DELL Strategic Management 30-03-2004 Group A9 Coman Fullard Alexius Freund Raman Karol Dhirapat Kulophas Adriano Prates Marcus Wyss

Introduction CEO: Michael Dell Teenage Entrepreneur College Dropout Multi-Millionaire World’s Number 1 PC maker Direct Sales Model Standards based designs Corporate Darwinism Almost no R&D JIT manufacturing Cost conscious

Products & Services Enterprise Servers Peripherals Workstations Laptops & Notebooks Networking Products Desktop Systems Managed Services Professional Services (consulting) Deployment Technical Support / Warranty Training / Certification GOLD SILVER

The Industry ? Potential Entrants Rivalry Within Industry Suppliers Economies of scale High Capital investment Low Product Differentiation Absolute Cost Advantage Rivalry Within Industry Suppliers Buyers Concentrated Supplier Market Few Suppliers / Key Components Important inputs Concentrated Market High global growth rate Low Differentiation High Bargaining Power Access to Information Low Switching Costs Substitutes ?

Business Model Traditional Model: DELL Direct Model: Suppliers PC Makers Distrib. Resellers Customer DELL Direct Model: Suppliers DELL Customer

The 4 P’s Product Price Place Promotion Build-to-order Mass Customisation Segmented service levels High quality/cost effective Price Lowest-cost producer Changes Daily Flexibility Essentially self-financing Place Fast, efficient distribution Internet, phone, catalogue based sales Distributors in some markets Promotion Relationship business SME: direct mail/online Consumer: editorials, word-of-mouth, print advertising

SWOT - I Strengths Weaknesses Unique Business Model Mass Customization Customer Contact Customer Loyalty Unique Management Style Standards Based Technology Limitations of Business Model Over-reliance on CEO Thrift Low Corporate Morale No R&D

SWOT - II Opportunities Threats Product Extension Splintered US Market International Expansion Vast Customer Base Increased service based opportunities Replication of business model by competitors Limitations of suppliers Decreasing profitability of the market Low morale talent flees \

Recommendations cooperation with the local players Grow the US consumer business International expansion Leverage current corporate customers to enter developing markets. Grow the European business by targeting the corporate segment. Explore domestic acquisition possibilities Expand the expert services offered Move in to the mid level servers. Maintain “Corporate Darwinism” & continuous improvement approach to operations. Nurture Company morale to retain talent brand building aggressive pricing strategies cooperation with the local players

Update 2001: Internal survey reveals very poor worker morale Enter Mobile phone market but fail & exit Expand storage offering with EMC 2002: Enter printer business 2003: Enter consumer electronics Revenue reaches $35 billion Net Earnings of $2.12 billion 15% of market 2004: Agreement with Fuji-Xerox Michael Dell resigns but leaves vision intact

The Tao of Michael Dell Hire ahead of the curve Segment the CEO Build a company of owners Stay allergic to hierarchy Mobilise people around a single business goal Develop products from the customers viewpoint Target a customer of one Add value “beyond the box” Align complementary strengths for success Flip the demand/supply equation Play judo with the competition