CASE NOTE

ANALYSIS ON
DELL-New
Horizons
Group Members:

1. Sachin S Hanwate PGP/14/238

2. Mangesh Patil217
3. Amit PGP/14/193
4. Nilu Khed PGP/14/221
5. Bhuvaneshwari PGP/14/206
6. Sravya PGP/14/243
Problem Statement:

To retain its growth rate and to explore the new markets, service and server by using Dell’s traditional
direct model.

Analysis:

Dell was founded in 1984, was entered as the most successful company in the PC industry. It had
achieved phenomenal records in sales and profit growth. In 2001, the PC industry’s growth declined by
10%. Some in the Industry believed that the hyper expansionary phase of the industry’s growth was
over and the major players in the industry would have to adjust their strategies to reflect the commodity
nature of the environment. In contrast Dell wanted to pursue a multi-pronged growth strategy.

DELL DIRECT MODEL

 Focuses on Build –to-order basis and its customers were mainly Business customers
 Custom-configure its products
 Direct sales force to sell its products
 Efficient Pricing
 Virtual Integration- Choosing best in class providers for each component
 Difficult to duplicate
 Efficient Distribution system
 Parts were ordered on a Just-in-time basis

SEGMENTATION:

Global: Primarily relationship and transactional, then broken down into 3 core areas: Relationship
Business, Small/Medium Businesses, and Consumer Business US Market (Relationship = 60%): Business-
global, enterprise, large corporate accounts, federal government, education, state & local government

Small/Medium Businesses (Relationship = 30%): Preferred account division, Business systems division

Consumer Business (Transactional = 10%): knowledgeable buyers.

Dell has combined and implemented a multi-segment target marketing strategy with 90% of its business
being relationship based.

PRODUCTS

Personal Computers:

Almost 75% of Dell’s Revenues came from laptops and desktop computers. But due to economic
downturn and saturation in this sector, growth will slow down. Dell used efficient Price cuts to retain its
market share but expansion of market share is not feasible in this economic downturn.
Workstations:

Dell entered the workstation market in mid-1997 and by 2000 Dell was the US and worldwide market
leader in Windows NT workstations

SERVERS:

Companies were migrating from mainframe computers to servers. Dell supports open platforms and
open architecture servers (SIAS). These servers have a growth rate of 30%.

STORAGE:

There is a shift from Direct Attach Source or DAS to external storage. EMC is the market leader in
External storage. Dell announced a marketing alliance with EMC under which Dell would become the
major sales channel for EMC’s CLARiiON line of products.

SERVICES:

DELL had begun to apply its commoditization model to the services business, taking the time needed to
install a commerce server to less than one hour.

International Expansion

As Dell looks at expanding into international markets, it needs to consider entering the markets that are
key to the region. For example, Germany in Europe, China in Asia, and Brazil in South America. Dell
needs to carefully study these types of key markets and implement its Direct Model only after it
understands how these regions economically and politically function. However, this expansionary
growth will place extensive demands on Dell’s information infrastructure needed to support such global
operations. To be successful in these new markets, Dell must update its websites in the particular
languages and modify the accounting systems to handle the specific currencies. Keeping these new
employees in touch with one another and with customers, suppliers, and partners will be a gigantic task
requiring the latest technology, increasing the demand for instant information. The global market is
huge and virtually untapped and Dell is in a great position to take advantage of this market, especially
with the use of the Internet and its advanced online capabilities. Dell’s most important strategic
advantage is the ability to sell direct from Dell, eliminating all the middlemen in the normal distribution
line. Anyone who wants a Dell must order it through the mail, online, or over the phone, which is a
perfect method for doing international business. Dell just takes the order and ships the computers via
one of its many shippers. Dell should focus on dominating the Asian market where they only have a
3.7% hold on a market with over 19.9 billion units. Asia is a virtually untapped market and is expected to
grow rapidly in the next few years. Dell currently has two manufacturing plants and four technical
support offices in the Asia area. Dell should look for ways to optimize these facilities and budget some
advertising towards attracting enterprise and big businesses in that region.
RECOMMENDATIONS

The booming PC market seems to have bottomed out, with little signs of improvement due to market
saturation. Positive signs have come mainly in the form of limited PC replacement programs at some
large companies and sales of notebook PCs. Any future PC market recovery will most likely be tied to an
improvement in the economy.

Therefore, Dell should ramp its efforts in three non-core areas as key for future growth: servers, external
storage and services. Meanwhile, it can carry on with its aggressive price-cutting strategy for all of its
products. Hopefully, these moves will allow them to gain traction in some markets, and even overtake
some competitors in others. Once Dell has used its lowest price strategy to increase its installed base of
clients in hardware sales, particularly in the enterprise market, the company can leverage its expertise in
customer support to keep those clients. Even though Dell has already made some impressive progress
in server and storage developments, it still lags behind other server vendors in total shipments and
sales. The company needs to create a greater presence among enterprise and service-provider
customers.

Dell can quickly grow its storage business by providing simplified and standardized storage solutions to
customers ranging from small businesses to large, global corporations with enterprise-class
requirements. It can leverage its ties to Microsoft, Intel and other prestige component vendors to focus
on providing Windows-based storage and server products. This move will make its high-end storage
products work with IBM, Hewlett-Packard and Compaq Computer Windows servers, as well as Dell
servers. This allows Dell to widen its customer base by appealing to customers that don't have Dell
servers, or have a mixture of servers from different vendors. With comprehensive support for multiple
platforms, Dell can also offer customers a storage solution that leverages their existing Windows server
investments, while scaling to accommodate their growing data requirements.

An expansion of the services group should also be pursued based on customer needs, which will vary
from country to country. While Dell continues to partner with third-party services firms in some areas, it
should also bulk up on its own services capabilities so it can provide customers with more complete
services offerings. Dell should realize that it would need to expand its services capability significantly in
order to be taken seriously by some global enterprise and service-provider customers. Dell can also
implement a fixed-price approach to services that will boost its presence in that market. New services,
such as migrating from Unix-based servers to new ones based on Linux can be offered and combined
with Dell's hardware. A total of $2 billion to $3 billion in service revenue can be achieved if this strategy
is correctly implemented. Dell's three-pronged growth strategy by no means guarantees a sure-fire path
to future profitability, but Dell's deliberate and measured steps to expand beyond its PC roots could
result in additional good news in the future.