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Case 5 - Dell Inc. in 2008 Can It Overtake Hewlett Packard as the World Leader in Personal Computers

Case 5 - Dell Inc. in 2008 Can It Overtake Hewlett Packard as the World Leader in Personal Computers

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Published by mattgenoa
Dell Inc. in 2008: Can It Overtake Hewlett Packard as the World Leader in Personal Computers?
Dell Inc. in 2008: Can It Overtake Hewlett Packard as the World Leader in Personal Computers?

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Published by: mattgenoa on Jul 05, 2012
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Case 5:"Dell Inc. in 2008: Can it Overtake Hewlett Packard as theWorld Leader in Personal Computers?"
Question 1:
1992: Michael Dell becomes the youngest CEO of a Fortune 500 company at age 27b.
Michael Dell has been the key factor for Dell, Inc. growing into the corporation it istoday. In my oppinion, his top 5 key strengths that helped Dell, Inc. grow include:i.
Competitive natureii.
Foresight & Visioniii.
Willingness to take risksiv.
Ability to executec.
5 Tasks of Crafting and Executing Strategy:i.
Developing a Strategic Vision: Dell's vision was to be the low cost provider.This is arguably the most important key to Dell's success. He decided thiswas the direction the company was going to go and stuck with it, and hisability to reduce overhead allowed him to achieve it.ii.
Setting Objectives: Dell's objective was focused on increasing margins,while keeping the end price low. He was able to achieve this by cutting outthe middle-men and selling directly to the end user.iii.
Crafting a Strategy: All of Dell's strategies were geared towards increasingthe bottom line. If it didn't align with the overall goals, the idea wasrejected.iv.
Implementing and Executing: Dell's ability to stay ahead of the curve byoffering completely customizable PCs build to the customers specificationallowed the company to maintain the explosive growth it saw in the earlyyears of the company. Strategic acquisitions allowed the company toaugment and expand its offering to target additional markets.v.
Evaluating Performance and Initiating Corrective Adjustments: Dell's earlyadoption of the newest technology has allowed the company to gain fullvisibility into the profitability of each piece of hardware it sells and helpedpredict future trends in consumer demand.
Question 2:
Dell's strategy includes the following:i.
Sell customizable PCs directly to the customerii.
Add customer valueiii.
Streamline manufacturing and supply chaine.
The core elements of this strategy include:i.
Decreased overhead by decreasing costs associated with built to ordermanufacturing1.
Part of this required reduction of materials through partnership withsuppliersii.
Targeting end users directly through sales effortsiii.
Expand offering to enter additional markets and niches through acquisitionsiv.
Standardize company processes
From Essentials of Strategic Management - The Quest for Competitive Advantage, Second Edition, byGamble & Thompson and published by McGraw-Hill.
Predict the future needs of the consumer and be prepared to meet them withR&Dvi.
Provide value add services to consumersf.
Dell is employing the low cost strategyg.
Everything Dell works on fits the company objective, to produce the best possiblecomputer for the lowest priceh.
Dell's strategy is constantly evolving to meet customer demands. Dell has adoptedSocial Media channels for customer feedback, expanded their offering countlessways, and become established as the industry leader for best practices through thesupply chain and manufacturing.
Question 3:
Dell's expansion into different technology is typically very strategic and generallyfollows these guidelines:i.
The technology is something many customers have already asked for fromDellii.
The technology is gaining popular acceptanceiii.
The technology has the potential to last many years without going obsolete
Question 4:
There is no doubt that Dell's strategy is working, even though their profit margins areshrinking yearly. However, just because their margins are decreasing, it does notmean the company is doing poorly. The shrinking margins are instead an indicationof the industry as a whole, where the market could hold higher margins a decade agoit will not anymore. See the numbers below.i.
Gross Profit Margin:1.
2008: 19.1%2.
2007: 16.6%3.
2006: 22.1%4.
2005: 18.4%5.
2004: 18.3%6.
2002: 17.7%7.
2000: 20.7%It would be ideal if this number was continuing to rise, but the numbers shownare still fantastic, even though they have dropped in recent years from the past.ii.
Operating Profit Margin:1.
2008: 5.6%2.
2007: 5.3%3.
2006: 7.9%4.
2005: 8.6%5.
2004: 8.5%6.
2002: 5.7%7.
2000: 9.0%It is disappointing that this is trending downward, but as the price of PCs hasdropped significantly, so have the profit margins.iii.
Net Profit Margin:1.
2008: 4.8%2.
2007: 5.8%
2006: 6.5%4.
2005: 6.1%5.
2004: 6.4%6.
2002: 4.0%7.
2000: 6.6%Same story as Gross and Operating Profit Margins, the market simply willnot handle the margins it once would.iv.
Return on Stockholder's Equity:1.
2008: 78.9%2.
2007: 59.7%3.
2006: 89.0%4.
2005: 46.5%5.
2004: 41.8%6.
2002: 26.5%7.
2000: 31.4%To give you an example of how great these look, the average ROE issomewhere in the low teens.v.
Earnings per Share:1.
2008: $1.332.
2007: $1.153.
2006: $1.504.
2005: $1.205.
2004: $1.026.
2002: $0.487.
2000: $0.66The fact that this is increasing year over year is a key indicator that thecompany is doing well.vi.
Long-Term Debt-to-Equity Ratio:1.
2008: 9.7%2.
2007: 13.1%3.
2006: 15.4%4.
2005: 7.8%5.
2004: 8.0%6.
2002: 11.1%7.
2000: 9.6%This simply demonstrates the company's ability to retain additionalcapital, if necessary. It is good that it is currently as low as it is.
Question 5:
Direct sales (eliminating the need for wholesalers and retailers)ii.
Diversity of IT product linesiii.
Dell brandiv.
Manufacturing & supply chain managementl.
Dell seems to be 1-2 steps behind Apple for everything but PCs. They seem

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