Dell Technologies Inc.

John Excel
Dr. Chee Piong,
Accounting for Decision Makers
ACG5075E1-109022019
Everglades University
September 26, 2019.

Dell Technologies Inc.

An analysis of the case study 7-5 reveals that Dell computers is the world largest direct selling
computer company with a work force capacity of 57,600 employees in more than eighty (80)
countries as well as customers in more than 170 countries. Dell gained a worldwide recognized
positive reputation that made them stand out as one of the world’s most preferred computer
systems companies and information technology to be patronized. The simple but powerful
strategy Dell computers used which has helped them climb and succeeded was the application of
the best customer service and their best computer technology by selling them directly from the
manufacturers to the customers. This strategy help eliminate the action of middle man that would
have influenced the price of their computers to the customers. .

Dell was founded in 1984 by Michael Dell at the age of 20 with about $1,000, on a simple
concept, by selling computer systems directly to customers for the fact that Dell understudied
and understood the need of the customers. The benefit to this strategy (direct sells to the
customers) was that, it help to eliminate retailers, who would have added unnecessary time and
cost, additionally, allowed the company to build system to order, and offering customers a
satisfactory, richly configured computer systems at a competitive price. .

Its corporate headquarters are located in Round Rock, Texas, and it conducts operations
worldwide through subsidiaries. The company’s core business strategy is built around its direct
customer model and highly efficient manufacturing and logistics. Currently, they are expanding
that core strategy by adding new distribution channels to reach even more commercial customers
and individual consumers not only in the USA but around the world. Recently, company also has
begun to pursue a targeted acquisition strategy designed to augment select areas of its business
with more products, services, and technology. Dell’s goal today is to provide the best possible
customer experience by offering superior value; high-quality, relevant technology; customized
systems and services; superior service and support; and differentiated products and services that
are easy to buy and use.

According to , Dell was doing well as he was the youngest CEO in 1991 with a fortune of 500
companies. He rose to the position of a chairman of the board in 2004. Dell over took its
competitors by introducing the latest but relevant technology faster than its competitors with
slow moving strategies and indirect distribution channels and tuning over inventory an average
of every four days. Dell was recognized as being number one retailer of personal computer,
outselling competitors like IBM and Hewlett-Packard. Whereas other competitors employed
strategy called build- to-stock. Pc manufacturer typically, like IBM and Packard they designed
and build their computer based on market forecast. Product first stored in company warehouse,
later dispatched to resellers, retailers and other intermediaries’ who took advantage of added up
20-30 percent markup before selling to customers. Meaning Manufacturers controlled the
upstream value chain while middle men controlled the downstream part. Whereas retailers, made
their selling power and profit by giving different benefits opportunities to their customers to
include, accessed locations, selection across multiple brands, opportunity to see and test products
before purchasing, and the use of knowledgeable customer relation to educate them about each
of the products before customers could chose to buy. .

Below are the Marketing strategies that has been adopted by Dell Technologies Inc.

Direct Sales Model; the strategy which helped Dell to run in the current position was direct
sales approach. The reason behind the use of this model is to avoid the intermediaries and sell the
product directly to the final user at a cheap rate. Direct sales model is an example of market
penetration strategy. Direct sales means that dell must reach out to potential customer, either
through its own sales force or through advertising and other marketing efforts.

Market Segmentation; Dell has divided its customers into two parts. One is another corporate
customers and home user customers. It has differentiated the product and services according to
its customers. This segmentation is very necessary as business based customers generally need
mainframes and different types of equipment opposed to the ordinary user at home who could
just need the bare minimum to do his/her computing.

Direct Customers Relationships; Dell has mainly focused on its customers relationships. It
provides equal priority to each customer. Through the direct sales model it can find out the need
and desire of customer what they want. Vendors who sells their product through resellers often
don’t know who their final customer are, so they must rely on secondary market research to
identify their own customer trends earlier so it can respond with the desired products before its
competitors. It has established a 24/7 network mechanism to listen and to provide services to its
customers. .

Dell employs the use of both the financial and nonfinancial scorecard in measuring the
company’s performance, this performance metrics though the same everywhere in the world but
it has helped the company to identify best practices in all dimension. However, the primary
financial objective that guides managerial evaluation at Dell is returns on invested Capital
(ROIC). In a comparative financial data curled from selected companies; Dell, IBM, Hewlett-
Packard and Gateway for a five-year average: 1999 – 2004, it was disclosed that Dell has a
Return on Equity in Percentage of 40.91% being the highest compared to IBM having 31.65%,
Hewlett-Packard had 7.86% while Gateway had negative ROIC of (42.8%).
Furthermore the financial results provided by on their financial performance shown below based
on selected non-GAAP Financial Measures for 2018 and 2017 would also be used in this
analysis.
DELL TECHNOLOGIES INC.
Selected Non-GAAP Financial Measures(in millions, except percentages; unaudited)
Three Months Ended
May 4, 2018 May 5, 2017 Change
Non-GAAP net revenue $ 21,543 $ 18,355 17 %
Non-GAAP gross margin $ 6,919 $ 5,801 19 %
% of non-GAAP net
revenue 32 % 32 %
Non-GAAP operating
expenses $ 4,893 $ 4,376 12 %
% of non-GAAP net
revenue 23 % 24 %
Non-GAAP operating
income $ 2,026 $ 1,425 42 %
% of non-GAAP net
revenue 9% 8%
Non-GAAP net income $ 1,174 $ 761 54 %
% of non-GAAP net
revenue 5% 4%
Adjusted EBITDA $ 2,383 $ 1,795 33 %
% of non-GAAP net
revenue 11 % 10 %
SOURCE:
The financial data above shows that within May 5, 2017 and May 4, 2018, the company
increased their net revenue by 17% this increase led to the gross margin growing by 19%. Dell
Technologies Inc. have continuously grew in all their financial measures as operating income
grew by 42% and net income grew by 54%. All these increases made Dell’s Adjusted Earnings
before Interest, Taxes, Dividend and Amortization (EBITDA) to increase by 33%, this thus
shows how well Dells Technologies have grown in their financials and it also reveals how the
company’s adopted strategies have been working at the best interest of the company. However
from the financial information, it is also revealed that the percentage of non GAAP net income
for all the items changes slightly, this is a result of the challenges Dell faces as a result of the
dynamic business environment and other factors.

CONCLUSION
Today the computer industry is arguably the most important industry in the world. It is the basis
for all information technologies and accounts for about 5% of the world’s gross domestic
products. As a tool the computer is a crucial element in many industries ranging from
telecommunications and consumer electronics to medical research and automobiles. In the first
quarter of 2008 Worldwide PC shipments grew by 14.6% to 69.5 million units, according to
IDC's Worldwide Quarterly PC Tracker. But today computer industry looks not like 20 years
ago. Every highly technological and innovative industry has rapidly changing trends and
structure and the computer industry one of those who requires from companies always to be in
touch with the latest technologies and movements..
Dell Inc. is one of the few corporations which was able to remain at the top of the market but
also nevertheless had a difficult time because of the inconsistency between its strategy and new
changing environment. From the beginning Dell’s strategy was built around a number of core
elements: build-to-order manufacturing, mass customization, partnerships with suppliers, just-in-
time components inventories, direct sales, market segmentation, customer service, and extensive
data and information sharing with both supply partners and customers. But nowadays Dell and
other U.S. personal computers (PC) makers are struggling to eke out a profit in an environment
of falling prices and intense international competition.