Dell - A Case Study Analysis

DELL - An overview :

Dell is among the world's leading computer manuIacturers that has transIormed
and diversiIied into variety oI business segments over the years. Spanning over 20
years, the company has always been associated with designing, manuIacturing and
customizing products and services to satisIy a diversiIied range oI customers
including individual customers to corporate and retailing businesses. The
company's philosophy to deal with customers one-on-one has become a
management model Ior other companies. Having gained the market leadership
position in computer products and services, Dell's team have always been careIul
in sustaining its marketing strategy oI providing standard-based computing
solutions. Dell's strategy is global. It realizes that being closer to the customers is
essential in carrying out its marketing strategies as well as in enabling it to build
customer base. Apart Irom the above customer level niche marketing, Dell also
believes in reducing competition through collaboration. Unlike other leaders in the
industry such as HP and Compaq, Dell does not believe in taking over existing
competitors to eliminate competition. Instead the company have always pride itselI
in using partnerships and associations Ior integrated marketing.

Issue analysis :

The Iollowings are the current issues which the company Dell is now experiancing
:

No 1 company in the US : Today, by nearly every unit oI measure (and the Iolks
at Round Rock love to measure), in the computer hardware business Dell is
irreIutably the No. 1 company in the U.S. Be it in desktops, notebooks, and
servers, or in proIits, growth, and margins, Dell is the leader. And it isn't slowing
down either. At its mid-February earnings conIerence call, Dell announced that
technology research Iirm IDC had determined that it had surpassed HP to become
the worldwide leader in PC market share, with 17.6.

Low price product : Dell`s highly eIIicient supply chain management and
manuIacturing organization, eIIicient direct business model, and concentration on
standards-based technologies allow Dell to maintain the lowest cost structure
among its major competitors, and to pass those savings to its customers. Dell`s
relentless Iocus on reducing its costs allows it to consistently provide customers
with superior value.

Disintermediation : A direct customer relationship, also reIerred to as Dell`s
'direct business model, eliminates wholesale and retail dealers that add
unnecessary time and cost or diminish Dell`s understanding oI customer
expectations. As a result, Dell is able to oIIer customers superior value by avoiding
expenditures associated with the retail channel such as higher inventory carrying
costs, obsolescence associated with technology products, and retail mark-ups. In
addition, direct customer relationships provide a constant Ilow oI inIormation
about customers` plans and requirements and enable Dell to continually reIine its
product oIIerings.

Customized product approach : Dell believes the direct business model is the
most eIIective model Ior providing solutions that address customer needs. In
addition, Dell`s Ilexible, build-to-order manuIacturing process enables Dell to turn
over inventory every Iour days on average, and reduce inventory levels. This
allows Dell to rapidly introduce the latest relevant technology more quickly than
companies with slow-moving, indirect distribution channels, and to rapidly pass on
component cost savings directly to customers.

usiness strategy : Traditionally, computer manuIacturers sold their products
through retailers. Dell, however, created a cost-eIIicient way to sell their
computers by 'cutting out the middle man and selling their computers directly to
their customers. This direct sell method saves Dell three to Iive percent in
inventory costs which would have otherwise been paid to retailers.
In the past, computer manuIacturers assembled computers based upon what they
had in their inventory. This necessitated maintaining a stock room with three to
Iour months oI computer inventory in the distribution channel. On the contrary,
Dell produces a computer only when the customer requests and pays Ior the item.
In essence, customers` Iunds are used to Iinance the transaction and this saves Dell
millions oI dollars in Iinancing costs. The direct sell method is advantageous Ior
Dell because the company maintains two days worth oI inventory and this helps to
save several million dollars in inventory holding costs.

Ansoff`s matrix :

The business oI Dell can be best understood by the AnsoII`s matrix. At the very
initial level when they started their business, they were new in the market and lots
oI competitor were there, so they tried to penetrate the market through their
innovative idea oI one to one business. That is what gave them the success.

AIter US, when they went to new market, they developed their market and
attracted new customers with new technologies. The same happened when they
entered their new products into the present market. They developed the product in
this case.

Finally, when they launched their new product into the new market, they had to
diversiIy their business Ior sustainable proIit. That means they had to come up with
new product range. So they introduced printers, servers and many more products.

By this opportunity matrix we can easily understand the business policies oI
DELL.

CG Matrix

Dell has passed through Introductory phase(Question Mark)at the starting when
his company was perceived as geek and gimmick to the Growth Phase(Star) Irom
1996 to 1999 when sales oI PC was 16 annually to Mature Phase(Star) Irom
2000-2004 at this time sales grew only by 3.6.

Recommendations

Growth should be inline with quality: As Dell`s mass production oI printers is
being outsourced Irom some other companies and so it has to check that the quality
oI the product and the service should not be compromised, so that its growth in
new products should be inline with quality Ior which it is Iamous Ior.

Focus on new emerging markets: US market has reached its maturation due to
which the PC business has been slowing down. From 1996 to 1999, PC sales in
U.S. climbed on average 16 annually and Irom 2000 to 2004, PC sales grew only
by 3.6 only. Dell has to expand its business in diIIerent countries like BRIC as
there is huge untapped market lying there.

Channel development, hybrid channels and integration: Dell has to develop
channels according to the markets in which he has to sell his products as the
customer`s methods oI buying is diIIerent Irom that oI US, e.g. iI Dell has to sell
its products in India it has to use channels like retailers, distributors, exclusive Dell
outlets etc. with this it has to provide its traditional channels i.e. telephone, internet
and the integration oI these channels is also must.

DELL : A SWOT analysis

Strengths: Dell's dynamic organizational structure allows it to achieve diversiIied
targets. By allowing the components to directly become integrated in the
manuIacturing process oI Dell, it has been able to reduce middle channel costs.
These components, such as HP, Lenovo, logistics, system integrators, repair and
support companies, component suppliers, third party HW and SW suppliers and
distributors have become each oI the company's manuIacturing processes so that
ease oI provision to the customers is possible.

Weaknesses: Within the strengths lies Dell's weaknesses. Much oI its strategies
have to rely on the capacity and capability oI these manuIacturing components.
Continuous updates and process improvement is required so that they can keep up
with Dell's pace oI development.

Opportunities: Having established an integrative and virtual network, Dell has
been able to achieve the high level oI corporate outcome that challenged most oI
the industry leaders. The established value web corporate model have also allow
Dell to have global wide access to customers and market. Reaching any niche
market in any continent is thereIore not a problem Ior Dell's marketers.

Threats: However, due to the integration oI components in Dell's organization
structure, Dell compete not only compete at the Iinal product level but also at the
suppliers level. Third party soItware and soItware Ior example have great
competition Ior price and product categorization which could eventually aIIect
Dell's position in the market.