1. Heilbronn University
Internationale Betriebswirtschaft - Interkulturelle Studien
Internationale Betriebswirtschaft - Osteuropa
Strategic Analysis: Dell Inc.
Specialized in PC segment, U.S. Market
submitted to
Herr Prof. Dr. Christian Buer
from
To Tran Duc Nha (178129)
Nguyen Viet Hoa (178121)
Summer Semester 2012

2. I
Table of contents
Table of contents.................................................................................................................................. I
1. Introduction................................................................................................................................. 2
2. External analysis.......................................................................................................................... 2
2.1. PEST Analysis............................................................................................................................ 2
2.1.1 Political factors................................................................................................................... 2
2.1.2. Economic factors............................................................................................................... 3
2.1.3. Social factors ..................................................................................................................... 3
2.1.4. Technological factors ........................................................................................................ 4
2.2 Industry analysis........................................................................................................................ 4
2.2.1. Bargaining Power of Suppliers .......................................................................................... 4
2.2.2. Bargaining Power of Buyers .............................................................................................. 5
2.2.3. Threat of Substitute Products ........................................................................................... 5
2.2.4. Threat of new entrants ..................................................................................................... 6
2.2.5. Rivalry amongst existed competitors................................................................................ 6
2.3. Market structure ...................................................................................................................... 7
3. Internal analysis............................................................................................................................... 8
3.1. Dell’s vision............................................................................................................................... 8
3.2. Corporate structure.................................................................................................................. 9
3.3. Dell’s business model............................................................................................................... 9
3.3.1. Direct model...................................................................................................................... 9
3.3.2. Customization and elimination of inventory and intermediaries ................................... 10
3.4. Range of Products .................................................................................................................. 11
3.5. Co-ordination with Suppliers.................................................................................................. 12
3.6. Excellent service..................................................................................................................... 14
3.7. Turnaround in Dell’s strategy................................................................................................. 15
4. SWOT analysis ............................................................................................................................... 17
4.1. Strengths ................................................................................................................................ 17
4.2. Weaknesses............................................................................................................................ 18
4.3. Opportunities ......................................................................................................................... 18
4.4. Threats.................................................................................................................................... 19
5. Conclusion..................................................................................................................................... 19
6. References................................................................................................................................. 21

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1. Introduction
Dell was founded by Michael Dell in 1984. The products and services range
includes enterprise solutions and services, software and peripherals, client
products and financial services. Dell Inc. has its corporate headquarter located in
Texas yet it business is operated worldwide through the network of subsidiaries. In
spite of wide products and services range, Dell highly focuses on selling computer
systems directly to customers, including enterprises and end customers. The core
value of Dell’s business strategy is based on the direct customer model and
effective supply chain management.
The aim of this report is to study the unique business model of Dell, its competitive
advantages and how Dell makes use of them to achieve considerable success over
the previous decades. The analysis will be conducted via two mains part which are
internal and external analyses. The SWOT analysis and further developments will
also be presented at the end of the report as a consolidated part of the preceding
parts.
Within the scope of this strategic analysis, the paper is mainly focused on the PC
segment in the U.S. market.
2. External analysis
2.1. PEST Analysis
2.1.1 Political factors
The ever-changing nature of the technology industry is crucially dependent on
political environment. According to Dell annual report in 2011, 52% of its
consolidated net revenue came from inside the U.S., which means that
government regulations play an important role in the performance of the company.
In the recent years, there have been many uncertainties in the political environment
including political instability notably after the 9/11. In the international market,
challenges emerge in countries without political stability. Many countries try to

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protect their domestic manufacturers by enforcing restrictive policies which prevent
or limit foreign companies from entering the markets. There are few choices for
foreign companies to enter those markets. One of which is to launch a joint venture
which local companies, with whom they have to accept minor shares and share
their technological know-how. However, as globalization is taking place worldwide,
there are many governments who actively try to ameliorate political situations to
attract investment from abroad, and thus, create considerable opportunities for
foreign companies especially those operate in the technology field.
2.1.2. Economic factors
The economic environment refers to the nature and trend of the economy including
economic structural anatomy, economic policies, organization of the capital market
and business cycles, etc., in which the company performs. As the computer market
in the US has gone through the mature stage and the majority of computer sales
are to replace or upgrade existing computers, this bring a negative effect on Dell’s
sales within the US, Dell’s main market. However, Dell still expects a growth of ten
percent in the following years in the computer industry (The Dell Company – A
strategic analysis, 2006). Thus foreign markets and their economic factors play a
leading role in fulfilling Dell’s growth objective. Dell annual report in 2011 cited:
“Our future growth rate and success are substantially dependent on continued
growth of our business outside the US, including in the key emerging countries of
Brazil, Russia, India, and China”. This growth is substantially affected by economic
situation in the specific country or region. Besides growth opportunities in foreign
markets, there are increasing risks which Dell might encounter for instance
changing inflation rates, currency fluctuation, and exchange rate of home currency.
2.1.3. Social factors
Social forces have a big stake in shaping the nature of the computer hardware
industry. The social environment determines the value system, which affects the
way business is practiced. The trends in social environment are sometime the

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main cause which decides the size of the market. Furthermore, the demand on a
specific market is also dependent on the educational standard of that country or
region. Moreover, as computers have become an integral part of modern life, more
and more younger people in immature markets are now the main target group of
computer companies. Additionally, brand name has a strong influence on buying
decision. Nowadays, people do not only buy something just because it looks nice
or it has fantastic features but also to acquire the value originated from the brand
name.
2.1.4. Technological factors
Technological factors have a significant impact on the technology industry.
Technological factors affect every company in the industry in two main dimensions:
development of new products or sales of current products. The development of
internet globally has enabled companies to approach closer and easier to potential
customers than ever. Moreover, the advance in technology is a prerequisite which
every company in the computer industry must possess as a competitive
advantage. Regarding the high-end computer market, there are numerous
products and services which might confuse customers in making buying decision.
There are obviously rooms for development in technology, which creates plenty of
opportunities for computer companies. However, as they are all competing in a flat
world, they always have to encounter the risk of imitation.
2.2 Industry analysis
2.2.1. Bargaining Power of Suppliers
Bargaining of Suppliers in PC industry is relatively strong. In particular, the Central
Processing Unit (CPU) is a core component for PC manufacturer. CPU is vital
because it decides how the PC performs. Improvements or innovations in PC
quality almost always come as a result of innovations in CPU areas. Because of

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the importance of CPU, most of the profit in PC industry is given to CPU providers.
Virtually, PC manufacturers can only find CPU from one of these following two
suppliers: Intel and AMD. In short, CPU suppliers have a strong bargaining power
toward PC manufacturers. PC manufacturers cannot compete with CPU suppliers
but to cooperate with those suppliers because the production process of PC is
dependent heavily upon CPU.
2.2.2. Bargaining Power of Buyers
The bargaining power of buyers in US's PC market is also to certain extent strong.
PC in US has been increasingly commoditized as the manufacture-cost plunged
significantly since 2000s. Also consumers have a wide range of choice in the PC
market with at least 5 major brands: HP, Dell, Apple, Toshiba, and Acer.
Additionally, consumers also have a wider range of choice to meet the needs that
once only PC can fulfill: texting, email, music, web-surfing, gaming, etc. It is
because of the emergence of a plethora of hi-tech gadgets as superior
substitutions to a PC (which is mentioned in the substitution part). Consumers
nowadays are not in need of PC to a high degree. To sum up, the bargaining
power of buyers in US's PC market is strong.
2.2.3. Threat of Substitute Products
To define the substitutions for PC, consumers’ usage of PC need defining first. On
their PC, customers process document, listen to music, web-surf, read, email, text,
watch video, play games. All of those functions, nowadays, can be done on many
other devices which might be cheaper, lighter, smaller, and faster, for example:
smart phone, iPhone which one can text, surf web, etc.; music players such as
iPods, game console such as Xbox, Sony Play Station, etc. Perhaps the only thing
a PC can do comparatively better than those gadgets is word-processing with the
keyboard which is not always what consumers look forward to doing on their PC. In

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short, PC industry now has a very wide range of substitutions making PC relatively
elastic with respect to price and increasing customer’s bargaining power.
2.2.4. Threat of new entrants
The PC industry of US has a low risk of new entrants. PC is no longer an extreme
high-tech product. A simple PC nowadays does not have high technological
requirement. Thus, the start-up of a PC vendor is not too high, provided that a
company has sufficient funds and gets support from input suppliers (for the CPUs
and other parts). On the other hand, there is a certain type of barrier, in regard of
economies of scale which plays an important role in PC industry generally today.
Price competition in PC industry has been and will still be fierce as the producing
cost of it keeps decreasing which makes the only way to survive is to attain
economies of scale. Another barrier for entrant is the distribution channel; it
determines the vendor's access to customer. Without an established distribution
channel, it is not possible for new entrant to compete with the existing players. In
short, the threat of new entrant in USA's PC market is quite low due to the
challenges in achieving economies of scale and setting up distribution channel.
2.2.5. Rivalry amongst existed competitors
Low threat of entrant implies that a few big players in the industry enjoy the
business. There only five major players in US PC market. at the end of 2011, HP,
Dell, Apple, Toshiba, Acer group in order are the 5 biggest player in US PC market,
accounted altogether for 87.6% market share. Rivalry amongst competitors in
American's US industry is intense, HP until the end of 2011, held the No. 1 position
with 23.1% market share, with Dell closely at 2nd place with 22.4% market share.
The market also witnesses a very strong growth of Apple amongst the top five
vendors. Also Lenovo’s US is looming as a new threat with shipments growth of
40% year-over-year. Yet, Lenovo’s US is not large enough for it to break in the top
5 ranking in US market. (Gartner, January 2012).

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2.3. Market structure
As mentioned above, the 5 companies: HP, Dell, Apple, Toshiba, Acer possess
more than 80% of the US Personal Computer market. The market where there are
a few companies that dominate the market is an oligopoly one. Personal computer
market in US is therefore an oligopolistic one. The commoditization of the personal
computer has become a powerful driver in the cost structure of this industry in
general. In the particular case of US, the cost has been driven down in the past 10
years in the US market. The figure below shows the general trend of computer
price in US, period 2008-2010.
Figure: Computer Price Index in US from the Bureau of Labor Statistics
Computer hardware industry is still a very prospective business emerging
countries, such as Latin America and non-Japanese Asia. However, specifically in
the PC market of US, the industry has entered the mature stage in its product life
cycles with decreasing growth rate. One question likely to be posed is when the
personal industry will come to the decline phase, paving the way for a new
industry. According to Raymond Kurzweil in his book "The Singularity Is Near:
When Humans Transcend Biology" (Kurzweil, 2006), personal computer industry
probably will come to an end or undergo a transformation into what is not the

9. 8
Personal Computer we know today. There is a relatively high possibility that few
computers will prevail in home. Instead, computers will become gadgets or devices
that people dress on, or even implanted, for example, in eyeglasses, with the retina
as the screen (Kurzweil, 2006). Innovation and advance in technologies are born
every year, and become the powerful engine to propel forward the personal
computer industry, even into its decline as Kurzweil implies, and at the same time
making the industry fiercer than ever.
3. Internal analysis
3.1. Dell’s vision
Dell’s vision provides a framework to its corporate strategy. Dell’s vision also
consists of values which the company is trying to pursue. Dell’s official website
cited: “Dell is committed to being a good neighbor in the communities we call
home. We must continue to grow responsibly – protecting our natural resources
and practicing sustainability in all its forms – and improve the communities where
we live and work through our financial and volunteer efforts." The company’s vision
is primarily based on the concept built-to-order and selling directly to customers. In
2007, Dell launched a campaign of using the new slogan “Yours is here” which
briefly means that the company’s customization system is high possible to satisfy
all customers’ requirements. Dell aims at creating a force of loyal customers
through its superior experience in field of creating values. Dell is committed to its
direct relationships with customers and providing them best products with
outstanding technology and excellent services. Dell has been continuously trying to
build an image of an easy-to-use, easy-to-buy products and superior support. It is
crucial that Dell possesses its competitive advantages which are latest technology,
PC customization, loyal customers and best-in-class service to maintain its leading
position in the PC market.

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3.2. Corporate structure
Dell’s organizational structure is highly results driven. With the number of
employees up to 55.000 people, Dell needs a clear structure in which everyone
can effectively collaborate. The flat corporate structure enables Dell to stimulate an
open environment for communication. Employees at Dell excessively benefit from
this structure since it gives them freedom in doing their works.
Dell applies the matrix organizational structure which is function-based (marketing,
finance, human resources, strategy), customer-based (consumers, small and
medium businesses, public institutions and large enterprises), and market-based
(EMEA, Asia-Pacific and Japan and Americas).
The operation of Dell is put under the board of directors, in which Michael Dell
serves as the chairman of the board and CEO of the company. There are five
committees, which set up by nine members of the board of directors, supervise
specific issues of the whole corporation. Those committees include Audit
Committee, Compensation Committee, Finance Committee, Governance and
Nominating Committee and Antitrust Compliance Committee
This structure was the result of the restructuring and management changes in late
2008. Dell’s CEO, Michael Dell referred to the changes as “a response to customer
desire for faster innovation and globally standardized products and services.”
3.3. Dell’s business model
3.3.1. Direct model
The core value of Dell’s business model is selling directly to customers. This direct
model has significantly changed the computer industry since Dell introduced it in
1984.
Back in 1984, the whole PC industry was utterly integrated to hardware companies
like IBM and software companies like Microsoft. Holding the handle of the knife,

11. 10
IBM and Microsoft made huge profits out of their products and services. The
connection between providers and customers were weak which brought difficulties
for both parties in matching supply and demand. In terms of distribution channel, a
certain company in PC industry which uses indirect distribution channel, the
process of producing a computer and delivering it to the final customer has to go
through five participants including suppliers, PC makers, distributors, retailers and
final customer. The contemporary trend was to display the tailored computers in
the stores and wait for customers to come. This means that there were few
interactions between PC makers and customers.
Dell chose a different way to do it, the well-known direct distribution channel. In this
direct model, products are delivered straight to customers by Dell. According to
Ireland (2009), in the manufacturing process, Dell sources components directly
from suppliers, assembles them according to customer specifications and then
delivers to customer free of charge. The ordering process is done via telephone or
its customization platform www.dell.com. This direct model was proven to be an
effective one for years because customization, fast delivery and low price gave Dell
a higher profit margin over IBM and HP.
Using an effective business model, within 12 years of development from 1984 to
2006, Dell advanced from a nonentity to the market leader. The market scenario in
2006 was dramatically changed with Dell topping the list of 10 most admired
companies in the U.S. Dell’s market shared in U.S. market even reached 33%.
3.3.2. Customization and elimination of inventory and intermediaries
Dell’s customization system allows customers to specify every component from
software to hardware they want to have in their computers. The system also
enables quick process from both parties. Customization has become a competitive
advantage for Dell since it can easily listen to its customers’ requirements, and
thus, this advantage helps Dell to match its supply with demand of the market. This

12. 11
customization model is mutually related with the direct business model as it
shortens the distribution channel and eliminates all inventories.
Moreover, customization gives Dell a means to eliminate all inventories. Compared
to its competitor HP, which has three to four weeks of inventory, Dell only has three
days of inventory. This effectively lowers inventory costs to the lowest level in the
industry. Later when the PC market became matured, the elimination of inventories
and intermediaries allowed Dell to cut the prices and gain market share while still
maintaining high profitability. (Hill and Jones, 2007)
3.4. Range of Products
To compete in an intensely competitive PC industry, Dell employs an extremely
flexible direct distribution system to aim at certain segments of products,
geographical areas, and customers that yield the best margins. Quote former CEO
Kevin Rollins: “We cut the market and then cut it again, looking for the most
profitable customers to serve,” (Grant, 2010).
This illustrates lucidly when looking in detail at how Dell segment its customers in
the sphere of PC. Dell products in PC business areas are divided mainly into
laptops and desktops for 5 groups of customers: for home, for small and home
office, for small and medium business, for education government and healthcare,
for large enterprise. Within each of those are another layer of customer
segmentation based upon their wants and needs they expect to fulfill in using a
PC. However, the marketing effort of Dell essentially channel into the Business-to-
consumer group, namely the first 3 group of customers: home use; small and home
office; and small and medium business.
For home use, with Laptop and Desktop, Dell characterizes the needs and desires
of several sub-category of customer: everyday computing; intricate design; high-
performance; gaming. For everyday computing, Dell offers often the Inspiron series
which stress the benefit of efficiency and effectiveness in handling daily task. To
customers that yearn stylish design, Dell provides ultrabooks, in the line of laptop

13. 12
category, which are ultrathin and powerful, including Inspiron and XPS series; in
the line of desktop, Dell offers a All-in-One Space-Saving type, also from Inspiron
and XPS series, all of which consists of only a big screen with all the components
inside, a keyboard, and a mouse. To the fan of high-technology, Dell presents, also
both in laptop and desktop lines, series of products which place emphasis on high-
performance, equipped with the latest, leading-edge technology (Inspiron and
XPS). And finally to gamers, Dell produces a special line of laptop and desktop
named Alienware particularly designed for gamers with “bleeding-edge graphics”,
and performance.
For small and home office, Dell supplies products with different value proposition to
customers. In the category of laptop for small and home office, Dell pitches
Inspiron with Style and entertainment; Vostro with mobile value and service support
as premiums; Latitude deemed as level of high performance and durability; and
XPS – focusing on advanced technology. For desktop, Dell offers 3 series: Vostro,
OptiPlex, Dell Precision. Vostro series centers on the ease of use and economical
price. OptiPlex series aid users work in networked environment. Dell Precision
series features advanced applications and graphics with ISV-certified reliability.
A few observations can be drawn from the way Dell segments and presents its
laptops and desktops to customers. Dell produces different series of laptop and
desktop to cater to the variety of consumers needs. Besides, Dell also presents the
same series of PC slightly different for different group of consumers in order to
stress the salient benefits that matter most to each certain type of consumer.
3.5. Co-ordination with Suppliers

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Above is the diagram of the Value Chain in Personal Computer industry, it shows
that PC manufacture company like Dell mainly purchase the input component from
suppliers then assembly and sell the products to customers. In the progress of
globalization, modern laptop become a typical example of a globally spread value
chain component. Location for each part of the process is selected in order to
benefit from places with best combinations of cost and technical know-how. The
trade-off, apart from higher inventories or cost of transportation, is primarily the
cost of time. To attain Just-in-time scheduling, physical proximity is required
between production activities. In the wake of 2008 crisis, a new need has arisen:
distant supplier should have enough access to credit which incurs another
disadvantage on globally dispersed value chain. (Grant, 2010).
Unlike companies that follow a globally spread value chain, Dell Computer forgoes
the cost advantage of globally dispersed value chain and focuses instead on
integrated operation. That permits Dell to have fast access to final market, enabling
it to compete on speed and delivery reliability. (Grant, 2010).
Dell takes advantage of the Internet to develop a constructive relationship with their
order, part of what helps Dell attain superiority in its distribution channel with Just-
in-time inventory. The suppliers and Dell really have to engage and keep close
eyes on the operation of each others. Dell uses planning program to forecast the
volumes of component requires for the assembly of their computers. The
information system then passes the forecast onto Dell’s suppliers which, after
analyzing the data, would respond to Dell with estimation of cost, and their
production plan. (Solis, 2001).
The information system Dell employs to attain their supply chain excellence
performance is the “i2” supply chain management... “i2 streamlines the supply
chain by providing component suppliers and Dell planners with global views of
product demand and material requirements. It also provides real-time factory
scheduling and inventory management, so employees can generate key reports

15. 14
based on accurate and timely data, pinpoint inventory on the factory floor, and
receives supplier deliveries on a true just-in-time basis (i2 supply chain
management systems).”
This system enables Dell to have swift turns of manufacturing schedule every two
hours, helping Dell to effectively manage the huge amount of customer orders. The
information on the schedule is also accessible to Dell’s suppliers with high
accuracy and celerity. That allows suppliers to increase their efficiency, avoid
excess in input. Suppliers are also bound to respond with speed to the information
and deliver the required materials to specific locations for product assembly.
(Soral, 2004).
In short, one core element of Dell competitive advantage lies in the superior supply
chain management Dell forges by utilizing technology to optimize the information
flow, and information interpretation between Dell and suppliers.
3.6. Excellent service
Services after purchasing are one critical part in Dell strategy in PC industry; Dell is
also well-known with each excellence service. In PC service after purchase, Dell
offers support in 2 ways: (1) customer log in online and go through a troubleshoot
process to see if the customer can solve the problem with the guide from Dell on
drivers, technical support and other resources; (2) customers can choose to call a
service center or a “solution station” for help. It is in the “solution stations” that Dell
substantially gains customer satisfaction.
In fact, the customer technical support operation in Dell is outsourced to
independent companies which cost them a lower level of salary. Dell excellent
customer service is carried on by an Indian specialist company. Inside US, Dell
also outsources to specialist companies in spheres of PC maintenance and repair
function. Excellent help over phone, if there is defective part the computer; a

16. 15
maintenance person will come to the customer and replace that defective part
within 24 hours. (Hill and Jones, 2007).
In addition to helping customer, operation in service also serves as a bridge
between Dell and its customer, and the performance in fact of its products.
Specialist companies also have the responsibility to report data of problems and
product failure to Dell in order to help better design of product. Outsourcing service
operation, thus, brings to Dell not only the cost advantage but also the benefit of
saving the time and effort to invest in its competitive edge while still retains
excellence customer service and the opportunity for improvement from customer’s
feedbacks. (Hill and Jones, 2007).
3.7. Turnaround in Dell’s strategy
Starting from 2000, the U.S. PC market became matured. Companies in the
industry must seek for different strategies to improve sales. Dell decided to shot in
the direction of business customers. After the dotcom bubble burst, there was a
fear in investment in IT, which dramatically reduced the profit of Dell. Dell began to
reduce price to secure the situation. Dell also tried to diversify into other areas and
new markets.
Dell experienced decreasing profitability and negative growth in the U.S. in 2006.
Customer support and product quality were negatively influenced since Dell
decided to cut costs to meet its financial targets. Operating in the most ever-
changing industry, the existing approach seemed to be obsolete. The modern
world needed both branding and innovative products yet Dell could not provide
either of them. The highly successful strategy in the past could not ensure a bright
future for Dell.

17. 16
Another point that added to the downturn of Dell was its products positioning.
While its competitors were trying to provide high-end products and services, Dell
still stuck with its lower-end models.
In order to overcome the concurrent challenges, Dell’s decision was to expand their
business to other segments or markets. The markets for servers and printers,
which were new to Dell, were the choice since they had higher margins than PCs.
As stated in the annual report 2011, Dell also has business in servers and storage,
mobility products, software peripheral categories. Those products and services
moved Dell from a purely PC maker to a diversified IT company.
In 2003, Dell started to extend its product lines to the consumer electronics market.
Plasma TVs, MP3 players and digital cameras were introduced. Dell also tried to
combine PCs and consumer electronics. According to Ireland (2009), the XPS line,
a high-end sub-brand in the media PC segment, was a representative for this new
direction. Regarding the disadvantage in technology innovation, Dell invested more
in R&D and kept on improving its innovative products toward the industry trends.
However, an increased emphasis on R&D would distance the company from its
core competencies. Increasing R&D changes its focus from mass customization
of mature products to smaller batches and product introduction
and growth. Additionally, it would limit the company from utilizing its direct sales
model, as new products require multiple distribution channels to ensure they are
available to customers as quickly as possible. Currently Dell's strength is the
sales of mature products through mass production, bringing quality and price
without the cost of R&D
Realizing that the U.S. PC market had matured, Dell expanded its operations to
new markets notably BRIC countries. However, Dell’s direct selling business model
seemed to be not effective in some markets since customers prefer to see and

18. 17
examine the products before buying or because the lack of Internet in those
markets.
4. SWOT analysis
Strengths
 High brand recognition
 Effective business direct model
 Effective supply chain
management
 Loyal customers
Weaknesses
 No proprietary technology
 Problems with direct model for
home users
Opportunities
 Discerned customer
 Opportunity to better exploit the
existing succes model
Threats
 Demanding market: quality, price
 Price differentiation is no longer
an advantage
 Challenge to look for new way to
continue differentiating the brand
4.1. Strengths
Dell is obviously one of the best renowned computer brands in the world. The high
brand recognition puts Dell among the first choices of customers when they
consider upgrading or purchasing new PCs.
The direct business model itself is considered to be the greatest asset of Dell.
Utilizing this model, Dell can directly reach customers without any intermediaries.
The direct model stimulates communication between Dell and buyers, thus, makes
Dell easier to match its supply with customers’ demand.
As Dell is not a manufacture, it buys components directly from suppliers and
assembles the computers using cheap labor, and then Dell delivers them directly to
customers according to their specifications. The direct model helps Dell have a
close-knit relationship in both directions, suppliers and final customers. This allows
Dell to lower the cost of inventory and have a better understanding of its supply

19. 18
chain. Moreover, Dell’s customization system is wholly based on the Internet,
which makes customers easy to access and thus enhance Dell’s efficiency.
In terms of targeting markets, Dell has a long-standing clientele which is the
business executive category. This provides a firm foundation for Dell’s stable
revenue for since most of its sales revenue comes from large business and
government organization.
Furthermore, the excellent customer services ensure Dell a long-term relationship
with its loyal customers.
4.2. Weaknesses
The major weakness that might hinder Dell’s performance is that Dell has no
proprietary technology over its competitors. This is the result of low investment in
R&D and the low-cost strategy. There was a voluntary product recall in 2004 due
to faulty batteries. Since the battery technology of Dell PCs belongs to Sony, it
might negatively influence Dell’s image if problems are caused by Dell’s partners.
For home users, Dell’s direct method and customization approach might pose
some barriers since it is impossible for customer to touch and try the product
beforehand.
The huge range of Dell’s products and components are greatly dependent on many
suppliers from various countries. This can be troublesome for Dell when the market
fluctuates.
4.3. Opportunities
As customers today has become more informed about personal computers
because an increasing number of them are second-time buyers. As customers
become more discerned and know what they want, this trend is a great opportunity
that Dell can still exploit with it effectual Direct Model framework to cater to the
needs of customers.

20. 19
The increasing pace of development in communication and technological
integration also brings about opportunities for Dell. As it has become usual today in
US for customers to go to the Internet and customize their computer, place orders,
this help compensate for Dell's lack of physical retail stores and increase the
efficiency for Dell and also the customers in the buying process.
4.4. Threats
PC market in US is a volatile and fierce market despite already being in its mature
stage: the price keeps on being lowered, product quality is still being constantly
improved and demanded with higher speed and more efficiency.
One major external threat to Dell now is that other competitors have become close
substitutes for Dell. Dell unique model which allows it to succeed in cost-saving
and once achieved great success, no longer give it a strong competitive
advantage. The reason is because the gap between Dell and other competitors
prices have been narrowed and also because price difference is not a critical issue
for buyers in US market.
The decreasing growth rate of the PC industry in US is another serious threat for
Dell. Although Dell still holds the second position in the US market, it is confronting
intense competition from other big players. The competition for market share will
immensely intensify in the future as the market slow down. Dell will have to find a
novel way to differentiate their brand from competitors. Also it is going to be a
challenge for Dell in finding a new competitive edge to replace the now-fading
Direct Selling model which will soon become ineffectual in the future.
5. Conclusion
This strategic analysis has examined the current standing of Dell in the US market
through: (1) a macro analysis of the general environment and the industry
circumstance. And (2) an internal analysis of Dell key factors to success in each
function. The PC industry in US is currently in its mature stage, dominated by a few

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big players competing fiercely against each other. The general trend in the PC
market of US also includes price driving-down of personal computer which is
usually coined as “commoditization of PC”. In our business analysis, Dell enduring
competitive advantage is revealed, which is its unique Direct Selling Model,
reaching customer with the highest level of celerity and reliability. This advantage
is derived from Dell ability to effectively manage its distribution channel to customer
and its coordination with its suppliers. This advantage allows Dell to assembly PC
with low cost which has become for a long time one of Dell primary value
proposition to customers. However, as it is showed in our consolidation SWOT
framework, Dell is now confronting with intense challenge which will hinder it to
persist the success with the competitive advantage mentioned above. Price
different is no longer really a concern for US customer; the immense speed of
technology innovation; all of that propel Dell to continue effectively exploit the
advantages it has once created while at the same time, look for new competitive
advantage to continue differentiate its brand in the future.

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6. References
Dell Values In Action, Retrieved on: 12.06.2012 , from:
http://www1.euro.dell.com/content/topics/global.aspx/about_dell/values/main/value
s?c=eu&l=en
Grant, Robert.(2010). Contemporary Strategy analysis, 7th
edition. Publisher:
Wiley
Hill, C. W. L and Jones, G. R. (2007): Strategic Management: An Integrated
Approach, 7th
edition. Publisher: Houghton Mifflin
Ireland, Hoskission and Hitt (2009): The Management of Strategy: Concepts and
Cases, 8th edition. Publisher: South-Western CENAGE Learning
Solis, Adriano O. (2001). Some success stories in supply chain management.
Retrieved on: 15.04.2012, from http://goo.gl/AV8i0
Soral, P. Dell: Building a World-Class Supply Chain Solution. Retrieved on:
15,04.2012. from http://www.intel.com/ebusiness/pdf/affiliates/i2-dell.pdf