CASE STUDY- DELL INC
Muhammad Salman ( Syed Ahmed Farooq Wasti ( Kamran Ullah Khan ( References: www.apple.com, www.dell.com, www.hp.com, www.ibm.com Finance.yahoo.com, www.gateway.com, www.sec.gov/edgar.shtml
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• Dell computer was founded by Michael Dell at age of twenty one in his dorm at the University of Texas, Austin. Initially the name of the company was PCs Ltd in 1984 but later it was changed to Dell Computer in 1987 when company got listed in stock exchange. • The company started with small operations through PCs by buying retailers surplus stocks at cost, then powering them up with graphics cards, hard disks, and memory before reselling them. • Dell’s strategy is to build computer so that it can be order by the consumers. It’s build to order strategy has made Dell the most successful company in the information technology field. • Dell sells its machines and other equipments directly to customers so it has eliminated the middleman. • Dell has high margin because of direct sale strategy and customers get excellent state of the art machines at low cost compare to Dell’s competitors.
• Dell has very user friendly web site and half of Dell’s sale, half of tech support and three quarter of order status takes place online. • The supply chain and data integration with suppliers has made Dell one of the most efficient computer manufacturers. • The continuous advancement in technology and innovative approach to manufacturing and assembly keeps Dell the low price leader in the PC industry.
• The Core Issues at Dell Corp: • 1. The Price War is going on between PC Makers. • 2. Revenues Down in 2002 compare to 2001 (31.9 to 31.1 billion) • 3. Worldwide sales of PC’s Down 11% in 2001, Dell’s Sales Up • 4. Leadership at Dell Corporation • 5. Service Contracts • 6. Maintaining the Market Share
General Environment Analysis
• Continuous increase in PC, server and storage equipment sales. • Emergence of specialized mass component suppliers. • Experiment with retailers and intermediaries were failed due to low profit margins. • Foreign-currency hedging strategy was risky and generated huge losses. • Quality difficulties appeared due to company's contract manufacturers. • Write off of Dell’s laptop line and suspended sales of laptops till Dell redesigned models got into the marketplace • Supplier Alliances • High competition in industry
• Rapid improvements in PC technology due to continues R & D • Specialized component suppliers Demographic trends • Growing customer interest in having PCs of their choices • Increased consumer awareness • Demands for customization by Technological savvy user Economic condition • Sharp decline in component prices • Low inventory and high sales turnover to better facilitate customer needs at lowest possible price with most modern technology. • In house versus outsource decision due to emergence of specialized component suppliers. • Direct selling to get maximum benefit of customer feedback and for highest profit margin. • Demand from Corporate and government sector. • Alliance with Data General Corporation (supplier) to enter the market for data storage equipment.
Industry Environment Analysis
Industry Definition • Dell belongs to PC Industry and has expanded its services to all computer related products. • Dell manufactures computers, workstations, and servers to order; none were produced for inventory. Dominant economic Characteristics • In terms of entry barrier, Dell’s JIT inventory keeps inventory costs to a minimum and has increased yearly sales. • Gaining of customers trust in highly competitive market. • Diversity and choice for customer to choose non-Microsoft based operating system. • Buyers want to purchase the latest computer at the lowest possible price. • Quality is now recognized with the company’s brand name. • Alliances with supplier are one of the key...
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