Dell Inc. Case Study

1. By: Dan McLindon Kyle McDaniel Jeremy Smiley Tom Anderson Ray Moorman Dell Inc. Case Study

2. Key Question for Dell Can Dell overtake HP as the world leader in personal computers with its current strategies of Build to Order and Direct to Consumer sales?

3. Secondary Questions What contributed to Dell’s success and rapid growth in the late 1990’s? Why is Dell choosing to become more like HP? What does Dell do well and where does it struggle? Can Dell ever be successful in B2C market in developing countries with Direct to Consumer distribution? What is Dell? A computer manufacturer? A consumer electronics company? An IT service partner? What is their focus? What is Dell doing today to set itself apart from the competition in the highly competitive and rapidly evolving personal computer industry?

4. Dell Computer Company Overview

5. PEST Analysis for Dell

6. What is going on in the PC industry?

7. Industry Overview (Supply) Porter’s five forces: Threat of substitute products High Rivalry among existing competitors High Bargaining power of buyers High Bargaining power of suppliers Low Threat of new entrants High

8. Porter’s Five Forces

9. 2007 PC Vendor Market Share Dell’s PC business model has not translated into global leadership.

10. What contributed to Dell’s success and rapid growth in the late 1990’s?

11. Build to Order Conclusion – Dell has spent its time and money on innovation to become an efficient manufacturer of computer hardware. Was that an effective use of their resources?

12. Is Dell’s Build to Order model still a competitive advantage or has it become a liability?

13. Build to Order

14. What has Dell done to separate itself from the competition?

15. Dell Inc. Product Timeline Conclusion – Expanding product set into several highly competitive markets with well established players. Strategy is be the low cost leader.

16. Internal Analysis – Core Competencies Red – Easy for competitors to develop Yellow – Possible for competitors to develop Green – Very difficult for competitors to develop

17. What does Dell do well and where does it struggle?

18. Dell's Geographic Performance(Operating Incomes) U.S. Business & EMEA markets showing strongest growth trends.

19. Internal Analysis – Markets Served Conclusion – Dell is strong in the US B2B market, but that strategy does not translate to success in B2C. Only 39% of sales generated outside US, compared to 67% global sales by HP.

20. Internal Analysis - Manufacturing Conclusion – Dell already starting to outsource its competitive advantage. Can it still compete with HP in the B2C market? Will outsourcing manufacturing impact their advantage in B2B market?

21. SWOT Analysis for Dell

22. Will Dell’s Strategy allow it to achieve the growth it desires? Which business models are dated and which can still proved a competitive advantage?

23. Elements of Strategy • Cost Efficient Build to Order • Competition has tried to emulate with limited success • ýAlthough other vendors have not replicated Dell’s strategy, they’ve done enough to close the cost advantage gap. • ýDell’s lean manufacturing techniques work best in production of desktop PCs. Consumer tastes have shifted to laptops. • Dell’s Strategy Contribution towards a future competitive advantage… Cooling Warming

24. Elements of Strategy • Partner with Suppliers • ýIBM, HP, Sony, Toshiba, Fujitsu abandoned vertical integration for strategic outsourcing of components in the early 1990s. • Partnering with suppliers to utilize their expertise is a given at this point, no contribution to competitive advantage. • Dell’s Strategy Contribution towards a future competitive advantage… Cooling Warming

25. Elements of Strategy • þCompetitors have not been able to shorten their supply chain as effectively as Dell • þCompetitors have had difficulty implementing the sell direct strategy because it cannibalizes other sales channels. • ýDisadvantage in some foreign markets where small business and individual customers want more of a hands on shopping experience. • Dell’s Strategy • Direct Sales Contribution towards a future competitive advantage… Cooling Warming

26. Elements of Strategy • Industry is constantly evolving with new products. Dell has demonstrated success in entering product segments and succeeding as the low cost provider. Examples are servers and networking equipment. • Name recognition from desktops and notebooks gives consumers confidence to try other products. • Opportunity for growth is large outside of PCs and servers where Dells market share is negligible. Market share is ≤5% in data storage, networking, printers, and IT services. • Dell’s Strategy • Expansion of products and services Contribution towards a future competitive advantage… Cooling Warming

27. Elements of Strategy • ý • Dell’s Strategy • Customer Service and Technical Support

28. Elements of Strategy • ý • Dell’s Strategy • R&D focused on customer needs

29. Elements of Strategy • ý • Dell’s Strategy • Use of Standardized Technologies

30. Elements of Strategy Contribution towards a future competitive advantage… Cooling Warming

31. Dell V. HPS

32. US Market Share – Dell vs. HP

33. World Market Share – Dell vs. HP • Conclusion – From 2005 declining trend in both US & World Market Share for Dell. HP has gained market share during that time. Possible reason for HP’s success is acquisitions (Compaq 2002, EDS 2008)

34. Contributors to HP's Operating Income HP acquires EDS Dell should continue focusing efforts on growing IT services business and look for acquisition of IT services company to continue to compete and hold market share against HP.

35. Leading Providers of Information Technology (2007) Acquisition of CSC would give Dell increased IT services market share of 3.3% vs. HP’s 5.3% combined market share (with EDS)

36. What does Dell need to do in order to take the lead again?

37. Recommendations • Develop a focus. Examine where the company is creating the most value for customers and invest in that business line • Focus on growth in B2B channel and the continued development of value-added IT services • Stay true to the Build to Order business model. Use it as a tool to create value for customers, not as just a cost control tool. • Pull out of retail stores immediately. This goes against every strategy and value that makes Dell what it is. • Fix problems in laptop manufacturing to keep competitive advantage in-house.