1.

1 INTRODUCTION

As one of the largest computer manufacturers in the world, Dell Computer Company has
grown tremendously since its incorporation in 1984 by Michael Dell. Dell’s Direct
Model, which is largely responsible for the success of the company, provides a fast, cost-
efficient, and customer friendly means of production and distribution. Now, in a market
that is ever changing, competitors are challenging Dell with new and unique products in
an effort to overcome the superiority of the Direct Model. The growth and development
of laptop computers is a primary area in which Dell can work for continued success,
despite the threats posed by its competitors.
Dell grew during the 1980s and 1990s to become (for a time) the largest seller of PCs and
servers. As of 2008 it held the second spot in computer-sales within the industry behind
Hewlett-Packard. The company currently sells personal computers, servers, data storage
devices, network switches, software, and computer peripherals. Dell also sells HDTVs,
cameras, printers, MP3 players and other electronics built by other manufacturers.
In 2006, Fortune magazine ranked Dell as the 25th-largest company in the Fortune 500
list, 8th on its annual "Top 20" list of the most-admired companies in the United States.
In 2007 Dell ranked 34th and 8th respectively on the equivalent lists for the year. A 2006
publication identified Dell as one of 38 high-performance companies in the S&P 500
which had consistently out-performed the market over the previous 15 years.
In 2006, Dell purchased the computer hardware manufacturer Alienware. Dell Inc.'s plan
anticipated Alienware continuing to operate independently under its existing
management. Alienware expected to benefit from Dell's efficient manufacturing system.
In February 2007 Dell became the subject of formal investigations by the US SEC and
the U.S. Attorney for the Southern District of New York. The company has not formally
filed financial reports for either the third or fourth fiscal quarter of 2006, and several
class-action lawsuits have arisen in the wake of its recent financial performance. Dell
Inc's lack of formal financial disclosure would normally subject the company to de-listing
from the NASDAQ, but the exchange has granted Dell a waiver, allowing the stock to
trade normally.
On March 1, 2007, the company issued a preliminary quarterly earnings report which
showed gross sales of $14.4 billion, down 5% year-over-year, and net income of $687
million (30 cents per share), down 33%. Net earnings would have declined even more if
not for the effects of eliminated employee bonuses, which accounted for six cents per
share. NASDAQ extended the company's deadline for filing financials to May 4.In Sept
2009- Dells Studio XPS line of computer experienced long delays in shipping, with some
costumers waiting over 7 weeks or more from their computers. As of December 1st, 2009
many of those laptops have still not been shipped. Customer support has given no
conclusive answers for the delays as reported on Dells own community blog. The Federal
Trade Commission has stated over the phone that the best course of action against the
companies’ behavior is to call and file a report. The more reports, the sooner the FTC will
start an investigation into the matter.

1.2 COMPETITOR ANALYSIS

When Dell acquired Alienware early in 2006, some Alienware systems had AMD chips.
On August 17, 2006, a Dell press-release stated that starting in September, Dell
Dimension desktop computers would have AMD processors and that later in the year
Dell would release a two-socket, quad-processor server using AMD Opteron chips,
moving away from Dell's tradition of only offering Intel processors in Dell PCs.On
October 23, 2006, Dell announced new AMD-based servers — the PowerEdge 6950 and
the PowerEdge SC1435.On November 1, 2006, Dell's website began offering notebooks
based on AMD processors (the Inspiron 1501 with a 15.4-inch (390 mm) display) with
the choice of a single-core MK-36 processor, dual-core Turion X2 chips or Mobile
Sempron.

1.3 Market Trends

The market for laptop computers has distinguished itself as one of the fastest growing
segments of the computer industry. Throughout its growth and development, this market,
like many others, has changed a great deal as a result of customer demands. In an effort
to cater to these demands, companies like Dell look to market trends to aid in the
development of new products. In its most recent stages, the laptop market has been
specifically influenced by a number trends.

Generally the overall market for PC’s is being influenced by many of these trends. One in
particular, however, is affecting the market more than any other. Simply, customers are
becoming more educated about their purchases. Computers are being sold less to first-
time buyers, and much more to customers who have purchased personal computers at
least one before (Matching Dell). As an increasing number of customers become more
knowledgeable about computers, others trends are beginning to take shape.
As a result of this consumer education, buyers want increased customization of personal
computers. The growing amount of knowledge among consumers is creating the ability
for buyers to distinguish their own personal needs in a computer from a standardized
product. This in turn, affects trends that are specific to the laptop market.
The laptop market is growing at a faster rate than desktop computers. The trend is being
driven by global integration and advances in communication technology. Customers are
living more mobile, communicative lives, and their computers must have similar
characteristics that make such activity not only possible, but also efficient and easy.
When it comes specifically to the products, customers are demanding increased
portability and durability from laptop computers. Driven by this new mobile lifestyle,
customers want a product that will be easy to move and difficult to harm or damage. This
may include making it smaller, lighter, and perhaps sturdier than previous models.
In addition to demanding more from the physical features of laptop computers, customers
need greater performance capabilities. Consumers need their computers to operate at
higher speeds, work with more memory, and to be easier to navigate than ever before.
Computer users depend more on their laptops to organize their lives and to hold vital
information, and as a result companies must work to provide them with the best
technology available.
1.4 ENVIRONMENTAL ANALYSIS

In general, Dell company is dynamic and complex organisation because of its proven best
quality services and being dedicated in serving the world with its management values that
has kept them to be one of the best and most renowned in the computer industry business
in relation to Dell’s climb in terms of market leadership which is the outcome of a
consistent focus on delivering the best possible customer experience by means of
standard based products and services in engaging the global market per se.
The external environment of a company consists of outside conditions that affect a firm’s
performance. An analysis of this external environment allows a firm to identify key
conditions that are beyond its direct control and those elements on which it can have an
affect. Analyzing these areas of the external environment help Dell identify the
opportunities and threats in the computer industry.

1.5 PEST Analysis

A PEST analysis is an analysis of the external macro-environment that affects all firms.
P.E.S.T. is an acronym for the political, Economic, Social, and technological factors of
the external macro-environment. Such factors usually are beyond the firm’s control and
sometimes presents themselves as threats. For this reason, some say that “PEST” is an
appropriate term for these factors. However, changes in the external environment also
create new opportunities and the letters sometimes are rearranged to construct the more
optimistic term of STEP analysis.
Many macro-environmental factors are country-specific and a PEST analysis will need to
be performed for all countries of interest. In the following, the analysis of the political,
economic, social and technological factors leads to a description of the macro
environment of the Dell computer industry.
1.5.1POLITICAL ENVIRONMENT

The political environment of a country is influenced by the political organisations such as

philosophy of political parties, ideology of government or party in power, nature and
extent of bureaucracy influence of primary groups etc. Political factors include
government regulations and legal issues determining the conditions under which
companies have to operate. In this field, the DELL computer industry has to face certain
restraints. Like in all markets, DELL computer industry is also subject to laws that
regulate virtually all aspects of their business, including such areas as health safety,
pollution, and advertising and labelling requirements. Problems can arise in countries
where political stability is not guaranteed, no matter whether companies operate
production facilities or if they do business with that country through exports. Many
countries still have restrictive policies which are maintained to protect domestic
manufacturers and production. Such policies often hinder foreign companies from
entering into these markets. The only possibility to do business in those countries is to
establish partnerships with local companies, where they are additionally forced to accept
minority shares and to provide money and technological know-how. However, the DELL
computer industry sees great potential in those countries which loose their restrictions.
This is especially true for China which has opened for many industries since its accession
to the WTO in 2001. In the course of globalisation trade barriers decline and new markets
emerge, allowing free trade to expand. In today’s world economy, international political
events greatly affect marketing activities. Probably the most significant global political
trend is the “war on terrorism” led by the United States and a coalition of many different
countries around the world. The threat of terrorism and the war on terrorism have
changed how people live and companies do business in many parts of the world. For
example, many consumers have reduced or changed their normal travel behavior. This
has had a negative impact on all aspects of the travel industry, especially the airline
industry. In contrast, the need for increased security has generated marketing
opportunities for firms providing security products and services.
1.5.2 ECONOMIC ENVIRONMENT

Economic environment refers to the aggregate of the nature of the economic system of
the country, the structural anatomy of the economy to economic policies of the
government, the organisation of the capital market, the nature of factor endowment,
business cycles, the socio-economic infrastructure etc. The economic environment
includes factors and trends related to income levels and the production of goods and
services. The economic environment consists of the \"factors that affects consumer
buying power and spending patterns\". The DELL computer industry expects a growth of
approximately ten percent over the next years.5 This growth is influenced by the
economic situation in a specific country, having an impact on the purchasing power of
potential customers. Additionally, changing inflation rates and currency fluctuation also
determine the profitability of a company. Another Factor that affects the Computer
industry is the value of the home currency, all branded products are imported, and their
prices vary with changes in the relative exchange rates. Also with an increase in income,
consumers are likely to purchase higher quality products rather than to simply purchase
more. Thus there is a growing market for higher quality and priced computers. The
successful businessman visualizes the external factors affecting the business, anticipating
the prospective market situations and makes suitable to get the maximum with minimize
cost.

1.5.3 SOCIAL ENVIRONMENT

The social dimension or environment of a nation determines the value system of the
society which, in turn affects the functioning of the business. The social environment
includes all factors and trends related to groups of people, including their number,
characteristics, behavior, and growth projections. Because consumer markets have
specific needs and problems, changes in the social environment can affect markets
differently. Trends in the social environment might increase the size of some markets,
decrease the size of others, or even help to create new markets. The potential for internet
growth is huge in china, giving foreign computer companies, DELL the opportunities to
expand into a new market. Computer companies have to acknowledge that in the Chinese
culture, people are still unsure about card sales because of the huge expense of computers
in China. DELL has to invest in door-to-door or face-to-face operations to gain
consumers faith and consumer’s trust in the company and product.

The national demand for DELL computers is dependent on the educational level
prevailing in a specific country. The higher the educational standard, the higher is the
demand. Furthermore, Dell computers get more and more involved in daily life. Today,
children already get familiar with the use of computers at a very young age, representing
a generation that will hardly live and work without a computer in the future. Additionally,
the brand image of a computer and lifestyle trends get more and more decisive for the
purchasing decision. The DELL computer industry adapts to this trend, e. g. by offering a
wider range of notebooks and by trying to create a strong brand name.

1.5.4 TECHNOLOGICAL ENVIRONMENT

The technological environment includes factors and trends related to innovations that
affect the development of new products or the marketing process. These technological
trends can provide opportunities for new product development; affect how marketing
activities are performed, or both. For example, advances in information and
communication technologies provide new products for firms to markets, and the buyers
of these products often use them to change the way they market their own products.
Using these technologies products can help marketers be more productive. In the
Computer industry, technology continues to be smaller and faster than ever. Providing
access to technologies developed by institutions has proven a key government resource. It
was observed that by the year 2000, mainland China’s annual PC production would reach
7.6 million making it the third largest in the world. The internet is a great opportunity for
companies to get their into the public domain as well as a fast way to tailor services to its
customer segments. A threat in the technological segment to DELL’S business in China
is that access to the internet is costly.

When DELL announced Q2 financial results on Aug. 28, 2008, it reported continued
conservatism in IT spending in the U.S., which had extended into Western Europe and
several countries in Asia. The company is seeing further softening in global end-user
demand in the current quarter. DELL will continue to execute against its five growth
priorities of global consumer, small and medium business, enterprise, notebooks, and
emerging countries. The company expects to incur costs as it realigns its business to
improve competitiveness, reduce headcount and invest in infrastructure and acquisitions,
but its committed to work aggressively on cost initiatives that will benefit its P and L
over time with improved growth, profitability and cash flow. The company grew unit
shipments faster than the industry in the first half of calendar 2008 and expects to grow
faster than the industry for the full year.

1.6 SWOT ANALYSIS

A SWOT (Strength, Weaknesses, opportunities and threats) provides a basis for crafting a
strategy that capitalizes on the company's resources, while taking advantage of the best
opportunities, and defending against the threats to its well being. In developing a new
laptop computer, Dell would like to target three specific segments. The first, business
executives generally receive their computers from their employer through a direct
relationship with a manufacturer or a supplier. The second, college students, generally
buy their computers through the school they attend. This is very much like the way in
which business executives receive their computers, in that the individual is limited to the
options chosen by the institution. Finally, Dell would like to explore the option of
creating a laptop as a replacement for home desktop computers. Each of these market
segments poses its own challenges and possibilities. In analyzing Dell’s strengths and
weaknesses relative to these markets, as well as the opportunities and threats provided by
the macro-environment, a clear picture can be drawn to aid in the development of the new
product.

1.6.1 STRENGTHS

Clearly, many of Dell’s strengths come as results of the Direct Model. The model itself
could be considered one of the company’s greatest assets. However, a few specific
advantages are gained through the Direct Model relative to the laptop market.
First and foremost, the Direct Model allows consumers to fully customize their laptops.
The market is becoming more educated, and now more than ever individuals want a
product that can target their specific needs. In the case of laptops, this means that
customers want more options in terms of both performance and portability. By cutting out
the retail seller as a distributor, Dell has made it possible for each buyer to order directly
from the factory, thus giving them the opportunity to fully customize their product. In
addition to this customization, the Direct Model yields relatively fast delivery. This
allows customers to place their order, and receive their customized computer often within
days. Both of these Direct Model benefits are great assets in targeting the home-user
market segment mentioned above.
Dell has also an advantage in their inventory turnaround time, and in their well-controlled
relationships with suppliers. These business features create large cost savings, which Dell
can pass on to its customers. The final result is a customized, low-priced computer
delivered to the customer’s doors within days.
One of Dell’s great strengths in targeting the business executive category is that roughly
75% of all sales revenue comes from large businesses and government organizations. In
other words, Dell has already created relationships with large companies, and this
provides most of their business. These companies, in turn, pass the relationship on
through their employees, providing them with Dell products. Here again, Dell has the
ability to customize their products to cater to whatever needs the business or individual
may have. This, combined with their extensive business relationships, puts them in good
position to target the business executive segment with new products.

1.6.2 WEAKNESSES

Dell’s biggest weakness is attracting the college student segment of the market. Dell’s
sales revenue from educational institutions such as colleges only accounts for a measly
5% of the total. Dell’s focus on the corporate and government institutional customers
somehow affected its ability to form relationships with educational institutions. Since
many students purchase their PCs through their schools, Dell is obviously not popular
among the college market yet.
In terms of the home user, Dell’s greatest weakness is that buyers can’t physically touch
or see the product they want to purchase. While the Dell Direct Model provides many
great opportunities, its greatest disadvantage is that customers can’t go to retailer, try a
few different products, and walk home with a computer all in a single trip. The very thing
that differentiates Dell from its competitors, customization, also creates a problem in that
consumers can’t go out to buy a Dell as simply as they could some other brands. Many
computer buyers are wary of a product that they can’t personally examine before
purchasing. Furthermore, an anxious buyer would have to wait a number of days before
their computer was delivered. This is the price that must be paid for customization.

1.6.3 OPPORTUNITIES

Personal computers are being purchased and used more ever than before. The markets for
laptops, in particular, are growing much faster than that of desktop computers. This
general trends lends itself is a great opportunity for Dell’s laptop business to grow in all
segments.

Another great opportunity for all of the targeted segments relates to the first trend that
was mentioned. Customers are becoming more educated about personal computers, as an
increasing number of them are second-time buyers. Consumers who have purchased
computers in the past know what they want, and Dell can cater to them. The Direct
Model can provide the framework for consumers to make truly personalized computers in
a relatively hassle-free environment. This trend toward more educated buyers provides a
great opportunity in this respect.

Increased communication and technological integration also create great opportunities for
Dell. Customers can now go onto the internet to personalize their computer, place an
order, or even just to get information. This is more efficient for both Dell and the
customer, and its benefits are many. For one, the ability of a customer to go to an “online
store” can, in some respects, make up for Dell’s lack of physical retail stores. The
continued advancement in these technologies will surely bring similar opportunities.
The internet also provides Dell with greater opportunities since all they have to do now is
to visit Dell’s website to place their order or to get information. Since Dell does not have
retail stores, the online stores would surely make up for its absence. It is also more
convenient for customers to shop online than to actually drive and do purchase at a
physical store.

1.6.4 THREATS

One of the biggest external threats to Dell is that price difference among brands is getting
smaller. Dell’s Direct Model attracts customers because it saves cost. Since other
companies are able to offer computers at low costs, this could threaten Dell’s price-
conscious growing customer base. With almost identical prices, price difference is no
longer an issue for a customer. They might choose other brands instead of waiting for
Dell’s customized computers.
In a volatile market such as personal computers, threats abound. Computers change in a
constant sometime daily basis. New software, new hardware and computer accessories
are introduced at a lightning speed. It is essential for Dell therefore to be always on the
lookout for new things or introduce new computer systems. The threat to become
outmoded is a pulsating reality in a computer business. Not only that, companies must
produce products that are high in quality but low in price. This is one challenge that Dell
contends with.

The growth rate of the computer industry is also slowing down. Today, Dell has the
biggest share of the market. If the demand slows down, the competition will become
stiffer in the process. Dell has to work doubly hard to differentiate itself from its
substitutes to be able to continue holding a significant market share. Technological
advancement is a double-edge sword. It is an opportunity but at the same time a threat.
Low-cost leadership strategy is no longer an issue to computer companies therefore it is
important for computer companies to stand out from the rest. Technology dictates that the
most up-to-date and fastest products are always the most popular. Dell has to always keep
up with technological advancements to be able to compete.
Finally, the quick pace of technological advancement, while generally being a
tremendous opportunity, is also great threat. Now that the low-cost leadership strategy is
becoming less applicable to computer companies, brands names must differentiate
themselves from their competitors. In the laptop market, this is largely based on
technology and product design. The newest, fastest, most efficient technology, and the
most durable, user-friendly product is going sell. If a company fails to keep up-to-date
with innovations in technology, they will quickly see a decline in performance.
1.7 CONCLUSION

The current markets trends in the personal computer industry, for laptops in particular,
are being driven by ever changing consumer needs, wants, and demands. As a result,
companies like Dell Computer Corporation are forced into a constant state of adaptation
in order to satisfy their customers. By taking full advantage of their strengths, paying
close attention to their weaknesses, and identifying both opportunities and threats from
the macro-environment, these companies can position themselves as significant
shareholders in an intensely competitive market. Overlaying pest factors on the typical
interactions among the Political/legal, Economic, Social, technological, competitive, and
institutional environments produces a complex future for marketers. Those that identify
the key trends among these factors and understand how these trends interact will be in the
best position to take advantage of marketing opportunities and to minimize threats.
Appendix1 - PEST Analysis

Social

Macro
Political Environment Technological

Economic
 APPENDIX 2 - SWOT Analysis of DELL
Strengths
• Many of Dell’s strengths come as results of
the Direct Model. The model itself could be
considered as one of the company’s greatest
assets.
• Dell has an advantage in their inventory
turnaround time and in their well-controlled
relationships with suppliers.
• One of Dell’s great strengths in targeting the
business executive category is that roughly
75% of all sales revenue comes from large
businesses and government organizations.
Opportunities
• The markets for laptops, in particular, are
growing much faster than that of desktop
computers. This general trends itself is a great
opportunity for Dell’s laptop business to grow in
all segments.
• The Direct Model can provide the framework for
consumers to make truly personalized computers
in a relatively hassle-free environment. This trend
toward more educated buyers provides a great
opportunity in this respect.
• Increased communication and technological
integration also create great opportunities for
Dell.
1.10 REFRENCES
William O. Bearden, Thomas N. Ingram, Raymond W. Laforge, Marketing: Principles
and Perspectives, 5th Edn, McGraw-Hill/Irwin, pp. 26-35.
Weaknesses
• Dell’s biggest weakness is attracting the college
student segment of the market.
• Dell’s sales revenue from educational institutions
such as colleges accounts for a measly 5% of the
total.
• Dell’s greatest weakness is that buyers can’t
physically touch or see the product they want to
purchase.
Threats
• One of the biggest external threats to Dell is
that price difference among brands is getting
smaller.
• The growth rate of the computer industry is
also slowing down. Dell has the biggest share
of the market.
• The single biggest problem for Dell is the
competitive rivalry that exits in the PC market
globally. As with all profitable brands,
retaliation from competitors and new entrants
to the market poses potential threats.
William R. Dillon, Thomas J. Madden, Neil H. Firtle, Marketing Research in a Marketing
Environment, 3rd Edn, Richard D. Irwin, pp. 70-74.

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