Dell

Case:

Dell: Overcoming Roadblocks to Growth

1.) Critically assess Dell’s competitive position in the PC market

STRENGHTS:

To determine a companies’ position in the market, the SWOT analysis is a very good method to find out the strategic position and use this knowledge to plan for the future. The aim is to identify a companies’ internal (strengths and weaknesses) and external factors (opportunities and threats).

A main reason why Dell has such a good performance in the computer industry is its well working supply chain. Dell offers a customized product, but still sells cheap computers. An efficient supply chain gives Dell the chance to “reduce prices to grab market share when necessary”. Thus, Dell became the company with the highest market share, with the most shipments in the computer industry. Due to direct communication (direct model) with their customers, suppliers and a close collaboration with business partners they were able to speed up supply and guarantee fast delivery. The close contact to customers and suppliers enables Dell to “conduct more precise forecasts” , as well as an excellent financial performance. Dell collects the payment (via credit card) from its customer before they make the payment to their suppliers. This reduces the need of working capital.

Customers can configure their own computer system, which makes Dell’s business much more variable, so that many different market segments can be met, “including large commercial accounts, government, educational institutions, small and medium businesses and home buyers”. Another strength is the low inventory which they keep. Dell eliminated all their warehouses and carries only inventory for the next 2 hours. This is a very important fact, because many computer components nowadays lose up to 2% of their value each week.

WEAKNESSES:

Within the strengths Dell also has weaknesses. Being an entrepreneur organization where faults and debilities can the opportunity for the competence to take advantage of them it is very important to identify them. Based on the case study we found out that:

The lack of indirect sales model.- (besides the recently started in United States, Canada and Puerto Rico) can become a weak spot in Dell’s market approach, as Michael Dell declared when he announced retail selling in Wal-Mart; "We're expanding the number of places and ways people can buy our products ". These may seem like a turn of the company that wouldn’t be expected but “After years as the top PC seller in North America, Dell has lost its place as market leader to Hewlett Packard, and seen its earnings flatten” and they have noticed that their direct sales were a new approach back in the 1990’s and by changing the approach it shows that the organization has the gumption to recognize their weakness and take steps to correct the same.

Resistance from customers who aren’t comfortable buying online.- “Dell has had limited success in the Asia-Pacific consumer market, where its lack of physical retail presence was a disadvantage” , the company has been facing some struggle from users who do not buy or make advance payments for expensive products such as a laptop, without first seeing the product, which shows another weakness.

Absence of Dell’s trend innovations.- As Sony VAIO and Hewlett Packard have been releasing laptops with different and original designs and colors for a couple of years now, Dell just recently released a color version of their laptops. We personally believe it a weakness because currently the amount of people that acquires or already own a laptop computer are not only looking for a well functioned operative system but also a “pretty one”, as to say.

OPPORTUNITIES

Diversification- Attack other markets (printer, flat tv, mobility product, and software peripheral markets).- A great opportunity that presents to Dell was the printer market, HP relays on this revenues for the sustainability of the company, offering really cheap printers but really expensive cartridges; Dell attack this share of the market, they look for high profit margins they focused on “selling high-yield cartridges that were larger and more durable than typical cartridges”

Launch of flat TV and other electronic devices, “it used its efficient supply chain to lower costs and undercut competitors with lower pricing”Ð'І. Today the tendency of business is “Objective Marketing”, this means to “identified and serve a particular market, and obtain benefits attending to new necessities and desires of consumer (existing or prospective)” Dell starts to take advantage of chase development in new profitable areas and offer more options to de client.

Retail Sell.- Now, as its global market share slips, Dell Inc. is giving that slow-motion model a closer look. The company is cautiously becoming a brick-and-mortar retailer. This year, the company started selling at Wal-Mart (WAM) in the U.S., Carphone Warehouse (CRWHF) stores in Britain, and Bic Camera outlets in Japan. And on Sept. 24, Dell announced it was teaming up with China's biggest electronics retailer, Gome. After nearly a decade in China, the second-biggest computer market after the U.S., Dell has less than 10% share among corporate buyers there and only 2.5% of consumers. That's in part because the Chinese enjoy shopping in stores and find delivery inconvenient. Dell is also considering traditional retail outlets in India, another market with vast potential but similarly poor conditions for direct sales. Everything is pretty much said, Dell quartely revenues have not increase and the consumer is heading back to stores to have the shopping experience, or feel really unsafe buying via internet; a perfect example could be China: “Dell has less than 10% share among corporate buyers there and only 2.5% of consumers. That's in part because the Chinese enjoy shopping in stores and find delivery inconvenient”.

Small Business, Schools, Government.- “Dell won a huge contract with the municipal government in Beijing to supply computers to schools” , in this case our assumption is empiric, due to the case that we’ve seen dell attacking the enterprise market, they’re in school, government offices, small business,