Strategic Analysis
Of Dell Inc.
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The competitors of Dell can be grouped into two categories: those . 1. responsiveness. environmentally sound atmosphere and be an active participant in community affairs” (Dell. and competitive pricing. The mission statement of Dell has been divided into three parts customer satisfaction that states “We are an established company striving to satisfy customers by meeting their demands of quality. Dell computer was founded in 1984 by Michael Dell who was then an undergraduate student at the University of Texas. Dell is cited as the largest player of the personal computer market. The dynamic nature of environment offers certain opportunities to Dell while posed certain threats to various player of the market including Dell. Each customer is #1” . safe. 2010). team satisfaction that states.Introduction: The purpose of this report is to analyze the strategic position of Dell Inc. Headquarter in Round Rock. External Analysis: The primary industry of Dell is personal computer and computer equipments that are evolving with the passage of time due to constant advancement of technology. Texas. The company follows unique selling policy that is known as Dell Model—selling computers and other equipments directly to customer and build-to-order strategy thereby eliminating the intermediary margins and inventory costs. “Management and employees are committed to cooperating as a team for the purpose of profitability and gratification of a job well done” and community satisfaction “We will provide jobs in a clean. From very inception the company is providing superior value to its target market by providing latest technology at competitive prices around the world.

1. Most of the computer manufacturers belong to US and the country government is taking huge efforts to facilitate the business. PEST Analysis: Dell’s environment consists of uncontrollable forces that directly or indirectly influence an organization’s ability to achieve a desired result.who sold their products directly to customer and those who use intermediary channel to distribute their products. Economic Factors: .1. This offers exciting opportunities across the world to manufacturer like Dell.1. and IBM etc. In order to capitalize the growing needs of the market the government of US has strengthen its ties with China in order to exploit the comparative advantage of the country in the form of low labor and technological cost. The political instability started after the 9/11 has affected the market conditions all over the world.2. Political Factors: The political environment of the business has pivotal effects on the performance of the business in the quest of achieving its strategic goals. 1. Acer. In the words of Kotler and Armstrong “marketing environment consists of the actors and forces outside marketing that affect marketing management’s ability to build and maintain successful relationships with target customers” (Kotler & Armstrong.1. HP. These influences create both opportunities and threats for a manager. 1. 2003). 1. We will use the PESTLE analysis for determining the DELL macro environment analysis. Toshiba.

Afghanistan and other parts of the world the GDP of various countries have shown a very low growth that have resulted in almost stagnant per capita income. The computing technology is leading the change from the front by offering exciting opportunities for advancement in technology. Inflation all over the world has surged to all time high.The economic environment has gone through tremendous changes after the advent of 9/11. Manufacturer across the industry are trying their level best to .4. This translates into various economies. and low fixed costs. Technological Factors: Due to advent of the information technology the world has condensed to global village. Due to huge expenditure on war terror fought in Iraq. and now a global culture is arising meaning the presence of universal segment having the same values. The condition stabilize relative in year 2006 and 2007 but after insolvency of Lehman Brothers and other giants of the US the economic condition all the world suffered. The interest rates are not stable due to huge fluctuation that arises from the instability in the financial situations. 1. This offers exciting opportunities to various organizations including computer manufacturer in the form of standardized product development offers across the world with no adaptation.3. Companies that were considered as giant in the market are now myths of the history. In fact the event has completely changed the economic conditions of the world. meaning change in attitude towards foreign brand.1. likes and dislikes and other norms across the world.1. Technology has enabled the various manufacturers to enjoy low cost advantage and better quality. 1. Socio-cultural Factors: The values across the continents are changing with the passage of time.

2005). 1. This probably the reason that new firms find it . Gateway etc. as the market type can rightly be cited as oligopoly. IBM. According to Porter “the nature of competitiveness in a given industry can be viewed as composite of five forces.2.1. potential development of substitute products. HP. The industry contains players like Dell. 1. Moreover the demands for the industry offerings are increasing with the passage of time due to extensive use of Internet and World Wide Web. The competition in the market is based on price and competitive advantage. Rivalry Amongst Existing Competitors: The personal computer industry from the beginning is inclined toward consolidation. Threat of New Entrants: Every player tries its utmost to beat and outperform competitors by producing the latest technology and then price them competitively. and buyers.2. 1. The relationship of Porter’s five forces model for Dell have been depicted in appendix 1 accompanying the essay. bargaining power of suppliers and bargaining power of consumers” (David. potential entry of new competitors. Toshiba. It helps in understanding the strengths of the company in the market against the competitors. Five Forces Analysis The Porter's five Forces model is a simple and powerful strategy analysis tool that helps managers to know where the control lies in a company situation.2. In the following we will explore the five elements that constitute Porter’s five forces one by one and evaluate their impact on Dell in particular and personal computer industry in general. suppliers. rivalry among competitive firms.2.offer innovative products at competitive prices.

Traditionally the threat of substitutes is very high for Dell.2. 1. 1. In additional to absence of brand loyalty. the switching cost is very low in the industry because most of the systems are based on the Intel processor. Moreover. Bargaining Power of Suppliers: Traditionally the bargaining power of suppliers is also very high in the computer market.4. This is due to the fact that there are very few suppliers who supply the major components of the computer. For example the major suppliers of microprocessor are Intel and AMD. They are almost having the monopoly over the market.very hard to enter the market and the existing competitors trying their level best to either maintain their market.3. Moreover the organization will bear significant switching if the decided to change the component part suppliers.2. 1. customer also feels comfortable with backward integration and building their own system through selecting the individual components manufactured by different producers. The computer industry has traditionally experienced similar products produced by the different manufacturer with a very little distinction between a computers produced by one manufacture . Substitute products: Usually the availability of substitute does affect the sales and profitability of the computer and its various components to huge extent. Bargaining Power of Buyer: In the personal computer industry the bargaining power of the buyer is very high due to the fact that there is very less amount of brand loyalty in the market because most of the manufacturer produced identical products.5.2.

with that of other. In order to stay competitive in the market all the players should continuously innovate their offerings according to the latest trends of the market. while other are trying to produce aesthetic design.html. . superior product performance. Some of the weak competitors have disband their production while others (HP and Compaq) have consolidated their business due to decreasing margins with the passage of time and economic crunch that have started after the insolvency of Lehman Brothers. As depicted in Figure 1 the customer now Requires solution and convenience as compared to technology and The competition between the rivals can be rightly cited as oligopoly because almost all the major producer manufactures identical products. Figure 1: Customer Preferences: adopted from http://www.nngroup. 1. Most of the competitors are trying their level best to differentiate their offerings from the competitors in order to reduced value for their consumers. 2010). ease of use. The Industry Life Cycle: The computer industry as a whole has entered the maturity stage of product life cycle (Norman.3.

innovative technology and competitive pricing. price signaling and non-price competition in the market by constant development and modification of new products. Dell is working on this end by developing new and improved personal computers.1. User friendly website 5. laptops and other technological products (Dell. HP and Compaq has now realize that cutting the prices for HP and Compaq products will not translates into increase in the market share for the merged organization and will led to decrease in the margin for the company because Dell will follow the same strategy within no time. Latest Technology 6. Price for Performance 4. Direct Sales Approach. 1.SWOT analysis: Strengths 1. Dell’s strategy to produce constantly innovative products has helped the company by beating the competitors on non-price factors. Dell use cut-throat competition strategy by matching even offering lesser price in some cases as compared to HP and Compaq. Market Leadership 3. 2. Non-availability in Retail Segment 4. Neglecting the College segments 3. Merger of HP and Compaq .4. Price leadership also helps Dell to attract huge margin for the company offerings.Competitors Analysis: The competitive strategies developed by Dell help the company to realize its mission by price leadership. Reliance on Corporate and Institutional Sales 2. These new product developments help the company to boost its market share and differentiate the company as distinctive company that offers value to customers in the form of improved product performance. Customization Weaknesses 1. 2009).5. Changing Consumer needs 5.

Outsourcing Threats 1. Volatile Market trends 2. Global Financial Crises 3. Untapped Market 2. Emergence of China and Indian IT giants 7.Opportunities 1. International Expansion 5. Slowdown in Economic Growth 4. Business Diversification 6. Increase usage of Internet 4. Price Wars . Technological innovation 5. Growing demand for Laptop 3. Slowdown in Industry growth rate 6.

In addition to this Dell design its products according to wishes of the target market (build to customer specification) that allow the company enjoy superior customer value and brand loyalty. . The value that the company creates for its customer b providing them superior technology. superior performance and technical support creates an enormous value for the offerings of the company. The company thus has the ability to offer its products at significantly lower prices than its competitors in the market. 3. Dell has the ability to produce superior performance products at a very low cost due to its status in the market because the company enjoys various types of economies which are not at the disposal of other players in the market. 2.1. Moreover Dell direct sales to customer by using its website is cited as the ideal strength that the company posses that is hard to imitate.Part 2: Internal Analysis: 2. The company follows variety of pricing strategies depending on the market conditions. The objective of the pricing policy is to create happy and satisfied customer profitably. Dell charge competitive prices for its various products in the market. The company ability to coordinate its various functions to produce exciting products is still another core distinctive competence that helps Dell to stand apart from competitors. aesthetic designs. Dell arrive its competitive advantage from three dimensions that are: 1. Dell’s Internal Analysis: Distinctive competencies are the core benefits that Dell enjoys in the form of low cost and superior product performance.

besides providing customization of the products according the needs of the market. The company website have been integrated in such a way that it helps Dell to market their product on the internet. It means that a customer is free to select the component parts of the computer he wish to have (SUIT101.1. 2. the processor. Dell differentiates their laptops and PC’s many different levels including direct-tocustomer model. This integrated process allows the company to use standardized policy across the world and enjoy various economies. and direct customer interaction in diverse marketplace. For example a customer may select the Hard Desk capacity. Thus some of cost saved by using the method is passed on to consumer by offering valued product at competitive prices. 2.2. Reliability.4.3. Dell’s Critical Success Factors: 2.4.2. 2010). Customization: Dell also offers the customization services to individual extent.2. 2. Price for Performance: Dell use an integrated process management system that coordinate the company process from procurement to distribution and technical support to ultimate customer. building better-quality performance and up-to-date technological products. RAM etc according to his own sweet well. Direct Model: The company use direct sales approach that has enabled the firm to enjoy direct relationship without any intermediary with business and organizational customers. Service and Support: .

This has helped Dell to enjoy unique value in the eyes of customer as no other company provides such type of services. and trustworthy customer services across the world that are available within 48 hours after lodging a complaint or problem with computer. .The company has differentiate its offerings from competitors by offering fast. reliable.

This is the root cause of problems that have start affecting Dell. IBM etc as Dell has its lost its differentiation (AJULA. With the passage of time. 2009). Dell should focus on offering real innovative product rather than just imitating competitors products. By doing so the competitors will not be able to copy the company strategy. this eliminates the company differentiation. because the outsourced firm provides the same component part to other competitors (Cuizon. 2009). Moreover the company should also consider some options like producing the proprietary . The strategy was once a very successful. However with the passage of time. and the competitor are taking steps to utilized this trend by following the Dell model of eliminating the traditional distribution system and focus on e-business. but keeping in view the present market conditions. and the company is losing its market share to competitors like HP and Compaq. Traditionally the company outsourced its various components parts from other organization in order to provide competitive prices to the customer.Chapter 3: Problem Diagnosis: Over the years. Moreover the company should re-consider its outsourcing strategy. One way to achieve this end is to get patents of its R&D efforts. the usage of internet across the world is increasing. Dell should now focus on another area that should be unique in the industry that will provide competitive advantage in form of differentiation to Dell. the management of Dell has devised some of the very successful strategies to guide the business towards the accomplishment of its mission. the company has failed to have a proactive approach to capitalize the opportunities provided by the macro environment and sustained its competitive advantage. but in order to achieve this objective the company needs to stop the extreme outsourcing strategy.

software in order to reduce its reliance on software giants. The strategy will also help the company integrate its offerings in a coherent way as did by Apple. .

Appendix A: .

com: http://www. from http://www. Dell SWOT.html SUIT101. (2005). P.htm Dell. (2010).nngroup. Retrieved March 28. R. & Armstrong. 2010. Prinicples of Marketing. (2003). 2010.. (2009).com/reports/life_cycle_of_tech.dellmfg. D.cfm/swot_analysis_of_dell_computers#ixzz0jO31D0Wv . (2010).htm Kotler. (2010). A. USA: Pearson. Dell Computer Corporate Global Strategies. G. Strategic Management Eight Retrieved March 27. 2010. from Strategic Business Planning suit101. Cuizon. (2009). USA: Pearson.Works Cited AJULA. Retrieved March (2009). from Dell Computer Inc: David. from Suit 101. Comparative Analysis of PC Market Leader. from American Jewish http://strategic-businessplanning.suite101. Dell. 2010. Dell Mission http://strategic-businessplanning. Strategic Options for Dell Computer: How Dell can Address Challenges and Threats. Retrieved March 27. Retrieved March 29. Retrieved March 28. The Life Cycle of Technology. from NN Group. 2010. F.suite101.

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