Dell: Overcoming Roadblocks to Growth

Case:

Dell: Overcoming Roadblocks to Growth

1.) Critically assess Dell’s competitive position in the PC market

STRENGHTS:

To determine a companies’ position in the market, the SWOT analysis is a very good method to find out the strategic position and use this knowledge to plan for the future. The aim is to identify a companies’ internal (strengths and weaknesses) and external factors (opportunities and threats).

A main reason why Dell has such a good performance in the computer industry is its well working supply chain. Dell offers a customized product, but still sells cheap computers. An efficient supply chain gives Dell the chance to “reduce prices to grab market share when necessary”. Thus, Dell became the company with the highest market share, with the most shipments in the computer industry. Due to direct communication (direct model) with their customers, suppliers and a close collaboration with business partners they were able to speed up supply and guarantee fast delivery. The close contact to customers and suppliers enables Dell to “conduct more precise forecasts” , as well as an excellent financial performance. Dell collects the payment (via credit card) from its customer before they make the payment to their suppliers. This reduces the need of working capital.

Customers can configure their own computer system, which makes Dell’s business much more variable, so that many different market segments can be met, “including large commercial accounts, government, educational institutions, small and medium businesses and home buyers”. Another strength is the low inventory which they keep. Dell eliminated all their warehouses and carries only inventory for the next 2 hours. This is a very important fact, because many computer components nowadays lose up to 2% of their value each week.

WEAKNESSES:

Within the strengths Dell also has weaknesses. Being an entrepreneur organization where faults and debilities can the opportunity for the competence to take advantage of them it is very important to identify them. Based on the case study we found out that:

The lack of indirect sales model.- (besides the recently started in United States, Canada and Puerto Rico) can become a weak spot in Dell’s market approach, as Michael Dell declared when he announced retail selling in Wal-Mart; "We're expanding the number of places and ways people can buy our products ". These may seem like a turn of the company that wouldn’t be expected but “After years as the top PC seller in North America, Dell has lost its place