Dell: From a Low-Cost PC Maker to an Innovative Company

Presented By: Aditya Sharma Alka Priyadarshini Babita Sharma Prashant Chauhan Sundeep

OutlineCompany Profile

Timeline

Strategic Analysis

Direct Business Model

Sources of Revenue

US PC Industry in 2006

Dell Facing Challenges

Dell Turnaround Strategy

Dell Turnaround Strategy: Will it do wonder?

Conclusion

Company Profile• Michael Dell is the chairman of the Board of Directors of Dell,

the company he founded in 1984 for $1,000.• With an unprecedented idea---build relationships directly with

consumers• Operational regions : Americas, Europe, Middle East and Africa

(EMEA); Asia-Pacific and Japan (APJ) • Today the number one supplier of computer systems in the

United States and second worldwide

Timeline• 1984: Michael Dell founds Dell Computer Corporation • 1987: International expansion begins with opening of

subsidiary in United Kingdom • 1988: Dell conducts initial public offering of company stock

(3.5 million shares at $8.5 each)• 1989: Company issued an IPO• 1992: Dell Inc. was included in Fortune 500 companies• 1993: Enters into Asia-Pacific region with subsidiaries in

Australia and Japan • 1996: Company begins major push into the server market• 1999: Dell Inc. overtook Compaq and became the largest PC

seller in US

Timeline Cont…• 2000: Company sales via Internet reach $50 million per day • 2001: For the first time, Dell ranks No. 1 in global market

share• 2003: Company extended its product portfolio to the

consumer electronics market by launching flat panel TVs, Dell digital juke box, USB key drivers

• 2004:Technology partnership with Fuji, Xerox, Kodak and Samsung followed by strategic partnership with Microsoft Corp. and Oracle Inc.

• 2005: Company entered into a contract with bombardier recreational products to supply technology products and services throughout the global IT market.

• 2006: Fall short of both its expected revenue and earning.

Strategy• Uses the direct business model (reliant on very efficient

manufacturing and supply chain management)• Helps turnover inventory every four days

• Collaboration with strategic partners• Adding a significant layer of innovation

Suppliers Dell Final Customers

Direct Business Model

Suppliers PC Maker Distribution Retailers Final Customers

Indirect Distribution Channel of the PC Industry

Dell’s Direct Distribution Channel

Strategic Analysis

• Unique Business Model• Brand

Core Competencies

• Price/Cost• Mass Customization

Competitive Advantage

Low Innovation

Sources of Revenue• Dell designs, develops, manufactures, markets, sells, and

supports the follow products:

• Dell also offers a variety of services from development and support to professional and fully managed solutions.

• Notebook Computers• Desktop Computers• Printing and Imaging• Software & Peripherals

• Servers• Storage• Workstations• Networking

US PC Industry in 2006• According to survey conducted by U.S consumer electronics

association in 2005:• 90% have one pc• 36% have two pc• 52% prospective buyers

• PC sales was around 190 million in 2005

Dell Facing Challenges• IBM sold it’s PC business to Lenovo in 2004• Gateway merged with eMachines• Biggest merger between HP and Compaq in 2002• Fall short of both its expected revenue & earnings• Dell spend less than 1% in R&D as compared to HP and IBM

spent 6%• Company such as Apple was emerging with innovative

products

Dell Facing Challenges(Cont.)• Dell did not had the core competence in branding &

innovation• Dell was managing cost instead of managing service & quality

therefore customers remained unhappy.• Dell customer satisfaction rating fell by 6.3%• Dell servers were not fit handle internet traffic so customer

shifted to its competitors HP and IBM based on AMD opteron chips

• Dell business model was not effective in China• Lithium battery controversy

Dell Turnaround Strategy • In 2003, it introduced Flat Panel TVs, DJ music players, digital

music player & projectors• In 2006, it launched XPS high-end media PC segment• Dell produced every single machine for a specific order which

reduced its inventory & cost• Dell gained 20% market share in printer market • Launched product according to industry trends

Dell Turnaround Strategy (Cont.)• Started to use AMD processors• Introduced Annual Maintenance Contract at different prices • Company introduced 57 kiosks in 9 US states• It introduced Premier Page Web site for its corporate

customers

Turnaround Strategy: Will it do Wonders?• Media Center PC failed to capture market• Dell didn't have any retail store on the other hand Market

leader Lenovo had 4,800 retail stores in China• Emphasis on selling low end PCs• Achieving success in the PC Market and doing the same in the

printer business were two different thing• Past performance is no guarantee of future result.

Conclusion• R&D investment is lower than competitors which might hurt

Dell in the long-run.• DELL should focus on new product market and reliance

on corporate clients.• DELL has many opportunities such as potential growth in

overseas markets, the industry is in a matured phase and the entering to the new product markets.

Thank You