Dell Case

The case study Product Development at Dell Computer asks for the validation of a product development decision facing Dell Computer Corporation in fall 1993 with respect to the implementation of a new battery technology for laptop computers. Case Crackers inquire into the competitive forces in the computer industry at the time of the decision (section one), scrutinize Dell’s product development process (section two), and evaluate three potential courses of action laid out in the case materials (section three). Case Crackers gives equal recognition to considerations of quality and revenue and recommends adoption of a hybrid option combining the advantages of all of these options while avoiding their downsides (section four). Expected net margin under Case Crackers’ recommendation is about 20% or $100,000,000 more than under any of the courses of action so far discussed by Dell.

Table of Contents Page

Cover / Abstract 1

Table of Contents 2

References 3

Section One: Background 4 - 6

1. Competitive Forces in the Computer Industry 4 - 5

2. Dell Computer Corporation’s Business Model 6

Section Two: Dell’s Product Development Process 7 - 11

Section Three: Valuation of Courses of Action 12 - 18

1. Qualitative analysis 14 - 16

a) Option one: develop laptop for a proven battery technology (NiHi) 14

b) Option two: develop laptop for a new battery technology (LiOn) 15

c) Option three: develop laptop for both battery technologies 16

2. Quantitative analysis 17 - 18

a) Option one: develop laptop for a proven battery technology (NiHi) 17

b) Option two: develop laptop for a new battery technology (LiOn) 18

c) Option three: develop laptop for both battery technologies 18

Section Four: Recommendation 19 - 24

1. Option four, quantitative analysis 20 - 22

2. Option four, qualitative analysis 22 - 24

3. Conclusion 24

Appendix A: Decision Tree 25

References

Our analysis is based on the treatment of the case Product Development at Dell Computer as a self-contained problem. Thus, the majority of the information and data we used were drawn from the case itself:

Stefan Tomke, Vish Krishnan & Ashok Nimgade, Product Development at Dell Computer, Harvard Business School Case 9-699-010 (1999).

Additional insights were derived from the following readings:

Marie Bell, Dell – New Horizons, Harvard Business School Case 9-502-022 (2002).

Joan Magretta, The Power of Virtual Integration: An Interview with Dell Computer’s Michael Dell, Harvard Business Review, Reprint 98208 (1998).

Jan Rivkin & Michael Porter, Matching Dell, Harvard Business School Case 9-799-158 (1999).

For better readability we abstained from attributing each factoid mentioned to its source by means of footnoting and only give this general reference.

Section One: Background

Our inquiry starts out with a description of the competitive forces in the computer industry at the time the decision that we are facing now was made: October 1993. Particular attention is given in this section to Dell’s business model, e.g. how Dell chose to compete in the industry and what organizational skills and capabilities it employs. These observations are crucial for a valuation of Dell’s options in the particular issue at hand, because every single business decision should ideally be in tune with the firm’s corporate identity and at the same time both build upon and fortify its distinctive company profile and core capabilities.

1. Competitive forces in the computer industry

In the ever-changing world of technology every company wants to be the first to develop the most innovative of products and sell them to