Situation Analysis Dell

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Situation Analysis

Dell Inc.
MKTG 300-51
Glenn, Hayen
By: Brian Cavalier
2- 28-2010

History & Background
As a student at the University of Texas Austin, Michael Dell founded Dell Inc in 1984. Michael started his venture by building PC’s from his dorm room. He wanted to sell directly to the consumer and give them options during assembly, which would lower cost and give the consumer more of what they desired. Michael believed that by selling directly to the consumers, he could better understand the wants and needs of the people who were purchasing his products. This was an immediate success, as Dell was grossing over $80,000 a month (Gale, 2010). In 1984, he dropped out of school and went public with Dell Computer Corporation.

Large firms such as IBM dominated the market in the 80’s, so Dell advertised in computer magazines directed at people with the knowledge that Dell used high quality parts, and sold their PC’s for less. Using this approach, Dell Inc. hit gross sales of $6 million in its’ first full year of distribution, and almost $40 million in the second year (Gale, 2010)

Dell is the second largest player in the global personal computer market with a 15% market share (Standard and Poors). The company’s expanding growth spurs out to Brazil, Russia, China and India with revenues from these countries rising by 20% the past year (Standard and Poors). Revenues have increased by 48% in segments outside the United States. The company recorded revenues of $61,101M (Business and Company) million during the financial year ended December 2009. FY2009, operating profit of the company was $3,190 M and its net profit was $2,478 M (Datamonitor, July, 2009). Dells’ customer base is mainly personal users, families, businesses, healthcare, governments and

schools. They are the number one supplier of personal PC’s in the United States and are second in the

world.( Standard and Poors) Dell’s main competitors are Hewlett-Packard and IBM.

Industry Analysis

The computer hardware industry is one which is growing globally. It grew by 7.6% in 2008 to reach a value

of $411 billion (Datamonitor, December, 2009). In 2013, the global computer hardware market is forecast to have a

value of $511.2 billion, an increase of 24.4% since 2008 (Datamonitor, December, 2009). With growth potential

forecasted to increase, Dell and it competitors will have room to increase their market value.

With favorable forecasting in the industry, computer hardware companies have a great deal of decisions to make. The industry has many diverse users all with different wants and needs. Issues such as storage, music manipulation, video enhancement, money management tools, peripheral options, business use, school use and a plethora of other applications affect market segmentation. With so many options, it means that the customer base is very diverse and has many different individual needs. The ability of companies to meet the needs of consumers effectively and find small advantages over their competitors is key to increasing overall earnings.

Technology trends play a huge role in the computer hardware industry. With the development of better, smarter, faster and innovative products the industry offers, it makes competition very great. The computer hardware industry strives to give every person a use for their products. New ideas happening everyday make their products more practical for users to purchase. Service has also become an interesting trend. Consumers don’t always know how to use their computer properly, and in turn they tend to blame it on the computer, not their inabilities. Great customer service is a trend Dell has embarked upon to gain market share. Increased globalization is a trend that will continue to happen in the industry. As the world economies become more stable and able to purchase computer hardware, they will have different wants and needs which will have to...
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