DELL Inc. Prepared by Zhanna Tulekova MGT 490

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

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

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

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

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

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

Dell Inc. Major Competitors

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 (2005 - 2008) and decline in 2009 which was a result of the economic down turn. All sales figures are in Million Dollars.

Dell Inc.

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)

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

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.

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.

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

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.

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.

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.

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.

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

Competitors #1

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.

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

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

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.

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

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

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

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

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.

Market Analysis 23.3% 8.4% 10.3%

Market Analysis Company % Growth in 2010 HP 10 Acer 40 Dell 18 Lenovo 43 Asus 72 Toshiba 24

(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

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

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.

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.

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.

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

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.

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

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%

Financial Information 42.2

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 2010. 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

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

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

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

BCG Matrix

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.

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, emails and chats with Dell IT specialists

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

Dell’s Value Chain

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

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

The Strategy clock High Perceived product Low High

Generic Strategy DELL

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.

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

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.

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