Revitalizing Dell Case AnalysisMGT 685 – Fall 2011

An Example of Student Excellence

Primary Question

Due to the rapidly changing, highly competitive, and innovation

driven computer/technology industry, what types of strategic efforts

are necessary for the Dell Corporation to revitalize itself in the PC

industry, fix the various issues within the company that brought

about bad public relations, and stimulate their growth again to be

able to handle future competition from existing competitors in the

United States and overseas markets?

• In the competitive PC industry of the past, how did the sales force, operating system, computer components, distribution, and research & development shape the industry to become what it is today? Was there one component that led the development (success)? What successful mix of those components did the key players, including Dell, use in order to become successful?

• How did Dell use their structurally sound business model and their ability to land large contracts as an advantage over others based upon where the competitors focused their attention, how they tried to structure their business model, and what they failed to realize as the industry changed? How did this help/hurt Dell?

• The future of the PC market hints that there are new drivers for success. What choices will Dell have to make to stay competitive, what will they have to offer their customers, and what will be internally necessary to keep the giant running?

Sub Questions

• In the competitive PC industry of the past how did the sales force, operating system, computer components, distribution, and research & development shape the industry to become what it is today? What successful mix of those components did the key players, including Dell, use in order to become successful?

Early Innovators of the PC Industry

PC Makers 1st on the Scene 2nd on the Scene“Established Firms” Late to the Party U.S. PC Market Share

1983P.C. Market Share Worldwide 1990

Year Late 1970’s Assumed to be roughly 4-5 year period 1981

Apple X 20% 7.1%

Texas Instrument X

38% 80.2%

HP X

Zenith X

NEC X

Xerox X

Sony X

Olivetti X

DEC X

IBM X 42% - But why so high 12.7% - But why so high

• IBM came late to the party but immediately controlled the majority of the U.S. Market and the World Market. They were successful because they (as the case said), had a world renowned sales force. Are sales forces the key driver to success?

• So …. Late Entrant + Sales Force = High Market Share

How IBM Organized the Industry Structure (and gained 42% market share in 2 years)

IBM “Open Architecture”

Microsoft = O.S.

Intel = Microprocessor

Variety of Software

Developers = Programs

Variety of Firms to make

peripherals

- Not one single company could make and sell the computer, it took the efforts of many to complete the product.

- Quite possibly the reason that IBM became so successful early on was because they did not limit themselves to certain companies. This in return lowers costs, increases availability, and improves quality due to competition.

Company Corporations/Big Business Small Business Individuals School/Institutions

IBMUsed Own Sales

Force/Used Resellers in time

Retailers (Sears) Dealers / Value-Added Resellers No Data

Dell Used Own Sales Reps

Order Online or with their Sales Rep

Order Online via their website No Data

IBM Clones Encouraged by IBM to use resellers as much as possible on all accounts to sell.

How IBM and Dell Organized their Sales Force

IBM had control over all aspects of the industry but they slowly backed away from customer interaction and focused solely on supplying……but did they focus on the wrong side?

Important PC components are made by many. IBM made nothing but the brand “IBM”. To sell this they needed face time with consumers………but they gave that away to the resellers (who were also selling competitors).

Dells biggest asset was that they kept in touch will all their customers

Did IBM get Lazy, and how this helped Dell and others:

Sold To / Found on which computers?

Not made specifically for a certain computer

PC Computer 2 Critical Components

Operating System

IBM, HP, Compaq, Dell All other Clones

Microprocessor

IBM, HP, Compaq, Dell All other clones

By letting everyone else produce for them they gave up the right to control the KEY aspects to building a machine, thus giving competitors an equal share of chances to succeed ……… everyone uses the same parts. Threat of new entrants high!

Is the industry now all based on just price?Is the industry now driven by the parts and not the whole machine?Where is the competitive advantage?Commodity instead of Unique Product?

MICROPROCESSOR OPERATING SYSTEM HARDWAREAPLICATION SOFTWARE

Leader Competition to Leader Leader Competition

to Leader Leader Competition to Leader Leader Competition

to Leader

Organization Intel AMP Microsoft Others Many No Data Microsoft Many

MKT Domination 80% 20% 90% 10% No Data No Data Strong Also Strong

Critical Piece to a PC Yes Yes Not As Much Not As Much

Cost Structure $450.00 out of $750.00 $60.00 out of $750.00 $135.00 out of $750.00 No Data

Price Structure over Time

All component pricing declined about 25% in a typical year. PC prices also fell over time.

The Makeup of a PC:

The microprocessor is a component in which PC companies (Dell, HP, Compaq) might be able to make their own/merge with someone to gain a competitive advantage.

O.S. only costs 8% of the entire unit. O.S. might be a way to gain a competitive advantage and brand identity at a cheaper cost…..people can tell a difference in O.S., but probably not in microprocessors.

Do you, as a PC Brand, focus on doing as much as you can yourself to offset the cost? This is where IBM’s “open source” policy, that set the industry standard in the beginning, turns out to be a bad thing.

Channels in the PC Market:

Slow Customer Receive Time

Fast Customer Receive Time

Too Many Cooks in the Kitchen

One (few) Hands involved before

reaching Customer

Brick & Mortar

Distributors

Direct Distribution

Integrated Resellers

At this point there is no channel that rivals “direct distribution” - and none immediately on its heels. It works and is unique!

Distribution Channel

Deals Directly with PC

Manufacturer(Communicative)

Provided Strong Support to the

End User(Supportive)

Profit Margins(Not a Rip-Off)

Buy-Backs and Price Protection(Unnecessary $)

Analysis

Brick & Mortar

(33.1% Sales)Yes Yes

Thin with Specialty Stores / High with Wal-Mart and Best

Buy

Yes

From this you gain access to many stores nationwide, but limited shelf space is a big gamble.Does Wal-Mart bring a good image to the consumer (who is brand driven) about your PC?

Distributors Yes No (but some did) 3-4% Yes

No support to the end user might leave a bad taste in the mouth of a consumer if they are left unhappy after the purchase of a specific brand.

Integrated Resellers

No (most bought from distributors)

Yes Modest Yes

With the exception of a few companies, this channel offers nothing more than old inventory that could sit on shelves and then get bought back. What is the appeal to the PC mfg – is it respect that consumers have for the resellers?

Direct Distribution

(42.2% Sales)Yes Yes

No Data – Assumed to be

HighNot Necessary

Costs that are saved (Buy-Back, Price Protection, Advertising) can be passed onto the customer. Close contact to consumer offers the opportunity for product improvement. To accomplish this your internals need to be well organized and responsive.

Channels in the PC Market:

Look who has the most green for being communicative, supportive, not a rip-off, and frugal

22.8% Sales

Distributors Resellers Retailers DirectUS Sales By

Channel (2008)

Dell Assuming Dell derived most of their success from the Direct Model – rest assumed to be 0% 100% N/A

IBM/Lenovo 90% of Sales N/A

Compaq/HP 67% No Data 25% 4% N/A

Apple No Data, but stated that they use a wide variety of distribution channels N/A

Distributors 22.8%

Retailers 33.1%

Direct 42.2%

Other 1.9%

Is this an indication that as time has passed more and more people are looking towards buying their PCs directly from the manufacturer? If so, then can we credit the success of Dell to the Direct Model of Distribution, and can we credit their future success to this?

Retailers = limited shelf space + no “customization” … Not where Dell should focus their brand.

R&D as a % of Sales 2008

Ratings of PC on 100 Point Scale (2008)

Price of a PC Desktop/Laptop in

2008

Corporate Revenue in 2008

ACER 0.1 No Data $518 / $670 No Data

APPLE 3.4 85 $1,472 / $1,718 32.5 (bn)

DELL 1.1 75 $601 / $785 61.1 (bn)

HP 3.0 73 $585 / $827 118.4 (bn)

LENOVO 1.5 No Data $674 / $1,095 14.9 (bn)

R&D in the PC Market:

Looks as if Apple is all about the BRAND and how to improve upon it (i.e. lots of R&D). They have the highest consumer ratings and also the highest prices for PCs ……opposite isn’t it?

Is the PC industry turning into being innovation driven and not so much availability and price driven? The more you spend on R&D, the more you sell?

Manufacturing in the PC Market:

Contract Manufacturers

in Asia

Outsourced Assembly

Outsourced Design

Lower Labor Costs

RISE OF ODM PC MFG.

OVERSEAS

PC manufacturers outsourced most all of the work to make a PC. Saved money, but this gave companies leverage to enter the market after they gained experience.

Did anyone think that maybe saving a few dollars was not the best route to take?

Everything is coming from overseas now. Can we say this turns the industry (as far as perception goes) into commodity driven rather than luxury item driven?

Late 1990s

• How did Dell use their structurally sound business model and their ability to land large contracts as an advantage over others based upon where the competitors focused their attention, how they tried to structure their business model, and what they failed to realize as the industry changed? How did this help/hurt Dell?

Generic Strategy Continuum / Customer Segmentation

Large Business

Large Purchases of Customized PCs – Loyal

to one Brand

Dell (Relationship Accounts)

Reliability, Stability

$$$

Small Business

Smaller Purchases of Customized PCs –

Company has a variety of Brands

Dell (but not as focused)

Functional for many uses within the business

$$

Consumer

Single Purchase of Stock or Customized PCs –

Sometimes uneducated

HP, Compaq, Dell, Apple, Acer

Basic, Stock, Same parts under different name

$

Education

Has potential to be a market for large purchases – still

growing

Apple (in graphic design schools), Still up for

grabs

Reliable, Long-lasting, Durable (though no

data)

??

Notice how Education is an outlier, no company has experience with this yet (as far as the case material is concerned) …… is this potential advantage for Dell?

The Difference with Dell:

- Works because it offers security to the consumer that they are getting EXACTLY what they want because it is built to suit.

- Big ticket items need customer support to offset buyer anxiety. This adds value to a brand.

Mass production of PCs and ship to a

variety of channels.

Channels then distribute as they see fit. Buy lots of

inventory and it sits.

Lots of time/effort is spent training the end user (if they

buy). What they do not buy gets sent

back.

Sometimes the consumers needs

support … sometimes they have

it, sometimes they do not.

Customer makes initial contact with Dell and places an order

Dell makes that computer AFTER it is purchased

Dell ships (3rd Party) to get the computer to the end user

Dell offers support after the fact via internet/service center

Dell Added Vaule, and it defines them as what:

Consumer places an order via online/rep

Order is electronically sent to the appropriate

mfg. facility

Parts are gathered via tracking

system and sent to assembly

Hardware Assembled /

Moved to Software Zone

Software installed per the customer

specifications

Computer is tested for several hours

Boxed and shipped via a third party

Stars indicate value that Dell adds to their computers. Notice all the added “value” has nothing to do with computer features, it is all about coordination, speed, and organization to get all the features together in one place and customized. Is this Dell’s version of “innovation”?

This defines Dell as being good at everything but being innovative. After all, Intel/Windows define what the consumer wants in a PC system.

Dell’s Piece of the Pie (early on):

In 1998 ---->Overall PC Sales in $$

Dell’s Sales Proportion

Dell’s Piece of the Pie from overall Sales

Large Business $28.1 billion

66%$42.3 Billion of the $64.1 Billion

Birth of email and the internet changed the way we do business. This might be an indicator of why this sector was booming and why Dell latched onto big business.

Small Business $36.0 billion

Consumers $29.5 billion 27% $8 Billion

With little experience in computers, customer support is critical to this sector. Does Dell hold such a large share because of their Customer support line and because others don’t have one? Competitive Advantage?

Education $6.4 billion 7% $500 Million

Why was Dell not latching onto contract deals with schools. Seems like this would have large potential to drive up sales (like big/small business). Did schools not have the $$ yet?

Dell Relationship Customer Groups:

The Dell Relationship

Customer

Outside Dell Sales Reps

Inside Dell Sales Reps

Assisted in system

configuration

Dell Courted this customer

Promoted more Dell

products after the fact

Took phone calls

internally to help with problems

Kept sales accounts as records and

used to recommend

Premier Pages=

Customization

“Relationship” is a strong word for a type of customer. This shows how Dell felt about them and showed how committed they were to them. Though this brought in huge amounts of revenue, this system seems very complex for the sole purpose of repeat business.

Dell Transaction Customer Groups:

The Dell Transaction Customer

Order Online or call a Rep

Obtain Product

Info/customize on their own

Reps encouraged

these buyers to upgrade to a

more expensive machine

Dell considered

them a transaction

buyers only if they were

“educated”

Not the favorite child of Dell, but Dell still used the direct model to access these customers.

Though the transaction customers generated less revenue for Dell, it seems that it would cost Dell less money to reach out to these customers than it would the relationship customers because no sales force was needed. Transaction buyers’ (mainly consumers) purchases are on the rise. Does Dell need to revisit their feelings towards this segment?

Major PC Providers

Major PC Providers (‘98) Brand Average

Desktop $$Average

Laptop $$

Strong in what Customer Segment

Direct Competition to Dell

Acer Low Cost Alternative - “Knock-Off” $518 $670 Individual

Consumers No – Different Brand

Apple Unique – Arts and Graphic oriented $1,472 $1,718 Niche Consumer No – Different Brand

Dell

Business class use, Standard Operation,

User Friendly

$601 $785 Big Business Mainly N/A

HP $585 $827 ConsumerNo – they are happy

serving the uneducated

Lenovo $674 $1,095 Consumer / Small Business Has Potential to Be

The major PC providers really do not compete with each other on every level. Each have their own area of interest or expertise that they wish to compete in. It is all in what image the “brand” brings with it.

Dell’s closest competitors offer roughly the same price points but operate in different segments.

Dells biggest competition might be themselves. Finding other avenues to improve sales on an already saturated US market is a challenge. You have a strong brand, strong distribution, strong customers, the question is “what next”?

Dell’s Pledge to Support (a part of their standard business procedure):

Support Classes

Customer Service

Ranking

Options Available to Customers

Online HelpTech

Support Staff

Third Party Fix

Specific Dell Technician

Spare Parts Stash

Business Customers

BestX X ? X X

High End PCs

BestX X ? X ?

Pay-for-Support

BestX X X X X

Everyone Else

Middle of the Road X X X ? ?

Dell 7.5 / 10

IBM 7.3 / 10

HP 7.1 / 10

Dell has a customer service segment to help EVERYONE, to an extent, with their PC problems. This is a great asset for them to have as it keeps loyalty with customers and could serve as a deciding factor for undecided consumers who are buying.

Customer Service Ranking indicates that Dell has good customer service that everyone is pleased with – very strong asset to have and build upon.

Apple was so different (own O.S., unique architecture, unique customer base, high

prices), that they can't really be considered a true competitor of a specific

PC manufacturer.

Analysis

Didn't think out their distribution very well - Spaghetti. Could have made this

work but then again why would a consumer do the same thing with IBM

that they were confortable with doing with Dell?

Why in the world did Compaq think that the channel members would be OK with giving their business to the direct model

for a moderate fee! "Yeah I will take less - for you to have more"??

Too obsessed with saving the channels. Dell's Direct program is pretty basic and common sense….WHY not focus efforts

on perfecting their own? It should be obvious at this point that PC = Direct

Mistake was they tried too much to mimmick Dell. They developed no

advantage over the industry. They blindly thought that Direct alone (with no added

advantage) = Success

Acer targeted only indivuduals and kept good relations with all channels. They

picked up the pieces where Dell was not so concerned with.

Success

Forced to go into some direct sales based upon

falling margin.

Bought by eMachines. Then bought by Acer.

Passed Dell in terms of PC provider in units

AppleNo - They were an entity all their

ownPretended like Dell and

others were not even there.SUCCESS

Increased Market share in US/World, Increase

revenue growth, Increased Brand Strength

Compaq (Before Merger)

HP (before the merger)

Gateway (before the merger)

Acer (after buying eMachine,

Packard Bell, Gateway)

Online Catalog, Order via Phone, Lowered days in

Inventory, ODM

No - Took Opposite Route, and had many more "trial and errors"

No - Not at first, but they came around

No - the embraced it and tried so very hard to make it work

Yes - was the poster child for everything anti-Dell … "un-Dell"

Gained reseller/distributor business that had dropped IBM and Compaq for going

direct.

Tried everything that Dell did (training, online store,

B2B, etc.).

Sold only to Individuals - Tried to become an OBM instead of ODM! (HTC??)

Laptops were a big hit!

Yes - FeverishlyIBM/Lenovo

CompetitorDid They Try to Compete Directly

With "Direct Distribution"Response Final Comment

This is huge to getting into Dells head - they too realize that there had to

be more than Direct? Did they set the "bar" too

high for themselves and the industry?

Sold PC to Lenovo, China Partnership looked like

SpaghettiFailure(s)

"Enhanced Intergration" and "AAP"

Success / Failure

Outcome

Failure(s)

Moved to Direct Distribution … but still tried to make nice with channel members (thus

FAIL)!

Failure

Failure

Does this elude to consumers becoming

more interested in only laptops? Is this why Acer

did so well?

The biggest worry of ALL PC Brands is losing a

customer to Apple first, then losing a customer to

their competitor.

Didn't understand what "Direct" meant,

therefore could not succeed.

Did not streamline it as well as Dell!

Wanted Direct but did not want to admit it…and thus

caused them to fail.

Recap of Competitors Reaction to Dell’s Direct Model:

• Notice all the “negative” words (sold, moved, forced, bought) found in the outcome column. These words all represent what happened to competitors (of Dell) when they tried Direct Distribution. Again, Dell is the only one that has been successful in this area.

• The only success comes from Acer who solely targeted consumers. Does Dell need to re-focus in on this segment to be able to compete with Acer?

• What about Apple? Should Dell be looking into O.S., unique architecture, and higher prices to draw some customers away from Apple and back to the PC?

• New Computer Industry: PC vs. Apple

Bread Winning Model / Approach

Operate as a B2B?

Operate as a B2C?

Leader In…Consumer Perception

Still Affected by Channel

Burdens?

Dell Direct Distribution Yes Yes Customized PCs Commodity Item Never Was

HP/CompaqSales Redesign / Cut

CostsYes Yes

IT (PCs and Printers)

Tried to Change back to

“personalization”

Still Is (3-4% markup – 2-3%

advertising costs)

Gateway Similar to Direct No Yes Nothing Commodity ItemNever Was – Had

other issues!

Acer “Un-Dell” No YesTargeting only

Individual Consumers

Low End Commodity Item

Yes – Channels are all they use

Apple Uniqueness Yes Not being a PCDifferent, Expensive

Yes – Use them to mfg. and distribute.

The PC industry is all over the place. Everyone seems to be on different roads trying to get to the same place.

This is the point where the industry is in transition to find the next “big player” and the next “big strategy”…. Dell needs to capitalize on what they already know/have as assets and play on that further.

• The future of the PC market hints that there are new drivers for success. What choices will Dell have to make to stay competitive, what will they have to offer their customers, and what will be internally necessary to keep the giant running?

Early attempts to add new business

Action Taken By Dell Year Why Good or Bad Why Analysis

Increased Number of Segments

2002 Opportunity / Logistics Good

This gives Dell the chance to look further into the existing segments and ask themselves “people who need PCs can’t possibly be lumped into 4 categories.” If we are known for customization then let’s reach out to all that we can.

Implemented “Symphony”

Late ‘90s to 2000’s

Track Everything “Big Brother”

Good

Dell was built on efficiency, low inventory and just-in-time delivery. This updated software allows them to offer more to the consumer at very low cost to Dell. Another way to differentiate (which is the name of the PC game).

Entered Retail 1990-1994New Business, Increase

PenetrationBad

Dell does not do retail. Their costs on PC’s are not the lowest in retail (which is the main driver for consumer purchase). They offered stock products in retail, which is not what consumers know Dell for. Not the best idea – Utilize your strengths Dell, stay out of Retail!

PC Market Size in 2008 (%) - Worldwide

U.S. Market Size in

Dol-lars (bn); 50.9

Worldwide Mar-ket Size in

Dol-lars (bn); 244

The Worldwide Market offers greater opportunity for all PC makers, including Dell, to expand their operations further overseas. This could include new sales, MIS support, and innovative products specific for the region.

Worldwide the industry is very “chopped up” – who might Dell be able to partner with or acquire to better position themselves in up and coming markets?

Acer; 10.9 Apple; 3.5

Dell; 14.7

Fujitsu; 2.8

HP; 18.9

IBM/Lenovo; 7.6

Sony; 2.1

Toshiba; 4.8

Others; 34.7

Market Share by Channel (2008)

U.S. Market

Share by Channel

2008

U.S. Sales by Channel

1996

U.S. Sales by Channel

2008

In U.S. from ‘96

– ’08Europe Asia Japan

Rest of the

World

Retail 35% 27.9% 33.1% 15.7% Growth 37% 48% 35% 29%

Distributor 22% 39.4% 22.8% Decline 39% 36% 32% 46%

Direct 41% 25.5% 42.2% 40% Growth 17% 15% 34% 24%

Channels in the PC Market:

Europe, Asia, Japan, ROW all have Direct as their least used distribution channel. U.S. started the same way and in 12 years direct distribution grew 40%. Dell has great potential to use their Direct Model overseas as a way to grow and revitalize their slowed growth.

Least Used

Least Used Most Used

Where Everyone Currently Is …. Where Dell Should Reach For:

Cater to Specific Segments/Products

Cater to Wide Variety and/or Specific Segments/Products

Full Control of Distribution Channel

Little Control over Distribution Channel

Dell

Compaq/HP

Gateway

Acer

Apple

Compaq/HP seems to be the closest competitor to Dell at this point (meaning this is who Dell needs to watch closely). They (HP/Compaq) are into the IT industry as a whole and are known as such, rather than just a PC company.

Dell needs to be known as an “IT Company”

Industry Up / Down

Demand for PCs surged till

1990

Brief Recession post 1990

Email and Internet after

Recession

Internet Bubble Burst 2001

Grew in much of 2000’s

(maybe because of Apple)

Economic Recession of 2008-2009

UP X X X

DOWN X X X

Average PC Selling Price N/A $1,965.00 N/A $962.00 N/A $681.00

Be Proactive rather than Reactive:

Prices are falling + Inconsistency in Demand= The inability to steadily control the market and consistently gain a competitive advantage over other competitors.

Do not wait for the industry to bring high sales from the next big thing. Create the demand yourself…which might be more than selling a PC.

Products and Services “more than just PCs”

Dell Computer Corporation

Desktops and Laptops (63% of Revenue)

Enterprise Products

(13% Revenue)

Peripherals / Software

(15% Revenue)

Computer Network Support /

Training (9% Revenue)

Dell realized that in order to stay competitive they needed to add “options” to their library of products/work. This is perfect because, unlike Cisco, when Dell expanded into a variety of different things they made sure that the core of each area was related to what they know best …. PC.

Customizing the PC for a specific industry ….. This could be HUGE for Dell’s future (and they already have a large experienced sales force)!!

Future “Specific”

Lines

Reliable/ Stable for

Big Business

Productive for Small Business /

Home

High Speed for Gaming

Sophistication for Animation

Product Line Name Given by Mfg. For Who? PC Manufacturer

“Reliable/Stable Line” Big Business Dell

“Productive Line” Small Business/Home Dell

“High Speed Line” Gaming Dell

“Sophisticated Line” Animation Dell

“Entry Level Line” Home Use HP/Compaq

“High End Line” Assumed to be Small Business HP/Compaq

“Voodoo” Gaming HP/Compaq

After the HP/Compaq merger, they took the same approach the Dell took – make specific products for specific consumer segments – i.e. the ultimate “personalization”.

However, Dell still has a rather large competitive advantage over HP/Compaq in this area because they have no competition from HP/Compaq in the big business and animation segment. This is a great advantage to Dell, and it should be utilized.

PC Market Divided …. Into more PC markets.

Consumer Category

Percentage of Sales

Has Full Time MIS

Staff

Cost Spent on Training

Cost Spent on Purchasing the

PC

Driving Factor of Purchase

Brand Loyalty/Aware

ness

1996 2008

Large Business 27% 21% Yes $5,500.00 $1,400.00High-

Performance / Reliability

No Really

Small Business 37% 26% No No Data No DataReliability and

SupportNot Really

Individuals 30% 43% No No Data No DataHome/Office

UseYes

Education 7% 10% No No Data No Data No Data No Data

Consumers in the PC Market:

Why are big businesses having to spend so much on training? Are the PC units not user friendly, and if not, could this be an area to gain competitive advantage?

The educational sector is the lowest sales segment BUT over time the world will be “tech” driven….meaning they need to train the children.

STRENGTHS

• Extremely efficient distribution system.• Ability to manage and control such a large

complex sales force.• Ability to stay focused on their vision of what it is

they do best.• Strong Brand that equates to customization and

differentiation• Cost cutting measures with operations (i.e. Just-

in-Time Delivery).• Strong relationships/experience with big business

customers.

WEAKNESSES

• Negative connotation from moving the customer service centers to India Equated to bad customer service image.

• Inability to move overseas quicker (catch emerging markets and shape).

• Unnecessary internal “hiccups” that should never of happened (bad consumer perception).

OPPORTUNITIES

• Expand upon the Dell name and the Dell brand, it is a powerhouse … use it to their advantage.

• Direct Distribution is their baby! Use it anywhere they can, it is a growing popularity.

• Develop new ways to reach out to individual consumers to be able to corner another market segment.

• Use intelligent sales force to reach out to specific industries. Match specific computers to specific industries (continue with customization).

• Exploring other IT industry segments.

THREATS

• Competitors successfully mimicking the direct model.

• Not reaching out to overseas markets soon enough and losing competitive advantage.

• Other technology markets (phones, iPad) taking market share away from Dell. (i.e. people not finding a need for PCs anymore).

• Biggest Competitor HP taking away some of their big business contracts.

Recommendations for Dell

Late Game Changing Events and Quick Recommendations

Event Possible ReasonPossible Customer

PerceptionWhat they should do……

Order they should fix them

(1 first, 5 last)

Slowed Growth

Bad Economy. They themselves could not

keep up with their own growth (too fast)

Unless Dell publicly stated they were slow, I don’t think this affected

perception.

Look into focusing their strong sales force on new, specific, customers.

1

Sony Batteries

Not Dells engineering problem.

Could bring a bad rap to Dell the longer they

do nothing about it.

Publicly get rid of Sony, take public efforts to make known they screen their products and

product makers/suppliers from now on; refunds-refunds-refunds!

3

Accounting Practices

Greed, StupidityNot an honest company

anymoreFire the people involved and publicly make

known their faults and their efforts to fix them.2

Retail Entrance

Again

Stalled growth, desire to gain more

individual customer sales

None really. Customers might see it as a Hail

Mary.

Tread lightly in those waters, they have not done well there in the past and they need to focus on

what they are good at – maybe not even consider this at all!

4

Recommendations – Their Future is in Support and Education (U.S.)

Customer Segment

Needs of the Customer Action Required by Dell Reason

Big BusinessReduce the Cost of Training and Post-Purchase Expenses

Dell needs to develop some way to offer training courses to their

big business customers as an added service to their contracts (at a lower cost than what the

company can do it for).

As the PC becomes more and more of a commodity Dell needs to act upon the fact that there has to be other

avenues in which they can make money in the industry without changing what it is that they do, meaning PC

work. It is getting to the point where others are going to start challenging Dells position as the big business

contract king. When this happens they (Dell) need to be able to act with something to keep the customers they

have and attract new customers with the phrase “…..and we also offer!”

Small Business

MIS Staff Members to set

up/monitor/control IT issues as they

arise on a day to day basis

Develop a mobile, well knowledgeable, and reachable MIS staff for small businesses.

Even though they can’t afford to have a full-time MIS staff (like

the big businesses), does not mean they do not have the same IT problems as big businesses.

Dell already has a well traveled and knowledgeable sales force that has yet to be matched by any other competitor.

Dell can use this tacit knowledge and built up its own MIS Sector to its business. By offering this service to

customers on a “when needed basis” they can be brought to the office by one phone call. Dell can corner the market

on a segment that nobody has yet to even suggest. This could build relationships from the ground up and as the

small business grows into a big business Dell has almost guaranteed sales for years to come.

EducationBulk Buys and

Reliable Computers

Take quick action to press more schools and universities to

purchase computers from Dell. This industry is already on the rise and Dell needs to pick it up

while it is still young.

The educational sector is already on the rise and with the economy still being in a recession they (Dell) need to

realize that with hard times comes choices for consumers…do I buy name brand or less expensive (Acer comes to mind). Dell has a strong name brand going for

them which could be the deciding factor for schools looking to upgrade.

Recommendations – Their Future is in Product Development and Focused Sales (U.S.)

Dells Computer Lines

Who to Sell to (Possibly)

Reason

Reliable / Stable Computer Line

Big BusinessThe reason why this has to be done is because the PC industry

has turned into a commodity driven industry. People are no longer looking around for the different options that a computer

has or what operating system it has – they look at price! Because of that, Dell is no longer standing out in front of the crowd in

their industry (because they are middle of the road on pricing). Any good company knows that all consumers have needs, and it is the responsibility of any company to tell the consumer of their

needs. Dell needs to reach out to these specific industries and show them what they have to offer. For example, Walt Disney

knows they need a sophisticated and complex computer to handle all their animation needs for animated movies – but that might be all they know. Dell needs to take what they know best (computers) and convey that to Walt Disney in order for Disney to buy Dell…because they have exactly the right computer line.

Reach out to Specifics + Tell them what they need to do their job successfully = Revenue / Competitive Advantage for Dell

Productive Line

Small Business – Could gain sales leads from their “hired” MIS staff

members

High-Speed LineGaming Companies

(ones that make video games??)

Sophisticated Line

Animation Companies (Walt Disney, Pixar,

Movie Making Companies)

Recommendations – Their Future is in Worldwide Distribution and Self-Sustainment

Needs: Dells Action Reason

Strong Distribution Overseas

Utilize what they do best and what they “invented”

… Direct Distribution.

When you find something you are good at it is a good idea to keep doing that thing for as long as you can. The US market is becoming

saturated and the Worldwide market is beginning to grow much more rapidly. Dell needs to utilize this opportunity and being setting

up shop overseas so that they can gain a stronghold in their value chain and relationships with suppliers.

Operating System and

Microprocessor that is self sustaining

Develop/Buy their own that they can install only

on their computers. Apple did it….look at their

success.

In the U.S. people are fairly content with the “Wintel” system that is put on all computers with the exception of Apple. But, overseas Dell has the opportunity to create that same loyalty to another O.S. and Processor. It was determined long ago that the industry was more

about the software than the hardware. It is only a matter of time until this catches up with them in the overseas market – that is if the consumers have not developed a loyalty to “Wintel” already.

Centrally located call centers

Dell’s customer service centers for U.S. callers should not be found in

overseas countries

Dell needs to bring back the call centers from India to the U.S. Nothing frustrates customers more than when they have to call

around the world to fix a problem on there computer from a company located in the same country as they are. Remember, the

industry in the U.S. is turning into a support industry. If you outsource your support for your own products, what image does that

send?