.The company is also facing problems with their existing design of portable computer as they had some technical problem relating to battery life.For solving the problem a meeting was held in hopes the group could reach a consensus on recommendation for developing a new line of laptop computers. 3. THE PERSONAL COMPUTER INDUSTRY The first digital computer were designed by Charles Babbage in the1830s. Micro computer revolution started in 1970s, with machine catering tohobbyists and hackers. In July 1974 an electronic magazine promoted a printed circuit boardthat came with instruction book for simulation. In late 1970s and 1980s apple computer California based firmsuccessfully commercialized an intuitively easy to use interface. Initially Texas Instruments and Zenith entered in the businesssegment of microcomputer. To play catch-up, IBM rapidly leveraged-off its traditional corporatebase and strong direct sales and services organization. It outsourced hardware & software components to launch its IBMpersonal computer in 1981. 4. THE HISTORY OF DELL In 1983 Michael Dell a freshman at the University ofTexas, Austin started upgrading IBM compatible personalcomputers door to door for local business. He soon started buying and assembling components himself inorder to sell computer his name directly to customers. High growth and attractive margins allowed him to fund growthinternally and he began to get number of orders from large oilcompanies and government agencies. In order to promote dell product , dell started 24 hour complainthotline & offer a supply of back up replacement equipment. Dells company grew to $6 million by 1985, firm introduced its own 5. DELL BUSINESS MODEL Dellcomputer used the same principal to sellcomputers. The company focused on selling customizedproducts directly via mail to shabby customer. Dell assured product quality by extensively pretesting allthe configuration options it offered. A 24-hour telephone support system comprising well-trained technical representative provided the first post-shipment level of support. Dell serviced its customers with combination of homebased telephone representative and field basedrepresentative. Dell maintained a months worth of component inventorybut it suppliers generally carried supplemental buffer 6. PROBLEM FACED BY DELL Dell had to callback 17000 units due totechnical problem. Company got stuck into Cash Crunch. Dell stock plunged to $7 a share. Profit slashed to $10 million. Retail Selling proved contrary to dell. Senior management unable to guide the firmto maturity. Improper structure of Product Development 7. THE NEXT GENERATION: WHICH BATTERY Holliday & his team entertained only a few realistic development option: Computer with a proven battery technology (NiHi):McCarty & Taylor, the mechanical engineer, favored this option such as communication control or memory management accessories. Go with the new battery technology (LiOn):Dell could incorporate new Lithium ion batteries into the notebook. This option mean incorporating an unproven & more expensive technology, which would also take up more space than traditional batteries. Defer commitment to either battery technology:Dell could continue to pursue the laptop development 8. DELL HAS THREE OPTION FOR PDP Option 1: continue with a proven battery technology (NiHi) Confidence = 100% (likelihood that it works as expected) Net margin = 825,000 units * $600/units- $10m =$485m Option 2: Go with the new battery technology (LiOn) Confidence = 60% (likelihood that it works as expected): nsky Net margin (if LiOn works) = 990,000 units*$600/unit-$10m=$584m Net margin (if LiOn fails) = (825,000 units*0.5) * $600/units-($10+0.3*$10)=$234.5m If LiOn fails at launch, a switch to NiHi would requiresubstantial rework (70% of original schedule and 30% ofcost). Because competitors would have an establishedproduct on the market before them. Dell would lose about 9. Option 3: Defer commitment until qualification phase review (dual development or design) *If dual Estimated=$2.5m development additional fixed paths cost *If product is Estimated=0.5% of overdesignedadditional revenue (2% of variable costmargin) Gross margin 999,000*$600/u $594m (before (if LiOn works) nitadditional cost) Gross margin 825,000*$600/u $495m (before The analysis assumes that Sony will give us enough (if LiOn fails) nit additional cost) information at the end of the qualification phase to determine with full certainly if LiOn will work or fail. If it fails 10. *these are the actual project cost incurred. They includeadditional designers and engineers, material & toolscost, etc. if we follow a dual path until the qualificationphase review. Te costs do not include the productopportunity forego if we had to pull people away fromother projects.* Because of the LiOn battery different dimension andproperties we would have to overdesign thecomputer case, the charging circuitry and batterymanagement software to a accommodate eitherbattery technology which would add about $12cost/unit. 11. Time(Months)ProfilePlanning ImpementatiionQualificationLaunch Acceptance 12. DELLS LATITUDE DEVELOPMENT PROJECT In 1991, Dell came out with its first line of portable computers . In1992, with portables accounting for 17 percent of Dellssales, rumors circulated about quality problems. Earlyin 1993, Dell canceled a new line of laptops underdevelopment, since these were deemed too slow and expensive. By May 1993, notebook sales had slipped to just 6 percent of Dellsalespreviously account for 20-25 percent of sales. Bill Gated stated: Dell is a super-solid company . Theyll get on top of the situation In October 1993, Dell recalled 17,000 notebooks. Announced plansfor launching a new line of notebooks, named the latitude series. 13. NEW PRODUCT DEVELOPMENT Profile Phase:Product and market definition, resulting in a two to three page product features guide. Planning Phase:Detailed business case for the product. Implemental Phase: Designed, built and tested functional prototypes of the proposed product. Launch Phase: The entire customer buying experience, from opening the packaged finished product torunning various software applications, was exhaustively tested. Acceptance Phase: 14. PORTABLE COMPUTER INDUSTRY Osborne marketed the first portable computer in 1981. By the end of the decade, the quality of the portability itselfgave these machines gross margins that were typically 3 to 5percent above desktops. In 1993 portable were classified as laptops if they weighedbetween 4.5 & 8 pounds & sub notebooks if they weighedunder 4 pounds.Portable computer Market Size(millions of units)World United States 19924.3 2.2 19936.2 2.9 19947.4 3.2 19958.9 3.7 15. DELL FINANCIAL DATAParticular 19911992 1993Net sale($M) $890$2.024 $2.873Products Desktops90% 88%94% Laptops 10% 12%2% Servers ---- 4%Market segmentsales Relationship59% 61%64% Transaction 41% 39%36%Markets US72.8% 72.5%70.9% Europe27.2% 27.5%27.2% Asia---- 1.9%