Dell Case

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FANTASTIC FIVE (Plus One) STRATEGISTS

REVITALIZING DELL Inc.BUAD 497 Case Leadership Presentation

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External Analysis

Internal Analysis

Financial Analysis

Strategic Challenges

Strategic Solutions

Strategic Recommendation

Q&A

AGENDA

↗

↗

↗

↗

↗

↗

↗

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EXTERNAL ANALYSIS

+

+

MACRO ANALYSIS

PORTER’S FORCES5

COMPETITOR ANALYSIS

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National & International

EconomyTechnology

Social Structure


Economy

Demographic Structure

Government & Politics

PC Industry

Technology

Social Structure


Economy

MACRO ANALYSIS

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Technology

Social Structure

• Performance Improvement• Standardization

• Recessions• Internet bubble 2001• Financial crisis


Economy

• Fashion• Portable

MACRO ANALYSIS

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Technology

Social Structure

• Performance Improvement• Standardization

• Recessions• Internet bubble 2001• Financial crisis


Economy


Technology• Performance Improvement• Standardization

Social Structure


MACRO ANALYSIS

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Threat of New

Entrants

Bargaining Power of Buyers

Bargaining Power of Suppliers

Threat of Substitute

Rivalry

Microprocessors

Other hardware

Software

Larger Business/Governme

nt

Small and Medium-Size businesses

Individuals

Complements

PORTER’S FORCES5

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COMPETITOR ANALYSIS

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Objectives Adapt to the strategy that delivers the best

financial result for the company

Strategy & Reaction Constantly changing

Assumptions Willing to adapt/imitate the strategy that works

Resources & Capabilities Advance technology + scale from Chinese

customers

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Objectives Focused on building relationship with the resellers

Strategy & Reaction Work together with the resellers with marketing

and sales strategy

Assumptions Most likely will continue to work with and help

resellers

Resources & Capabilities Ability to differentiate their product with

fashionable design

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Objectives Mass production to gain economies of scale

Strategy & Reaction Opposite of Dell (“indirect” strategy)

Target products with different brands

Assumptions Cost-advantage leader

Resources & Capabilities Experience in mass production

Separate department for manufacturing

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Objectives Integrated ecosystem with beautiful design

Strategy & Reaction Focus on high-end customer, full range of

distribution channels, high price

Assumptions Superior design and high price

Resources & Capabilities Own Apple stores, integrated products

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89 90 92 94 96 98 00' 02' 04' 05' 06' 07' 08'0%

5%

10%

15%

20%

25%

30%

35%

40%

0.9% 1.0%3.7% 4.2%

6.5%

12.0%

18.5%

28.5%

34.9%35.7%32.8%

29.1%29.4%

Dell Market Share in US

Dell Market Share Worldwide

DELL’s MARKET SHARE

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1992 1993 1994 1996 1998 2000 2002 2004 2005 2006 2007 20080

10,000

20,000

30,000

40,000

50,000

60,000

70,000

2,014 2,873 3,4757,759

18,243

31,88835,262

49,121

55,788 57,42061,133 61,101

DELL’s REVENUE ($ in millions)

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11%

14%

22%36%

16%

1%

RetailDistributor/ResellerDirect:InboundDirect:OutboundDirect:InternetOther

DELL’s SALES BY DISTRIBUTION CHANNEL (2008)

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92 93 94 96 98 00' 02' 04' 05' 06' 07' 08'0

10

20

30

40

50

60

70

80

71

33

39

157 6 4 4 5 5

96

Days of Inventory

AVERAGE DAYS IN INVENTORY

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U.S. Sales by Distribution

Channel

96 98 00' 02' 04' 05' 06' 07' 08'0%

10%

20%

30%

40%

50%

60%

Retail Distributor Direct 96 98 00' 02' 04' 05' 06' 07' 08'0

500

1,000

1,500

2,000

2,500

3,000

3,500

Desktop PC

Laptop PC

U.S. PC Average Selling Price

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STRATEGIC CHALLENGES

CHALLENGE #1

Increasing Competition

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CHALLENGE #2

Changing Consumer Demand + Declining PC Industry

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CHALLENGE #3

Finding the Balance Between

Sales Methods

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CHALLENGE

Increasing Competition

OPTION 2

Focus Sales and Manufacturing in Asia

OPTION 1

Partnership/Merger with Another Company

PROS

• Gain resources and scale

• Increase market share

• Barriers to entry

CONS

• High cost

• Lose control of management

• Cultural difference

PROS

• Lower COGS

• Grow Asian market share

• Room for growth

CONS

• High costs of transferring

• Cultural conflicts

STRATEGIC OPTIONS

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PROS

• Enter Niche Market

• Expand Consumer Base

• Offer Broader Products

CHALLENGE

Changing Consumer Demands+ Decline of the Computer

Industry

OPTION 2

Acquire a Company in a Niche PC Market

OPTION 1

Invest in Other Consumer Electronics

PROS

• Product Development

• Diversify Product Line

• Enter New Markets

CONS

• Potential Lost in Profit

• PCs Account for 70% of

Revenues

• High R&D Costs

CONS

• High costs of transferring

• Lack of Industry Expertise

• High Risk

STRATEGIC OPTIONS

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PROS

• Expand Customer Base

• More Distribution Channels

CHALLENGE

Finding the Balance Between Sales Methods

OPTION 2

Expand Retail Channels

OPTION 1

Focus on Direct Method

PROS

• Leverage Internal Strengths

• Differentiation Strategy

• Barriers to Imitation

CONS

• Harder to attract consumers

not interested in

customization

CONS

• High Risk

• Previous Case of Failure

• High Expenses for Retail

Stores

STRATEGIC OPTIONS

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STRATEGIC RECOMMENDATIONS

M&ANICHE MARKET

NEW PRODUCTS

EXPAND CUSTOMER BASE

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FOCUS ON

ASIA

PARTNERSHIPS

COST CUTS

MARKET SHARE

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BUILD TO ORDER

TARGET MARKET

ONLINE MARKETPLACE

PERSONALIZED CUSTOMER

SERVICE

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THANK YOU

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Dell Case

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