Management

Case Study #1

DELL INC. IN 2008: CAN IT OVERTAKE HEWLETT-PACKARD AS THE WORLDWIDE LEADER IN PERSONAL COMPUTERS QUESTIONS
1.What is your evaluation of Michael Dell’s performance in his roles as Dell’s CEO and Chairman? How well has he performed the five tasks of crafting and executing strategy that were discussed in Chapter 2? 2.What are the elements of Dell’s strategy? Which one of the five generic competitive strategies is Dell employing? How well do the different pieces of Dell’s strategy fit together? In what ways is Dell’s strategy evolving? 3.Does Dell’s expansion into other IT products and services make good strategic sense? Why or why not? 4.Is Dell’s strategy working? What is your assessment of the financial performance that Dell’s strategy has delivered during fiscal years 2000-2008? Use the financial ratios presented in Table 4.1 of Chapter 4 (pages 104-105) as a basis for doing your calculations and drawing conclusions about Dell’s performance. 5.What does a SWOT analysis reveal about the attractiveness of Dell’s situation in 2008? 6.Which company is competitively stronger—Dell or Hewlett-Packard? Use the weighted competitive strength assessment methodology shown in Table 4.4 of Chapter 4 to support your answer. 7.In what respects, if any, is Hewlett-Packard’s strategy in PCs more appealing or better than Dell’s strategy? 8.What issues and problems does Michael Dell need to address? 9.What actions and strategy changes would you recommend to Michael Dell to boost the company’s performance and its prospects for overtaking HP in global sales of PCs?

ranscript of Copy of Dell Inc. in 2008: Can It Overtake Hewlett-Packard as the Worldwide Leader in Personal Computers? Dell Inc. in 2008: Can It Overtake Hewlett-Packard as the Worldwide Leader in Personal Computers? Introduction Michael Dell, in 1984 founded Dell in order to directly serve their customers with computers that meet their needs. Mission We have provided below details of the content of the Dell Mission Statement, one of the most successful companies in the World. We hope that the Dell Mission Statement together with our definitions, hints and tips will provide you with inspiration to develop your own successful explanatory paragraph which will prove to be suitable for both your associates, customers and employees.

Vision Analysis of Macro Environment Political factors include government regulations and legal issues determining the conditions under which companies have to operate. Political-Legal Economic Changing inflation rates Currency Fluctuation Socio-cultural Today, children already get familiar with the use of computers at a very young age, representing a generation that will hardly live and work without a computer in the future. Technological Increased Research & Development have caused permanent innovation processes which lead to short product life cycles resulting in a faster depreciation of the products. Analysis of Task Environmental Opportunities • Internet Marketing

• Changing consumer behaviour
• Changing trends
• Technology

Threats
• Price wars
• Strong competitors
• Rapid changes in technology
Problem How could Dell company international operations restore share price appreciation for future growth with minimal strategies involved? Objectives Surpass its rival and gain higher market share Alternative Courses of Action Strategy A: Personal computers that are built should be sold directly to consumers Strategy B: Increase the company’s brand equity

Dell, Inc.
1.) What if anything, strikes you as impressive about Dell? In reading and preparing the case, was there anything that you thought was particularly outstanding about this company? I was very impressed with the fact that Michael Dell started Dell, Inc. with only $1,000, at a young age of 19. The company was one of the first to build to order personal computers, and sell them directly to consumers. After two years of being in business, in 1986 Dell began refining its business strategy, building an adequate infrastructure, and established market credibility against many of the better known rivals. I was also amazed with the fact that Dell, Inc. Was able to take over the market share of Hewlett-Packard and became the global market leader in 2004-2005. Although is faced many ups and downs and several obstacles, the way in which the company started the many of the goals they were able to accomplish were outstanding. 2.) What is your assessment of the job Michael Dell has done in as the company CEO and, more recently as Chairman? What grade would you give him for his leadership of the company over the past 20 years? Has he done a good job performing the five strategy-making/strategy-executing tasks described in chapter 2? I was impressed with what Michael Dell has done for the company.

Dells first company, PC’s Ltd. had a strategy of selling PC computers which mimicked IBM, except for a few minor components, were being sold to price conscientious consumers, about 40 percent below the price of the best selling IBM. By selling the computers below market price, and generate rapid revenue growth for Dell. Michael Dell put tremendous effort into his company, working 18 hour days, and employing more than 40 people. I found it astonishing that at the end of that year, sales had reached 33 million. He later renamed the company in 1987, Dell, Inc. while seeking to refine the company’s business model, and production compactly, while focusing on building a deeper management staff and corporate infrastructure, while trying to obtain the same low cost. I was also impressed with the financials of the company during it first years at Dell, Inc. The company started selling to large companies, along with government agencies, and became a public company, raising $34.2 million in its first offering of common stock. In 1990 is had sales of $388 million. I strongly believe Michael Dell embraced his vision of trying to become one of the top tree PC companies. Dell found a niche and was able to run with it. I would give Dell an “A” considering posted revenues for 2008 were $61.1 billion, showed a profit of almost $3 billion. I think that Dell’s decision of bringing in Lee Walker proved that Dell wanted and knew what was best for the company, and provided it. I view Michael Dell as a very involved and well rounded CEO, while focusing on implementing the five strategy-making/strategy-executing tasks.

3.) What are the elements of Dell’s strategy? Which of the five generic competitive strategies is Dell employing? How well do the pieces of Dell’s strategy fit together? Is the strategy evolving, and if so, in what ways? There are four main elements to Dell’s strategy of delivering superior customer value. The fist key element is that Dell focused on selling directly to the consumer, which has proved to be very efficient way to market the company’s products, while eliminating wholesale and retail dealers. The second was allowing customers to purchase built products and services in a custom tailored way, which allows them to meet customer’s specific needs. The third is a highly effective supply chain and manufacturing organization, which has strong roots in standardized technologies, and selling direct. This allows Dell to sell it products at lower prices than most of the competitors. The last is Dell delivers added value to customers. They implement this through extensive research in all technology options, by trying to determine which ones would be optimal, and lastly to be accountable to customers for helping them receive the highest return on their investment. In the business model, Dells’ Strategy was clear. It constantly strived for was to reduce cost. In the most recent year, 2008, they set a goal of trying to reduce cost by $3 billion.

With dell obtaining the seven major factors in its strategy it was able to dominate the market. First it made its computers “build to order.” Second, it partner with its suppliers to “squeeze cost savings” out of the supply chain. Third, it used direct sales techniques to gain customers. Fourth, it grew into a larger a larger market share with expanding its additional products and services to capture a larger share of consumers IT spending. Fifth, it focused on providing outstanding customer service and technical support. Sixth, it kept R&D and engineering activities solely on better meeting the needs of consumers. Lastly, it focuses on using standardized technologies in all of its product offerings. Dell’s strategy is together well, which the major factors relying on one another in order for the company to succeed as a whole. I believe Dell’s strategy is constantly evolving. They are always looking of new ways to expand their products and services without trying to overload the system. In recent years, Dell has expanded into data storage hardware, switches, handheld PC’s, printers, and printer cartridges, and several new software products. 4.) Does Dell’s expansion into other IT product make good sense? Why or why not?

Dell’s decision to expand into other IT products makes good sense. I think that dell has dominated the PC industry not only is it marketing and customization, but is the quality if the product it sells to the consumer. It make good sense to me because many people who purchase Dell computers, and are very loyal to their brand would preferred to have matching components to their PC’s. For instance, many consumers would probably buy the printer, so that it matched their computer. They would do this not only for the name brands to match, but because Dell has a quality reputation which consumers know and trust. They would be more apt to try a new product from a honest and worthy quality supplier, than they would from a company they do not trust. 5.) Given that Del is a global player, how would you characterize the company’s strategy-is Dell using a multi-country strategy, or a global strategy? And if a global strategy, what kind of global strategy?

I would characterize Dell’s strategy as constantly searching for ways to reduce cost, which focusing on superior customer value. Dell uses a global strategy. This is implemented in the various products it offers, in the most innovative ways. Dell provides outstanding customer service and a wide range of PC’s for home and business. It also has expanded into new IT products which are marketed across the world. The products and services are well known, and backed by the Dell name. Dell has an outstanding reputation in the industry, which allows them to employ a global strategy in a very effective manner. Dell employed kiosko to various cities and countries, which allowed consumer to try the products, inspect the products, and speak with knowledgeable representative who could assist them in ordering the product. Although the “kiosko” did carry inventory, they proved to be a success. WHAT KIND OF GLOBAL STRATEGY?????????????????????????

6.) What does SWOT analysis reveal about Dell’s situation? Strengths: Dell is the World’s largest PC maker. They cut out the retailer and supplies directly to the customers. It uses information technology, and Customer Relationship Management approaches to capture data on its loyal consumers. Weaknesses: The Company has such a huge range of products and components from many suppliers from various countries, that there is the occasional product recall that can cause Dell some embarrassment. Dell is a computer maker, not a computer manufacturer. It buys from a group of concentrated hi-tech component manufacturers. Opportunity: Dell is pursuing a immense diversification strategy by introducing many new products. Initially this has meant goods such printers and toners, but now also included LCD televisions and other non-computing goods. Dell is making and selling low-cost, low-price computers to PC retailers in the United States.

Threats: The single biggest problem for Dell is the competitive rivalry that exists in the PC market globally. Dell, being global in its marketing and operations, is exposed to fluctuations in the World currency markets. 7.) What does a competitive strength assessment reveal about Dell, as compared to IBM/Lenovo, Hewlett-Packard, and Gateway? Among these four competitors, who enjoys the strongest competitive position? Who has the weakest overall competitive position? Although Dell is not currently the leader in market share for the PC, is takes a close spot as second to Hewlett-Packard. Dell, as of the first quarter of 2008 had a market share of 15.7%. Lenovo had a total market share of 6.9 %, while Gateway fall into the other category, and it not a large threat to Dell as a competitor. The leader Hewlett-Packard had 19.1%.

Both grew at a steal rate of 1% compared to the previous quarter. I believe Hewlett-Packard enjoys the strongest competitive position, with a fourth quarter in 2008 increasing 4%. HP forecasted the 2009 fiscal year revenues to be between $127.5 to $130 billion range. Dell forecasted for the same period a 3% decrease from that of the previous year, with their 2008 net profit already being down 3 percent. Gateway has the weakest overall competitive position, with HP having the highest. Dell’s strategy resulted in a sustainable competitive advantage over rivals? If so what is the nature and source of the advantage? Although Dell is not the leader in the market share, I do believe it has a sustainable competitive advantage when compared to some of its competitors. One of Dell’s main competitive advantages is having consumer’s custom order. This eliminates excess inventory, and ensures that the consumer is getting a product that fits their needs. This employs Dell strategy of providing a quality product at the best possible price. 9.) What is your assessment of Dell’s financial performance during the 1998-2009 period? 10.) What are Dell chances of becoming the global market share leader in PCs?

Is its strategy potent enough to beat out Hewlett-Packard? Dell has a chance to become the global market share leader again, although it will have to implementing a new plan and strategy to evolve with the changing market. Right now the “two-two” system is not efficient and too costly. Dell with have to change many of its manufacturing procedures to reduce the cost in order to regain the market. Dell is very capable of building quality products, they are just falling behind in manufacturing them in a cost efficient way, where they are able to increase the revenue. Without taking their current strategy, what will continue to fall behind Hewlett-Packard.