Dell Changing Business Model – Mini Case 1

Strategic Management in a global environment Fall 2015

[Dell Changing Business Model – Mini Case]

By

Salma Yassin – 1040503

Dell Changing Business Model – Mini Case 2

What is the Story?

Dell Inc, is a multinational enterprise which deals in the assembling of personal

computer, laptops, tablets, software and other computing services. In the year of 1984, Michael

Dell founded the Dell as he was a college student. Soon after his increased sales practices in the

local market, he started to assemble his own computers and changed the name of his company. In

the early years of its operations, the company earned a huge profit ratio and had a lot of market

shares in the local market and the international computer industry. Michael Dell’s policies were

highly appreciated by famous newspapers and giants of computer industry, in the early years of

the 1990s. In the year of 1995, the company became one of the five top computer vendors around

the globe as it was the world’s leading direct marketer of the personal computers (Case study:

Dell—Distribution and supply chain innovation, 2011).

By the year of 2001, the Dell turned to be the giant of the computer industry with the first

position in the global market. Moreover, the company changed its name to Dell INC. in the year

of 2003 and its net worth increased in the coming years. However, an important phase came in

the business cycle of this multinational enterprise when the increased competition from the

global vendors resulted the Dell to lose its first position in the global computer market. In the

period of great recession in the years 2008-2009, the market share of the Dell deceased to an

alarming level, resulting in Dell to change its business model. In the coming years, the story

turned to be like this that the Michael Dell started hiring top ranked executives from Motorola

and other companies to get back the top position in global market (RAPPA, 2009). In this story,

the main focus of the writing will be limited to the changing business cycle of the Dell INC. and

that whether this cycle is meeting with the needs of the modern computer industry or not.
Dell Changing Business Model – Mini Case 3

In the fast changing computer industry, innovation and creativity are essential key success

factors. Please discuss Michael Dell’s entrepreneurial character.

Computer industry is one of the most rapid and fast changing industry. Innovation and

creativity are considered as key and essential success factors in this industry. Talking in the

context of the entrepreneurial character of the Michael Dell, one can clearly draw a conclusion

that his character needs to be assessed in two phases. Initial phase of the entrepreneurial

character of the Michael Dell is about the time when he was a student and he established the Dell

Inc (Michael Dell: Taking The Direct Approach, 2012). In that context, it is clearly evident from

the case study that his entrepreneurial character was well balanced and quite good in terms of the

innovation and the creativity. Both of these key factors can be seen in his initial professional

career when he launched the company and after hard work of some years, he started assembling

his own computers. This thing shows that his creativity and innovation were up to the mark in

terms of that era and the needs of that time (DELL, n.d.).

However, if we assess the entrepreneurial character of the Michael in the second phase of

his professional career, it is clearly evident from the case study that he had stopped adopting the

innovation and creativity. The history of the Dell Inc.’s financial and success stories tells that

Michael Dell didn’t adopt the innovation and was unable to compete with the needs of the

modern word and the global computer industry (FOSTER, 2013). Moreover, another important

thing to know is that poor entrepreneurial character of the Michael Dell was not only limited to

himself but he started hiring the top class executives from the Motorola and Apple etc. For this

thing, many of the previous executives of Dell Inc. were fired who were a part of Dell’s success

since it started.
Dell Changing Business Model – Mini Case 4

Is Dell doing the right thing by continuously changing its business model?

The statement ―is dell doing the right thing by continuously changing its business model‖

is quite an unclear kind of statement. Every one of us is aware of the fact that innovation,

productivity and creativity are the basic factors which are required for success of any business

venture. In the context of the Dell, the case study makes it clearly visible that Dell has been

changing its business model continuously since it has seen a decrease in the market share and has

lost its top place. In terms of changing its business model, it can be seen that Dell didn’t adopt

the innovation within its products and services, in order to compete with the modern trends of the

global computer industry (Johnson, 2013). this thing resulted in that Dell started dividing its

business to different models such as assembling and selling personal computer, software

developing, developing miscellaneous products such as printers, storage products and other

services such as infrastructure services.

The Dell Inc. didn’t stay associated only with the above mentioned changes but it kept on

changing its business model continuously. Hence, in context of the above mentioned question

and by keeping the financial statistics of the Dell Inc. one can clearly conclude that Dell is not

doing the right thing by changing its business model continuously. The basic reason behind this

assessment is that Dell Inc. needs to adopt innovation and creativity for its new business models

instead of changing them randomly and without any prior and proper planning (Rochili, 2007).

The changing business models in a continuous manner have not helped the Dell Inc. to meet with

its real objectives and this is the reason that it needs to focus on a long term business model

based on innovation and creativity.

Dell Changing Business Model – Mini Case 5

What would be the most dangerous thing for Dell to extrapolate into the future?

There are various things which can be dangerous for Dell to extrapolate into the future.

As mentioned earlier, Dell Inc. has strongly focused on changing its business model after regular

intervals. This can be one of the most dangerous thing for Dell to extrapolate into the future and

it may not be able to meet with the modern needs of the global computer industry.

Currently, Dell Inc. is the second largest computer vendor in the world after HP but it is

facing a serious rivalry and competition from that of ACER. In order to extrapolate into the

future, this can also be one of the dangerous things for Dell. A number of analysts of the

computer industry had already felt that Dell would not be able to make its final cut in the

computer industry in terms of low priced and commodity type personal computers (Gross, 2005).

The different computer brands around the globe have highly adopted the innovation within their

products as the iPad and iPod from Apple. This can be termed as the biggest danger for the Dell

if it focuses to extrapolate into the future (Risk Factors Affecting Our Business and Prospects,

n.d.).

The need of time for Dell is that it should focus on a long term business model and

should adopt the innovation within its products and services. Moreover, in order to overcome the

other threats from the leading competitors of the computer industry, Dell Inc. will have to focus

on a well-balanced and well defined long term product planning.

Dell Changing Business Model – Mini Case 6

Should Dell continue with its current strategy of following the consumer market

down in price and adjusting its costs accordingly or, like IBM, should it change its focus to

more profitable business services or, like HP, should it do Both?

HP has been the leading computer seller with the largest market share of the global

computer industry since many years. On the other hand, the IBM too holds a huge market share

by focusing on different business services. The case study makes it clearly visible that Dell has

been focusing on both of the things with its primary focus on the personal computers and

laptops. In the context of the above mentioned question, one must focus on the financial statistics

of the Dell Inc. in order to conclude that it should focus on the profitable business services like

IBM or it should focus on the both things like HP.

In terms of the IBM, the case is like though IBM is well known for its profitable business

services but it is not considered as a giant of the computer industry. While on the other hand, the

HP has reserved the top place in the industry since many years. Focusing on these statistics, it is

needed that Dell should focus on continuing the both things as profitable business services and

following the consumer market down in price and adjusting its costs accordingly. This thing will

not only help the Dell Inc. to get its top position back but it can also come up with long term

benefits for the company. For this reason, the company needs to focus on buying any acquisition

as HP bought the EDS for a worth of total 13.2 billion United States Dollars (Purcell, 2014).

Moreover, the dell also needs to stay aware about the demands of the modern computer industry

in terms of the customer satisfaction. This thing can be done by developing a proper and long

term business model by taking care of previously done mistakes. As a general conclusion of this

case study, it can be concluded that Dell needs to focus on both thing as the profitable business

services and about following the consumer market down in price.

Dell Changing Business Model – Mini Case 7

Bibliography
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DELL, M. (n.d.). Michael Dell's Rules for Winning Startups. Retrieved from Inc. :
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FOSTER, T. (2013). Michael Dell: How I Became an Entrepreneur Again. Retrieved from Inc:
http://www.inc.com/magazine/201407/tom-foster/michael-dell-on-transformating-
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http://www.slate.com/articles/business/moneybox/2005/08/is_dell_dying.html

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RAPPA, M. (2009). CASE STUDY: DELL COMPUTER. Retrieved from Digital Entreprise:
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Risk Factors Affecting Our Business and Prospects. (n.d.). Retrieved from Wikinvest - Dell:
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Rochili, D. (2007, May 22). Dell to change their business model? Retrieved from Techology tell:
http://www.technologytell.com/gadgets/25682/dell-to-change-their-business-model/