Dell Strategic Management

Assignment/Case Study Solution

Dell Strategic Management Assignment/Case Study. It reviews the organizational structure,
vision, mission, SWOT, PESTEL Analysis, Strategic Group Map Competition and Product
Positioning Map of Dell.
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Introduction
This report undergoes a strategic management overview of Dell, one of the leading PC
vendors of the world with a unique operations model focusing on built to order and
direct to consumer frameworks. The report begins with a comprehensive overview of
the companys operations, its hierarchy, location and principle of logistics. An
understanding of the vision, mission and objectives allows for the strategic analysis to
be put into context and perspective. Our first strategic analysis tool is the SWOT
analysis followed by an internal and external factor analysis. This is accompanied by a
TWOS matrix allowing the report to pin point specific strategies which may help the
organization cash on its strength and opportunities to offset threats. An overview of the
life cycle of the industry is followed by a PEST analysis. Understanding the political
factors is critical and along with the location principles explained in the first section
allows us to pin point some strategic direction for the company. Similarly the
economic, social and technological factors are discussed for the industry and the
implications for Dell on a strategic level. A competitive analysis with other names in
the industry is done through a product positioning map on the factors of price and
customization.

Overview of product and size

Dell became the leading PC Vendor of the world in 2001. One of the most unique
proposition of Dell is the by passing of reseller through a direct to final buyer strategy.
This accounts for 90 percent of its sales leading to the reporting of higher profitability
and revenues for the company. This direct to buyer results in a consumer intensive
strategy is called by many as the key to the success of Dells model of business
(Kraemer, et al., 2000). The direct relationship with consumers not allows for reduced
costs, better inventory decisions and increased revenues but also allows for a better
understanding of what the customer requires. The PCs are therefore built to the exact
specifications as required by the customer. This is a sharp contrast to the conventional
model of PCs which are based on vendors who make attempts to predict the demands
of the market. This built to order strategy helps Dell in multiple fronts, reducing
overheads and increasing return on investments at the same time as allowing for a
better understanding of the market and consumer needs. This specific strategy comes
with several complications in operations. The operations need to make sure that all
parts and components are quickly available so that customized configurations can be
handled quickly. The capabilities of production and logistics of supplies must be

optimized in order to make sure that there are quick turnarounds and orders are
processed efficiently.
The requirements of such an operations means there is an interesting structure of
logistics. There is a focus on outsourcing of activities which are non strategic while
the emphasis is laid down on key strategic areas. There is a relationship intensive
strategy with partners who provide the components and elements of the Personal
Computers so as to provide value added products. The actual production network of
Dell is spread around the world ranging from America, Europe to Asia. Some of the
production cycles are outsourced to other manufacturers. There is also a reliance on
the supply of several components such as CD ROMs and Disk Drivers to outsiders.
Partnership with software providers such as Office also allows it to further increase the
value of final product. Outside partners are also used for installation, repairs on the
site and integration of the overall systems. Resellers are used for recommendation of
the product to consumers.

Locations
The location factor of Dell is critical to the effectiveness of its built to order model.
The basic decisive factor in choosing a location is to understand how costs can be
minimized, built to order models can be extended and direct sales can be maximized
around the world with minimum time and maximum customer satisfaction. Specific
locations and their selection depend upon labor rates in an area, the transportation
infrastructure, political barriers and the closeness to high demand areas.
The headquarters originally was in Austin Texas, where the company was formed.
Manufacturing units exist in Tennesse as well. Currently the manufacturing units in
America are limited to these two areas. Brazil has a manufacturing unit of Dell in
Eldorado do Sul. This location point was decided on the basis of the need to supply the
South American market. There were also political factors such as the avoiding of
tarrifs because of the choice of location. The European, Middle Eastern and African
market are combined as one sector; the headquarters of which is based in the UK.
Ireland is used for a production unit because of the tax incentives available over there
(Loughran, 2000). Logistic hubs and technical support units are also deployed around
the continent.
Manufacturing units are placed strategically in the Asia-Pacific region as well.
Malaysia because of its appropriate labor rates, political incentives and closeness to
suppliers were chosen as the central location. Production units are placed around the
continent including one in China with close suppliers in Taiwan.

Hierarchy
The organizational hierarchy can be seen as follows:-

Vision, mission, goals and objectives

Vision
Its the way we do business. Its the way we interact with the community. Its the way
we interpret the world around usour customers needs, the future of technology, and
the global business climate. Whatever changes the future may bring, our visionDell
Visionwill be our guiding force
The vision statement is able to put forward one of the most important principles
behind the operations of Dell. The industry that Dell operates in is one of the most
dynamic and ever changing one in the international market. Fluctuation of technology
and consumer demands mean that change is the only constant. This is why the lack of
prediction leads to the vision statement which focuses on the interpretation of strategy
through consumer needs, technology trends and international business climate.

Mission Statement
Dells mission is to be the most successful Computer Company in the world at
delivering the best customer 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

Business Objectives
Dells business objectives include quality, leading technology, competitive pricing and
flexible customization support. Through a strong quality assurance team and in house
capabilities to build most of its product it has been able to develop a strong QA
engineering function. Through a participative culture of employees and a drive to meet
future market needs it is able to incorporate all development of technologies in its
expansion. Its business model has always been successful to stay on top of technology.

Utilizing a build to order model it has been able to incorporate leading technology as
well as provide flexibility of products to consumers. Through the removal of middle
men in sales as well as developing in house capacities and optimized inventory
management; Dell has also been able to achieve cost leadership in many market
segments of the computer industry.

Culture, Values and History

Dell has a highly customer centric culture. Founded by Michael Dell in 1984, the
company was founded to serve the customers directly with PCs that were able to meet
specific needs. The company was named PCs limited at that time. There has been one
belief that has always driven the organization right from the beginning which is to be
completely consumer focused to the point that they are able to incorporate customized
requirements during ordering processes. The company was able to go public within 4
years. Dell made its entry into the laptop market in 1991 marking an aggressive
growth rate in the following years becoming one of the top 5 computer companies of
the world. Dell believes in high turnover solutions which are also available on their
website. A technology savvy culture with a focus on consumer needs drives the
operations and initiatives at the company. Another driving factor for Dell has been
delivering the computers directly to consumers. This build to order strategy has
removed the middle man, increasing turnovers and decreasing costs for all parties
involved. This allows Dell to sell at a highly competitive rate as compared to the
competition. It is this consumer driven culture, innovative values and cost
optimization that sets Dell apart (Dell, 1999).
Company Culture as cited by the companys website (www.dell.com) includes
Meritocracy: Making sure that employees are rewarded for doing a good job
in order to enforce better performance and motivate the human resource in meeting
measurable objectives
Direct Relationships: Focuses on a relationship intensive strategy internally
and externally making sure that the environment is based on two way communication
Empowerment: One of the most crucial factors of an innovative company is
empowerment. Highly employee participation culture is seen at Dell.

SWOT Analysis
Strengths
1. The business model of dell which focuses on a built to order framework where
the middleman is removed and PCs are sold directly to the end buyer
2. Strong strength of sales strategy through a variety of mediums ranging from
conventional to e-commerce

3. Elimination of the mark ups added by the reselling party through the direct
sales to end buyer resulting in lower costs to consumer without cutting down
margins for Dell
4. Reliability that comes out of a built to order model reduction of over-heads
related to large inventories and finished goods.
5. One of the industry leads in the Personal Computer market
6. Considerable number of manufacturing units across the world
7. Strong brand value and power in B2B as well as B2C
8. Significant margins over costs of production because of the direct sales to the
end buyer
9. A highly relationship intensive strategy starting from the consumer sector and
extending to the corporate and government sectors
10. Holds a large share in the market of personal computers
11. Through the built to order model of production, Dell is able to achieve a quick
turnover as well as decrease the stock required in the inventory
12. High level of quality assurance through extensive testing in the production
process
13. A wide array of customers including specific market segments such as
hospitals and universities
14. Top ranked Server on Intel technology by the publication Technology Business
15. Strong understanding of individual customer segment needs
16. Wide array of methods of advertising and marketing
17. There are not a lot of production units and regional offices in the west
including the United States
18. For some consumers it is an inconvenience that Dell PCs cannot be purchased
through retail outlets
19. It has not been able to penetrate into several international segments as a
leading supplier even though the number of locations in the international
market are great
20. In the printer market it does not produce its own products rather purchases it
from Lexmark
21. There is a strong dependency on outside suppliers from foreign lands which
leads to a strong dependency on fuel supply and their prices leading to
fluctuation
22. The size of the company comes in the way of faster growth
23. There is a continuing demand for personal computers

24. There is a strong and evolving market for notebooks and tablets
25. There are strong opportunities of partnership in the market including one
potentially with Microsoft
26. There is a strong margin of expansion in consumer electronics
27. Consumer spending on technology is relatively untouched compared to other
products
28. Strong growth in the market of color printers
29. There are more mergers and acquisitions happening in the industry a threat of
strong consolidation trend in the PC industry
30. The influence and dependency on outside suppliers means increasing oil prices
are crippling the spending of the consumers on PCs
31. The demand of commercial usage of PCs are not increasing at the same pace
32. Strong competition continues to act as a threat
33. The growth of the market has slowed down
34. Strong fluctuation in price
35. Computing power fees has reduced
36. The market has widened
37. The fluctuating value and devaluation of currency continues to happen in the
international market

Weaknesses
Opportunities
Threats
Source: (Kharif, 2005) and (Dell, 1999)

Key External Factors

Opportunities
There is a continuing demand for
personal computers
There is a strong and evolving market

Weight

Rating

Weighted
Score

.1

.3

.1

.4

for notebooks and tablets

There are strong opportunities of
partnership in the market including one
potentially with Microsoft
There is a strong margin of expansion
in consumer electronics
Consumer spending on technology is
relatively untouched compared to other
products
Strong growth in the market of color
printers
Threats
There are more mergers and
acquisitions happening in the industry
a threat of strong consolidation trend in
the PC industry
The influence and dependency on
outside suppliers means increasing oil
prices are crippling the spending of the
consumers on PCs
The demand of commercial usage of
PCs are not increasing at the same pace
Strong competition continues to act as a
threat
The growth of the market has slowed
down
Strong fluctuation in price
Computing power fees has reduced
The market has widened
The fluctuating value and devaluation
of currency continues to happen in the
international market

Total

.1

.4

.05

.1

.05

.1

.05

.1

.05

.15

.05

.15

.025

.05

.15

.45

.1

.2

.025
.025
.05
.05

4
3
3
2

.1
.075
.15
.1

2.85

Internal Factor Evaluation (IFE) Matrix

Key Internal Factors

Strengths

Weight

Rating

Weighted
Score

The business model of dell which

focuses on a built to order framework
where the middleman is removed and
PCs are sold directly to the end buyer
Strong strength of sales strategy
through a variety of mediums ranging
from conventional to e-commerce
Elimination of the mark ups added by
the reselling party through the direct
sales to end buyer resulting in lower
costs to consumer without cutting down
margins for Dell
Reliability that comes out of a built to
order model reduction of over-heads
related to large inventories and finished
goods.
One of the industry leads in the
Personal Computer market
Considerable number of manufacturing
units across the world
Strong brand value and power in B2B
as well as B2C
Significant margins over costs of
production because of the direct sales to
the end buyer

A highly relationship intensive strategy

starting from the consumer sector and
extending to the corporate and
government sectors
Holds a large share in the market of
personal computers
Through the built to order model of
production, Dell is able to achieve a
quick turnover as well as decrease the
stock required in the inventory
High level of quality assurance through
extensive testing in the production
process
A wide array of customers including
specific market segments such as
hospitals and universities
Top ranked Server on Intel technology
by the publication Technology Business
Strong understanding of individual
customer segment needs

.1

.4

.05

.15

.025

.075

.05

.15

.1

.4

.05

.2

.05

.2

.15

.025

.075

.05

.15

.05

.15

.05

.15

.05

.2

.05

.2

.025

.075

.05

Wide array of methods of advertising

and marketing

.025

.1

There are not a lot of production units

and regional offices in the west
including the United States
For some consumers it is an
inconvenience that Dell PCs cannot be
purchased through retail outlets
It has not been able to penetrate into
several international segments as a
leading supplier even though the
number of locations in the international
market are great
In the printer market it does not
produce its own products rather
purchases it from Lexmark
There is a strong dependency on
outside suppliers from foreign lands
which leads to a strong dependency on
fuel supply and their prices leading to
fluctuation
The size of the company comes in the
way of faster growth

.025

.05

.025

.025

.05

.1

.025

.025

.05

.1

.025

.025

Total

1.00

Weaknesses

3.15

TWOS MATRIX
Strengths
Weaknesses
38.
The business
54.
There are not a
model of dell which
lot of production units
focuses on a built to
and regional offices in
order framework
the west including
where the
the United States
middleman is
55.
For some
removed and PCs are
consumers it is an
sold directly to the
inconvenience that
end buyer
Dell PCs cannot be
39.
Strong
purchased through
strength of sales
retail outlets
strategy through a
56.
It has not been
variety of mediums
able to penetrate into
ranging from
several international

conventional to ecommerce
40.

Elimination
of the mark ups
added by the
reselling party
through the direct
sales to end buyer
resulting in lower
costs to consumer
without cutting down
margins for Dell

41.

Reliability
that comes out of a
built to order model
reduction of overheads related to large
inventories and
finished goods.

42.

One of the
industry leads in the
Personal Computer
market

43.

Considerable
number of
manufacturing units
across the world

44.

Strong brand
value and power in
B2B as well as B2C

45.

Significant
margins over costs of
production because
of the direct sales to
the end buyer

46.

A highly
relationship intensive
strategy starting from
the consumer sector
and extending to the
corporate and
government sectors

47.

Holds a large
share in the market

segments as a leading
supplier even though
the number of
locations in the
international market
are great
57.

In the printer
market it does not
produce its own
products rather
purchases it from
Lexmark

58.

There is a
strong dependency on
outside suppliers from
foreign lands which
leads to a strong
dependency on fuel
supply and their
prices leading to
fluctuation

59.

The size of the

company comes in the
way of faster growth

of personal
computers

Opportunities
60.

There is a
continuing demand
for personal
computers

61.

There is a
strong and evolving
market for

48.

Through the
built to order model
of production, Dell is
able to achieve a
quick turnover as
well as decrease the
stock required in the
inventory

49.

High level of
quality assurance
through extensive
testing in the
production process

50.

A wide array
of customers
including specific
market segments
such as hospitals and
universities

51.

Top ranked
Server on Intel
technology by the
publication
Technology Business

52.

Strong
understanding of
individual customer
segment needs

53.

Wide array of
methods of
advertising and
marketing

S-O Strategies
66.

Expansion
intensive strategy
into the personal
computer as well as
laptop Market
[Combination of
Strength 1, Strength
5, Opportunity 1]

W-O Strategies
68.

The
development of
further production
units as well as retail
units in the United
States [A combination
of Weakness 1,
Weakness 3 and

notebooks and
tablets
62.

67.

There are
strong opportunities
of partnership in the
market including
one potentially with
Microsoft

63.

There is a
strong margin of
expansion in
consumer
electronics

64.

Consumer
spending on
technology is
relatively untouched
compared to other
products

65.

Strong
growth in the
market of color
printers

Threats
70.

There are
more mergers and
acquisitions
happening in the
industry a threat
of strong
consolidation trend
in the PC industry

71.

The
influence and
dependency on
outside suppliers
means increasing oil
prices are crippling
the spending of the
consumers on PCs

72.

The demand
of commercial
usage of PCs are not

Strategize
such that all future
developments are in
line with the
evolving technology
and focus on a
corporate social
responsibility agenda
(Strength number 14
and Opportunity
number 1)

S-T Strategies
79.

Opportunity 5]

69.

Diversification
strategy towards the
printer market into the
color printers
including
development of
internal capabilities
[Weakness 4 and
Opportunity 6]

W-T Strategies

Provide
attractive pricing and
discounting packages
on specific products
to the B2C market [A
combination of
strength 9 and Threat
4]

80.

Counter
competition and
increasing market
share by penetrating
into the Asian and
European market for
leading supplier
position in maximum
locations [A
combination of
weakness 3 and threat
1]

increasing at the
same pace
73.

Strong
competition
continues to act as a
threat

74.

The growth
of the market has
slowed down

75.

Strong
fluctuation in price

76.

Computing
power fees has
reduced

77.

The market
has widened

78.

The
fluctuating value
and devaluation of
currency continues
to happen in the
international market

Life cycle of the firms industry

Stage 1: Development of the Product
The first stage of the life cycle is marked by a research intensive and secretive process.
The more the innovation in a PC company, such as apple, the more investment goes
into the research process. Code name are usually utilized without naming it till its
developed completely

Stage 2: Announcement of the Product

This stage is not to be mixed with the actual product introduction stage. The purpose is
to bring the media and big guns to an event and announce what will be coming
through in the near future. The product does not always reach its final shape at the
time of announcement of the product.

Stage 3: Introduction of Product

The introduction of the product is the stage when the final product is ready to be
delivered to the consumers. At the time of announcement, the supply of the product is
not that high and expensive in order to hit big profits. At this point of time, a new
product is also started to be developed which means Stage 1 of a future product starts
at the Stage 3 of the new product.

Stage 4: Maintenance
It is during this stage of the life cycle that the price starts decreasing and the supply
increases getting even with the actual demand in the market. The products will be
send to all major sales point of Dell around the world at a lower cost than before. It is
at this stage of the new product that the future product is announced.

Stage 5: Retirement
Since Dell operates in a highly technological environment, changes and advancement
are frequent which results in a relatively quicker retirmenet of products. This is now
replaced by the introduction of the product which incorporates new technology.

Identification of environmental changes

Political Factors:
The political factors include legislature, government regulations and other
restrictions/provisions of political nature. This directly implicates the conditions under
which Dell has to operate. Political factors have caused certain restraints from time to
time because of the political instability. Some of the political factors include the ones
that come as a direct result of signing of World Trade Organizations. Market access is
one such factor. For example, Texas and Malaysia, two of the top choices for Dell in
the region are central to U.S Tennesse and to Asia Pacific respectively. Ireland, another
hub of Dell, is in close proximity to United Kingdom, Germany and france. Tarriff free
access to markets are one of the biggest political incentives to Dell. Political changes
which cause an impact on market access and their conditions can have consequences
on pricing strategy of Dell as well as supply choices. Political incentives such as tax
holidays provided by Malaysia are another such political factor. Low corporate taxes,
financial incentives, land support and per capita grants per employee are other such
factors which contribute to the political dynamics of the operating environment for
Dell.

Economic
The economic situation around the world, in specific regions have a direct impact on
two things. A) The changing economic situation and landscape has a direct impact on
the pricing strategy and profit margin of Dell and B) Economic turmoils such as the
one faced right now by the world decreases consumer power to buy the Dell products.
Currency fluctuation and Changes in Oil prices are another factor which causes strong

disruption in pricing models of Dell. Strong dependency on foreign supply means

these two factors become all the more critical.

Social
Demand for computers has a strong dependency on several social factors. One of the
most critical of these social factors is the level of education that prevails within a
country. Higher education standards lead to strong demand for the PCs around the
globe.

TECHNOLOGICAL
Technological changes in environment include the advancement of components, more
efficient parts, internet access, newer ways to market the product and the pace at
which products keep getting smaller and faster. This change in speed and size is
central to the changes that are required on a regular basis by Dell in order to keep up
with the business environment.
Source: (Kharif, 2005)

Strategic group map competition

Product Positioning Map
HP: HP is the closest competition to Dell. With a strong advantage over Dell in the
segment of Printers, it has an edge on that front. On the other hand Dell continues to
have an edge in terms of its competitive price over HP. The weakness, however,
remains in the printer segment infront of HP (Schmid and Kelber, 2005).
IBM:
Dell and IBM do not have conflicting target market segments. However, IBM seems to
have a better penetration into the Asian market as well as better access to cheaper
wage rates. One of the most important competitive edge for IBM is the server market
(Schmid and Kelber, 2005).
Apple Computers:
Apple is one of the most innovative firms in the PC market. Their target market is
different from Dell as well. They are more innovative and sell the products on
premium prices. Leading edge design and low variety in products are the features of
Apple.
Note: The product positioning is based on customization and cost. Customization is
seen as the variety in product portfolio as well as the customizable specifications
within one product.

Product Positioning Map

Expensive

Apple

Customizable
Generic

HP

Dell

IBM
Inexpensive

Recommendations
Recommendations for strategy implementation
Dells strategy has been focused on building computers that can be ordered by
consumers through a strong internal capability of manufacturing and quick inventory
turnarounds. This build to order strategy has been the differentiating factor for Dell for
the past few decades. The removal of the middle man gives it high margin in direct
sales as well as provides low costs to its consumers. One of the strong strategic
advantages for Dell has been its ability to adapt to changes. As an employer Dell has
focused on a strong relationship with employees, focusing on their motivation, well
being, reward strategy and empowerment strategy. Its strategic supply chain
management, data integration with suppliers, relationship intensive approach and
integrating physical store sales with online sales has made sure Dell continues to grow
at an exceptional rate.
The following are recommended as strategic line of action for Dell
1. An involvement in CSR activities including a Green Campaign for collection
of old PCs/electronic equipment for recycling/disposition in an environmental

friendly way. This will lead to better image in the society as well as sustainable
development and cost efficiency in the long term
2. A series of internal marketing efforts to maintain a highly innovative culture
within the organization for a re enforcement of its employer values for high
performance management and employee participation.
3. Venture into R&D partnership with an established company sharing intellectual
resources and the hardware infrastructure of Del for development of
technology savvy products for future.
4. Building more manufacturing plants around the world and specifically in the
US. Global expansion should be met with region specific capacity building as
well as to reduce supply chain costs/complications and dependency on external
factor
5. Internal capacity building for the development of printer products in order to
cut down its costs, increase quality and increase market share in competition to
HP.

Conclusion
The industry of personal computers, laptops and related hardware is one which
evolves continuously. The result of globalization, political incentives and
technological advances can be seen on a regular basis. This means that a reassessment
of strategy for all the players in the industry is important in order to keep the
respective competitive advantage going. Dells structure allows for efficiency, cost
optimization, customer relationship intensive strategies and optimum supply chain.
This report assessed the strategic direction that Dell has been taking on the basis of its
external environment and internal capabilities/limitations. Through TWOS, PEST,
positioning maps and internal/external key factor evaluation, the report came up with a
five point recommendation focusing on research and development, production plants,
internal capability development, high performance management and corporate social
responsibility.

References
Dell, M. (1999). Direct From Dell: Chairman and Chief Executive Officer, Dell
Computer Corporation. Collins
-

Kharif, O. (2005). Dell, Time for a New Model? BusinessWeek

Schmid, N. and Kelber, A. (2005). The Dell Company A Strategic Analysis.

Management Seminar. Hochschule
-

www.dell.com

www.hp.com

www.ibm.com