dell strategic management assignment_case study solution (project)

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2/7/2016 D el l Str ategi c M anagem ent Assi gnm ent/C ase Study Sol uti on ( Pr oj ect)

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Dell Strategic Management Assignment/Case Study

Solution

Dell Strategic Management Assignment/Case Study. It reviews the organizational structure, vision, mission,SWOT, PESTEL Analysis, Strategic Group Map Competition and Product Positioning Map of Dell.

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Introduction

This report undergoes a strategic management overview of Dell, one of the leading PC vendors of theworld with a unique operations model focusing on built to order and direct to consumer frameworks. Thereport begins with a comprehensive overview of the companys operations, its hierarchy, location and

principle of logistics. An understanding of the vision, mission and objectives allows for the strategicanalysis to be put into context and perspective. Our first strategic analysis tool is the SWOT analysis

B E T T E R C L O U D

S O L U T I O N

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followed by an internal and external factor analysis. This is accompanied by a TWOS matrix allowing thereport to pin point specific strategies which may help the organization cash on its strength andopportunities to offset threats. An overview of the life cycle of the industry is followed by a PESTanalysis. Understanding the political factors is critical and along with the location principles explained inthe first section allows us to pin point some strategic direction for the company. Similarly the economicsocial and technological factors are discussed for the industry and the implications for Dell on a strategiclevel. A competitive analysis with other names in the industry is done through a product positioning mapon the factors of price and customization.

Overview of product and size

Dell became the leading PC Vendor of the world in 2001. One of the most unique proposition of Dell isthe by passing of reseller through a direct to final buyer strategy. This accounts for 90 percent of its salesleading to the reporting of higher profitability and revenues for the company. This direct to buyer resultsin a consumer intensive strategy is called by many as the key to the success of Dells model of business(Kraemer, et al., 2000). The direct relationship with consumers not allows for reduced costs, betterinventory decisions and increased revenues but also allows for a better understanding of what thecustomer requires. The PCs are therefore built to the exact specifications as required by the customer.This is a sharp contrast to the conventional model of PCs which are based on vendors who make attemptsto predict the demands of the market. This built to order strategy helps Dell in multiple fronts, reducingoverheads and increasing return on investments at the same time as allowing for a better understanding ofthe market and consumer needs. This specific strategy comes with several complications in operations.The operations need to make sure that all parts and components are quickly available so that customizedconfigurations can be handled quickly. The capabilities of production and logistics of supplies must beoptimized in order to make sure that there are quick turnarounds and orders are processed efficiently.

The requirements of such an operations means there is an interesting structure of logistics. There is afocus on outsourcing of activities which are non strategic while the emphasis is laid down on key strategicareas. There is a relationship intensive strategy with partners who provide the components and elementsof the Personal Computers so as to provide value added products. The actual production network of Dell

is spread around the world ranging from America, Europe to Asia. Some of the production cycles areoutsourced to other manufacturers. There is also a reliance on the supply of several components such asCD ROMs and Disk Drivers to outsiders. Partnership with software providers such as Office also allows itto further increase the value of final product. Outside partners are also used for installation, repairs on thesite and integration of the overall systems. Resellers are used for recommendation of the product toconsumers.

Locations

The location factor of Dell is critical to the effectiveness of its built to order model. The basic decisive

factor in choosing a location is to understand how costs can be minimized, built to order models can beextended and direct sales can be maximized around the world with minimum time and maximumcustomer satisfaction. Specific locations and their selection depend upon labor rates in an area, thetransportation infrastructure, political barriers and the closeness to high demand areas.

The headquarters originally was in Austin Texas, where the company was formed. Manufacturing unitsexist in Tennesse as well. Currently the manufacturing units in America are limited to these two areas.Brazil has a manufacturing unit of Dell in Eldorado do Sul. This location point was decided on the basisof the need to supply the South American market. There were also political factors such as the avoiding oftarrifs because of the choice of location. The European, Middle Eastern and African market are combinedas one sector the headquarters of which is based in the UK. Ireland is used for a production unit because


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of the tax incentives available over there (Loughran, 2000). Logistic hubs and technical support units arealso deployed around the continent.

Manufacturing units are placed strategically in the Asia-Pacific region as well. Malaysia because of itsappropriate labor rates, political incentives and closeness to suppliers were chosen as the central location.Production units are placed around the continent including one in China with close suppliers in Taiwan.

Hierarchy

The organizational hierarchy can be seen as follows:-

Vision, mission, goals and objectives

Vision

Its the way we do business. Its the way we interact with the community. Its the way we interpret theworld around usour customers needs, the future of technology, and the global business climate.Whatever changes the future may bring, our visionDell Visionwill be our guiding force

The vision statement is able to put forward one of the most important principles behind the operations ofDell. The industry that Dell operates in is one of the most dynamic and ever changing one in theinternational market. Fluctuation of technology and consumer demands mean that change is the only

constant. This is why the lack of prediction leads to the vision statement which focuses on theinterpretation of strategy through consumer needs, technology trends and international business climate.

Mission Statement

Dells mission is to be the most successful Computer Company in the world at delivering the bestcustomer experience in markets we serve. In doing so, Dell will meet customer expectations of:

Highest quality

Leading technology

Competitive pricing

Individual and company accountability

Best-in-class service and support

Flexible customization capability

Superior corporate citizenship

Financial stability


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Business Objectives

Dells business objectives include quality, leading technology, competitive pricing and flexiblecustomization support. Through a strong quality assurance team and in house capabilities to build most ofits product it has been able to develop a strong QA engineering function. Through a participative cultureof employees and a drive to meet future market needs it is able to incorporate all development oftechnologies in its expansion. Its business model has always been successful to stay on top of technology.Utilizing a build to order model it has been able to incorporate leading technology as well as provide

flexibility of products to consumers. Through the removal of middle men in sales as well as developing inhouse capacities and optimized inventory management Dell has also been able to achieve cost leadershipin many market segments of the computer industry.

Culture, Values and History

Dell has a highly customer centric culture. Founded by Michael Dell in 1984, the company was foundedto serve the customers directly with PCs that were able to meet specific needs. The company was namedPCs limited at that time. There has been one belief that has always driven the organization right from the

beginning which is to be completely consumer focused to the point that they are able to incorporatecustomized requirements during ordering processes. The company was able to go public within 4 years.Dell made its entry into the laptop market in 1991 marking an aggressive growth rate in the followingyears becoming one of the top 5 computer companies of the world. Dell believes in high turnoversolutions which are also available on their website. A technology savvy culture with a focus on consumerneeds drives the operations and initiatives at the company. Another driving factor for Dell has beendelivering the computers directly to consumers. This build to order strategy has removed the middle man,increasing turnovers and decreasing costs for all parties involved. This allows Dell to sell at a highlycompetitive rate as compared to the competition. It is this consumer driven culture, innovative values andcost optimization that sets Dell apart (Dell, 1999).

Company Culture as cited by the companys website (www.dell.com) includes

Meritocracy: Making sure that employees are rewarded for doing a good job in order to enforcebetter performance and motivate the human resource in meeting measurable objectives

Direct Relationships:Focuses on a relationship intensive strategy internally and externallymaking sure that the environment is based on two way communication

Empowerment:One of the most crucial factors of an innovative company is empowerment.Highly employee participation culture is seen at Dell.

SWOT Analysis

Strengths

1. The business model of dell which focuses on a built to order framework where the middleman isremoved and PCs are sold directly to the end buyer

2. Strong strength of sales strategy through a variety of mediums ranging from conventional to e-commerce

3. Elimination of the mark ups added by the reselling party through the direct sales to end buyerresulting in lower costs to consumer without cutting down margins for Dell
http://www.dell.com/


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4. Reliability that comes out of a built to order model reduction of over-heads related to largeinventories and finished goods.

5. One of the industry leads in the Personal Computer market6. Considerable number of manufacturing units across the world7. Strong brand value and power in B2B as well as B2C8. Significant margins over costs of production because of the direct sales to the end buyer9. A highly relationship intensive strategy starting from the consumer sector and extending to the

corporate and government sectors10. Holds a large share in the market of personal computers11. Through the built to order model of production, Dell is able to achieve a quick turnover as well as

decrease the stock required in the inventory12. High level of quality assurance through extensive testing in the production process13. A wide array of customers including specific market segments such as hospitals and universities14. Top ranked Server on Intel technology by the publication Technology Business15. Strong understanding of individual customer segment needs16. Wide array of methods of advertising and marketing17. There are not a lot of production units and regional offices in the west including the United States18. For some consumers it is an inconvenience that Dell PCs cannot be purchased through retail outlets19. It has not been able to penetrate into several international segments as a leading supplier even

though the number of locations in the international market are great

20. In the printer market it does not produce its own products rather purchases it from Lexmark21. There is a strong dependency on outside suppliers from foreign lands which leads to a strong

dependency on fuel supply and their prices leading to fluctuation22. The size of the company comes in the way of faster growth23. There is a continuing demand for personal computers24. There is a strong and evolving market for notebooks and tablets25. There are strong opportunities of partnership in the market including one potentially with Microsoft26. There is a strong margin of expansion in consumer electronics27. Consumer spending on technology is relatively untouched compared to other products28. Strong growth in the market of color printers29. There are more mergers and acquisitions happening in the industry a threat of strong

consolidation trend in the PC industry30. The influence and dependency on outside suppliers means increasing oil prices are crippling the

spending of the consumers on PCs31. The demand of commercial usage of PCs are not increasing at the same pace32. Strong competition continues to act as a threat33. The growth of the market has slowed down34. Strong fluctuation in price35. Computing power fees has reduced36. The market has widened37. The fluctuating value and devaluation of currency continues to happen in the international market

Weaknesses

Opportunities

Threats

Source: (Kharif, 2005) and (Dell, 1999)


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Key External Factors

Weight

Rating

Weighted Score

Opportunities

There is a continuing demand for personalcomputers .1 3 .3

There is a strong and evolving market fornotebooks and tablets .1 4 .4

There are strong opportunities of partnershipin the market including one potentially withMicrosoft

.1 4 .4

There is a strong margin of expansion inconsumer electronics .05 2 .1

Consumer spending on technology isrelatively untouched compared to other

products

.05 2 .1

Strong growth in the market of color printers.05 2 .1

Threats

There are more mergers and acquisitionshappening in the industry a threat of strongconsolidation trend in the PC industry

.05 3 .15

The influence and dependency on outsidesuppliers means increasing oil prices arecrippling the spending of the consumers onPCs

.05 3 .15

The demand of commercial usage of PCs arenot increasing at the same pace .025 2 .05

Strong competition continues to act as a threat.15 3 .45

The growth of the market has slowed down.1 2 .2

Strong fluctuation in price.025 4 .1

Computing power fees has reduced.025 3 .075

The market has widened.05 3 .15

The fluctuating value and devaluation ofcurrency continues to happen in theinternational market

.05 2 .1

1 2.85


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Total

Internal Factor Evaluation (IFE) Matrix

Key

Internal

Factors

Weight

Rating

Weighte

Score

Strengths

The businessmodel of dell

which focuseson a built toorderframeworkwhere themiddleman isremoved andPCs are solddirectly to theend buyer

.1 4 .4

Strong

strength ofsales strategythrough avariety ofmediumsranging fromconventionalto e-commerce

.05 3 .15

Elimination ofthe mark upsadded by the

reselling partythrough thedirect sales toend buyerresulting inlower costs toconsumerwithoutcutting downmargins forDell

.025 3 .075


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Reliability thatcomes out of a

built to ordermodel reduction ofover-headsrelated to largeinventoriesand finished

goods.

.05 3 .15

One of theindustry leadsin the PersonalComputermarket

.1 4 .4

Considerablenumber ofmanufacturing

units acrossthe world

.05 4 .2

Strong brandvalue and

power in B2Bas well as B2C

.05 4 .2

Significant

margins overcosts of

productionbecause of the

direct sales tothe end buyer

.05

3

.15

A highlyrelationshipintensivestrategystarting fromthe consumersector andextending tothe corporate

andgovernmentsectors

.025 3 .075

Holds a largeshare in themarket of

personalcomputers

.05 3 .15

Through thebuilt to ordermodel of

.05 3 .15

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production,Dell is able toachieve aquick turnoveras well asdecrease thestock requiredin the

inventory

High level ofqualityassurancethroughextensivetesting in the

productionprocess

.05 3 .15

A wide arrayof customersincluding

specificmarketsegments suchas hospitalsanduniversities

.05 4 .2

Top rankedServer on Inteltechnology bythe publicationTechnology

Business

.05 4 .2

Strongunderstandingof individualcustomersegment needs

.025 3 .075

Wide array ofmethods of

advertisingand marketing

.025 4 .1

Weaknesses

There are nota lot of

productionunits andregionaloffices in thewest including theUnited States

.025 2 .05


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For someconsumers it isaninconveniencethat Dell PCscannot be

purchasedthrough retail

outlets

.025 1 .025

It has not beenable to

penetrate intoseveralinternationalsegments as aleadingsupplier eventhough thenumber oflocations intheinternationalmarket aregreat

.05 2 .1

In the printermarket it doesnot produce itsown products

ratherpurchases itfrom Lexmark

.025 1 .025

There is astrongdependencyon outsidesuppliers fromforeign landswhich leads toa strongdependencyon fuel supplyand their

prices leadingto fluctuation

.05 2 .1

The size of thecompanycomes in theway of fastergrowth

.025 1 .025

Total 1.00 3.15


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TWOS MATRIX

Strengths Weaknesses

1. The business model of dellwhich focuses on a built to

order framework wherethe middleman is removedand PCs are sold directlyto the end buyer

2. Strong strength of salesstrategy through a varietyof mediums ranging fromconventional to e-commerce

3. Elimination of the markups added by the reselling

party through the directsales to end buyerresulting in lower costs toconsumer without cuttingdown margins for Dell

4. Reliability that comes outof a built to order model reduction of over-headsrelated to large inventoriesand finished goods.

5. One of the industry leadsin the Personal Computermarket

6. Considerable number ofmanufacturing units acrossthe world

7. Strong brand value andpower in B2B as well asB2C

8. Significant margins overcosts of production

because of the direct salesto the end buyer

9. A highly relationshipintensive strategy startingfrom the consumer sectorand extending to thecorporate and governmentsectors

10. Holds a large share in themarket of personalcomputers

11. Through the built to ordermodel of production, Dell

1. There are not a lot ofproduction units and

regional offices in thewest including theUnited States

2. For some consumers it isan inconvenience that DellPCs cannot be purchasedthrough retail outlets

3. It has not been able topenetrate into severalinternational segments as aleading supplier even

though the number oflocations in theinternational market aregreat

4. In the printer market itdoes not produce its own

products ratherpurchases it from Lexmark

5. There is a strongdependency on outsidesuppliers from foreignlands which leads to astrong dependency on fuelsupply and their pricesleading to fluctuation

6. The size of the companycomes in the way of fastergrowth


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is able to achieve a quickturnover as well asdecrease the stockrequired in the inventory

12. High level of qualityassurance throughextensive testing in the

production process13. A wide array of customers

including specific marketsegments such as hospitalsand universities

14. Top ranked Server on Inteltechnology by the

publication TechnologyBusiness

15. Strong understanding ofindividual customersegment needs

16. Wide array of methods of

advertising and marketing

Opportunities

S-O Strategies

W-O Strategies

1. There is a continuingdemand for personalcomputers

2. There is a strong and

evolving market fornotebooks and tablets

3. There are strongopportunities of

partnership in the marketincluding one potentiallywith Microsoft

4. There is a strong marginof expansion in consumerelectronics

5. Consumer spending on

technology is relativelyuntouched compared toother products

6. Strong growth in themarket of color printers

1. Expansion intensivestrategy into the personalcomputer as well as laptopMarket [Combination of

Strength 1, Strength 5,Opportunity 1]

2. Strategize such that allfuture developments are inline with the evolvingtechnology and focus on acorporate socialresponsibility agenda(Strength number 14 andOpportunity number 1)

1. The development offurther production units aswell as retail units in theUnited States [A

combination of Weakness1, Weakness 3 andOpportunity 5]

1. Diversification strategytowards the printer marketinto the color printers including development ofinternal capabilities[Weakness 4 andOpportunity 6]

Threats

S-T Strategies

W-T Strategies


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1. There are more mergersand acquisitionshappening in the industry

a threat of strongconsolidation trend in thePC industry

2. The influence anddependency on outsidesuppliers means increasing

oil prices are crippling thespending of the consumerson PCs

3. The demand ofcommercial usage of PCsare not increasing at thesame pace

4. Strong competitioncontinues to act as a threat

5. The growth of the markethas slowed down

6. Strong fluctuation in price7. Computing power fees has

reduced8. The market has widened9. The fluctuating value and

devaluation of currencycontinues to happen in theinternational market

1. Provide attractive pricingand discounting packageson specific products to theB2C market [Acombination of strength 9and Threat 4]

1. Counter competition andincreasing market share by

penetrating into the Asianand European market forleading supplier positionin maximum locations [Acombination of weakness3 and threat 1]

Life cycle of the firms industry

Stage 1: Development of the Product

The first stage of the life cycle is marked by a research intensive and secretive process. The more theinnovation in a PC company, such as apple, the more investment goes into the research process. Codename are usually utilized without naming it till its developed completely

Stage 2: Announcement of the ProductThis stage is not to be mixed with the actual product introduction stage. The purpose is to bring the mediaand big guns to an event and announce what will be coming through in the near future. The product doesnot always reach its final shape at the time of announcement of the product.

Stage 3: Introduction of Product

The introduction of the product is the stage when the final product is ready to be delivered to theconsumers. At the time of announcement, the supply of the product is not that high and expensive in order


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to hit big profits. At this point of time, a new product is also started to be developed which means Stage 1of a future product starts at the Stage 3 of the new product.

Stage 4: Maintenance

It is during this stage of the life cycle that the price starts decreasing and the supply increases gettingeven with the actual demand in the market. The products will be send to all major sales point of Dellaround the world at a lower cost than before. It is at this stage of the new product that the future product is

announced.

Stage 5: Retirement

Since Dell operates in a highly technological environment, changes and advancement are frequent whichresults in a relatively quicker retirmenet of products. This is now replaced by the introduction of the

product which incorporates new technology.

Identification of environmental changes

Political Factors:

The political factors include legislature, government regulations and other restrictions/provisions ofpolitical nature. This directly implicates the conditions under which Dell has to operate. Political factorshave caused certain restraints from time to time because of the political instability. Some of the politicalfactors include the ones that come as a direct result of signing of World Trade Organizations. Marketaccess is one such factor. For example, Texas and Malaysia, two of the top choices for Dell in the regionare central to U.S Tennesse and to Asia Pacific respectively. Ireland, another hub of Dell, is in close

proximity to United Kingdom, Germany and france. Tarriff free access to markets are one of the biggestpolitical incentives to Dell. Political changes which cause an impact on market access and their conditions

can have consequences on pricing strategy of Dell as well as supply choices. Political incentives such astax holidays provided by Malaysia are another such political factor. Low corporate taxes, financialincentives, land support and per capita grants per employee are other such factors which contribute to the

political dynamics of the operating environment for Dell.

Economic

The economic situation around the world, in specific regions have a direct impact on two things. A) Thechanging economic situation and landscape has a direct impact on the pricing strategy and profit marginof Dell and B) Economic turmoils such as the one faced right now by the world decreases consumer

power to buy the Dell products. Currency fluctuation and Changes in Oil prices are another factor whichcauses strong disruption in pricing models of Dell. Strong dependency on foreign supply means these twofactors become all the more critical.

Social

Demand for computers has a strong dependency on several social factors. One of the most critical of thesesocial factors is the level of education that prevails within a country. Higher education standards lead tostrong demand for the PCs around the globe.


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TECHNOLOGICAL

Technological changes in environment include the advancement of components, more efficient parts,internet access, newer ways to market the product and the pace at which products keep getting smaller andfaster. This change in speed and size is central to the changes that are required on a regular basis by Dellin order to keep up with the business environment.

Source: (Kharif, 2005)

Strategic group map competition

Product Positioning Map

HP: HP is the closest competition to Dell. With a strong advantage over Dell in the segment of Printers,it has an edge on that front. On the other hand Dell continues to have an edge in terms of its competitive

price over HP. The weakness, however, remains in the printer segment infront of HP (Schmid and Kelber2005).

IBM:

Dell and IBM do not have conflicting target market segments. However, IBM seems to have a betterpenetration into the Asian market as well as better access to cheaper wage rates. One of the mostimportant competitive edge for IBM is the server market (Schmid and Kelber, 2005).

Apple Computers:

Apple is one of the most innovative firms in the PC market. Their target market is different from Dell aswell. They are more innovative and sell the products on premium prices. Leading edge design and lowvariety in products are the features of Apple.

Note: The product positioning is based on customization and cost. Customization is seen as the variety inproduct portfolio as well as the customizable specifications within one product.

Product Positioning Map

Expensive

Apple

Customizable HP Generic


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Dell

IBM

Inexpensive

RecommendationsRecommendations for strategy implementation

Dells strategy has been focused on building computers that can be ordered by consumers through astrong internal capability of manufacturing and quick inventory turnarounds. This build to order strategyhas been the differentiating factor for Dell for the past few decades. The removal of the middle man givesit high margin in direct sales as well as provides low costs to its consumers. One of the strong strategicadvantages for Dell has been its ability to adapt to changes. As an employer Dell has focused on a strongrelationship with employees, focusing on their motivation, well being, reward strategy and empowerment

strategy. Its strategic supply chain management, data integration with suppliers, relationship intensiveapproach and integrating physical store sales with online sales has made sure Dell continues to grow at anexceptional rate.

The following are recommended as strategic line of action for Dell

1. An involvement in CSR activities including a Green Campaign for collection of old PCs/electronicequipment for recycling/disposition in an environmental friendly way. This will lead to better imagein the society as well as sustainable development and cost efficiency in the long term

2. A series of internal marketing efforts to maintain a highly innovative culture within the organizationfor a re enforcement of its employer values for high performance management and employee

participation.

3. Venture into R&D partnership with an established company sharing intellectual resources and thehardware infrastructure of Del for development of technology savvy products for future.

4. Building more manufacturing plants around the world and specifically in the US. Global expansionshould be met with region specific capacity building as well as to reduce supply chaincosts/complications and dependency on external factor

5. Internal capacity building for the development of printer products in order to cut down its costs,increase quality and increase market share in competition to HP.

Conclusion

The industry of personal computers, laptops and related hardware is one which evolves continuously. Theresult of globalization, political incentives and technological advances can be seen on a regular basis. Thismeans that a reassessment of strategy for all the players in the industry is important in order to keep therespective competitive advantage going. Dells structure allows for efficiency, cost optimization,customer relationship intensive strategies and optimum supply chain. This report assessed the strategicdirection that Dell has been taking on the basis of its external environment and internalcapabilities/limitations. Through TWOS, PEST, positioning maps and internal/external key factorevaluation, the report came up with a five point recommendation focusing on research and development,

production plants, internal capability development, high performance management and corporate socialresponsibility.


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References

Dell, M. (1999). Direct From Dell: Chairman and Chief Executive Officer, Dell ComputerCorporation. Collins

Kharif, O. (2005). Dell, Time for a New Model? BusinessWeek

Schmid, N. and Kelber, A. (2005). The Dell Company A Strategic Analysis. ManagementSeminar. Hochschule

www.dell.com

www.hp.com

www.ibm.com

Filed under General Management, International Marketing, Marketing, Strategic Management Taggedwith Dell, Dell Strategic Management, Dell SWOT, Dell Vision, External Environment Analysis,Industry Overview, Marketing Analysis, Organizational Structure of Dell, PC Industry Overview,PESTEL Analysis, Product Positioning Map, SWOT Analysis

Comments

One Response to Dell Strategic Management Assignment/Case Study Solution

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this was very helpful in my assignment as i did not know where to start. it gave me guideance and light tostart and finish my assignment. thank so much.

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