Dell Strategic Management

PROJECT ON STRATEGIC MANAGEMENT


NAME : JEBASTIN JOSEPH

ROLL NO.: 25008

SUBJECT: STRATEGIC MANAGEMENT

SUBMITTED TO:

Prof. RAHUL MISHRA

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Acknowledgement

This project comes out to be a great source of learning and experience. A lot of

effort has been put by various people to make this project a success. This has

greatly enhanced our knowledge about Dell Inc. I greatly acknowledge our

indebtness to Mr. Rahul Mishra,for helping me throughout this project and for

providing me in-depth knowledge. This project is a culmination of efforts of my

friends whose sincere inputs and focused attitude could bring this project to

fruition. Finally, thanks to almighty God who has been a source of strength and

confidence.

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INDEX

SR. NO PARTICULARS PAGE NO

1 ABOUT DELL 4

2 KEY TOWARDS STRATEGIC PLANNING 6

3 PEST ANALYSIS 10

4 STRATEGIC MANAGEMENT PROCESS 13

5 SWOT ANALYSIS 20

6 7-S FRAMEWORK OF McKINSEY 22

7 LEVELS OF STRATEGIC MANAGEMENT 25

8 MICHAEL PORTER’S MODEL OF COMPETITIVE ADVANTAGES

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9 BCG MATRIX MODEL 29

10 GE MATRIX 31

11 GRAND/CORPORATE LEVEL STRATEGY 34

12 SUGGESTIONS 36

13 CONCLUSION 38

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CHAPTER 1ABOUT DELL

Founded in 1984 by Michael Dell. No.1 PC provider in the U.S. and No.2 worldwide. Based in Round Rock, Texas. Employs more than 82,700 people worldwide. Grew during the 1980s and 1990s to become a brand. Direct Business Model is the foundation for Dell’s business. Dell maintains a consistent focus on offering the best value and customer. Dell is a trusted technology innovator with a diversified, comprehensive IT portfolio. Dell is a global company committed to its customers and employees

History :

• In 1996, Dell began selling computers via its web site • Introduced the 316LT, the company’s first notebookcomputer in 1989• Joined the top-five computer system makers worldwide in 1993• Earning appr. $1 million per day 7 months after the launch of dell.com in 1996• Introduced E-Support, an online tool to provide technical support to customers 1999• 1999, Dell overtook Compaq to become the largest seller of personal computers in the US• 2007, Dell set a goal of becoming the greenest technology company on Earth for the long term. The company launched a zero-carbon initiative• For the first time, Dell achieves No. 1 ranking in global market share in 2001• 2003, name was changed to "Dell Inc."• 2006, Dell purchased the computer hardware manufacturer Alienware• January 2007, started a turnaround plan that promises to yield $3 billion in annual savings over the next three years.

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Recent Developments :

• In January 2009, Dell announced that they will withdraw all manufacturing from Limerick and move it to its new plant in the Polish city of Lodz by January 2010.• Raised their cost-reduction target to $4 billion.• Dell also announced that it aimed to become a "onepercent company," giving away 1 % of pretax profits to education and digital inclusion projects mainly in emerging markets, by February 2010.

Product line

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CHAPTER 2

KEY TOWARDS STRATEGIC PLANNING

VISION STATEMENT“Through effective and strategic community partnership, dell supports educational services programs that address the critical and most basic technology access needs of its neighbours in Dell communities prerequisite to success in digital world.”

Dell provides a classic example of how the principles of strategic management have been used to translate an innovative vision into a successful and sustainable enterprise. Their vision statement basically tells the way they do their business. They want to be successful in the digital world for this they rely on latest technology. Dell provides quality products to cater the needs of the people. In intend to build good relationship with their customers and suppliers.

MISSION STATEMENT

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“To provide customers with superb value, high quality, relavent technology, customized systems, superior service and support and products and services that are easy to purchase and use.”

VALUES

Their first priority is to be a successful business and that means investing for growth and balancing short term and long term.

OBJECTIVES

Following are the objectives of Dell Corporation

1. Modify laptop designs according to student’s preferences.

2. Double laptop sales in student market.

3. Increase revenues by 25% by the end of the second year of launching.

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4. Develop a promotional campaign to promote the modified laptops.

5. Increase awareness of the existent agency project objective research strategic

plan conclusion.

GOALS

Goals are the specific interim or the ultimate time based measurement to be achieved. While implementing strategies in pursuit of companies objectives. The goal of the organization are set consistent , achievable and realistic. As per survey’s the present major goal of the organization is to adopt the best technology and appoint few more personnel that would bring efficiency in the organization.

PROGRAMS

Last but not the least “program” plays a significant role in maintaining a smooth

track within the organization. Dell has got an implementation plan followed up by

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the above strategic plan. The Program of Dell creates opportunities to develop real-world skills in an environment that encourages personal and professional growth and gain exposure. It learns the ins and outs of one of the high-tech industries in the same sector.

STRATEGY To do business with its customers one on one through the phone and internet. In doing so, Dell will meet its customers’s expections of :

· Highest quality.· Leading technology.· Competitive pricing· Individual and company’s accountability.· Best in class service and support· Flexible customer capacity· Financial stability.

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“The direct relationship continues throughout the

customer experience”

CHAPTER 3

PEST ANALYSIS

A scan of the external macro-environment in which the firm operates can be expressed in terms of the following factors:

Political Economic Social

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Technological

POLITICAL

The political environment in the US has been changing abruptly in the previous year. Dell being an integral part of this economy has also been greatly affected by these changes and has not been able to counter them. Changes in the legislation and laws of the US govt. have tried to revive the PC business but the reciprocations have been less then what was expected. The company has been able to beat the expectations of Wall street who predicted more dip by posting less losses by utting costs. The conservatism that exists in the consumer spending has been increasing which has adversely affected Dell’s performance. Issues of environment policies has also affected Dell as Dell came under significant pressure from environmental groups across the US to assume responsibility for its old products and this experience sensitized company officials to the risks and opportunities of state and federal e-waste regulations and the need to take proactive steps against them.

ECONOMIC

High tarrifs on IT products makes Dell difficult to enter other markets apart from USA . since most of the population of the world is young and adaptive to change in technology, dell aimed to manufacture its products which are more user friendly and can be afforded by young professionals, because purchasing power of working population saw an increase over the past few decades. Since the economy saw a change due to the meltdown and recession, dell also had to modify some of its policies to cope up with the changing scenario.The change in the US economy also effected Dell with it bring change in its core policies of inventory and credit management of receivables and inventory conversion days to decrease its operating cycle and thus reduce cost.

SOCIAL

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Increase of younger population and working population have led to the increase of the use of computers. A technological revolution has been around the corner, people have become techsavy ,that have resulted in the increase in the demand forcomputers .These days people have time constrains and as a result of it they prefer to buy the product online ,which has given Dell an advantage over others because of dell.com.

TECHNOLOGICAL

Tecnological changes are happening at a very fast rate due to which Dell is able to provide advanced technology products to the customers.As a result of chnological changes Dell has also increased their product line.It is adopting to the echnological changes as he old technology is becoming obsolete.One of the most important affets of technological changes that have led to the increase of the demand of Dellcomputers is their Direct Business Model.They have excellent ecommerce capabilities, which can be seen with the success of the dell. The recent chnological changes can be seen in their recent products like New PowerEdge Servers, New Enterprise Computing Portfolio, Innovation Aids Recovery, Ultra-Thin Laptop, Adamo,which will be in the market very soon. Dell could exploit the network-internet,extranet to reach the corners of the world.

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CHAPTER 4

STATEGIC MANAGEMENT PROCESS

Strategic thinking provides the foundation of the strategic management. By providing an insight into the forces behind the intense competition, by developing a sustaining competitive advantage based on organization core competency. It can be broadly divided into three phases:

PHASE 1

Strategic formulation

It is referred as a strategic plan

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1. Framing mission objectives: The first step adopted by Dell Corporation was to frame the mission and objectives for the organization.

For example mission: the purpose of the organization is to achieve the honor of becoming the best consumer friendly company

2. Analysis of the internal environment:After setting the mission and objectives the next step is to analyses the internal environment.

E.g.: Dell Corporation needs more qualified manpower, machines adopted by Dell Corporation should be highly Resultant.

3. Analyze of external environment:

The management conducts the analyses of the external environment.

E.g.: Dell Corporation manufactures product that are hygienic and long lasting.

4.Gap analyses:

Management also conducts gap analyses that is for this purpose the management compares and analyses its present performance level and desired future performance level.

E.g.: Dell Corporation has in acted gap analyses as it compared the last 5yrs. The performance level with the present level and came with a conclusion that in future they will surely come up with the new brand launch

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5 Framing alternative strategies

The management needs to frame alternative strategies and accomplish the objectives of the firm.

6 Choice of strategies:

Dell Corporation already has a highly sophisticated server with alternative strategies it chooses the best among the various strategies.

Phase 2

Strategic implementation:

The strategies are formulated for each and every functional area.

Once the strategies are formulated the next stage is strategic implementation

Step 1

Formulation of plans, programs and projects

Setting strategies will not guarantee success, so every organisatron also needs to work laboriously in order to achieve the desired results. Dell Corporation has a broad plan which includes the goals, policies and procedures.

Step 2

Project implementation

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The project passes through various stages i.e.

1 Dell Corporation makes it a point that their concept is achievable.

2 Their plans are organized in such a way that the results are achieved without any damage or duplications.

3 clean up phase: Dell Corporation follows follow up action of above listed phases.

Step 3

Procedural implementation:

Dell Corporation before implementing any new strategies examine all the government regulatory framework

E.g. Dell Corporation before dealing with any foreign company needs to be aware of all the export and import charges.

Step 4

Resources and allocation:

It deals with the arrangements and commitment of physical financial and hr, Dell Corporation allocates all its resources in such a way that there is no duplication of work and also aims at avoiding wastage

e.g. it sets different goals for the delegates

Step 5

Structural implementation

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There is a need for an organizational structure for implement strategies. Dell Corporation follows the divisional structure and therefore the implementation strategy moves on division wise.

Step 6

Functional implementation

Dell Corporation as an organization implements all its functional plans and its policies .

Step 7

Behavioral implementation

After implementing the strategy an organization studies the behavior of the strategy.

E.g. Dell Corporation studies the impact of its strategies by keeping a small conference meeting with all its divisional heads

Phase 3

Strategic evaluation and control:

It is the phase in which the manager tries to assume that the strategic choice is properly implemented and is meeting the objective of the organization

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Step 1

Setting standards

Dell Corporation in order to initiate control is done by setting standards and making them aware of the tolerance limit they should keep.

Step 2

Measurement of performance

The next step is to measure the actual performance with the planned one.

E.g. the organizational heads compares the set targets with the achieved one.

Step 4

Finding out deviation

At this step the organization pin points the deviation or blockages if any

E.g. while implementing a strategy for a new branded product Dell Corporation faced a difficulty as the packaging of that product was done with the help of low quality plastic

Step 5

Analyzing deviations

Here the top executives are the cause of deviations

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E.g. Dell Corporation could not procure better spare parts from the company it used to buy earlier.

The emotional bonding was the main cause for its dependence of that company providing low quality spare parts.

Step 6

Taking corrective measures

The top level management of Dell Corporation will analyze the blockage and give an alternative

E.g. in order to remove the blockage Dell Corporation may replace the low quality spare parts and find out other good quality plastic at the low price.

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CHAPTER 4

SWOT ANALYSIS

STRENGTH

No inventory buildupAcquition with EqualogicQuality product and serviceWhole world focusBrand nameCustomer service

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Cost efficiencyDirect sell model=customization + fast+ delivery + low costWinning culturelatest technologyFirst mover advantagee-commerce capabilities: www.dell.comBuid to order manufacturing processProduct design+after sales serviceExpert Supply Chain Management

WEAKNESS

No proprietary technologyHigh dependency on component suppliersoccasional product recall.Eg.In 2004 Dell had to recall 4.4 million laptop adapters because of a fear that they could overheat, causing electric shocks or fires.unable to switch supply dues to the lack of large suppliers in the Worldhigh attrition rates among visitors to Dell.comno physical presence ofservice centresslow in introducing fancy featuresLack of innovation

OPPORTUNITIES

Network-internet, intranet and extranetDeveloping nations marketLow costs and growing advanced technologyGrowth in business, education and government marketsGlobal wide access to customers and market.ExpansionIncreasing income of consumersGlobalisation

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THREATS

CompetitionCurrency fluctuation incountries outside the USPolitical instabilityTariff trade barriersRecessionDecling sales

CHAPTER 6

7-S FRAMEWORK OF McKINSEY

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The 7-s framework of McKinsey is a Value Based Management (VBM) model that describes how one can holistic and effectively organise a compan. Together these determine the way in which a corporation operates.

Dell Corporation has become a leading company as it has a very strong product marketing focus it has certainly adopted the basic 4p’s of marketing ie price,product, place,and promotion mix are the 4 strong weapons with the help of

which Dell Corporation has overcome all the consequences it has faced during its inception.

SHARED VALUEThe interconnecting center of McKinsey’s model is: Shared Values. What does the

organisation stands for and what it believes in. Central beleifs and attitudes. As the hand works in the human body the shared values are the core values of the organization as it connects soft skills of the Dell Corporation.

STRATEGYPlans for the allocation of a firms scarce resource, over time, to reach identified goals. Environment, Competition, Customers. As Dell has already adopted the brand name Dell it has reached its saturation stage now in order to sustain for a longer term they need to renovate or launch new products under the same brand name which they are doing.

STRUCTUREThe way the organisation’s units relate to each other : centralised, function divisions (top-down); decentralised(the trend in larger organisation); matrix, network, holding,etc. Chief company official all the essentials departments in order to acquire efficiency and effectiveness. This assits the organization to achieve the desirable goals. the company saw to if they have acquired expertise knowledge to develop faith and trust of the consumers.

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SYSTEMThe procedures, processess and routine that characterise how important work is to be done: financial systems; hiring, promoting and performance appraisal systems; information system. The Dell Corporation has followed formal as well as informal procedure that governs the day to day activity. The mis system of Dell Corporation is so strong that they can analyze consumer response by a easy going system whereas due to its dignified image it has acquired intermediaries confidence within them. the agent of the organization conduct various market surveys with the help of the retail system, call centre system,etc. such a informal system avails the organization to have crystal clear information in the to progress.

STAFFNumbers and types of personnel within the organisation. Dell has also appointed people from below poverty line session so that they can also their livelihood on the same side,in oder to motivate their staff they provide various financial as well as non financial incentives.

This will make their employees to work in more enthusiasm and intrest.

STYLECultural style of the organisation and how key managers behave in achieving the organisation’s goals.ie; Management Styles. The top level management of Dell Corporation has maintained a discipline aatmosphere. They make sure that they achieve result within a defined time. They supervise their subordinated in such way that they work in deliberate manner.

SKILLDistinctive capabilities of personnel or of the organisation as a whole. The capability of the organization has bound that the consumers with their standardized quality product. The competency of the organization is to provide its product at an

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affordable price and in addition to it,its products are convention able, available in urban as well as remote areas.

CHAPTER 7

LEVELS OF STRATEGIC MANAGEMENT

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CORPORATE LEVELDell’s corporate strategy is to provide products directly to customers.To provide high technology quality products and services through customization.Their strategy also includes cost cutting where ever possible.

BUSINESS LEVEL

Dell's business strategy combines its direct customer model with a highly efficient manufacturing and supply chain management organization and an emphasis on standardsbased technologies. This strategy enables Dell to provide customers with

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Business

Level

Funtional

Level

Operational

Level


superior value; high-quality, relevant technology;customized systems; superior service and support; and products and services that are easy to buy and use.

FUNCTIONAL LEVEL

Cost leader ship through direct sell model. In direct sales model it sells directly to Customers ,which has the following characteristics:

Efficient supply chain/distribution system Just-In-Time inventory system reduces costs Direct sales by using www.dell.com Internet increases good relations with consumers & suppliers Impressive Supply Chain Management Strong strategic alliances with other companies Direct Business Model = Customisation+ Customer service

OPERATIONAL LEVEL

Dell has built one, global, end-to-end operational chain from customer to supplier and back again that sets it apart from all others in terms of cash flow and responsiveness.

In short,the company is increasingly leveraging these new conditions to reinvent their cost structures, set new industry performance standards, and create unmatched customer experiences in their business strategies.

Dell believe that Changing the game on competitors, sometimes permanently, is the outcome of a winning operations management strategy.

CHAPTER 8

MICHAEL PORTER’S MODEL OF COMPETITIVE

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ADVANTAGES

Threat of New Entrants: MODERATE

The entry of new comers is quite difficult because of the entry barriers thatare caused by:· Buyer loyalty· Brand name· Low price· Award winning customer service· CustomisationDecreasing profitability shows that there is a threat of new entrants.HPovertook dell few yrs back

Rivalry: HIGH

· Price War· Decreasing profitability· Low differentiation

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However, in the midst of sever competition, Dell can still gain marketshare from other competitors. That proves Dell’s business strategieshave been successful.

Threat of Substitutes: LOW

· Strong presence of PC’s throughout society· One computer for every three people in the U.S.· Customer service· Direct Business ModelHowever, high price, and lack of software support prevent people fromswitching to Apple system.

Bargaining Power of Buyer: High

· Highly price sensitive· The cost leader has high market share which leads to high bargainingpower relative to its suppliers· Reliability and customer service become important factors.· Dell’s products are very reliable and customer service is outstanding.These two factors help Dell to create certain brand royalty. But that’sgiven the fact that the Company set the prices very low. If the pricesare raised too high, customers will not hesitate to switch.

CHAPTER 9

BCG MATRIX MODEL

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No strategic management or marketing text appears to be complete without the inclusion of the Boston Consulting Group (BCG) growth-share matrix. The BCG Growth-Share Matrix is based on two dimensional variables: relative market share and market growth. They often are pointers to healthiness of a business (Kotler 2003; McDonald 2003). In other words, products with greater market share or within a fast growing market are expected to wield relatively greater profit margins. The reverse is also true. Let’s look at the following components of the model:

Market Growth

Market growth axis, correlates with the product life cycle paradigm, and predicates the cash requirement a product needs relative to the growth of that market. A fast growing market is generally considered attractive, and pulls a lot of organisation’s resources in an effort to increase gains. A case in point is the technological market widely consider by experts as a fast growing market, and tends to attract a lot of competition. Therefore, a product life cycle and its associated market play a key role in decision-making.

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CASH COWS

These products are said to have high profitability, and require low investment for the fact that they are market leaders in a low-growth market. This viewpoint is captured by the founders themselves thus:

The cash cows fund their own growth. They pay the corporate dividend. They pay the corporate overhead. They pay the corporate interest charges. They supply the funds for R&D. They supply the investment resource for other products. They justify the debt capacity for the whole company. Protect them (Henderson 1976).

According to experts (Drummond & Ensor 2004; Kotler 2003; McDonald 2003), surplus cash from cash cow products should be channelled into Stars and Questions in order to create the future Cash Cows.

STARS

Stars are leaders in high growth markets. They tend to/should generate large amounts of cash but also use a lot of cash because of growth market conditions. Dell computers are placed in this stage which possess a large share in the rapidly growing market.

QUESTION MARKS

Question Marks have not achieved a dominant market position, and hence do not generate much cash. They tend to use a lot of cash because of growth market conditions. Consider Hewlett-Packard’s small share of the digital camera market, behind industry leader Canon’s 21% (Canon 2006). However, this is a rapidly growing market.

Eg. Dell Mobiles are newly introduced in the market and thus possess low market share in a growing Market.

DOGS

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Dogs often have little future and are big cash drainers on the company as they generate very little cash by virtue of their low market share in a highly low growth market.

Thus to conclude with dogs these are the products that should be divested because it is these are

of no good for the company and has become a kind of liability for Dell Computers.

CHAPTER 10

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GE MATRIX

The 9 cells of ge matrix are grouped on the basis of low to high industry attractiveness and week to strong business strength and competitive position. There are 3 zones indicating 3 different combinations.

1 “GO AHEAD”

Under these phase the signal is to proceed and take decisions such as Dell has become universally acceptable and now it should go ahead and take up more marketing development and expansion .

2 “wait and watch”

These is the 2nd zone of ge matrix, this indicates hold and maintain current strategy.

3“STOP”

Coming to the 3rd zone it gives signal to stop under the product of Dell Corporation

Thus to conclude with ge matrix it allows the user to select whatever criteria they feel are more appropriate to their business situations.

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Dell Corporation possess highest attraction through its highly innovative and technical products of mobile and computers and stands first in the Ranking of Revenue and hence placed in the category as shown in the above table.

CHAPTER 11

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GRAND/CORPORATE LEVEL STRATEGIES

Grand strategies adopted by Dell corporation are explained below with the help of the above table.

Dell adopts the combination of two strategies that is the 1,2; (Stability Strategy and Growth Strategy)

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INTERNAL GROWTHIntensification StrategyMarket PenetrationMarket DevelopmentProduct DevelopmentDiversification StrategyVERTICAL DIVERSIFICATIONForward integrationBackward IntegrationHORIZONTAL DIVERSIFICATIONCONGLOMERATE IntegrationConcentric IntegrationEXTERNAL GROWTHMergerAcquisitionAmalgamationJoint Venture


In the stability strategy Dell adopts the Sustainable growth Strategy wherby the company wants to get a consistent profit through its products irrespective of any new entrance of companies, Competiton, Technologyetc.

And in the second strategy Dell adopts the Product Development Strategy which fall under Intensification Strategy. This Strategy is concerned with the Internal Growth of the Company.

As the Company has a very good strenght in case of market attraction through its innovative and user friendly products and with a great business strenght, the company prefer to enter into more products in the same field.

New Products that are introduced by Dell are provided briefly in Chpt-1. Example, dell has come up with some new softwares, started producing new electronic products like Mobiles, High tech Laptops. And hence the dell Corporation adopts the combined Strategy of Stability and growth.

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CHAPTER 12

SUGGESTIONS

Should look for Alliance-mergers and acquisitions that would bring synergic benefits for the company

Reduce the attrition rate by Converting visitors into customers(people who visit the Dell site)

Focus on developing nations

Physical presence of Service centers would add value to their customer service

Invest more in Research and Development.

Reduce errors in Dell’s direct Internet ordering system and create a “Clearance” area on its website

Enhance customer support services

Increase Company recognition through a national advertising campaign.

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Should not only depend on the internet sales, should give equal importance to retail stores. Though they have started with the retail selling but they should give equal importance to it as they give to online selling

Build a variety of competencies (build core competencies into diverse product lines)

Should focus on developing nations like India, China etc.

Demand for laptops will increase in the coming future therefore they should try to exploit this situation.

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CHAPTER 113

CONCLUSION

Dell computer is successful in global markets as a result of best understanding of customers' needs and their direct sell business model.

Dell's environmental programs for product asset recovery and product design for environment have spanned more than a decade.

The company designs and customizes products and services to the requirements of the organizations and individuals, and sells an extensive selection of peripheral hardware and computing software.

Dell is a well known name in the world that has been very successful towards its mission.

It has focused on customization and maintaining low cost that has been very profitable for the company.

But are faced with the problem of slipping sales in the U.S. They are being forced to look at alternative ways of bringing revenue to the company and will be able to tackle this situation and would maintain a tight grip on the market due to their cost leadership and because of their coming strategies.

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Dell Strategic Management

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