Foreign Market Entry And Diversification

Foreign Market Entry and Diversification

Vermell Greene

BUS599-Strategic Management

Dr. L. Blue

Strayer University North Charlotte Campus

February 27, 2013

An Argument for Diversification

Growth and Profit

Micheal Dell established his first computer at the age of 19 in the year of 1984. Since then Dell computers has shipped straight to customers, avoiding retailers, proved insightful and unexpected. The consumers who read Dell computer ads in computer magazines quickly fell in love with the idea of getting a great computer filled with IBM components, but without the IBM price tag (Farfaran, 2008).

"Dell's global headquarters campus is a 2.1 million square foot facility powered completely by wind-power and gas energy converted from a landfill. On-site employees have access to a fitness center, banking centers, employee store, a mother's room, and notary publics. Dell Computer Inc. has helped the economy by employing over 32,100 workers in the Asia-Pacific region of the world. Dell manufacturing facilities are in Malaysia, India, and China Regional offices in 13 countries" (Farfaran, 2008).

The data above shows that Dell has gained access to a larger market that increased their profits and encourages their growth. They could achieve lower cost and compete more effectively by letting their core competencies shine in the foreign markets. Dell computer Inc. would now have an opportunity to become innovative in the foreign market, and they could bring home new ideas to better serve their domestic market.

While entering a foreign market could be a risky venture, Dell could actually spread its business risk across a larger market that would give them more probabilities to accomplish their goal. Dell could achieve a competitive advantage by being the first movers in the foreign market, and to expand internationally because their competitors are already there.

Strategy for Diversification

Determining what new businesses to enter and defining the most successful path to access given Dell's current situation. Which industries make sense in terms of the overall corporate strategy? Does Dell have capabilities comparable to those necessary to be effective in the target market (Thompson, Strickland & Gamble, 2010)?

Global companies play an important role in the business environment, because they connect their business together around the world. A good example of a global company is Dell Inc., an American computer-hardware company, headquartered in Austin Texas, which develops, manufactures, sells and supports a wide range of personal computers, servers, data storage devices, network switches, personal digital assistants, software, computer peripherals, and more. They design, build and customize products and services to satisfy a range of customer requirements: from the server, storage and premier services needs of the largest global corporations, to those of consumers at home. According to the Fortune 500 2006 list, Dell ranks as the 25th-largest company in the United States by revenue (Dignan, 2012).

Dell has to recognize and select opportunities that will increase their performance as well as their overall company's operation. Dell computers must be able to build a sustainable competitive advantage by leveraging cross-business value chain relationships and making sure the chosen strategy mounts with the foreign market that Dell computers is trying to enter. The success of the entry depends a great deal on how Dell prioritizes their diversification opportunities and how the company use corporate resources (Thompson, Strickland & Gamble, 2010).

Dell Inc. has realized that the most efficient route to the customer is through a direct relationship, with no intermediaries to add confusion and cost. With the power of their direct model and their team of talented people, they are able to provide to their customers high-quality, pertinent technology, customized systems, superior service and support and products and services that are easy to buy and use.

The customer-driven strategy, technology initiatives, innovations, and product directions has connected Dell computers with its customers, sharing risks and profits, allowing the customers to participate in the decision making process. Therefore, Dell Inc. manufactures and sells only what the customer needs; which gives them the competitive edge of adding value to their products in the future (Ahmed, 2008).

Foreign Market Dell should enter and what Strategy to Implement

The global call for environmentally friendly products and the need for energy efficiency and reduction in carbon emission have provided an interesting opportunity for market growth. Dell already has major contributions in this area, with their "Zero Carbon Initiative" where Dell's target is to reduce its carbon emissions by at least 15 percent by 2012, along with the "Plant a tree for me" program that Dell has started in Europe. Dell has a great opportunity to gain more revenue as well as market development in this area (Wilcox, 2001).

Virtualization software solutions are gaining importance and are highly in demand by leading organizations; this is due to its improvement to hardware utilization and operational efficiency. Dell already has a presence in this market segment but further expansion in such a growing market would increase revenue and allow for market share for its shareholders.

The market for mini-notebooks or net-books is expected to grow further and faster due to increasing demand in comparison with other personal computer products. Dell should expand further in this market as it would provide for a steady revenue flow and locally competitions would increase; including the other renowned brands worldwide.

Dell operates in 17 European countries, where server sales grew 15 times the market rate. Server sales soared 89 percent in Germany and 98 percent in the United Kingdom during the fourth quarter (Dignan, 2012).

A good strategy for Dell computers to implement would be to use Europe as a growth vehicle as well as a profit contributor for the overall company. This would work being that Dell is No. 3 in Europe, with a 31 percent year-over-year unit-growth rate in the fourth quarter. Now that Dell has got a major corporation deciding that it's going to buy a PC direct, the battle's over because Dell has broken through the foreign market cluster,