Company Analysis Dell 1k5c1b

Company Analysis Dell Computers

Presented By: Vidyasagar Tiwari(Roll No: 57) Vikas Mishra(Roll No: 57)

SUBMITTED TO: Prof. Sneha Mishra

1

DELL Dell Inc. (stylized as DELL) was a multinational computer technology company based in Round Rock, Texas and, along with Dell EMC, is a subsidiary of Dell Technologies, one of the largest technology companies in the world with 138,000 employees.Dell manufactures, sells, repairs, and s personal computers (PCs), servers, data storage devices, network switches, computer software, computer peripherals, high-definition televisions, cameras, printers, and electronics built by other manufacturers. The company is well known for its innovations in supply chain management and e-commerce, particularly its direct-sales model and its "build-toorder" or "configure to order" approach to manufacturing—delivering individual PCs configured to customer specifications. Dell is eponymously named after its founder, Michael Dell. With a market share of 15.9%, Dell was the third largest PC vendor in the world in the first quarter of 2017, after Lenovo and HP Inc. (formerly The Hewlett-Packard Company).[7] In the first quarter of 2016, Dell was the largest manufacturer of computer monitors in the world, with a market share of 16.8%.[8] Dell was the third largest employer and largest private employer in Austin, Texas. On September 7, 2016, Dell Inc. merged with EMC Corporation (now Dell EMC) and both companies became subsidiaries of Dell Technologies.[1]

2

PEST ANALYSIS A scan of the external macro-environment in which the firm operates can be expressed in of the following factors:    

Political Economic Social Technological

POLITICAL The political environment in the US has been changing abruptly in the previous year. Dell being an integral part of this economy has also been greatly affected by these changes and has not been able to counter them. Changes in the legislation and laws of the US govt. have tried to revive the PC business but the reciprocations have been less then what was expected. The company has been able to beat the expectations of Wall street who predicted more dip by posting less losses by utting costs. The conservatism that exists in the consumer spending has been increasing which has adversely affected Dell’s performance. Issues of environment policies has also affected Dell as Dell came under significant pressure from environmental groups across the US to assume responsibility for its old products and this experience sensitized company officials to the risks and opportunities of state and federal e-waste regulations and the need to take proactive steps against them. ECONOMIC High tarrifs on IT products makes Dell difficult to enter other markets apart from USA . since most of the population of the world is young and adaptive to change in technology, dell aimed to manufacture its products which are more friendly and can be afforded by young professionals, because purchasing power of working population saw an increase over the past few decades. Since the economy saw a change due to the meltdown and recession, dell also had to modify some of its policies to cope up with the changing scenario.The change in the US economy also effected Dell with it bring change in its core policies of inventory and credit management of receivables and inventory conversion days to decrease its operating cycle and thus reduce cost.

3

SOCIAL Increase of younger population and working population have led to the increase of the use of computers. A technological revolution has been around the corner, people have become techsavy ,that have resulted in the increase in the demand for computers .These days people have time constrains and as a result of it they prefer to buy the product online ,which has given Dell an advantage over others because of dell.com.

TECHNOLOGICAL Tecnological changes are happening at a very fast rate due to which Dell is able to provide advanced technology products to the customers.As a result of chnological changes Dell has also increased their product line.It is adopting to the echnological changes as he old technology is becoming obsolete.One of the most important affets of technological changes that have led to the increase of the demand of Dell computers is their Direct Business Model.They have excellent ecommerce capabilities, which can be seen with the success of the dell. The recent chnological changes can be seen in their recent products like New PowerEdge Servers, New Enterprise Computing Portfolio, Innovation Aids Recovery, Ultra-Thin Laptop, Adamo,which will be in the market very soon. Dell could exploit the network-internet,extranet to reach the corners of the world.

4

SWOT ANALYSIS Strengths  







Brand name: Dell has a very strong brand reputation for quality products. Its brand is valued at $ 7.5 billion. Product customization: Dell allows its customers to customize their laptops. Such services were not originally found within any other major computer retailer (and currently only Sony and Toshiba allow that), but add great value to the customers and provides Dell with a competitive advantage. Environmental record: Dell is engaged in many green initiatives and has received many rewards for being an eco-friendly business. This is a benefit when working with public and government agencies. Competency in mergers and acquisitions: Over the last five years Dell has spent $13 billion for successful mergers and acquisitions, which brought patents, new capabilities, assets and skills to the business. Direct selling business model: Dell doesn’t sell its products through big-box retail outlets but instead sells directly to consumers and enterprises, keeping their already thin profit margin to themselves.

Weaknesses 











Commodity products: The large stream of Dell’s revenues comes from computer, especially laptop, sales, which is a commoditized product. Computer hardware (commodity) products are sold with a very low profit margin. Poor customer services: Once praised, Dell’s customer services deteriorated due to outsourcing its call centers offshore. Dell invested a large sum of money in fixing this, but hasn’t yet regained its previous reputation for customer services. Low investments in R&D: The company spends a much lower percentage of its income on R&D that its main competitors and thus, missed an opportunity to develop strong products for smartphones and tablet markets as well as to learn new skill and capabilities. Weak patent portfolio: Due to low spending on R&D Dell hasn’t acquired a strong portfolio of patents and is now finds it hard to compete in lucrative smartphones and tablets market. Too few retail locations: Selling products online saves money and allows for product customization but provides less visibility for the products. The consumer finds it hard to trust the products if it can’t hold it first in his hands. Low differentiation: Low price was once Dell’s competitive advantage but the company is no longer able to provide competitive prices. Apart from the price, Dell’s products are

5

little differentiated from competitors’ products and are in competitive disadvantage if the price offered by competitor is lower. Opportunities 







Expand services and enterprise solutions divisions: Dell provides various services (cloud, security and infrastructure) and enterprise solutions (servers, networking and storage), which are the most profitable Dell’s business at the moment. Dell business should focus on growing these divisions as they promise better growth opportunities and higher profit margins. Obtain more patents through acquisitions: If Dell wants to diversify, it needs new technology patents and new ideas. Dell hasn’t properly established its R&D facilities to discover new technologies and patents, so the only feasible way to obtain patents and technologies is to acquire other companies. Strengthen their presence in emerging markets: Emerging economies are the fastest growing markets for laptops, tablets and other electronic devices. Dell has a good presence in these markets but should strengthen its position as the company experiences declining market share. Tablet market growth: Tablet market is expected to grow in double digits for the next few years and the company has a great opportunity to release new tablet models and benefit from the market growth.

Threats 







Growing demand for smartphones and tablets: With a lower price and strongly improved capabilities, consumers often choose tablets and smartphones over laptops. The growing demand for the previous devices takes a share out of laptops, the main stream of revenue for Dell. Profit margin decline on hardware products: Dell’s main income is from selling hardware products, which prices will increase in the future due to rising raw material prices. This will add to costs for Dell and will further cut the profit margin. Slowing growth rate of the laptops market:Growth rate of the computer market is slowing down and in the near future the markets will become saturated. It will prove hard for Dell to compete in such market or at least fight back the lost market share. Intense competition:The company faces intense competition in all its business segments. It competes in of price, quality, brand, technology, reputation, distribution and range of products, with Acer, Apple, HP, IBM, Lenovo and Toshiba.

6

Value Chain Analysis Value-chain analysis is an analytical framework that assists in identifying business activities that can create value and competitive advantage to the business. The Figure 1 below illustrates the essence of value chain analysis. It is important to note that the pattern of Dell value chain management has been extensively imitated by other companies, including companies outside of consumer technology industry due to its evident contribution to the success of the company.

PRIMARY ACTIVITY Inbound logistics. Dell works with more than 165,000 channel partners in inbound logistics and provides USD 125 million partner incentives and investments annually[1]. The company utilizes Just-in-Time (JIT) philosophy in dealing with inbound logistics. Thanks to this strategy, Dell is able to save on huge inventory costs and sustain cost leadership for the majority of its products and services. Customer orders are ed by Dell and its vendors simultaneously by an integrated system. Then, materials are shipped by suppliers within 2 hours and shortly received at Dell’s assembly unit due to geographical proximity (see Figure 2 below). Operations. The main distinctive point between operations of Dell and its competitors relates to the fact that Dell is not a computer manufacturer; the company merely assembles parts manufactured by other companies. At the same time, high level of product customization is adapted as one of the bases of competitive advantage by the business. Therefore, operations mainly consist of three stages – assembly of stardard parts, installation of custom parts and testing product configurations (see Figure 2 below).

7

Outbound logistics consists of five stages as marked in red color in Figure 2 above. Thanks to the practice of mass customization, Dell is able to complete order fulfilment in a short duration of time. Generally, Dell completes customer shipments in a timely basis, staying committed to its promise of product customization as a result of cumulative advantages of part modularity, inventory program managed by vendors, demand management and mass customization. Marketing and sales is acknowledged by Dell as a critically important primary activity and the company’s marketing strategy has changed since the company became private in August 2013. Specifically, Dell marketing management aims to associate the brand image with an entrepreneurial spirit by shifting attention to the fact that the company is no longer publicly listed, hence the management is freed from the need to track stock prices on a daily basis. Service. Pre and post sales customer can be specified as one of the solid bases of Dell’s competitive advantage. It has been noted that Dell’s employees “take 50,000 phone calls from

8

customers every day and document and organize their comments, which are then distributed to managers”. Also, there are 4300 Dell certified partners globally who assist with Dell solutions and services to customers

ACTIVITIES Product R&D, Technology And Systems Development: Dell Inc.’s R&D group employed four thousand engineers and had a budget of six hundred million dollars in 2008. They have high standards of quality control in it plants. They have various tests and quality control process to check the quality of parts, components, and finished products. Procurement:They work very closely with their suppliers to maintain the quality of their components. Their long term relationship with their suppliers has brought them some advantages, such as, the supply of enhanced quality components, the timely delivery of components, suppliers’ engineers are stationed at the company’s plants for development and launch of new products and also adapt new ways to reduce costs out of the supply chain. Human Resource Management:The company has 88,200 employees worldwide. 57% percent of these employees are in customer facing and frontline roles. General istration: Dell Inc. has formed alliances with local service providers to provide on-site services to their customers. They have also formed strategic alliance with Lexmark to make printers and cartridges under the Dell label.

9

7-S FRAMEWORK OF McKINSEY The 7-s framework of McKinsey is a Value Based Management (VBM) model that describes how one can holistic and effectively organise a compan. Together these determine the way in which a corporation operates. Dell Corporation has become a leading company as it has a very strong product marketing focus it has certainly adopted the basic 4p’s of marketing ie price,product, place,and promotion mix are the 4 strong weapons with the help of which Dell Corporation has overcome all the consequences it has faced during its inception.

SHARED VALUE The interconnecting center of McKinsey’s model is: Shared Values. What does the organisation stands for and what it believes in. Central beleifs and attitudes. As the hand works in the human body the shared values are the core values of the organization as it connects soft skills of the Dell Corporation.

STRATEGY Plans for the allocation of a firms scarce resource, over time, to reach identified goals. Environment, Competition, Customers. As Dell has already adopted the brand name Dell it has reached its saturation stage now in order to sustain for a longer term they need to renovate or launch new products under the same brand name which they are doing.

STRUCTURE The way the organisation’s units relate to each other : centralised, function divisions (top-down); decentralised(the trend in larger organisation); matrix, network, holding,etc. Chief company official all the essentials departments in order to acquire efficiency and effectiveness. This assits the organization to achieve the desirable goals. the company saw to if they have acquired expertise knowledge to develop faith and trust of the consumers.

SYSTEM The procedures, processess and routine that characterise how important work is to be done: financial systems; hiring, promoting and performance appraisal systems; information system. The Dell Corporation has followed formal as well as informal procedure that governs the day to day activity. The mis system of Dell Corporation is so strong that they can analyze consumer response by a easy going system whereas due to its dignified image it has acquired intermediaries confidence within them. the agent of the organization conduct various market

10

surveys with the help of the retail system, call centre system,etc. such a informal system avails the organization to have crystal clear information in the to progress.

STAFF Numbers and types of personnel within the organisation. Dell has also appointed people from below poverty line session so that they can also their livelihood on the same side,in oder to motivate their staff they provide various financial as well as non financial incentives.This will make their employees to work in more enthusiasm and intrest.

STYLE Cultural style of the organisation and how key managers behave in achieving the organisation’s goals.ie; Management Styles. The top level management of Dell Corporation has maintained a discipline aatmosphere. They make sure that they achieve result within a defined time. They supervise their subordinated in such way that they work in deliberate manner.

SKILL Distinctive capabilities of personnel or of the organisation as a whole. The capability of the organization has bound that the consumers with their standardized quality product. The competency of the organization is to provide its product at an affordable price and in addition to it,its products are convention able, available in urban as well as remote areas.

11

VRIO Analysis Resource/ Capability

Does it have Value?

Is it

Is it

Is the company

Rare?

Inimitable?

Organized to exploit this resource/capability

Mergers and Acquisitions

Yes

Yes

E-Commerce: “Built to Order”

Yes

Yes

Michael Dell

Yes

Yes

No

SCA, TCA, tCA,

TCA Yes

No

Yes

Yes

TCA

Yes

SCA

Mergers and Acquisitions: What Dell wisely does is realize their needs, and then acquire companies which will serve as a separate entity, but also supply products within the realm of the corporation. This is a serious cost advantage, and a very strategic approach to business. E- Commerce: Dell is well known for its innovations in supply chain electronic commerce, particularly its direct-sales model and its "build-to-order" or "configure to order" approach to manufacturing and delivering individual PCs configured to customer specifications. Michael Dell (privatization): The main aim of Dell's leveraged buyout is to redo the company’s financial structure, as the buyout would save the company between $4 and $5 billion in taxes they would otherwise have to pay on repatriated profits controlled by tax haven subsidiaries, and the company would be able to reinvest this cash stockpile in restructuring. Dell founder Michael Dell said of the buyout "I believe this transaction will open an exciting new chapter for Dell, our customers and team ".

Now that we have discussed each companies specific resources, it is time to explore their overall business strategies.

12

MICHAEL PORTER’S FIVE FORCE MODEL Threat of New Entrants: MODERATE The entry of new comers is quite difficult because of the entry barriers that are caused by:  Buyer loyalty  Brand name  Low price  Award winning customer service  Customisation Decreasing profitability shows that there is a threat of new entrants.HP overtook dell few years back Rivalry: HIGH  Price War  Decreasing profitability  Low differentiation However, in the midst of sever competition, Dell can still gain market share from other competitors. That proves Dell’s business strategies have been successful. Threat of Substitutes: LOW  Strong presence of PC’s throughout society  One computer for every three people in the U.S.  Customer service  Direct Business Model However, high price, and lack of software prevent people from switching to Apple system. Bargaining Power of Buyer: High  Highly price sensitive  The cost leader has high market share which leads to high bargaining  power relative to its suppliers  Reliability and customer service become important factors  Dell’s products are very reliable and customer service is outstanding These two factors help Dell to create certain brand royalty. But that’s given the fact that the Company set the prices very low. If the prices are raised too high, customers will not hesitate to switch.

13

BCG MATRIX MODEL The following section has conducted an analysis of the products being managed by Dell Inc. using BCG Matrix. The evaluation is based on the market share and growth prospects of the different products, which helps in placing these products in different categories of cash cows, stars, question marks and dogs. Cash Cows The cash cow in BCG Matrix is used for products that have a high market share in their respective industry. Moreover, the industry has reached its potential therefore, it is not likely to have any further development, thus limiting the chances of any further significant growth for the product. Nevertheless, the situation is still deemed as favorable by the organization as the high market share makes the product a source of sustainable profits and revenues for the business entity. Dell Inc. has some products which can be categorized as a cash cow on the basis of the high market share and revenues of these products. One of the prominent examples in this case is the Dell PC which has been able to provide the company with sustainable profits. There has been a decline in the market need of PC, nevertheless, Dell has been able to continue getting operational profits through its PC segment (Lev-Ram, 2016). This positioning of the PC can help Dell to maintain a strong position in the market, while use the cash generated by this segment for promoting the operations of its other product ranges. Stars According to the BCG framework, stars on the other hand have the potential to grow in the market as the industry is still progressing. The high market share possessed by the stars is also likely to increase with the growth of the product. Any product that is categorized as a star is required to fulfil these two criteria, a good source of income for the firm and a significant market share that has future growth potential due to favorable industry dynamics. The matrix has further reflected the possibility of a star product turning into cash cow if the favorable industry environment and market success drives the product into becoming a leading source of earning for an organization. Dell monitors can be seen as stars owing to their innovative ideas and the possible appeal that the innovative products can create in the target market. According to Hardavar (2017) the ultra-thin monitor required some major changes in the design of monitors and this step has enabled the company to gain positive response from the target market. The monitor is expected gain significant market share in the future, indicating the possibility of this star product turning into a cash cow for Dell Inc. At present, the ultra-thin monitor is operating in a growing industry which allows the firms to create new product designs and use the innovative ideas to make the products profitable. Another notable example that has generated significant amount of revenues for the

14

company is its laptops, primarily the XPS 13 which is marked by a high degree of flexibility and offers the s 360 degree hinge, along with the ease of portability (Kingsley-Hughes, 2017). Question Marks The BCG Matrix has also focused on products that seem to have an uncertain future, which has been termed as question marks. These products can either become a success case for the firm by improving their financial performance, or become a prime candidate for divestment due to low performance. The market share of these products is low however they seem to have some chance of improvement in of market share and financial performance. Cloud computing is a question mark for the company as it has recently taken the initiative to obtain cloud computing platforms. The future of cloud computing platforms under the management of Dell is still in an emerging phase. It can become a profitable venture for Dell as the rising trend of cloud computing can bring higher revenues and profitability to the company. However the possibility of failure indicates that this product segment is a question mark as the future progress is still uncertain. A positive development in this domain, Dell can place the cloud computing as a star, and eventually a cash cow. Dogs The dogs in BCG Matrix are products that are the low performing items or business units that fail to generate enough revenues. In addition to this, these products have a low market share which is an additional issue in managing the production of these items. The low profits emerging attributed to the low sales of these items is the key reason for identifying these items as a dog. The continuous stream of investment followed by low revenues make this category a likely target for divestment by the management. Dell has decided to launch its own brand of cell phones to cater the needs of smart phone s across the globe. Its smart phone can be identified as a dog as it the product is included in the list of items that have not been able to become a source of profitability for the technology leader. Contrary to the company expectations, its entry into the smart phone market didn’t succeed and it was unable to compete against market leaders such as Apple Inc. Reisinger (2011) has analyzed the lack of success of Dell mobiles and found the root cause of problem as the lack of product compatibility with the consumer needs and preference. Due to this reason the company had greater investment than the return it was able to gain for that financial input.

15

GE MATRIX The 9 cells of ge matrix are grouped on the basis of low to high industry attractiveness and week to strong business strength and competitive position. There are 3 zones indicating 3 different combinations. GO AHEAD:Under these phase the signal is to proceed and take decisions such as Dell has become universally acceptable and now it should go ahead and take up more marketing development and expansion . Wait and Watch:These is the 2nd zone of ge matrix, this indicates hold and maintain current strategy. STOP:Coming to the 3rd zone it gives signal to stop under the product of Dell Corporation, Thus to conclude with ge matrix it allows the to select whatever criteria they feel are more appropriate to their business situations.

Dell Corporation possess highest attraction through its highly innovative and technical products of mobile and computers and stands first in the Ranking of Revenue and hence placed in the category as shown in the above table.

16