Case Study: Dell, Inc.

1. History of the company.

In 1983, Michael Dell started his own business while in college. The company he started was PC's ltd., which was the forerunner to Dell Inc. today. Dell started his business with a simple concept which is made to order computers. The computers were to be direct sales to consumers. Dell maximized his profits by bypassing distributors and retailers. Although he his product was sold by retailers he soon took the product out of the stores and continued focus on direct sales. Initially, Dell started selling computers by mail and phone orders then until 1994 when he started a website to sell his computers. At this point, Dell became the first computer company to have a website. By 1996, the website sells increased dramatically leading the company to be the largest retailer on the internet by 1999. As of today, Dell is the largest personal computer supplier in the world with under 18 percent of the global market.

2. Mission and Vision Statement Dell's mission is to be the most successful computer company in the world at delivering the best customer experience in markets we serve. Dell will meet customer expectations of highest quality, leading technology, competitive pricing, individual and company pricing, best in class service and support, flexible customization capability, superior corporate citizenship, and financial stability.

3. Strategies The strategies are unrivaled speed to market; superior customer service; a fierce commitment to producing constantly high-quality custom-made systems-heralded what has perhaps been the company's crowning achievement: an early exploitation of the Internet. One of the first companies to actually make money online, Dell is now selling more than $12 million worth of systems per day over

4. SWOT Analysis


He became the youngest Fortune 500 CEO in 1992. Dell was born in 1965. not a compute manufacturer.Dell is the World's largest PC maker. that there is the occasional product recall that can cause Dell some embarrassment. Weaknesses The company has such a huge range of products and components from many suppliers from a plethora of countries. based in India. Despite founder Dell's massive success. never by Dell. and founded Dell in 1984 with $1000 whilst studying at the University of Texas. and Customer Relationship Management (CRM) approaches to capture data on its loyal consumers. You can even keep track of your delivery by contacting customer services. Whilst this is a tremendous advantage in terms of business operations. Profits for the 3 months to July 2005 were in excess of $1 billion US. Dell has total command of the supply chain. The Dell brand is one of the best known and renowned computer brands in the World. It buys from a group of concentrated hi-tech component manufacturers. and to an extent is locked in for periods of time (i. Dell cuts out the retailer and supplies directly to the customers. Dell is a computer maker. For the last couple of years it has held its position as market leader (it took it from rivals HewlettPackard). allowing Dell to focus on marketing and logistics.4 million laptop adapters because of a fear that they could overheat. unable to switch supply dues to the lack of large suppliers in the World). Opportunities Kevin Rollins replaced Michael Dell in 2004 as Dell's Chief Executive Officer. The finished goods are then dropped off with the customer by courier. .e. PC's are assembled using relatively cheap labor. and then adds items and upgrades until the PC is kitted out to the customer's own specification. the company is reliant on a few large suppliers. causing electric shocks or fires. representing a growth of around 28%. Dell remained the company's Chairman. It uses information technology. Components are made by suppliers. new blood and a change in management thinking could lead the company into a new. and will be a tough act to follow. even more profitable period. So a customer selects a generic PC model. In 2004 Dell had to recall 4.

even sourcing the same or similar components from the same or similar suppliers. Dell is making and selling low-cost. Hewlett-Packard. As with all profitable brands. ultimately. Threats The single biggest problem for Dell is the competitive rivalry that exists in the PC market globally. but now also included LCD televisions and other non-computing goods. NEC and Fujitsu-Siemens. . to operating responsibly and. Cisco and 3Com could have an adverse effect on future financial results. Dell. IBM. Sun Microsystems. Porters Five Forces Model • The rivalry between existing sellers in the market. although a departure for Dell. Dell faces stiff competitive challenges ranging from low-cost PC manufacturers over-seas to technology leaders such as Cisco. Dell sources from Far Eastern nations where labor costs remain low. orders do have to be placed some time ahead due to their size or value. Remember. Re-branding and re-badging for retailers. but there is nothing stopping competitors doing the same . The recent cancellation of distribution agreements with Hewlett-Packard. 5. As Dell enters into new market segments like networking and printers. Although it is a very lean organization.Dell is pursuing a diversification strategy by introducing many new products to its range. low-price computers to PC retailers in the United States. to our team. Dell's commitment to customer value. execution concerns are heightened further. So Dell competes against iPod and other consumer electronics brands. This initially has meant good such as peripherals including printers and toners. being global in its marketing and operations. The Background section provides critical information and history about Dell's business world. gives the company new market segments to attack with the associated marketing costs. retaliation from competitors and new entrants to the market pose potential threats. to being direct. is exposed to fluctuations in the World currency markets. to winning continues to differentiate us from other companies. Lexmark. not a PC manufacturer. Dell is a PC maker. The PC's are unbranded and should not be recognized as being Dell when the consumer makes a purchase. Changes in exchange rates could leave the company exposed to potential loses in parts of its supply chain.

the United States is currently the leader in producing personal computers. compared with its computer-system peer group. In addition. Computer purchases represent a significant expense for both individual consumers and businesses. When the general economy weakens. product differences are difficult to establish. Despite the increasing role of brand identity. purchasers are likely to try and exert considerable energy to try and bargain down the prices with PC suppliers. Dell's financial results are highly dependent on tight supply-chain controls that support rapid inventory turns and extremely low inventory levels. One potential threat of new sellers in the market is a seller that can successfully control t the market in retail sales which will make it even more difficult for Dell to expand. PC manufacturers and distributors compete for these contracts and switching costs are low which will make price a key driver of PC manufacturers' success. so does a PC maker's bottom line. 6. from component short-ages to transportation • The potential threat of new sellers entering the market. As anti-trust agreements disallow imposters to produce similar fstype=ii&cid=153088 . • The impact of the suppliers on the sellers. Japan and Europe are also key players in this industry. Balance Sheet & Income Statement (as of current) Balance Sheet-see link. • The threat of substitute products becoming available in the market. price is likely to be the critical driver of unit sales. What serves as a greater threat is the global production of computers. Thus. the threat of substitute products is not an immediate threat to the computer industry. Any supply-chain disruptions. PC manufacturers often compete on price. In this Dell is better positioned to continue meeting buyer's price/performance expectations than competitors. as many consumers view computers as a commodity.http://finance. Macroeconomic forces play an important role in a PC manufacturers' success.• The bargaining power of the consumer. Businesses in particular are likely to have significant bargaining power as they often buy large quantities of computers at one time. In addition. however. They pose a threat to United States computer manufacturers.

Dell's success in France was particularly impressive. midrange servers. Dell has 27. Dell estimates that these markets combined represent another $128 billion in total addressable market that Dell will target. 4.http://finance.23 R. Look up recent changes which have occurred.Income Statement-see link. based on strong growth that was 20% higher in units than the rest .O. networking and printers. Last quarter alone. is still driven from the sale of personal computers. Work the following financial ratios: Liquidity: Current Ratio and the Acid Test Leverage: Debt to Owners Equity Profitability: Dell is in various stages of a product expansion strategy that will further extend its product reach into storage.5%. (Return on sales)-.7% in Asia Pacific and fstype=ii&cid=153088 7.S. either laptop or desktop computers. growing share from 9. Use the Internet.5% in Europe.1% in Japan.S. (Return on equity) as of current--66.P. 4 PC supplier to the No.7% to 10. New Product Expansion-The majority of Dell's revenue. 2 PC supplier. We consider the international PC market to be untapped potential for growth.Dell has a return on sales of around 8% R.1% Activity: (Inventory Turnover) as of current 78. (Earnings per share) as of current—1. However.3% 8. Dell saw measurable international success in EMEA. approximately 70%.O. beyond the $172 billion PC market. compared to only 10. the Middle East and Africa (EMEA). International Expansion-Approximately 70% of Dell's revenue comes from sales into the Americas. the company moved from the No.2% PC market share in the United States.E.

Rather. This compares to less than a 20% consumer mix for Dell. Gains in PC Market Share. Germany. More recently. More recently. according to IDC. Dell's growing brand awareness and creative marketing campaign have been successful in expanding its penetration within the consumer market. If Dell succeeds in increasing its worldwide PC market share to 30% from 15% in the next five years. Dell believes its aggressive pricing strategy. strong brand. be implemented. France. China and Japan.Based on its direct sales strategy. in which Dell reinvigorates its differentiation strategy. Consumer Expansion. This strategy does not make unnecessary or drastic operational changes which have the potential to disrupt the successful corporate culture and structure. Dell has averaged 60 basis points of PC market -share gains per quarter in the last several quarters.Dell has only a 15% share of the worldwide PC market. the recommended strategy identifies and improves several existing competencies which have made the com . Dell has focused international expansion in four key markets. Dell is expanding its consumer PC market share through its marketing campaigns. With this strategy.of the industry. existing organizational resources and wherewithal can be leveraged to develop a clear differentiation advantage. 9. the company could double its annual revenue to over $62 billion. direct model. consumer PC shipments accounted for about 33% of the worldwide PC market. the vertical market segments for Dell tends to be more heavily tilted toward education. It is recommended that the final alternative. government and enterprise markets. new white-box initiatives and international expansion plans should contribute to continued market -share gains within the PC market. Make recommendations for this company based on numbers 1-8. Last year.