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Dell Case analysis

  1. Dell Strategic Management case
  2. Total Market GW
  3. Global share
  4. Driving forces • Innovation • Asian competition • Competitive Market
  5. Industry issues • 2008-2009 Great recession • New entrance • Substitution (I-pad) • Competition
  6. Porter’s five forces
  7. MKT share
  8. Competitors strategies -High spending on R&D (Apple and HP) that makes them to gain high profit margins - Distribution strategy of competitors include direct marketing as Dell, distribute in public retailers as Wal-Mart or exclusive stores as Apple. -Lowering cost to get back to profitability (Gateway) -Acquisition of other companies (HP acquire Compaq) -Asian competitors (Acer, Toshiba and Lenovo) win at emerging markets and developing countries. -Apple introduce I-pad and cannibalized 25% of notebook sales -IBM, HP and oracle had advantages over Dell in introducing services for their customers IBM had sold its laptop, hard drive, and printer businesses to focus on building its services business. - HP acquired Electronic Data Systems in 2008 to boost its expertise in services.
  9. SWOT analysis • Strengths • Strong market position supported by strong brand value • Strong sales and marketing*Differentiated Products • Because of its direct model, Dell was able to be described as having a differentiated product. Every PC assembled would be somewhat different from the previous based on customer order. • Customer Service • After sale customer service was another one of Dell’s strengths. A customer with a problem could reach a technical support staff through a “hotline that was manned 24 hours a day” • Dell’s Direct Model allowed Dell to manufacture machines that were “modified tocustomer needs” and based on Just -in-Time inventory* Dell's brand is one of the best known in the world.* Sell directly to consumers* Keep costs below competitors
  10. SWOT analysis • Weaknesses • Customers cannot go to retailers because Dell does not use distribution channels. • Low market share in the International Market • Compared to its rivals, Dell had a low market share in the international market. • They build computers, not develop them. • They have weak business relationships with many computer retailers. • They do not have unique technologies to offer the market.
  11. SWOT analysis • Opportunities • European Market Dell has an opportunity to increase its market share in the European market. • Growing Economy Increasing growth in the economy is an opportunity for Dell to increase its market share and at the same time production as well. • Increased communication and technological inclusion also create great opportunities for Dell • Threats • Strong Brands in the Market (IBM) • Changing Consumer Needs • Increasingly popular brand name in the competition • Increasingly lower prices for product amount for their competitors
  12. Firm strategies issues • No investment in R&D • Distribution strategy issues • No innovation • Closing company’s desktop plants due to cost pressure • sales is centralized in USA •After sales service and customer service quality became to be average • Servers, software and consulting is weak point when compared to competitors • Dell’s emphasis on cost reduction and competitive pricing meant that it was no longer perceived as providing high-quality personal computers or the quality service to go with them.
  13. Dell sales 1995 2005 2007 2008 2010 Revenues 3,500,000,00 55,800,000,0 57,400,000,0 61,100,000,0 52,900,000,0 Net income 2.4 3,600,000,00 2,600,000,00 2,900,000,00 1,400,000,00 0 10,000,000,000 20,000,000,000 30,000,000,000 40,000,000,000 50,000,000,000 60,000,000,000 70,000,000,000
  14. Net income trend 201320122011201020092008200720062005200420032002200120001999 2.373.492.641.432.482.952.583.573.042.652.
  15. Dell, -41% HP, 11% IBM, 31% -50% -40% -30% -20% -10% 0% 10% 20% 30% 40% Stock Price 2007
  16. Mission & Vision Mission “…to be the most successful computer company in the world at delivering the best customer experience in the markets we serve” Vision “…to lead in all regions we serve. The foundation of our success is the same in the United Kingdom and France, China and Japan, Canada and other countries. Customers want technology products that are relevant to them, offer great value and can be easily purchased and used. That’s what our team around the globe consistently delivers”
  17. Past strategies adopted by company 1-Corporate level • In July 2004, Kevin Rollins replaced Michael Dell as Chief Executive Officer, allowing the founder to focus on being Chairman of the Board. however. Rising sales coupled with rapidly falling net income caused Michael Dell to rethink his retirement and resume his role as CEO in January 2007. • R&D investment Dell Market RD 1% 5% 0% 2% 4% 6% RD
  18. 2008 2009Closed Tennessee Closed Texas desktop plant N.Carolina Close Open assembly lines in A North Carolina plant Jan 2011 2005 Corporate level
  19. Corporate level •Michael Dell in 1995 after huge growth he temporarily slowed the corporation’s growth strategy while he worked to assemble and integrate a team of experienced executives from companies like Motorola, Hewlett-Packard, and Apple. •Instead of spending its money on new computer technology, Dell waited until a new technology became a standard. Michael Dell explained that soon after a technology product arrived on the market, it was a high-priced, high-margin item made differently by each company. Over time, the technology standardized—the way PCs standardized around Intel microprocessors and Microsoft operating systems.
  20. Line of business level •Distribution strategy firstly Management decided in 1995 to abandon distribution of Dell’s products through U.S. retail stores and return solely to direct distribution. Over time, Dell’s competitors had imitated Dell’s direct marketing model, but were also successfully selling through retail outlets. A presence in retail was becoming especially important in countries outside North America. Sales in these countries were often based on the advice of sales staff, putting Dell’s “direct only” business model at a disadvantage. In response, Dell began shipping its products in 2007 to major U.S. and Canadian retailers, such as Wal-Mart, Sam’s Club, Staples, and Best Buy. This was soon followed by sales elsewhere in the world through DSGI, GOME, and Carrefour, among others, to number over 56,000 outlets worldwide
  21. Line of business level •In other lines rather than desktop Dell (along with HP) offered x86 open-system servers. In order to better compete in the large enterprise market segment, Dell purchased Perot Systems, an IT services company, in 2009. Even after this acquisition, however, services accounted for only 13% of Dell’s sales.
  22. Function level 2007, when Michael Dell resumed being the company’s CEO, Dell has made more than 10 acquisitions, cut about 10,000 jobs, and hired executives from Motorola and Nike to add more excitement to its product line. 90,000 78,000
  23. Function level Manufacturing Dell drove down costs further by perfecting its manufacturing processes and using its buying power to obtain cheaper parts. Dell IBM HP Revenue per employee 1,000,000 333333.333 500000 0 200,000 400,000 600,000 800,000 1,000,000 1,200,000 Revenue per employee
  24. Strategic options 25% 31% 18% 11% 11% 4% Sales desktop PCs mobility software and peripherals servers and networking services storage Dell is diversified company worked in the following areas
  25. Corporate Level Strategic Options
  26. Evaluation-ve+veImplementationStrategies Increased Contribution out of US Cost, ControlSecured business Select 10 centers around the world Decentralization SurveysCostRestore competit ive edge -Increase quality & quantity of customer services and maintenance centers More investment in customer service & after sale service Market share of HQ PDCts Cost, RiskyHQ products High NI Reach MKT level (5%)Increase investment in R&D
  27. Business line Level
  28. Evaluation-ve+veImplementationStrategies Market shareFew custom ers Few customers with high revenue Marketing & sales team Customized desktop lines for corporations with internal system Contribution of linesMore cost effective -MarketingDifferentiation of Laptops to 3 categories NINicheIncrease revenue Specialized line for customized laptops Customized Laptop with unique quality (high Price) Market share of large enterprise Increase the large enterprise MS Outsourcing and merging Increase Investment in Services & servers
  29. Function Level
  30. Evaluation-ve+veImplementationStrategies MS% gain for each line CostRestore brand value Marketing & Media campaigns Brand positioning NIRiskHigher NI-Standard manufacture line More cost effective Manufacturing Productivity per head TurnoverNIIncreased productivity (Recruitment & training & evaluation Displace revenue per head strategy to Profit per head strategy
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