C A S E 9Dell Inc.: Changing the Business Model

Prepared by

Name: Masud Rana

ID: 11102205

Section: D

Program: BBA

IUBAT- International University of Business Agriculture and Technology

Introduction

DELL INC. was founded in 1984 by Michael Dell at age 19 while he was a student living in a

dormitory at the University of Texas. Dell, Inc. has experienced tremendous growth since

Michael Dell founded the company with only $1,000 in his University of Texas dorm-

room. Today, Dell has global revenues of nearly $50 billion and employs more than 55,000

individuals. 

Current Performance

By 1995, with sales of nearly $3.5 billion, the company was the world’s leading direct marketer

of personal computers and one of the top five PC vendors in the world.

In 1996, Dell supplemented its direct mail and telephone sales by offering its PCs via the Internet

at dell.com.

By 2001, Dell ranked first in global market share and number one in the United States for

shipments of standard Intel architecture servers. The company changed its name to Dell Inc.

In 2003 as a way of reflecting the evolution of the company into a diverse supplier of technology

products and services.

Net revenue for February through July 2010 increased to $30.4 billion compared to only $25.1

billion during the first half of 2009, while first half net income rose to $886 million in 2010

compared to $762 million during the same period in 2009.

Mission

“…to be the most successful computer company in the world at delivering the best customer

experience in the markets we serve”

Vision

“…to lead in all regions we serve. The foundation of our success is the same in the United

Kingdom and France, China and Japan, Canada and other countries. Customers want technology

products that are relevant to them, offer great value and can be easily purchased and used. That’s

what our team around the globe consistently delivers”

External environment

Economic Forces

 The consumer is increasingly important in the computer hardware market, corporate spending

represents approximately 80% of all technology spending. Therefore, economic conditions

depressing business capital spending decreases computer hardware sales.

Technological Forces

Technological change is critically important to the computer hardware business, contributing

specifically to the perilously short product life cycle for computers. A phenomenon known as the

“upgrade cycle” continues to be one of the most influential macro forces in the computer

industry.

Industry environment

Threat of New entrants

Threat of New entrants is low. This is because it is based on the low costs to enter the market and

product unanimity. This is due to an easy and cheap development stage.

 

Rivalry between Competing Firms

Rivalry between competing firms is high because Compaq, IBM, Hewlett Packard and legend

are main competitors.

Bargaining Power of Suppliers 

Bargaining Power of Suppliers is also high as dell’s direct model is based on the just in time

system. The supplier holds a major key in this process and in the value chain.

Bargaining Power of Buyers 

Bargaining Power of Buyers is also high. Buyers have lot of manufactures to choose from and

they are choosing a product in a rapidly growing industry. The manufacture will have to be up to

date with technology advances to successfully cater to demanding customers.

Threat of Substitutes 

Threat of Substitutes is low. There are no substitutes for computers.

Human Resources

 

Dell employs over 55,000 individuals. The organization is dedicated to creating a diverse

workforce to meet the objectives of the organization and its customers. Dell-sponsored groups

were formed to promote a sense of community among employee participants, support business

goals, aid in their personal and professional development, support business goals and provide are

source for organically recruiting and retaining the best and brightest talent in the industry. 

SWOT Analysis

Strengths

* Strong market position supported by strong brand value

* Strong sales and marketing

*Differentiated Products – Because of its direct model, Dell was able to be described as having a

differentiated product. Every PC assembled would be somewhat different from the previous

based on customer order.

* Customer Service – After sale customer service was another one of Dell’s strengths. A

customer with a problem could reach a technical support staff through a “hotline that was

manned 24 hours a day”

* JIT – Dell’s Direct Model allowed Dell to manufacture machines that were “modified to

customer needs” and based on Just-in-Time inventory

* Dell's brand is one of the best known in the world.

* Sell directly to consumers

* Keep costs below competitors

Weaknesses:

* Customers cannot go to retailers because Dell does not use distribution channels.

* Low market share in the International Market – Compared to its rivals, Dell had a low market

share in the international market.

*They build computers, not develop them.

* They have weak business relationships with many computer retailers.

*They do not have unique technologies to offer the market.

Opportunities:

*European Market – Dell has an opportunity to increase its market share in the European market.

*Growing Economy – Increasing growth in the economy is an opportunity for Dell to increase its

market share and at the same time production as well.

* Increased communication and technological inclusion also create great opportunities for Dell.

Threats:

*Strong Brands in the Market (IBM)

*Changing Consumer Needs

*Increasingly popular brand name in the competition

*Increasingly lower prices for product amount for their competitors