Dell Computers Corporation

Internal Factors Analysis Summary (IFAS)

If Dell is to stay competitive in the new era among consumers, then it should start to rethink its Direct from Dell mantra. Computers have evolved from technical specialized machines to simple commodity products. Dell would have a hard time getting new users if these users cannot see, touch and use these products on their own in a physical store. Now that computers have become a commodity product, Dell should start considering selling it like one.
External Factors Analysis Summary (IFAS)

The greatest opportunity for Dell has been the next billion PCs which would be found in India, China and other first time computer buyers. This is due to the slowdown in the US PC market due to the saturation as well as the economic downturn. Getting a secure foothold in China and India has the potential to secure the company’s future for a foreseeable amount of time.

Strategic Factors Analysis Summary

TOWS Matrix

Five Forces Analysis

Competitive Rivalry – This is a strong force in the computer market. Apart from competition between PC makers, Apple is also encroaching on the PC market itself.

Power of Suppliers – The only major supplier is Intel as all the other suppliers for Dell products are undifferentiated companies. However, due to the competitive nature of the PC industry, the power of suppliers are low as Intel and other suppliers will strive to keep their costs down to become competitive with the rest of the industry. One exception is Microsoft whose operating system fortunes will have an effect on the salability of Dell computers.

Power of Customers – For Dell, these would be the large corporations who purchase Dell computers, servers and systems in bulk. They have a large say in Dell’s strategy. The loss of a major customer has the potential to create ripples and severely impair Dell’s standing within the industry. Dell’s consumer customers on the other hand are quite numerous and independent. We can safely say that the power wielded by the consumer sector pales in comparison to the power held by Dell’s commercial clientele.

Threat of Substitute technologies   – For Dell, these substitute technologies would be smartphones and other devices whose computing power are now encroaching in areas usually dominated by the desktop computer. This is a particularly strong force in the laptop market due to the mobility and built in communications features of these devices.

Threat of new entrants – Due to its size and age, Dell is relatively secure in its position from new entrants. Moreover, any new competing technologies (such as Zing) can simply be bought by Dell to add strategic value to their product portfolio.

Value Chain

As a company which builds computers, Dell’s value proposition comes in Phase Two – the assembly of complete computers from discrete components.  Dell’s value chain is actually shorter than its competitors like HP and Gateway. These companies have an intermediate stage between assembly and end users – the retail and distributor chains which then sell the products to the consumer. Dell found early success in marketing directly to consumers. These consumers knew what they wanted, and they will expend the effort to get it their way. However, one must ask if this is sustainable in today’s computer market where the average Joe and Jane now “shops” for a computer instead of “spec-ing” a computer then having Dell build it.
Based on these analyses, the following form my five IT recommendations for Dell computers. These IT suggestions would help Dell in implementing their strategies.

1. Use IT in supply chain management – Dell’s business model centers around its value chain. Therefore, IT efforts should go into making this value chain as efficient and reliable as possible. Wal-Mart has made great strides in using supply chain management to improve the visibility of its operations. Dell, as a manufacturing company with manufacturing and assembly operations in multiple sites all over the world can surely benefit its efficiency through the implementation of IT solutions which improve visibility in their supply chain.  IT can also play a part should Dell decide to finally open a retail store. A customer at a brick and mortar Dell store can touch and use the computer, before he or she can commit an order. Once the order has been committed at the store, the specifications of the computer which the customer wanted can then be directly communicated to Dell’s factories for assembly and eventual shipping to the customer’s residence.
2. Online Customer Service – Dell has already started to this end, implementing an IT solution which allows customers to troubleshoot and fix their computer problems online. This can be improved upon. One possible improvement would be to implement software on the computers the mselves to diagnose any problems and communicate with Dell should any faults arise.
3. Cooperative Customer Service – When a Dell computer fails, the problem could be with any number of components. It could be due to Dell’s own hardware, or the installed operating system (whether it be from Microsoft or some other developer), or the software its users have installed on the machine. TO this end, Dell can further improve its customer service by using IT to coordinate service with other important software vendors. Dell can work with strategic partners to implement a comprehensive service system. This system would keep all partners in the light about all potential issues and troubleshooting protocols in all their products. With this, Dell can avoid having to point fingers when a system crashes. With a comprehensive database of faults and issues, Dell’s customers would feel a more integrated and seamless solution when buying a Dell product. Moreover, this will avoid the situation where Dell would have to point fingers when a problem arises – a situation which no customer wants to experience.
4. Command and Communications with offshore operations – Dell’s expansion into developing markets is a critical move to grow the company beyond the US computing market. To do this, Dell would have to create local operations in these markets. IT will play a major part in supporting these new operations. IT can provide communications and coordination with headquarters. IT can also allow more efficient operations of these new markets, allowing local offices to connect directly with Dell’s manufacturing and support facilities instead of having to connect through Dell’s headquarters in Austin.
5. Development of Turnkey Solutions – Dell is currently trying to break into the “next 1 billion PC users”. Along with the consumers of China, and India, another burgeoning market would be the business users in these countries. Dell can start to leverage their might by not only selling computing hardware to these firms but entire IT systems. For example, instead of selling hardware to automate accounting and finance over an entire organization, Dell can possibly sell hardware, software, and the development of personnel to maintain these systems to interested companies. A complete solution like that will ease Dell’s entry into these new business markets. This may be done in house, or by purchasing smaller IT providers. In line with Dell’s mantra of innovation, it is also possible for Dell to create their own novel IT solutions which it can sell to these companies. Doing so would also diversify the company’s product offerings, diluting its concentration in the high volume low margin computer markets. This may be done in house, or by purchasing smaller IT providers. In line with Dell’s mantra of innovation, it is also possible for Dell to create their own novel IT solutions which it can sell to these companies. Doing so would also diversify the company’s product offerings, diluting its concentration in the high volume low margin computer markets

References

Dell . (2008). Fiscal 2007 in Review. In Dell Inc.. Retrieved August 23, 2008, from http://www.dell.com/content/topics/global.aspx/about_dell/investors/financials/07_yir?c=us&l=en&s=corp.

Burrows, P. (August 14, 2008). Dell vs. Apple: Why it may be personal. In Business Week. Retrieved August 23, 2008 from http://www.businessweek.com/magazine/content/08_34/b4097022701166.htm

Einhorn, B. & Lakshman, N. (September 14, 2007). Selling Computers to India. In Business Week. Retrieved August 23, 2008 from http://www.businessweek.com/globalbiz/content/sep2007/gb20070914_201048.htm

Kay, R. (June 19, 2008) Servers Become Dell’s Comeback Weapon. In Business Week. Retrieved August 23, 2008 from http://www.businessweek.com/technology/content/jun2008/tc20080618_206274.htm

Ricadela, A. (July 28, 2008).  Michael Dell:’ A Big Second Half’. In Business Week. Retrieved August 23, 2008 from http://www.businessweek.com/technology/content/jul2008/tc20080727_394373.htm

 Thompson, A., & Strickland A (2003). Strategic Management 13th edition. New York, NY: McGraw Hill.