INSTRUCTOR: PROF.

STEVE
LACHOWSKI
SUBMISSION DATE: TUESDAY 12, JULY 2011

Presented By
Ainabe Eseohe
Philo
300633042
Preetinder Kaur
300633211

Aseeb Mushtari

Dalbir Singh

821821651

300638591

Rhoda I. GyangGyang

Rohan
Castelino

300598502

300639954

Kevin Pariag
822793378

Table of Contents
Sr. No.

Topic

Page No.

INTRODUCTION
Dell Computers was founded by Michael Dell in 1984, head quartered in
Austin, Texas, Dell is the world's No. 1 computer systems company, and is a
premier provider of products and services required for customers to build
their information-technology and Internet infrastructures. Company revenue
for the last four quarters totaled $32.6 billion.
Dell is No. 1 worldwide in market share and consistently the leader in liquidity, profitability and
growth among all major computer systems companies, with approximately 38,300 employees
around the globe. The company is a leading supplier of servers and computer products to
business customers, government agencies, educational institutions and consumers. Dell's climb
to market leadership is the product of a persistent focus on delivering the best possible customer
experience by directly selling computing products and services based on industry-standard
technology.

EXECUTIVE SUMMARY
Dells core competency has not been in assembling computers, but computer assembly activities
in moderation coupled with a constant effort of discovering new value in the face of changing
customer demands and evolving market. Dedication towards the customer, increased customer
attention by segmenting based upon sales to forge stronger relationships, build trust, loyalty and
to sense customer needs to predict demand. Integrating the supply chain into a value network a
network of trust and reliability built by sharing demand forecasts and nurturing a sense of
partnership blurring the corporate boundaries.
In this report we look at the strategies adopted by Michael Dell to revolutionize sale of
computers and compete with other players in the competitive market. We also give an insight of
the companys financial standings, SWOT analysis and innovative ways to dominate the IT
market in order to be the Numero Uno.

1. What is your evaluation of Michael Dells performance in his roles as Dells CEO and
Chairman? How well has he performed the five tasks of crafting and executing strategy
that were discussed in Chapter 2?

In his role as CEO, his performance was excellent. Through his innovative way for marketing
computers, he guided Dell from a small, start-up company into a global leader in PCs and IT
Products and Services. He was very accessible CEO and a role model for young executives
because he knew how to delegate the authorities to subordinates. He believed that the best results
come from the talented people who can be relied upon to do what they are supposed to do.
Michael Dell was also the chief architect of the company's direct sales approach and build-to-

order approach. Furthermore, he had spent a lot of time travelling to company operation and meeting
with customers, listening to their demands and trying to carry out strategies that can bring
satisfaction to the customers. And as a CEO, he always has timely and appropriate solutions for
difficulties that company faced to. Moreover, he also displays social responsibility by turning Dell
to be energy efficient, PVC free and using recycled materials.
In summary, Michael Dell is the excellent CEO of Dell, and his role in Dell cannot be replaced. The clearest
evidence is in 2006, when Michael Dell transferred his title of CEO to Kevin Rollins, the company immediately
got a decrease in performance in the next year.
Michael Dell justified his excellent performance by performing well in all the five areas of Crafting & Executing
Strategy. He formed a strategic vision for Dell which is very simple - personal computer (PCs)
could be built to order and sold directly to customers. This strategic vision contained four tenets, which
described the vision of having a strong and direct relationship to customer, allowing customer to purchase custom
built product, creating non-proprietary and efficient technology and supply chain and company should endeavour
to deliver added value to customers. These four tenets were the key to delivering a superior customer values. The
strategy that he set for Dell had seven core elements which were consistent to companys vision and developed
the business model which uses the company's strong capabilities in supply chain management, low cost
manufacturing and direct sales capabilities to expand into product categories where Dell could provide added
values to its customer in the form of lower prices. In implementing, he made clearly acts to follow
the companys vision and strategy and he also always catches up with the executing of the strategies and
makes appropriate and timely adjustment. Under his leadership, Dell has become the low-cost leader using his
business model and strategy and become one of the top 3 PCs companies in the worlds.

2. What are the elements of Dells strategy? Which one of the five generic competitive
strategies is Dell employing? How well do the different pieces of Dells strategy fi t
together? In what ways is Dells strategy evolving?
The elements of Dells strategy includes:
1.

Cost-Efficient Build-To-Order Manufacturing: this involves customers purchase products

and services in a custom tailored way. Customers could order custom-equipped servers and
workstations according to the needs of their applications. This gave them a competitive
advantage
2.

Partnerships with Suppliers; this provided the company with a very effective supply chain

that helped achieve its objective thereby strengthening the weakness of the company. This made
better sense than backward integration because they could capitalize on the strengths of the
suppliers.
3.

Dell's Direct Sales Strategy: this involved the company selling directly to customers

thereby eliminating whole sale and retail dealers. With this the company could know what was
actually going on in the market so if there is any change it would know how to react to the
change.
4.

Expanding into additional products and services; this was done to capture a larger market

share. They expanded into manufacturing data storage hardware, switches, handheld PCs,
printers, printer cartridges, and software products.
5.

Providing good customers service and technical support: they listened to customers and

this helped them know their expectations and emerging needs.

6.

Research and development activities which helped deliver added value to customers.

7.

The use of efficient and standardised technology to provide its best for its customers at the

same time achieving organisations goals and objectives.

Which one of five generic competitive strategies is Dell employing? How well do the different
pieces of Dells strategy fit together?
The low cost strategy; they strive to provide great services at low cost by eliminating the cost of
supply chain so as to deliver high quality products at low costs. All the differ strategies pulled
together helps Dell in achieving its overall objective and achieving greater quality at a minimal
cost
In what way is Dells strategy evolving?
Dells strategy is evolving by expanding its market by creating new plants in India, Poland,
Brazil, etc. Enhancing its products by creating flexible computer, simplify IT and providing
quality service.

3. Does Dells expansion into other IT products and services make good strategic sense?
Why or why not?
Yes Dells expansion into other IT products and services make good strategic sense because IT is
no longer a luxury it is now a necessity. Dell provides value added services to meet the needs of
consumers. If they had only continued producing P.C their sales growth would have declined. By
expanding and using their low cost strategy, high quality products, taking advantage of

standardized technology, they have gained a competitive advantage Dell can then apply its skills
in discipline, speed, and efficiency and can drop prices faster than any other companies and
prompt demand to soar.
4. Is Dells strategy working? What is your assessment of the financial performance that
Dells strategy has delivered during fiscal years 2000-2008? 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?
Net revenue:

1. Gross Profit Margin:

2. Net Income:

3. Total Net Revenue in different parts of the world:

Looking at these graphs, we can say that the strategy used by Dell is perfect. It is continues
growing. It is customer oriented. This strategy is able to attract a lot of desired customer.

5. What does a SWOT analysis reveal about the attractiveness of Dells situation in 2008?
1. Strength:

Provide custom made products.

Reach directly to the customer without any intermediary.

Great customer care and technical support departments.

Bigger range of products.

More focused on creating new products.

Use of standardized technology in all product offering.

Unique sales system.

Cost cutting techniques.

2. Weakness:

The company has such a huge range of products and components from many
suppliers from a plethora of countries, that there is the occasional product recall
that can cause Dell some embarrassment.

Dell is a computer maker, not a computer manufacturer.

There are less big suppliers around the world.

3. Opportunity:

Kevin Rollins replaced Michael Dell in 2004 as Dell's Chief Executive Officer.
Dell remained the company's Chairman. Despite founder Dell's massive success,
new blood and a change in management thinking could lead the company into a
new, even more profitable period.

Dell is pursuing a diversification strategy by introducing many new products to its

range. This initially has meant good such as peripherals including printers and
toners, but now also included LCD televisions and other non-computing goods.
So Dell competed against iPod and other consumer electronics brands.

4. Threats:

The single biggest problem for Dell is the competitive rivalry that exists in the PC
market globally. As with all profitable brands, retaliation from competitors and
new entrants to the market pose potential threats. Dell sources from Far Eastern
nations where labor costs remain low, but there is nothing stopping competitors
doing the same - even sourcing the same or similar components from the same or
similar suppliers. Remember, Dell is a PC maker, not a PC manufacturer.

The growth rate of the computer industry is also slowing down.

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.

.
6. Which company is competitively strongerDell or Hewlett-Packard? Use the weighted
competitive strength assessment methodology shown in Table 4.4 of Chapter 4 to support
your answer.
Considering the various key success factors as mentioned below in Exhibit A and B, Dell and HP
are very close competitors.
In the acquisitions category, Dell is stronger as whether it was acquiring the Converge Net
Technologies in 1999 or Equal logic in 2007 or Perrot Systems they have been better than HP
Compaq acquisition in 1999. Dell has been competitively stronger with relative costs systems
because of their continuous pursuit of cost reduction initiative and also when it comes to
customer service capabilities due to (1) providing online services to shoppers (2) always
listening to customers (3) spending on customer driven R&D and (4) giving value added services
with large IT operations. Dell has been slightly better than HP on two occasions, one in the
manufacturing capabilities with their lean approaches and second with technological skills with
their white box pc segment. Quality and product performance had been Dells forte by constantly
improving in assembly efficiencies also because they urged their suppliers to participate in
quality certification programs.

HP has been strong with human capital for their simple strategy to hire expertise for their key
accounts. HP has been ahead of Dell in dealer network and in market share too. HP revenue for
2006 and 2007 was $91.76 and $104.3 million respectively whilst Dell stood at $55.8 and $57.4
million for the same two years. Product innovation has been HP competitive advantage with the
acquisition of more than a dozen software and technical services to capitalize on the 3 big
opportunities of (1) next gen (2) mobile computing and (3) digital printing.
To conclude Dell and HP have been neck to neck most times. If Dell is strong in US and UK, HP
holds a good position in Europe and Asia pacific. Dell boasts about laptops and HP about
refurbished PCs and printers.
Exhibit A - UNWEIGHTED COMPETITIVE STRENGTH ASSESSMENT
KEY SUCCESS FACTORS/STRENGTH MEASURE
DELL
Quality/product performance
8.5
Reputation/ image
9
Market share and profitability
7
Manufacturing capability
9.5
Technological skills
9
Dealer network/distribution capability
6
New product innovation capability
8
Human capital
6
Acquisitions and successful integration
8
Relative cost position
10
Customer service capabilities
9
90

HP
9
8
9
8
8
9
9
8
5
6
7
86

Exhibit B-UNWEIGHTED COMPETITIVE STRENGTH ASSESSMENT

DELL
HP
Strengt
Strengt
KEY

SUCCESS Importanc

Importanc

FACTORS
Quality
Reputation/ image
Market share
Manufacturing

e Weight
0.10
0.10
0.03

Rating
9
9
7

Score
0.85
0.90
0.18

e Weight
0.10
0.10
0.03

Rating
9
8
9

Score
0.90
0.80
0.23

capability

0.10

10

0.95

0.10

0.80

Technological skills
0.05
Dealer network
0.05
New
product

9
6

0.45
0.30

0.05
0.05

8
9

0.40
0.45

innovation capability
Human capital

0.05
0.10

8
6

0.40
0.60

0.05
0.10

9
8

0.45
0.80

Acquisitions
Relative cost position
Customer service

0.03
0.25
0.15

8
10
9

0.20
4.83
1.35
11.00

0.03
0.25
0.15

5
6
7

0.13
4.95
1.05
10.95

Q7. In what respects, if any, is Hewlett-Packards strategy in PCs more appealing or better
than Dells strategy?
HP strategic focus is the technology research and development. Every year HP will work out a
budget, so it masters a lot of the core technology in the IT industry. In addition this company also
focuses on building retailers network all over the world. It brings to HP a lot of advantages in the
product distribution and introduction of new products.
Strategies for both DELL and HP are very different from each other. They have their own
advantages and disadvantages. In recent years commercial competition tended to be competition
of strategic alliances and in long-term development. HPs core technology will guide the market.
So HP has more opportunities and possibilities than Dell Company to set up strategic alliance
and become leader in the PC industry. Furthermore; because HP has stronger retail network and
distribution capacity, so its products can reach customers everywhere and all over the world. In
the trend of globalization nowadays this may be the key advantage to gain market share beyond
rivals.
Q8. What issues and problems does Michael Dell need to address?

The most important issue that Dell must address is how to raising sales and market share position
in a very strong competitive conditions. HP currently the main rival of Dell and it is much
competitively stronger than Dell with their retailing prowess. HPs sales are increasing
continuously even in the crisis period. Moreover; there are many emerging competitors such
Acer and Asus who are compute fiercely with Dell. Besides, the lack of innovation in product
developing another issue is that the international expansion of Dell. In order to reach
international customers more effectively, Dell must incur more costs as it expands into retail
distribution a move that will further eat away at Dells cost advantage. Moreover Dell two key
advantages supply chain efficiency and customized direct sales model do have much advantage
in competition as before. In addition the economic condition and technology changes rapidly also
effect Dells product development.
Q9.

What actions and strategy would you recommend to Michael Dell to boost the

companys performance and its prospects for overtaking HP in global sales?

Dells present strategy issues are:

Slow growth of its main products

Declining customer service

Inability to serve all market needs because of its strategy of limited vendors in the supply
chain

Recommendations for strategy improvement are:

Adding a PC and server product line based on AMD microprocessors

This will enable Dell to serve the entire market of PC users; its exclusive use of Intel
processors has limited its ability to match high end products being offered by competitors.

Developing a showroom style store in developing markets

Lack of credit cards in developing countries and the tendency for buyer to want to touch and
feel before purchasing has placed Dells strategy at a disadvantage. Developing showrooms
will give it increased advantage

Expanding consulting services to include business services.

This includes business consulting services; this will help to open potentially new revenue
streams. Dells manufacturing and value chain efficiencies will give it an edge of respected
reputation as a consultant.

Focus on innovation

By putting more emphasis on research and development and strive to develop the technology
for the next generation and establish first mover advantage instead of relying on recreating
technology.

Reinvent differentiation advantage

Dell could improve its core competencies which gave it differentiation in the beginning;
these include enhancement of customer service, addition of suppliers, new market
campaigns, modification of retail sales and the expansion of turn-key solutions. i.e. widen
the companys competitive advantage through the refinement of its existing core
competencies; improvement of value chain management.
CONCLUSION
Dell which made its name selling low cost computers has seen its competitive advantages
eroded. The company which bases its foundation on being successful regardless of location

believes what works in the U.S will work anywhere else. This strategy gave Dell an advantage in
previous years but with emerging market it has become necessary for Dell to re-invent and refine
its strategy to cater to the changes in the business environment and to help it regain the
advantages it one enjoyed. The business approach used by Dell alongside its customer relations
is a great combination for competitive advantage for the company. The company should be
looking at how to add marginal value through design or technological changes to its PCs and
core competencies. On the whole Dells strategy is sound and in line with the vision but it must
be revisited to help the company take advantage of changes in the business environment, enable
it to compete favorably and give it competitive advantage.

BIBLIOGRAPHY
1. Referred Chapter 4 Evaluating a Companys Resources and Competitive Position from
the Book Crafting and Executing Strategy by Jai Goolsarran Text and Readings, 17 th
Edition and the Case studies text both Printed by The McGraw- Hill Companies
2. Melenovsky, M.and Humphreys, J. Maximizing Flexibility and Minimizing Costs:
Dell's Enterprise Computing Strategy. An IDC White Paper.
http://www.dell.com/downloads/global/solutions/idc_enterstrategy.pdf