DELL
Michael Dell the Henry Ford
of the Information Age
Group B 13
Masato Shirai
Andrea Tellarini
Vasilis Kykrilis
Gabrielle Ng
Matthias Kuhn
Dell’s history
1984 - Michael Dell founds Dell Computer Corporation
1985 - First Dell designed PC is introduced: the Turbo, featuring Intel
8080 processor
1987 - Dell is first PC company to offer next-day, on-site service
Subsidiary in United Kingdom opened
1988 - Organization around customer segments
IPO
1990 - Manufacturing center in Limerick, Ireland
1991 - Dell’s first notebook PC
Dell’s History
1993 - Dell among the top-five PC makers worldwide
Subsidiaries in Australia and Japan mark entry into Asia-Pacific market
1996 - Manufacturing center in Penang, Malaysia
Launch of dell.com
Dell added to S&P 500 index
1997 - Introduction of first workstation systems
1998 - Manufacturing center in Xiamen, China
First enterprise storage product
Product Segmentation
PERSONAL COMPUTER
SERVERS
WORKSTATIONS
STORAGE
CONSUMER ELECTRONICS
Personal Computers
Laptops and desktops constitute core products
80% of sales in 2003
Key strategy
• Direct Sales
• Aggressive Price Cut
Implications
• Market share growth
• Brand Awareness
Workstations
Enterprise and medium business segment
Key strategy
• Powerful
• Cost Effectiveness based on
Windows usage
Implications
By 2000 Dell was the US and
worldwide leader of in Windows NT
workstations
Servers
Enterprise and medium business segment
Key strategy
• Open architecture system
• Entry-level servers
Implications
By 1999 Dell gained 12% of sales
Storage
Enterprise and medium business segment
Key strategy
• Linux
• Alliance with EMC
• Standardisation
Implications
Broader target market including smallmedium business
Consumer Electronics
Individual Consumers
Key strategy
• Narrow range of standardized products closely
integrated with computer technology
• Direct Sales
Implications
Challenge for the future – The biggest
test of the Dell business model
Customer Segmentation
RELATIONSHIP
BUSINESS
SMALL-MEDIUM
BUSINESS
CONSUMER BUSINESS
• Global Enterprise and
Large Corporate
Accounts (Fortune 5000
companies)
• Preferred Account PAD
(400 – 3500 employees)
• Individual customers
• 60% of Dell North
America revenues
• Execution - Key
Success Factor
• Equipment needs to
be deployed globally in
timely basis
• Longer payment cycle
• Business System
Division BSD ( 10 - 400
employees)
• 30% of Dell North
America revenues
• Efficient Customer
Database - Key Success
Factor
• Transaction Segment
• 10% of Dell North
America revenues
• Ability to convert sales
into cash within 24 hours
• Customers less
educated
Supply Chain Value
INBOUND
MANUFAC OUT
BOUND
TURING
BTO
SALES
SERVICES
Direct Sales
Investment
on
customer
services
COMPETITIVE
ADVANTAGE
Inventory
Mass
Steady
Cost Cut Customization Delivery
Channel
Cost Cut
Orders on Sale People
the Web for relations
customer
VALUE
PROPOSITIONS
Low
Price
Price
Fulfilling
Request
Customer
Convenience
to
order
Technical
Quality
Reliability
with
deliver
Best
Customer
Services
Timing
quality
Service
quality
Good
Reputation
in Service
Keeping
Good
Relation
Reputation Relationship
quality
quality
Industry Analysis
Main Competitors
HP Hewlett Packard • Global provider of a broad range of computing
system
45$ Billion Revenues
• Segments: enterprise, commercial and consumer
markets
IBM
89$ Billion Revenues
• Desktops, portables, servers, storage
Sun Microsystem
16$ Billion Revenues
• Scalable computer and storage system, highoperating network computing equipment
• Offering of a variety of tech solutions (systems,
products, services, software and financing)
• Broad range of services including support and
professional services
Gateway Corp.
7$ Billion Revenues
• Direct marketer of PCs and related product and
services
• Servers, workstations
Industry forces
BARRIERS TO ENTRY
MEDIUM
High investment required
with moderate tech level
SUPPLIERS
MEDIUM
Suppliers size comparable
to manufacturers
RIVALRY
HIGH
Many players with relatively
low differentiation
SUBSTITUTE
PRODUCTS
LOW/MEDIUM
• No substitutes for PCs,
network computers
potential substitute
CUSTOMERS
HIGH
Customers have choices
SWOT Analysis
Strengths
DIRECT MODEL
SUPPLIER
RELATIONSHIP
Complicated and time consuming transition
for competitors in the short term
INVENTORY MANAGEMENT
• Pull System
• Shared demand information with suppliers
FOCUS ON CUSTOMER VALUE ACTIVITIES
• Outsourcing of non-core activities
PRICING
Ability to exploit the high elastic demand of
the industry undercutting prices
SWOT Analysis
Weaknesses
R&D
SERVICES
• Limited ability to innovate
• High reliance on suppliers
• Not complete solutions
• High client retention effort
SWOT Analysis
Opportunities
INTERNATIONAL
EXPANSION
APAC/Japan
EMEA
AMERICAS
• Further penetration in non US markets
(only 33% of total revenues come from
EMEA and APAC/Japan)
• Growing telephony and internet
infrastructure – Indonesia, India
9%
21%
70%
SERVICES AND
SOLUTIONS
• Selling of high-end systems to global
customers and local enterprise in China
market
• Complete solutions
• Consulting and Support
SWOT Analysis
Opportunities
ENTERPRISE
PRODUCTS
• Small-medium segment is growing
• Open architecture systems are emerging
in response to increased storage demand
and need for standard solutions
EMC PARTNERSHIP
Extends Dell’s capabilities and drives
additional customer value in:
• R&D
• Sales
• Service
• Manufacturing
SWOT Analysis
Opportunities
CONSUMER ELECTRONICS
Advantages
Issues
• Huge number of potential
customers
• High reliance on third
manufactures
• $800 bn market
• Products not individually
configured
• Products highly integrated
with PCs
• Improvement of customer
segmentation leverage
• Shift from analogue to
digital technology plays to
Dell’s strengths
• Direct Sales as new channel
distribution for c.e.
• Brand Awareness?
• PDAs market entry
Other Issue
Printing
At the beginning of 2003 Dell decided to enter the computer printer
market
Concerns
• Analysts view the market as flat in the short-term and
declining in the long term
• Fierce competition (HP over 50%)
• Reduced flexibility
• Higher inventory costs
SWOT Analysis
Threats
DIRECT MODEL
Duplication in the long term
MARGINS
Increasing size of rivals through
consolidation
potential squeeze in
market share and margins
PCs
Saturated market with declining demand
Conclusions
AS IS
PCs MARKET
DIRECT MODEL
• Commodity
Mid-term
Duplication
• Low margin
AS TO BE
CONSUMER
ELECTRONICS
SERVICES
• New source of
revenues
• Lucrative margin
• Educate the
customers
• Differentiation
• Fierce competition
• Complexity