Competitive Strategy

DELL IncYours is here

Yours is here The Cottle Taylor case

A BIRDS EYE VIEW:

Where is the PC industry today? How did it evolve? Was young Dell a game changer or a mere spectator as the game changed? Dell entered in the PC industry in 1984 with a humble 1000$ but generated a revenue of 56.94 billion $ in 2013. Within 8 years of its inception, the company was ranked in the Fortune 500

Group Number: H4

Abhishek Bardia(61510045) Manuj Kumar(61510346) Priyank Garg(61510570) Shruti Jangid(61510529) Dr. Sana Shaikh(61510570)

IntroductionDell announced on February 5, 2013 that it had stuck a $24.4 billion leveraged buyout deal to take the company private, delisting its shares from NASDAQ and Hong Kong stock exchange. The buyout, largest technology buyout ever, surpassing the 2006 buyout of Freescale Semiconductor for $17.5 billion, is the brainchild of Michael Dell, companys founder, who will buy the shares at $13.65 apiece, aided by Silver Lake partners and $2 billion loan from Microsoft. Why the BuyoutDell was losing confidence of its investors rapidly. By Dec12 stock prices, which had traded above $40 in 2005, had sunk below $10. Source Yahoo FinancialInvestors werent responding positively to the diversification strategy, with all the news focused on declining PC sales and market share, rather than on the fact that it had built the non-PC business from $8 billion in 2004 to $20 billion in ten years with a CAGR of 9.1% as compared to 1.2% for PC business1. PC Business CAGR = 1.2%Non-PC Business CAGR = 9.1%

Source Dell Annual ReportsThis buyout will give Michael Dell freedom to restructure its PC business and beef up the offerings in enterprise solutions and cloud computing without worrying about the impact on quarterly results and stock prices.Can Michael Dell transform Dell into an enterprise powerhouse in the next five years?The buyout has handed Michael Dell an absolute power to implement his vision, however a lot of lingering questions and doubts remain whether the company, worlds third-largest personal computer maker, can successfully push into enterprise solutions and services.Theres a long way to go to successfully re-align the business. After spate of acquisitions (Exhibit 1), worth more than $13 billion, in non-PC segment, consuming more than 20 firms; the firm still gets around 50% of revenue from PCs. Source Dell Annual Reports

2013 is now officially in the books as the worst in the PC markets history, as industry-wide sales declined by more than 35 million units year over year2Challenges facing Dell3 1. Dells market share in services and software stands at less than 1%, but these are the only categories making money and growing. 2. Enterprise solutions, software and services space witnessing increasing competition from traditional rivals like Hewlett-Packard and IBM and IT newcomers such as Amazon and Rackspace, which are wooing businesses with cloud-based services. 3. Rocky growth in PC business - Net income dropped 32% from a year earlier due to Dell strategy to gain market share even at expense of profit (Price wars). In Ovums view4, Dell has always been late in changing the course of its strategy whether it is - switching from a direct to a blended sales model; considering segments adjacent to end-user computing such as smartphones; or leveraging its many acquisitions. Hence company will need to prove that it can achieve its desired transformation and demonstrate that it can outsmart its publicly owned competitors by going private.The Personal Computer IndustryPerhaps the Personal Computer (PC) is the one of the biggest innovation of the last 25 years that has had the huge impact on the society and businesses. Since its birth, Personal Computer (PC) has transformed the way people work and communicate. Growth through regional expansionGrowth by innovationGrowth by standardization in componentsGrowth through consolidationGrowth by increasing penetrationPrice Wars

Source - 2011 Computer Industry Almanac & eTForecastsThe Growth stage (1981 1995) Source - http://www.c-i-a.com/worldwideuseexec.htmInnovation driven growth (Main Characteristic - rapid technological transition) Chart - Plot of transistor counts against dates of introduction. Chart Logarithmic scaleThe curve shows counts doubling every two years. Source - Wikipedia Source - http://ns1758.ca/winch/winchest.htmlInnovations in Supply ChainStandards consolidation in the market Largely controlled by Microsoft and Intel Little Scope for Product Differentiation Standardization battles can constrain innovation - as PC makers are reluctant to incorporate technologies before a standard is set Cons of Standard Consolidation

Pros of Standard Consolidation Economies of scale can be achieved - With standard product lines Using retail stores channel - Alliances with leading retailers including Wal-Mart and Carrefour Low Switching cost for Consumers The standardization helped kept the prices of PCs flat

New avenues to gain Competitive AdvantageProduct innovation at the system level was incremental and emphasized on developing slightly different products for narrowly defined market niches, such as PC gamers who demand high performance or business travellers who desire ultra-light notebooks, rather than more distinctively innovative products. Instead, most product innovation occurs upstream in components and software, which are then incorporated by PC makers.Limited scope in Product Differentiation

Vendor managed Inventory24 Hrs. Customer ServiceDirect Sales channelBuild-to-order productionThird party logistics

ServiceSalesSupply ChainManufacturingInnovations across value chain to gain competitive advantage

The Mature stage (1995 present) Price WarsThe maturing phase of the just decade-old personal computer industry came earlier than expected. As a characteristic of mature phase, starting in 1999, a PC price war started to brew. Various companies began to cut prices on their existing product lines and at the same time rolled out lower-priced PC models. The raging price war, which has been continuing until now, bolstered strong players and reduced vulnerable manufacturers to ashes. The downward spiral of personal computer prices can be attributed to the following reasons: Technology has become more and more powerful. As the cost of components drops, so do personal computer prices. The mail-order market posed a threat to the leading PC makers. These companies, notably Gateway, do not perform and actual design and innovation, but successfully grabbed a significant chunk (as much as 16%) of the PC market. PC industry entered in mature phase signifying slowness in demand for the personal computers. Drop in shipments have forced companies to cut price to boost up sales.Figure: Technology Price-Performance WedgeSource - Computer Industry Almanac & eTForecasts July 2007 Worldwide PC MarketTrends in DemandPC demand has been shifting steadily for over a decade towards smaller, more integrated and more communications-oriented products (Exhibit 2). Form factor

Continued overseas expansion

Emergence of Internet - Sales of PCs have been sticky as consumers have not replaced the existing PCs with these new devices instead have purchased multiple such devices, with each device providing somewhat uniquely purposed network access.

Continued price/performance gains in key components as well as the shift of production to lower cost locations have driven prices lower, expanding overall demand for PCs. As a result sales have grown in the emerging markets (Asia Pacific, Latin America) where economic growth is providing the income to afford these ever cheaper PCs (Exhibit 3a & 3b)

Differences in Apple and IBM StrategiesMajor Differentiation Strategies of Major players Source of Competitive AdvantageLow-Cost LeadershipDifferentiation Cost Focused Leadership Differentiation

Based on Cost LeadershipBased on DistinctivenessIndustry wide (Broad)Specific Niche or Segment (Narrow)Target Market

Dells Competitive Position Target Market Mass Market Source of Competitive Advantage Low-Cost Leadership 1. Direct sales channel results in better margins, which are passed on to consumer2. Build to Order manufacturing resulting in higher profits

Source of Competitive AdvantageLow-Cost LeadershipDifferentiation Cost Focused Leadership Differentiation

Based on Cost LeadershipBased on DistinctivenessIndustry wide (Broad)Specific Niche or Segment (Narrow)Target Market

HPs Competitive Position Target Market Mass Market Source of Competitive Advantage Differentiation with High Quality products More focus towards corporate customers

Source of Competitive AdvantageLow-Cost LeadershipDifferentiationBased on Cost LeadershipBased on DistinctivenessIndustry wide (Broad)Specific Niche or Segment (Narrow)Target MarketApples Competitive Position Target Market Niche Market Source of Competitive Advantage Focused Differentiation 1. towards user experience2. Proprietary Operating system

Focused DifferentiationCost Leadership

Source of Competitive AdvantageLow-Cost LeadershipDifferentiation Cost Focused Leadership Differentiation

Based on Cost LeadershipBased on DistinctivenessIndustry wide (Broad)Specific Niche or Segment (Narrow)Target Market

IBMs Competitive Position Target Market Mass Market Source of Competitive Advantage Mixed Strategy

PC Industry analysis at the time of entry by Dell in 1980s:Industry- Many players in the industry like IBM, Compaq, HP, Apple etc- Indirect effects played through complementary products (computer hardware/ software- Technological legitimation & breakthroughs gave rise to fierce competition- Intense price wars began - High exit & acquisition rates as sustenance was difficult

Compatibility was the most highly valued attribute Similar offering by many competitors so bargaining power was high of the consumers Consumers were price sensitive and were not very brand loyal The switching costs among the Microsoft operated PCs were low Customers were barely able to differentiate among the offeringsBuyers They were in large numbers as the associated costs were low Some of them assembled parts & sold unbranded PCs for 50% lesser price and thus became threats to the PC industry brands Software makers like Microsoft had a stronger hold on the suppliers than the PC makers Due to the bulk orders, they slashed prices to maintain relations with the major players 0

SuppliersIndustryEntry to Barrier Uncertainty regarding the emerging technology and the technological standards (TS) Imitation of the dynamic nature of the PC industry was a challenge High associated fixed costs Many players entered after the introduction of the Wintel including Dell, Compaq

Substitutes Given the already existing network, the mobile phone companies, could be turning to the PC industry with more intense competition or substitutes No existing substitute for the home PC and with comparable performance

Dell Business Model

Customer Value Proposition Target Customer - Experienced and computer-literate customers Customers can purchase custom-built products and custom-tailored services through the direct business model Dell's flexible, build-to-order manufacturing process enables quick deliveries. Allows Dell to rapidly introduce the latest relevant technology quicker than companies with slow-moving, indirect distribution channels. Efficiencies and component cost savings rapidly passed on directly to customers Standards provide customers with flexibility and choice while allowing their purchasing decisions to be based on performance, cost, and customer service. Profit Formula Dell is the low-cost leader Focus on reducing days of Inventory Industry leading levels Build to order process No finished goods inventory in system Direct sales channel enabled Dell to save on Dealer margin resulting in savings of 10-15%. Concentration on standards-based technologies allow Dell to maintain the lowest cost structure among its major competitors. Relentless focus on reducing its costs allows it to consistently provide customers with superior value. Key resources and processes Highly Efficient Supply chain and manufacturing organisation Efficient Direct sales channel Focus on leveraging standards rather than proprietary technology resulted in significant cost saving Benefited from the extensive research and development in the entire supply chain, due to focus on standards Strong emphasis on service and support ensuring customer problems are usually solved within 24-48 hoursStory of DELL, Inc.Dell: Birth and Childhood (1983-1990)In 1984, Michael Dell, a college freshman, formed Dell Computer Corporation to sell assembled PCs directly to customers at a 15% discount to established brands. Within a year, Dell had to drop out of college to attend to his business full time and on May 3, 1984, his dorm-room business officially became Dell Computer Corporation. Late Mature PhaseMature PhaseProfitless growthExplosive growth

Source Dell Annual ReportsProfitless Growth (1990-1995)Dells low cost differentiation model was imitated by several mail-order vendors, notably Gateway, who entered the PC market, threatening to undercut Dells prices by 15%-30%. To counter the growing threat as well as increase sales, Dell entered retail channel, through partnership with retailers such as CompUSA etc. The retailer in addition to selling also provided sales and services support. The sales grew from $800 million to $2 billion within a year and Dell became top-five PC makers in the world. The rapid growth resulted in a cash crunch resulting in a first loss in 1994. The major problem was Dells foray into the use of indirect channels, such as Retail. Dells low cost operating model did not work in the retail channel. Further, Dell sold standard PCs through the retail channel and was not able to leverage its supreme customization capabilities. Hence the retail channels contributed to growth but company was not making profit on these sales. As a result, Dell withdrew out of retail in 1994 (see exhibit 4). Dell also focused on European and APAC region during the period. To cope with a surge in demand in these markets Dell opened numerous manufacturing facilities in the regions which helped the company increase its penetration in the regions.

Source Dell Annual ReportsExplosive Growth (1995-2001)Dell focused on the direct model and experienced phenomenal growth. Sales grew from $3.5 billion in 1994 to over $31 billion in 2001. Over this period, Dell became the top US PC manufacturer, from a less than 3% US share in 1994, Dells US share grew to 18.5% in 2000.

Source 2011 Computer Industry Almanac & eTForecastsDell also forayed in the global market and became the second largest PC manufacturer, with a 10.6% share in 2000. Source - 2011 Computer Industry Almanac & eTForecastsDuring the period, industry witnessed intense competition, with margins falling from 35-40% in the early 90s to 15% or less in the late 90s. As a result, the industry experienced a trend of consolidation. Mature Phase (2002-present)Increasing Competition in PC marketWith the success of Dells direct model and its Internet application, many other PC firms were moving towards a build-to-order model such as 1. Compaq announced a new BTO process and later started shipping direct to customers through the Web. Compaq ended up being overpowered by the resulting complexity, due to conflicts between its traditional indirect sales channels and new direct channel. 2. IBM and HP transferred part of their PC assembly to distributors to reduce inventories. 3. NEC changed its distribution model from indirect to direct, but it was unsuccessful. Most of these attempts were unsuccessful. Dell has already built substantial competitive advantage and was way ahead in the curve whereas competitors had to put together an entirely new delivery system. Dell Computer became the leading PC vendor in 2001 and retained the lead through 2006 Compaq was acquired by HP in 2002 IBM PC business was acquired by Lenovo in 2005 Gateway was acquired by Acer in 2007 The top 10 PC brands accounted for nearly 84% of total worldwide PC sales in 2010Consolidation in PC market

By the turn of the millennium, Dell was one of the leading PC makers worldwide. However by 2005, Dell was feeling the heat from the increasing competition, mainly from HP on corporate side (with the acquisition of Compaq and one stop solution offerings for businesses) and from Acer on consumer side (with its focus on low cost differentiation).

Michael Dell at the Helm, again!In a bid to arrest declining market share and profitability, Michael Dell re-joined his role as a CEO and initiated a restructuring effort at the company. The restructuring effort can be broadly classified into two main categories Acquisition of software, storage, and technology services companies - enhance capabilities which would help its end customers and channel partners. Through these acquisitions, Dell get into the growing storage area network market, offer better service to its enterprise consumers and expand its presence in growing SaaS enables services market. Focus on product design - Stress on R&D so that the company could develop more innovative products Using retail stores channel - Alliances with leading retailers including Wal-Mart and Carrefour Cost cuts initiated a layoff program, focused on reducing manufacturing costs and increasing production efficiency in its attempt to raise profit margins

DELL IN TROUBLE, AGAINMichael Dells restructuring efforts seemed to yield some positive results as Dell reported a six percent year-on-year increase in revenues in FY 07-08. While Dell was trying to regain its position in the global PC market, the global financial crisis cropped up in 2008, affecting the business badly, particularly due to the companys focus on the professional segment, particularly large enterprises. Also, the crisis reduced consumer spending which affected the demand in the PC market also. Figure: Dell Customer SegmentsLarge CustomersSmall CustomersLarge CompaniesMid-Size CompaniesGovernmentEducationSmall CustomersLarge CompaniesGlobal CompaniesSmall BusinessConsumerRelationship BasedTransactional

- Competition by HP in Large Customers- Mid and Large size companies primarily affected by downturn- Competition by Acer in Small Customers segment- Reduced personal expenditure because of downturn

Analysis of Dell through Key Strategy Frameworks The Dell, in a short time of 15 years from its inception, has grown to be worlds 2nd largest PC manufacturer. The success of the company cannot be attributed to just one key differentiating factors. In fact, Dell has been very nimble and flexible in its approach and adapted well to the changing times by changing its strategies to keep differentiating itself from the competition. Below is the chart which plots key differentiating strategies adopted by Dell during various stages of its growth Red Ocean StrategyBlue Ocean StrategyMature PhaseExplosive GrowthIntroductionProfitless Growth

Key Differentiating frameworks 1. Growth through Innovation

Figure Dells Innovation frameworkInnovation in Delivery - Dell Direct ServiceKey Questions we analyse below Dell does not manufacture any components, but it can produce custom-built PCs in a matter of hours. How does Dell do it? Industry Standard Indirect ChannelComponentsComponent ManufacturerPC ManufacturerDistributor/ResellerCustomerOrderForecast

ProductProduct

Components for customization

Dells Innovation Direct ChannelOrderComponent ManufacturerPC ManufacturerCustomer

Components

Product

Distributor/Reseller

Dells direct model, based on direct sales from the PC manufacturer to the customer, is shown in above Figure. The model was driven by the slicing of the computer industry that took place in the mid-eighties.Reduce- Delivery time to customers- Reduce Channel costs- Number of suppliers which enables close coordination- Product replacement time to customers in case of quality issues.Create- Supply chain efficiencies achieving high degree of coordination b/w suppliers and Dell.- Data driven decision making accelerate every facet of business thereby increasing velocityEliminate- Dealers mark-up- Carrying cost of finished goods inventory- Work in progress inventories and process delays.Raise- Due to Build to order, faster introduction of technologies- Quality standards- Product Improvement time Incorporate customer feedback without process delays.Dells New Value chain in Delivery

Innovation in ManufacturingCreate- Every PC manufactured is specifically configured to a customers order- Team members have profit-sharing incentives, and hourly data on their performance are posted in large monitors on the factory floorReduce- Dells close relationship with its suppliers enables coordination to reduce inventory levels and to increase speed.- The short time lag b/w demand & supply mitigates undesirable effects of variability

Eliminate- Facility has no warehouse space- No inventory other than work in process- No Finished goods inventoryRaise- Components arrive from suppliers just in time for manufacturing- Manufacturing is synchronized to avoid storing parts or finished systemsDells New Value chain in manufacturing

Innovation in Customer ServiceDell provides 24 hrs customer service ad single point of accountability as it knows that increasingly complex technology makes it more challenging for customers to address their technology needs sufficiently. It offers an array of services designed to provide customers the ability to maximize system performance, efficiency, and return on investment.Dell employs third-party maintenance providers who send out technicians to tackle problems that require on-site support. These problems are usually solved within 24-48 hours. Even though field service is contracted out, Dell maintains accountability for customer service.By creating tightly coordinated relationships with its suppliers, vendors and maintenance providers, Dell made its customers feel they were dealing with just one large company. This relationship also enabled Dell to have instant access to the new technologies its suppliers developed whereas traditional systems vendors still depend too heavily on resellers, and that prevents them from reacting quickly to customer needs, because the resellers may place their own interests first. In contrast, for Dell, the feedback loop is very short. How does Growth through DiversificationIn 2007 the PC market was in a decline stage and selling only PCs wasnt going to cut it. Dell needed to expand its software, networking, security and services offerings. This was achieved through acquisitions, Dell went on a $13 billion buying spree (exhibit 1). A key component of Dells business strategy is to continue shifting portfolio to products and services that provide higher-margin and recurring revenue streams over time. As part of this strategy, they emphasized expansion of into enterprise solutions. Dells enterprise solutions included servers, networking, and storage products. The growth of enterprise solutions and services business has contributed to improvements in our operating margins.Dells focus now moving forward is to provide product leadership by developing next generation capabilities for client products, which include mobility and desktop PC products.

Strategic Failures of DellTill early 2000s, Dell has been the blue eyed boy of the industry, always ahead of the curve by clearly differentiating itself from its competitors. Dells differentiating strategies during various phases of growth -Source of Competitive AdvantageLow-Cost LeadershipDifferentiation Cost Focused Leadership Differentiation

Based on Cost LeadershipBased on DistinctivenessIndustry wide (Broad)Specific Niche or Segment (Narrow)Target MarketIntroduction PhaseDells Competitive Position Target Market Specific Niche Segment: Computer Literate Source of Competitive Advantage 1. Cost Leadership Due to direct sales channel better margins2. Focused Differentiation Innovations in Service, Manufacturing and Delivery

Growth PhaseDells Competitive Position Target Market Mass Market Source of Competitive Advantage Low-Cost Leadership 1. Direct sales channel results in better margins, which are passed on to consumer2. Build to Order manufacturing resulting in highly customized products at low price.Source of Competitive AdvantageLow-Cost LeadershipDifferentiation Cost Focused Leadership Differentiation

Based on Cost LeadershipBased on DistinctivenessIndustry wide (Broad)Specific Niche or Segment (Narrow)Target Market

The above differentiating strategies worked well for Dell as it grew to become top PC maker worldwide by 2001, only 16 years since its inception A phenomenal achievement. Nonetheless in early 2000s PC industry entered mature phase as the customers moved on from computers to smartphones, tablets and other mass media & communication devices. The PC industrys growth slow down from 22% in 1999 to less than 6% in 2002. This slowdown triggered two major trends in the industry Consolidation in the industry Many competitors such as Compaq, Gateway, IBM exited the market selling off their businesses to existing players. As a result of consolidation, top 10 PC makers accounted for 84% of worldwide sales as compared to 50% in 1999. Price war in the industry Millennium saw the entry of many Asian manufacturers such as Acer, Asus etc. in the market whose prime differentiating strategy was Low-Cost. This triggered a price war in the industry resulting in nose-diving profitsDells Strategic failures - 1. Focus on Low Cost leadership even in mature phase in industry When Michael Dell resumed his role again in 2007, he initiated a series of Price cuts to regain market share. However the move resulted in decline in operating profits from 6.3 percent in FY 2007-08 to 5.3% in FY 2008-09 combined with fall in PC business revenues from $46.9 billion to $46.4 billion. The Low-Cost differentiation strategy has been a winner for Dell in the past but the circumstances now changed due to which Dell was not able to leverage the Low-Cost method anymore: Dell has also in parallel to price cuts has announce re-entry in the retail sales channel which caused significant (12-13%) erosion on margins for Dell resulting in low profits. Also, the Asian manufacturers, particularly Acer, has significantly build its capabilities, in a short span of time, to compete with Dell in Low-cost market, namely the Consumers segment.2. Late entry in the enterprise markets Today, in effort to track valuable customer data and support critical systems and business processes companies deploy data centres, servers, networks and software extensively. As part of the effort to tap into this market Dell also tried to expand into the enterprise market. As the demand in PC market was low and with an eye to diversify in the related business, Dell focused energies on entering the virtualization and managed services business. Dell acquired Perot systems, a technology services company, in 2009 for US $3.9 billion. Reactive Dell MoveDells latest move received mixed response in the industry. Many felt that move was a right step for the company however it came a bit too late. The fundamental strategic question many asked is why is Dell attempting such a transformation now, especially by disrupting the ongoing operations, exposing the company and its customers to uncertainty? Dells strategy thus give a perception of being untimely and reactive rather proactive. IBMS MASTERSTROKEIBMs acquisition of Lotus notes in 95 for US $3.5-billion announce its strategic entry in the services space. Over the next few years it continued to steadily acquire and strengthen its software, services and integration capabilities. It was one of the first major players to enter into business strategy consulting space which has proved to be a very successful decision as it has transformed IBM towards providing insightful and innovative solutions to solve customers business problems, rather than merely IT problems. The IBM strategy to transform the company into Services Company and the results that strategy has borne are truly amazing. Today IBM is the worlds largest technology company.

3. Entry into Devices marketIn November 2009, as part of its efforts to improve profitability, Dell announced that it would enter into the cell phones, Dell wanted its customers to connect anytime, anywhere through its products and services. The entry into the mobile space despite high barriers to entry and low probability of success was a risky decision (Cell Phone Porter Analysis below). Threat of Suppliers (Low)- Fragmented Industry- Vertical Integration difficult

Threat of Rivalry (High)- Concentrated markets- Limited Differentiation in hardware- Huge scope of differentiation in Software- Price wars- Brand name a big factorThreat of Entry (Low)- Economies of scale difficult at hardware level but easy at software level- Huge capital requirements investments in R&D and operations

Threat of Buyers (High)- Elastic Demand- High Bargaining power- Technology driven- High switching costsThreat of substitutes (High)- Tablets- PDAs- Laptops- Notebooks- Brand name a big factor

Figure Cell Phone industry analysisAs part of the decision, Dell announced the formation of new business unit focused on communications and mobile devices. The Dell was not successful in its foray in the smartphone business as hardware is not the key differentiator, something which Dell is good at, due to which it was not able to leverage its existing synergies into the cell phone business. Dell officially pulled the plug on smartphone business in 2012.

Conclusion and RecommendationsAs the consumer shifts from PC autonomy to one with greater emphasis on distributed and mobile computing, there is an absolute need for Dell to transform. Due to the increasing adoption of technology resulting in increasing data driven decision making in industry End-user device types such as data centres and communication networks are all in a period of significant change. For companies, they must also evolve or risk becoming irrelevant. Dell, as evident by its many acquisitions, is changing its stripes. Hence the decision of Michael Dell to take the company private is correct as it will allow the company to test out waters in different avenues without shareholders wrath. Dell, rather than predominantly being hardware provider, is seeking to branch out in services so as to beef up the offerings in end-user computing and enterprise solutions space. No doubt, as experienced so far, this will be a challenging transformation. However one characteristics which we have noticed might hamper in this transformation. It is Dells tendency to play safe because of which the company has missed several opportunities at crucial stages which has given its competitors competitive advantage. For Example - Being in the PC business, Dell not only missed capitalising on tablet and smart phone devices segment, but also failed to effectively leverage its core strengths into the attractive enterprise services business during the 1990s like IBM did. Then when it went into Enterprise business, spending close to $15 billion in services capability acquisitions, it did not appropriately integrate acquisitions within Dells landscape as a result most business are still standalone. Therefore, the timing of related diversification becomes extremely critical, i.e., which related businesses should the company enter, where can it leverage its core strengths and create a competitive advantage in the entered business? How attractive would the industry continue to be in the medium to long term? This is where IBM succeeded while Dell and HP are still miles awayTherefore absorbing and optimizing its many acquisitions presents a significant set of hurdles and changing market perceptions from hardware manufacturer to an all-rounder in technology space will not occur overnight. Market is full of uncertainty and Dells market combatants are also aiming to solidify and expand their positions in the market landscape. Nevertheless, standing still is unacceptable. ExhibitsExhibit 1 Dells acquisitions from 1999 -2014YearCompanyCompany Area of FocusAmount

1999ConvergeNet TechnologiesData storage$340,688,000

1999NetSageSoftware$10,000,000

2002PluralIT Services ProviderUndisclosed

2006ACSInformation technologyUndisclosed

2006AlienwareComputer desktopsUndisclosed

2007ASAP Software ExpressInformation technology$340,000,000

2007SilverBack Technologies, Inc.Network MonitoringUndisclosed

2007EverdreamSoftwareUndisclosed

2008EqualLogicStorage area networks$1,400,000,000

2008The Networked Storage CompanyInformation providerUndisclosed

2008MessageOneOffice software management$155,000,000

2009Perot SystemsIT Services Provider$3,900,000,000

2010BoomiCloud Integration VendorUndisclosed

2010Ocarina NetworksStorage Deduplication VendorUndisclosed

2010ScalentData Center Management VendorUndisclosed

2010ExanetOEM NAS Software Provider$12,000,000

2010KACE NetworksAppliance Based Systems Management ProviderUndisclosed

2010CompellentStorage Systems Manufacturer$960,000,000

2011RNA NetworksSoftwareNetworkingUndisclosed

2011Force10Data centerethernet switches$700,000,000

2011SecureWorksSecurity services$612,000,000

2012Gale TechnologiesInfrastructure Automation SolutionsUndisclosed

2012Quest SoftwareSystems Management and Security Software$2,400,000,000

2012Make TechnologiesServicesModernizationUndisclosed

2012Clerity SystemsServicesModernizationUndisclosed

2012Wyse TechnologyCloud TechnologyUndisclosed

2012SonicWALL, Inc.SoftwareSecurityUndisclosed

2012AppAssureSoftwareSecurityUndisclosed

2012Credant TechnologiesUndisclosed

2013Enstratius (enStratus Networks)Cloud ManagementSoftware$3,500,000

2014StatSoftStatistical Softwareand servicesUndisclosed

Exhibit 2Continuum of Devices with Varying Price Points and Purposes

Source Bernstein Research, Let's Talk Tablets: A Form Factor Revolution?

Exhibit 3a

Source - 2010 Computer Industry Almanac & eTForecasts

Exhibit 3b

Source - 2010 Computer Industry Almanac & eTForecasts

Exhibit 4 Cost structure in Direct and Indirect channel

RetailDirect

Channel Mark-up4-6%0%

Co-op Marketing3%0%

Financing1%1%

Price Protection *4%0%

Obsolescence1.50%1%

Total13.5%-15.5%2%

Source -stuff.mit.edu/afs/athena/course/15/15.823/attach/Dell%20CASE.pdf * Price protection is a scheme whereby the PC manufacturer protection resellers From losses on unsold computers when their price is reduced.

Exhibit 5 IBMs acquisitions from 1995 onwardsYearCompanyCompany Area of Focus

1996Object TechnologyData storage

2001Informixdatabase management capabilities

2001Mainspring

2002PWCs consulting practiceBusiness consulting

2002CrossWorldsSoftware

2005MicromouseIT Services Provider

2006MRO SoftwareInformation technology

2006FileNetComputer desktops

2007Daksh eServicesbusiness process outsourcing

2007Softekdata mobility and Web conferencing

2009SPSSstatistical analysis software

2012Kenexasocial business, big data, talent management, customer experience

2012TeaLeafsocial business, big data, talent management, customer experience

References 1 Data quoted from Dell Annual Reports2 Data from IDC3 http://www.forbes.com/sites/connieguglielmo/2013/10/30/you-wont-have-michael-dell-to-kick-around-anymore/4 http://ovum.com/2013/02/06/where-will-private-ownership-leave-dells-enterprise-services/

http://www.thehindubusinessline.com/opinion/can-dell-do-an-ibm/article4633956.ece http://www.forbes.com/sites/patrickmoorhead/2012/04/30/hp-and-ibm-need-to-be-very-afraid-of-dell/http://news.yahoo.com/dell-confirms-exit-smartphone-business-drop-android-003848278.htmlhttp://www.zdnet.com/blog/btl/dell-throws-in-the-towel-on-smartphones-in-u-s/72681http://www.forbes.com/sites/jeanbaptiste/2012/12/12/dell-quits-smartphone-business-globally-android/Dell (II): A Company in Transition 2009, http://practicalstockinvesting.com/, November 24, 2009http://www.nytimes.com/2009/11/20/technology/companies/20dell.html?_r=0http://www.businessweek.com/magazine/content/09_43/b4152036025436.htm http://in.reuters.com/article/2009/03/11/dell-layoffs-idINN1130306420090311 Page 1 of 27