Michael Dell the Henry Ford of the Information Age DELL Group B 13 Masato Shirai Andrea Tellarini Vasilis Kykrilis Gabrielle Ng Matthias Kuhn

Dell’s history Michael Dell founds Dell Computer Corporation First Dell designed PC is introduced: the Turbo, featuring Intel 8080 processor Dell is first PC company to offer next-day, on-site service Subsidiary in United Kingdom opened Organization around customer segments IPO Manufacturing center in Limerick, Ireland Dell’s first notebook PC

Dell’s History Dell among the top-five PC makers worldwide Subsidiaries in Australia and Japan mark entry into Asia-Pacific market Manufacturing center in Penang, Malaysia Launch of dell.com Dell added to S&P 500 index Introduction of first workstation systems Manufacturing center in Xiamen, China First enterprise storage product

Product Segmentation PERSONAL COMPUTER WORKSTATIONS STORAGE CONSUMER ELECTRONICS SERVERS

Personal Computers Laptops and desktops constitute core products 80% of sales in 2003 Key strategy Direct Sales Aggressive Price Cut Implications Market share growth Brand Awareness

Workstations Enterprise and medium business segment Key strategy Powerful Implications By 2000 Dell was the US and worldwide leader of in Windows NT workstations Cost Effectiveness based on Windows usage

Servers Enterprise and medium business segment Key strategy Open architecture system Implications By 1999 Dell gained 12% of sales Entry-level servers

Storage Enterprise and medium business segment Key strategy Linux Implications Broader target market including small- medium business Alliance with EMC Standardisation

Consumer Electronics Individual Consumers Key strategy Narrow range of standardized products closely integrated with computer technology Implications Challenge for the future – The biggest test of the Dell business model Direct Sales

Customer Segmentation RELATIONSHIP BUSINESS Global Enterprise and Large Corporate Accounts (Fortune 5000 companies) 60% of Dell North America revenues Execution - Key Success Factor Equipment needs to be deployed globally in timely basis Longer payment cycle SMALL-MEDIUM BUSINESS Preferred Account PAD (400 – 3500 employees) Business System Division BSD ( employees) 30% of Dell North America revenues Efficient Customer Database - Key Success Factor CONSUMER BUSINESS Individual customers Transaction Segment 10% of Dell North America revenues Ability to convert sales into cash within 24 hours Customers less educated

Supply Chain Value INBOUND MANUFAC TURING OUT BOUND SERVICES SALES BTODirect Sales Investment on customer services Inventory Cost Cut Mass Customization Steady Delivery Channel Cost Cut Orders on the Web Sale People for relations customer Low Price Convenience to order Fulfilling Request Customer Reliability with deliver Best Customer Services Good Reputation in Service Price Keeping Good Relation Technical Quality Timing quality Service quality Reputation quality Relationship quality COMPETITIVE ADVANTAGE VALUE PROPOSITIONS

Industry Analysis Main Competitors HP Hewlett Packard 45$ Billion Revenues Global provider of a broad range of computing system Segments: enterprise, commercial and consumer markets IBM 89$ Billion Revenues Desktops, portables, servers, storage Offering of a variety of tech solutions (systems, products, services, software and financing) Sun Microsystem 16$ Billion Revenues Scalable computer and storage system, high- operating network computing equipment Broad range of services including support and professional services Gateway Corp. 7$ Billion Revenues Direct marketer of PCs and related product and services Servers, workstations

Industry forces BARRIERS TO ENTRYMEDIUM High investment required with moderate tech level SUPPLIERSMEDIUM Suppliers size comparable to manufacturers SUBSTITUTE PRODUCTSLOW/MEDIUM No substitutes for PCs, network computers potential substitute CUSTOMERSHIGH Customers have choices RIVALRYHIGH Many players with relatively low differentiation

SWOT Analysis Strengths DIRECT MODEL Complicated and time consuming transition for competitors in the short term SUPPLIER RELATIONSHIP PRICING INVENTORY MANAGEMENT Pull System Shared demand information with suppliers FOCUS ON CUSTOMER VALUE ACTIVITIES Outsourcing of non-core activities Ability to exploit the high elastic demand of the industry undercutting prices

SWOT Analysis Weaknesses R & D Limited ability to innovate High reliance on suppliers SERVICES Not complete solutions High client retention effort

SWOT Analysis Opportunities INTERNATIONAL EXPANSION Further penetration in non US markets (only 33% of total revenues come from EMEA and APAC/Japan) Growing telephony and internet infrastructure – Indonesia, India Selling of high-end systems to global customers and local enterprise in China market SERVICES AND SOLUTIONS Complete solutions Consulting and Support 9% 21% 70% APAC/JapanEMEAAMERICAS

SWOT Analysis Opportunities ENTERPRISE PRODUCTS Small-medium segment is growing Open architecture systems are emerging in response to increased storage demand and need for standard solutions EMC PARTNERSHIP Extends Dell’s capabilities and drives additional customer value in: R&D Sales Service Manufacturing

SWOT Analysis Opportunities CONSUMER ELECTRONICS Huge number of potential customers $800 bn market Products highly integrated with PCs Improvement of customer segmentation leverage Shift from analogue to digital technology plays to Dell’s strengths AdvantagesIssues High reliance on third manufactures Products not individually configured Direct Sales as new channel distribution for c.e. Brand Awareness? PDAs market entry

Other Issue Printing At the beginning of 2003 Dell decided to enter the computer printer market Analysts view the market as flat in the short-term and declining in the long term Fierce competition (HP over 50%) Reduced flexibility Higher inventory costs Concerns

SWOT Analysis Threats PCs Saturated market with declining demand MARGINS Increasing size of rivals through consolidation potential squeeze in market share and margins DIRECT MODEL Duplication in the long term

Conclusions CONSUMER ELECTRONICS SERVICES New source of revenues Educate the customers Fierce competition Lucrative margin Complexity Differentiation AS IS PCs MARKET DIRECT MODEL Commodity Low margin Mid-term Duplication AS TO BE