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Dell Computer Corporation

Dell Computer Corporation. Strategic Plan block 6, team 11 Steven Huang • Sri Kalyana Rama Chakravarthy Maddala • John Moon • Andrei Outkine • Noga Peled • Kris Yam. Align Strategies with Dell’s Goal. Deliver Application Outsourcing (AO). Expand Product Selection. Focus on Solution

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Dell Computer Corporation

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  1. Dell Computer Corporation Strategic Plan block 6, team 11 Steven Huang • Sri Kalyana Rama Chakravarthy Maddala • John Moon • Andrei Outkine • Noga Peled • Kris Yam

  2. Align Strategies with Dell’s Goal Deliver Application Outsourcing (AO) Expand Product Selection Focus on Solution Delivery Goal Maintain historic growth of firm and shareholder value Expand Product Selection Deliver Application Outsourcing Focus on Solution Delivery

  3. Dell’s New Vision To be the Global Leader in IT Outsourcing Solutions

  4. Outsource Software Network-centric The Changing Environment In-house Hardware Desktop-centric

  5. Deliver Application Outsourcing Deliver Application Outsourcing Expand Product Selection Focus on Solution Delivery

  6. S A P What is Application Outsourcing? ` Enterprise Companies AO Provider Small to Medium Size Businesses Mobile Workforce Hardware Data center Integrated software Support Maintenance

  7. Mainframe Client/Server Internet A New Application Model Software Custom Standard IT Infrastructure

  8. Dell’s Customers Evaluate AO Benefits Risks • Minimize TCO • lower software upgrade costs • cost control • Information security • Access to new technology • Quality of service and support • Minimize “down-time” • Scope of services • Focus on core business

  9. Minimize TCO • lower software upgrade costs • cost control • Information security • Quality of service and support • Access to new technology • Minimize “down-time” • Scope of services • Focus on core business Dell’s Customers Evaluate AO Benefits Risks

  10. Relationships with software vendors Hardware support skills Customer service support skills    Application integrator  Network service centers ? AO Success Criteria

  11. AO Revenue Growth CAGR = 60% estimated margin 30% - 45% Source: Forrester Research

  12. Focus on Solution Delivery Deliver Application Outsourcing Expand Product Selection Focus on Solution Delivery

  13. Knowledge Capital Expertise in the analysis of complex business issues Leverage Competitive Advantage ... Reputation Competencies Competitive Advantage Practice Areas e-commerce Consulting Business Processes

  14. … into Consulting Services • e-Commerce • Implement “Be Direct” Model • Build e-Businesses • Business Process Design • Facilitate Process Development and Improvement • Optimize Clients’ Supply Chain Management

  15. Dominate a Specific Niche Strategy Implementation McKinsey AT Kearney Gemini Consulting Andersen Consulting Dell

  16. Expand Product Selection Deliver Application Outsourcing Expand Product Selection Focus on Solution Delivery

  17. Sell via OEM Contract Manufacture & Sell Low value-added assembly • Handheld PCs • PDA products • Mobile devices High value-added assembly • Data storage • Network computer • NetPliances core products Complementary Product Offering

  18. Focus on High Growth, High Margin Source: DataQuest, 1999

  19. Financial Projections Deliver Application Outsourcing Expand Product Selection Focus on Solution Delivery

  20. Significant Market Potential

  21. New Vision - Financially Attractive Dell’s Current Cost of Capital = 14%

  22. Enterprise 15% Other 7% Other 6% Enterprise 12% Services & AO 22% PCs 57% PCs 81% Shift in Revenue Mix

  23. Maintaining Top-Line Growth ... CAGR=30% New Model Current Model CAGR=23%

  24. … And Boosting Earnings

  25. From Strategy to Vision Vision To be the Global Leader in IT Outsourcing Solutions Deliver Application Outsourcing Expand Product Selection Focus on Solution Delivery

  26. Questions ?

  27. AO Target Customers • Small to medium size businesses (SMEs) • estimated 300,000 emerging enterprises in U.S. (Forrester Research) • Mobile workforces • increase in tele-commuting workforce • Enterprise companies

  28. High Margin in AO Business Estimated Gross Margin 30% - 45% Software Licenses 15% - 20% Infrastructure 25% - 30% Support & Maintenance 15% - 20% Source: Company research and Cherry Tree & Co.

  29. AO Competitors USinternetworking (USIX) Corio Electronic Data Systems Corp. FutureLink Distribution IBM Global Services Telecomputing ASA AristaSoft ServiceNet Global Recruiting Services Oracle Business OnLine

  30. AO Enabling Technologies Ubiquity of the Internet Increasing availability and decreasing cost of bandwidth Proliferation of e-commerce & e-business Shared applications in corporations

  31. Attract and Retain Talent Software Experts Dedicated Employees Hardware Experts

  32. Link Vision with Values Comparable Compensation Package Attract & Retain High Growth Potential Access to Cutting Edge Technology

  33. Establish Partnerships Motorola 3Com HP Nokia

  34. Revenue ($M) Source: Dataquest, August 1999 New Product Growth Opportunities • Storage Area Network (CAGR = 29%) • Other Products: • Handheld devices (CAGR = 77.4%) • Web terminals (CAGR = 124%) • Info. Appliances (CAGR = 58.1%

  35. data storage file server app. server user Traditional Distributed Data Storage Model • Limited capacity (file server bottleneck) • Permits limited expansion • Backup and recovery consume bandwidth • Cumbersome design and management • storage deployment and support costs can total 10 times the equipment acquisition price

  36. app. server user file servers Storage Area Network (SAN) Model • Higher availability (redundant connectivity) • Faster performance (smaller, specialized servers) • Easy expansion • Consolidated management and control • devices can be physically distributed, but locally managed

  37. SAN Benefits and Disadvantages Benefits • Permits servers to communicate with storage devices in a many-to-many relationship • Separates data traffic from LAN traffic • Backup operations performed off LAN Disadvantages • Requires compatability between all network components (switches, hubs, routers)

  38. Strengthen Dell’s competitive edge Reasons for International Expansion • Capture a share of soaring international market • Mitigate slowing domestic growth • Better serve international customers • multi-national corporate customers

  39. High International Potential Source: eTForecasts, October 1999

  40. Leverage Domestic Competitve Advantages Supply Chain Mgmt. Brand Management Dell’s “Be Direct” Policy Flexibility, Dependability, Adaptability Strong customer base How to Succeed Globally? … to Succeed Abroad • Replicate Supply-Chain infrastructure - plants in strategic locations - leverage existing customer relationships • Promote “Be Direct” selling abroad • Build brand equity

  41. International Selection Criteria • Growing presence of high-tech firms • Strategic location • proximity to suppliers • reduce transportation costs to customers • No dominant competitor • Strong economic climate • Political stability • Reduced trade barriers

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