WHAT IS PESTEL ANALYSIS?

A PESTEL analysis or PESTLE analysis (formerly known as PEST

analysis) is a framework or tool used to analyze and monitor the macro-
environmental factors that may have a profound impact on an
organization’s performance. This tool is especially useful when starting a
new business or entering a foreign market. 

PESTEL ANALYSIS
OF
DELL

THE FIVE FACTORS OF ANALYSIS

ARE :
1. Political factor
2. Economical factor
3. Social factor
4. Technological factor
5. Environmental factor
 6. Legal facto

 Dell today operates in multiple nations and thus considering the political
scenarios of each of the country it operates in is important. The country’s
political situation determines the ease with which the corporate functions.
 Europe and China are two important geographical regions for Dell. US is in
midst of intense trade war under the leadership of Trump. This toughens the
export and import of products.
 The rates shoot up due to the political differences. Same is the case with
European Union.
 The additional adverse impact this political stability has is on supply of raw
material and semi-finished good carrying for assembly.
 The integrity of the politicians and their likelihood to take part in acts of
corruption, as the resulting repercussions may lead to possible impeachments or
resignations of high level government employees.
 The laws that the country enforces, especially with regards to business, such
as contract law also creates a problem for the business.
 The trade barriers that the host country has would protect; however, trade
barriers that countries with potential trade partners would harm companies by
preventing potential exports.
 A high level of taxation would de-motivate companies like from maximizing
their profits.
 Dell as a giant tech corporate faces many economic challenges. Primary factor
is the exchange rate since it operates in multiple countries and in each country,
it is equally important to have a healthy currency rate.
 The economic system that is currently operational in the sector in question-
whether it is a monopoly, an oligopoly, or something similar to a perfect
competition economic system.
 The economic growth index called GDP determines the growth rate of
corporation in that specific country.
 Then comes the taxation policies of respective territory. The higher the taxes
more will be the overall cost of the goods to be sold and in times like global
recession people lose their buying power and thus the sale of Dell reduces
drastically.
 The import rates and excise duties which spike up the raw material import costs
is also a critical factor.
 The interest rates in the country would affect how much individuals are willing
to borrow and invest.
 However efficiently the financial markets operate also impact how well can
raise capital at a fair price, keeping in mind the demand and supply.
 Many a times the new policies do well to corporation. For example, GST in
India in which all sub-taxes we brought under one umbrella calling it the GST.
 Dell is no more into just computers. It also has acquired companies in gaming
sector, big data etc. Thus, their economic factors also affect Dell as the parent
organization

 The demographics of the population, meaning their respective ages and genders,
vastly impact whether or not a certain product may be marketed to them.
 The class distribution among the population is of paramount importance: would
be unable to promote a premium product to the general public if the majority of
the population was a lower class; rather, they would have to rely on very niche
marketing.
 To some extent, the differences in educational background between the
marketers and the target market may make it difficult to relate to and draw in
the target market effectively.
 It should be very careful not to lose the connection to the target market's
interests and priorities.
 Needs to be fully aware of what level of health standards, reactions to
harassment claims and importance of environmental protection prevail in the
industry as a whole, and thus are expected from any company as they are seen
as the norm.

 Usage of computer has seen a great evolution. It was a necessity at premium

office spaces in earlier days. Having personal computer at desk was a sign of
prestige. But the time has changed. People are now more technology oriented
 and have made peace with the fact that without technological learning’s they are
not going to progress in career.
 Also, a totally different segment of market is formed by youngsters who are
much ahead and equipped to learn technology. They use PCs both for gaming as
well as educational purpose.
 The preference for detachable and tablets is more. Dell should study the
demographics and accordingly set their marketing and product distribution.
 The economic class of the region is also necessary study prior to targeting
specific product in any market.

 The recent technological developments and breakthroughs made by

competitors. If encounters a new technology that is gaining
popularity in the industry in question, it is important to monitor the level of
popularity and how quickly it is growing and disrupting its competitors’
revenues. This would translate to the level of urgency required to adequately
respond to the innovation, either by matching the technology or finding an
innovative alternative.

 How much an improvement of technology would improve/ transform what the

product initially offers. If this improvement is drastic, then other firms in the
industry suffer more heavily.

 The impact of the technology on the costs that most companies in the industry
are subject to have the potential to increase or reduce the resulting profits
greatly.
 If these profits are great in number, they may be reinvested into the research and
development department, where future technological innovations would further
raise the level of profits, and so on, ensuring sustainable profits over a long
period of time.

 Dell as a corporation is definitely affected by the technological changes since it

itself is technology-based firm.
 Main product of dell is computer. People have changing demands. There was a
time when computer was only to be operated by mouse and external keyboard.
Then came the laptops with track pad and embedded keyboards. Now is the
phase where touch screen monitors in both computers (PCs) and laptops. The
demand is to have as big screen as possible.
 The processor is upgraded timely. Since Dell is into gaming laptops as well
(after acquiring Alienware), there the graphic card technology has to be updated
with challenging competitors so as to not be obsolete. Developing technologies
which support PC sector like the cloud are also to be considered and Dell is in
the business of Cloud services.

 The current weather conditions may significantly impact the ability of to

manage the transportation of both the resources and the finished product. This,
in turn, would affect the delivery dates of the final product in the case of, say,
an unexpected monsoon.

 Technological firms are under the scanner of government and other institutions
since they cause harm to the environment while manufacturing their products.
 The major concern is the immense carbon prints they leave behind.
 The electronic waste generated which is non-biodegradable is dangerous for the
soil, water bodies and also the stray animals who may consume it.
 Dell should try and focus to create recyclable products and its R&D team
should focus on the same.
 That would not only give them an edge over the competitors by reducing the
costing because the amount of raw material to be imported would reduce
drastically but also create a very good socially responsible brand image among
its customers.

 Laws are also placed to ensure a certain level of quality or reasonable price for
certain products to keep the customer safe and prevent them for being provided.
The industries this applies to find often their costs elevated.

 Since Dell operates in multiple regions it has to abide by respective laws.

 The labor laws covering the minimum wages, just working conditions, welfare
of employee may vary from country to country.
 The taxation laws as well change from place to place but Dell has to be in
compliance with them in every place it operates to save itself from facing any
penalty.
 When in 2019, India operates under GST law but if Dell doesn’t change its
policies accordingly then its operation in India will be at huge loss.
 Environment laws are also governing factors for manufacturing of their
products and these environmental laws need to be followed strictly seeing the
current attention of the world as a whole concerning the environment we live in.

Porter’s Five Forces Analysis

A model was put forward by Michael. E. Porter in an article in
the Harvard Business Review in 1979. This model, known as
Porter's Five Forces Model is a strategic management tool that
helps determine the competitive landscape of an industry. Each of
the five forces mentioned in the model and their strengths help
strategic planners understand the inherent profit potential within
an industry. The strengths of these forces vary across the industry
to industry, which means that every industry is different
regarding the profitability and attractiveness. The structure of an
industry, even though it is stable, can change over time.
 FIVE FORCE ANALYSIS
OF
DELL

These Porter’s five forces are as follows:

Threat of New Entrants
Bargaining Power of Suppliers
Bargaining Power of Buyers
Threat of Substitute Products or Services
Rivalry Among Existing Firms
THREAT OF NEW ENTRANTS

 The economies of scale are fairly difficult to achieve in the industry in

which Dell operates. This makes it easier for those producing large capacitates
 to have a cost advantage. It also makes production costlier for new entrants.
This makes the threats of new entrants a weaker force.
 The product differentiation is strong within the industry, where firms in
the industry sell differentiated products rather a standardized product.
Customers also look for differentiated products. There is a strong emphasis on
advertising and customer services as well. All of these factors make the threat of
new entrants a weak force within this industry.
 The capital requirements within the industry are high, therefore, making it
difficult for new entrants to set up businesses as high expenditures need to be
incurred. Capital expenditure is also high because of high Research and
Development costs. All of these factors make the threat of new entrants a
weaker force within this industry.
 The access to distribution networks is easy for new entrants, which can
easily set up their distribution channels and come into the business. With only a
few retail outlets selling the product type, it is easy for any new entrant to get its
product on the shelves. All of these factors make the threat of new entrants a
strong force within this industry.
 The government policies within the industry require strict licensing and
legal requirements to be fulfilled before a company can start selling. This makes
it difficult for new entrants to join the industry, therefore, making the threat of
new entrants a weak force.

BARGAINING POWER OF SUPPLIERS

 The number of suppliers in the industry in which Dell operates is a lot compared

to the buyers. This means that the suppliers have less control over prices and

this makes the bargaining power of suppliers a weak force.

 The product that these suppliers provide are fairly standardised, less

differentiated and have low switching costs. This makes it easier for buyers like

Dell to switch suppliers. This makes the bargaining power of suppliers a weaker

force.

 The suppliers do not contend with other products within this industry. This

means that there are no other substitutes for the product other than the ones that

the suppliers provide. This makes the bargaining power of suppliers a stronger

force within the industry.

 The suppliers do not provide a credible threat for forward integration into the

industry in which Dell operates. This makes the bargaining power of suppliers a

weaker force within the industry.

 The industry in which Dell operates is an important customer for its suppliers.

This means that the industry’s profits are closely tied to that of the suppliers.

These suppliers, therefore, have to provide reasonable pricing. This makes the

bargaining power of suppliers a weaker force within the industry.

BARGAINING POWER OF BUYERS

 The number of suppliers in the industry in which Dell operates is a lot more

than the number of firms producing the products. This means that the buyers

have a few firms to choose from, and therefore, do not have much control over

prices. This makes the bargaining power of buyers a weaker force within the

industry.

 The product differentiation within the industry is high, which means that the

buyers are not able to find alternative firms producing a particular product. This

difficulty in switching makes the bargaining power of buyers a weaker force

within the industry.

 The income of the buyers within the industry is low. This means that there is

pressure to purchase at low prices, making the buyers more price sensitive. This

makes the buying power of buyers a weaker force within the industry.

 The quality of the products is important to the buyers, and these buyers make

frequent purchases. This means that the buyers in the industry are less price

sensitive. This makes the bargaining power of buyers a weaker force within the

industry.

 There is no significant threat to the buyers to integrate backwards. This makes

the bargaining threat of buyers a weaker force within the industry.

 THREAT OF SUBSTITUTE PRODUCTS OR

SERVICES

 There are very few substitutes available for the products that are produced in the
industry in which Dell operates. The very few substitutes that are available are
also produced by low profit earning industries. This means that there is no
ceiling on the maximum profit that firms can earn in the industry in which Dell
operates. All of these factors make the threat of substitute products a weaker
force within the industry.
 The very few substitutes available are of high quality but are way more
expensive. Comparatively, firms producing within the industry in which Dell
operates sell at a lower price than substitutes, with adequate quality. This means
that buyers are less likely to switch to substitute products. This means that the
threat of substitute products is weak within the industry.
 RIVALRY AMONG EXISTING FIRMS

 The number of competitors in the industry in which Dell operates are very few.
Most of these are also large in size. This means that firms in the industry will
not make moves without being unnoticed. This makes the rivalry among
existing firms a weaker force within the industry.
 The very few competitors have a large market share. This means that these will
engage in competitive actions to gain position and become market leaders. This
makes the rivalry among existing firms a stronger force within the industry.
 The industry in which Dell is growing every year and is expected to continue to
do this for a few years ahead. A positive Industry growth means that
competitors are less likely to engage in completive actions because they do not
need to capture market share from each other. This makes the rivalry among
existing firms a weaker force within the industry.
 The fixed costs are high within the industry in which Dell operates. This makes
the companies within the industry to push to full capacity. This also means these
companies to reduce their prices when demand slackens. This makes the rivalry
among existing firms a stronger force within the industry.
 The products produced within the industry in which Dell operates are highly
differentiated. As a result, it is difficult for competing firms to win the
customers of each other because of each of their products in unique. This makes
the rivalry among existing firms a weaker force within the industry.
 The production of products within the industry requires an increase in capacity
by large increments. This makes the industry prone to disruptions in the supply-
demand balance, often leading to overproduction. Overproduction means that
companies have to cut down prices to ensure that its products sell. This makes
the rivalry among existing firms a stronger force within the industry.
 The exit barriers within the industry are particularly high due to high investment
required in capital and assets to operate. The exit barriers are also high due to
government regulations and restrictions.