Question 1: What is your evaluation of Michael Dells perform ance in

h i s r o l e s a s Dells CEO and Chairman?

In the PC industry, according to the textbook, Michael Dell had become one of the most
respected executives; even journalist had described him as the quintessential American
entrepreneurs and the most innovative guy for marketing computers. In particular, Michael
Dell appears to be a very efficient. From the very first day of operating the company, Michael
Dell had applied low-cost strategy by direct-selling to end user which is save for every product
cost 40%. As a continuous effort, by late 1997, Dell had become a low cost leader among PC
vendors by wring greater and greater efficiency out of its direct sale and build- to-order business
model. Not being stand-out for efficiency alone, Michael also an effective leader. First, what
needs to take in to account to assess his potent management is the technical knowledge. He is not
a technological wizard but knowledgeable enough to understand his customer need and meet
those needs effectively. As well, Michael possesses the ability to work well with other people
both individual and group the human skills. He knows how to communicate, motivate, lead and
inspire enthusiasms to get the work done effectively. Finally, Dell can see the organization as a
whole; understand how the company fits into its broader environment. Another noting for Dells
effective and lucid management is his continuous emphasize for customer benefit which bring
back a lot of positive response form the society.
How well has he performed the five tasks of crafting and executing strategy that were
discussed in Chapter 2?
Crafting and executing a companys strategy has five phases:
Phase 1: Developing a strategy vision. In 1984, Michael dell founded Dell Computer with a
simple vision and business concept that personal computers could be built to order and sold

directly to customers. As the time goes by, Dell Companys strategy vision now became: "Its the
way we do business. It's the way we interact with the community. It's the way we interpret the
world around us-- our customers needs, the future of technology, and the global business climate.
Whatever changes the future may bring our vision -- Dell Vision -- will be our guiding force."
They are committed to direct relationships, providing best products with standard based
technology outperforming the competition with value and a superior customer experience.
Phase 2: Setting objective. The strategic objective of Dell Company is: By the most efficient
procurement, manufacturing, and distribution capabilities to get a substantial cost and profit
margin advantage over rival, then became the global market leader.
Phase 3: Crafting a strategy. As holding firmly the key to delivering superior customer value,
Dells strategy has been contained making built-to-order manufacturing more cost efficient;
partnering closely with suppliers to squeeze cost saving out of the supply chain; using direct
sales technique to gain customers; expanding into additional products and services to capture a
bigger share of customers IT spending; providing good customer service and technical support,
keeping R&D and engineering activities focused squarely on better meeting the need of
customers; using standardized technologies in all product offering
Phase 4: Implementing and executing the strategy and Phase 5: Evaluating performance and
initiating corrective adjustments was done perfectly through it past period. Dell grew their
business from a simple company with $1000 capital to one of the global market leading. They
please customer all around the world with their dedicated commitment. They had been out
competing rival keenly. The change of the world is adapted quite well under the clever strategy
of Dell.

Question 2: What are the elements of Dells strategy?

Elements:

1.making

build-to-order

manufacturing

progressively

more

cost-efficient,

2.partnerring closely with supplies to squeeze cost savings out of the supply chain, 3.using direct
sales techniques to gain customers, 4.expanding into additional products and services to capture
a bigger share of customers IT spending, 5.providing good customers service and technical
support, 6.keeping R&D and engineering activities focused squarely on better meeting the needs
of customers, 7. using standardized technologies in all product offerings.
Which one of the five generic competitive strategies is Dell employing?
Dell is relentlessly pursuit the A low cost provider strategy which is striving to achieve lower
overall cost than rival and appealing to broad spectrum of customer usually by underpricing
rivals. They has been employing this strategy from the forming period till now
How well do the different pieces of Dells strategy fit together?
The business model is prove to be very effective and efficiently. The companys latest initiative
was to reduce costs by $3 billion in 2008. As for the main hightlight of Dell strategy, cost
efficient built to order manufacturing had reduce significant cost comparing to other rival and
built to order bring to Dell not only tiny stock in house but also the superior customer value. In
good agreement with the ultimate goal cost and customer value- Dell use other element to
accomplish like partnering with supplier, more cost-efficient technology form R&D department,
direct sale, tier quality control, and technical support other than that, Dell expand his business
into many other product like switches, storage with the believe that he can save cost for
customer. And the result can be seen is that, these 7 elements work perfectly well together in
order to complete the objective of being low cost and serving superior customer value.

In what ways is Dells strategy evolving?

Dell uses the companys strong capabilities in supply chain management, low-cost
manufacturing, direct sale to grow sale and market share in both the PC and serve segment and
expands into product categories where Dell could provide added value to its customers in the
form of lower prices. The standard pattern for entering new product categories was to identify an
IT product with good margins; figure out how to build it or else have it build by other cheaply
enough to be able to significantly underprice competitive products; market the new products to
Dells steadily growing customer base; watch the market share points, incremental revenues and
incremental profit pile up.
Does Dells expansion into other IT products and services make good strategic sense? Why
or why not?
Yes, it does make sense. Because the expansion in other products which include data storage
hardware, switches, handheld PCs, printers and printer cartridges and software products in an
effort to diversify its revenues stream and use its competitive capabilities in PCs and server to
pursue growth opportunities. Furthermore, the technology industry is going though the process of
standardization commoditization. Moreover, the last reason is that Dell realizes the importance of
customer relationship, so they believe its their responsibility to save cost for customer. As for
switches, Dell had explain the reasons that Dell believe that their customers is charged unfair
prices and, it must has been lower than the current price. And an important factor is that Dell
think they can drive down the entire cost of owning and using those products.

Question 3:Conduct a financial analysis using the template provided on Beachboard. Is

Dells strategy working? What is your assessment of the financial performance that Dells
strategy has delivered during fiscal years 2001-2010? Use the financial ratios presented in
Table 4.1 of Chapter 4 (pages 104-105) as a basis for doing your calculations and drawing
conclusions about Dells performance.

Year (Numbers
in $Mil)

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

Revenue

$31,888

$31,168

$35,404

$41,327

$49,121

$55,788

$57,420

$61,133

$61,101

$52,902

COGS
Operating
Expense

$25,445

$25,611

$29,055

$33,764

$40,103

$45,897

$47,904

$49,462

$50,144

$43,641

$3,674

$3,718

$3,505

$4,038

$4,821

$5,509

$6,446

$8,231

$7,767

$7,089

Operating Income

$2,769

$1,789

$2,844

$3,525

$4,206

$4,382

$3,070

$3,440

$3,190

$2,172

Net Income

$2,310

$1,246

$2,122

$2,625

$3,081

$3,602

$2,538

$2,947

$2,487

$1,433

Total Assets

$13,435

$13,535

$15,470

$19,311

$23,215

$23,252

$25,635

$27,561

$26,500

$33,652

Total Liabilities

$7,813

$8,841

$10,597

$13,031

$16,730

$19,205

$21,307

$23,826

$22,229

$28,011

Total Equity

$5,622

$4,694

$4,873

$6,280

$6,485

$4,047

$4,328

$3,735

$4,271

$5,641

COGS as % of
Revenue

79.8%

82.2%

82.1%

81.7%

81.6%

82.3%

83.4%

80.9%

82.1%

82.5%

Operating expense as
% of Revenue

11.5%

11.9%

9.9%

9.8%

9.8%

9.9%

11.2%

13.5%

12.7%

13.4%

Operating Income as a
% of Revenue

8.7%

5.7%

8.0%

8.5%

8.6%

7.9%

5.3%

5.6%

5.2%

4.1%

Net Income as a % of
Revenue

7.2%

4.0%

6.0%

6.4%

6.3%

6.5%

4.4%

4.8%

4.1%

2.7%

Return on Assets

17.2%

9.2%

13.7%

13.6%

13.3%

15.5%

9.9%

10.7%

9.4%

4.3%

Return on Equity
Financial Leverage
(Assets/Equity)

41.1%

26.5%

43.5%

41.8%

47.5%

89.0%

58.6%

78.9%

58.2%

25.4%

2.39

2.88

3.17

3.08

3.58

5.75

5.92

7.38

6.20

5.97

Table 1: Some financial indicators of Dell period from 2001-2010

The overall concern for Dell as emphasized in the Strategy is to be lower the company cost, and
enhance the end profit. As the table presenting above, Dell revenue from 2001 to 2010 in general
increase, which is from $31,888 to $52,902. As a raise of 165,89% in revenue, cost of good sold
also increase but even with bigger rate 171,7% from 25,445 to 43,641. Noting that, in 2010 the
cost of good sold is actually decreased comparing to 2009. Constantly enlarged from 2001 to
2008, operating expenses and operating income relatively increase by 224% and 124,2%. In
2009 and 2010, both of them is decrease, but still speed of change in income is not matched with
the change in expense. This may be the reason why Dell net income is fluctuated but overall
decreased as comparing 2001 to 2010. The net income as % of revenue is declined from 7,2% to
2,7% which is showed the erosion in profit as Dell operating from 2001 to 2010. About the
financial indicators like ROE, it lessens from 41,1% to 25,4% mainly due to the decrease of net
income

.
As for ROA, it declines as well from 17,2% to 4.3%, 2010 is about 4 times lessen than 2001.
This result is foreseen, because of the decrease in net income and 250,4% increase in total asset.
And it may attribute to the expansion in business by acquisition of additional assets for operating
purpose. The falling tendency can be understand for the unequal speed of change between return

and assets. Also The use of financial leverage has increased form more 2% to the peak of almost
8% which may reflect the riskier the business happen to be.
Question 4: What does a SWOT analysis reveal about the attractiveness of Dells situation?
Strength:
Mentioning to Dells distinctive competence is mention to its Direct Business Model which
enables Dell to contact with customer, quickly detect the change in sale trends, design problems
and quality glitches, give Dell a significant advantage and become a customer-driven method.
Cost-efficient built-to-order manufacturing is accomplished through Flexible customization
capability, building its assembly plants close to customer, just-in-the-nick-of-time delivery
Also, Dell possesses valuable human assets, intellectual capital. Worthy to be mentioned is the
participation of Michael Dell as an influential and critical asset to the company. Otherwise, there
are also superior corporate staffs About the valuable organizational asset, we can observe the
excellent quality control from dell manufacturing processes. Furthermore, the company holds a
worlds highest volume internet commerce sites. Well cooperation with other resource strengths,
achievements and skills attribute effectively to it overall competitiveness in the marketplace as
well. Another considerable thing is high quality of customer services and technical support.
Besides all that, Dell is able to make use of its huge reputation, strong terms with the suppliers
and competitive pricing.
Opportunities
Opportunities for Dell is raising from mass customer base; expansion in PC industry diversifying
its products categories such as in outer devices, non-computing items such as LCD TVs, and also
in sections such as security devices, security software are few of the fastest growing need of the

customers in the industry; potential growth in overseas emerging market like European and Asian
market. As well, there is business related laptop, internet-base and custom-built computer.
So looking at the SWOT analysis, because Dell's business strategy is successful in cost
leadership strategy based upon its unique customization, delivery, and cost proposition, it still
holds a distinctive competence and remain a strong position comparing to HP. Besides that, Dell
constantly possesses a good and stable relationship with both customer and their suppliers.
Which company is competitively strongerDell or Hewlett-Packard

Key Success Factor

Quality/product performance
Reputation/image
Manufacturing capability
Technological skills
Dealer network/distribution capability
New product innovation capability
Financial resources
Relative cost position
Customer service capabilities
Sum of importance weights
Weighted overall strength rating

Importance Weight
0.10
0.10
0.10
0.05
0.05
0.05
0.10
0.30
0.15
1.00

Score
Dell
9/0.90
10/1.00
10/1.00
8/0.40
8/0.40
8/0.40
10/1.00
10/3.00
10/1.50

Hewlett-Packard
9/0.90
10/1.00
10/1.00
10/0.50
10/0.50
10/0.50
10/1.00
7/2.10
8/1.20

83/9.60

84/8.70

As the table suggestion, in overall without taking into account the weight, HP is ahead Dell.
However, when the weighted factor is considered, the largest weighted is on relative cost
position, this make Dell have more advantage than HP on cost position. So even though HP is
currently a market leader in PC vendor, but Dell also has it distinctive competence that make it
also shine.
In what respects, if any, is Hewlett-Packards strategy in PCs more appealing or better than
Dells strategy?
Taking into account the strategy in doing business, a focus of technology research and
development is what make HP different from Dell. Hewlett-Packard spends a lot of money on
R&D department. As a result, HP own a lot of distinctive competences on core technology. In

contrast, focused on modeling the supply chain is Dells strategy because it thinks there is no
lack of technology in the world, and it values distribution model and channel more. Being the
biggest competitor of each other, they do have their own competitive advantage. However, since
HP own much innovations in technology, having long-term development, and the power to set up
strategic alliances, HP is likely to be a market leader in long-term than Dell

Question 5:

What issues and problems does Michael Dell need to address?

Weaknesses
The companys depend on component suppliers and manufactures of subassemblies and other
devices since Dell believed that it made much sense for the company to partner with suppliers
than to integrate backward and get into parts and components manufacturing on its own. Well,
another pitfall is its lack of multi channel distribution which make it behind other rival in sale
promotion. Also important, Dell has no proprietary technology, the currently used technology by
Dell is shared by the other major competitors. Additionally, bad customer support and product
quality can really hurt Dells image and reputation. Consequently, Dell will lose it current and
even potential customers for other company like HP, Acer, Toshiba and Apple Not only that,
Dells lack of innovation will cause them to be in a lower position in the future if it just relies on
cutting cost strategy. Fierce competition will forces Dell to continue cut cost and results in
hurting itself profit.
Threats
There will be a fierce competition for price and market shares since now one of the biggest
external threats to Dell is that price difference among brands is getting smaller. Not only subject
to old and big rival, has Dell had to face with emerging of new competitive forces also. That is
not mention big risk come from global market like tariff, tax and trade barriers, Currency
fluctuation and political & economic instability in some countries. The last and also the biggest
fear for Dell is that its two distinctive competences are loosing it competitive advantages since
HP and Apple can and is closing the gap of products price.

What actions and strategy changes would you recommend to Michael Dell to boost the
companys performance and its prospects for overtaking HP in global sales of PCs?
As the heat of competitive is rising, what Dell needs to take into consider in order enhancing the
companys performance is:
About the research and development, there is a critical need for Dell to put more resources and
effort in create innovations which will reduce Dells disadvantage over other competition.
Moreover, integrating its low-cost-provider skills with differentiated product features to create
value for its customers is appear to be a good move, since efficiency and effectiveness uniting in
strong relationship. As for the manufacturing, Dell should remain its core factor in business
model as being cost-conscious. However, expanding the value of its resources and capabilities by
sharing activities will exploit economies of scope between its businesses more. Next concern is
about information management. Improvement in information flow is critical in order to improve
services for its corporate customers further and deeper, enable more effective work stream and
communication which will bring to Dell more flexibility. Furthermore, developing on marketing
strategy is a great way to come directly into customer attention. Since there is still room for
growth in foreign market especially in Asia like China, Singapore, India

+Enhancing energy efficiency of products

+Using green energy alternative at the corporate headquarters

+Improving the recycle ability of Dell product for customer

+Using packaging made of renewable material

From the videos we watched, what are some of the recent developments and new initiatives
Dell is employing?

Moreover, the video, watched in class, show that Dell is pour its money on that attractive
emerging markets, beside that, focusing on IT services and customer services that bring more
value to their customers is a new way Dell adopted from IBMs example.