A Business Report On Dell

PROJECT

S'ECONOMIC

Submitted By : Usama Shehzad (SR-II-S)

Sir Omer : Submitted To

Dell Computer Corporation was established in 1984 and today ranks among the world's largest computer systems companies. Dell pioneered the concepts of selling personal computer systems directly to customers; offering build-to-order computer systems; and providing direct, toll-free technical support and next-day, on-site service. The company designs and customizes products and services to end-user requirements, and offers an extensive selection of peripherals and software.

Dell's complete range of high-performance computer systems include: Dell Dimension and OptiPlex desktop computers, Latitude notebook computers, and PowerEdge network servers. The company's products and services are sold in more than 140 countries and territories to customers extending from major corporations, government agencies and medical and educational institutions to small businesses and individuals. The company employs approximately 11,000 people. Headquarters are located in Round Rock, Texas, with manufacturing facilities in Austin, Texas; Limerick, Ireland; and Penang, Malaysia

The value chain also chain as value chain analysis is a concept from business management that was first

Executive Summary

VALUE CHAIN ANALYSIS

described and populated by Michael Porter in 1985. A value chain is a chain of activities for activities for a firm operating in a specific industry. The chain of activities gives the products more added values then the sum of added values of all activities and also said that, value chain is an interrelated series of process that produce a service on product to the satisfaction of customer. The concept of value chain also focus esattention on the types of processes in the value chain

: lHistory of Del

Founded by Michael Dell in 1984 The single concept: Selling computer systems

directly to customers Designed and built the first computer system of its

own design in1985 Was one of the first computer companies to send a

technician to homes to service personal computers in 1985

Introduced the 316LT, the company's first notebook computer in 1989

Joined the top-five computer system makers worldwide in 1993

Earning approximately $1 million per day 7 months after the launch of dell.com in 1996

For the first time, Dell achieves No. 1 ranking in global market share in 2001

Activities of DELL:

Primary Activities:

Inbound logistics:

All those activities concerned with receiving and strong externally sourced materials.

Just in time ordering. Close to suppliers.

Operations: The manufacture of products and services- the way

in which resources inputs are converted to outputs Build-to-order. Customizations options.

Outbound Logistics:

All those activities associated with getting finished goods and services buyers.

Close to customers. The monitor example. Room for improvement. Evening delivery.

Marketing and sales: Essentially an information activity-informing buyers

and customers about products and services. China/ credit cards/shops essential. Improve a lifestyle brand

Services:

All those activities associated with maintaining product performance after the product has been sold.

Service a poor. People don't like offshore support, usually stressed

when they call and this adds to their stress. If something goes wrong then pc has to return in the

past.

: Supporting Activities

: Procurement

Sourcing and negotiating with materials suppliers. Lowering the bargaining power of Intel and Microsoft.

Human Resource Management: Those activities concerned with recruiting,

developing, motivating and rewarding the work force of a business.

Potential for spinning it off as a separate business unit.

Hosted payroll.

Technology Development:

Activities concerned with managing information processing and the development and protection of knowledge in a business.

Lagging behind in technology research and development.

Infrastructure: Concerned with a wide range of support systems and

functions such as finance, planning, quality control and general senior management.

Reacting to problems by change in senior management.

Steps of Dell:

Dell is approaching some steps in operation to meet adding value, improve quality, add efficiency & increase profit.

Receiving & distributing raw material. Converting raw material into a finished product. Identifying customers & distributing the product.

Dell is an American multinational information technology corporation based in Round Rock, Texas, and United States that develops, sells and supports computers and related products and services. Bearing the name of its founder, Michael Dell, the company is

PEST Analysis

one of the largest technological corporations in the world, employing more than 96,000 people worldwide. Dell had 46,000 employees as of Jan. 30. About 22,200 of those, or 48.3 percent, were in the United States, while 23,800 people, or 51.7 percent, worked in other countries, according to a filing with the Securities and Exchange Commission. Citation needed] Dell is listed at #38 on the Fortune 500 (2010). Fortune also lists Dell as the #5 most admired company in its industry. Dell has grown by both organic and inorganic means since its inception—notable mergers and acquisitions including alien ware (2006) and Perot Systems (2009). As of 2009, the company sold personal computers, servers, data storage devices, network switches, software, and computer peripherals. Dell also sells HDTVs, cameras, printers, MP3 players and other electronics built by other manufacturers. The company is well known for its innovations in supply chain management and electronic commerce. On May 3, 2010, Fortune Magazine listed Dell as the 38th largest company in the United States and the 5th largest company in Texas by total revenue. It is the 2nd largest non-oil company in Texas (behind AT&T) and the

largest company in the Austin area.

PEST Analysis :

Political

One of DELL’s biggest threats is involving the fourth

element of the external environment, the political/legal environment. The Chinese government prefers to promote national PC vendors to foreign companies. There is a lot of red tape involved in securing government contracts. The Chinese government not only favors local firms but also local companies. Government control of internet usage in China is

another threat to the growth of the internet.

Economic :

The economic environment refers to the nature and direction of the economy in which a firm competes or may compete. A primary threat that computer companies encounter in China is the problem of software piracy. China has a shortage of skilled labor, even though the country has many economic opportunities. Computer companies have to acknowledge that the average consumer could not afford the investment and very few had a bank account. DELL is aware that Chinese customers go for

the cheapest System.

Social :

The socio-cultural segment is concerned with a society’s attitudes and cultural values. The potential for Internet growth is huge in China, giving foreign

computer companies, DELL the opportunities to expand into a new market. Computer companies have to acknowledge that in the Chinese culture, people are still unsure about card sales because of the huge expense of computers in China. DELL has to invest in door-to-door or face-to-face operations to gain consumers’ faith and consumers’ trust in the company

and product.

Technological :

The technological segment includes the institutions and activities involved with creating new knowledge into products, processes and materials. In the computer industry, technology continues to be smaller and faster than ever. Providing access to technologies developed by institutions has proven a key government resource. It was observed that by the year 2000, mainland China’s annual PC production would reach 7.6 million making it the third largest in the world. The internet is a great opportunity for companies to get their name into the public domain as well as a fast way to tailor services to its customer segments. A threat in the technological segment to DELL’s business in China is

that access to the Internet is costly.

The bargaining power of suppliers

According to common assumption, power is high where the brand is powerful. Therefore, Dell is assumed to have far higher bargaining power than the suppliers. Dell has been successfully managing its competitors in terms of getting the needed supply of inventories and get them produce the inventories according to the specifications of the company. And the CEO of the company, Michael Dell also mentioned that Dell Company never sticks to one supplier forever, as they always change the suppliers if the suppliers are not meeting the demands of Dell. And the company always goes to the supplier which is innovative and cost competitive among other rival suppliers.  Therefore, it again indicates that Dell has higher bargaining power than its suppliers. Another indication of Dell to be in better position than its suppliers is that Dell got most of its suppliers locate their businesses and manufacturing units close to Dell’s manufacturing and assembly units.  By getting the suppliers near its manufacturing units, inventory is down to an incredible

Porters Five Force

s Analy

sis

four days and efficiency is the key ingredient. Moreover, suppliers can regularly supply their inventories to Dell within hours of assembling the computers which indicates a strong corporate

understanding of both Dell and its suppliers.

Bargaining power of Customers

One of the competitive advantages Dell has gained has been through offering in-person relationships with corporate and institutional customers. This is done by telephone; internet purchasing, customized computer systems where corporate clients can go to Dell’s special website called Premier Dell.com and configure computer systems in regard to the price and specifications. Moreover, they have post sales online supports which are online and in some cases the

company engineers can even visit the customer sites.

As long as the company has been serving giant companies such as governments, and huge companies such as Cox communications, EDS and etc., they tend to be permanent customers as it costs massive money for the customers to switch from Dell to another company. Moreover, as the company has been diversifying its product ranges from simply computers to other products such printers, storage services; this indicates that the company will be serving all type of customers, not only corporate clients. Therefore, Dell has to focus on improving its customer service to small business and individual customers as well to gain their

lifetime loyalty.

: Threat of new Entrants

As it has been stated by Michael Dell, his only fear about his business empire is the possibility of new entrants to the market who could adversely affect his business. And moreover, Dell’s new strategy is the product diversification; therefore, almost all electronic

companies are potential entrants to this new market.

Threat of Substitutes:

The threat of substitutes in the computer hardware is low in the computer hardware industry. As we know so far, the customers have two choices for PC which is Apple environment and windows environment. In additional, there is big different in the cost between these competitors. In the other hand, high price and lack of software support prevent people from switching

to Apple environment. 

The intensity of competitive rivalry:

The level of competition is exceptionally high. In the PC market, the largest vendors are IBM (although its PC business is now owned by Lenovo), HP, and Dell. And then, smaller vendors like Gateway and Toshiba. However, there are another group of manufacturers whom selling unbranded computers that they have assembled or purchased from a local assembler. Since

white boxes increasingly use the same components as branded computers, their functionality differs little from those sold by the largest and smaller original vendors. The rivalry in PC industry is high due to the decreases in component prices. The computer companies including Dell need to decrease the profitability from their operations. The growth of unbranded market will require Dell and the other companies as well to maintain competitive prices. However, the midst of competition, Dell can still gain market share from other competitors which proves that Dell’s business

strategies have been successful.

Strengths:

Dell's Direct Model approaches of enables the company to offer direct relationships with customers such as corporate and institutional customers. Their strategic method also provides other forms of products and services such as internet and telephone purchasing, customized computer systems; phone and online technical support and next-day, on-site product service. This extensive range of products and services is

definitely one of Dell’s strengths.

Dell Computer's award-winning customer service, industry-leading growth and consistently strong

SWOT Analysis

financial performance differentiate the company from

competitors for the following reasons:

Price for Performance – Dell boasts a very efficient procurement, manufacturing and distribution process allowing it to offer customers powerful systems at

competitive prices.

Customization - Each Dell system is built to order to

meet each customer’s specifications.

Reliability, Service and Support – Dell’s direct customer allows it to provide top-notch customer service before

and after the sale.

Latest Technology – Dell is able to introduce the latest relevant technology compared to companies using the indirect distribution channels. Dell turns over inventory for an average of every six days, keeping inventory

costs low.

The company's application of the Internet to other parts of the business --including procurement, customer support and relationship management -- is growing at a rate of 30 percent. The company's Web site received at least 25 million visits at more than 50 country-specific

sites.

Weaknesses:

Dell’s biggest weakness is attracting the college student segment of the market. Dell’s sales revenue from educational institutions such as colleges only accounts for a measly 5% of the total. Dell’s focus on the corporate and government institutional customers somehow affected its ability to form relationships with educational institutions. Since many students purchase their PCs through their schools, Dell is obviously not popular among the college market yet. For home users, Dell’s direct method and customization approach posed problems. For one, customers cannot go to retailers because Dell does not use distribution channels. Customers just can’t buy Dell as simply as other brands because each product is custom-built according to their

specifications and this might take days to finish.

Opportunities:

Personal computers are becoming a necessity now more than ever. Customers are getting more and more educated about computers. Second-time buyers would most likely avail of Dell’s custom-built computers because as their knowledge grows, so do their need to experiment or use some additional computer features. Demand for laptops is also growing. As a matter of fact, demand for laptop has overtaken the demand for desktops. This is another opportunity for Dell to grow in other segments. The internet also provides Dell with greater opportunities since all they have to do now is to visit Dell’s website to place their order or to get information. Since Dell does not have retail stores, the

online stores would surely make up for its absence. It is also more convenient for customers to shop online than

to actually drive and do purchase at a physical store.

Threats:

In a volatile market such as personal computers, threats abound. Computers change in a constant sometime daily basis. New software, new hardware and computer accessories are introduced at a lightning speed. It is essential for Dell therefore to be always on the lookout for new things or introduce new computer systems. The threat to become outmoded is a pulsating reality in a computer business. Not only that, companies must produce products that are high in quality but low in price. This is one challenge that Dell contends with. One of the biggest external threats to Dell is that price difference among brands is getting smaller. Dell’s Direct Model attracts customers because it saves cost. Since other companies are able to offer computers at low costs, this could threaten Dell’s price-conscious growing customer base. With almost identical prices, price difference is no longer an issue for a customer. They might choose other brands instead of

waiting for Dell’s customized computers.

The growth rate of the computer industry is also slowing down. Today, Dell has the biggest share of the market. If the demand slows down, the competition will become stiffer in the process. Dell has to work doubly hard to differentiate itself from its substitutes to be able to continue holding a significant market share.

Technological advancement is a double-edge sword. It is an opportunity but at the same time a threat. Low-cost leadership strategy is no longer an issue to computer companies therefore it is important for computer companies to stand out from the rest. Technology dictates that the most up-to-date and fastest products are always the most popular. Dell has to always keep up with technological advancements to

be able to compete.

Dell is one of the leading Consumer durables brand. The marketing mix of dell talks about the way in which

dell has improvised to gain a competitive position.

: Product

Dell believes that, ‘Marketing is not about providing products or services it is essentially about providing changing benefits to the changing needs and demands of the customer.

Dell provides a wide variety of both business class and home/consumer class products and services.

Dell designs, develops, manufactures, markets, sells, and supports a wide range of products that in many cases are customized to individual customer requirements.

MARKETING MIX ANALYSIS

A few examples of products for individual and professional customers are Dell Precision workstations, OptiPlex desktops, Dimension desktops, and Inspiron and Latitude notebooks.

Price:

Pricing strategies usually change as the product passes through its life cycle, because there is constrains on the company’s freedom to price a product at different stage.

The main objective of Dell is to produce the low price and profitable PC for the customers.

For the above reason Dell’s product pricing reflects the affordability of the local consumers.

Because Dell products are so customizable, the price is largely dependent on the options and services added to the product.

Dell is undercutting competitors in price to rapidly gain market share.

Place:

Place is also known as channel, distribution, or intermediary. It is the mechanism through which goods and/or services are moved from the

manufacturer / service provider to the user or consumer.

Dell has been able to affect the location strategy aspect of its marketing campaign.

As Dell’s products are always available at the nearest dealer’s customers develop trust for the “local Dell” thereby achieving the objective of gaining their trust in Dell products and services, and forming a large and diversified consumer base.

Promotion:

Another one of the 4 P’s is promotion. This includes all the tools available to the marketer for ‘marketing communication.

Dell in the past have not concentrated on extensive marketing campaigns but these revolutionaries in 1999 when Dell changed its tactics by engaging in extensive marketing campaigns.

Dell markets its products primarily by advertising on television and the Internet, advertising in a variety of print media, and mailing or emailing a broad range of direct marketing publications, such as promotional materials, catalogs, and customer newsletters.

Dell has recently started promoting its products through retailers like Best Buy, Staples, Wal-Mart, GOME, and Carrefour.