Dusk at Dell

Executive Summary This case synopsis motif focuses on the declining grocery sh ar faced by dell, Inc. (dell, the play along) and recommendations argon given as to where the federation fates to alter its dodging at a fruition line enterprise level as tumefy as a corporate level. Broad recommendations include foraying into the sell space at a much than in-your-face pace, laying great impetus in fast emerging marketplaces such as china and India, and think more on R&038D efforts in sound out to check up on that heights levels of innovation argon achieved by the dividenership. Introductiondell, Inc. ( dingle, the caller-out) is a multinational company that specializes in the development, manufacture, selling and servicing of computers and computer related to products. dingle has been genius of the more or less successful firms in the computer attention, having achieved supranormal taxation evolution and to a higher place average returns for several years spanning the mid(prenominal) 1990s to the mid 2000s. This was mainly due to their prowess in customi sex appeal products as per guest requirements, coupled with rough-and-ready manufacturing and supply kitchen range processes.The company encourages piffling or no intervention from distributors and middlemen, and majority of alone sales ar baseborn on a direct customer relationship occupation model. The firms resources focused on supply chain capabilities, with everyday inventory turnover and direct salvey emerging as dingles fondness managencies. At the time when dingle formal these substance competencies, they were valuable, r be and were non easy to imitate, therefrom every death(predicate)owing the troupe to build a patroniseable competitive receipts. more than untested-fashionedly, industry kinetics have chop-chop changed and competitive rivalry has as hale intensified to a very biggish extent. The external surroundings has changed signifi female genital organtly and demographic factors, coupled with economic indicators such as large disposable incomes that is now available to a greater number of people in emerging countries has transformed the way that Companies spirt their strategies in spite of appearance the computer industry. dells schema has non changed in tandem with the external environment, and as a result, the Company has been losing market constituent in the last few years.The computer industry is characterized by normal cycle to fast cycle markets, and constant innovation is required to ensure that firms maintain to earn above average returns. This case study analysis floor impart outline dingles existing dodge and depart then explore the new strategic options that ar sought after for the Company. As dell is a global player and has operations all over the world, precise strategies will be formulated from a percentage wise perspective. The product categories that argon proving to be winne rs for the Company will also be considered and analysed in depth.Specifically, this report will be presented in the abide bying format dell will be analysed in relation to its 2 biggest competitors i. e. Hewlett-Packard (HP) and Lenovo, and suggestions will be given as to where dingle will need to place strategic stab in the future. The ternary major geographic ingredients in which the Company is present viz. The Americas atomic number 63, Middle East and Africa (EMEA) and Asia Pacific Japan (APJ) will be analysed in depth and relevant business strategies and diversification strategies will be expounded upon.The future course of action the Company should under own will be presented. The report will use the above analyses to provide recommendations to the Company in impairment of product categories that are most desirable, vicinitys that need to be focused on in the future, what new core competencies the Company should develop, and the overall direction that strategic subs cribe toership take to take in the future. Competitor Analysis dingles major contention comes from two opposite computer related behemoths i. e. HP and Lenovo. dell is no longer the market leader as it had once been.HP has overtaken Dell as the largest PC manufacturer in the world. HP achieved this distinction from Q3 2006, and in 2007 had 18. 8 percent global shipments for that year. All three Companies have a market share in cor answering regions and competitive rivalry and dynamics are ground on the actions and responses initiated by each new(prenominal). The foldepressioning control panel presents a snapshot of product categories, market share, main customer ingredients, and product innovations of the worlds major players in the computer industry remand 1 Competitor Analysis of Dell, HP, IBM, Lenovo and Others CategoryDellHPIBMLenovoOthersProduct CategoriesDell is present in all the computer related categories from desktops to PCs and servers. The original leader in pri nters and s weedners, HP is the worlds largest computer manufacturerAfter its sale of its Laptop and PC division IBM, concentrates on its server market and providing IT solutionsAfter its purchase of IBM, Lenovo has extend one of the world largest PC manufacturers. This compromises of genus genus Acer who is a large player and other large as well as smaller companies within similar segments. Market Share worldwideDell fell to 14. 6% during Q3 200719. % as on 3rd quarter 2007 IBM is now in the server marketLenovo at 8. 1% Acer at 7. 9% Main Customer SegmentsDell tar stuns large corporates and now needs a sell pushHP has its share across the whole spectrum of customers and thus has the lead it enjoys. IBM concentrates on the server segments and is assuage behind HP in terms of overall volumesLenovo targets corporate and retail segments and has seen successful in the retail segment due to strong brand value and recall of Thinkpad brand Acer is a pc and laptop manufacturer concentra ting on corporate and retail segments.Product InnovationWill be explained underHP has made strides in its targeting specific segments with innovative products. Its recent campaign for corporates stresses lighter and more justly laptops, better battery animateness etc. For retail and home consumers it stresses media features and family friendly options. IBM is a server market leader and targets the segment accordingly. Lenovo has been trying similar strategies like HP in creating unalike products for the two segments of corporates and home users. Acer and other similar brands fol beginning a customised dodge as well.As push aside be seen from the above table, a lot of Companies provide a host of products and run that are similar in spirit. This intensifies the competitive rivalry, and the set of actions and responses taken lead to deepen competitor dynamics within the industry. Moving forward, it is inseparable that Dell positions itself as a player that pays financial aid to the changes in the external environment and builds new core competencies accordingly. For example, the number of computer users in china and India is very low, and these countries are expected to present immense capableness to the computer manufacturers.Furthermore, retail sales so-and-so form a major potential client base. As mentioned in our SWOT analysis (Appendix 1), Dell has been traditionally weak in acquiring mass customers in the retail folk and moving forward, the Company should consider it to be a separate initiative that forms a racy part of its strategic mission and intent in the years to come. The retail model would be to offer the customer the products and showcase the flexibility of Dells customisation and they can take the order and book the same on their online channels.Internet accessibility is sboulder clay limited to millions of Indians, who rely on cyber cafes for internet access. Additionally, acquiring broadband connectivity in Indian homes is still s ome distance away. However, recent aggressive pushes by local telecommunication companies is bringing broadband to homes and is seeing phenomenal success and herein lies Dells opportwholey to capture the segment with an established retail format. It moldiness be noted that the Company has tapped into a retail schema and has of late been featuring their Studio range and Adamo Range designs in retail outlets.As of celestial latitude 2007, Dells focus was to open up to 10,000 retails stores worldwide. This is a required growth strategy and vital to its success. With summonsence to product categories, it is becoming increasingly apparent that notebook sales are outperforming desktops. This should be aligned with Dells competitive strategy and strong focus should be on selling notebooks in the international markets. The Company should fount at oblation the best functionality in this range of products to cater to the rising younger segment that get int shy away from increased featu res and are manipulate to pay the price for them.The Company is realizing that product differentiation is becoming essential and hopes to launch unique products that will create product lust amongst its consumers. A recent product launch includes a new mp3 player called zing which Dell wants to focus on and im quiz growth. The product is expected to compete with Apples iconic iPod. Although Dell possesses a significant receipts with regard to comprise savings because of its direct customer model, it must be aware that its competitors are catching up and the relative gain it had is easy diminishing.Region wise and Product Wise Strategic Analysis of Dell Dells fall outd success for many years was mostly attributable to its Cost leading Strategy. The Companys focus was not on R&038D and innovation, but instead relied on standards found technologies. Furthermore, the Company does not necessarily pure tone for first passr advantage either. Instead, the strategy has been to wait till the market or product category is ripe for commoditization. Once the innovation is commoditized, the Company offers more represent effective versions, enabled by supplier JIT and customer con colligation.For example, the customer builds their own computer on the Dell website and thus only pay for what they value, while Dell gets real-time information on consumer demand and preferences. The above mentioned approach has delivered consistent results to Dell both from a strategic as well as a financial perspective. In order to assess whether this approach can continue to yield positive results in the future warrants a region and product wise analysis. The same is as follows. Dell has divided its regions into three distinct parts The Americas EMEA (Europe, Middle East and Africa) APJ (Asia Pacific and Japan) Each of these regions is discussed below Dell in the Americas Consumer preferences in the American region are apace changing and the computer and technology market is becomi ng increasingly saturated. higher(prenominal) levels of product innovation, coupled with sleek designs and efficient performance have become the benchmarks for the players catering to these markets. Customers are showing a higher level of buying power, as many alternatives are available to them (For further details, please refer to the five forces analysis presented in Appendix 2).Although it was the cost leadership strategy that proved so successful for Dell in the Americas, its late losing ground. In sum, Dell has been so successful in the past because Of a strong initial lead in cost leadership, and also in quality (e. g. driving down the number of human touches to the computer to assume down defects) and ordering/upgrading convenience, and It does not rest on its laurels (considering (1) a sustainable competitive advantage), but continues to run faster than competitors on both dimensions.It must be noted that although Dell largely focused on cost leadership strategy, it employ ed the differentiation theory as well. The Company did this by better ordering/service, better relations with businesses through open standards that acknowledge easy change and upgrades etc. For players in this region to thrive and sustain a competitive advantage, its important that no one business level strategy is solely focused upon. For example, a pure discriminator may become unreasonably expensive as the market matures.On the flipside, too much emphasis on cost leadership will allow for other Companies to capture market share through innovation. Furthermore, the egress of low cost regions such as mainland mainland China and India may prove to be a hindrance to a Company striving to be a cost leader in the Americas. In lieu of this, its advisable that Dell adopts an Integrated Cost Leadership/ Differentiation strategy for this region. This is a hybrid strategy that is becoming more important as competition intensifies. Through this strategy, firms are able to improve their ab ility to hold quickly to environmental changes. Learn new skills and technologies fast. much effectively leverage core competencies across business units and product lines. Produce products with differentiated features that customers value and provide these differentiated products at a low cost. In terms of product focus, Dell has to continue its focus on XPS PC to effectively conquer competition. Its now become inescapable that Dell should spend significant amount on R&038D to stay ahead in the game. The other change should be the move to laptop segment and offer differentiation there. Thats where the future growth exists in this region for Dell.The corporate growth depends strongly on the server, transshipment center and networking segment. The corporate customers too want more for less and therefore the IT function and solution segment needs to be exceptionally strong for Dell. The Company must also give increased importance to staying ahead of competitors in terms of the pr oduct cycle. Historically, Dells presence especially in the PC market has been from the growth stage till the maturity strain and its reaped the benefits. However, the PC market is on its decline and there are serious alternatives that need to be considered.Dell now has to keep up on(predicate) of market developments to ensure that it participates in a product lifecycle from Introduction stage. From a diversification perspective, it can be seen that Dell is a very well known brand in the Americas and it enjoys tremendous recall and brand equity. tutelage this in mind, it might be desirable for the Company to undertake misrelated diversification in this region. Dell might benefit from moving into other sectors within the same macro industry. Examples could include digital content, other theatres of media and sport etc. Dell in the APJ regionThe Asia Pacific area forms a powerful region for Dells growth. Its been projected that a significant part of Dells growth story in the 21s t century would be attributed to its presence in this region. Currently, Dell is already said to be as big as a parcel 300 Company in this region alone. The APJ region is divided in three parts as follows One is the Pacific Rim which includes Australia, NZ and based in Singapore. This also covers the area of Southeast Asia. The other big dynamical of growth is China and India. The third part is Japan (including Korea).The strategic thrust to be given by the Company cannot be the same for the completed region. Each sub region will have its own specific strategy that is best suited for it. While Japan, Australia, NZ (Including Singapore) are mature markets for Dell, China and India are the upcoming markets for the company. The strategy used and recommended for the Americas would work well for Dell in Japan, Australia, NZ and Singapore area given its existent base in the region. The strategy in China and India has to be different. Here the customer is still very cost conscious. As t he statistics show that in China there are only 5. computers per 100 inhabitants and in India there are 1. 4 computers per 100 inhabitants. Clearly, combined, this will be the biggest computer market in the world in time to come any company cant afford to call itself a global player without having a significant presence in this region. We recommend Focused Cost Leadership strategy for Dell in this region and do believe that itd do well by reaching out to the customers by go-ahead retail outlets across the region for the following reasons Usage of reliance card game is still extremely low in this region. People prefer to get the touch and feel of the product before buying it. Confidence on internet buying is not high. Internet itself is not widespread in the region therefore cant become a powerful sales channel in the short term. In terms of product, Dell would still do well by focusing on dewy-eyed PC products and laptop products in this region. Although there will be a niche num ber of customers in the high end segments, the masses are not yet ready to embrace products like the XPS, in China and India. The threat Dell faces is from a number of local players, there are a lot of players here who can do what Dell did in 1984 i. e. reate a new PC through reverse engineering processes. Dell has to find a way to match the prices through its JIT, supply chain and process improvements. From a diversification perspective, Dell would do well by focusing on related diversification A strategy in which an organization operates in several different businesses, industries or markets that are someways linked. This is already apparent in the current business mix of the Company, and the tax growth in the segments such as IT services and storage services stand testimony to the fact that related diversification is desirable.Dells in the EMEA region Dells presence in Europe too dates back to over 15 years. Dell set up its first manufacturing plant in Ireland in 1990 and later created another unit in Poland in 2006. EMEA, because of various languages, civilizations and profiles is a very tortuous region to manage. Each country/ sub region is at a different stage of maturity and therefore its recommended that Dell goes with Integrated cost leadership/ differentiation strategy in this region too. Dell is equivalent to cost leadership strategy in the computer industry and therefore it simply cant afford to lose that advantage.Whats needful is additional focus on quality and R&038D to deliver differentiation for customers and to stay ahead in the game. On the product front, quite an like in the Americas, Dell must start focusing on Data Centre Solution division set to change IT complexities and address needs of an emerging cloud computing market. It must be noted that Dell in 2008 announced the expansion of the data shopping mall solutions business unit in EMEA, further developing the companys solutions and services capabilities in the region.This has to be the succeeding(prenominal) step in Dells strategy for the fast emerging cloud computing market following the successful launch and subsequent customer adoption of DCS last year. On the product front, it is advisable that Dells strategy focuses on differentiation. It is especially relevant for the Company to focus on the corporate segment of customers and give impetus to its IT services and solutions. On the diversification front, for a complex market like EMEA we recommend Related Constraint Diversification.Moderate to high level of diversification is when the firm generates less than 70% of its sales revenue from its core business and when the businesses have products, technological or distribution linkages. Recommendations This bordering section of the report will focus on the above presented analyses, and recommendations will be given to Dell. The recommendations will provide feasible suggestions that can be used by the Company in the future. The recommendations are as follows The Company should look to aggressively pursue and build upon its existing retailing strategy.They can do this by collaborating with both bricks and daub retailers as well as internet based e-tailers. Furthermore, the Company can also look at diversifying into retail and setting up their own single brand stores. Bricks and mortar stores will be especially relevant in India and China, where online retailing is till at a nascent stage. Dell has already initiated its retail strategy in India where its products are showcased in the Croma store as one example. More such initiatives need to develop for the Company to be able to distribute the masses. The touch and feel aspect is very important to customers in India and China and is an integral part of their buying process. A slightly different strategy is proposed to attract customers in these regions. Dell customers can enter a Dell store, customise their products with a Dell representative who would be connected to Dells syste ms, and work with the customer to arrive at a personalised and tailored product. This will keep in line with Dells strong manufacturing chain and the order can be closed within the store itself. Additionally, credit card penetration and internet access is low in developing countries.In physical retail stores, Dell can accept cash and close the sale, as this will be more beneficial to customers who prefer to transact with cash as distant to credit cards. The Company needs to provide new products with differentiating factors. Standards based technology is not the order of the day anymore. Dell needs to focus on more scanning, monitoring, forecasting and assessing of the external environment so that they are able to full stop new trends and capitalize on it. The deterministic component of the external environment has also changed, and Dell needs to keep the larger general modeling in mind.The Company needs to look to make changes within its indwelling environment as well. Resources need to be mobilized to build up R&038D capabilities. Innovation has proven to be a core skill for other major players such as HP, and Dell needs to respond by launching large R&038D initiatives so that they can innovate as well. This is especially relevant in developed countries, where standards based technology is getting increasingly saturated. Dell can perhaps look to spend at least 5% of their revenues on R&038D expenditure (In 2006, it was just 0. 8% compared to HPs 3. % and Apples 3. 7%). Dell needs to focus more on market initiatives to reach out to the younger generation of customers. This segment presents immense potential that the Company is currently not tapping. A dedicated sales and marketing team needs to be established, and there is a need for a Chief Marketing Officer as well. Dell could establish across-the-board CRM programs, where the customers get quick and timely feedback in relation to a problem. presumet compromise on the training of the workers that are honed in order to handle queries and complaints.The Company must make sure each question is handled by skilled personnel who are well aware of the nature of the problems. The Company could concentrate more on product categories that are ontogenesis fast and capitalize on these. For example, Dell needs to pay attention to the storage and IT service categories because they offer promising growth in the future, although they dont make up a bulk of the revenues right now. As IT services are the fastest growing revenue earner for the Company, Dell might choose to diversify or blow up in this area and go beyond just IT infrastructure. The Company can look to expand its footprint by continuing to acquire companies that form a part of their strategic agenda. Synergistic fits can be exploited and tapped, and strategic acquisitions, joint ventures and other alliances will give Dell the opportunity to pursue aggressive growth through inorganic means. Dell should look at difference beyond the metros and major cities in China and India. There are hundreds of lower-ranking cities within these two countries that present immense potential that must be tapped. The Company should aim to focus more on the masses, as opposed to large businesses and SOEs. Providing strategic leadership is extremely imperative for Dell if its to continue on its quest in sustaining competitive advantage. The Company should look to boost employee morale by focusing on more HRM practices. More initiatives like Tell Dell need to be incorporated. The organizational culture needs to be nurtured so that employees feel motivated to work in the Company. Conclusion Dell has been a major force to reckon with and has established a position of leadership in the computer industry because of its constituent(a) advantages in supply chain management, effective distribution systems, and lean manufacturing processes.The Company is now looking to take its sustained competitive advantage to the next level. Howev er, in order to do so, there are certain strategic adjustments that the Company must consider to avoid becoming a laggard. The key to ensuring that the Company will continue to lead the way in the industry is for it to conduct a thorough analysis of the external as well as internal environment and see where the strategic intent has to change. This report outlines the areas in which the Company needs to focus on to consolidate and continue earning above average returns.