DELL : Analysis

Presented By : S18 : Atul Bansal, N15 : Ashok Khiwal

N66 : Saurabh Kachru, N72 : Sujit KumarMBA(PT)-2012, FMS

Dell : Company Details• Founded in 1984 by Michael Dell • Concept : By selling computer systems directly to customers, one

can best understand their needs and efficiently provide the most effective computing solutions to meet those needs.

• Corporate headquarters : Round Rock, Texas, USA• Manage business in four operating segments:

– Americas Commercial; – Europe, Middle East and Africa (“EMEA”) Commercial; – Asia Pacific-Japan (“APJ”) Commercial; – and Global Consumer.

• Employees : End of Fiscal’10 96,000 employees – 36.5k US, 57.5k outside US rouhly 2k temp.

Business Strategy• Direct relationships with customers.• Continue to expand global presence and further diversifying the

revenue streams. • Constant Focus on higher margin products, services, and solutions

to increase overall profitability.• Focus on improving competitiveness by reducing overall costs.

– In May 2008, announced a $3 billion cost reduction initiative, which included both cost of goods sold and operating expenses.

– In the fourth quarter of Fiscal 2009, increased cost-reduction target to $4 billion by the end of Fiscal 2011.

• Growth Strategy – reaching new customers through new distribution partners, value added resellers and distributors and targeted acquisitions.

Product Categories

• notebooks, desktop PCs, • software and peripherals, • servers and networking products, • services • storage• search, services, and 3G originations.• virtualization solutions• IT-as-a-Service solution : remote and lifecycle management, e-mail

backup, and software license management, among other services. • system software

ProductsMobility / Desktop PCs

– XPSTM and AlienwareTM line - gaming systems. – Studio line - powerful multimedia elements. – InspironTM line - high performance, stylish , affordable package. – 3G enabled Mini - a light, highly mobile : Inspiron line. – LatitudeTM line / OptiplexTM - to help business / government /

institutional customers manage their TCO through managed product lifecycles , performance, security, and communications.

– VostroTM line - to customize technology, services, and expertise to suit the specific needs of small businesses.

– Dell PrecisionTM line of mobile workstations – for professional users

Products

Software. Wide range of third-Party software products, 2009 : launched the Dell Download Store

Peripherals. Printers and displays and software titles, televisions, notebook accessories, networking and wireless products, digital cameras, power adapters, scanners, and other products. – The M109s on-the-go projector : First pocket projector (2008)

Won the prestigious CES Innovations 2009 award.

Storage : Advanced storage solutions : SAN, NAS, Direct-Attached storage, disk and tape backup systems and removable disk backup. Dell PowerVaultTM, Dell EqualLogicTM , and Dell|EMC storage sys.

Services– Infrastructure Consulting Services

– Deployment Services

– Asset Recovery and Recycling Services

– Training Service

– Support Services

– Managed Services

– Financial Services (US)

Sales and Marketing• Sales : Directly to customer through dedicated sales

representatives, telephone based sales, online at www.dell.com and indirect sales channels.

• Customers : large corporate, government, healthcare and education accounts, SMBs and individual consumers.

• Region based S&M resources divided among customer groups.• No single customer accounted for more than 10% of their

consolidated net revenue during any of the last three fiscal years. • Customers may offer suggestions for current and future Dell

products, services, and operations on an interactive portion of their website called “Dell IdeaStorm”.

Sales and Marketing• Large business & Institutional Customers

– Field Sales Force– Dedicated Account Teams (system engineers and consultants)– Tailored Solutions & Customer Feedback

• Multinational Customers– Single points of contact/accountability – Global Account Specialist– Special Global Pricing– Global Service/Support Programs

• SMBs – Advertising : television, internet, print media, mailing/emailing direct

marketing publications.• Indirect Sales Channel

– Outside US through selected partners– In US : Third party solution providers, system integrators and resellers

• Retail : More than 56,000 retail locations worldwide e.g ., BestBuy, Staples, Walmart, Carrefour etc

Online

Advertising

Community BuildingEducation Youth connect Volunteering

Giving Social innovation

S&M : Green InitiativesRecyclingGreen products

Responsible operationsSustainable packaging

Revenue

Revenue

Dell Services

Services Revenue Composition

New Dell Services

Acquisitions

Global Strengths

2009-10

• SALES– Grew consulting force by 250% – Increased sales specialists 50%– Compensation plans revised to focus on profitable

solutions• SOLUTIONS– $100M+ investment in new solution development– Business Ready and Reference Architecture– Solution Training focus

2009-10

• MARKETING– Efficient Enterprise Solutions Message – Social Media and community Intiatives

• Acquisitions and Alliances– Added 15000 Equalogic customers– Perot Acquisition – pipeline $6Bn– Acquisition Boomi (cloud computing)– New Alliance Strategy => 2011 : SecureWorks (in

progress)

DELL : INDIA

• 2006 -> 2010 : #1Laptops, #2 overall PC• Team (Local Brand -> Local Market)• Mfg Plant ( $30m investment : 1m units/yr ]• Customization – “Direct Business Model” xxx Launched Retail

Stores; introduced Direct model within retail, order delivered within 5-7 days.

– “No channel partners” xxx Channel Partners (Tier II/III cities)

DELL : INDIA

• SERVICES – Sep 2009 ($3.9 bn cash) Perot Systems– Perot : 50% employees (21k) in India– Approx. 90 new projects since acquisition– Target : $20-50m projects– Max Healthcare : Rs. 90 crore contract

• ++ Cross Selling• Entering Mobile Handset Mkt (Smartphones)

Strengths

• World’s 2nd largest PC maker.• Direct to customer business model.• Low operating cost. No retailers and

wholesalers involved.• Each Dell system is built to order to meet

each customer’s expectations.• Inventory turnover period is as low as 6

days. Low inventory carrying costs.• Information and CRM used intensely for

data retention of potential customers.

Opportunities

• Diversify by introducing many new products to its range.

• Market penetration in education and government markets.

• Partnership or acquiring of suppliers.• Physical presence in the market for

supporting, troubleshooting and customer support services.

• Server market.

Threats

• Competitive rivalry.• Price difference among brands is not

much.• Other companies offering systems at low

cost. Dell’s low cost direct model is challenged.

• Customers may opt for other brands as price difference is low. Dell’s customized systems take some time before delivered to the customer.

Weaknesses

• Computer maker and not the computer manufacturer, unable to switch supply.

• Not attracting the college student segment of the market. Sales revenue from educational institutions merely 5% of the total.

• Each system is custom-built as per customer specifications, this might take days to finish.

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SWOT ANALYSIS

Bargaining Power of Suppliers (HIGH)• Limited number of suppliers for

key components.• Two major suppliers

monopolized:Microsoft Intel

Threat of Substitutes (MODERATE)• Numerous PC sellers offering the

same specifics and functions that Dell offers.

• Since company offers customization, the customer has the option of choosing parts which is a unique combination. Other companies do not offer this.

Threat of New Entrants (MODERATE)• Capital investment for

independent stores is low.• Low product differentiation.• Brand name may be a barrier to

entry. No legal or governmental barriers.

Bargaining Power of Customers (HIGH)• PCs of all brands contain the same

components or the same type of components.

• Dell products are reliable and customer service is outstanding. This creates certain brand royalty.

• If the prices are raised too high, customers will not hesitate to switch.

PORTER’s ANALYSIS

Intensity of Competition (HIGH)• All offer same basic product.

Must compete on price.• Decreasing profits.• Low product differentiation.

Existing Products New Products

ExistingMarkets

Market Penetration

• Retail initiatives (Dell tied up with Tata Croma and Staple stores).• Dell opened exclusive stores in India (Delhi and Coimbatore)

Product Development

• Mid range server growth.• PDA and Smart phones.

NewMarkets

Market Development

• New markets like Brazil, Russia, China.

Diversification

• Dell Streak.• Services.• Acquisitions (Perot Systems, Boomi).

ANSOFF MATRIX

Recommendations• Continue with Acquisitions. This will lead to increased market share and

economies of scale.• Dell should add retailers and wholesalers as part of their distribution for

fulfilling immediate orders.• Target new International Markets– Target new segments and enter new

markets with existing products. The Potential benefits of international expansion are increased market share, revenues, profit, and buyer awareness.

• Diversify in terms of new products and existing and new services. • Improve customer service and support.

– Improve its customer service representatives’ selection process, ensuring they are easily understood and well trained.

• To strengthen Dell’s customization position, the firm must offer increased configuration choices through the establishment of additional supplier relationships. – This will allow Dell to offer additional choices for its customers while

maintaining production efficiencies.

Thank You