Dusk at Dell: What’s wrong with the Company’s

Strategy

[Dusk at Dell: What’s wrong

with the Company’s Strategy]

[Dell has experienced tremendous growth over the past

twenty years. Throughout this Period, Dell has continued to
raise its standards of excellence. The values, mission and
vision of the company facilitate the achievement of these
illustrious goals. The purpose of this document is to
evaluate the internal and external environments and Dell’s
position within this competitive landscape. Based upon this
analysis, a recommended strategy will be outlined which
will guide Dell back to its roots.

The recommended strategy for Dell is to reinvigorate its

differentiation advantage. Ultimately, the company must
get back to basics. This requires the firm to realign its core
competencies with the needs of a global marketplace.]

Sunday , July 4, 2010

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Dell History in brief

The key competencies of Dell are customer focus, manufacturing processes, supply
chain management, customer selection, acquisition and retention, customer service
and human capital management. Dell’s strategy has been to match its core
competencies with key industry success factors.

The PC industry is facing increasingly strong worldwide competition – leading to

reduced differentiation among competitors and increased price sensitivity among
consumers. Although Dell has seen considerable growth, the company is beginning
to lose its competitive edge in critical business segments. Specifically, Dell needs to
improve in the following areas: customer service, customization options, increased
marketing presence and retail solutions tailored to the global environment. Dell’s
ability to adapt in these business segments will ultimately determine its ability to
maintain its predominant position.

Computer market structure

The computer industry has grown since 1975 into a mature and dependable
industry of today. In 1975 less than 50,000 PCs were sold with a value of about
$60M. From this limited start the PC industry has grown to unit sales of over 280M
units in 2009. PC retail revenue topped $330B in 2007 and 2008, but is in a
declining phase due to continued price declines and a shift to low-cost products
such as netbooks. The next table shows the tremendous growth of the PC industry
in the last 30+ years. And the growth of the PC industry will continue, but at much
lower rates than previously-at least in terms of unit sales.

The sheer size of the PC industry limits its growth rate, but the yearly worldwide
sales will grow by over 40% in the next five years—from 231M units in 2006 to
nearly 335M in 2012 or a 6.3% compound annual growth rate. Worldwide number of
PCs in-use surpassed 900M units in 2005 and will reach 1.47B units by year-end
2011. Worldwide cumulative PC sales topped 1B units in 2002 and will top 2B in
2007 and 3B in 2011. PCs in-use reached 241M in the U.S. in 2006 and will top
300M in 2012.i

Table extracted from: http://www.c-i-a.com/worldwideuseexec.htm

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The computer industry has undergone major changes in its market structure to
dominate the market. In the early days of development, the market was controlled
only by a few independent small firms designing their own system with minimal
compatibility. Competition within the computer industry is intensive, with dominant
players like Dell, Apple (IMAC), Hewlett Packard, Sony, etc.

The United States dominated the computer industry in 1980, with 80 percent of the
industry's revenues worldwide. Most of these revenues were produced by less than
ten companies, with IBM as the leader. All of these firms, including IBM, however,
lost ground during the ensuing decade, despite the facts that the computer industry
grew three times in size and its cost-effectiveness improved some ten-thousand-
fold.

In this industry, known and established companies have competitive advantages

over new entrants.

Older firms enjoy economy of scale and relatively lower cost of production of
compared to newer firms. Due to this, new entrants typically are forced to either
absorb the higher cost wit lower profit margin, or search new market target to avoid
price war with established firms.

Current positioning and strategy

Dell currently serves a global market through the sales of its products and
services. Its core business is computer related and is based in the U.S.,
where the company has the largest percentage share of the computer
market.

Figure : Product-Market-Matrix

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• Dell competes in several international and domestic markets and currently

produces a wide variety of products.
• Dell's present product line can be segmented into 5 major categories:
Desktop and Mobility Computing, Software and Peripherals (Printers,
Monitors, Plasma TV's, Cameras, etc.), Servers and Networking, Infrastructure
Services and Storage.
• Dell, through the creation of subsidiaries, has expanded its business model
worldwide. While its core business resides in the U.S., operations in Europe,
Asia and Japan continue to grow, making up 34.5% of Dell's year-to-date
(YTD) revenue (Form 10Q, 2005)
• Dell benefits from the advantage of incentives and discounts that arise from
volume and the ease of only having to maintain one production line for
attachment of microprocessors (Yager, 2005)
• Currently Dell's service provisions are limited to infrastructure services. Dell
works with a customer to determine the necessary technology, deliver it and
set it up, and then terminate its involvement with the customer
• Currently Dell's service provisions are limited to infrastructure services. Dell
works with a customer to determine the necessary technology, deliver it and
set it up, and then terminate its involvement with the customer
• Another key aspect of Dell's brand is its high quality customer service
reputation. Among low end customers, Dell's ranking has slipped due to

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changes in the way services are marketed as the company focuses on higher
margin products
• One of Dell's stars is its server business. Dell’s market share has grown at a
rate of over 25% and it recently surpassed Sun as the #3 provider of servers.

PEST Analysis of Dell/Computer Industry

The PEST analysis studies into the important factors that are affecting the business
externally. Focusing on the computer industry, we view the following:-

Political

Political factors like rules, constraints, regulations and conditions made by the
government have a direct impact on all industries.

Any change in the government policy will have a strong impact on the computer
industry. Increase in taxes by government on import would directly increase the
indirect cost of production. With the intensive competition, some manufactures
may not be able to pass on the cost to consumers directly by increasing the price.
Depending on the degree of customer brand loyalty and elasticity, it may be
possible to pass on some cost to consumers.

Similarly, a move towards improving technological skills and knowledge of its

people will drive greater demand for computers. Such skills and knowledge are
incorporated into compulsory education syllabus and demand will definitely
increase.

One such mandate affecting the computer industry is in China. As of 5 Aug 2009,
China’s Ministry of Industry and Information Technology (MIIT) has delayed a
controversial mandate requiring every new computer sold in the country to install
internet-filtering software called Green Dam Youth Escort. The Chinese ministry
describes the Green Dam as aiming to prevent children from gaining access to
online pornography and other content deemed to be harmful. Parents can also use
this software to check the online time and viewing content of their children, in order
to protect the children from “internet addiction.” However, critics at home and
abroad argue that the software still has large flaws, including a security hole that
would allow computers with the software to be easily attacked by hackers. Other
critics focus on the possible breaches of consumer rights, competition law and
government purchasing rules implicit in the law.

Most leading computer makers declined to oppose the plan publicly, with companies
either installing the software or including it uninstalled with the free software
package that comes with their computers. Asian and Chinese computer
manufacturers, including Japan’s Sony, Chinese Taiwan’s Acer and Asustek, and
China’s Lenovo and Haier mostly took the former approach, and are already selling

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or have indicated that they will sell computers that comply with the government
program. HP and Dell have categorically said they would not install Green Dam in
their new personal computers, instead only providing it in the separate software
package. Analysts also argue that concerns about corporate image played into the
decision of Western companies to not install the software, and that companies that
decided to install the software could be haunted by the decision.

Economic

There are several factors within the economic environment that affects the
performance of the computer industry. Interest rates, GDP growth, inflation rate,
exchange rates, etc are some factors within the economy region. In addition,
stability and fluctuations in the economy have a direct impact on the cost of capital,
price revenue and profitability level of the computer industry and its players.

Prior to the recent upswing in the national economy which sees lower
unemployment rate, tax relief measures were passed to reduce amount of taxes
paid for both companies and households. Such economic factors contributed to a
larger disposable income and spending power for individuals. For companies,
higher budget for more capital expenditures can be seen. Purchasing power
increases which leads to increase in demand.

Similarly, the international economy has a strong impact on the exchange rate.
Fluctuations in the exchange rates typically affect companies’ profitability. Such
impact is stronger for companies involving more with import and export of
computer and related parts and products.

Apart from fluctuating exchange rate, the export tax provision is another
uncontrollable factor for computer firms. Higher tariffs will impact profitability and
export opportunities.

In particular for Dell, the two main countries are the United States (US) and China.
Out of the two, the US has been struggling to stimulate the economy back into life.
Sales across the board have been down, including in the IT industry. However, with
the US government implementing policies to re-start the economy, things are
beginning to look up – albeit slowly. This is an ideal time for Dell to ‘put its house in
order’ so to speak, regarding the US market. Other emerging economies like China
have suffered less, and continue to hold good prospects for Dell.

Societal

Social factors, which include age distribution, ethnic groups, religion, etc have
widen in the computer industry. The social attitude towards technology and
computers has changed along the years. Unlike in the past, the age range of
consumers has far widened. Children are seen using computers are much younger

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age and in fact, computer education has been incorporated into schools. Demand
for computers was seen to have increased and likely to continue increase.

In 2002, MIT Professor Nicholas Negroponte experienced first-hand how connected

laptops transformed the lives of children and their families in a remote Cambodian
village. He then developed a campaign called One Laptop per Child (OLPC) with
mission to empower the children of developing countries to learn by providing one
connected laptop to every school-age child. Also it aims to provide a means for
learning, self-expression, and exploration to the nearly two billion children of the
developing world with little or no access to education. While children are by nature
eager for knowledge, many countries have insufficient resources to devote to
education—sometimes less than $20 per year per child (compared to an average of
$7,500 in the United States). OLPC made a partnership with companies like AMD,
Marvell, and Nortel, and currently will partner with Macintosh software in a unique
fundraising program.

Technological

Info-communication and technology has now become a major part in all business
sectors. Businesses are seen to be improving quality through technology. In the
computer industry, the rate of technology change is high. The extraordinary
demand for latest technology has drive firms into developing at a faster pace to
meet the demand.

With the development of new technologies, prices of existing technology are forced
downwards. As each new technological breakthrough is introduced into the market,
the “current latest technology” became shelved and cheaper. In order to stay
competitive, firms are driven to slash pricing to clear stocks on hand. This constant
pressure to stay ahead in the market has led to the players in computer industry
reducing their price while continuing to improve in the research and development
activities of their products.

Technology innovation and the availability of system compatible software are the
main contributing factors for new entrants. Unless they are able to excel better,
consumers are still more likely to purchase more familiar and established brands.

Some PCs continue to bulk up and tout their speed and raw power, others represent
a new trend: slimming down. These smaller, simpler machines are aimed at a
potentially lucrative market: the next 1 billion PC users around the planet. Intel, the
chipmaker, calls the category "netbooks" recognizing that much of what people do
on their laptops involves going on the Internet. The new machines are also being
called ultra-low-cost PCs, mini-notebooks or even mobile Internet gadgets. In
appearance, they have the familiar clamshell design, but they're smaller, with 7 to
10 inch screens. They offer full keyboards (albeit with smaller keys) and weigh less
than three pounds. Perhaps most important, the majority cost less than $500 --

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some as little as $299. Intel says it expects more than 50 million of these netbooks
to be sold by 2011. It has introduced a tiny, low-power processor called Atom to run
them, putting 47 million transistors on a chip about the size of a penny. Intel has
created the Classmate PC to show the potential market for students around the
world. In Brazil, they're sold under the Postivo brand. In India, Intel partners with
HCL Infosystems to produce them. Asus, a computer manufacturer in Taiwan, burst
out of the gate last fall with its Eee PC, priced at $299 (running on the Linux
operating system) and $399 (with Windows XP). And other major computer makers
like Dell, HP and Toshiba follow them to release their new small notebooks. In
January 2009, Sony debuted its P-Series Lifestyle PC, an 8-inch laptop computer that
shoehorned netbook-level innards into a men’s suit wallet (or women’s wallet)
-sized form factor.

Currently Dell showed their new netbook Latitude 2100 and expects hundreds of
thousands of children to use its netbooks when they return to school this fall. They
said 970 U.S. school districts have placed orders for its netbook since it was
announced in mid-May. That adds up to 73,000 units in the U.S, and since students
will share the netbooks, the total number of users will be in the hundreds of
thousands. There are two forces propelling sales of the 2100: educators' desire to
adopt new technology at a reasonable price and Dell's desire to gain share in a
market it entered late. School administrators say the 2100, which starts at $369, is
not particularly cheap for a netbook but it is much more affordable than a typical
laptop. Dell, in turn, sees the educational market as an area where it can lead
netbook sales, since rivals like Acer and Asus already dominate the consumer
space.

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Figure 3: Porter’s 5 Forces

Potential entrants
Low Entry Barrier,
Assemblers, High
Demand.

Buyer’s Power
Supplier’s power Competitive Multiple
Intel, AMD, Nvdia Rivalry Configurations,
Limited source of HP. IBM.SUN, Many competitors,
products Assemblers, Product Assemblers

Substitutes
New tech Mobile, TV
PC, Palm Tops.

Bargaining Power of Suppliers

Suppliers hold considerable power in the computer hardware industry. Although
Intel’s grip on the market has decreased slightly with the emergence of AMD, the
company still supplies about 90% of the microprocessors used in PCs. Similarly, the
Microsoft operating system is used in an estimated 85% to 90% of PCs worldwide

Bargaining Power of Customers

Consumers also have a significant amount of power within the PC market. As a

result, PCs have become commodities – requiring vendors to maintain competitive
prices in order to retain customers. In addition, almost all providers allow customers
to customize the PC to match their needs. Plus, nearly all PCs contain roughly the
same components and may have been manufactured by the same
Chinese/Taiwanese firms. The addition of new technology to a market (such as the
introduction of a new operating system) will lead consumers to upgrade their
systems, thereby limiting some of the consumers’ power.

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Threat of New Entrants

The explosive growth in servers in the late 1990s attracted new entrants to the
market. In addition, PC server participants, drawn by projected growth rates of 25%,
further stimulated the market with dramatic price cuts (Graham Hackett, Industry
Profile, 2005). However, the computer hardware industry has been in a
consolidation phase for a number of years (for example, Compaq purchased
Tandem then HP purchased Compaq).

Threat of Substitutes

The threat of substitutes is low in the computer hardware industry. Consumers only
have two choices for PCs – Apple’s Macintosh or Windows-based PCs. However, the
cost of switching between the two systems is significant, thereby making it unlikely
that customers will substitute one for the other. Servers, on the other hand, have no
available substitutes.

Intensity of Competition

The number of competitors in the PC and server markets is relatively low;

nevertheless, the level of competition is exceptionally high. In the PC market, the
largest (“Tier 1”) vendors are IBM (although its PC business is now owned by
Lenovo), Sun Microsystems, HP, and Dell. Smaller (“Tier 2”) vendors include
Gateway and Toshiba. However, below the second tier lies another group of
manufacturers - companies selling unbranded “white box” computers that they
have either assembled themselves or purchased from a local assembler. Since
white boxes increasingly use the same components as branded computers, their
functionality differs little from those sold by the Tier 1 and 2 vendors (Graham-
Hackett, 2005). The recent trend towards consolidation and the decreases in
component prices has led to the intense competitive pricing now facing the
industry. Given the long-term downtrend in PC pricing, vendors will need to
continue to cut costs from their operations. The growing ‘white box’ market will
require the Tier 1 and Tier 2 vendors to maintain competitive prices. Companies
with more favourable cost structures increase their chance of profitability.

SWOT Analysis.

Strengths

 The DM or lowest cost direct model perfected by Dell.

 Customized products from the customers choices based at point of purchase
 Able to order via the telephone or online
 Wide range of products from PC, Laptops, Servers, Storage , Enhance Service
and Peripherals and Consumer electronics
 Low cost of stock and very low stock levels compared to its peers.
 A best in class production, sourcing and integrated supply chain to support its
Direct Model supply chain.

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 A track record of overcoming financial turbulence in Markets like the Dot.com
bust and still making good returns. Overcoming the merger of HP and
Compaq and taking a lead in the market.

Weaknesses

 The central focus of Dell is unclear for the future as its take the market that
makes sense for it based on the city it wants to operate in. Its does not build
any long-term brand allegiance with its consumers. The segment it operate
its treat Dell as the lowest cost in relation to it peers.
 It does not invest heavily in R&D and does not introduce any sort of new
products into the market.
 Its marketing presence via television or social media is lacking compared to
HP which is selling their products via celebrity’s as lifestyle items versus a
cheap computer.
 It has no stores thus its limited in its ability to capture more “hinterland”
markets or locations in developing world where accesses to credit cards or
even the internet could be challenging. Thus is not able to actively get new
masses into the pipeline of order.
 High staff turnover and high senior level departures from the Dell, shows that
there are issues within the company culture that remain unresolved.

Opportunities

 PC and Laptop market will grow and China and India will be amongst the new
frontiers of the growing masses in demand for PC and Laptops
 The low cost model will appeal to cost conscious rural Asian markets where
such items are considered a luxury item.
 Dell has yet to review the options of setting up stores in selected cities thus
the room to adapt to local needs is not a limiting factor to growth
 In India and China by joining forces with a local partner the expansion
timeline could be shorted and the market share expanded via some local
acquisitions of local and known brands.

Threats

 Technology markets and hardware become obsolete very fast.

 The customer needs evolve too fast and Dell is not able to anticipate this and
is caught off guard in it planning and huge capital expenditures are made
that could prove wrong in terms of plants.
 The emergence of handheld device like I phone and other personal digital
assistants/voice/internet devices with strong computing power will lead to a
challenge the use of traditional PC and Laptop, if such device could just like
to you TV for screen display enhancement.

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 A weak or inexperienced senior management team due to attritions could
find they do not have the necessary experience or expertise to plan and drive
the company into the future and overcome obstacles.

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New Strategies
No single strategy or strategies can guarantee long term success indefinitely.
Environments change, industries change, competitors change and customers
change – so it goes without saying, strategies must also change.

Between 1996 and 2006, Dell’s revenues multiplied more than tenfold from $5.3
billion to $55.9 billion – its stock price rose by approximately 87,000 percent, from
lowest to highest – it was the world’s largest producer of personal computers (PCs)
with nearly 18% of all shipments in 2006. Dell’s unequalled success also saw a
disastrous merger between Hewlett-Packard (HP) and Compaq, and the former
inventors of the PC, IBM, leave the PC business altogether.

Taking into account the analysis up to this point regarding Dell’s internal strengths
and weaknesses, and the external opportunities and threats in the market, we
recommend Dell do the following:

Business Level Strategies

Dell’s current predicament is really due to a contradiction in its original strategy of

the “direct business model”. This model implies direct contact with the customer,
and as such Dell should actually be closer to its customers than its competitors. But
this isn’t the case, even though Dell has been selling direct to its customers it hasn’t
taken advantage of that intimate connection to develop closer customer
relationship management (CRM). By doing so Dell would ‘feel the pulse’ of its
customers and understand their complex wants and needs. Dell has to return to
understanding that customers are the foundation of business level strategies, and
that customer preferences should affect how business strategy should be
formulated. Ultimately the firm’s core competencies should be focussed on
satisfying customer needs.

How should it do that?

1. Cost leadership

To date Dell has excelled in its cost leadership model. It has managed to
keep costs low by maintaining a direct business model with its customers,
and by running a very efficient supply chain. These are obviously core
competencies that Dell has maintained over the years, and one that it should
hold on to.

2. Differentiation

This is where Dell desperately needs work. Over the years Dell has become
extremely complacent with its pole-position to its own detriment. Dell has
several areas to work on in differentiating itself.

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a. Innovation

For ten years Dell churned out extremely aesthetically and functionally
bland computers, but because of its price superiority, and other pretty
boring computers, it stayed in the lead. In a recent newsletter Donald
Norman, a renowned product designer wrote about Dell’s new high-end
computers “... sensible, logical, ugly.” But in a world where all
computers are ugly, who cares? The re-emergence of Apple, and in
particular its entry into the notebook market with the MacBook Pro in
2006, made customers realise that boring isn’t trendy anymore.

Dell was always innovation-shy, it was satisfied with selling standards-

based products. In 2006 it only held 1,581 patents compared to 30,000
patents held by HP in 2005. It also had a very paltry R&D spend of
approximately 0.8% of revenue in 2006, compared to 3.9% and 3.7%
for HP and Apple respectively.

Dell needs to be much more innovative in its product design and

selection. The Apple model clearly shows that people are no longer
satisfied with choosing the cheapest products. This will entail a greater
and more efficient use of R&D dollars.

b. Quality

The recent 4.1 million notebook recall because of unsafe batteries

showed Dell’s drop in product quality standards. It also had a
disastrous effect on Dell’s reputation. Dell needs to clearly differentiate
itself as a producer of quality. Just because it may be priced below the
competition – it dare not accept a reputation as a producer of shoddy
goods. That would be the end of Dell. Dell needs to ensure high quality
components are used in all their products, and that all are tested
extensively

c. Service

Customer satisfaction has been dropping at Dell, due to neglect of

service excellence, outsourcing and measurement metrics. Dell needs
to re-focus attention on service excellence. Dell’s particular direct
business model must be driven hand-in-hand with excellent service,
because it is communicating directly with the customer without
intermediaries. Great attention needs to be paid on excellent service
and communication, along with an extremely efficient process of
problem solving.

d. Human Resources

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Recently Dell has suffered a high-rate of executive defections to
competitor companies. This has been caused by a combination of an
excessively driven work culture and falling morale. Dell has to realize
that it cannot continue to lose top executives, or to become satisfied
with a more transient pool of human resources. Good human resources
are the very life-blood of innovation which is really lacking at Dell. It is
also the source of the company’s greatest competitive advantage. Dell
needs to rethink its HR strategy, attract and keep talented employees
at all levels.

Geographical and Competition Strategies

In 2006 Dell’s US market share was 32.1% beating all its rivals, and its global
market share was 16.1% a fraction behind the leader HP. Dell would need to
maintain market development to remain a major player in the industry. China and
India are fast becoming prime emerging markets for growth, so Dell needs to
consider its entry strategies carefully.

China and India

Out of the two countries China represents the biggest immediate opportunity.
It already boasts 133 million internet users in 2006, almost twice that of
Japan, and more than twice that of Germany. Its major cities are therefore in
a prime position to accept Dell’s current direct business model. The model
also lends itself well in removing unnecessary layers of bureaucracy in the
supply-chain. The only caveat would be that relatively few Chinese customers
use credit cards, or are used to purchasing online or by telephone. This can
be overcome by using more stalls and more flexible payment methods.

Dell currently stands third in Chinese market share behind two local
companies, Lenovo and Founder. With the correct marketing, education and
product development Dell could remain a serious contender in the Chinese
market.

Lenovo

Lenovo is clearly becoming a large threat to Dell. It currently has the top
market share in China and the number four position globally. Chinese
customers are still very loyal to local producers, but key innovation and
reputation enhancements by Dell could change that, rapidly increasing Dell’s
position in China.

HP

Globally HP is marginally ahead of Dell; however, with the above strategies

Dell could regain the top spot.

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Diversification Strategies

Dell has already seen the results of its moves into diversification within the IT
industry with substantial growth in IT services, printers and the hand-held PC
market. There is also value creation with this related diversification. Dell must
continue to innovatively attack the hand-held segment as there obviously seems to
be a gap between the notebook and mobile phone markets. It must also develop its
related products (services, printers, etc) to provide a 360 degree approach to IT, for
both the corporate and individual segments.

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Recommendation for Dell

1) Develop a new Core competency based on innovative products. Dell whilst

maintaining its cost leadership in the market place should aim to move to the
next level of “Integrated Cost-leadership/Differentiation”.

The objective is to make its current PC business more resilient to the price
wars by adopting the model Apple has taken with the I-Mac and other new
devices. This will help to create a buffer to its traditional core strength of PC
manufacturing based on its cost leadership advantage. It is this category that
provides 38% of income based on 2006 2nd Qtr data.

2) Create a line of products catered to the gaming markets not only in screen
design but total gaming PC and Laptop’s meant for exclusive and serious
gamers.

An ideal product would require a total re-design of the PC as we know it

meant for office and general use. From the screen shape & design e.g.
Concave shaped, 3 dimensional and to new manners of key board design or
even virtual free hand movement devices and highly sophisticated enhanced
audio capability built in.

Thus the potential is there is create a niche market using a Focused

Differentiation for this segment of its business. The below is from Michael
Pachter of WedBush Morgan Securities featured in Gamasutra an online
gaming magazine.

"The PC games market is becoming a niche, substantial in size, but a niche

nonetheless. There will always be PC games, and the MMOs are likely going
to remain PC-based because of the required Internet connection. There are
also games that just make sense on a PC, like RPG, RTS and certain puzzle
games.
ii
The game industry value chain is made up of six connected and distinctive
layers:

a) Capital and publishing layer: involved in paying for development of

new titles and seeking returns through licensing of the titles.
b) Product and talent layer: includes developers, designers and artists,
who may be working under individual contracts or as part of in-house
development teams.
c) Production and tools layer: generates content production tools, game
development middleware, customizable game engines, and production
management tools.
d) Distribution layer: or the "publishing" industry, involved in generating
and marketing catalogs of games for retail and online distribution.

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e) Hardware (or Virtual Machine or Software Platform) layer: or the
providers of the underlying platform, which may be console-based,
accessed through online media, or accessed through mobile devices
such as the iPhone. This layer now includes non-hardware platforms
such as virtual machines (e.g. Java or Flash), or software platforms
such as browsers or even further Facebook, etc.
f) End-users layer: or the users/players of the games.

Dell has the ability to contribute items c and f in this niche market through a
focused differentiation strategy.

3) Create a new “Services, Consulting and Outsource Partner” arm as a

separate business entity.

The focus areas will be Enhanced Services and Software and Peripherals that
are currently under Dell. A Dell team of up and coming competent managers
within Dell and major consulting firms with an external CEO to be established.

This will ensure that a new set of core competencies can be sowed and
developed without the shadow of Dell current management issues or cost
driven culture weighing down the new company. Based on Dell’s strengths
the new entity would offer the following to non competitive markets or
business the following.

a) Provide consulting services on supply chain and cost management of

business that implement the direct model approach
b) Handle the supply chain as an outsourced vendor of business that lack the
infrastructure or capital to invest in a supply chain network
c) Support infant new ventures as a venture capital partner to establish the
required distribution and provide management skills transfers from
incubation to growth stage. Whilst retaining significant shareholding
d) Create software along the lines of SAP focused on total supply management
and order processing.
e) Create a Call Center Management and consulting services is another area to
be leveraged upon.

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 Dusk at Dell: What’s wrong with the Company’s
Strategy
Conclusion

In order to sustain domestic and international growth, it is important for Dell to

implement its business strategy that led the company to global prominence.
Dell should continue to focus on its customers and meeting their needs. It is
also important that Dell continue to keep its costs low and create economies of
scale. Dell should keep looking for new technologies and developments that
will enable them to create new products or enhance its existing products.
Furthermore, it is extremely important that Dell focuses on the needs of each
geographic segment it serves, and it should adjust products to fit those needs
as they change.

References

1. http://www.cibmagazine.com.cn/Features/Obizuary.asp?
id=1038&green_dam_postponed.html
2. http://laptop.org/en/vision/mission/index.shtml
3. http://articles.moneycentral.msn.com/Investing/Extra/ComputerMakersChase
HundredDollarLaptop.aspx?page=all
4. http://www.forbes.com/2009/08/06/dell-netbook-schools-technology-
enterprise-dell.html
5. http://prmac.com/release-id-6778.htm

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i
http://www.c-i-a.com/worldwideuseexec.htm
ii
http://en.wikipedia.org/wiki/Video_game_industry#Game_industry_value_chain