1

Project Report On:

Dell Company
Submitted To: Mr. Shahid Mehmood Submitted By:

Mr. Imtiaz Ali Roll No: 79

Mr. Arslan Ayub Roll No: 58 BS-Commerce !"enin#$ Session: %&&7-%&'' (e)artment o* Commerce

Project Report on Dell Company

Preface

The primary function of this report is to share the process of learning and knowledge which I underwent during my research on this project. The purpose of this report is to enhance personal skills and knowledge about the compilation of data and information about an organization into a summarized form. The organization chosen is a multinational organization. The report focuses on the putting together or composing from materials gathered from many sources.

Project Report on Dell Company

Executive Summary Masters in commerce is a professional degree. According to the nature of our subject which is a credit one, the research is being undertaken on Dell corporation. Dell computer corporation was established in #$%& and today ranks among the world"s largest computer systems company. Dell ser'ing the selling of personal computers directly to customers, pro'iding direct toll free technical support and on site ser'ices. Dell offers build to order computer systems to customers. Dells complete range of high(performance computer systems include) Dell Dimension and !pti*le+ desktop computers, ,atitude notebook computers, and *ower -dge network ser'ers. This report co'ers the contents of current and past o'er'iew of dell company, its offerings, financial analysis and many more. ompany. !ne of the world"s leading

Project Report on Dell Company

Experience is not what happens to you, it is what you do with what happens to you. -Aldous Huxley

Acknowledgement: .y the grace of Allah who has pro'ided me with the skills and abilities to be able to complete this report and present a clear picture of what I ha'e been doing during the course of my project. I would firstly like to thank the Department of Commerce for making this learning e+perience a part of our education and specifically thanks to Mr. Shahid for his ad'ice and assistance in helping us a'ail this opportunity. I would like to thank all those who helped me for the entire course of my project, my group fellows who cooperated me throughout the project and became my one of the best companions.

Project Report on Dell Company

DEDICATED TO:

MY BELOVED PARENTS

AND RESPECT ABLE TEACHERS

Project Report on Dell Company

Ta le of Content!

Introduction Dell Inc. 0istory *roducts 2cope and .rands !rganization ompetitors Dell"s 2trategy .usiness ,e'el 2trategy Total 6uality Management orporate ,e'el 2trategy 2econd or ,ate Mo'er 2trategy Mission 8 9ision 2tatement Mission 2tatement

/% /% #/ #1 #1 #& #3 #4 #5 #% #$ 77 71 71

Project Report on Dell Company

9ision 2tatement :inancial Analysis :inancial 2tatements Income 2tatement .alance 2heet ash :low ;atio Analysis ompetiti'e Analysis *ositioning 2trategy Analysis *roduct<2er'ice 2trategy Analysis *ricing 2trategy Distribution 2trategy Analysis 2=!T Analysis 2trength =eakness !pportunity Threat ;eferences

7& 73 73 73 75 1# 1& 14 14 14 14 15 1% 1% 1$ &/ &# &1

Project Report on Dell Company

"ntroduction Dell Inc. is an American multinational information technology corporation based in ;ound ;ock, Te+as, >nited 2tates, that de'elops, sells and supports computers and related products and ser'ices. The founder of Dell Inc. is Micheal Dell. This is one of the world"s largest corporation employing more than #/1,1// employees worldwide. As of 7//$, the company sold personal computers, ser'ers, data storage de'ices, network switches, software"s and computer peripheral de'ices. The company is well known for its inno'ation.

Dell "nc.

Project Report on Dell Company

Type

*ublic ?A2DA6) Dell 0@-A) &11# 28* 3// omponent omputer 2ystems omputer *eripherals omputer 2oftware IT consulting IT ser'ices Austin, Te+as ?o'ember &, #$%& Michael Dell # Dell =ay ;ound ;ock, Te+as, >.2.B#C =orldwide Michael Dell D hairman 8 -!E Desktops 2er'ers ?otebooks ?etbooks *eripherals *rinters Tele'isions 2canners 2torage 2mart *hones F4#.&$ billion D7/##EB7C F1.&1 billion D7/##EB7C

"ndu!try

#ounded #ounder$!% &ead'uarter! Area !erved (ey people

)roduct!

*evenue +perating income

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,et income Total a!!et! Total e'uity Employee! Su !idiarie! -e !ite F7.41 billion D7/##EB7C F1%.3$ billion D7/##EB7C F3.4& billion D7/##EB7C #/1,1// D7/##EB7C Dell 2er'ices Alienware Dell.com

&i!tory Micheal Dell being the founder of Dell Inc. transformed his idea in to reality in #$%&. 0e was student in >ni'ersity of te+as, Austin, when he realized that selling personal computers directly to customers may fulfill the needs of them in order to pro'iding pcs" according to there e+pactations. =ith an initial capital of F1//,/// he commenced his business of * s limited.

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In #$%3, the company produced the first computer of its own design GTurbo *cH sold for >2 F5$3. The company ad'ertised its system in ?ational omputer Magazines for its selling of * s"

directly to consumers, assembled according to their needs. :or the 'ery first year of its business the company grossed F53 million.

The company changed its name to IDell omputer orporationI in #$%% and began e+panding globally, first in Ireland. In June #$%%, DellKs market capitalization grew by F1/ million to F%/ million from its June 77 initial public offering of 1.3 million shares at F%.3/ a share. In #$$7, :ortune magazine included Dell omputer orporation in its list of the worldKs 3// largest companies, making Michael Dell the youngest -! of a :ortune 3// company e'er. In #$$4, Dell began selling computers 'ia its web site, and in 7//7, Dell e+panded its product line to include tele'isions, handhelds, digital audio players, and printers. DellKs first acLuisition occurred in #$$$ with the purchase of on'erge?et Technologies. In 7//1, the company was rebranded as simply IDell Inc.I to recognize the companyKs e+pansion beyond computers. :rom 7//& to 7//5, Michael Dell stepped aside as -!, while long(time Dell

employee @e'in ;ollins took the helm. During that time, Dell

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acLuired Alienware, which introduced se'eral new items to Dell products, including AMD microprocessors. To pre'ent cross( market products, Dell continues to run Alienware as a separate entity but still a wholly owned subsidiary. !n August #4, 7/#/, Dell announced its intent to acLuire the data storage company 1*A;. !n 2eptember 7, 7/#/ 0ewlett(*ackard offered F11 a share, which Dell declined to match.

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)roduct! Scope and rand! Its .usiness< orporate class represent brands where the company ad'ertises emphasizes long life(cycles, reliability, and ser'iceability. 2uch brands include)

!pti*le+ Doffice desktop computer systemsE 9ostro Doffice<small business desktop and notebook systemsE n 2eries Ddesktop and notebook computers shipped with ,inu+ or :reeD!2 installedE ,atitude Dbusiness(focused notebooksE *recision Dworkstation systems and high(performance notebooksE, *ower-dge Dbusiness ser'ersE *ower9ault Ddirect(attach and network(attached storageE *ower onnect Dnetwork switchesE Dell<-M Dstorage area networksE -Lual,ogic Denterprise class i2 2I 2A?sE

DellKs 0ome !ffice< onsumer class emphasizes 'alue, performance, and e+pandability. These brands include)

Inspiron Dbudget desktop and notebook computersE 2tudio Dmainstream desktop and laptop computersE A*2 Dhigh(end desktop and notebook computersE

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2tudio A*2 Dhigh(end design(focus of A*2 systems and e+treme multimedia capabilityE Alienware Dhigh(performance gaming systemsE Adamo Dhigh(end lu+ury laptopE

DellKs *eripherals class includes >2. keydri'es, , D tele'isions, and printersM Dell monitors includes , D T9s, plasma T9s and projectors for 0DT9 and monitors. Dell >ltra2harp is further a high(end brand of monitors.

+rgani.ation A board of directors of nine people runs the company. Michael Dell, the founder of the company, ser'es on the board. !ther board members include Don Carty/ -illiam 0ray/ 1udy 2ewent/ (lau! 2uft/ Alex Mandl/ Michael A. Mile!/ and Sam ,unn. 2hareholders elect the nine board members at meetings, and those board members who do not get a majority of 'otes must submit a resignation to the board, which will subseLuently choose whether or not to accept the resignation. The board of directors usually sets up fi'e committees ha'ing o'ersight o'er specific matters. These committees include the Audit Committee, which handles accounting issues, including

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auditing and reportingM the Compen!ation Committee, which appro'es compensation for the -! and other employees of the

companyM the #inance Committee, which handles financial matters such as proposed mergers and acLuisitionsM the 0overnance and ,ominating Committee, which handles 'arious corporate matters Dincluding nomination of the boardEM and the Antitru!t Compliance Committee, which attempts to pre'ent company practices from 'iolating antitrust laws. The corporate structure and management of Dell e+tends beyond the board of directors. The Dell Nlobal -+ecuti'e Management ommittee sets strategic directions. Dell has regional senior 'ice( presidents for countries other than the >nited 2tates, including David Marmonti for EMEA and Stephen 1. #elice for A!ia31apan. As of 7//5, other officers included Martin 0arvin Dsenior 'ice president for worldwide procurementE and Su!an E. She!key D'ice president and hief Information !fficerE. Competitor! DellKs major competitors include)

0ewlett(*ackard D0*E Acer Toshiba

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Nateway 2ony Asus ,eno'o I.M 2amsung Apple 2un Microsystems.

Dell and its subsidiary, Alienware, compete in the enthusiast market against A9ADirect, :alcon ?orthwest, 9oodoo* subsidiary of 0*E, and other manufacturers. Dell4! !trategy DellKs business strategy is a successful cost leadership strategy. The companyKs formula for success has been based upon its uniLue customization, deli'ery, and cost proposition. In reaction to faltering performance and the need to pursue new growth opportunities, a dual(strategic approach is reLuired to confront rapidly changing market conditions. :irst, Dell must integrate its cost leadership skills with differentiated product features and related ser'ices to create 'alue for its customers and achie'e the benefits of an integrated cost leadership<differentiation strategy. Additionally, becoming a di'ersified IT company opens up opportunities in related businesses, where similar products, buying
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Da

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processes, target customers, or other operationally(related acti'ities can produce synergies. This business(le'el and corporate(le'el strategy combination offers Dell a method of dealing with the companyKs competiti'e realities. .oth strategies are discussed below.

5u!ine!!62evel Strategy ustomer e+pectations in the industry ha'e created a growing demand for low(priced, differentiated products. As a result, Dell needs to be able to perform primary and support acti'ities that simultaneously yield low costs and differentiated features, or an integrated co!t leader!hip3differentiation !trategy. The

objecti'e of using this strategy is to efficiently produce products with attributes that boost product Luality or performance. -fficient production is the source of maintaining low costs, while differentiation is the source of uniLue 'alue. 2uccessful use of an integrated cost leadership<differentiation strategy has the added benefit of building skills that can help Dell adapt more Luickly to new technologies and rapid changes in the e+ternal en'ironment. 2imultaneously concentrating on de'eloping two sources of competiti'e ad'antage Dcost and differentiationE increases the

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number of primary and support acti'ities in which the company must become competent, which contributes to greater fle+ibility. :le+ible manufacturing systems, information networks, and total Luality management systems can also yield a more fle+ible organization. -ach type of initiati'e should be considered by Dell as it tries to balance the objecti'es of continuous cost reductions and continuous product enhancements. Dell already utilizes a customized assembly process based upon a :M2 to fill customer orders. To increase fle+ibility, the company should look for ways to enhance the effecti'eness of information networks Dlinking the supply chain through to the customerE to impro'e work flow and communication among employees to identify and resol'e problems that emerge. Impro'ements in information linkages would pro'e particularly beneficial as Dell seeks to impro'e ser'ices for its corporate customers. Total 'uality management $T7M% is another managerial inno'ation that emphasizes an organization"s total commitment to the customer and to continuous impro'ement of e'ery process through the use of data(dri'en, problem(sol'ing approaches based on empowerment of employee groups and teams. The de'elopment and use of T6M systems at Dell would align actions with the companyKs strategic needs and would concurrently ser'e to D#E

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increase customer satisfaction, D7E cut costs, and D1E reduce the amount of time reLuired to introduce inno'ati'e products to the marketplace. All of these objecti'es ha'e been identified as critical factors that will influence DellKs future success. T6M systems result in the enhancement of inno'ati'e abilities, the ability to e+ceed customers" Luality e+pectations Ddifferentiating the company from its competitorsE, and the elimination of process inefficiencies to cut costs Dallowing Dell to offer better performing features at the relati'ely low prices e+pected by its customersE. Thus, an effecti'e T6M system will help Dell de'elop the fle+ibility needed to identify opportunities to implement its integrated cost leadership<differentiation strategy. .ecause T6M systems are a'ailable to all competitors, they may help the company maintain competiti'e parity, but rarely will they unilaterally lead to a competiti'e ad'antage. Corporate62evel Strategy A corporate6level !trategy specifies actions a firm takes to gain a competiti'e ad'antage by selecting and managing a group of different businesses competing in different product markets. orporate(le'el strategies help companies select new strategic positions to increase the firm"s 'alue. They are also a means to grow re'enues and profits.

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.y 7//4, Dell has already di'ersified from a purely desktop * pro'ider to operating in the following additional product categories) mobility, ser'er, storage, printer, enhanced ser'ices, software, and consumer electronics. More than thirty percent of its re'enue is generated outside of its dominant business. .ecause of this ratio and because there are e+isting links between its di'ersified businesses, a related con!trained diver!ification !trategy is being employed. =ith a related constrained di'ersification strategy, Dell will be able to e+pand the 'alue of its resources and capabilities by sharing acti'ities and e+ploiting economies of scope between its businesses. A'ailable to companies operating in multiple product markets or industries, economie! of !cope are cost sa'ings that the firm creates by successfully sharing some of its resources and capabilities Doperational relatednessE or by transferring one or more corporate( le'el core competencies that were de'eloped in one of its businesses to another of its businesses Dcorporate relatednessE. To create economies of scope both tangible resources Dsuch as plant and eLuipment or other physical assetsE and intangible resources Dsuch as knowledge or other bases of core competenciesE can be shared. In at least two ways, the related linked di'ersification strategy can help Dell create 'alue. :irst, because a core

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competence has already been de'eloped Dand paid forE in one of the company"s businesses, transferring it to a second business eliminates the need for that second business to allocate resources to de'elop it. ;esource intangibility is a second source of 'alue creation through corporate relatedness. Intangible resources are difficult for competitors to understand and imitate. .ecause of this difficulty, the unit recei'ing a transferred corporate(le'el competence often gains an immediate competiti'e ad'antage o'er its ri'als. !ne thing to keep in mind, howe'er, is that it can be difficult for in'estors to actually obser'e the 'alue created by a firm as it shares acti'ities and transfers core competencies. :or this reason, the 'alue of DellKs assets being used to create economies of scope may be discounted by in'estors. DellKs business model became successful in the * industry as

personal computers gained acceptance in the market. The companyKs growth was achie'ed by taking away share from industry leaders and IcommodifyingI the product. ;ather than being the market leader in other consumer electronic products D0DT9, digital cameras, etc.E when new product prices are high and consumers are doing e+tensi'e research prior to the purchase Dneeding retail outlets to touch and feel the productE, DellKs place might be to jump into the market as consumer electronic products

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begin to transition into commodities. The company can be prepared to capture the second wa'e or tier of consumers who ha'e not adopted new technologies and products until prices lower and technology becomes accepted Dcapturing the market after the product<technology is pro'en, offering low prices, great Luality, new features, and complementary ser'ices at this timeE. This !econd $or late% mover strategy is a competiti'e response to first mo'ersK competiti'e actions and is typified by imitation. Taking the time to monitor customer reaction to product inno'ations and a'oiding the mistakes and costs of new product introductions are compatible with DellKs successful business model. The approach also pro'ides Dell with time to de'elop more efficient processes and technologies or create additional 'alue for consumers. !'erall, the outcomes of first mo'er competiti'e actions can pro'ide an effecti'e blueprint for DellKs late mo'er approach, especially as the consumers get comfortable with making in'estments in new technologies and begin to eLuate dependable Luality and good 'alue with the Dell brand. It is also going to be important for Dell to properly scale its aging businesses Dsuch as * KsE to the size of the replacement market. B!f course, the company should always continue to look for ad'ancements that

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might breathe life into mature products ( such as it has done by turning home * Ks into media centersE.

Mi!!ion and 8i!ion Statement

Dell Mi!!ion Statement

9To e the mo!t !ucce!!ful computer company in the world at delivering the e!t cu!tomer experience in market! we !erve.9 Dell

Mi!!ion Statement Dell"s mission is to be the most successful omputer ompany in the world at deli'ering the best customers e+perience in markets we ser'e. In doing so, Dell will meet customer e+pectations of) 0ighest Luality ,eading technology ompetiti'e pricing Indi'idual and company accountability .est(in(class ser'ice and support
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:le+ible customization capability 2uperior corporate citizenship :inancial stability

8i!ion Statement It"s the way we do business. It"s the way we interact with the community. It"s the way we interpret the world around us. !ur customers needs, the future of technology, and the global business climate. =hate'er changes the future may bring our 'ision. Dell 9ision will be our guiding force. 2o Dell needs full customers satisfaction. In order to become the most successful computer company, they need the newest technology and loyal customers.

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#inancial Analy!i!: #inancial Statement!: "ncome Statement

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5alance Sheet
Currency in Millions of U.S. Dollars

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Ca!h #low
Currency in Millions of U.S. Dollars

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!ecei"a?le

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*atio Analy!i!
!atio data ++M as of &$B(1B(&$$ PROFITABILITY - DELL INC (DELL)
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MARGIN ANALYSIS - DELL INC (DELL)

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ASSET TURNOVER - DELL INC (DELL)
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Competitive Analy!i! )o!itioning Strategy Analy!i! Dell"s uniLue selling proposition has always been defined by its direct business model. Its founder, Michael Dell, lead the way using the direct(sales approach for computers. Dell has a simple formula) Geliminate the middleman and sell for lessH D0oo'ersE. Dell keeps it simple by pro'iding customers with built(to(order bo+es that help with lower in'entories, lower costs, and higher profit margins. )roduct!3Service! Strategy Analy!i! Dell is the major player in the personal computer industry and its aim is to market both * s and ?on(* s related products to the consumers. It uses to target its market the differentiated approach. 2uch as it pro'ides the products to the markets according to the needs to consumers, as according to home, health, go'ernment,

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small and large scale markets etc. It differentiates its products from others which is the key point to target its market. )ricing Strategy Dell made F#%.7 billion in re'enue with a net profit margin of %O. In 7//4 their re'enue was almost tripled to F33.$ billion, but with a lower net profit margin of 4.&O. Dell"s net income has almost constantly risen throughout the years, due to their highly competiti'e cost structure. Their elimination of the middleman keeps their costs low and profits high. Di!tri ution Strategy Analy!i! Dell"s main factory is located in Te+as with its regional headLuarters in Te+as, Tennessee, and .razil. Dell always tries to centralize its headLuarters to where it can pro'ide the ser'ice to its customers in timely and effecti'e manner. Dell"s location has helped the company organize its distribution model. =hen Dell Americas operations were e+panded, Dell chooses middle Tennessee because the transportation infrastructure allowed Dell to reach 5/O of its customer base within twenty(four hours by ground. =ith the Internet and the phone as its biggest distribution channel, Dell is able to reach customers faster and with its

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distribution network streamlined it can meet each customer"s demand successfully and speedily. All these strategies not only made possible for Dell Inc. to be among the world"s leading orporations in the omputer Industry but 1%th largest orporation in >nited 2tates. S-+T Analy!i! of Dell Computer Strength! DellKs Direct Model approach of enables the company to offer direct relationships with customers such as corporate and institutional customers. Their strategic method also pro'ides other forms of products and ser'ices such as internet and telephone purchasing, customized computer systemsM phone and online technical support and ne+t(day, on(site product ser'ice. This e+tensi'e range of products and ser'ices is definitely one of Dell"s strengths. Dell omputerKs award(winning customer ser'ice, industry(leading growth and consistently strong financial performance differentiate the company from competitors for the following reasons)

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*rice for *erformance P Dell boasts a 'ery efficient procurement, manufacturing and distribution process allowing it to offer customers powerful systems at competiti'e prices. ustomization ( -ach Dell system is built in order to meet each customer"s specifications. ;eliability, 2er'ice and 2upport P Dell"s direct customer allows it to pro'ide top(notch customer ser'ice before and after the sale. ,atest Technology P Dell is able to introduce the latest rele'ant technology compared to companies using the indirect distribution channels. Dell turns o'er in'entory for an a'erage of e'ery si+ days, keeping in'entory costs low. The companyKs application of the Internet to other parts of the business ((including procurement, customer support and

relationship management (( is growing at a rate of 1/ percent. The companyKs =eb site recei'ed at least 73 million 'isits at more than 3/ country(specific sites. -eakne!!e! Dell"s biggest weakness is attracting the college student segment of the market. Dell"s sales re'enue from educational institutions

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such as colleges only accounts for a measly 3O of the total. Dell"s focus on the corporate and go'ernment institutional customers somehow affected its ability to form relationships with educational institutions. 2ince many students purchase their * s through their schools, Dell is ob'iously not popular among the college market yet. :or home users, Dell"s direct method and customization approach posed problems. :or one, customers cannot go to retailers because Dell does not use distribution channels. ustomers just can"t buy

Dell as simply as other brands because each product is custom( built according to their specifications and this might take days to finish. +pportunitie! *ersonal computers are becoming a necessity now more than e'er. ustomers are getting more and more educated about computers. 2econd(time buyers would most likely a'ail of Dell"s custom(built computers because as their knowledge grows, so do their need to e+periment or use some additional computer features.

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Demand for laptops is also growing. As a matter of fact, demand for laptop has o'ertaken the demand for desktops. This is another opportunity for Dell to grow in other segments. The internet also pro'ides Dell with greater opportunities since all they ha'e to do now is to 'isit Dell"s website to place their order or to get information. 2ince Dell does not ha'e retail stores, the online stores would surely make up for its absence. It is also more con'enient for customers to shop online than to actually dri'e and do purchase at a physical store. Threat! In a 'olatile market such as personal computers, threats abound. omputers change in a constant sometime daily basis. ?ew software, new hardware and computer accessories are introduced at a lightning speed. It is essential for Dell therefore to be always on the lookout for new things or introduce new computer systems. The threat to become outmoded is a pulsating reality in a computer business. ?ot only that, companies must produce products that are high in Luality but low in price. This is one challenge that Dell contends with.

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!ne of the biggest e+ternal threats to Dell is that price difference among brands is getting smaller. Dell"s Direct Model attracts customers because it sa'es cost. 2ince other companies are able to offer computers at low costs, this could threaten Dell"s price( conscious growing customer base. =ith almost identical prices, price difference is no longer an issue for a customer. They might choose other brands instead of waiting for Dell"s customized computers. The growth rate of the computer industry is also slowing down. Today, Dell has the biggest share of the market. If the demand slows down, the competition will become stiffer in the process. Dell has to work doubly hard to differentiate itself from its substitutes to be able to continue holding a significant market share. Technological ad'ancement is a double(edge sword. It is an opportunity but at the same time a threat. ,ow(cost leadership strategy is no longer an issue to computer companies therefore it is important for computer companies to stand out from the rest. Technology dictates that the most up(to(date and fastest products are always the most popular. Dell has to always keep up with technological ad'ancements to be able to compete.
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*eference!
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Project Report on Dell Company