Case Study on Dell Inc.Chapter Writing

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Dell Inc. Case Study

How well has Michael Dell performed defining forces driving industry competition that were discussed in Chapter 4?

What are the elements of Dell's strategy?

Which one of the generic competitive strategies is Dell employing?

How well do the different pieces of Dell's strategy fit together?

Does Dell's expansion into other IT products and services make good strategic sense? Why or why not?

What does a SWOT analysis reveal about the attractiveness of Dell's situation?

Strengths

Weaknesses

Opportunities

Threats

Has Dell's strategy given it a sustainable competitive advantage?

Is Dell's strategy potent enough to beat out existing competitors?

What are Dell's changes for becoming the dominant leader in the global PC market?

How good are Dell's prospects for continued growth in revenues and earnings?

SWOT Analysis and Strategic Sweet Spot

References

Abstract

The following paper performs a detailed strategic analysis on Dell. The paper analyzes the strategy of Dell, its strengths, weaknesses, opportunities, threats and future prospects for the organization. The paper also proposes some recommendations for the organization and develops a strategic factor analysis summary so as to identify the strategic sweet spot for the organization.

Dell Inc. Case Study

Introduction

Dell Computer Corporation was formulated in the year 1984 by Michael Dell, who was 19 years old at that time. The organization has established itself as the market leader in the computer and data processing industry since the year 2001. The organization witnessed an evident growth since it was formulated by Michael Dell with only 1000 computers in its dorm room in the University of Texas.The organization enjoyed a market share of around 15.4%, with the total sales of 31 million computers. Dell has also raised its global revenues to around 50 billion dollars and employs more than 55,000 employees in different regions of the world. Despite the tremendous growth and expansion, the organization's strategy is based on its founding values.(Wheelen & Hunger, 2012, pp. 9 -- 1; Dell, 2015)

Even though the organization witnessed commendable growth and development in the initial years; the increase in competition and cost pressures, because of intensive completion, led towards the narrowing and erosion of the profit margins of the company. Although the revenues of the company continued to increase and amounted to $57.4 billion and $61.1 billion in the fiscal year 2007 and 200e respectively; the net income of the organization dropped to $2.6 billion in the year 2007. There was, however, an increase of $0.3 billion in the net income of the year 2008, as it amounted to $2.9 billion.(Wheelen & Hunger, 2012, pp. 9 -- 2)

Dell as well as the computer industry were influenced negatively by the great recession of 2008 -- 2009. There was a further fall in the net income of Dell during the fiscal year 2009, where it fell to $1.4 billion with revenues of $52.9 billion. There was, however, an enhancement in the sales of the organization during the year 2010, as the global economy began to show the signs of recovery. The net revenue for the first half of the year 2010 from the month of February through the month of June elevated to $30.4 billion as compared to the $25.1 billion of the first half of 2009.The net income for the first half of the year 2010 was observed to be $886 million, which is higher than the $762 million of the first half of 2009. The net income of Dell, however, was only 2.91% of the net revenue, which is quite lower than the 6.45% of the year 2006. (Wheelen & Hunger, 2012, pp. 9 -- 2)The following is the mission of Dell:

'It's the way we do business. It's the way we interact with the community. It's the way we interpret the world around us -- our customers' needs the future of technology, and the global business climate. Whatever changes the future may bring our vision -- Dell Vision will be our guiding force.'(Dell, 2015)

Questions

1. How well has Michael Dell performed defining forces driving industry competition that were discussed in Chapter 4?

Michael Dell Performed exceptionally well in managing the basic forces that shape and drive competition in any industry. These forces can be termed as: threats of potential entrants; power of buyers, threat of substitutes; power of suppliers; other stakeholders; and rivalry among the competitors. (Wheelen & Hunger, 2012, pp. 110) In order to address the threats of substitutes, and power of buyers, the organization focused on providing the customers with high quality services. The organization is known for its top notch customer service. As a result, the organization was able to develop and maintain a loyal customer base. Consequently, the brand switching cost was increased, as a result the threat of substitutes and power of buyers was reduced. (Wheelen & Hunger, 2012, pp. 9 -- 2)

The organization because of its initial focus on growth and development established itself as the market leader. The entry of new players in the market did not effect it evidently in the beginning. However, as the intensity of competition and consumer expectations enhanced; Dell confronted competition from these new players. In order to stabilize its market position and reduce its costs, so as to compete effectively, Dell produced its products on the building to order process. This, as a result, reduced the costs of the organization and strengthened its position. (Wheelen & Hunger, 2012, pp. 9 -- 2)

Michael Dell also developed a company culture that spelled out what was expected from the employees in a detailed manner. This enabled the organization to gain commitment from the employees and manage them effectively. The strategic integration also aids the organization in tackling all the important members of the firm appropriately. In order to reduce the supplier power, the organization has maintained diversified lines of suppliers and exerts considerable control over them. Furthermore, the use of the process of direct selling, which enabled it to enhance customer satisfaction by providing them with high quality services. (Wheelen & Hunger, 2012, pp. 9 -- 2)

2. What are the elements of Dell's strategy?

During the initial stages of its formulation, the organization followed a growth strategy in order to become the biggest manufacturer of personal computers in the world. By the year 1995, the organization attained the sales of $3.5 billion.In addition to that, the organization become the biggest direct marketer and seller of computers in the world. Furthermore, it also made a place among the top five vendors of personal computers in the world. The organization then shifted its focus from growth to sustainability and effectiveness. The current enhancement in competition, however, has led towards further alteration of the company's strategy. (Wheelen & Hunger, 2012, pp. 9 -- 1 -- 9 -- 2)

In order to enhance its competitive position and maintain sustainable competitive edge over its rivals the company has incorporated three major elements in its strategy. These are listed below:

1. Enhancement of Core Business: The organization has an aim of improving the core business by making profitable expansions in the desktop as well as mobile computer business and intensifying the online and physical experiences of the customers with the organization. For this reason, the strategy includes cost saving initiatives such as, just in time inventory and build to order manufacturing. In addition to that, the organization has also simplified its product offering. (Wheelen & Hunger, 2012, pp. 9 -- 5)

2. Shift in Product Portfolio: The organization has also focused on a product development strategy so as to shift the portfolio products that entail higher margins and recurring revenue offerings.To achieve this shift the organization has expanded its business in the area of customer solutions regarding servers, services, storage and software. The organization achieved this expansion through organic growth as well as acquisitions.(Wheelen & Hunger, 2012, pp. 9 -- 5)

3. Strong Financial Position: In order to attain this objective, the organization aimed at balancing liquidity, growth, and profitability by having a strong balance sheet with an effective liquidity position so as to ensure that the organization may respond appropriately to the changing situations of the market. This provides the organization with an opportunity to acquire and develop skills that are required for survival and growth in the current business place.(Wheelen & Hunger, 2012, pp. 9 -- 5)

3. Which one of the generic competitive strategies is Dell employing?

There are four types of generic competitive strategies as proposed by Michael Porter, namely: cost leadership; cost focus; differentiation; and differentiation focus. These strategies are referred to as generic as these can be deployed by all the businesses irrespective of their size and nature. The generic competitive strategy deployed by Dell is cost leadership, which can be referred to as the ability of an organization, or a business unit, to produce, market, and deliver the final product to the market in a more efficient manner as compared to the competitors and targets the mass market.(Wheelen & Hunger, 2012, pp. 185)

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