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Dell Case Key Issues

Dell Case Key Issues. Matching Dell. Industry Dynamics How to attain advantage How to protect advantage. Industry Dynamics. 5 Forces Model – Gauges the degree of competitive rivalry in industry. Bargaining Power of Suppliers. Bargaining Power of Customer. Threat of new entry.

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Dell Case Key Issues

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  1. Dell CaseKey Issues

  2. Matching Dell • Industry Dynamics • How to attain advantage • How to protect advantage

  3. Industry Dynamics • 5 Forces Model – Gauges the degree of competitive rivalry in industry. • Bargaining Power of Suppliers. • Bargaining Power of Customer. • Threat of new entry. • Threat of substitutes. • Intensity of Rivalry.

  4. Bargaining Power of Suppliers • Proprietary Standards from Microsoft and Intel - Extract profits • Other inputs are commodities • Thus Bargaining Power of Suppliers is Very High

  5. Bargaining Power of Customers • Standardized product means its easy to switch brands • Resellers and retailers have grip on channels. • Corp. users buy direct based on price since little differentiation • Over BP of customers is high and rising.

  6. Threat of new entry. • Increasing with rise of internet and direct channel. • Main barrier is capital needed for manuf. facility. • Only real barrier are economies of scale. • Threat is fairly high.

  7. Threat of substitutes. • Within product category, few direct substitutes.

  8. Intensity of Rivalry. • Rivalry is very high due to: • Lack of differentiation. • Reliability and Service are only diff’s. • Price is similar for all competitors • If prices are similar, this is a signal of rivalry. • Do prices go down or up? • Tend to fall.

  9. Dell’s Advantages/Disadv. • Direct to order • Efficient (best cost position) • Effective (for some customers - best) • Focus! • Not distracted by other channels • Maybe not competent in other channels? • Service • By from Dell, deal w/ Dell.

  10. IBM’s Advantages/Disadv. • Direct Salesforce. • Well regarded laptop. • Costs are higher • Few non-corporate customers

  11. Compaq Adv/Disadv. • Cost position is good • Retail relationships • Poor quality • Poor reputation

  12. HP Adv/Disadv. • Quality reputation • Higher cost • Resellers

  13. Gateway Adv/Disadv. • Price – lower • Service • Image?

  14. Example of Unit Price and Cost Analysis

  15. For all firms Note: IBM numbers are likely inflated by Mainframe and service being included.

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