Case Analysis: Dell
Present CEO and chairman of the board Michael Dell founded Dell in 1984, as a leading technology provider that designs, develops, manufactures, and supports PCs, software and peripherals, storage and servers, and associated services. With operations in four geographic areas and additional business centers and manufacturing sites in more than 20 locations around the world, Dell is able to reach more than 24,000 retail locations worldwide. Dell’s ability to process in-depth customer knowledge and the tailoring of solutions to the specific customer, through a direct customer sales model, catapulted the company in 2008 to the top PC provider in the United States and second worldwide in terms of sales. Dell also commanded 15.1 percent share of the worldwide computer systems market, and 11 percent growth rate, which exceeded industry worldwide computer systems growth of 9.7 percent. However Dell saw enormous success in 2008, in 2009, Hewlett Packard took over the top spot as the leading PC provider and revenue growth rate stalled with revenues falling from $61.133 billion in 2008 to $61.101 billion in 2009. The economic downturn forced Dell to scale back spending directly impacting Dell’s market share, with Dell shipping 16.7% fewer computers worldwide in 2009 versus 2008. After suffering losses in 2008, Dell announced that it would start 2009 by reorganizing its business units from regional segments to four globally operated areas. The new sectors would include the following: large enterprise, public sector, small and medium businesses, and a global consumer; so that they could better align themselves with the needs of customers in order to produce “faster innovation and globally standardized products and services”. Key Issues
As previously stated Dell’s key issues began with the little growth worldwide in the corporate market, which was Dell’s core source of revenue, and slow growth in the consumer market. Operating costs were too high; especially as the price competition was rising due to an increasingly competitive environment. The economy’s downturn continued to weaken IT spending, as worldwide PC shipments continued to decline. This caused Dell to have to cut back spending which in turn affected their market share. This case study will reflect the decisions made by Dell in 2009, as they try to regain market share and better diversify their product lines in order to combat the key issues that have arisen during this time. General Environment:
The general environment is composed of segments that are external to the firm. These environment segments affect all industries and the firms competing in them. The challenge for Dell is to scan, monitor, forecast, and assess the elements in each segment to determine their effects on the firm (Hitt). Also, it is important for Dell to understand the driving forces behind each of the six factors in the general environment: demographic, economic, political/legal, socio-cultural, technological and global. Demographic:
The demographic segment has many opportunities for Dell. Dell servers four main customer segments – Home Users, Larger Enterprise, Small and Medium Businesses (SMB), and Public Sector. The home users segment makes up 25 percent of all computers shipped worldwide. Despite being a smaller market, the consumer segment “has the potential to expand faster than business with corporations and government agencies” (Hitt). Being the largest buyers in the IT industry, large enterprise customers can demand customized solutions for their specific needs. Analysts suggest that the small and medium business customer segment is expected to grow 4 to 7 percent in 2009 for a total available market opportunity of $68 billion. Dell is trying to meet the needs of low-cost Basic PC users with their product, the Vostro-A, in emerging markets. Dell’s products are known to be affordable, reliable, scalable, and customizable to meet their...
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