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A PEST analysis is an analysis of the external macro-environment that affects all firms. P.E.S.T. is an acronym for the political, Economic, Social, and technological factors of the external macro-environment. Such factors usually are beyond the firm’s control and sometimes presents themselves as threats. For this reason, some say that “PEST” is an appropriate term for these factors. However, changes in the external environment also create new opportunities and the letters sometimes are rearranged to construct the more optimistic term of STEP analysis. Many macro-environmental factors are country-specific and a PEST analysis will need to be performed for all countries of interest. In the following, the analysis of the political, economic, social and technological factors leads to a description of the macro environment of Dell computers. Political Environment The political environment of a country is influenced by the political organisations such as philosophy of political parties, ideology of government or party in power, nature and extent of bureaucracy influence of primary groups etc. Political factors include government regulations and legal issues determining the conditions under which companies have to operate. In this field, DELL computers has to face certain restraints.
Like in all markets, DELL computers is also subject to laws that regulate virtually all aspects of their business, including such areas as health safety, pollution, and advertising and labeling requirements. Problems can arise in countries where political stability is not guaranteed, no matter whether companies operate production facilities or if they do business with that country through exports. Many countries still have restrictive policies which are maintained to protect domestic manufacturers and production. Such policies often hinder foreign companies from entering into these markets. The only possibility to do business in those countries is to establish partnerships with local companies, where they are additionally forced to accept minority shares and to provide money and technological know-how. However, DELL computers sees great potential in those countries which loose their restrictions. Economic Environment Economic environment refers to the aggregate of the nature of the economic system of the country, the structural anatomy of the economy to economic policies of the government, the organization of the capital market, the nature of factor endowment, business cycles, the socioeconomic infrastructure etc. The economic environment includes factors and trends related to income levels and the production of goods and services. The economic environment consists
all branded products are imported. in turn affects the functioning of the business. the opportunities to expand into a new market. Technological Environment The technological environment includes factors and trends related to innovations that affect the development of new products or the marketing process. children already get familiar with the use of computers at a very young age. The higher the educational standard. It was observed that by the year 2000. changes in the social environment can affect markets differently. Additionally. Additionally. Another economic factor that can adversely affect the computer industry is the exchange rate of the home currency. Furthermore. Providing access to technologies developed by institutions has proven a key government resource. e. Thus there is a growing market for higher quality and priced computers. Because consumer markets have specific needs and problems. Today. The potential for internet growth is huge in Asian countries like India and China. Using these technologies products can help marketers be more productive. changing inflation rates and currency fluctuation also determine the profitability of a company. technology continues to be smaller and faster than ever. Also with an increase in income. and the buyers of these products often use them to change the way they market their own products. the higher is the demand. including their number. These technological trends can provide opportunities for new product development. DELL computers adapts to this trend. advances in information and communication technologies provide new products for firms to markets. and their prices vary with changes in the relative exchange rates.6 million making it the third largest in the world. having an impact on the purchasing power of potential customers. by offering a wider range of notebooks and by trying to create a strong brand name. or even help to create new markets. behavior. and growth projections. This growth is influenced by the economic situation in a specific country. or both. characteristics. Dell computers get more and more involved in daily life. decrease the size of others. In the Computer industry. The national demand for DELL computers is dependent on the educational level prevailing in a specific country. consumers are likely to purchase higher quality products rather than to simply purchase more. . DELL computers has to invest in door-to-door or face-to-face operations to gain consumers faith and consumer’s trust in the company and product. g. Social Environment The social dimension or environment of a nation determines the value system of the society which. The internet is a great opportunity for companies to get their into the public domain as well as a fast way to tailor services to its customer segments. representing a generation that will hardly live and work without a computer in the future. mainland China’s annual PC production would reach 7. giving foreign computer companies. affect how marketing activities are performed. DELL computers expects a growth of approximately ten percent over the next five years. Trends in the social environment might increase the size of some markets. For example. A threat in the technological segment to DELL’S business in China is that access to the internet is costly.of the “factors that affects consumer buying power and spending patterns”. The social environment includes all factors and trends related to groups of people. the brand image of a computer and lifestyle trends get more and more decisive for the purchasing decision.
One of Dell’s great strengths in targeting the business executive category is that roughly 75% of all sales revenue comes from large Dell’s biggest weakness is attracting the college student segment of the market. The first. and customer friendly means of production and distribution. Now. SWOT (Strength. Finally. business executives generally receive their computers from their employer through a direct relationship with a manufacturer or a supplier. opportunities and threats) analysis provides a basis for crafting a strategy that capitalizes on the company’s resources. Dell would like to explore the option of creating a laptop as a replacement for home desktop computers. in a market that is ever changing. The model itself could be considered as one of the company’s greatest assets. provides a fast. The second. a clear picture can be drawn to aid in the development of the new product. Weaknesses. cost-efficient. Dell has an advantage in their inventory turnaround time and in their well-controlled relationships with suppliers. Strengths Weaknesses Many of Dell’s strengths come as results of the Direct Model. generally buy their computers through the school they attend. and defending against the threats to its well being. Dell’s greatest weakness is that buyers can’t physically touch or see the product they want to purchase. in that the individual is limited to the options chosen by the institution. Dell’s Direct Model. competitors are challenging Dell with new and unique products in an effort to overcome the superiority of the Direct Model. Dell’s sales revenue from educational institutions such as colleges accounts for a measly 5% of the total. This is very much like the way in which business executives receive their computers.SWOT Analysis of DELL Computers As one of the largest computer manufacturers in the world. . In analyzing Dell’s strengths and weaknesses relative to these markets. despite the threats posed by its competitors. Dell would like to target three specific segments. which is largely responsible for the success of the company. Dell Computer Company has grown tremendously since its incorporation in 1984 by Michael Dell. while taking advantage of the best opportunities. college students. In developing a new laptop computer. Each of these market segments poses its own challenges and possibilities. The growth and development of laptop computers is a primary area in which Dell can work for continued success. as well as the opportunities and threats provided by the macro-environment.
which Dell can pass on to its customers. Strengths Clearly. and in their well-controlled relationships with suppliers. The single biggest problem for Dell is the competitive rivalry that exits in the PC market globally. thus giving them the opportunity to fully customize their product. However. One of Dell’s great strengths in targeting the business executive category is that roughly 75% of all sales revenue comes from large businesses and government organizations. retaliation from competitors and new entrants to the market poses potential threats. Dell has also an advantage in their inventory turnaround time. Dell has the biggest share of the market. First and foremost. The Direct Model can provide the framework for consumers to make truly personalized computers in a relatively hassle-free environment. The growth rate of the computer industry is also slowing down. In the case of laptops. are growing much faster than that of desktop computers. the Direct Model allows consumers to fully customize their laptops. As with all profitable brands. and now more than ever individuals want a product that can target their specific needs. in particular. Opportunities Threats The markets for laptops. low-priced computer delivered to the customer’s doors within days. The model itself could be considered one of the company’s greatest assets. The final result is a customized. By cutting out the retail seller as a distributor. These business features create large cost savings. In other words. many of Dell’s strengths come as results of the Direct Model. and this provides most of their . and receive their customized computer often within days. This trend toward more educated buyers provides a great opportunity in this respect. Dell has made it possible for each buyer to order directly from the factory. Dell has already created relationships with large companies. Both of these Direct Model benefits are great assets in targeting the home-user market segment mentioned above. In addition to this customization. this means that customers want more options in terms of both performance and portability. This allows customers to place their order. This general trends itself is a great opportunity for Dell’s laptop business to grow in all segments. Increased communication and technological integration also create great opportunities for Dell. a few specific advantages are gained through the Direct Model relative to the laptop market. The market is becoming more educated.businesses and government organizations. the Direct Model yields relatively fast delivery. One of the biggest external threats to Dell is that price difference among brands is getting smaller.
puts them in good position to target the business executive segment with new products. and Dell can cater to them. Dell has the ability to customize their products to cater to whatever needs the business or individual may have. While the Dell Direct Model provides many great opportunities. Customers can now go onto the internet to personalize their computer. This. try a few different products. customization. providing them with Dell products. or even just to get information. Many computer buyers are wary of a product that they can’t personally examine before purchasing. 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. This general trends lends itself is a great opportunity for Dell’s laptop business to grow in all segments. are growing much faster than that of desktop computers. The very thing that differentiates Dell from its competitors. and walk home with a computer all in a single trip. Dell’s sales revenue from educational institutions such as colleges only accounts for a measly 5% of the total. Increased communication and technological integration also create great opportunities for Dell. Weaknesses Dell’s biggest weakness is attracting the college student segment of the market. Consumers who have purchased computers in the past know what they want. make up for Dell’s lack of physical retail stores. an anxious buyer would have to wait a number of days before their computer was delivered. This trend toward more educated buyers provides a great opportunity in this respect. and its benefits are many. its greatest disadvantage is that customers can’t go to retailer.business. The markets for laptops. in some respects. pass the relationship on through their employees. This is more efficient for both Dell and the customer. the ability of a customer to go to an “online store” can. place an order. Another great opportunity for all of the targeted segments relates to the first trend that was mentioned. For one. in particular. Since many students purchase their PCs through their schools. Since Dell does not have retail stores. Here again. This is the price that must be paid for customization. Furthermore. These companies. Dell is obviously not popular among the college market yet. Dell’s greatest weakness is that buyers can’t physically touch or see the product they want to purchase. Dell’s focus on the corporate and government institutional customers somehow affected its ability to form relationships with educational institutions. combined with their extensive business relationships. Opportunities Personal computers are being purchased and used more ever than before. In terms of the home user. Customers are becoming more educated about personal computers. as an increasing number of them are second-time buyers. in turn. The continued advancement in these technologies will surely bring similar opportunities. The Direct Model can provide the framework for consumers to make truly personalized computers in a relatively hassle-free environment. also creates a problem in that consumers can’t go out to buy a Dell as simply as they could some other brands. .
Now that the low-cost leadership strategy is becoming less applicable to computer companies. In a volatile market such as personal computers. companies must produce products that are high in quality but low in price. If the demand slows down. It is an opportunity but at the same time a threat. they will quickly see a decline in performance. In the laptop market. this could threaten Dell’s price-conscious growing customer base. Computers change in a constant sometime daily basis. Since other companies are able to offer computers at low costs. this is largely based on technology and product design. the competition will become stiffer in the process. the quick pace of technological advancement.the online stores would surely make up for its absence. 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. Today. New software. Dell has to always keep up with technological advancements to be able to compete. It is also more convenient for customers to shop online than to actually drive and do purchase at a physical store. user-friendly product is going sell. Technological advancement is a double-edge sword. while generally being a tremendous opportunity. threats abound. new hardware and computer accessories are introduced at a lightning speed. If a company fails to keep up-to-date with innovations in technology. 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. They might choose other brands instead of waiting for Dell’s customized computers. Threats One of the biggest external threats to Dell is that price difference among brands is getting smaller. Finally. Dell’s Direct Model attracts customers because it saves cost. is also great threat. fastest. Dell has to work doubly hard to differentiate itself from its substitutes to be able to continue holding a significant market share. most efficient technology. and the most durable. Not only that. The growth rate of the computer industry is also slowing down. price difference is no longer an issue for a customer. The newest. Dell has the biggest share of the market. This is one challenge that Dell contends with. Technology dictates that the most up-to-date and fastest products are always the most popular. . With almost identical prices. brands names must differentiate themselves from their competitors.
McDonald’s worldwide is well known for the high degree of respect to the local culture. which has enabled Indian businesses to grow by improving their ability to compete in today’s international markets. McDonald’s hires local personnel for all positions within the restaurants and contributes a portion of its success to communities in the form of municipal taxes and reinvestment. McDonald’s has developed a menu especially for India with vegetarian selections to suit Indian tasted and culture. turned out to be among the main brand names in the international scene. The first Indian McDonald’s outlet opened in Mumbai in 1996. McDonald’s has also re-engineered its operations to address the special requirements ofa vegetarian menu. Vegetable . McDonald’s traditionally operates with local partners or local management. Keeping in line with this McDonald’s does not offer any beef and pork items in India. Part of this development involves the transfer of state-of-the-art food processing technology. its operations have also expanded to the Asian region. it operates thousands of store franchises that functions autonomously. McDonald’s and its international supplier partners worked together with local Indian Companies to develop products that meet McDonald’s rigorous quality standards. In the rest of the globe.Case Study: McDonald’s Business Strategies in India McDonald’s The modest beginnings of McDonald’s at Illinois in USA. McDonald’s purchases from local suppliers. McDonald’s in India Around the world. contractors. McDonald’s constructs its restaurants using local architects. It was one of the first to perfect the concept of fast service in the food industry in its early days of operations in 1955. The cheese and cold sauces used in India is 100% vegetarian. Six years prior to the opening of the first McDonald’s restaurant in India. labour and – where possible – local materials. In India too. It has been synonymous to what is widely-accepted the fast-food concept. The company operates over thirty one thousand stores all over the world to date. Given that the products of the company are mainly western in character.
the hallmark of McDonald’s that sets its restaurants apart from others. cooking and serving.000 on each of the McDonald’s restaurants already franchised or to be franchised. McDonald’s India provides fast friendly service. the company has been able to achieve consistent product taste and quality across geographies. lifestyle. in India. in the future. The McDonald’s philosophy of Quality. Product Consistency – By developing a sophisticated supplier networked operation and distribution system. This separation of vegetarian and non-vegetarian food products is maintained throughout the various stages of procurement. but also protecting its long term brand reputation. Globally McDonald’s was known for its hamburgers. and a royalty equal to 5 per cent of the gross sales from the operations of all its Indian restaurants on a monthly basis to McDonald’s International. only vegetable oil is used as a cooking medium. value systems. comfortable environment especially suited for families. Business Model Franchise Model – Only 15% of the total number of restaurants are owned by the Company. carefully adhered to McDonald’s menu is priced at a value that the largest segment of the Indian consumers can afford. The company follows a comprehensive framework of training and monitoring of its franchises to ensure that they adhere to the Quality. Act like a retailer and think like a brand – McDonald’s focuses not only on delivering sales for the immediate present. using dedicated equipment and utensils. McDonald’s does not sacrifice quality for value – rather McDonald’s leverages economies to minimize costs while maximizing value to customers. McDonald’s restaurants provide a clean. At McDonald’s. Service. has moved an application to the government seeking permission for payment and remittance of the initial franchise fee and royalty to Mc Donald’s Corporation. Also in India. The permission has been sought on two grounds: McDonald’s India would pay an initial franchise fee of $45. The company has invested Rs 450 crore so far in its India operations out of its total planned investment of Rs 850 crore till 2007. Service. health and hygiene while continuously maintaining their own recognized standards. language and perception. Most Indians are . Cleanliness and Value propositions offered by the company to its customers. All McDonald’s products are prepared using the most current state-of-the-art cooking equipment to ensure quality and safety. This is achieved through McDonald’s stringent cleaning standards. McDonald’s India Pvt. Cleanliness and Value (QSC&V) is the guiding force behind its service to the customers. All McDonald’s suppliers adhere to Indian Government regulations on food. Challenges in Entering Indian Markets Regiocentricism: Re-engineering the menu – McDonald’s has continually adapted to the customer’s tastes. Ltd. the customer always comes first. beef and pork burgers.products are prepared separately. McDonald’s India serves only the highest quality products. The remaining 85% is operated by franchisees. They currently serve around 5 million customers a day and hope to grow at the rate of 50% to 70% a year.
the company came up with a completely new line of vegetarian items like Mc Veggie burger and Mc Aloo Tikki. . When McDonald’s entered in India it was mainly perceived as targeting the urban upper class people. To survive. To cater to this customer segment. hygienic and relaxing atmosphere has ensured that McDonald’s maintains a positive relationship with the customers. This commitment of quality of food and service in a clean. service and hygiene. barred by religion not to consume beef or pork. The separation of vegetarian and nonvegetarian sections is maintained throughout the various stages. the company had to be responsive to the Indian sensitivities. Today it positions itself as an affordable place to eat without compromising on the quality of food. The vegetarian customer – India has a huge population of vegetarians. Product Positioning “Mc Donald’s mein hai kuch baat” projects McDonald’s as a place for the whole family to enjoy. The outlet ambience and mild background music highlight the comfort that McDonald’s promises in slogans like “You deserve a Break Today” & “Feed your inner child”. lamb and fish burgers to suite the Indian palate. So McDonald’s came up with chicken.
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