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1. Competitive forces shaping computer industry in 1993:

Threat of New Entrants: The entry of new manufacturers boosted the public demand for

computers. This lead to increasing product differentiation and competitive pricing posed a

threat from new entrants.

Threat of Substitutes: Increasing number of software applications and operating systems were

acting as substitutes in the software industry.

Bargaining power of buyers: As many number of manufacturers were coming up in the industry

the buyers had increasing bargaining power. The customers were less willing to pay for service

and hand-holding.

Bargaining power of suppliers: There was an increase in number of manufacturers; the

suppliers had the bargaining power because of increase in demand of the raw materials.

Rivalry within Industry: Tough competition between IBM, Apple, and Texas increased rivalry

within industry.

2.

Fate of Dell prior to and in 1993:

Financial Situation:

In 1991 dells annual sale were $890 mn. And it increased to $2 bn in 1992. In 1993 dells

sales were $2.8 bn. However, The net income(after taxes) in 1991 was $51 mn, in 1992 it

was $102 mn, and in 1993 it decreased to $10mn. Its stocks plunged to $7 a share in 1993

after the announcement of profits.

Customer Base:

Following is the market info. Of Dell prior to and in 1993

Markets 1991 1992 1993

U.S. 72.8% 72.5% 70.9%

Europe 27.2% 27.5% 27.2%

Asia 1.9%

Product Quality:

Dell assured product quality by extensively pre-testing all the configuration options it

offered. Customized products depending upon customers config. were provided to the

them in early 1990s. However, in 1993 designed products were frequently thrown over the

wall to manufacturing, and in some cases quality issues were addressed too late in th

Development process.

Product Development process:

Product development at Dell in the early nineties i.e. before 1993 had remained an informal

process, run by autonomous teams that often centered around experienced developers.

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While such an approach delivered several successful products, the results were neither

consistent nor predictable.

Dell management started in early 1993 to organize product development around core

teams of development professionals from several different functions. These teams, led by

nominated core team leaders, were to take charge of the products success from start to

finish. Thus, through daily contact between different core team members, and through

phase reviews, core teams hoped to avoid the pitfalls of the previous era.

3. Why dells senior management introduced the 18 mnth. Development process ? what are

they trying to change/improve ?

Dells senior management realized the need for a more structured approach adapted to the

increasingly rapid product development cycles in the computer industry. Through daily

contact between different core team members, and through phasereviews, core teams

hoped to avoid pitfalls of the previous era. A part of the reason for the reorganization was

to speed decision-making in an industry with ever-shortening product development cycles.

4. Which battery option should Hollidays team select ? , 5. Stay with proven NiHi battery

technology developed by Sony (LiOn) or differ until the qualification phase:

Hollidays team should select defer commitment until qualification phase review. By using

this method the gross margin (if LiOn) works = $594 mn. , and if LiOn fails = $495 mn. If the

LiOn fails then Dell can drop them and move on to option 1 i.e. NiHi technology.