Dell Incorporated

Slide on SWOT Analysis

STRENGTHS:

1. Direct to Customer Business Model

Ð'* One of the core elements in Dell’s rise to global prominence was its cost-efficient approach to build-to-order manufacturing. This allowed customers to purchase custom-built products and custom-tailored services, which was the most effective ways to meet customer needs.

Ð'* So, customers could order whatever configuration of microprocessor speed, random-access memory, hard disk capacity etc they preferred.

Ð'* Your order was directed to the nearest factory and Dell had assembly plants in Austin, Texas; Nashville, Tennessee; Limerick, Ireland; Xiamen, China; Penang, Malaysia and El Dorada do Sul, Brazil; largest plant was in Winston-Salem, North Carolina, headquarters in Round Rock, Texas.

Ð'* Dell had a commanding 33.9% share of PC sales in US in 1st nine months of 2005, comfortably ahead of rivals HP, Gateway and IBM. Dell appears to be a low-cost leader along the major players in the IT industry.

Ð'* The sell-direct and built to order strategy bypassed distributors and retail dealers eliminating the mark-ups of resellers and also building to order greatly reduced costs and risk associated with carrying large stocks of goods. Dell unlike competitors (HP/Compaq and IBM) using the traditional value chain model did not have to wait for resellers to clear out their own inventories before it could push new models into the marketplace.

Ð'* Equally important was that those customers who bought from Dell got the satisfaction of having their computers customised to their particular liking and pocketbook.

This strength leads onto my next point, which is Dell, had:

2. No Inventory Build Up:

Ð'* Dell was regarded as a world class-manufacturing innovator and using the Just-in-Time inventory system yielded major cost advantages and shortened lead times.

Ð'* In 1997, Dell used a traditional single operation system where an order form accompanied metal chassis along the production line. Components of the PC were installed to meet customer needs.

Ð'* Next Dell shifted to cell manufacturing techniques where a team of workers assembled an entire PC to customers’ specifications. This reduced assembly times by 75% and doubled productivity per sq ft of assembly space.

Ð'* So Dell’s implementation of Just-in-Time practices brought it to a new level of faster assembly. Dell partnered with reputable suppliers of PC parts and components. This close partnership allowed Dell to operate with no more than two hours of inventory and newly assembled PCs could be boxed and shipped to customers the same day.

Ð'* In 1995, Dell had inventory turn cycle of 32 days but by 2006 this had dramatically fallen to 3 to 4 days.

3. Customised/ Standardised Products:

This is another important strength for Dell.

Ð'* It was a strong advocate of incorporating standardised components into its products so as not to tie either it or the consumer to one company’s proprietary technology and components.

Ð'* These would normally be at a higher price and therefore the costs would be transferred to the customer.

Ð'* Standardisation was evident in Dells servers, storage, networking and high performance computing. This area was taking over the largest part of the $800 bn spent annually on IT.

Ð'* Standardised clusters of high performance PCs and servers were replacing mainframe and custom-designed supercomputers because of their much lower cost. According to studies conducted by Dell, standardised products delivered twice the performance per $ of cost as non-proprietary technology.

4. Customer Service and Support:

This is another strength that Dell possesses.

Ð'* The direct sales model also enables closer customer integration. Dell has built strong and stable relationships with both large corporations and smaller enterprises that are its core customers.

Ð'* Unlike it rivals who depend on indirect sales, Dell possesses a great deal of information about its customers - their purchasing behaviour, demand patterns and satisfaction levels. They know who the end user is, what equipment they have bought, where it was shipped and how much the customer has spent.

Ð'* This information helps Dell provide high levels of customised service; to offer complementary product and services; to coordinate maintenance and technical support and even to forecast PC replacements and upgrades.

Ð'* Reliable customer service is an important feature of Dells strategy and they have been providing a year’s free onsite service with most of their PC’s since 1986. Customers needing technical support could contact Dell through a toll-free phone number or email.

Ð'* Also, Dell is seeking to enhance its online technical support tools reducing number and cost of telephone costs.

Finally, a vital strength in Dell’s success had been its pioneer use of the Internet and e-commerce technology.

5. Leadership in Internet Sales:

Ð'* With the emergence of the Internet, Dell Computer could extend the reach and scope of the direct sales model at a relatively low marginal cost.

Ð'* The company was ideally positioned to take advantage of the Internet because of its distinctive supply chain i.e. no distributors or retailers unlike rivals had.

Ð'* Customers could easily configure their own product online just like they were already doing over the phone.

Ð'* Dell was an early and enthusiastic convert to the Internet and gained first mover advantage by setting up its first Web site in 1994, a year in which total revenues were US$ 3.5 bn.

Ð'* Through the use of the Internet and e-commerce technologies, Dell aimed to squeeze greater efficiency out of its supply chain becoming a low cost provider.

Ð'* By 1998, its Internet sales had accounted for more that half of the firm’s total revenues, which had surged to more that US$20 bn. At that point, Michael Dell had joined Bill