SWOT ANALYSIS
(DELL COMPUTERS INC.)
Dell Computers History
The company was founded in 1984 by Michael Dell, now the computer industry’s longest-tenured chief executive officer, on a simple concept: that by selling personal computer systems directly to customers, Dell could best understand their needs, and provide the most effective computing solutions to meet those needs. Today, Dell is enhancing and broadening the fundamental competitive advantages of the direct model by increasingly applying the efficiencies of the Internet to its entire business. Company revenue for the last four quarters totaled .9 billion. Through the direct business model, Dell offers in-person relationships with corporate and institutional customers; telephone and Internet purchasing (the latter now exceeding million per day); customized computer systems; phone and online technical support; and next-day, on-site product service. Dell arranges for system installation and management, guides customers through technology transitions, and provides an extensive range of other services. The company designs and customizes products and services to the requirements of the organizations and individuals purchasing them, and sells an extensive selection of peripheral hardware and computing software. Nearly two-thirds of Dell’s sales are to large corporations, government agencies and educational institutions. Dell also serves medium and small businesses and home-PC users. Dell’s Unique Direct Model: Dell’s award-winning customer service, industry-leading growth and consistently strong financial performance differentiate the company from competitors.
SWOT Analysis
Strengths Weaknesses
- No Inventory build-up
- Industry Leading Growth
- Cost Efficiency
- Direct to Customer Business Model
- Access to Latest Technology
- Customization
- Internet Sales Leadership
- Million Worth of Products Everyday
- No Proprietary Technology
- High Dependency on Component Suppliers
- Network Internet, Intranet and Extranet
- Strong potential market in Europe, China and India
- Low Costs and advanced Technology
- Growth in business, education and government markets.
- Competition in price and market share
- Currency fluctuation in markets outside the U.S.
- Political instabilities in some markets
- Tariff trade barriers
Opportunities Threat
SWOT Analysis
(Strength)
- No Inventory build-up
Dell turns over inventory every six days on average, keeping related costs low. Superior Shareholder Value — During the last four quarters, the value of Dell common stock nearly doubled. From 1996 through 1998, Dell was the top-performing stock among the Standard & Poor’s 500.
- Industry Leading Growth
Company revenue for the last four quarters totaled .9 billion.
- Cost Efficiency
With the industry’s most efficient procurement, manufacturing and distribution process, Dell offers its customers powerful, richly configured systems at competitive prices. Every Dell system is built to order. Customers get exactly what they want.
- Direct to Customer Business Model
Dell’s Unique Direct Model: Dell’s award-winning customer service, industry-leading growth and consistently strong financial performance differentiate the company from competitors.
- Access to Latest Technology
Dell introduces the latest relevant technology much more quickly than companies with slow-moving indirect distribution channels.
- Customization
Every Dell system is built to order. Customers get exactly what they want. Dell uses knowledge gained from direct customer contact before and after the sale to provide award-winning reliability and tailored customer service.
- Internet Sales Leadership
Internet Leadership Sales via Dell’s Web site surpassed million per day during early 1999, accounting for 30 percent of overall revenue. The company’s application of the Internet to other parts of the business –including procurement, customer support and relationship management — is approaching the same 30-percent rate. The company’s Web received 25 million visits at more than 50 country-specific sites last quarter.
- Million Worth of Products Everyday
(Weaknesses)
- No Proprietary Technology
Dell do not enjoy protected by trademark or patent or copyright technology. The technology being used in the industry is shared by all industry players.
- High Dependency on Component Suppliers
Line-of-business applications are applications that are central to a company’s operations include systems such as databases, messaging servers, enterprise resource planning (ERP) and customer relationship management (CRM) applications, and core file and print services. Clustering helps ensure that these critical applications are online when needed by removing the physical server as a single point-of-failure. Dell employs Microsoft technology (Microsoft Cluster Server) instead of having its own.
(Opportunities)
- Network Internet, Intranet and Extranet
The Internet is becoming more integrated into daily life, businesses rely on the Internet for commerce and real-time information exchange; customers go online to shop, bank and conduct personal correspondence; and students from grade schools through college use the Internet as an educational tool. From servers that power the Internet connection, to desktops and notebooks that efficiently and effectively provide the interface, to workstations used to develop digital content, the ability to provide products and services that enable Internet access and enhance the online experience will be vital for companies in the computer systems industry. Current Dell initiatives include moving even greater volumes of product sales, service and support to the Internet; using the Internet to improve the efficiency of Dell’s procurement, manufacturing and distribution process and further expanding an already broad range of value-added services. By taking its direct business model and its associated customer experience to even higher levels, through the Internet.
- Strong potential market in Europe, China and India
Dell still has significant opportunity for expansion in all parts of the world, especially in markets outside of the U.S.; in all customer segments; and in all product categories, ranging from home PCs to enterprise products, such as network servers and workstations. Europe has now overtaken the United States to become the biggest market for personal computers. This was revealed in the report saying that the shipment of PCs in the global market increased by around 15.3 percent in 2005. Interestingly, Dell continues to impress the customers as it extended its advantage over Hewlett-Packard. The number of PC users is expected to hit or exceed 1 billion by 2010, up from around 660 million to 670 million today, fueled primarily by new adopters in developing nations such as China, Russia and India, according to analysts.
- Low Costs and advanced Technology
The stream of software and hardware innovation from companies such as Microsoft Corp. and Intel Corp. is rapid and robust, and is sharply increasing system performance and reducing the relative cost of computing. While computer performance is going up, the relative cost of computing computer prices per MIPS has steadily declined, encouraging new computer users and more rapid PC replacement. Customers, in turn, are using those savings to buy even more powerful, more richly configured systems.
· Growth in business, education and government markets.
The most likely driver of PC sales would be state and local government spending, including education. Government and education is typically the biggest sequential growth driver in the July quarter. While federal demand has held up well, we remain concerned about state and local spending. Educational spending at the K through 12 levels is particularly important in the July quarter, and the state and local budget crises make this a key wild card for the quarter (Spooner, CNETNews.com, 2003).
(Threat)
- Competition in price and market share
The merger, between Hewlett- Packard and Compaq HP-Compaq will command a whopping 81 percent of the U.S. retail PC market. HP-Compaq is expected to be more cost efficient by cutting its duplicative costs.
- Currency fluctuation in markets outside the U.S.
Some investors traditionally have ignored currency differences when investing internationally. They have shared a widely held view that such discrepancies even out over time and so the effect of currency fluctuations is reduced when investing for the long term. But increasingly, investors are taking more account of currency considerations when they invest internationally, realizing that currency is a major driver behind the short- to medium-term performance of such markets.
- Political instabilities in some markets
The economic implication of political instability is to increase transaction costs associated with security and flow of capital, goods and people between countries. Insurance cost would also increase.
- Tariff trade barriers
Tariffs and trade barriers affect the smooth flow of a company’s operation by finding natural or legal restrictions being imposed by other countries. The additional payment paid on tariffs by products bought from other countries increases manufacturing and delivery cost.
BalanceScoreCard
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Dell’s mission statement, which appears on its website, is “to be the most successful computer company in the world at delivering the best customer experience in markets we serve” Dell’s two biggest assets are classified under its organizational assets, namely the leadership of Michael Dell and its organizational structure, the business processes underlying the direct business model.
Dell has the flexibility to respond quickly. Because it relies mostly on its highly reliable supplier, where Dell streamlines its operation and relies on its computer monitor supplier to ship directly to the customer. As long as its supplier retains its leadership position, Dell would collaborate with it to achieve mutual success, but if it fails, Dell has the flexibility to respond quickly. Another asset? Employees. Direct salespeople, help-desk operators, engineers, and the like all have to be knowledgeable and customer focused to ensure Dell’s continued competitiveness. This is why “Employee” is classified also as a critical factor to success under customer measures.
In addition, customers are critically important assets to Dell. When Dell introduced the direct model, its competitors were selling computers to end consumers via distributors. Dell, on the other hand, sells directly to consumers and is continuously communicating with them and benefiting, especially in two areas, seeing sales trends and learning about unmet customer needs. The company also relies on customers’ knowledge of what they want to purchase and when they want to complete the transaction to drive the direct business model. Dell leverages this source of customer knowledge by making it as easy as possible for a customer to place a customized order electronically. Electronic ordering is hassle free for the customer and cost effective for Dell.
Dell’s assets that relate to its customer intimacy and operational efficiency value propositions are the following. Dell’s leadership, structure, customer, brand, and employee assets play a pivotal role in delivering on the customer intimacy value proposition. Michael Dell says his most important leadership responsibility is looking for “value shifts” in his company’s customer base. To identify the shifting needs of customers, he has to stay in close contact with them. To build customer intimacy and loyalty, Dell leverages its customers’ knowledge of their own unmet needs. Dell’s brand image was and is shaped by customer feedback.
Identifying this linked set of assets enables Dell to select strategy-focused, asset-based balanced scorecard measures that support the customer intimacy value
proposition. For example, the balanced scorecard’s learning and growth measures might include the following. (1)Training dollars spent per full-time equivalent by customer segment to ensure that well-educated business segment managers provide state-of-the art advice to customers. (2)Number of collaborative customer-solution teams that motivate Dell to collaborate with its customers and jointly create technology solutions that fulfill any unmet customer needs. (3)Number of emerging technologies evaluated inspires Dell’s leaders to stay abreast of technology threats and opportunities that may alter the competitive landscape in the future.
Business process measures might include. (1)Percentage of total hours spent in contact with the customer, (2) Number of customer-initiated product innovations, And (3) Average customer idea ramp-up time. The first measure—hours spent with the customer— would be evaluated at the executive as well as managerial levels. This would motivate Dell’s highest-level leaders, as well as its segmented management teams, to stay in touch with the customer. The second business process measure— customer-initiated product innovations—should motivate Dell employees to listen to and collaborate with customers.
The first two measures from the learning and growth perspective would support this process-oriented measure. The third measure—ramp-up time—assesses how long it takes Dell to translate a customer’s idea into reality because creating innovative ideas is one thing, but delivering results in a timely manner is another.
The three customer measures are customer perception of customized response capability, customer perception of stability and first-to-market capability, and customer retention. If the learning and growth and business process outcomes are being achieved, then as the first customer perspective measure suggests, customers should perceive that their individual needs are being met in a timely manner. The second measure focuses on brand image. If Dell stays in touch with customers and delivers solutions consistent with their needs, then its brand image of stability in the institutional segment and “first-to-market with the latest technology” in the consumer segment should remain strong. Finally, if customer perception regarding the prior two measures is positive, Dell should be able to retain customers and grow the business. Pursuing the value proposition of customer intimacy should lead to revenue growth, so the financial measures are revenue growth by segment and gross margin by segment. Since the growth needs to be profitable growth, gross margin is included as a financial measure to ensure profitable growth.
Credit:ivythesis.typepad.com
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