Group A9

Coman FullardAlexius FreundRaman Karol

Dhirapat KulophasAdriano Prates Marcus Wyss

DELL

Strategic Management 30-03-2004

Introduction

CEO: Michael DellTeenage EntrepreneurCollege DropoutMulti-Millionaire

World’s Number 1 PC maker

Direct Sales Model

Standards based designs

Corporate Darwinism

Almost no R&D

JIT manufacturing

Cost conscious

Products & Services

EnterpriseServers

Workstations Peripherals

Laptops &Notebooks

NetworkingProducts

DesktopSystems

•Managed Services

•Professional Services (consulting)

•Deployment

•Technical Support / Warranty

•Training / Certification

GOLDGOLD

SILVERSILVER

The Industry

Potential Entrants

Rivalry Within Industry

Substitutes

BuyersSuppliers

•Economies of scale•High Capital investment•Low Product Differentiation

•Absolute Cost Advantage

•Concentrated Supplier Market

•Few Suppliers / Key Components

•Important inputs

•Concentrated Market•High global growth rate•Low Differentiation

•High Bargaining Power•Access to Information•Low Switching Costs

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Business Model

Suppliers PC Makers Distrib. Resellers Customer

Suppliers DELL Customer

Traditional Model:

DELL Direct Model:

The 4 P’s

Product

•Build-to-order•Mass Customisation•Segmented service levels•High quality/cost effective

Price

•Lowest-cost producer•Changes Daily•Flexibility•Essentially self-financing

Place

•Fast, efficient distribution•Internet, phone, catalogue based sales

•Distributors in some markets

Promotion

•Relationship business•SME: direct mail/online•Consumer: editorials, word-of-mouth, print advertising

SWOT - I

Strengths Weaknesses

• Unique Business Model

• Mass Customization

• Customer Contact

• Customer Loyalty

• Unique Management Style

• Standards Based Technology

• Limitations of Business Model

• Over-reliance on CEO

• Thrift

• Low Corporate Morale

• No R&D

SWOT - II

Opportunities Threats

• Product Extension

• Splintered US Market

• International Expansion

• Vast Customer Base

• Increased service based opportunities

• Replication of business model by competitors

• Limitations of suppliers

• Decreasing profitability of the market

• Low morale talent flees

Recommendations

• Grow the US consumer business

• International expansion

• Leverage current corporate customers to enter developing markets.

• Grow the European business by targeting the corporate segment.

• Explore domestic acquisition possibilities

• Expand the expert services offered

• Move in to the mid level servers.

• Maintain “Corporate Darwinism” & continuous improvement approach to operations.

• Nurture Company morale to retain talent

brand building aggressive pricing strategies

cooperation with the local players

Update

• 2001: Internal survey reveals very poor worker morale

• Enter Mobile phone market but fail & exit

• Expand storage offering with EMC

• 2002: Enter printer business

• 2003: Enter consumer electronics

• Revenue reaches $35 billion

• Net Earnings of $2.12 billion

• 15% of market

• 2004: Agreement with Fuji-Xerox

• Michael Dell resigns but leaves vision intact

The Tao of Michael Dell

• Hire ahead of the curve

• Segment the CEO

• Build a company of owners

• Stay allergic to hierarchy

• Mobilise people around a single business goal

• Develop products from the customers viewpoint

• Target a customer of one

• Add value “beyond the box”

• Align complementary strengths for success

• Flip the demand/supply equation

• Play judo with the competition