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Primary Question Considering the highly competitive nature of the PC industry in terms of hardware commoditization, brand differentiation, and sales channels,

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Presentation on theme: "Primary Question Considering the highly competitive nature of the PC industry in terms of hardware commoditization, brand differentiation, and sales channels,"— Presentation transcript:

1 Primary Question Considering the highly competitive nature of the PC industry in terms of hardware commoditization, brand differentiation, and sales channels, what recommendations would you make to Dell in order to revitalize their business model, and differentiate from competitors to ultimately gain profit and market share throughout targeted market segments?

2 Structure of Presentation How do distribution channels and value chains affect the business models for PC makers in terms of how they sell and who their target audiences are; how do competitors vary in terms of inventory, marketing, and pricing strategy? What is the remote environment like for PC makers, suppliers, and buyers in various market segments? Where is Dell’s current focus, and how can they differentiate in terms of brand, sales, and, products in the U.S. and abroad?

3 HOW DO DISTRIBUTION CHANNELS AND VALUE CHAINS AFFECT THE BUSINESS MODELS FOR PC MAKERS IN TERMS OF HOW THEY SELL AND WHO THEIR TARGET AUDIENCES ARE; HOW DO COMPETITORS VARY IN TERMS OF INVENTORY, MARKETING AND PRICING STRATEGY?

4 Distribution Channels Brick-and-Mortar Retail Stores DistributorsIntegrated ResellersDirect Process--delivery from PC manufacturers; moved through own distribution centers i.e. Best Buy, Walmart --worked with small resellers i.e. Ingram Micro, Tech Data --small, owner-managed firms OR --dealt directly with manufacturers --led directly from mfg to end customer Market Leaders--Acer & Apple dominate market --Lenovo dominates market --Dell dominates in both outbound & internet Strengths--displays and sales staff help customers with decision making (customer education) --supply of full-range hardware and software to resellers --worked closely with businesses to design, buy, configure, install and support networks --operated own distribution centers --sometimes managed PC networks of clients --high gross margins on ongoing support --low levels of inventory --high levels of internal control over sales & distribution Weaknesses--competition for shelf space --low margins in specialty stores; reduction in those types of stores --earned low margins --hardware markup 3-4%, so pricing higher than direct --earned modest margins on procurement & installation of corporate PC networks --hardware markup of 3-4%, so pricing higher than direct --customers had to rely on phone, internet or sales forces --little to no customer education Strategic Impact for PC makers --Industry transformation to broad based rather than specialty stores --some PC makers find it more efficient to open their own stores (Apple) --required PC makers to spend additional money on advertising --required PC makers to manage product returns; decreased revenue from buy- backs & price protections --PC makers spent additional money on advertising --Purchasing influence over customers --acted as additional sales staff for PC maker by guiding uneducated customers --decreased revenue from returns and buy-backs --took away margins from PC makers by offering post-purchase support --greater profit margin from avoidance of inventory, buy backs, and price protections --PC maker must manage entire process (well) internally

5 Customers Large Businesses/ Government Small-Midsize BusinessesIndividual ConsumersEducational Institutions Unit Share in %--Highest in ‘96-’98 --Highest in ‘08--Highest in ‘02 Market Segment Leaders --*Dell dominates market--*Lenovo dominates market with 36% --*Acer dominates market with 62% *Apple dominates market, with only 18% Issues affecting purchase: --Retained knowledgeable MIS departments that purchased, maintained, & supported PCs --need for high- performance computers --control of system costs --Lacked MIS staff --decisions made based on reliability, performance, support, service, price, brand, and channel recommendations --home or home-office use --relied on salespeople, prior experience, online information, and publications --No data Strategic Impact--capital cost was about 25% of the added costs associated with administration, training, and repairs post-purchase --due to collection of PC brands & vintages, maintenance and reliability were problems --BOTH ARE INDICATORS OF A NEED FOR SERVICE- LEVEL AND POST-SALE SUPPORT --all of the big 5 companies have relatively equal market share here; might be hard for Dell to succeed unless they differentiate --Might Dell have the opportunity to win them over with service contracts? --price sensitive --more receptive to brand name of PC and microprocessor = buyer power is greater for individual consumers --marketing is important. --this sector has never been Dell’s primary target --seems to be a heavily untapped market. Apple is dominating the industry in terms of sales to education institutions…might Dell have an opportunity for further penetration here?

6 Value Chain Models-Dell’s Competitors IBM/LenovoCompaqHPGatewayAcerApple Business Model --Authorized Assembly Program --Optimized Distribution Model --cuddled distributors & resellers --”hard-deck” --Direct (Focus on home & small office users) --100% indirect, “un- Dell” (focus on retailers & distributors) --resellers, storefront retailers, and direct sales Process--shipped “lightly configured” PCs downstream --partners completed to customer specifications; used IBM components --PCs built after an order received; --Orders & deliveries sent through distributors & resellers --sold primarily through distributors & resellers & more demanding consumers --hard deck; decision not to sell to customers below a certain size --orders direct from customers, produced PCs to specification, and shipped machines directly to customers --designed, branded, marketed, and serviced PCs built by others --individual consumers= primary target --utilized own operating system, Intel Microprocessor, and own retail stores Strategic Impact --reduced need for resellers to reconfigure --improved quality and inventory turnover rate --meant to take on a more Direct approach to compete with Dell, but failed --inventory days (high end of industry) --Offered inexpensive basic models for the less experienced user --PC 35 days old when it arrived to a business customer --distributors & resellers held special “alliance” with HP because they were not promoting ‘direct’, which gave them a competitive advantage --lack of cohesive brand structure; tried their hand at every strategy and didn’t specialize anywhere --tailored brands to customer segments & geography --had enough volume to demand discounts from suppliers & contract manufacturers --lowest overhead costs in industry=cost advantage --Own operating system- differentiated --iPod music player and iPhone segments (new products) --design, sleek; innovation is KEY

7 Dell Value Chain-Direct Model Order received Sent electronically to mfg. facility (Texas, NC, Tennessee, Brazil, Ireland, Malaysia, and China Computer generated parts list & barcode tracking assigned Hardware assembled Software Loading Zone High-speed computer network installed customer-specified software (op system, application, & diagnostics) Some Corporate Customers receive proprietary software Tested & Shipped Rigorous few hours of testing Electronic links allowed them to direct suppliers’ shipments straight to the customers. Boxed with accessories & shipped via 3 rd party. = mere hours Dell’s primary competitive advantage is in their value chain. With as a little as 4 days of inventory, and coordination for just-in-time inventory with suppliers, Dell can produce more PCs in less time.

8 Inventory of Dell vs. Revenue & Gross Margin Revenue31,88835, , , , , ,101 _ Gross Margin (in millions) 6,4436, , , ,516 _ 11, ,957 _ Inventory (in millions) , Days of Inventory SignificanceMost competitors carrying days inventory. Michael Dell steps down as CEO Common stock down 40%; plagued by PR problems, faulty hardware Michael Dell returns; enters the retail market; introduced laptop accessories Dell saw a near constant increase in both revenue and gross margin from 2000 to Is Michael Dell’s plan to enter the retail environment working? Both revenue and gross margin decreased in PC orders fulfilled on orders only. No finished goods inventory of standardized machines

9 An industry shift to “direct” business model IBM to LenovoCompaqHPGateway to AcerApple Shift to Dell-like strategy created website to allow individual customers to buy direct; businesses were referred to resellers intro to web sales for small & midsize businesses --90’s –”Direct Plus” --attempted online catalog & website --00’-new CEO tried to meld direct + indirect --CEO said “can’t ignore what Dell has done” --99’ sell PCs online to businesses --02-direct to small businesses --copied Dell’s direct approach, but sold to home and small office users, rather than corporate accounts --utilized direct sales in addition to indirect channels Strategic Impact FAIL --Stuck in the middle “weren’t Dell, weren’t the old IBM” --led to a confused customer base --lost money --sold PC business to Lenovo (China’s #1 PC maker) Post-Acquisition: --incohesive sales tactics --supply chain issues --Lenovo selling to customers through retailers --IBM brand back to indirect FAIL --direct attempt alienated relationships with resellers & distributors --impossible to have “direct” program and still keep partners happy with referral fees --was acquired by HP --sustained relationships with resellers, other channel partners --synergies with Compaq’s direct line failed to materialize --direct sales went through an indirect approach; education of the customer and demand created by salespeople or resellers allowed the customer to make the choice of how and where they wanted to order. FAIL --confused strategy --sales slowed, net income dropped --unstocked showrooms used for “direct” selling; didn’t work --Gateway sold to Acer, the “unDell” --differentiated approach of Apple- owned retail stores helped in managing the “direct” side of the business If all of Dell’s competitors are making efforts to go “direct”, why is Dell back-pedaling and trying to enter retail? As the PC industry matured, more and more competitors adopted a similar strategy, which began to hone in on Dell’s competitive advantage.

10 Market Leaders of PC Market ‘90‘92‘94‘96‘98‘00‘02‘04‘05‘06‘07‘08 #1 spot (% mkt share) IBM/ Lenovo (12.7) IBM/ Lenovo (10.4) Compaq (10.3) Compaq (10.5) Compaq (14.7) HP (19.8) HP (16.0) Dell (17.4) Dell (17.6) Dell (16.5) HP (18.4) HP (18.9) #2spot (% mkt share) Apple (7.1) Apple (9.0) Apple (8.5) IBM/ Lenovo (8.9) IBM/ Lenovo (8.8) Dell (10.4) Dell (14.7) HP (15.0) HP (14.9) HP (16.2) Dell (14.6) Dell (14.7) Dell managed to sustain the market leader position in , but have been in a struggle with HP since ‘00. Where are HP’s strengths? How can Dell regain their #1 position?

11 HP + Compaq Merger HP, Dell’s largest rival, was able to take advantage of what was supposed to be a complementary deal with Compaq, which would have allowed them to expand their product portfolio into the direct-to-customers realm. It was somewhat of a failure. It did allow them to market a basic level PC. Would Dell benefit from a partnership or acquisition of a company who is strong in Distributor/Reseller sales, or a company that has a competitive advantage that they do not?

12 HP’s Marketing Efforts-Post Merger The Computer is Personal Again Meet or DeleteVoodoo BrandAbandon hard-deck policy Target-Sales focused on the individual user. --Young people--Gamers--PCs for small businesses Marketing-Innovative campaign featuring ads of celebrities and their personal PC content. --MTV show used to select dates or roommates by examining personal PC content of candidates --Differentiated between entry-level Compaq brand and premium HP brand --every potential customer covered by HP internal salesperson or a reseller, then “let the customer decide” whether to buy directly or through resale Strategic Purpose -Re-thinking the PC; trying to personalize the PC away from a commodity --Appeal to a younger audience + individual user --stylish hardware, friendlier software to distinguish between products; innovation, new uses for PC --create demand in general --education of customers HP’s marketing efforts differentiated them from their competitors. While others were selling PCs as a commodity, HP was setting their brand apart in terms of individual and small business sales and appealing to new users. How can Dell benefit from innovative marketing efforts with new customers? Would an investment in direct marketing help revitalize their business with existing relationships?

13 2008 -average $ per PC unit by top 5 competitors Apple has the highest prices, yet is differentiated by their own operating system and software. Acer competes with Dell in the low-cost arena, but only plays in the “indirect” realm, and primarily focuses on the individual user, rather than the corporate segment. Can Dell maintain their low cost-leader position from HP & Lenovo, their primary competitors, by taking advantage of their low inventory and economies of scale and yet still offer the same quality and competitive PCs?

14 WHAT IS THE REMOTE ENVIRONMENT LIKE FOR PC MAKERS, SUPPLIERS, AND BUYERS IN VARIOUS MARKET SEGMENTS?

15 2008/2009 Industry Porter’s 5 Forces Supplier-power--Overall Supplier power for hardware-low; however, Intel-provided 80% of microprocessors at a standard price --Overall supplier power for software-high; Microsoft had over 90% of the market. --HP & Dell would pay fees to Microsoft to sell their computers with hardware installed. Buyer-power--High for individual users and buyers; low switching costs, a lot of brands, lower for distributors and resellers Threat of Substitutes--Low; personal digital assistants, cell phones growing in popularity, but most individuals and businesses still need PCs to work on Threat of New Entrants--High-the most market share any one company has in the market is 18.9% worldwide by HP in There is common technology and widespread access to distribution channels --High growth periods –entry by innovators. Degree of Industry RivalryHigh- there are low switching costs, low levels of overall product differentiation, and slow market growth. Competitors struggling for brand loyalty, sales volume, etc. Due to the vast commoditization of hardware parts and software applications, the threat for new entrants (theoretically, any individual) is high. If the actual hardware and software is becoming so trite, where can firms differentiate? Post-service contracts? Branding & Marketing? Price? Value-chain/economies of scale?

16 Comparison of PC Market to Dell The rest of the Market “Indirect” model: distributors, resellers and retailers Companies rely on resellers and retail stores to enhance the brand relationship. These third parties often serviced the large accounts. Most companies work with resellers & distributors to educate the individual customer. Costly amounts of inventory; had to pay buy-backs or provide price protection to indirect channels. Dell Pioneered a differentiated model utilizing direct sales to end-user. Relationship sales: Customers with purchases of > $1 million provided 70% of firm’s revenue. Dell provided service internally to their customers. Dell takes the opposite approach. By selling to those already very familiar with PCs, they save money and time by not devoting their efforts to consumer education. Little to no inventory: Saved money, efficient value chain. Less markup passed on to clients.

17 Generic Strategy Low CostProduct Uniqueness Broad (Industry-wide) Narrow (Market Segment) Cost Leadership StrategyDifferentiation Strategy Focus Strategy (Low cost) Focus Strategy (differentiation) Dell Apple HP Gateway Acer Lenovo

18 Industry Trends: Manufacturing Manufacturing -assembly-line techniques; PCs composed of standard parts -Contract manufacturers (ODMs) made PCs for other firms to brand & market -Some PC makers also outsourced design (i.e. China, Taiwan) Anyone can make a computer with access to appropriate channels and sales efforts. Dell is making a shift to outside contractors, thus branding is increasingly important. Should they brand themselves as a PC service provider?

19 Industry trends: R&D/ Mkt&Sales R&D -Expenditures steadily declined from Microsoft (software) and Intel (microprocessors) led R&D efforts. Are outside industries (software and peripherals) prepping to take over the PC business eventually? Marketing & Sales -HP spent $1 billion. Apple spent $500 million on advertising in Both are excelling in the market OR -”White box” approach with no advertising to end-users HP & Apple (two of Dell’s largest competitors) are both excelling in terms of sales and market share in market segments. Does advertising spend have a direct correlation on revenue and brand recognition/loyalty?

20 Global Outlook-2008 Unit Sales by Country United States EuropeAsiaRest of World AcerXX AppleX DellXX HPXX LenovoX ChannelsUnited States EuropeAsia except Japan JapanRest of World RetailXX Distributor/ Reseller XX Direct-InboundXXX Direct- Outbound XX Direct-InternetXX X=where channel style is most popular by region X=where PC unit sales are highest by company Acer-Retail & Distributor/Reseller in Europe & Distributor/Reseller & Direct Inbound-Rest of World Apple-should focus primarily on Direct channels Dell-Direct in U.S. and Retail in Asia HP-Retail & Distributor/Reseller in Europe; Distributor Reseller/ Direct Inbound-Rest of World Lenovo-focus on Retail channels

21 Comparative Days of Inventory in Industry-2008 Lower Days of Inventory=Lower internal costs=Higher profit margin. Dell utilized Symphony as a metric for build time and projected profitability. Dell’s Direct Model allowed them to provide a competitive product for a lower price, providing them with a cost advantage over competitors. It also allowed them to distribute internal resources (time & money) elsewhere. They should try to maintain this advantage.

22 PC Market Size-U.S. vs. Global The U.S. market for PCs has grown steadily in terms of units sold, but has decreased in dollars received for the units. Margins are likely shrinking for the PC market. Companies are pedaling the bike faster, but not going anywhere. The global market including emerging markets for PCs is huge. Both the units and the dollar spend has increased from 2004 to 2008.

23 WHERE IS DELL’S CURRENT FOCUS, AND HOW CAN THEY DIFFERENTIATE IN TERMS OF BRAND, SALES, AND PRODUCTS? WHERE SHOULD THEIR STRATEGIC FOCUS LIE IN THE FUTURE?

24 Dell’s Strengths & Weaknesses Minimal levels of Inventory Masters of the “Direct Model” Business Model Customization Relationships with larger clients Value chain process Sales-Symphony software/Performance Metrics Strengths Post-purchase customer support for transaction buyers Retail know-how Marketing support for product lines Sales to individual consumers, education channels Relationships with resellers & distributors Weaknesses

25 Dell’s Relationship Model: Who are they?Outside RepsInside RepsExternal SupportOnline Support Relationship Buyers Large organizations with repeat orders for multiple PC units. Outside (field) reps (thousands) were used to configure IS & promote Dell Inside (call center) sales reps used to service accounts, take orders and give product delivery info After-sale service & technical support. Online database of purchase history. Premier pages- customized online computer stores Transaction Buyers Small to medium businesses and individual users. N/AOrders taken online or via an inside sales rep (call). Reps encouraged up sells of advanced PCs. N/AOnline site offered product information, customization, pricing, the ability to place an order, and track progress. Sales to large organizations seems to be Dell’s niche. Through catering to “experienced” users who are not focused solely on price, they are able to avoid indirect models. Their ability to service post- purchase is important, particularly for repeat business and managing existing accounts, which would indicate higher growth margins. Is there an opportunity for ongoing added-value with existing clients- perhaps through direct marketing?

26 Dell’s Desktops & Laptops-4 different lines Large Organization Line= Reliable/Stable Productivity Needs of Small Businesses and Basic Home Users Line for high-end gaming & entertainment Workstations for sophisticated animations (i.e. 3D animation) Dell is differentiating from “commodity” type sales, and moving into more specialty niche markets. Desktops & Laptops account for roughly ¾ of Dell’s sales. How can they add-value for their most important revenue source? Is there an opportunity here to add additional product lines for large organizations with similar qualities? Competition for Apple, which appeals to the design elite/innovators, and HP’s voodoo line.

27 Enterprise Products More powerful products for same price=VALUE High-end servers, network switches, and storage devices Could Dell couple their value chain expertise with their vast experience marketing highly technical products to acquire companies with different product lines?

28 Dell-Post Purchase Support Program Preferred Market Segments: Business Customers Buyers of High-End PCsThose who pay for support How they were Serviced: Thousands of free online support pages Call-center with technical support staff Diagnostic software in the factory (technician has access to PC from a remote location ) On-site personnel, sometimes via 3 rd party (i.e. Unisys) Can Dell find a way to service new markets in the same way they service their preferred market segments by utilizing their emergency-part caches and global control centers? This ongoing support model extended to large organizations helped Dell surpass competitors IBM and HP in terms of quality, price, reputation, service, innovation, and collaboration in They should capitalize on the service niche.

29 Dell’s rise & fall YearSignificanceStrategic Impact Dell hired managers from cross disciplines (Motorola, Apple, Intel, Sun Microsystems) & became synonymous with execution and performance metrics. --Different points of view from varying disciplines=power to build a cohesive brand? --performance metrics kept the company at a peak in terms of value chain performance and inventory Entered market for Enterprise products=high end servers, network switches, & storage devices. --Provided added value by adding punch to their products and keeping a stable price Dell changed name from Dell Computer Corporation to Dell, Inc. --Dell rates higher than their primary competitors on all levels from price to service to performance --Name change reflected Dell’s desire to emphasize product lines outside of PCs. --positive public relations for the company; the Dell brand is synonymous with a reliable and quality product at this point Dell handed over CEO reign to Kevin Rollins --support for business customers moved back to U.S. --Dell recalled 4 million laptops (issues with Sony batteries) --government investigation on accounting practices --cut prices on business PCs, but volume didn’t change --internal switch up gave investors and employees cause for concern --customer service of individual customers=rocky; was this a reflection upon moving call centers to India? --need better internal review on suppliers --execs adjusting numbers=bad business practices; internal review of ethics, code of conduct --customers not reacting to price; is Dell inadvertently signaling a decrease in value?

30 Dell’s Sales Is there an opportunity to sell to educational institutions in need of a large # of PCs? They are knowledgeable, “upper level” consumers. Dell can sell large quantities at once. Enterprise software and peripherals are expanding as a percentage of overall sales. There may be more opportunity here for new and existing clients.

31 PC Brand Ratings Ratings of PC BrandsAppleDellHP way tie for 3 Dell was only rated number one for one year in 2003, just prior to Michael Dell’s departure. Although they struggled with growth and revenue in the years following, they have managed a stronghold as #2 in the industry saw a shift in business model toward retail/resellers. Should Dell stick with what they know? Is their slipping number indicative of a need for innovation?

32 Changing directions-good for business? YearSignificanceStrategic Impact % of Dell’s revenue came from peripherals and software --Enterprise products=13% of revenue --Dell’s distribution of revenue is spreading. Indicative of high competition in PC market? --Expansion of portfolio beyond hardware=very important Dell replaced Rollins as CEO --announcement to simplify IT --innovate beyond software into solutions --Dell brought in new talent from diverse backgrounds --reliance on contractors to make PCs --shift in production plants -identify new market segment with decreased need for customization --enter into retail channel --global expansion --Primary aim to improve investor confidence; bounce-back --differentiate from others who were adding complexity --move away from commoditization and create value-added --prep for global expansion? Potential knowledge for future acquisitions or expansion? --outsource hardware to decrease costs, and allows them to focus in other areas --close few Desktop plants=laptops gaining popularity; lower costs --opportunity for new target markets with decreased need for low inventory, can route supply chain --resellers and distributors hesitant to partner with them…is it good to move away from their solid expertise in “direct”? --eye on future growth is key; move to emerging markets where markets may be less saturated $3.9 B Acquisition of Perot Systems --deepen partnership with resellers to enhance small & mid- size business --move to separate “direct” from “indirect” --expanded product offerings in services is essential to building success, but did they overpay and under-deliver? --this will be a stretch for Dell who specializes in “direct”…are they opening a can of worms? --is there a place for Dell in the well-established retail industry?

33 Dell Recommendations-Internal Overall Tactics:Dell’s Efforts Focus on qualityWith the Sony-battery disaster imprinting images of burning Dell computers in everyone’s minds, Dell really needs to make a conscious effort for more quality control and testing of suppliers’ products. Since the majority of hardware/software is now coming from outside contractors, if Dell is going to brand the materials with their name, they need to invest in research and testing to ensure they are selling and marketing a quality product. Strategic Focus on Servicing of accounts Due to the fact that capital costs of PCs and related items are only a fraction of post-purchase costs, it seems a no-brainer to emphasize the after-sale service aspect in terms of computer networking, customer education of IT, configuration, etc. Dell’s relationship sales are making them the most money, so if they continue to have a relationship with people through service, rather than focusing on a one-time sale, they should continue to increase profitability. Keep call and service centers local to the region. Dell should keep their service centers for the U.S. inside the U.S. They should focus on becoming a consultative business for corporations (i.e. could make recommendations on network security, , and other items that would be important to large businesses). They can simplify IT by having their customers spend less time internally on their networks (outsource MIS departments to Dell). Develop high –end accessories; peripherals Dell should add value to their PCs with innovative, high-margin accessories and peripheral offerings. In the same way they developed the hard colored shells for their laptops, they could sell offerings of software/security applications for corporate networks, and smaller accessory peripherals for small businesses and the individual consumer sector. Internal analysisDell would benefit from an internal analysis and potential re-structure of their leadership. After 2004’s debacle with government audits, they need to work on establishing a top-down approach in terms of a code of ethics and morals. When Michael Dell left, the company fell apart. Even though Rollins was hand-picked by Dell, they should work on sourcing leaders that can add value to the company with a focus on innovation and future-direction.

34 Dell Recommendations- U.S. Tactics:Dell’s Efforts Enhance Marketing CampaignsAs HP has focused marketing on the younger, individual user, and Apple has amped up marketing efforts to demonstrate innovation, and appeal to the young adopter market segments, so to should Dell invest in marketing to improve their brand name. With the recent public relations disasters of 2004 likely still haunting their reputation, Dell should advertise primarily via business to business forums (i.e. tradeshows/conferences to demonstrate expertise, LinkedIn + social media, television commercials, etc.). They could have a few corporate clients back them with public references, and Michael Dell himself could do some self-promoting to show the company is back on track and committed to excellence. Acquisition of a company with new product lines Dell’s primary strength resides in their value chain and distribution. They could use the efficiency of their “direct model” to sell other products by ODMs. One avenue for Dell might be in mobile phones, similar to Apple. Due to the fact that they work closely with businesses and large corporations, the security and service aspect of their business might serve them well with RIM, or another company that aligns themselves with similar value propositions. Target the education sectorThe customer market segment for education is largely untapped. With contracts for universities and colleges in particular, Dell could greatly increase sales, and also have an opportunity to sell service contracts too.

35 Dell Recommendations-Outside U.S. RegionsTacticsDell’s Efforts EuropeBecome a “help desk” for European customers Dell is fourth out of the big five competitors in terms of market share in Europe. European customers tend to respond more to retailers and distributors/resellers than the direct model. Dell could slowly integrate their direct model with large corporate level customers in Europe by entering the market and gaining trust through service contracts for all PCs. Asia Outside JapanOpen own retail “service centers” Dell has the second highest market share in Asia after Lenovo (whose home country is China). Since Lenovo primarily targets the same two sectors (corporations and small & midsize business), Dell may be able to differentiate through their service contracts, and educate customers on the value of their brand through strategically placing local retail/service-centers throughout the region. In this way, Dell’s staff can be their sales staff, and customers can see and touch the difference between Dell & Lenovo, and also have their IT service providers in-house or dispatched from these locations. The Rest of the WorldFocus on customer education through marketing in order to increase necessary knowledge for direct model. The rest of the world including emerging markets are responsive to the inbound-direct model. There is a major opportunity here for all levels of customers. Dell should focus on marketing and customer education to differentiate their brand from the commoditized market.


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