1. DELL Inc.
Prepared by Zhanna Tulekova
MGT 490

2. Organizational Background
Dell Corporation is the direct selling computer company, with 96,000 employees. Dell was originated in 1984 by Michael Dell. Beginning with small capital Michael Dell, who is current Chairman and CEO, made the company profitable after first two years. The income report for the last three years is presented in the table below
Period Ending
Jan 28, 2011
Jan 29, 2010
Jan 30, 2009
Total Revenue
61,494,000
52,902,000
61,101,000
Operating Profit
3,433,000
2,172,000
3,190,000
Net Income
2,635,000
1,433,000
2,478,000

3. Organizational Background
Dell focuses on the design, improvement, produce, advertising, sale, and support of a variety of computer systems and services worldwide. The key market segments are Governments and big businesses. The company’s strategy is “Direct Business”- to understand consumers’ needs and efficiently provide its products by eliminating retailers.
Organizational Background

4. Dell Strategy- Direct Business Model
Sell directly to customers
Build products to customer order
Reduce retail mark-ups and costs
Reduce risk associated large inventories of finished goods
Leverage relationship with suppliers and consumers
Make better relationship with customers
Use information to improve the Value Chain

5. Ranking n terms of impact
PEST Analysis
Factor
Opportunity/
threat
Impact
(1=Low; 5=High)
Ranking n terms of impact
Political
Foreign Trade Regulations
Government expenditure on IT for businesses
Chinese government’s ignorance on PC piracy
Opportunity
Threat 4 5 2
Economic
Economic recession
Emerging market growth
Currency fluctuations and exchange rates 3

6. Ranking n terms of impact
PEST Analysis (cont.)
Factor
Opportunity/
threat
Impact
(1=Low; 5=High)
Ranking n terms of impact
Social
Desire for constant connection
Opportunity 2 1
Technological
Constant Technological innovations
Globalization of Internet Technology
In some countries Internet access is costly
Threat 5 3 4

7. PEST Analysis (cont.) X- Ranks of PEST Analysis Y- Rank Y X
(4- most important, 3- important, 2- less important, 1- the least important)

8. Dell Inc.
Major Competitors

9. PC Industry Sales
Year
Total PC Sales
($ US mln)
2005
3,809.7
2006
5,046.6
2007
6,341.5
2008
7,344.3
2009
6,796.1
2010
8,034.6 Y X
X-Year
Y- Total Industry Sales
The whole computer industry demonstrates increase in sales over a 4 years ( ) and decline in 2009 which was a result of the economic down turn. All sales figures are in Million Dollars.

10. Dell Inc.

11. Porter’s 5 forces Factor Evaluation Intensity of Rivalry
Strong (several major PC makers)
Buyer Power
Strong (customers are attracted by low prices, but they may switch easily)
Supplier Power
Moderate (high switching cost; many suppliers; Microsoft monopolization, strong power of processors’ suppliers)
Threat of Substitute Products
Strong (Smartphone, tablets, and etc.)
Threat of New Entrants
Moderate (easy to entry, but hard to compete)

12. Porter’s 5 forces
(4- the highest threat, 3- high threat, 2- moderate threat, 1- the lowest threat)

13. Porter’s 5 forces Large number of rivals
Intensity of Rivalry
(Very High)
Large number of rivals
‡Relatively low difference in price between competitors‡
Low differentiation
High exit barriers
However, Dell differentiates from other competitors by its successful business strategy. Dell should keep with low prices.

14. Bargaining Power of Buyer
Porter’s 5 forces
Bargaining Power of Buyer
(Very High)
Customer service is important factor
Highly price sensitive (If the prices are raised high, customers will buy from competitors)
Dell should pay big attention to consumers and entry emerging markets for obtaining new customers.

15. Bargaining Power of Suppliers
Porter’s 5 forces
Bargaining Power of Suppliers
(High)
Large amount of suppliers for different parts: hardware, keyboards, and etc.
High switching costs
Supplier power is high in PC’s industry, but Dell is a big corporation, and suppliers would like to work with Dell

16. Porter’s 5 forces
Threat of Substitutes
(Low)
Wide usage of PCs throughout the society (one computer for every three people in the U.S.)
It is difficult to find alternative to computers, especially for businesses and governments.

17. Porter’s 5 forces Required low capital investment
Threat of new entrants
(Moderate)
Required low capital investment
No legal or government barriers
Difficult to compete
Difficult to acquire customer’s loyalty and trust
In the PC’s industry it is easy to entry, but new companies will not create a tense competition for Dell. Because quality reputation is important, and new companies will need much time to prove its excellence.

18. Conclusion on overview Dell’s strategy and industry analysis
In conclusion, the external environment is wholesome to the company because the Political, Economical, Social and Technological factors are opportune to the business. The company has come up unique strategy, which have helped to gain competitive advantage in the industry in which it operates.

19. Competitors Major Competitors
Recently, the computer industry progressed a lot. New products are coming out all the time, the competition is brutal, and customers are changeable. The major competitor of Dell Inc. are presented below.

20. Net Income (in millions)
Competitors
Sales (in millions)
Net Income (in millions)
Generic Strategy
Employees
City of Headquarters
Dell Inc.
61,494
2,635
Low cost/
Differentiation
100,300
Round Rock, TX
Hewlett Packard
126,033
8,761
324,600
Palo Alto, CA
IBM
99,870
14,833
436,085
Armonk, New York
Apple
65,225
14,013
46,600
Cupertino, CA
Cisco
40,040
7,767
70,700
San Jose, CA
Xerox
21,633
606
136,500
Norwalk, CT

21. Competitors #1

22. Competitors Competitors Quality based ranking Price based ranking
Web Influence*
Total Score
(30 is maximum)
Dell Inc. 9 10 8 27
Hewlett Packard 26
IBM
Apple 7
Cisco 25
Xerox 24
* Web influence describes a company's ability to build brand-name recognition on the Web. Web influence data can be determined by the number of hyperlinks to the company’s Web site from external domains.

23. Competitors QUALITY COST High Low Low High DELL HP, IBM APPLE CISCO
XEROX
Low
Low
High
COST

24. Competitors Founded in 1939
HP’s mission: “To invent technologies and services that drive business value, create social benefit and improve the lives of customers—with a focus on affecting the greatest number of people possible.”
The founders developed a unique management style that came to be known as The HP Way.
1. We have trust and respect for individuals.
2. We focus on a high level of achievement and contribution.
3. We conduct our business with uncompromising integrity.
4. We achieve our common objectives through teamwork.
5. We encourage flexibility and innovation.
HP is listed in Greenpeace’s Guide to Greener Electronics

25. Competitors Founded in 1911
IBM mission “We translate advanced technologies into value for our customers through our professional solutions, services and consulting businesses worldwide.”
International Business Machines is a technology and consulting firm. It manufactures and sells computer hardware and software, and it offers infrastructure, hosting and consulting services in areas ranging from mainframe computers to nanotechnology.
IBM has nine research laboratories worldwide
IBM’s goal is a reduction of the company's impact on the environment
Tokyo Ohka Kogyo Co. and IBM are collaborating to establish new, low-cost methods for bringing the next generation of solar energy products to market.

26. Competitors
Founded 1976
Apple’s mission: “Apple will be a leader in providing simple, powerful, high-quality information products and services for people who learn, communicate, and create.”
Apple is listed in Greenpeace’s Guide to Greener Electronics
Stylish product innovation

27. Worldwide PC Vendor Unit Shipment
3Q10 Shipments
3Q10 Market Share (%)
3Q09 Shipments
3Q09 Market Share (%)
3Q09-3Q10 Growth (%)
Company HP
15,431,749
17.5
15,513,420
18.9
-0.5
Acer
11,527,716
13.1
11,726,586
14.3
-1.7
Dell
10,816,474
12.2
9,908,099
12.1
9.2
Lenovo
9,140,778
10.4
6,871,379
8.4 33
Asus
4,793,186
5.4
3,911,263
4.8
22.5
Toshiba
4,695,600
5.3
4,014,945
4.9 17
Others
31,896,091
36.1
30,106,333
36.7
5.9
Total
88,301,595
100
82,052,026
7.6

28. U.S. PC Vendor Unit Shipment
3Q10
Shipments
3Q10 Market Share
(%)
3Q09
3Q09 Market Share
3Q09-3Q10 Growth (%)
Company HP
4,459,473
25.3
4,372,231
25.4 2
Dell
4,188,688
23.8
4,447,478
25.8
-5.8
Acer
1,848,511
10.5
2,338,816
13.6
-21
Apple
1,831,664
10.4
1,611,000
9.3
13.7
Toshiba
1,629,100
1,427,000
8.3
14.2
Others
3,650,807
20.7
3,036,573
17.6
20.2
Total
17,608,242
100
17,233,099
2.2

29. EMEA PC Vendor Unit Shipment
3Q10 Shipments
3Q10 Market Share (%)
3Q09 Shipments
3Q09 Market Share (%)
3Q09-3Q10 Growth (%)
Company
Acer
6,147
22.5
6,161
24.2
-0.2 HP
5,206
19.1
4,949
19.5
5.2
Dell
2,449 9
2,201
8.7
11.3
Asus
2,370
1,875
7.4
26.4
Lenovo
1,613
5.9
1,000
3.9
61.3
Others
9,498
34.8
9,235
36.3
2.8
Total
27,284
100
25,420
7.3

30. PC Vendor Unit Shipment
In Asia/Pacific, PC shipments reached 29.7 million units in the third quarter of 2010, a 10.5 percent increase from the third quarter of 2009.
PC shipments in China in the third quarter of 2010 held steady at 62% of all PCs shipped in Asia/Pacific, growing 11.3% over the same quarter last year.
Latin American PC shipments totaled 8.2 million units in the third quarter of 2010, a 9.9% increase from the third quarter of 2009.
PC shipments in Japan surpassed 3.6 million units in the third quarter of 2010, a 14.1% increase from the same period last year.

31. Market Analysis
23.3%
8.4%
10.3%

32. Market Analysis Company % Growth in 2010 HP 10 Acer 40 Dell 18 Lenovo43
Asus 72
Toshiba 24

33. (Average Selling Price)
Market Analysis
(Average Selling Price)
PCs
Servers
Mainframe Servers
Average Price Decline
-4.4%
-6.2%
-3.6%
Key Reasons causing prices to decline
Increased price decline due to commoditization
Industry’s tend to decrease manufacturing costs

34. Distribution of revenue
2004
2005
2006
2007
2008
USA (million units)
Consumer
21.8
23.6
25.6
29.0
32.6
Commercial
36.5
40.3
41.9
46.0
49.4
Total
58.3
63.9
67.5
75.0
82.0
Worldwide (million units)
64.9
78.4
88.4
100.0
111.2
114.4
129.4
141.9
157.1
173.3
179.3
207.8
230.3
257.1
284.5

35. Market Analysis
Technologies are improving every year, consequently making the industry fiercer.
“Ten years from now there will be a small number of computers in home. As an alternative, people will be wearing computers implanted, for example, in eyeglasses, with the retina as the screen” according to IT Specialist, Raymond Kurzweil.

36. Market Analysis
An important question to ask is how profitable is the industry. And the answer is very profitable. The industry is always redefining itself as well as every other business on the world due to its deep routes within every industry. As for what company ranks the highest in profit at the moment is Apple, but the numbers are skewed due to other hardware Apple provides. The industry is extremely competitive and profitable.

37. Market Analysis
In the US computers are found in most homes with access to the Internet. Population is taught to use computers in school at a young age. The target market for PC industry is the whole world (families, children, businesses, governments, and etc.)
However, there are some countries where people do not hot to use computers. The PC industry has plans to expand into emerging markets.

38. Social Media Dell Community - Support Forums -Owners Club
Dell uses social media to listen, learn and engage with the customers.
Dell Community
- Support Forums
-Owners Club
- Dell Groups
Facebook
- Dell Home/Consumer
-Dell Large Enterprise
- Dell Small & Medium size Business
Likedln
Twitter
- Dell News
- Dell Corporate Accounts
- Dell Support Accounts

39. Conclusion on competitor analysis
PC industry is very profitable with constant innovations. Almost all companies work globally, they compete with each other by choosing different strategies. The leader in sales for 2010 is HP.

40. Dell’s Business Model
Earn customers' respect and loyalty by providing high quality, value, and low prices by direct business
To seize opportunities to growth by offering products in retail stores.
Comply with laws and rules
Attain profit for finance growth, value for shareholders investment and corporate objectives
To demonstrate the commitment to employees by promoting and rewarding based on performance and by creating a good work environment.
To lead in the marketplace by developing and delivering useful and innovative products and services

41. Sales Year PC Shipments (in mln.) PC Market Share 2005 9.2 16.8% 2006
9.8
17.18%
2007
10.9
14.5%
2008
11.2
15.95%
2009
10.8
12.2%
2010
11.1
12.1%

42. Financial Information
42.2

43. Changes in distribution of sales by product/region
Expanded relationships with retail partners around the world
Created Streak, a 5-inch device designed to provide on-the-go entertainment, social connection and navigation experience
Dell saw its sales in China jump 81% since Now China generates about $4 billion in annual sales, about 7-8% of Dell's total
In India sales jumped 52%, generating sales around$1 billion annually

44. Resources Human Resources
100,300 employees including multi cultural employees
Superior engineering and IT skills
In-depth industry knowledge
Staff and distributors trainings
Physical Resources
Properties in many countries
R&D facilities
Production machineries
Financial Resources
Internal funds generation (shareholders)
Company’s revenue
Intangible Resources
Brand image
Customer loyalty
Patents & Copyrights

45. Assets Current assets Cash Inventories Receivables Office Supplies
Fixed Assets
Properties
Land
Production machineries
Intangible assets
Patents & Copyrights

46. BCG Matrix
Dell in China
Dell in USA
Dell in EMEA
Dell in Japan

47. BCG Matrix

48. Value Chain Analysis Activities Analysis Inbound logistics
Dell has competitive advantage of lowest in the Industry cost structure. The company receives the exact material every two hours to fulfill actual customer orders.
Reliant on sole suppliers for the purchase of materials with short life span. E.g. Intel for processors and Microsoft for different software products.
Operations
Finished products from components and sub assemblies are acquired from a wide range of vendors
Dell has 6 production units to carry large quantities of different products to increase their leverage
Outbound logistics
Dell computers are offered in retail stores and can be ordered directly
Rail, sea, and air from Asia to Europe,
Rail network from China to South Asia.
Ocean shipment to Japan, Australia and New Zealand.
In the America, Dell relies primarily on air shipment
To minimize the delay between purchase and delivery, Dell has a general policy of manufacturing its products close to its customers.
Transportation with reduction in fuel consumption and carbon emissions.

49. Value Chain Analysis Activities Analysis Marketing and Sales
Products are made available to customers through direct and channel sales
Dell markets its products on the television, newspaper, radio, and social media.
Service
Extensive service and support
Provides total care after sales service, maintenance and installation
Provides service for calls, s and chats with Dell IT specialists

50. Value Chain Support Activities
Analysis
Firm Infrastructure
Infrastructure includes Information Management and Business Intelligence Solutions for archiving, recording management products, data protection and enterprise data and leasing, financing, financial asset management services, etc.
Human resource management
100,300 employees worldwide
Large levels of responsibility
Serve customers at the highest level
Technology development
Dell is converging the IT Fabric With 10-Gigabit Ethernet
Dell invests money in R&D
Dell created Streak, a 5-inch device designed to provide on-the-go entertainment, social connection and navigation experience
Procurement
Advanced technologies

51. Dell’s Value Chain

52. SWOT Analysis Strengths Brand name: ranked as the 2nd largest PC maker
Strong market position in key segments, wide production portfolio
Strong financial situation
Human Resource Management
Launched newer technology far more before the other companies
No inventory build up (JIT approach)
It offers performance PCs that are powerful and configured at competitive prices (customer loyalty)
Weaknesses
The firm having such a large range of components from many vendors in different countries
It is dependant on large suppliers for being an assembler rather than a computer tech manufacturer
Quality issues regarding the suppliers
Weak relations with other retailers
Weak internal control

53. SWOT Analysis Opportunities
Emerging markets, particularly BRIC (Brazil, Russian, India, and China) countries
e-Commerce expansion
Cost reduction in latest technology
New retail agreements
Consumers expenditure
Threats
Strong competitors like Hewlett Packard, Acer, Intel, IBM
Changes in the currency rates
Political instability, government regulations and tariffs in developing countries
Slowdown in economic conditions in the world

54. The Strategy clock
High
Perceived product
Low
High

55. Generic Strategy
DELL

56. Acquisitions and mergers
Grand Strategy
Date
Acquisitions and mergers
November 2, 2010
Dell Inc. agreed to acquire Boomi, Inc. from Ben Franklin Technology Partners of Southeastern Pennsylvania, FirstMark Capital, L.L.C.
November 4, 2010
MET Laboratories, Inc. acquired assets and operations of the Austin, Texas Regulatory Test Laboratory of Dell Inc.
December 9, 2010
Dell Inc. signed a tentative agreement to acquire Compellent Technologies, Inc. from Crescendo Venture Management LLP and other shareholders for approximately $890 million on.
December 22, 2010
Dell Inc. agreed to acquire InSiteOne, Inc. from Allegra Partners, Primus Capital Funds and others
January 4, 2011
Dell Inc. signed a definitive agreement to acquire SecureWorks Inc. from Frontier Capital LLC, Great Hill Partners, LLC, Noro-Moseley Partners and other investors. SecureWorks reported revenue of $120 million for 2010.

57. International Markets
In 1987 Dell opened its first international subsidiary in the United Kingdom
In 1990 opened a manufacturing center in Limerick, Ireland to better serve customers in Europe, the Middle East, and Africa
In 1993 the first entries into the Asia Pacific region (subsidiaries in Australia and Japan)
The first Asia Pacific customer service is opened in Penang, Malaysia
In 1998 Dell opened manufacturing and support center in Xiamen, China
In 1999 Dell opened manufacturing operations in Brazil to better serve customers in Latin America
In 2003 Dell became the 3rd largest provider of computer systems and services in China
Dell's shipment growth was better than regional averages across most regions. However, the Europe/Middle East/Africa (EMEA) region remained weak

58. Conclusion
The company heavy relies on its employees, consumers and stockholders, bearing in mind that human resources is the central asset of the company, and customer and stakeholder expectations are very high. The organization has come up with various products and services, which have helped to give it a competitive edge in the industry in which it operates.

59. Conclusion
Dell’s business model is more oriented to satisfy customers’ needs
Dell saw its sales in China jump 81% since 2010 and In India sales jumped 52%
According to the generic strategy, Dell is cost leadership
Dell aggressively expands into international market
The main strength in SWOT analysis is JIT approach
The main weakness in SWOT analysis is dependence on large suppliers for being an assembler rather than a computer tech manufacturer
The strongest opportunity for Dell is emerging markets
Threats in emerging markets are political instability, government regulations and tariffs