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Dell Inc in 2009

Dell was once a leader in the PC industry due to its direct sales model and focus on customization and competitive pricing. However, it began to slip as the industry became more competitive and substitutes like mobile devices emerged. To regain its top position, Dell needs to diversify its product portfolio, expand into related services, treat different customer segments differently, and focus on volumes over high margins as the PC market becomes more commoditized.

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Anupam Chaplot
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1K views29 pages

Dell Inc in 2009

Dell was once a leader in the PC industry due to its direct sales model and focus on customization and competitive pricing. However, it began to slip as the industry became more competitive and substitutes like mobile devices emerged. To regain its top position, Dell needs to diversify its product portfolio, expand into related services, treat different customer segments differently, and focus on volumes over high margins as the PC market becomes more commoditized.

Uploaded by

Anupam Chaplot
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Dell Inc

Presented by
Group H
Analyze Dell’s success story from the viewpoint of ‘Built
to Last: Successful Habits of Visionary Companies’.
Clock building, not time telling

Michael Dell (Clock builder) – The visionary leader


who right from beginning focused on assembling
computers for end users who valued the ability to
customize their machines

Anti hierarchical, cost focused corporate culture is


also reflected in their high value for money products
Tyranny of the “OR”
vs.
Power of the “AND”

Focusing on ‘Low Cost AND High Quality’ instead of


‘Low Cost OR High Quality’

Giving the customer what they want!


Distinguish “What Changes” from
“What Doesn’t Change”

Dell stopped offering detailed financial guidance to focus on long


term strategy

Michael Dell called earnings promises a trap that “caused us to,


every turn of the crank, think a little bit more short term until
ultimately we sort of drove ourselves off the cliff”!

The core ideology is to provide customized products at competitive


prices
Offered retail consumers computers at break even
Having Big Hairy Audacious Goals

In 2002, during a slumping market Dell set an


internal goal to double their sales to $ 60
billion by 2007

Targeting $ 3 billion in annual cost savings by


2011
Nurture a Cult‐like Culture

Having an anti-hierarchical, cost focused corporate


culture

Plain buildings with little or no décor


‘No free lunches’
If a division grows big, it is immediately broken down to
smaller divisions
Try a lot of stuff and keep what works

Dell started off selling computers through retailers

In 1994 Dell ended its 4 year retail strategy and


started the Direct Selling model through the internet

Dell went back into retailing in 2007, to target the


growing consumer segment
How did Dell build up a strong set of
competitive advantages
Opportunity
Trends during 1980s
– Corporate customers were becoming increasingly
sophisticated
– Individuals had become savvy and experienced
– Components of PC became standard permitting
mass customization
Strategic decisions
Company’s model
– Direct selling
– Mass customization
Direct model features
– Outsource all components and company performs only
assembly
– Eliminate retailers
– Orders via phone or internet which provides
convenience
– Integrated supply chain
Strategic decisions
Direct model allowed
– reduce cost
– To build every system to order, offering customers
powerful, richly configured systems at competitive
prices
– Lower inventory
Mass customization allowed
– Provide best possible customer experience Fast
delivery and customized products
Other decisions
Concentrate on high margin customers
Use of facts and data in daily decision making
Very good communication
Reduce the number of workers’ touches along
the line
Excellent use of IT
Anti hierarchical, cost focused corporate
culture
CA Strategies
Industry structure – Oligopoly  CR4 = 52.7%

Cost Leadership
Product Differentiation
Cost Leadership
Not much of R&D  reduces cost
Low inventory (Built-to-order)
They waited for cost of technology to fall
Decrease headcount
Reduce compensation & benefits cost
Improve productivity
Tighten discretionary spend
Excellent logistics
Product Differentiation
Product attributes
– Preloaded software
– Tagged and addressed machine
– Introduced direct selling at the right time
Firm-customer relationship
– Improved user convenience
– Customized products
Firm linkages
– Very good relationships with suppliers
What factors made Dell slip from its position
as a leader
Porter’s Five Forces
Threat of New Entrants  Moderate
Uniformity and availability of technology
Low capital investment for independent stores
Low product differentiation
Low economies of scale
No legal or governmental barriers
Threat of Rivalry High
High concentration
Price War: Low Margin
Decreasing profitability
Low switching cost
Porter’s Five Forces
Threat of Buyers High
Highly price sensitive
Reliability and customer service become important
factors
Threat of Suppliers High
Large number of suppliers for components like
hardware, keyboards, etc.
But two major inputs are monopolized
Microsoft standard for all PC’s
Intel standard for most PC’s
High switching costs
Porter’s Five Forces
Threat of Substitutes High
Windows Mobiles
Tablet PCs (iPad)
PDA/Palmtop computers
First Mover Advantage

DELL

Source: Suarez F. and Lanzolla G, “The Half Truth of First Mover Advantage”,HBR
Competitive Advantages
Direct Selling
Supply Chain Management
Relationship with Suppliers
Excellent use of IT
Cost Leadership Strategy
Product Differentiation Strategy
Mass customization
VRIO Framework
All the Competitive Advantages, though added value to
Dell in the starting but were

Not Rare
Almost all the vendors provide same kind of products
Imitable
HP and Apple also started selling their products online
Other vendors learned from Dell and implemented
their supply chain also in the same manner
What must Dell do to regain its top position
ERRC Framework
Eliminate
– Too much dependence on Direct selling model
Raise
– Customer satisfaction
– Product/service offerings
Reduce
– Cost
– Its dependence on high margin customers
Create
– Value to a broad set of customers
– Good relations with retailers
Recommendations
Adding PC and server product line based on AMD
microprocessors
Developing a showroom style storefront in
developing markets
Expanding consulting services to include business
services
Increase effort and investment in R&D
Recommendations
Treat corporate and individual customers
separately
For medium sized companies, Dell should concentrate more
on enterprise solutions
For large companies it should focus more on storage and
server business
For individual customers, Dell can target them through a
combination of direct and retail models
Recommendations
Try to enlarge corporate e-commerce clientele with
more services and product combinations specifically
targeted at enterprise levels

Dell should focus more on volumes than margins


– Computer market is getting commoditized
• Increasing number of substitutes
– More players are entering into the market
Thank You

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