Market Analysis of Dell Corporation

Abstract………………………………………………………………………..……3

2. Introduction……………………………………………………………..….…….4
3. Strategic analysis………………………………………………………………………………………4
   3.1 Methods………………………………………………………………………………………….……4
   3.2 Strategic Business Unit………………………………………….……..………5
   3.2.1 External Environment………………………………………………………5
   3.2.1.1 Opportunities……………………………………………………………5
   3.2.1.2 Threats…………………………………………………………..…….…5
   3.2.1.3 PEST Analysis…………………………………………………….…..…5
   3.2.1.4 Porter’s Five Factors……………………………………………….……..7
   3.2.2 Internal Environment…………………………………………………………..8
   3.2.2.1 Strengths…………………………………………………………….…..…8
   3.2.2.2 Weaknesses………………………………………………………….…..…8
   3.3 Dell Balance between Demand & Supply………………………………….……..8
   4 Conclusion…………………………………………………………………….………9
   5 References…………………………………………………………………………….10

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Market Analysis of Dell Corporation

1. Abstract

At age of twenty two, Michael Dell founded the Dell Computers in his dorm at Texas
University, Austin. The company sells its computers directly to the consumers eliminating
middlemen. Through its direct sale strategy, it has a high profit margin and gives its
customers an excellent state of the machine art at a low cost compared to competitors. The
visionary leadership of Michael Dell has made the company to be the second successful PC
maker in the computer industry after IBM. The company’s greatest strength is adapting to
changes in circumstances.
Dell has a user friendly website and half of tech support, half dell sale and three
quarter of its order status take place online. The continuous advancement in innovative
approach and technology to assembly and manufacturing has made it to be the leading in low
price in the PC industry. The data integration and supply chain with supplies has made the
company to be one of the most efficient computer manufactures. Dell has the highest
inventory turnover (65.70%), highest return on assets (11.10%) and highest return on
invested capital in PC market (24.40%), (Hart-Davis, 2008).

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2. Introduction

Dell core business strategy is built around its customer direct model and its highly
efficient manufacturing logistics. The core strategy is being expanded through adding new
distribution channels to reach individual consumers and commercial customers not only in
USA but to the rest of the world. Dell’s goal is to provide the best customer experience by
providing superior value; relevant technology, high quality, customized services and systems;
superior support and service; and differentiated services and products easy to buy and sell. Its
vision statement include a culture that second environmental excellence through waste
minimization, reuse programs and recycling. Its mission is, ‘‘being the most successful
computer company in the world at delivering the best customer experience in the market we
serve’’ (Aginatku, 2008). This report attempts to identify interpret and analyse the marketing
strategy of Dell Inc.

3. Strategic Analysis

3.1 Methods
The main source of information of this analysis is Dell company website that contains
presentations and reports of the company and all its updates. The information has been used
in undertaking a comprehensive research for formation of the business marketing analysis.
The internet contains a lot of reports and previous documents and plans of the company.
Many media houses have different interests in the firm and thus have researched and
published information about the firm. Journals, newspapers and magazines are tools that have
recorded Dell company previous activities. Business documents, interviews and
questionnaires in the organisation were one first hand source that was reliable and contributes
to 70% of the data collected.

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3.2 Strategic Business Units
3.2.1 External Environment
The external factors of Dell – opportunities and threats will be examined using PEST and
Porter’s Five Forces
3.2.1.1 Opportunities
Dell provides various enterprise solutions (networking, storage, servers) and services (cloud,
infrastructure and security) that at present are the most profitable business. For it to diversify,
it requires new ideas and technology patents. Emerging markets are the fastest growing
markets for tablets, laptops and other electronic devices. The company has great opportunities
to grasp market share from developing new windows devices due to the newly partnership
with Microsoft (Hart-Davis and Holzman, 2012).
3.2.1.2Threats
The world and the society are ‘on the go’, thus the demand for smartphone and tablets will
increase and due to the low price, consumers will choose the devices over laptops. The
growing demand will take a share out of the company Dell market and the PC growth rate
and laptop market will slow down (Hart-Davis, 2008). The company faces competition in all
business areas in terms of price and quality and furthermore in regards of distribution,
reputation and their range of products.
3.2.1.3 PEST Analysis – Dell Macro Environment
Political Factors

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Dell’s operations are regulated by various legal environments, these regulations include;
antitrust, environmental, export/import, consumer and employment protection laws, investor
protection and others. Intel paid Dell $4.3 billion between 2003 and2006 in an agreement not
to use AMD chips. This manoeuvre artificially inflated the company lance sheet and helped it
in beating Wall Street earnings for four years (Hart-Davis, 2008).
Economic Factors
As the industry is growing with a fast pace, it faces increased demand that is focused on
reducing the environmental impact on ways products are manufacture, used, designed and
managed at end life. Dell’s marketing and sales targets the evolving consumer needs with
their business model giving it direct communication with its customers allowing them to
refine their products (Aginatku, 2008).
Socio-Cultural Factors
The factors have high influence on Dell product demand with high potential in emerging
countries. Their products are functional for work, used by the whole family, schools and
entertainment and are customized by individual needs. The employees are engaged in
charitable or political activities and the staff are involved in the making the company’s
decision.
Technological Factors
Dell relies on technology to remain the best with a constant need to improve on their
technology with a faster pace than competitors.

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3.2.1.4 Porter’s Five Forces- Competition and Competitors
Rivalry among Competitors-High
Price is a high determining factor with little space for differentiation in the market. It faces
strong competition from Asus, Lenovo, HP, Apple, Acer and Toshiba increasing market
saturation (Grinnell and Muise, 2011).
Potential Entrants-Low
Potential of new competitors is lows due to the high starting cost and the economies of scale
leads to added advantages
Substitute of Products- Medium
Cloud drives are changing the consumer storage needs. Smartphones and tablets reduce the
desktop and laptop need (Aginatku, 2008).
Bargaining Power of Suppliers- High
It has long-term close relationship with multiple suppliers thus getting lower prices on parts.
Supplier monopoly like Intel and it is impossible to have substitutes for RAM, hard drives
and processors (Grinnell and Muise, 2011).
Bargaining Buyers Power- High
There is high price competition in the market and some customers prefer customized PC
options. Consumers tend to seek good value for fair and cheaper price as gadget lifestyle get
shorter (Hopkins and Turner, 2012).

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3.2.2 Internal Environment
3.2.2.1 Strengths
Dell sells their products directly to the corporate and individual customers instead of retail
stoles thus keeping the thin profit margin. Its product customization service is valued by its
customers as it provides a sustainable competitive advantage as that service is not offered by
competitors (Grinnell and Muise, 2011). Dell is well known and respected brand with a good
reputation of quality products and has been nominated for two years as the ‘world most
ethical company’. (Hart-Davis and Holzman, 2012) Dell has spent billions for successful
acquisitions and mergers that has brought new assets and capabilities, new skills and patents
for the company (Aginatku, 2008).
3.2.2.2 Weaknesses
The cost leadership of Dell provide competitive advantage has become challenging in today’s
market with little differentiation from competitors products and also due to Asians in the
market. The company is in competitive disadvantage when competitors’ products are lower in
price (Grinnell and Muise, 2011). The major Dell revenue comes from corporate high-margin
in server market but income from commodities like laptops and PCs is small due to the small
margin. Their weak portfolio of patent has hampered their competing ability on lucrative
market for tablets and smartphones (Hopkins and Turner, 2012).
3.3 Dell Balance between Demand and Supply

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They have a sophisticated supply-chain-system that has always kept them a step ahead of
their competitors. They have the ability to alter product mixing and pricing has given them a
competitive advantage and their competitors who rely on retail cannot manage demand like
them (Aginatku, 2008). They are known to reduce cost, close factories, and outsource staff in
order to offer their products at a lower price.
4 Conclusions
In its early years, Dell became successful, their philosophy and business model and their
sophisticated supply-chain-management system have enabled them to sustain their
competitive advantage for a long time. Competition is getting stronger with lower profit
margins. Dell has relied on laptops, desktops and servers and failed to jump to iPods, iPhones
and ipads as its competitor Apple did. The marketing analysis is useful to the company in
realizing their strengths and opportunities. Weakness and strengths should be its baseline in
rising through the competing world where it should not assume the growing technology and
the shift to the digital world where smartphones and tablets are replacing desktops.

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5 List of references

Aginatku, A. (2008). GRIN – Analysis of Dell’s Business Strategy. [online] Grin.com.
Available at: http://www.grin.com/en/e-book/124459/analysis-of-dell-s-business-strategy
[Accessed 21 May 2016].
Grinnell, J. and Muise, C. (2011). Dell Computers: Competing Toward Decline?. Journal of
Business Case Studies (JBCS), 6(3).
Hart-Davis, G. and Holzman, C. (2012). The healthy PC. New York: McGraw-Hill.
Hart-Davis, G. (2008). PC. Emeryville, Calif.: McGraw-Hill/Osborne.
Hopkins, J. and Turner, J. (2012). Go mobile. Hoboken, N.J.: Wiley.