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Porter’s Five Forces

Threat of New Entrants ( High):

Foreign and local competitors
IBM, Compaq and HP also entered into market.
Less government policy barriers (China joined WTO in 2002)

Potential barriers include:

Access to distribution channels
Scale economies (Local production plants)

Bargaining Power of Suppliers (Low):

Most competitors are vertically integrated that’s why the there is low bargaining power opportunities for Dell with suppliers.

External Analysis:
Bargaining Power of Customers (MODERATE):

Few buyers purchase a large portion of industry output
State-owned companies, MNCs and educational institutions
Sales account for a large portion of Dell’s sales revenues 50% from government, education, telecoms, power and finance. Brand reputation and product differentiation can mitigate

Substitutes (Low):

Competitive Rivalry (Intense):

High profit potential due to industry growth
Main buyers are institutions with more resources than individuals Price pressure from local competitors
High fixed costs of production capacity
High strategic stakes (focus on market share)
Aggressive competitive response
Lenovo adopting Dell’s direct sales model in China
Lenovo’s joint venture with IBM to increase its share
Lenovo’s brand campaign to improve recognition

Competitors Analysis:
Future objectives:
Build market share rapidly over its competitors.
Current strategy:
Cost leadership (Lenovo, Founder, Tongfang)
Differentiation (HP, IBM & Compaq)
Focused on consumer market
Lenovo positioning itself to challenge in high-end
Competitors
Critical investigation and analysis of Dell in Chinas market Key Strengths:
Chinese competitors: market knowledge and low cost advantage. American competitors: technology and brand recognition.

Key Weaknesses:

Chinese competitors: brand recognition
American competitors: higher costs

High-end Customers
* State-owned companies
* MNCs
* Government
* Educational institutions
* Large Corporate Accounts (1,500+ employees in Telecoms, Power and Finance)

Individual Consumers

Behavior:
* Consumer market is price sensitive
* Prefer a trial use of PCs before purchase
* Internet purchases were uncommon but internet users increasing * Best way to reach is through retailing (Kiosks)
* Value product quality, especially high-end customers
* Brand loyal

Key Resources
Key tangible resources:
* World Wide market leadership & financial resources ($8B in China) * Direct sales system and customer service
* Local production plant in China
* Alliance with Oracle
* Manufacturing (“Build-to-order) and low inventory” strategy * “Just-in-time” model (6 days vs. 40 days of supply) * Portfolio of award-winning products

Key intangible resources:

* Strong brand
* Reputation (“Dell experience” of high-quality products, support and service) * Innovative in its technology, business practices and customer service * Core Competencies
* Ability to simplify PCs and the supply chain since their beginning * Ability to understand customer needs and deliver innovative technology and services * Ability to use technology to simultaneously improve customer experience and contain costs * Ability to operate a direct business model

* Value Chain Analysis
Primary activities of value:

Operations:

Manufacturing processes contain costs well

Outbound logistics:

Direct sales model

Service:
High responsiveness to customer needs

Technological development:

Innovative web site and IT infrastructure

Firm infrastructure:

Visionary founder and management team

Recommendation
After the analysis of Dell organization, its current status and present running business strategies in China and all over the globe, we suggest following strategic recommendations to Dell in order to boost up its market position in order to rise up its market...
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