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GURU NANAK COLLEGE OF ARTS, SCIENCE AND COMMERCE G. T. B. NAGAR, MUMBAI - 400 037
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Acknowledgement
This project comes out to be a great source of learning and experience. A lot of effort has been put by various people to make this project a success. This has greatly enhanced our knowledge about Dell Inc. I greatly acknowledge our indebtness to Mr. Rahul Mishra,for helping me throughout this project and for providing me in-depth knowledge. This project is a culmination of efforts of my friends whose sincere inputs and focused attitude could bring this project to fruition. Finally, thanks to almighty God who has been a source of strength and confidence.
INDEX
CHAPTER NO. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 PARTICULARS ABOUT DELL KEY TOWARDS STRATEGIC PLANNING PEST ANALYSIS STRATEGIC MANAGEMENT PROCESS SWOT ANALYSIS 7-S FRAMEWORK OF McKINSEY LEVELS OF STRATEGIC MANAGEMENT MICHAEL PORTERS MODEL OF COMPETITIVE ADVANTAGES BCG MATRIX MODEL GE MATRIX GRAND/CORPORATE LEVEL STRATEGY SUGGESTIONS CONCLUSION BIBLOGRAPHY PAGE NO 6 8 12 15 22 24 27 29 31 34 36 38 49 40
Recent Developments :
In January 2009, Dell announced that they will withdraw all manufacturing from
Limerick and move it to its new plant in the Polish city of Lodz by January 2010. Raised their cost-reduction target to $4 billion. Dell also announced that it aimed to become a "onepercent company," giving away 1 % of pretax profits to education and digital inclusion projects mainly in emerging markets, by February 2010. Product line
VISION STATEMENT Through effective and strategic community partnership, dell supports educational services programs that address the critical and most basic technology access needs of its neighbours in Dell communities prerequisite to success in digital world. Dell provides a classic example of how the principles of strategic management have been used to translate an innovative vision into a successful and sustainable enterprise. Their vision statement basically tells the way they do their business. They want to be successful in the digital world for this they rely on latest technology. Dell provides quality products to cater the needs of the people. In intend to build good relationship with their customers and suppliers.
MISSION STATEMENT To provide customers with superb value, high quality, relavent technology, customized systems, superior service and support and products and services that are easy to purchase and use. 8
VALUES Their first priority is to be a successful business and that means investing for growth and balancing short term and long term.
OBJECTIVES Following are the objectives of Dell Corporation 1. Modify laptop designs according to students preferences. 2. Double laptop sales in student market. 3. Increase revenues by 25% by the end of the second year of launching.
plan conclusion.
GOALS Goals are the specific interim or the ultimate time based measurement to be achieved. While implementing strategies in pursuit of companies objectives. The goal of the organization are set consistent , achievable and realistic. As per surveys the present major goal of the organization is to adopt the best technology and appoint few more personnel that would bring efficiency in the organization.
PROGRAMS Last but not the least program plays a significant role in maintaining a smooth track within the organization. Dell has got an implementation plan followed up by the above strategic plan. The Program of Dell creates opportunities to develop real-world skills in an environment that encourages personal and professional growth and gain exposure. It learns the ins and outs of one of the high-tech industries in the same sector.
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STRATEGY To do business with its customers one on one through the phone and internet. In doing so, Dell will meet its customerss expections of : Highest quality. Leading technology. Competitive pricing Individual and companys accountability. Best in class service and support Flexible customer capacity Financial stability.
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A scan of the external macro-environment in which the firm operates can be expressed in terms of the following factors:
POLITICAL The political environment in the US has been changing abruptly in the previous year. Dell being an integral part of this economy has also been greatly affected by these changes and has not been able to counter them. Changes in the legislation and laws of the US govt. have tried to revive the PC business but the reciprocations 12
have been less then what was expected. The company has been able to beat the expectations of Wall street who predicted more dip by posting less losses by utting costs. The conservatism that exists in the consumer spending has been increasing which has adversely affected Dells performance. Issues of environment policies has also affected Dell as Dell came under significant pressure from environmental groups across the US to assume responsibility for its old products and this experience sensitized company officials to the risks and opportunities of state and federal e-waste regulations and the need to take proactive steps against them. ECONOMIC High tarrifs on IT products makes Dell difficult to enter other markets apart from USA . since most of the population of the world is young and adaptive to change in technology, dell aimed to manufacture its products which are more user friendly and can be afforded by young professionals, because purchasing power of working population saw an increase over the past few decades. Since the economy saw a change due to the meltdown and recession, dell also had to modify some of its policies to cope up with the changing scenario.The change in the US economy also effected Dell with it bring change in its core policies of inventory and credit management of receivables and inventory conversion days to decrease its operating cycle and thus reduce cost.
SOCIAL Increase of younger population and working population have led to the increase of the use of computers. A technological revolution has been around the corner, people have become techsavy ,that have resulted in the increase in the demand for computers .These days people have time constrains and as a result of it they prefer to buy the product online ,which has given Dell an advantage over others because of dell.com.
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TECHNOLOGICAL Tecnological changes are happening at a very fast rate due to which Dell is able to provide advanced technology products to the customers.As a result of chnological changes Dell has also increased their product line.It is adopting to the echnological changes as he old technology is becoming obsolete.One of the most important affets of technological changes that have led to the increase of the demand of Dell computers is their Direct Business Model.They have excellent ecommerce capabilities, which can be seen with the success of the dell. The recent chnological changes can be seen in their recent products like New PowerEdge Servers , New Enterprise Computing Portfolio, Innovation Aids Recovery, Ultra-Thin Laptop, Adamo,which will be in the market very soon. Dell could exploit the networkinternet,extranet to reach the corners of the world.
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Strategic thinking provides the foundation of the strategic management. By providing an insight into the forces behind the intense competition, by developing a sustaining competitive advantage based on organization core competency. It can be broadly divided into three phases: PHASE 1 Strategic formulation It is referred as a strategic plan
1. Framing mission objectives: The first step adopted by Dell Corporation was to frame the mission and objectives for the organization.
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For example mission: the purpose of the organization is to achieve the honor of becoming the best consumer friendly company
2. Analysis of the internal environment: After setting the mission and objectives the next step is to analyses the internal environment. E.g.: Dell Corporation needs more qualified manpower, machines adopted by Dell Corporation should be highly Resultant.
3. Analyze of external environment: The management conducts the analyses of the external environment. E.g.: Dell Corporation manufactures product that are hygienic and long lasting.
4.Gap analyses: Management also conducts gap analyses that is for this purpose the management compares and analyses its present performance level and desired future performance level. E.g.: Dell Corporation has in acted gap analyses as it compared the last 5yrs. The performance level with the present level and came with a conclusion that in future they will surely come up with the new brand launch
5 Framing alternative strategies The management needs to frame alternative strategies and accomplish the objectives of the firm.
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6 Choice of strategies: Dell Corporation already has a highly sophisticated server with alternative strategies it chooses the best among the various strategies.
The strategies are formulated for each and every functional area. Once the strategies are formulated the next stage is strategic implementation
Step 1 Formulation of plans, programs and projects Setting strategies will not guarantee success, so every organisatron also needs to work laboriously in order to achieve the desired results. Dell Corporation has a broad plan which includes the goals, policies and procedures.
The project passes through various stages i.e. 1 Dell Corporation makes it a point that their concept is achievable. 17
2 Their plans are organized in such a way that the results are achieved without any damage or duplications. 3 clean up phase: Dell Corporation follows follow up action of above listed phases.
Step 3 Procedural implementation: Dell Corporation before implementing any new strategies examine all the government regulatory framework E.g. Dell Corporation before dealing with any foreign company needs to be aware of all the export and import charges.
Step 4 Resources and allocation: It deals with the arrangements and commitment of physical financial and hr, Dell Corporation allocates all its resources in such a way that there is no duplication of work and also aims at avoiding wastage e.g. it sets different goals for the delegates
There is a need for an organizational structure for implement strategies. Dell Corporation follows the divisional structure and therefore the implementation strategy moves on division wise. 18
Dell Corporation as an organization implements all its functional plans and its policies .
After implementing the strategy an organization studies the behavior of the strategy. E.g. Dell Corporation studies the impact of its strategies by keeping a small conference meeting with all its divisional heads
It is the phase in which the manager tries to assume that the strategic choice is properly implemented and is meeting the objective of the organization
Dell Corporation in order to initiate control is done by setting standards and making them aware of the tolerance limit they should keep.
Step 2 Measurement of performance The next step is to measure the actual performance with the planned one.
E.g. the organizational heads compares the set targets with the achieved one.
Step 4 Finding out deviation At this step the organization pin points the deviation or blockages if any E.g. while implementing a strategy for a new branded product Dell Corporation faced a difficulty as the packaging of that product was done with the help of low quality plastic
Step 5 Analyzing deviations Here the top executives are the cause of deviations E.g. Dell Corporation could not procure better spare parts from the company it used to buy earlier. The emotional bonding was the main cause for its dependence of that company providing low quality spare parts. 20
Step 6 Taking corrective measures The top level management of Dell Corporation will analyze the blockage and give an alternative E.g. in order to remove the blockage Dell Corporation may replace the low quality spare parts and find out other good quality plastic at the low price.
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STRENGTH No inventory buildup Acquition with Equalogic Quality product and service Whole world focus Brand name Customer service Cost efficiency Direct sell model=customization + fast+ delivery + low cost Winning culture 22
latest technology First mover advantage e-commerce capabilities: www.dell.com Buid to order manufacturing process Product design+after sales service Expert Supply Chain Management
WEAKNESS No proprietary technology High dependency on component suppliers occasional product recall.Eg.In 2004 Dell had to recall 4.4 million laptop adapters because of a fear that they could overheat, causing electric shocks or fires. unable to switch supply dues to the lack of large suppliers in the World high attrition rates among visitors to Dell.com no physical presence ofservice centres slow in introducing fancy features Lack of innovation
OPPORTUNITIES Network-internet, intranet and extranet Developing nations market Low costs and growing advanced technology Growth in business, education and government markets 23
Global wide access to customers and market. Expansion Increasing income of consumers Globalisation
THREATS Competition Currency fluctuation in countries outside the US Political instability Tariff trade barriers Recession Decling sales
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The 7-s framework of McKinsey is a Value Based Management (VBM) model that describes how one can holistic and effectively organise a compan. Together these determine the way in which a corporation operates. Dell Corporation has become a leading company as it has a very strong product marketing focus it has certainly adopted the basic 4ps of marketing ie price,product, place,and promotion mix are the 4 strong weapons with the help of which Dell Corporation has overcome all the consequences it has faced during its inception. SHARED VALUE The interconnecting center of McKinseys model is: Shared Values. What does the organisation stands for and what it believes in. Central beleifs and attitudes. As the
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hand works in the human body the shared values are the core values of the organization as it connects soft skills of the Dell Corporation.
STRATEGY Plans for the allocation of a firms scarce resource, over time, to reach identified goals. Environment, Competition, Customers. As Dell has already adopted the brand name Dell it has reached its saturation stage now in order to sustain for a longer term they need to renovate or launch new products under the same brand name which they are doing.
STRUCTURE The way the organisations units relate to each other : centralised, function divisions (top-down); decentralised(the trend in larger organisation); matrix, network, holding,etc. Chief company official all the essentials departments in order to acquire efficiency and effectiveness. This assits the organization to achieve the desirable goals. the company saw to if they have acquired expertise knowledge to develop faith and trust of the consumers. SYSTEM The procedures, processess and routine that characterise how important work is to be done: financial systems; hiring, promoting and performance appraisal systems; information system. The Dell Corporation has followed formal as well as informal procedure that governs the day to day activity. The mis system of Dell Corporation is so strong that they can analyze consumer response by a easy going system whereas due to its dignified image it has acquired intermediaries confidence within them. the agent of the organization conduct various market surveys with the help of the retail system, call centre system,etc. such a informal system avails the organization to have crystal clear information in the to progress. STAFF Numbers and types of personnel within the organisation. Dell has also appointed people from below poverty line session so that they can also their livelihood on the 26
same side,in oder to motivate their staff they provide various financial as well as non financial incentives. This will make their employees to work in more enthusiasm and intrest.
STYLE Cultural style of the organisation and how key managers behave in achieving the organisations goals.ie; Management Styles. The top level management of Dell Corporation has maintained a discipline aatmosphere. They make sure that they achieve result within a defined time. They supervise their subordinated in such way that they work in deliberate manner.
SKILL Distinctive capabilities of personnel or of the organisation as a whole. The capability of the organization has bound that the consumers with their standardized quality product. The competency of the organization is to provide its product at an affordable price and in addition to it,its products are convention able, available in urban as well as remote areas.
CHAPTER 7
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CORPORATE LEVEL Dells corporate strategy is to provide products directly to customers.To provide high technology quality products and services through customization.Their strategy also includes cost cutting where ever possible.
BUSINESS LEVEL 28
Dell's business strategy combines its direct customer model with a highly efficient manufacturing and supply chain management organization and an emphasis on standardsbased technologies. This strategy enables Dell to provide customers with superior value; high-quality, relevant technology;customized systems; superior service and support; and products and services that are easy to buy and use. FUNCTIONAL LEVEL Cost leader ship through direct sell model. In direct sales model it sells directly to Customers ,which has the following characteristics: Efficient supply chain/distribution system Just-In-Time inventory system reduces costs Direct sales by using www.dell.com Internet increases good relations with consumers & suppliers Impressive Supply Chain Management Strong strategic alliances with other companies Direct Business Model = Customisation+ Customer service
OPERATIONAL LEVEL Dell has built one, global, end-to-end operational chain from customer to supplier and back again that sets it apart from all others in terms of cash flow and responsiveness. In short,the company is increasingly leveraging these new conditions to reinvent their cost structures, set new industry performance standards, and create unmatched customer experiences in their business strategies. Dell believe that Changing the game on competitors, sometimes permanently, is the outcome of a winning operations management strategy.
CHAPTER 8
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Threat of New Entrants: MODERATE The entry of new comers is quite difficult because of the entry barriers that are caused by: Buyer loyalty Brand name Low price Award winning customer service Customisation Decreasing profitability shows that there is a threat of new entrants.HP overtook dell few yrs back Rivalry: HIGH Price War Decreasing profitability 30
Low differentiation However, in the midst of sever competition, Dell can still gain market share from other competitors. That proves Dells business strategies have been successful. Threat of Substitutes: LOW Strong presence of PCs throughout society One computer for every three people in the U.S. Customer service Direct Business Model However, high price, and lack of software support prevent people from switching to Apple system. Bargaining Power of Buyer: High Highly price sensitive The cost leader has high market share which leads to high bargaining power relative to its suppliers Reliability and customer service become important factors. Dells products are very reliable and customer service is outstanding. These two factors help Dell to create certain brand royalty. But thats given the fact that the Company set the prices very low. If the prices are raised too high, customers will not hesitate to switch.
CHAPTER 9
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No strategic management or marketing text appears to be complete without the inclusion of the Boston Consulting Group (BCG) growth-share matrix. The BCG Growth-Share Matrix is based on two dimensional variables: relative market share and market growth. They often are pointers to healthiness of a business (Kotler 2003; McDonald 2003). In other words, products with greater market share or within a fast growing market are expected to wield relatively greater profit margins. The reverse is also true. Lets look at the following components of the model:
Market Growth Market growth axis, correlates with the product life cycle paradigm, and predicates the cash requirement a product needs relative to the growth of that market. A fast growing market is generally considered attractive, and pulls a lot of organisations resources in an effort to increase gains. A case in point is the technological market widely consider by experts as a fast growing market, and tends to attract a lot of 32
competition. Therefore, a product life cycle and its associated market play a key role in decision-making.
CASH COWS These products are said to have high profitability, and require low investment for the fact that they are market leaders in a low-growth market. This viewpoint is captured by the founders themselves thus: The cash cows fund their own growth. They pay the corporate dividend. They pay the corporate overhead. They pay the corporate interest charges. They supply the funds for R&D. They supply the investment resource for other products. They justify the debt capacity for the whole company. Protect them (Henderson 1976). According to experts (Drummond & Ensor 2004; Kotler 2003; McDonald 2003), surplus cash from cash cow products should be channelled into Stars and Questions in order to create the future Cash Cows.
STARS Stars are leaders in high growth markets. They tend to/should generate large amounts of cash but also use a lot of cash because of growth market conditions. Dell computers are placed in this stage which possess a large share in the rapidly growing market.
QUESTION MARKS Question Marks have not achieved a dominant market position, and hence do not generate much cash. They tend to use a lot of cash because of growth market conditions. Consider Hewlett-Packards small share of the digital camera market, behind industry leader Canons 21% (Canon 2006). However, this is a rapidly growing market. Eg. Dell Mobiles are newly introduced in the market and thus possess low market share in a growing Market. 33
DOGS Dogs often have little future and are big cash drainers on the company as they generate very little cash by virtue of their low market share in a highly low growth market. Thus to conclude with dogs these are the products that should be divested because it is these are of no good for the company and has become a kind of liability for Dell Computers.
CHAPTER 10
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GE MATRIX
The 9 cells of ge matrix are grouped on the basis of low to high industry attractiveness and week to strong business strength and competitive position. There are 3 zones indicating 3 different combinations.
1 GO AHEAD
Under these phase the signal is to proceed and take decisions such as Dell has become universally acceptable and now it should go ahead and take up more marketing development and expansion .
These is the 2nd zone of ge matrix, this indicates hold and maintain current strategy.
3STOP
Coming to the 3rd zone it gives signal to stop under the product of Dell Corporation Thus to conclude with ge matrix it allows the user to select whatever criteria they feel are more appropriate to their business situations.
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Dell Corporation possess highest attraction through its highly innovative and technical products of mobile and computers and stands first in the Ranking of Revenue and hence placed in the category as shown in the above table.
CHAPTER 11
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Grand strategies adopted by Dell corporation are explained below with the help of the above table. Dell adopts the combination of two strategies that is the 1,2; (Stability Strategy and Growth Strategy)
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In the stability strategy Dell adopts the Sustainable growth Strategy wherby the company wants to get a consistent profit through its products irrespective of any new entrance of companies, Competiton, Technologyetc. And in the second strategy Dell adopts the Product Development Strategy which fall under Intensification Strategy. This Strategy is concerned with the Internal Growth of the Company. As the Company has a very good strenght in case of market attraction through its innovative and user friendly products and with a great business strenght, the company prefer to enter into more products in the same field. New Products that are introduced by Dell are provided briefly in Chpt-1. Example, dell has come up with some new softwares, started producing new electronic products like Mobiles, High tech Laptops. And hence the dell Corporation adopts the combined Strategy of Stability and growth.
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CHAPTER 12 SUGGESTIONS
Should look for Alliance-mergers and acquisitions that would bring synergic benefits for the company
Reduce the attrition rate by Converting visitors into customers(people who visit the Dell site)
Physical presence of Service centers would add value to their customer service
Reduce errors in Dells direct Internet ordering system and create a Clearance area on its website
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Should not only depend on the internet sales, should give equal importance to retail stores. Though they have started with the retail selling but they should give equal importance to it as they give to online selling
Build a variety of competencies (build core competencies into diverse product lines)
Demand for laptops will increase in the coming future therefore they should try to exploit this situation.
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CHAPTER 13 CONCLUSION
Dell computer is successful in global markets as a result of best understanding of customers' needs and their direct sell business model.
Dell's environmental programs for product asset recovery and product design for environment have spanned more than a decade.
The company designs and customizes products and services to the requirements of the organizations and individuals, and sells an extensive selection of peripheral hardware and computing software.
Dell is a well known name in the world that has been very successful towards its mission.
It has focused on customization and maintaining low cost that has been very profitable for the company.
But are faced with the problem of slipping sales in the U.S. They are being forced to look at alternative ways of bringing revenue to the company and will be able to tackle this situation and would maintain a tight grip on the market due to their cost leadership and because of their coming strategies.
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BIBLOGRAPHY
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