Dell: Porter's 5 Forces

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Strategic Management: Managing Dell Case 1
Dayna Gibson 100371286
BUSI 4701-003
Word Count:712

Question 1
Bargaining Power of Suppliers- HIGH
Although there were many suppliers for computer components, “microprocessors were supplied by only a handful of companies.” Pg.3. Microsoft and Intel monopolized the suppliers market as, “between 85% and 90% of computers sold conformed to Microsoft/ Intel Standards.”pg.3. With such a high percentage of computers being sold using Microsoft and Intel it would make it very difficult for any new suppliers to take the lead in this market, making the supplier power high. Threat of Substitutes- LOW

Computers were a hot item in the U.S, being that “45.5% of household’s owner a computer in 1998, and the figure was expected to rise to 49.5% by 2000.”pg3. A computer was something new into the market, and no other product nearly compared to its capabilities and complexity. Given that the computer was one of its own kind in this time the threat of other substitutes was very low. Bargaining Power of Buyers- HIGH

Dell created a strong and reliable relationship with its customers. “Over a thousand outside sales reps spent their time in the field, understanding customer needs, courting customer personnel, helping customers configure their information systems, and promoting Dell’s products and services.” Pg6. Although Dell had put a great effort into their customer service, the prices of the product were a key factor in the success of Dell. “Customers at retail don’t know what they’re looking for, other than price.” Pg.7. As price appears to be the major deciding factor in product choice, the buyer will be most likely to purchase their product based on price rather than quality of the actual product. Threat of New Entrants- MEDIUM/HIGH

Within the market of computers, there is not a great amount of product differentiation, with the exception of Dell directly serving its customers. Without much differentiation new entrants could...
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