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 (Evening) Session: 2007-2011 Department of Commerce

Project Report on Dell Company

2

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

3

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 Company. One of the world’s leading corporation. Dell computer corporation was established in 1984 and today ranks among the world’s largest computer systems company. Dell serving the selling of personal computers directly to customers, providing direct toll free technical support and on site services. Dell offers build to order computer systems to customers. Dells complete range of high-performance computer systems include: Dell Dimension and OptiPlex desktop computers, Latitude notebook computers, and Power Edge network servers. This report covers the contents of current and past overview of dell company, its offerings, financial analysis and many more.

Project Report on Dell Company

4

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

Acknowledgement: By the grace of Allah who has provided me with the skills and abilities to be able to complete this report and present a clear picture of what I have been doing during the course of my project. I would firstly like to thank the Department of Commerce for making this learning experience a part of our education and specifically thanks to Mr. Shahid for his advice and assistance in helping us avail 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

5

DEDICATED TO:

MY BELOVED PARENTS AND RESPECTABLE TEACHERS

Project Report on Dell Company

6

Table of Contents

Introduction Dell Inc. History Products Scope and Brands Organization Competitors Dell’s Strategy Business Level Strategy Total Quality Management Corporate Level Strategy Second or Late Mover Strategy Mission & Vision Statement Mission Statement Vision Statement Financial Analysis Financial Statements Income Statement

08 08 10 13 13 14 15 16 17 18 19 22 23 23 24 25 25 25

Project Report on Dell Company

7

Balance Sheet Cash Flow Ratio Analysis Competitive Analysis Positioning Strategy Analysis Product/Service Strategy Analysis Pricing Strategy Distribution Strategy Analysis SWOT Analysis Strength Weakness Opportunity Threat References

27 31 34 36 36 36 36 37 38 38 39 40 41 43

Project Report on Dell Company

8

Introduction Dell Inc. is an American multinational information technology corporation based in Round Rock, Texas, United States, that develops, sells and supports computers and related products and services. The founder of Dell Inc. is Micheal Dell. This is one of the world’s largest corporation employing more than 103,300 employees worldwide. As of 2009, the company sold personal computers, servers, data storage devices, network switches, software’s and computer peripheral devices. The company is well known for its innovation.

Dell Inc.

Type

Public NASDAQ: Dell HKEX: 4331 S&P 500 Component Computer Systems Computer Peripherals

Industry

Project Report on Dell Company

9
Computer Software IT consulting IT services Founded Founder(s) Headquarters Area served Key people Austin, Texas November 4, 1984 Michael Dell 1 Dell Way Round Rock, Texas, U.S.[1] Worldwide Michael Dell (Chairman & CEO) Desktops Servers Notebooks Netbooks Peripherals Printers Televisions Scanners Storage Smart Phones $61.49 billion (2011)[2] $3.43 billion (2011)[2] $2.63 billion (2011)[2] $38.59 billion (2011)[2] $5.64 billion (2011)[2] 103,300 (2011)[2] Dell Services Alienware Dell.com

Products

Revenue Operating income Net income Total assets Total equity Employees Subsidiaries Website

Project Report on Dell Company

10

History Micheal Dell being the founder of Dell Inc. transformed his idea in to reality in 1984. He was student in University of texas, Austin, when he realized that selling personal computers directly to customers may fulfill the needs of them in order to providing pcs’ according to there expactations. With an initial capital of $300,000 he commenced his business of PCs limited.

In 1985, the company produced the first computer of its own design “Turbo Pc” sold for US $795. The company advertised its system in National Computer Magazines for its selling of PCs’ directly to consumers, assembled according to their needs. For the very first year of its business the company grossed $75 million.

Project Report on Dell Company

11

The company changed its name to "Dell Computer Corporation" in 1988 and began expanding globally, first in Ireland. In June 1988, Dell's market capitalization grew by $30 million to $80 million from its June 22 initial public offering of 3.5 million shares at $8.50 a share. In 1992, Fortune magazine included Dell Computer Corporation in its list of the world's 500 largest companies, making Michael Dell the youngest CEO of a Fortune 500 company ever. In 1996, Dell began selling computers via its web site, and in 2002, Dell expanded its product line to include televisions, handhelds, digital audio players, and printers. Dell's first acquisition occurred in 1999 with the purchase of ConvergeNet Technologies. In 2003, the company was rebranded as simply "Dell Inc." to recognize the company's expansion beyond computers. From 2004 to 2007, Michael Dell stepped aside as CEO, while long-time Dell employee Kevin Rollins took the helm. During that time, Dell acquired Alienware, which introduced several new items to Dell products, including AMD microprocessors. To prevent crossmarket products, Dell continues to run Alienware as a separate entity but still a wholly owned subsidiary.

Project Report on Dell Company

12

On August 16, 2010, Dell announced its intent to acquire the data storage company 3PAR. On September 2, 2010 Hewlett-Packard offered $33 a share, which Dell declined to match.

Project Report on Dell Company

13

Products Scope and brands Its Business/Corporate class represent brands where the company advertises emphasizes long life-cycles, reliability, and serviceability. Such brands include:
• • • • • • • • • •

OptiPlex (office desktop computer systems) Vostro (office/small business desktop and notebook systems) n Series (desktop and notebook computers shipped with Linux or FreeDOS installed) Latitude (business-focused notebooks) Precision (workstation systems and high-performance notebooks), PowerEdge (business servers) PowerVault (direct-attach and network-attached storage) PowerConnect (network switches) Dell/EMC (storage area networks) EqualLogic (enterprise class iSCSI SANs)

Dell's Home Office/Consumer class emphasizes value, performance, and expandability. These brands include:
• • • • • •

Inspiron (budget desktop and notebook computers) Studio (mainstream desktop and laptop computers) XPS (high-end desktop and notebook computers) Studio XPS (high-end design-focus of XPS systems and extreme multimedia capability) Alienware (high-performance gaming systems) Adamo (high-end luxury laptop)

Dell's Peripherals class includes USB keydrives, LCD televisions, and printers; Dell monitors includes LCD TVs, plasma TVs and projectors for HDTV and monitors. Dell UltraSharp is further a high-end brand of monitors.

Project Report on Dell Company

14

Organization A board of directors of nine people runs the company. Michael Dell, the founder of the company, serves on the board. Other board members include Don Carty, William Gray, Judy Lewent, Klaus Luft, Alex Mandl, Michael A. Miles, and Sam Nunn. Shareholders elect the nine board members at meetings, and those board members who do not get a majority of votes must submit a resignation to the board, which will subsequently choose whether or not to accept the resignation. The board of directors usually sets up five committees having oversight over specific matters. These committees include the Audit Committee, which handles accounting issues, including auditing and reporting; the Compensation Committee, which approves compensation for the CEO and other employees of the company; the Finance Committee, which handles financial matters such as proposed mergers and acquisitions; the Governance and Nominating Committee, which handles various corporate matters (including nomination of the board); and the Antitrust Compliance Committee, which attempts to prevent company practices from violating antitrust laws.

Project Report on Dell Company

15

The corporate structure and management of Dell extends beyond the board of directors. The Dell Global Executive Management Committee sets strategic directions. Dell has regional senior vicepresidents for countries other than the United States, including David Marmonti for EMEA and Stephen J. Felice for Asia/Japan. As of 2007, other officers included Martin Garvin (senior vice president for worldwide procurement) and Susan E. Sheskey (vice president and Chief Information Officer). Competitors Dell's major competitors include:
• • • • • • • • • • •

Hewlett-Packard (HP) Acer Toshiba Gateway Sony Asus Lenovo IBM Samsung Apple Sun Microsystems.

Project Report on Dell Company

16

Dell and its subsidiary, Alienware, compete in the enthusiast market against AVADirect, Falcon Northwest, VoodooPC (a subsidiary of HP), and other manufacturers. Dell’s strategy Dell's business strategy is a successful cost leadership strategy. The company's formula for success has been based upon its unique customization, delivery, and cost proposition. In reaction to faltering performance and the need to pursue new growth opportunities, a dual-strategic approach is required to confront rapidly changing market conditions. First, Dell must integrate its cost leadership skills with differentiated product features and related services to create value for its customers and achieve the benefits of an integrated cost leadership/differentiation strategy. Additionally, becoming a diversified IT company opens up opportunities in related businesses, where similar products, buying processes, target customers, or other operationally-related activities can produce synergies. This business-level and corporate-level strategy combination offers Dell a method of dealing with the company's competitive realities. Both strategies are discussed below.

Project Report on Dell Company

17

Business-Level Strategy Customer expectations in the industry have created a growing demand for low-priced, differentiated products. As a result, Dell needs to be able to perform primary and support activities that simultaneously yield low costs and differentiated features, or an integrated cost leadership/differentiation strategy. The

objective of using this strategy is to efficiently produce products with attributes that boost product quality or performance. Efficient production is the source of maintaining low costs, while differentiation is the source of unique value. Successful use of an integrated cost leadership/differentiation strategy has the added benefit of building skills that can help Dell adapt more quickly to new technologies and rapid changes in the external environment. Simultaneously concentrating on developing two sources of competitive advantage (cost and differentiation) increases the number of primary and support activities in which the company must become competent, which contributes to greater flexibility. Flexible manufacturing systems, information networks, and total quality management systems can also yield a more flexible organization. Each type of initiative should be considered by Dell as it tries to balance the objectives of continuous cost reductions and continuous product enhancements.

Project Report on Dell Company

18

Dell already utilizes a customized assembly process based upon a FMS to fill customer orders. To increase flexibility, the company should look for ways to enhance the effectiveness of information networks (linking the supply chain through to the customer) to improve work flow and communication among employees to identify and resolve problems that emerge. Improvements in information linkages would prove particularly beneficial as Dell seeks to improve services for its corporate customers. Total quality management (TQM) is another managerial innovation that emphasizes an organization’s total commitment to the customer and to continuous improvement of every process through the use of data-driven, problem-solving approaches based on empowerment of employee groups and teams. The development and use of TQM systems at Dell would align actions with the company's strategic needs and would concurrently serve to (1) increase customer satisfaction, (2) cut costs, and (3) reduce the amount of time required to introduce innovative products to the marketplace. All of these objectives have been identified as critical factors that will influence Dell's future success. TQM systems result in the enhancement of innovative abilities, the ability to exceed customers’ quality expectations (differentiating the company from its competitors), and the elimination of process

Project Report on Dell Company

19

inefficiencies to cut costs (allowing Dell to offer better performing features at the relatively low prices expected by its customers). Thus, an effective TQM system will help Dell develop the flexibility needed to identify opportunities to implement its integrated cost leadership/differentiation strategy. Because TQM systems are available to all competitors, they may help the company maintain competitive parity, but rarely will they unilaterally lead to a competitive advantage. Corporate-Level Strategy A corporate-level strategy specifies actions a firm takes to gain a competitive advantage by selecting and managing a group of different businesses competing in different product markets. Corporate-level strategies help companies select new strategic positions to increase the firm’s value. They are also a means to grow revenues and profits. By 2006, Dell has already diversified from a purely desktop PC provider to operating in the following additional product categories: mobility, server, storage, printer, enhanced services, software, and consumer electronics. More than thirty percent of its revenue is generated outside of its dominant business. Because of this ratio and because there are existing links between its diversified businesses, a related constrained diversification

Project Report on Dell Company

20

strategy is being employed. With a related constrained diversification strategy, Dell will be able to expand the value of its resources and capabilities by sharing activities and exploiting economies of scope between its businesses. Available to companies operating in multiple product markets or industries, economies of scope are cost savings that the firm creates by successfully sharing some of its resources and capabilities (operational relatedness) or by transferring one or more corporatelevel core competencies that were developed in one of its businesses to another of its businesses (corporate relatedness). To create economies of scope both tangible resources (such as plant and equipment or other physical assets) and intangible resources (such as knowledge or other bases of core competencies) can be shared. In at least two ways, the related linked diversification strategy can help Dell create value. First, because a core competence has already been developed (and paid for) in one of the company’s businesses, transferring it to a second business eliminates the need for that second business to allocate resources to develop it. Resource intangibility is a second source of value creation through corporate relatedness. Intangible resources are difficult for competitors to understand and imitate. Because of this difficulty, the unit receiving a transferred corporate-level

Project Report on Dell Company

21

competence often gains an immediate competitive advantage over its rivals. One thing to keep in mind, however, is that it can be difficult for investors to actually observe the value created by a firm as it shares activities and transfers core competencies. For this reason, the value of Dell's assets being used to create economies of scope may be discounted by investors. Dell's business model became successful in the PC industry as personal computers gained acceptance in the market. The company's growth was achieved by taking away share from industry leaders and "commodifying" the product. Rather than being the market leader in other consumer electronic products (HDTV, digital cameras, etc.) when new product prices are high and consumers are doing extensive research prior to the purchase (needing retail outlets to touch and feel the product), Dell's place might be to jump into the market as consumer electronic products begin to transition into commodities. The company can be prepared to capture the second wave or tier of consumers who have not adopted new technologies and products until prices lower and technology becomes accepted (capturing the market after the product/technology is proven, offering low prices, great quality, new features, and complementary services at this time).

Project Report on Dell Company

22

This second (or late) mover strategy is a competitive response to first movers' competitive actions and is typified by imitation. Taking the time to monitor customer reaction to product innovations and avoiding the mistakes and costs of new product introductions are compatible with Dell's successful business model. The approach also provides Dell with time to develop more efficient processes and technologies or create additional value for consumers. Overall, the outcomes of first mover competitive actions can provide an effective blueprint for Dell's late mover approach, especially as the consumers get comfortable with making investments in new technologies and begin to equate dependable quality and good value with the Dell brand. It is also going to be important for Dell to properly scale its aging businesses (such as PC's) to the size of the replacement market. [Of course, the company should always continue to look for advancements that might breathe life into mature products - such as it has done by turning home PC's into media centers).

Project Report on Dell Company

23

Mission and Vision Statement

Dell Mission Statement
"To be the most successful computer company in the world at delivering the best customer experience in markets we serve." Dell

Mission Statement Dell’s mission is to be the most successful Computer Company in the world at delivering the best customers experience in markets we serve. In doing so, Dell will meet customer expectations of: • • • • • • • • Highest quality Leading technology Competitive pricing Individual and company accountability Best-in-class service and support Flexible customization capability Superior corporate citizenship Financial stability

Project Report on Dell Company

24

Vision 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. 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. So Dell needs full customers satisfaction. In order to become the most successful computer company, they need the newest technology and loyal customers.

Project Report on Dell Company

25

Financial Analysis: Financial Statements: Income Statement
Currency in Millions of U.S. Dollars

As of: Feb 01 2008
USD

Jan 30 2009

Jan 29 2010

Jan 28 2011
USD

Reclassified Reclassified USD USD

Revenues

61,133. 0

61,101.0

52,902.0 61,49 4.0

TOTAL REVENUES

61,133. 0

61,101.0

52,902.0 61,494.0

Cost of Goods Sold

49,462. 0

49,998.0

43,404.0 50,041.0

GROSS PROFIT

11,671. 0

11,103.0

9,498.0 11,453.0

Selling General & Admin Expenses, Total

7,446.0

6,966.0

6,227.0

7,234.0

R&D Expenses

610.0

665.0

617.0

653.0

OTHER OPERATING EXPENSES, TOTAL

8,056.0

7,631.0

6,844.0

7,887.0

OPERATING INCOME

3,615.0

3,472.0

2,654.0

3,566.0

Interest Expense

-45.0

-93.0

-160.0

-199.0

Interest and Investment Income

496.0

180.0

57.0

47.0

NET INTEREST EXPENSE

451.0

87.0

-103.0

-152.0

Currency Exchange

-30.0

115.0

-59.0

4.0

Project Report on Dell Company

26

Gains (Loss)

Other Non-Operating Income (Expenses)

-48.0

-58.0

12.0

-13.0

EBT, EXCLUDING UNUSUAL ITEMS

3,988.0

3,616.0

2,504.0

3,405.0

Merger & Restructuring Charges

-92.0

-282.0

-482.0

-61.0

Gain (Loss) on Sale of Investments

14.0

-10.0

2.0

6.0

Other Unusual Items, Total

-83.0

--

--

--

In Process R&D Expenses

-83.0

--

--

--

EBT, INCLUDING UNUSUAL ITEMS

3,827.0

3,324.0

2,024.0

3,350.0

Income Tax Expense

880.0

846.0

591.0

715.0

Earnings from Continuing Operations

2,947.0

2,478.0

1,433.0

2,635.0

NET INCOME

2,947.0

2,478.0

1,433.0

2,635.0

NET INCOME TO COMMON INCLUDING EXTRA ITEMS

2,947.0

2,478.0

1,433.0

2,635.0

NET INCOME TO COMMON EXCLUDING EXTRA

2,947.0

2,478.0

1,433.0

2,635.0

Project Report on Dell Company

27

ITEMS

Balance Sheet
Currency in Millions of U.S. Dollars

As of: Feb 01 2008
USD

Jan 30 2009

Jan 29 2010

Jan 28 2011
USD

Reclassified Reclassified USD USD

Assets Cash and Equivalents 7,764.0 8,352.0 10,635.0 13,913.0

Short-Term Investments

208.0

740.0

373.0

452.0

TOTAL CASH AND SHORT TERM INVESTMENTS

7,972.0

9,092.0

11,008.0 14,365.0

Accounts Receivable

5,961.0

4,731.0

5,837.0

6,493.0

TOTAL RECEIVABLES

5,961.0

4,731.0

5,837.0

6,493.0

Inventory

1,180.0

867.0

1,051.0

1,301.0

Prepaid Expenses

370.0

447.0

539.0

374.0

Finance Division Loans and Leases, Current

1,732.0

1,712.0

2,706.0

3,643.0

Deferred Tax Assets, Current

596.0

499.0

444.0

558.0

Restricted Cash

294.0

213.0

147.0

25.0

Other Current Assets

1,775.0

2,590.0

2,513.0

2,262.0

Project Report on Dell Company

28

TOTAL CURRENT ASSETS

19,880. 0

20,151.0

24,245.0 29,021.0

Gross Property Plant and Equipment

4,614.0

4,510.0

4,652.0

4,729.0

Accumulated Depreciation

-1,946.0

-2,233.0

-2,471.0

-2,776.0

NET PROPERTY PLANT AND EQUIPMENT

2,668.0

2,277.0

2,181.0

1,953.0

Goodwill

1,648.0

1,737.0

4,074.0

4,365.0

Long-Term Investments

1,560.0

454.0

782.0

704.0

Finance Division Loans and Leases, Long Term

407.0

500.0

332.0

799.0

Deferred Tax Assets, Long Term

485.0

568.0

237.0

75.0

Other Intangibles

780.0

724.0

1,694.0

1,495.0

Other Long-Term Assets

133.0

89.0

107.0

187.0

TOTAL ASSETS

27,561. 0

26,500.0

33,652.0 38,599.0

Project Report on Dell Company

29

LIABILITIES & EQUITY 11,492. 0

Accounts Payable

8,309.0

11,373.0 11,293.0

Accrued Expenses

3,534.0

3,009.0

2,865.0

3,077.0

Short-Term Borrowings

25.0

113.0

663.0

851.0

Current Portion of Long-Term Debt/Capital Lease

200.0

--

--

--

Current Income Taxes Payable

99.0

6.0

426.0

529.0

Other Current Liabilities, Total

690.0

721.0

593.0

575.0

Unearned Revenue, Current

2,486.0

2,701.0

3,040.0

3,158.0

TOTAL CURRENT LIABILITIES

18,526. 0

14,859. 0

18,960.0 19,483.0

Long-Term Debt

362.0

1,898.0

3,417.0

5,149.0

Unearned Revenue, NonCurrent

2,774.0

3,000.0

3,029.0

3,518.0

Other Non-Current Liabilities

2,164.0

2,472.0

2,605.0

2,683.0

TOTAL LIABILITIES

23,826. 0

22,229. 0

28,011.0 30,833.0

Common Stock

10,589. 0

11,189. 0

11,472.0 11,797.0

Project Report on Dell Company

30

Retained Earnings

18,199. 0

20,677. 0

22,110.0 24,744.0

Treasury Stock

25,037. 0

27,904. 0

-27,904.0 -28,704.0

Comprehensive Income and Other

-16.0

309.0

-37.0

-71.0

TOTAL COMMON EQUITY

3,735.0

4,271.0

5,641.0

7,766.0

TOTAL EQUITY

3,735.0

4,271.0

5,641.0

7,766.0

TOTAL LIABILITIES AND EQUITY

27,561. 0

26,500. 0

33,652.0 38,599.0

Project Report on Dell Company

31

Cash Flow
Currency in Millions of U.S. Dollars

As of: Feb 01 2008
USD

Jan 30 2009

Jan 29 2010

Jan 28 2011
USD

Reclassified Reclassified USD USD

NET INCOME

2,947.0

2,478.0

1,433.0 2,635.0

Depreciation & Amortization

596.0

666.0

647.0

620.0

Amortization of Goodwill and Intangible Assets

11.0

103.0

205.0

350.0

DEPRECIATION & AMORTIZATION, TOTAL

607.0

769.0

852.0

970.0

Asset Writedown & Restructuring Costs

83.0

--

--

--

Provision & Write-off of Bad Debts

187.0

310.0

429.0

382.0

Change in Accounts Receivable

1,086.0

480.0

-660.0

-707.0

Change in Inventories

-498.0

309.0

-183.0

-248.0

Change in Accounts Payable

837.0

-3,117.0

2,833.0

-151.0

Change in Unearned

1,032.0

663.0

135.0

551.0

Project Report on Dell Company

32

Revenues

Change in Other Working Capital

-241.0

-421.0

-1,354.0

228.0

CASH FROM OPERATIONS

3,949.0

1,894.0

3,906.0 3,969.0

Capital Expenditure

-831.0

-440.0

-367.0

-444.0

Sale of Property, Plant, and Equipment

--

44.0

16.0

18.0

Cash Acquisitions

2,217.0

-176.0

-3,613.0

-376.0

Investments in Marketable & Equity Securities

1,285.0

749.0

155.0

-2.0

CASH FROM INVESTING

1,763.0

177.0

-3,809.0 -1,165.0

Short-Term Debt Issued

--

100.0

76.0

--

Long-Term Debt Issued

66.0

1,519.0

2,058.0 3,069.0

TOTAL DEBT ISSUED

66.0

1,619.0

2,134.0 3,069.0

Short Term Debt Repaid

-100.0

--

--

-176.0

Long Term Debt Repaid

-165.0

-237.0

-122.0 -1,630.0

TOTAL DEBT REPAID

-265.0

-237.0

-122.0 -1,806.0

Issuance of Common Stock

136.0

79.0

2.0

12.0

Project Report on Dell Company

33

Repurchase of Common Stock

4,004.0

-2,867.0

--

-800.0

Other Financing Activities

-53.0

--

-2.0

2.0

CASH FROM FINANCING

4,120.0

-1,406.0

2,012.0

477.0

Foreign Exchange Rate Adjustments

152.0

-77.0

174.0

-3.0

NET CHANGE IN CASH

1,782.0

588.0

2,283.0 3,278.0

Project Report on Dell Company

34

Ratio Analysis
Ratio data TTM as of 01/28/2011 PROFITABILITY - DELL INC (DELL)
Return on Assets Industry Comparison Return on Equity Industry Comparison

6.17%
Return on Capital Industry Comparison

39.31%

18.98%

MARGIN ANALYSIS - DELL INC (DELL)
Gross Margin Industry Comparison EBITDA Margin Industry Comparison

18.62%

7.38%

ASSET TURNOVER - DELL INC (DELL)
Total Assets Turnover Industry Comparison Accounts Receivables Turnover Industry Comparison

1.7x
Fixed Assets Turnover Industry Comparison Inventory Turnover Industry Comparison

10.0x

29.8x

42.6x

Project Report on Dell Company

35

CREDIT RATIOS - DELL INC (DELL)
Current Ratio Industry Comparison Quick Ratio Industry Comparison

1.5x

1.3x

LONG-TERM SOLVENCY - DELL INC (DELL)
Total Debt/Equity Industry Comparison Total Liabilities/Total Assets Industry Comparison

77.3x
Not meaningful

79.9x

Competitive Analysis

Project Report on Dell Company

36

Positioning Strategy Analysis Dell’s unique 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: “eliminate the middleman and sell for less” (Hoovers). Dell keeps it simple by providing customers with built-to-order boxes that help with lower inventories, lower costs, and higher profit margins. Products/Services Strategy Analysis Dell is the major player in the personal computer industry and its aim is to market both PCs and Non-PCs related products to the consumers. It uses to target its market the differentiated approach. Such as it provides the products to the markets according to the needs to consumers, as according to home, health, government, small and large scale markets etc. It differentiates its products from others which is the key point to target its market. Pricing Strategy Dell made $18.2 billion in revenue with a net profit margin of 8%. In 2006 their revenue was almost tripled to $55.9 billion, but with a lower net profit margin of 6.4%. Dell’s net income has almost constantly risen throughout the years, due to their highly

Project Report on Dell Company

37

competitive cost structure. Their elimination of the middleman keeps their costs low and profits high. Distribution Strategy Analysis Dell’s main factory is located in Texas with its regional headquarters in Texas, Tennessee, and Brazil. Dell always tries to centralize its headquarters to where it can provide the service to its customers in timely and effective manner. Dell’s location has helped the company organize its distribution model. When Dell Americas operations were expanded, Dell chooses middle Tennessee because the transportation infrastructure allowed Dell to reach 70% of its customer base within twenty-four hours by ground. With the Internet and the phone as its biggest distribution channel, Dell is able to reach customers faster and with its 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 Corporations in the Computer Industry but 38th largest Corporation in United States. SWOT Analysis of Dell Computer

Project Report on Dell Company

38

Strengths Dell's Direct Model approach of enables the company to offer direct relationships with customers such as corporate and institutional customers. Their strategic method also provides other forms of products and services such as internet and telephone purchasing, customized computer systems; phone and online technical support and next-day, on-site product service. This extensive range of products and services is definitely one of Dell’s strengths. Dell Computer's award-winning customer service, industry-leading growth and consistently strong financial performance differentiate the company from competitors for the following reasons: Price for Performance – Dell boasts a very efficient procurement, manufacturing and distribution process allowing it to offer customers powerful systems at competitive prices. Customization - Each Dell system is built in order to meet each customer’s specifications. Reliability, Service and Support – Dell’s direct customer allows it to provide top-notch customer service before and after the sale.

Project Report on Dell Company

39

Latest Technology – Dell is able to introduce the latest relevant technology compared to companies using the indirect distribution channels. Dell turns over inventory for an average of every six days, keeping inventory costs low. The company's application of the Internet to other parts of the business --including procurement, customer support and

relationship management -- is growing at a rate of 30 percent. The company's Web site received at least 25 million visits at more than 50 country-specific sites. Weaknesses Dell’s biggest weakness is attracting the college student segment of the market. Dell’s sales revenue from educational institutions such as colleges only accounts for a measly 5% of the total. Dell’s focus on the corporate and government institutional customers somehow affected its ability to form relationships with educational institutions. Since many students purchase their PCs through their schools, Dell is obviously not popular among the college market yet. For home users, Dell’s direct method and customization approach posed problems. For one, customers cannot go to retailers because

Project Report on Dell Company

40

Dell does not use distribution channels. Customers just can’t buy Dell as simply as other brands because each product is custombuilt according to their specifications and this might take days to finish. Opportunities Personal computers are becoming a necessity now more than ever. Customers are getting more and more educated about computers. Second-time buyers would most likely avail of Dell’s custom-built computers because as their knowledge grows, so do their need to experiment or use some additional computer features. Demand for laptops is also growing. As a matter of fact, demand for laptop has overtaken the demand for desktops. This is another opportunity for Dell to grow in other segments. The internet also provides Dell with greater opportunities since all they have to do now is to visit Dell’s website to place their order or to get information. Since Dell does not have retail stores, the online stores would surely make up for its absence. It is also more convenient for customers to shop online than to actually drive and do purchase at a physical store. Threats
Project Report on Dell Company

41

In a volatile market such as personal computers, threats abound. Computers change in a constant sometime daily basis. New 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. Not only that, companies must produce products that are high in quality but low in price. This is one challenge that Dell contends with. One of the biggest external threats to Dell is that price difference among brands is getting smaller. Dell’s Direct Model attracts customers because it saves cost. Since other companies are able to offer computers at low costs, this could threaten Dell’s priceconscious growing customer base. With 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
Project Report on Dell Company

42

substitutes to be able to continue holding a significant market share. Technological advancement is a double-edge sword. It is an opportunity but at the same time a threat. Low-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 advancements to be able to compete.

References
www.scribd.com/doc/19235366/Dell-Notes-Strategy en.wikipedia.org/wiki/Dell

Project Report on Dell Company

43 www.alacrastore.com/.../GlobalData_Company_ReportsDell_Inc_Financial_and_Strategic_Analysis_Review-2087-1578 i.dell.com/sites/content/corporate/secure/.../FY09_SECForm10K.pdf finapps.forbes.com/finapps/jsp/finance/.../Ratios.jsp?tkr=DELL www.suite101.com/.../swot-analysis-of-dell-computers-a92597 content.grin.com/document/v57007.pdf www.grin.com/e-book/57007/the-dell-company-a-strategic-analysis

Project Report on Dell Company

Sign up to vote on this title
UsefulNot useful