Competitive Analysis of Dell

COMPETITIVE STRATEGY 559

PC Industry Competitive Analysis

Dr. Daniel Fyfer

Felix Garifouline, Hannah St. John, Dimitri Noe von Nordberg Schell

3/31/2008

BUSINESS SCHOOL LAUSANNE

Table of Contents

Executive Summary 5

Introduction 7

Case Study: Dell Computers 8

Products Offering (Six Main Categories) 10

Four Major Product Lines 11

Technological Innovation 12

Environmental Innovation 13

Industry Overview 14

Key Success Factors in the PC Industry 14

Market Size and Growth 16

Growth in Sales by Regions 16

Industry Value Chain 17

Sales Performance of Major Players 17

Revenues 19

Technological Advancement and Consumer Needs 19

Competitive Advantage in the Industry 20

Changes within the PC Industry 21

Competitive Force Analysis (Porters 5 forces) 22

Potential Rate to Growth of the Industry 22

Ease of Entry of New Firms 24

Intensity of Competition among Rival Firms 25

Degree of Product Substitutability 26

Dependence on Complementary/Supporting Products and Services 27

Degree of Bargaining Power of Buyers and Customers 27

Degree of Bargaining Power of Suppliers and Vendors 29

Degree of Technological Sophistication in the Industry 30

Rate of Innovation in the Industry 30

General Level of Management Capability 31

Competitive Analysis 33

Apple Inc. 33

Using Excess Cash as a Strategic Tool 34

Current Strategy 35

IBM 37

Financial Goals 38

Sales and Distribution 39

R&D 39

Integrated Operations 39

Competitive Assumptions of IBM 39

Current Strategy 40

IBM Capabilities 41

Hewlett Packard 42

History Overview: 42

Present 43

Financial Summary 2008 43

Financial Summary 2008 Continued 44

Competitive Profile Matrix (CPM) 47

CPM Results 48

Market Share 49

Dell and Competitor Profits 50

Major Share Prices in the PC Industry and DOW Industrial 51

Conclusion 52

Sources 53

Executive Summary

Founded in 1984 by Michael Dell, Dell was based on a business plan to allow a PC company to directly serve consumers, via a “Make-to-Order” method, with computers that meet their specific demands, while completely avoiding excess costs that are associated with distribution channels going threw dealers and retailers. With this system, customers were able to customize their computers during the process of ordering, and save money due to the fact that the costs that were faced by Dell were lower in result of their business strategy. The company grossed $73 million their first year of operations. Dell began selling their product