Dell Strategic Management Report

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SM assignment 2:

“Internal elements pose more potential risks to an organisation achieving its strategic objectives than external elements.”

Dell is a multi-national information technology corporation which designs, develops, manufactures, markets, sells, and supports a range of computer systems and services that are customized to individual customer requirements. As one of global PC suppliers, Dell set 2 strategic objectives to achieve, to be the No.1 global market share PC supplier, and optimize the balance of liquidity, profitability, and growth with a focus on increasing the mix of their product portfolio to higher margin products and recurring revenue streams. (Dell annual report 2009, pg 4). Dell existed in one of the biggest competition industries-PC industry, both external and internal elements can pose risks to Dell and forces Dell to be in disadvantage situation, this paper is aiming at analyzing and discussing the external and internal environment for Dell, and state Dell’s position in that moment. Therefore, this essay will focus on external elements pose more potential risk to an organization achieves its strategic objectives than internal elements. At the beginning of this essay we will use porter’s five force model to analysis the competitive environment for Dell and state Dell’s status, then the Value-Chain analysis will analyse the internal potential risks for Dell, latterly, compare external and internal risks for Dell.

The external environment in which an organization operates presents both threats and opportunities, both opportunities and threats exists independently from the corporation, therefore the external environment is usually beyond a firm’s control. The analysis of Dell’s external environment will focus on Porter’s five force activities.

Figure1.
Porter’s five force analysis:

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Michael Porter’s Five Forces Model is a framework which helps managers analysed the competitive forces within an industry which can then be used to identify opportunities and threats to an organization within that industry. The Five Forces are risk of entry by potential competitors, rivalry among established firms, the bargaining power of buyers, the bargaining power of suppliers, and substitute products. (Rothaermel, 2008)The following will discuss all of the primary forces affecting the personal computer industry, and Dell in particular, proving that the personal computer industry in which Dell exists is actually a very unfavourable industry to be in.

Hanson et al (2008) defined substitute products are goods and services from outside a given industry that perform similar or the same functions as a product that the industry produces. A threat from substitutes exists if there are alternative products with low prices of better performance parameters for the same purpose. They could potentially attract a significant proportion of market volume and hence reduce the potential sales volume for existing players. (Kapuscinski et al, 2008) There are some substitutes for Dell, and substitutes can give high influence to Dell to lose its clients. The threats of substitutes can affect Dell in achieving their strategic objectives. An example is that Dell’s major competitor Apple promotes iPad to the market at 2010. It influences consumers’ traditional view for the laptop. Cox, a high school math teacher visiting from Manchester, England, said he tested his device with a quick email to friends and family."It looks fantastic, so nice to hold and play and touch," he said, noting that the iPad is smaller than he expected. "It's easier to carry around. I certainly know I'll use it when I'm out."(Reuters,2010). The iPad may be the substitutes for the laptop market, because the iPad is the first in a wave of lightweight tablet devices that are expected to hit the market later this year from rival vendors, including Hewlett-Packard Co (HPQ.N) and Dell Inc( Reuters,2010) Even through managers...
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