Dell: Reviewing strategy

Dell: Reviewing strategy

Farheen Irfan Ahmed

Dell: Reviewing strategy

Executive Summary:
Dell, founded by Michael S. Dell in 1983 initially started its business by selling
desktop PC's. it was the time when computer were totally new technology which
came up therefore, the business grew tremendously and made huge profits for
next 20 years. However, after two decades, the CEO of the company gave
chance to Kevin Rollins in 2004 and replaced him with his position in the hope
that this step will be in the best interest of the company and may generate high
revenues.
Rollins main focus was to increase sales with high prices for which he tried to
capture foreign markets but failed due to the high focus of competitors towards
innovation and quality. The poor management system of Rollins made way for
the repositioning of Michael after just three years in 2007, who then tried his
level best to restore the company's initial state.
Now, the main problem which Michael faced was how to retain the trust of
investor in their company so as to increase customers. Since, this was the time
he decided to take the risk and indulge in totally new lines of business. He tried
to focus on high consuming buyers and tried to deliver them the product through
retail channels. This resulted in profits from two sides; Dell was not only able to
increase average price of its computer but was also able to maintain its trust in
its customer's eyes who were now able to take a complete look on Dell's
products before buying.
The second main problem was to increase sales by increasing inventories turn
over. Dell followed an efficient path which means to increase cost of goods sold
and reduce operating expenses. It first gets an order from any firm and after a
short span of time the suppliers were able to deliver the components. This was
profitable from two sides; firstly this method was time saving, secondly Dell was
in full touch with the market through retailers who were building the trust of
company again in the eyes of customers.
Now, in order to retain the top position again in the market, the main opportunity
for Dell is to indulge in totally new lines of business. It will not only increase the
sales but also give Dell an edge from its competitors.
With the help of opportunities like providing products through suppliers and
retailers step helped Dell to reduce costs, improve services which further
generated revenues for the company and with the help of emerging into new
businesses like note Pad, laptops and smart phones, Dell may able to capture
new markets with handsome prices. The factors which were the root cause of
uplifting the Company's profit initially were quality, attention towards innovation,
importance towards high inventory turn over's and a high regard towards
customer centric environment. The company needs all these factors again to rise
and shine and the first and foremost step in retaining the initial position would be
innovation with hard work.

Dell: Reviewing strategy

Dell: Reviewing strategy

Introduction:
Dell, Incorporation is a computer producer, supplier and distributor company. The
company enjoys place among top computer distributors in both quantity and
quality and proves itself among the top companies of United States. The core
products of the company include desktop PC, note pads and laptops. From the
time period between 1999 to 2006, Dell delivered computer systems to almost
one quarter of the world and at the end of 2007 Dell was well ahead of its goal
reaching $60 billion and become the top producer of computer products in the
market, mentioned in (figure5)
Most of Dell's products are desktop PC's, laptop in which Dell's use Intel or AMD
processors. The company also contains professionals in making keyboard, mice,
scanners and printers.
Since, in the beginning the company focused on its sales which provided a wide
space to the competitors as they began to capture market and hence decline in
market shares of Dell were the results. However, with help of analyzing its SWOT,
culture and sales table, Dell may once again emerge as the top service provider
of computer related products.
Following mentioned are the tools with which Dell should try to improve its
internal and external environment better and with this analysis Dell would be
able to recognize its internal strengths and weaknesses and external threats and
opportunities. However, the other remaining tools like PEST, five forces can also
an important role in retaining the position of Dell.

Situational analysis:
Macro and micro environment:
Since the micro environment of Dell constitutes of certain strategies and steps
which every employee have to follow. These steps are devotion to work, ability to
perform better, cope up with team and promise of continuous improvement.
Dell is committed to help customers so that they can be satisfied by their
products. The main strategy of their environment is about innovation which is the
main factor in the success of any company, hence, dell asks its employees to
work with devotion so that they can provide best quality PC's to their customers
and can think on solving the problem of next generation so as to increase the
market share.
The macro environment is filled with threats for Dell because customers wants
low price and high technology and which requires companies to become
sustainable and produce such PC's that can meet the customer's demand and
are environmental friendly. HP and Acer are those emerging competitors who are

Dell: Reviewing strategy

working eagerly to capture market. Acer which purchased gate way INC in 2007
is becoming a greatest threat for Dell as it is capturing teen agers market by
providing high quality laptops and on really reasonable prices.
We will discuss in detail the macro and micro environment of Dell with the help of
PEST analysis:

PEST analysis:
The Pest analysis of Dell is mentioned in (figure 3)

Political Environment:
Like every company, Dell is also subjected to the slings and arrows of political
environment which essentially means that Dell has to obey all rules and
regulations of the country. Dell not only has to suffer physical problems like
heath issues, pollution, terrorism, political instability, rebellions or any rallies but
it also has to bear virtual problems like ban on certain websites, moral issues of
any state, internet traffic or the lack of trust of consumers regarding online
buying. These problems create hindrances in foreign investment also decreases
market share of Dell in those countries. The solution lies in the fact to do
partnership with the local companies so as to boost sales and retain the trust of
customers.

Economical environment:
Since due to the economic crisis, Dell has concentrated on prices and even with
the great downfall of currency it sold its products above 15- 20% of usual price to
high investing companies. Now, Dell should make its price stable so that
customer can easily buy it but it should also not forget about innovation which is
the oxygen of the company. With the help of sustainable price, customers will be
able to buy even in crises because they want high quality product which Dell is
already providing them.

Social environment:
The socio-cultural environment means that a company has to deal with the
culture and tradition of the country in which it is operating. It has to understand
all the values and tradition of the people living in that country. Let's take China
example whose people are not open to card system therefore Dell has to deliver
them product manually. Dell has to provide its services at door step in order to
catch long term buyers.

Technological Environment:
Dell has to engage in the race of innovation and should produce modern
technology gadgets with reasonable rates. Like apple who engaged in new lines
of business like I pad, iPod, tablet pc's, Dell should also expand its range of
products and capture new customers.

Dell: Reviewing strategy

Market, competition, customers, services:

Computer Market:
As we know, computer industry is a highly competitive industry where the main
key factor of success is innovation, the more you came up with creative and
modern gadgets, and the more is your sales and higher revenues. This is
because people want latest, modern and highly customized gadgets therefore
catering the needs of customers is the main thing which Dell should focus on.
Because even one device can decrease your sales if you lack the trust of people
in your devices. The industry is very flexible, technology is changing day by day,
and Dell has to run so fast in order to catch up with the extra ordinary speed of
technology. If the company cannot catch up with it, they will be eliminated in the
industry by their competitors. Here are few names of outstanding companies in
:the industry

Competitors in the market:

The threat of competitors is also mentioned in (figure2) with the help of porter's
five forces:
.HP was started in the year 1939

.IBM was mainly started in 1880s

.In 1976, Acer laid the foundation of its company

.In the same year as Acer, Apple was also started in 1976

From above information we have seen that Dell is the newest in the market
which was started in 1984. Therefore it's very difficult for Dell to beat the
industry's Giants. Hard work, innovation and devotion to work can help Dell in
.maintaining the same position it once enjoyed

Customers:
Dell has got only 30 years of experience which is quite small in front of other
competitors, therefore it has strive very hard to compete the competitors and
provide the best products that cater to all the needs of modern, latest and
.globalized customers
Since every gadget is now replacing by another in a matter of seconds and it
seems that there is a flood of technology which is coming towards the
customers, every company is busy in catering to the demands of all types of
customers from teen agers to highly professionals, if Dell fails to cater the needs
of customers which is high-tech, smart, stylish look, speedy gadgets then
customers require just few seconds to change their mind and can shift to other
.company's product

Dell: Reviewing strategy

Services:
Dell offers a series of services and caters to the needs of every market aged from
teen to professionals. Be it laptops, desktop PC's, note books etc Dell fulfills its
promise of constant innovation and continues improvement. But, these are not
the limits. The threat of competitors are always turned on and in order to ensure
the safety of market shares Dell should introduce a system of incubators which is
a program where every employee from top to bottom sit together and give their
views about innovation of products and where everyone is free to express their
creative ideas, If majority agrees to it then he/she can implement it without any
hindrance. This program will increase the trust of employees along with widens
the scale of innovation in the company.

The organization:
Mission Statement:
"Dell's mission is to be the most successful computer company in the world at
delivering the best customer experience in markets we serve". In order to
achieve its mission Dell has to give attention on following dynamics:

best quality products

modern technology gadgets
Reasonable prices
Customer centric environment
Financial stability
Highest market share

Culture:
The culture of Dell is anti hierarchical where everyone is concerned with their
work. Due to decentralized policy of Dell, every employee feels a responsibility of
doing his own work and expecting work done by others is strictly against the
policy of Dell.
About the work place, Dell should think in terms of such work place which is
comfortable yet productive also. It helps employees easing burden from their
shoulders. Therefore they should work on such office place that is flexible not in
terms of environment but also in terms of Job timings, also they should focus on
virtual teams which can solve problems sitting at their home at their finger tips.

Marketing Strategies:
Corporate branding should be the main aim of Dell so that it can cater products
and services' ranging from Desktop PC's to Smartphone's, Laptops, Note books,
Tablets to software managing tools. Dell should focus on corporate industry
clients also and try to come up with their desired Computers with their
demanded Software's. But it should also not forget the demands of students who
are Dell's second most capturing market. Dell should also focus on acquisitions
and mergers so as to increase its market. It should not focus on one brand but

Dell: Reviewing strategy

try to merge it with relative devices like highly demanded Software's. Innovation
is the backbone of any organization and Dell should focus on it in order to
maintain its position in computer market.

Finance:
Product diversification means to engage in new lines of business, for example
dell should think in terms of producing note pads, smart phones which are
related to the main technology which dell is producing but differ in physics and
style. It is one of the key factors which can boost Dell's sales and provides it with
a competitive advantage as it already is the number1 producer of Desktop
computers. Introducing into new structures of business will not only help Dell in
sustaining its position but it will also help Dell to capture new markets.

SWOT:
The SWOT of Dell is mentioned in (figure1) with details:

Internal Strengths:
Following are some of the Strengths of Dell which provide it with a comparative
advantage in the market. The strengths of Dell includes knowledge about core
products, team work and customer centric environment which helps Dell to
increase revenues. These strengths can help in maintaining the status of Dell in
providing top class computer related all over the globe.

Internal Weaknesses:
Dells direct method of providing products cause problems for normal customers
who want to purchase product through retailers. Since, they did not use retailers
like many other companies did. This hurt their sales drastically. Although, they
are among the top producer of gadgets but they fails to meet the demand of
customer who actually wanted to buy product after searching variety of their
devices.

External Opportunities:
Dell has many external opportunities to grow. With the rise of virtual companies,
the demand for laptop has risen and this is main opportunity through which Dell
can actually make profits. Also with the rise of e-books and online research
journals the demand for tablets, laptops gained weight age from students circle.
This is a golden chance as two main markets are demanding modern, latest and
stylish devices which if Dells would deliver; it can earn huge profits and can safe
its future till the next generation.
Besides that, it has an efficient supply chain management system with respect
to procurement, manufacturing, and distribution. It helps Dell to pass distributor
and retailers step as now Dell is offering its product to its professional clients at
their door step through their experienced retailers. This helps it to achieve
strategic competitive advantage as it can assemble and distribute products in an
efficient manner.

Dell: Reviewing strategy

External threats:
Since, the threat of competitors is among the biggest threats and Dell is
continuously facing it. Although, it has won out in the market but the competitors
like Acer are continuously striving to offer great product within reasonable
amount. Reasonable prices and constant innovation are the two keys on which
Dell has to focus most in order to sustain its future.

Strategic Problems:
Direct method bypassing retailer's step:
Direct method of distributing goods appeared to be economical initially but it had
its own side effects as by this methods Dell had to widen its departments which
were not able to communicate with each other and as a result the sales were
down and the clients were dissatisfied. Therefore, Dell should replace this
method by Retailer's channel that are experienced in talking the customers and
can be an efficient tool in maintaining the trust of customers in Dell's products.

Price Wars:
Competing with the prices of competitors is another strategic problem faced by
Dell. Companies like Acer and HP which have more experience in the market
were trying to increase productivity and decrease the price of their products
while Dell was busy in changing and reviewing its direct method strategy. As a
result, HP got highest position in 2007 and became the top producer of computer
products while Dell was greatly suffered by lower sales and decline in revenue.
Now, Dell has to focus on sustainable price system that can be reasonable for
customers and profitable for Dell so that it can deliver best out of its products
and earn large revenues.

Low Customer relationship:

Low relationship with customers appeared to be the third major problem which
transformed into main hindrance towards the development of company. Since,
Dell changed its policy from direct method to Retailer channel newly therefore it
was very difficult to maintain the same relation with customer as HP had.
Because of the long period cut off from retailers it was very hard to retain the
trust of customers again. Now, Dell should focus on its customer relationship.
There are several tools which are time saving and that can maintain customer
relationship better. These tools are discussed in detail below.

Strategic Opportunities:
Product diversification:
"Product diversification is a key strategy for Dell as it seeks to maintain a
competitive advantage in the declining PC market. Dell needs to restructure its
core business priorities and develop new structures that can help it to gain
leverage in a highly competitive industry. The development of a comprehensive

Dell: Reviewing strategy

approach is essential because it can lead to competitive advantage in the future.
(Khan& Khan, 2009)"
Product diversification was the main opportunity for Dell. Since the theme of
business was same and the thing which was needed just innovation and
improvement in quality. If Dell works on it, it can also capture markets of Smart
Phone's, Tablets and Software's.

Acquisitions and mergers:

Acquisition and mergers with different local companies were among the golden
chances that can help Dell in retaining its position again, because local
companies are close to customers and their relationship is very strong and
binding with customers. Therefore, it may help Dell to uplift its position among
top producers of Computer gadgets.

Comparative Advantage:
Comparative advantage and best supply chain management are the tools
through which Dell can capture new customers easily along with generating high
revenues. Since, now Dell is focusing on Retailer channel method, it is a ripe
moment which can eliminate most of Dell problem like price wars, low customer
relationship as Retailer's have the trick to convince customers and this tool can
become the root cause in retaining the initial position of Dell.

Analysis of problems:
Since, HP and Acer are coming up with more innovative gadgets and modern
technology. The main reason for their success is distribution through distributors
and retailers because it provides buyers a chance to check the device completely
and become satisfied before buying the device. The capture of position of Dell by
HP is a clear indication that the thing which is missing is lack of trust from
customer side. If dell can provide them with this step that they can be satisfied
completely then there is no denying the fact that Dell can make profits. Also,
buyers want reasonable product with high quality and this is what competitors is
practicing day and night to come up with such technology that is cost effective
and highly innovative. Smart phones are the best example through which Apple
made profits. It is easy to carry, stylish, reasonable to buy and last but not least
efficient in work. Dell if indulge in these lines can not only earn profits but can
easily capture new markets.

Analysis Of opportunities:
Through indulging in new lines of business, Dell can really generate revenues.
With the rise of virtual businesses and virtual teams, laptop or any other related
gadget has become the need of professionals. Whether to make orders, make
presentations, communicate with peers, distribution of any goods or any ERP
based system in the work place these modern and easy to carry tools have
gained huge importance that without them it has become impossible to run
businesses. Its a golden chance for Dell to produce those products which hit

Dell: Reviewing strategy

corporate sector and try to produce laptops in reasonable range to students
which want these gadgets for making their assignments, reading e-books or
analyzing any online research paper. By targeting these both adult and
professional markets, Dell can retain its trust and make profits.

Alternatives:
Pricing:
From pricing point of view, the alternative lies in the fact that Dell should not just
focus on lowering prices but it should come up with those innovative products
that are reasonable to produce so that Dell has clear choices and can easily
divide its customers into different categories on the basis of prices.

E-commerce:
E-commerce is gaining huge importance and it is one of the key that can lead
Dell towards success and helps Dell to peaks of revenues. Through blogging and
social media Dell can capture customers and satisfy them completely along with
promoting customer centric environment and online shopping is the technology
to turn temporary visitors onto long term buyers.

Social Media:
The third alternative deals with customer relationship. Social media and blogging
has become the powerful of promotion of any product. These are the tools that
can promote any product in a very short span of time. All is required is just a
blogger and social media addict who can work day and night and promote the
products by making pages on Face book, writing Blogs with attractive Meta tags,
updating statuses or uploading pictures of latest Gadgets being produced at Dell
Inc. Social media can not only promote Dell's products but it can also helps in
sustaining its future by increasing the fans.

Evaluation of Alternatives:
Acquisitions and mergers:
According to a press release "The Special Committee of the Board of Dell Inc.
(NASDAQ: DELL) today announced that the go-shop period provided for in the
merger agreement between the company and entities owned by Michael Dell,
Dells Founder, Chairman and Chief Executive Officer, and investment funds
affiliated with Silver Lake Partners, has elicited two alternative acquisition
proposals. The Special Committee also noted that Michael Dell has confirmed to
the Committee his willingness to explore in good faith the possibility of working
with third parties regarding alternative acquisition proposals".
This will result in large increments in sale for both companies and it shows that
mergers and acquisition can actually uplift Dell's name and its quality. All is
needed at this time for Dell s acquisition and mergers so that it can grab market
again and increase its share in the market.

Dell: Reviewing strategy

Restructure pricing Format:

"Dell needs to restructure itself so that it can create the image of a diversified
technology solution provider. Services and software will be the main backbone of
its new marketing strategy. Besides that, its core business, which is hardware,
will remain but it will provide technological and innovative solutions. Dell needs
to target home users as well as different corporate customers. The development
of a comprehensive business strategy is critical for success as it will lead to longterm growth". (Graham, 2005)
The remarks clearly shows that Dell dont just have to cut prices and incur losses
but it should diversify its product line such that it becomes able to produce at
cheap prices and hence can earn profits because for Innovation Dell is already
working and if it caters with same quality and reduced costs it can easily shake
the market by huge market shares.

E-commerce:
In order to retain the trust of customers which greatly damaged due to direct
method, low customer relationship and lack of communication, now Dell should
focus on e-commerce because it is the latest tool which is cost effective, time
saving and easy to use not only for the company but also for the customers.
Online shopping through credit cards is the method of transaction. Through this
method, Dell can not only customize its product but it can also track the progress
of the order. It can not only help Dell but also make easy for customers to buy
online and get to know the details an updates regarding their device. With the
help of service tags, shipment and other stages of transaction, Dell can increase
the trust of its customers and as a result can make its foot print darker in the
market. On the other hand, the opening of new websites at every office with
easy access to customers can help new customers to search their desired
product from the panel of Dell's products along with price tags placed on their
website.

Action Plans:
The opportunities are nothing out of the box; they are really implementable and
can provide Dell with an edge in the market. But Dell has to cover certain steps
in order to attain the fruits of these opportunities. The steps are also easy to
adopt and are mentioned below:
Firstly, Dell has to indulge in new lines of business like Smart Phones, tablets etc
along with its key factor innovation and quality product ,its a question mark
product whose market share is unknown but there is a hope that this new
technology will grab customers more quickly, also mentioned in (figure4)
Secondly, Dell has to promote its product so that customers get attracted
towards it. Social media is the best tool to attain this step.

Dell: Reviewing strategy

Thirdly, Dell has to open certain portal which caters visitors with complete
information like prices, product description. Also Dell has to update its FAQ page
frequently so that every customer gets answer of his/her question.
Fourthly, it has to introduce online shopping system on its websites so as to
increase its buyers. Since online shopping is very easy and time saving, Dell can
grab a large chunk of customers through this tool.
Last but not least, Dell has maintained its relation with its customers like it
should introduce a feedback system so as to know the demands of customers
and faults in their products.

Recommendations and conclusion:

Dell has enjoyed top position among computer producing companies because of
its supply chain management and direct business model. But now, acquisition
and mergers are the demand of time and Dell should focus on it. Because,
competitors are striving hard to sustain their position and due to advantage of
having strong relation with retailers, now the main competitor HP is working on
innovation to completely grab the market. This is the ripe moment Dell should
use its wild card by indulging into new lines of business and merging with
different local companies. On the other hand, Although Dell had enjoyed top
position in the market due to direct business, but now, the situation has changed
as customers want variety and a complete satisfaction before buying product
which can't be achieved through direct model. Therefore Dell has to change its
strategies from direct business to Retailer channels method for which it has to
pass the distributor and retailers step but in order to get the trust of customers
back it's not a big deal. With the use of its strengths like flexible supply chain
management system that reduces costs and inventory, Dell can come up again
with the expectations of customers and can grab market.
The threats has not died, and the threat from competitors will always turned on
but now Dell needs to devise such strategy that is based upon product
diversification. Also, the company should focus on high quality and cost saving
gadgets and should implement those marketing strategies like promotion though
social media which are cost effective and sustainable for the future.

Dell: Reviewing strategy

Appendices:
Figure1: DELL SWOT
WEAKNESSES

Direct Business method

Low customer relationship
Price wars
Outdated technology.
Old products.
Lack of mergers

STRENGTHS
core products knowledge
Excellent communication between
departments and corporation among team
mates.
Product diversification
World class products
Constant innovation
System of reward includes bonuses and
promotions.
Motivation through quick appreciation
responses.

THREAT
Potential entrants.
Competitor's attention towards
innovation.
Reasonable price from competitors.
Currency crisis.
Poor economy which is declining the
purchasing power of people and
diminishing their faith in buying.

OPPORTUNITIES
Dell's external opportunities include new
customers for Laptops, Note pads and
Smart phones.
Product diversification.
Comparative advantage

Dell: Reviewing strategy

Figure 2: Porter's Forces framework

Threat of New
Entrants is high
There is a high threat ofnew entrants as the
computer industry has
totally changed its place
and the products are now
replaced by fast paced
. modern gadgets
The industry has. reached maturity stage
- Apple and HP are hitting
other lines of business
Bargaining Power of
Buyers is high
the bargaining power
of customers is high in
computer industry as
most of the products
are being substitued
by reasonable price
. high quality gadgets

Degree of Rivalry
is HIGH
Dell has manycompetitors in the
target market for its
. computer products
The competitors arein a constant price
. war with each other
Acer is increasing
rivalry by entering
market with
reasonable rates and
targeting Dell
audience
Threat of Substitute
Products High
There are manyalternative products
available in the market
that can be used to
substitute Dell
. products
These products includeNote Pads, ipad, smart
phones e and otaher
. similar alternatives
These substitutes are affordable and
. relatively easy to use

Bargaining Power of
Suppliers is low
the bargaining powerof supliers is low in
laptops and Note Pads
. fields

Dell: Reviewing strategy

Figure3: Dell PEST

Political
- The political scenario of a country
may directly affect the future for the
beer industry and the companies
involved.
- In some countries, political
leadership plays a vital role in
hindering the sales growth of Dells
product.

Socio-cultural
-dell has to cope with with every
culture.
-US believes in online shopping
therefore Dell should cater to the
needs of its customers.

Economic
-economic crisis.
-sustainable prices so as to prevnet
price wars.

Tecnological
- Technological
Technological advancements
advancements in
in the
the

manufacturing
manufacturing techniques
techniques for
for desktop
desktop
PCs
devices are
enabling
PCs and
and related
related devices
are enabling
companies
achieve mass
mass production
companies to
to achieve
production
and
achieve considerable
and to
to achieve
considerable cost
cost
cutting.
- smartphones and tablets can become
the
products of
the core
core products
of Dell
Dell for
for the
the future.
future.

Dell: Reviewing strategy

Figure4: Dell BCG analysis:

Question
Marks
(Smart
Phones)

Stars
(Laptops
)

Dogs
(Desktop
PC's)

Cash
Cows
(Tablet
Pc's)

Dell: Reviewing strategy

Share in 2006

Figure
ranking

15.9
15.8

rank

Company name
1st Dell

2nd HP

7.0

3rd Lenovo

5.8

4th Acer

5: Dell
data

Dell: Reviewing strategy

References:

(2009). Khan, M., Khan, M.A. "How technological innovations extend

services outreach to customers", International Journal of Contemporary
Hospitality Management, Vol. 21 No.5, pp.509-22.
(2005). Graham, P. R. C. J. L. International Marketing (twelfth Ed.). New
York.
(2013).Dell. Dell Official Site - The Power To Do More | Dell. Retrieved from
http://www.dell.com/
(2013). Jamie Rigg. Michael Dell and Silver Lake up their offer for Dell
buyout [Press Release]. Retrieved from
http://www.engadget.com/2013/08/02/dell-buyout-offer-increased/?
utm_medium=feed&utm_source=Feed_Classic&utm_campaign=Engadget