Dell Case Study

Case Study: Dell, Inc.

1. History of the company.

In 1983, Michael Dell started his own business while in college. The company he started was PC's ltd., which was the forerunner to Dell Inc. today. Dell started his business with a simple concept which is made to order computers. The computers were to be direct sales to consumers. Dell maximized his profits by bypassing distributors and retailers. Although he his product was sold by retailers he soon took the product out of the stores and continued focus on direct sales. Initially, Dell started selling computers by mail and phone orders then until 1994 when he started a website to sell his computers. At this point, Dell became the first computer company to have a website. By 1996, the website sells increased dramatically leading the company to be the largest retailer on the internet by 1999. As of today, Dell is the largest personal computer supplier in the world with under 18 percent of the global market.

2. Mission and Vision Statement

Dell's mission is to be the most successful computer company in the world at delivering the best customer experience in markets we serve. Dell will meet customer expectations of highest quality, leading technology, competitive pricing, individual and company pricing, best in class service and support, flexible customization capability, superior corporate citizenship, and financial stability.

3. Strategies

The strategies are unrivaled speed to market; superior customer service; a fierce commitment to producing constantly high-quality custom-made systems--heralded what has perhaps been the company's crowning achievement: an early exploitation of the Internet. One of the first companies to actually make money online, Dell is now selling more than $12 million worth of systems per day over www.dell.com.

4. SWOT Analysis

Strengths

Dell is the World's largest PC maker. Profits for the 3 months to July 2005 were in excess of $1 billion US, representing a growth of around 28%. For the last couple of years it has held its position as market leader (it took it from rivals Hewlett-Packard). The Dell brand is one of the best known and renowned computer brands in the World.

Dell cuts out the retailer and supplies directly to the customers. It uses information technology, and Customer Relationship Management (CRM) approaches to capture data on its loyal consumers. So a customer selects a generic PC model, and then adds items and upgrades until the PC is kitted out to the customer's own specification. Components are made by suppliers, never by Dell. PC's are assembled using relatively cheap labor. You can even keep track of your delivery by contacting customer services, based in India. The finished goods are then dropped off with the customer by courier. Dell has total command of the supply chain.

Weaknesses

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. In 2004 Dell had to recall 4.4 million laptop adapters because of a fear that they could overheat, causing electric shocks or fires.

Dell is a computer maker, not a compute manufacturer. It buys from a group of concentrated hi-tech component manufacturers. Whilst this is a tremendous advantage in terms of business operations, allowing Dell to focus on marketing and logistics, the company is reliant on a few large suppliers, and to an extent is locked in for periods of time (i.e. unable to switch supply dues to the lack of large suppliers in the World).

Opportunities

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 was born in 1965, and founded Dell in 1984 with $1000 whilst studying at the University of Texas. He became the youngest Fortune 500 CEO in 1992, and will be a tough act to follow.

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 competes against iPod and other consumer electronics brands.

Dell is making and selling low-cost, low-price computers to PC retailers in the United States. The PC's are unbranded and should not be recognized as being Dell when the consumer makes a purchase. Re-branding and re-badging for retailers, although a departure for Dell, gives the company new market segments to attack with the associated marketing costs.

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.

Dell, being global in its marketing and operations, is exposed to fluctuations in the World currency markets. Although it is a very lean organization, orders do have to be placed some time ahead due to their size or value. Changes in exchange rates could leave the company exposed to potential loses in parts of its supply chain.

Dell's commitment to customer value, to our team, to being direct, to operating responsibly and, ultimately, to winning continues to differentiate us from other companies. The Background section provides critical information and history about Dell's business world.

5. Porters Five Forces Model

* The rivalry between existing sellers in the market.

Dell faces stiff competitive challenges ranging from low-cost PC manufacturers over-seas to technology leaders such as Cisco, Hewlett-Packard, Sun Microsystems, Lexmark, IBM, NEC and Fujitsu-Siemens. As Dell enters into new market segments like networking and printers, execution concerns