Dell Inc.

Executive Summary:

Dell, founded by Michael S. Dell in 1983 initially started its business by selling desktop PC's.  it was the time when computer were totally new technology which came up therefore, the business grew tremendously and made huge profits for next 20 years. However, after two decades, the CEO of the company gave chance to Kevin Rollins in 2004 and replaced him with his position in the hope that this step will be in the best interest of the company and may generate high revenues.

Rollins main focus was to increase sales with high prices for which he tried to capture foreign markets but failed due to the high focus of competitors towards innovation and quality. The poor management system of Rollins made way for the repositioning of Michael after just three years in 2007, who then tried his level best to restore the company's initial state.

Now, the main problem which Michael faced was how to retain the trust of investor in their company so as to increase customers. Since, this was the time he decided to take the risk and indulge in totally new lines of business. He tried to focus on high consuming buyers and tried to deliver them the product through retail channels. This resulted in profits from two sides; Dell was not only able to increase average price of its computer but was also able to maintain its trust in its customer's eyes who were now able to take a complete look on Dell's products before buying.

The second main problem was to increase sales by increasing inventories turn over. Dell followed an efficient path which means to increase cost of goods sold and reduce operating expenses. It first gets an order from any firm and after a short span of time the suppliers were able to deliver the components. This was profitable from two sides; firstly this method was time saving, secondly Dell was in full touch with the market through retailers who were building the trust of company again in the eyes of customers.

Now, in order to retain the top position again in the market, the main opportunity for Dell is to indulge in totally new lines of business. It will not only increase the sales but also give Dell an edge from its competitors.

With the help of opportunities like providing products through suppliers and retailers step helped Dell to reduce costs, improve services which further generated revenues for the company and with the help of emerging into new businesses like note Pad, laptops and smart phones, Dell may able to capture new markets with handsome prices. The factors which were the root cause of uplifting the Company's profit initially were quality, attention towards innovation, importance towards high inventory turn over's and a high regard towards customer centric environment. The company needs all these factors again to rise and shine and the first and foremost step in retaining the initial position would be innovation with hard work.

Introduction:

Dell, Incorporation is a computer producer, supplier and distributor company. The company enjoys place among top computer distributors in both quantity and quality and proves itself among the top companies of United States. The core products of the company include desktop PC, note pads and laptops. From the time period between 1999 to 2006, Dell delivered computer systems to almost one quarter of the world and at the end of 2007 Dell was well ahead of its goal reaching $60 billion and become the top producer of computer products in the market, mentioned in (figure5)

Most of Dell's products are desktop PC's, laptop in which Dell's use Intel or AMD processors. The company also contains professionals in making keyboard, mice, scanners and printers.

Since, in the beginning the company focused on its sales which provided a wide space to the competitors as they began to capture market and hence decline in market shares of Dell were the results. However, with help of analyzing its SWOT, culture and sales table, Dell may once again emerge as the top service provider of computer related products.

Following mentioned are the tools with which Dell should try to improve its internal and external environment better and with this analysis Dell would be able to recognize its internal strengths and weaknesses and external threats and opportunities. However, the other remaining tools like PEST, five forces can also an important role in retaining the position of Dell.

Situational analysis:

Macro and micro environment:

Since the micro environment of Dell constitutes of certain strategies and steps which every employee have to follow. These steps are devotion to work, ability to perform better, cope up with team and promise of continuous improvement.

Dell is committed to help customers so that they can be satisfied by their products. The main strategy of their environment is about innovation which is the main factor in the success of any company, hence, dell asks its employees to work with devotion so that they can provide best quality PC's to their customers and can think on solving the problem of next generation so as to increase the market share.

The macro environment is filled with threats for Dell because customers wants low price and high technology and which requires companies to become sustainable and produce such PC's that can  meet the customer's demand and are environmental friendly. HP and Acer are those emerging competitors who are working eagerly to capture market. Acer which purchased gate way INC in 2007 is becoming a greatest threat for Dell as it is capturing teen agers market by providing high quality laptops and on really reasonable prices.

We will discuss in detail the macro and micro environment of Dell with the help of PEST analysis:

PEST analysis:

The Pest analysis of Dell is mentioned in (figure 3)

Political Environment:

Like every company, Dell is also subjected to the slings and arrows of political environment which essentially means that Dell has to obey all rules and regulations of the country. Dell not only has to suffer physical problems like heath issues, pollution, terrorism, political instability, rebellions or any rallies but it also has to bear virtual problems like ban on certain websites, moral issues of any state, internet traffic or the lack of trust of consumers regarding online buying. These problems create hindrances in foreign investment also decreases market share of Dell in those countries. The solution lies in the fact to do partnership with the local companies so as to boost sales and retain the trust of customers.

Economical environment:

Since due to the economic crisis, Dell has concentrated on prices and even with the great downfall of currency it sold its products above 15- 20% of usual price to high investing companies. Now, Dell should make its price stable so that customer can easily buy it but it should also not forget about innovation which is the oxygen of the company. With the help of sustainable price, customers will be able to buy even in crises because they want high quality product which Dell is already providing them.

Social environment:

The socio-cultural environment means that a company has to deal with the culture and tradition of the country in which it is operating. It has to understand all the values and tradition of the people living in that country. Let's take China example whose people are not open to card system therefore Dell has to deliver them product manually. Dell has to provide its services at door step in order to catch long term buyers.

Technological Environment:

Dell has to engage in the race of innovation and should produce modern technology gadgets with reasonable rates.  Like apple who engaged in new lines of business like I pad, iPod, tablet pc's, Dell should also expand its range of products and capture new customers.

Market, competition, customers, services:

Computer Market:

As we know, computer industry is a highly competitive industry where the main key factor of success is innovation, the more you came up with creative and modern gadgets, and the more is your sales and higher revenues. This is because people want latest, modern and highly customized gadgets therefore catering the needs of customers is the main thing which Dell should focus on. Because even one device can decrease your sales if you lack the trust of people in your devices. The industry is very flexible, technology is changing day by day, and Dell has to run so fast in order to catch up with the extra ordinary speed of technology. If the company cannot catch up with it, they will be eliminated in the industry by their competitors. Here are few names of outstanding companies in the industry:

Competitors in the market:

The threat of competitors is also mentioned in (figure2) with the help of porter's five forces:

·         HP was started in the year 1939.

·         IBM was mainly started in 1880s.

·         In 1976, Acer laid the foundation of its company.

·         In the same year as Acer, Apple was also started in 1976.

From above information we have seen that Dell is the newest in the market which was started in 1984. Therefore it's very difficult for Dell to beat the industry's Giants. Hard work, innovation and devotion to work can help Dell in maintaining the same position it once enjoyed.

Customers:

Dell has got only 30 years of experience which is quite small in front of other competitors, therefore it has strive very hard to compete the competitors and provide the best products that cater to all the needs of modern, latest and globalized customers.

Since every gadget is now replacing by another in a matter of seconds and it seems that there is a flood of technology which is coming towards the customers, every company is busy in catering to the demands of all types of customers from teen agers to highly professionals, if Dell fails to cater the needs of customers which is high-tech, smart, stylish look, speedy gadgets then customers require just few seconds to change their mind and can shift to other company's product.

Services:

Dell offers a series of services and caters to the needs of every market aged from teen to professionals. Be it laptops, desktop PC's, note books etc Dell fulfills its promise of constant innovation and continues improvement. But, these are not the limits. The threat of competitors are always turned on and in order to ensure the safety of market shares Dell should introduce a system of incubators which is a program where every employee from top to bottom sit together and give their views about innovation of products and where everyone is free to express their creative ideas, If majority agrees to it then he/she can implement it without any hindrance. This program will increase the trust of employees along with widens the scale of innovation in the company.

The organization:

Mission Statement:

"Dell's mission is to be the most successful computer company in the world at delivering the best customer experience in markets we serve". In order to achieve its mission Dell has to give attention on following dynamics:

ü  best quality products

ü  modern technology gadgets

ü  Reasonable prices

ü  Customer centric environment

ü  Financial stability

ü  Highest market share

Culture:

The culture of Dell is anti hierarchical where everyone is concerned with their work. Due to decentralized policy of Dell, every employee feels a responsibility of doing his own work and expecting work done by others is strictly against the policy of Dell. 

About the work place, Dell should think in terms of such work place which is comfortable yet productive also. It helps employees easing burden from their shoulders. Therefore they should work on such office place that is flexible not in terms of environment but also in terms of Job timings, also they should focus on virtual teams which can solve problems sitting at their home at their finger tips.

Marketing Strategies:

Corporate branding should be the main aim of Dell so that it can cater products and services' ranging from Desktop PC's to Smartphone's, Laptops, Note books, Tablets to software managing tools. Dell should focus on corporate industry clients also and try to come up with their desired Computers with their demanded Software's. But it should also not forget the demands of students who are Dell's second most capturing market. Dell should also focus on acquisitions and mergers so as to increase its market. It should not focus on one brand but try to merge it with relative devices like highly demanded Software's. Innovation is the backbone of any organization and Dell should focus on it in order to maintain its position in computer market.

Finance:

Product diversification means to engage in new lines of business, for example dell should think in terms of producing note pads, smart phones which are related to the main technology which dell is producing but differ in physics and style. It is one of the key factors which can boost Dell's sales and provides it with a competitive advantage as it already is the number1 producer of Desktop computers. Introducing into new structures of business will not only help Dell in sustaining its position but it will also help Dell to capture new markets.

SWOT:

The SWOT of Dell is mentioned in (figure1) with details:

Internal Strengths:

Following are some of the Strengths of Dell which provide it with a comparative advantage in the market. The strengths of Dell includes knowledge about core products, team work and customer centric environment which helps Dell to increase revenues. These strengths can help in maintaining the status of Dell in providing top class computer related all over the globe.

Internal Weaknesses:

Dells direct method of providing products cause problems for normal customers who want to purchase product through retailers. Since, they did not use retailers like many other companies did. This hurt their sales drastically. Although, they are among the top producer of gadgets but they fails to meet the demand of customer who actually wanted to buy product after searching variety of their devices.

External Opportunities:

Dell has many external opportunities to grow. With the rise of virtual companies, the demand for laptop has risen and this is main opportunity through which Dell can actually make profits. Also with the rise of e-books and online research journals the demand for tablets, laptops gained weight age from students circle. This is a golden chance as two main markets are demanding modern, latest and stylish devices which if Dells would deliver; it can earn huge profits and can safe its future till the next generation.

Besides that, it has an efficient supply chain management system with respect to procurement, manufacturing, and distribution. It helps Dell to pass distributor and retailers step as now Dell is offering its product to its professional clients at their door step through their experienced retailers.  This helps it to achieve strategic competitive advantage as it can assemble and distribute products in an efficient manner.

External threats:

Since, the threat of competitors is among the biggest threats and Dell is continuously facing it. Although, it has won out in the market but the competitors like Acer are continuously striving to offer great product within reasonable amount. Reasonable prices and constant innovation are the two keys on which Dell has to focus most in order to sustain its future.

Strategic Problems:

Direct method bypassing retailer's step:

Direct method of distributing goods appeared to be economical initially but it had its own side effects as by this methods Dell had to widen its departments which were not able to communicate with each other and as a result the sales were down and the clients were dissatisfied.  Therefore, Dell should replace this method by Retailer's channel that are experienced in talking the customers and can be an efficient tool in maintaining the trust of customers in Dell's products.

Price Wars:

Competing with the prices of competitors is another strategic problem faced by Dell. Companies like Acer and HP which have more experience in the market were trying to increase productivity and decrease the price of their products while Dell was busy in changing and reviewing its direct method strategy. As a result, HP got highest position in 2007 and became the top producer of computer products while Dell was greatly suffered by lower sales and decline in revenue. Now, Dell has to focus on sustainable price system that can be reasonable for customers and profitable for Dell so that it can deliver best out of its products and earn large revenues.

Low Customer relationship:

Low relationship with customers appeared to be the third major problem which transformed into main hindrance towards the development of company. Since, Dell changed its policy from direct method to Retailer channel newly therefore it was very difficult to maintain the same relation with customer as HP had. Because of the long period cut off from retailers it was very hard to retain the trust of customers again. Now, Dell should focus on its customer relationship. There are several tools which are time saving and that can maintain customer relationship better. These tools are discussed in detail below.

Strategic Opportunities:

Product diversification:

"Product diversification is a key strategy for Dell as it seeks to maintain a competitive advantage in the declining PC market. Dell needs to restructure its core business priorities and develop new structures that can help it to gain leverage in a highly competitive industry. The development of a comprehensive approach is essential because it can lead to competitive advantage in the future. (Khan& Khan, 2009)"

Product diversification was the main opportunity for Dell. Since the theme of business was same and the thing which was needed just innovation and improvement in quality. If Dell works on it, it can also capture markets of Smart Phone's, Tablets and Software's.

Acquisitions and mergers:

Acquisition and mergers with different local companies were among the golden chances that can help Dell in retaining its position again, because local companies are close to customers and their relationship is very strong and binding with customers. Therefore, it may help Dell to uplift its position among top producers of Computer gadgets.

Comparative Advantage:

Comparative advantage and best supply chain management are the tools through which Dell can capture new customers easily along with generating high revenues. Since, now Dell is focusing on Retailer channel method, it is a ripe moment which can eliminate most of Dell problem like price wars, low customer relationship as Retailer's have the trick to convince customers and this tool can become the root cause in retaining the initial position of Dell.

Analysis of problems:

Since, HP and Acer are coming up with more innovative gadgets and modern technology. The main reason for their success is distribution through distributors and retailers because it provides buyers a chance to check the device completely and become satisfied before buying the device. The capture of position of Dell by HP is a clear indication that the thing which is missing is lack of trust from customer side. If dell can provide them with this step that they can be satisfied completely then there is no denying the fact that Dell can make profits. Also, buyers want reasonable product with high quality and this is what competitors is practicing day and night to come up with such technology that is cost effective and highly innovative. Smart phones are the best example through which Apple made profits. It is easy to carry, stylish, reasonable to buy and last but not least efficient in work. Dell if indulge in these lines can not only earn profits but can easily capture new markets.

Analysis Of opportunities:

Through indulging in new lines of business, Dell can really generate revenues. With the rise of virtual businesses and virtual teams, laptop or any other related gadget has become the need of professionals. Whether to make orders, make presentations, communicate with peers, distribution of any goods  or any ERP based system in the work place these modern and easy to carry tools have gained huge importance that without them it has become impossible to run businesses. It’s a golden chance for Dell to produce those products which hit corporate sector and try to produce laptops in reasonable range to students which want these gadgets for making their assignments, reading e-books or analyzing any online research paper. By targeting these both adult and professional markets, Dell can retain its trust and make profits.

Alternatives:

Pricing:

From pricing point of view, the alternative lies in the fact that Dell should not just focus on lowering prices  but it should come up with those innovative products that are reasonable to produce so that Dell has clear choices and can easily divide its customers into different categories on the basis of prices.

E-commerce:

E-commerce is gaining huge importance and it is one of the key that can lead Dell towards success and helps Dell to peaks of revenues. Through blogging and social media Dell can capture customers and satisfy them completely along with promoting customer centric environment and online shopping is the technology to turn temporary visitors onto long term buyers.

Social Media:

The third alternative deals with customer relationship. Social media and blogging has become the powerful of promotion of any product. These are the tools that can promote any product in a very short span of time. All is required is just a blogger and social media addict who can work day and night and promote the products by making pages on Face book, writing Blogs with attractive Meta tags, updating statuses or uploading pictures of latest Gadgets being produced at Dell Inc. Social media can not only promote Dell's products but it can also helps in sustaining its future by increasing the fans.

Evaluation of Alternatives:

Acquisitions and mergers:

According to a press release "The Special Committee of the Board of Dell Inc. (NASDAQ: DELL) today announced that the “go-shop” period provided for in the merger agreement between the company and entities owned by Michael Dell, Dell’s Founder, Chairman and Chief Executive Officer, and investment funds affiliated with Silver Lake Partners, has elicited two alternative acquisition proposals.  The Special Committee also noted that Michael Dell has confirmed to the Committee his willingness to explore in good faith the possibility of working with third parties regarding alternative acquisition proposals".
 This will result in large increments in sale for both companies and it shows that mergers and acquisition can actually uplift Dell's name and its quality. All is needed at this time for Dell s acquisition and mergers so that it can grab market again and increase its share in the market.

Restructure pricing Format:

"Dell needs to restructure itself so that it can create the image of a diversified technology solution provider. Services and software will be the main backbone of its new marketing strategy. Besides that, its core business, which is hardware, will remain but it will provide technological and innovative solutions. Dell needs to target home users as well as different corporate customers. The development of a comprehensive business strategy is critical for success as it will lead to long-term growth". (Graham, 2005)

The remarks clearly shows that Dell don’t just have to cut prices and incur losses but it should diversify its product line such that it becomes able to produce at cheap prices and hence can earn profits because for Innovation Dell is already working and if it caters with same quality and reduced costs it can easily shake the market by huge market shares.

E-commerce:

In order to retain the trust of customers which greatly damaged due to direct method, low customer relationship and lack of communication, now Dell should focus on e-commerce because it is the latest tool which is cost effective, time saving and easy to use not only for the company but also for the customers. Online shopping through credit cards is the method of transaction.  Through this method, Dell can not only customize its product but it can also track the progress of the order. It can not only help Dell but also make easy for customers to buy online and get to know the details an updates regarding their device. With the help of service tags, shipment and other stages of transaction, Dell can increase the trust of its customers and as a result can make its foot print darker in the market. On the other hand, the opening of new websites at every office with easy access to customers can help new customers to search their desired product from the panel of Dell's products along with price tags placed on their website.

Action Plans:

The opportunities are nothing out of the box; they are really implementable and can provide Dell with an edge in the market. But Dell has to cover certain steps in order to attain the fruits of these opportunities. The steps are also easy to adopt and are mentioned below:

Firstly, Dell has to indulge in new lines of business like Smart Phones, tablets etc along with its key factor innovation and quality product ,it’s a question mark product whose market share is unknown but there is a hope that this new technology will grab customers more quickly, also mentioned in (figure4)

Secondly, Dell has to promote its product so that customers get attracted towards it. Social media is the best tool to attain this step.

Thirdly, Dell has to open certain portal which caters visitors with complete information like prices, product description. Also Dell has to update its FAQ page frequently so that every customer gets answer of his/her question.

Fourthly, it has to introduce online shopping system on its websites so as to increase its buyers. Since online shopping is very easy and time saving, Dell can grab a large chunk of customers through this tool.

Last but not least, Dell has maintained its relation with its customers like it should introduce a feedback system so as to know the demands of customers and faults in their products.

Recommendations and conclusion:

Dell has enjoyed top position among computer producing companies because of its supply chain management and direct business model.  But now, acquisition and mergers are the demand of time and Dell should focus on it. Because, competitors are striving hard to sustain their position and due to advantage of having strong relation with retailers, now the main competitor HP is working on innovation to completely grab the market. This is the ripe moment Dell should use its wild card by indulging into new lines of business and merging with different local companies. On the other hand, Although Dell had enjoyed top position in the market due to direct business, but now, the situation has changed as customers want variety and a complete satisfaction before buying product which can't be achieved through direct model. Therefore Dell has to change its strategies from direct business to Retailer channels method for which it has to pass the distributor and retailers step but in order to get the trust of customers back it's not a big deal. With the use of its strengths like flexible supply chain management system that reduces costs and inventory, Dell can come up again with the expectations of customers and can grab market.

The threats has not died, and the threat from competitors will always turned on but now Dell needs to devise such strategy that is based upon product diversification. Also, the company should focus on high quality and cost saving gadgets and should implement those marketing strategies like promotion though social media which are cost effective and sustainable for the future.

Appendices:

Figure1: DELL SWOT

Strengths	Weaknesses
-        core products knowledge -        Excellent communication between departments and corporation among team mates. -        Product diversification -         World class products -        Constant innovation -        System of reward includes bonuses and promotions. -        Motivation through quick appreciation responses.	-        Direct Business method -        Low customer relationship -        Price wars -        Outdated technology. -         Old products. -        Lack of mergers
Opportunities	Threat
-        Dell's external opportunities include new customers for Laptops, Note pads and Smart phones. -        Product diversification. -        Comparative advantage	-        Potential entrants. -        Competitor's attention towards innovation. -        Reasonable price from competitors. -        Currency crisis. -        Poor economy which is declining the purchasing power of people and diminishing their faith in buying.

Figure 2: Porter's Forces framework

Figure3: Dell PEST

Figure4: Dell BCG analysis:

Figure 5: Dell ranking data

Company name	rank	Share in 2006
Dell	1st	15.9
HP	2nd	15.8
Lenovo	3rd	7.0
Acer	4th	5.8

References:

·          (2009). Khan, M., Khan, M.A. "How technological innovations extend services outreach to customers", International Journal of Contemporary Hospitality Management, Vol. 21 No.5, pp.509-22.

·         (2005). Graham, P. R. C. J. L. International Marketing (twelfth Ed.). New York.

·         (2013).Dell. Dell Official Site - The Power To Do More | Dell. Retrieved from http://www.dell.com/

·         (2013). Jamie Rigg. Michael Dell and Silver Lake up their offer for Dell buyout [Press Release]. Retrieved from http://www.engadget.com/2013/08/02/dell-buyout-offer-increased/?utm_medium=feed&utm_source=Feed_Classic&utm_campaign=Engadget