Michael Dell the Henry Ford Michael Dell the Henry Ford
of the Information Ageof the Information Age
DELLDELL
Group B 13Group B 13Masato ShiraiMasato Shirai
Andrea TellariniAndrea TellariniVasilis KykrilisVasilis Kykrilis
Gabrielle NgGabrielle NgMatthias KuhnMatthias Kuhn
Dell’s historyDell’s history1984 - Michael Dell founds Dell Computer Corporation
1985 - First Dell designed PC is introduced: the Turbo, featuring Intel 8080 processor
1987 - Dell is first PC company to offer next-day, on-site service Subsidiary in United Kingdom opened
1988 - Organization around customer segments IPO
1990 - Manufacturing center in Limerick, Ireland
1991 - Dell’s first notebook PC
Dell’s HistoryDell’s History
1993 - Dell among the top-five PC makers worldwide Subsidiaries in Australia and Japan mark entry into Asia-Pacific market
1996 - Manufacturing center in Penang, Malaysia Launch of dell.com Dell added to S&P 500 index
1997 - Introduction of first workstation systems
1998 - Manufacturing center in Xiamen, China First enterprise storage product
Product SegmentationProduct Segmentation
PERSONAL COMPUTERPERSONAL COMPUTER
WORKSTATIONSWORKSTATIONS
STORAGESTORAGE
CONSUMER ELECTRONICSCONSUMER ELECTRONICS
SERVERSSERVERS
Personal ComputersPersonal Computers
Laptops and desktops constitute core products
80% of sales in 2003
Key strategyKey strategy • Direct Sales
• Aggressive Price Cut
ImplicationsImplications • Market share growth
• Brand Awareness
WorkstationsWorkstations
Enterprise and medium business segment
Key strategyKey strategy • Powerful
ImplicationsImplications By 2000 Dell was the US and worldwide leader of in Windows NT workstations
• Cost Effectiveness based on Windows usage
ServersServers
Enterprise and medium business segment
Key strategyKey strategy • Open architecture system
ImplicationsImplications By 1999 Dell gained 12% of sales
• Entry-level servers
StorageStorage
Enterprise and medium business segment
Key strategyKey strategy • Linux
ImplicationsImplications Broader target market including small-medium business
• Alliance with EMC
• Standardisation
Consumer ElectronicsConsumer Electronics
Individual Consumers
Key strategyKey strategy • Narrow range of standardized products closely integrated with computer technology
ImplicationsImplications Challenge for the future – The biggest test of the Dell business model
• Direct Sales
Customer SegmentationCustomer Segmentation
RELATIONSHIP RELATIONSHIP BUSINESSBUSINESS
• Global Enterprise and Large Corporate Accounts (Fortune 5000 companies)
• 60% of Dell North America revenues
• Execution - Key Success Factor
• Equipment needs to be deployed globally in timely basis
• Longer payment cycle
SMALL-MEDIUM SMALL-MEDIUM BUSINESSBUSINESS
• Preferred Account PAD (400 – 3500 employees)
• Business System Division BSD ( 10 - 400 employees)
• 30% of Dell North America revenues
• Efficient Customer Database - Key Success Factor
CONSUMER BUSINESSCONSUMER BUSINESS
• Individual customers
• Transaction Segment
• 10% of Dell North America revenues
• Ability to convert sales into cash within 24 hours
• Customers less educated
SupplySupply Chain ValueChain ValueINBOUND
MANUFACTURING
OUT BOUND
SERVICES SALES
BTO Direct Sales Investment on
customer services
Inventory Cost Cut
Mass Customization
Steady Deliver
y
Channel Cost Cut
Orders on the Web
Sale People for relations
customer
Low Price
Convenience to
order
Fulfilling Request Customer
Reliability with
deliver
Best Customer Services
Good Reputation in Service
Price
Keeping Good
Relation
Technical Quality
Timing quality
Servicequality
Reputation
quality
Relationship
quality
COMPETITIVE ADVANTAGE
VALUE PROPOSITIONS
Industry Analysis Industry Analysis MainMain CompetitorsCompetitors
HP Hewlett HP Hewlett PackardPackard
45$ Billion Revenues
• Global provider of a broad range of computing system
• Segments: enterprise, commercial and consumer markets
IBMIBM89$ Billion Revenues
• Desktops, portables, servers, storage
• Offering of a variety of tech solutions (systems, products, services, software and financing)
Sun MicrosystemSun Microsystem16$ Billion Revenues
• Scalable computer and storage system, high-operating network computing equipment
• Broad range of services including support and professional services
Gateway Corp.Gateway Corp.7$ Billion Revenues
• Direct marketer of PCs and related product and services
• Servers, workstations
Industry forcesIndustry forces
BARRIERS TO ENTRYMEDIUMMEDIUM
High investment required with
moderate tech levelSUPPLIERS
MEDIUMMEDIUMSuppliers size comparable to manufacturers
SUBSTITUTE PRODUCTSLOW/MEDIUMLOW/MEDIUM
• No substitutes for PCs, network computers potential substitute
CUSTOMERSHIGHHIGH
Customers have choices
RIVALRYHIGHHIGH
Many players with relatively low differentiation
SWOT AnalysisSWOT AnalysisStrengthsStrengths
DIRECT MODEL Complicated and time consuming transition for competitors in the short term
SUPPLIER RELATIONSHIP
PRICING
INVENTORY MANAGEMENT
• Pull System
• Shared demand information with suppliers
FOCUS ON CUSTOMER VALUE ACTIVITIES
• Outsourcing of non-core activities
Ability to exploit the high elastic demand of the industry undercutting prices
SWOT AnalysisSWOT AnalysisWeaknessesWeaknesses
R & D• Limited ability to innovate
• High reliance on suppliers
SERVICES
• Not complete solutions
• High client retention effort
SWOT AnalysisSWOT AnalysisOpportunitiesOpportunities
INTERNATIONAL INTERNATIONAL EXPANSIONEXPANSION
• Further penetration in non US markets (only 33% of total revenues come from EMEA and APAC/Japan)
• Growing telephony and internet infrastructure – Indonesia, India
• Selling of high-end systems to global customers and local enterprise in China market
SERVICES AND SERVICES AND SOLUTIONSSOLUTIONS
• Complete solutions
• Consulting and Support
9%
21%
70%
APAC/Japan EMEA AMERICAS
SWOT AnalysisSWOT AnalysisOpportunitiesOpportunities
ENTERPRISE ENTERPRISE PRODUCTSPRODUCTS
• Small-medium segment is growing
• Open architecture systems are emerging in response to increased storage demand and need for standard solutions
EMC PARTNERSHIPEMC PARTNERSHIP
Extends Dell’s capabilities and drives additional customer value in:
• R&D
• Sales
• Service
• Manufacturing
SWOT AnalysisSWOT AnalysisOpportunitiesOpportunities
CONSUMER ELECTRONICSCONSUMER ELECTRONICS
• Huge number of potential customers
• $800 bn market
• Products highly integrated with PCs
• Improvement of customer segmentation leverage
• Shift from analogue to digital technology plays to Dell’s strengths
AdvantagesAdvantages IssuesIssues
• High reliance on third manufactures
• Products not individually configured
• Direct Sales as new channel distribution for c.e.
• Brand Awareness?
• PDAs market entry
Other IssueOther Issue PrintingPrinting
At the beginning of 2003 Dell decided to enter the computer printer market
• Analysts view the market as flat in the short-term and declining in the long term
• Fierce competition (HP over 50%)
• Reduced flexibility
• Higher inventory costs
ConcernConcernss
SWOT AnalysisSWOT Analysis ThreatsThreats
PCs Saturated market with declining demand
MARGINS Increasing size of rivals through consolidation potential squeeze in market share and margins
DIRECT MODEL Duplication in the long term
ConclusionsConclusions
CONSUMER CONSUMER ELECTRONICSELECTRONICS
SERVICESSERVICES
• New source of revenues
• Educate the customers
• Fierce competition
• Lucrative margin
• Complexity
• Differentiation
AS IS
PCs MARKETPCs MARKET DIRECT MODELDIRECT MODEL
• Commodity
• Low margin
Mid-term Duplication
AS TO BE