Dell SWOT Analysis

By: Blake Prosser - Place Katie Schneider - Price Matt Raccuglia - Promotion Melody Souvannasane - Product

Table of Contents
Introduction...3 Product..4 Price..8 Place11 Promotion14 Customer Service18 Recommendation20 Works Cited22

Introduction
This SWOT analysis will identify Dells strengths, weaknesses, opportunities and threats compared to Apple within the business to business market. Dell and Apple both offer computers and electronics to customers, but the marketing strategies for each company are wildly different. Until recently, Dell dominated the home and business computer market. In the past few years, Apple has aggressively captured some of Dells market share in each of these categories.
Figure 0.2 1996 Dell.com is launched, changes the way people shop for computers Figure 0.1

1984 Founded by Michael Dell

1988 Has IPO, Becomes Dell Computers

1993 Dell develops product lines for business users

2003 Begins to offer home electronic product lines

2007 Dell introduces product line to cater specifically to small business users

1980

1985

1990

1995

2000

2005

2010

1987 Expands into the United Kingdom

1990 Opens facility in Limerock, Ireland to serve Europe

1995 Dell expands worldwide

1998 Establishes facilities in China

2005 Dell tops the Americas Most Admired Companies list by Fortune Magazine.

2009 - Dell ranks #1 in servers, corporate laptops and desktops with business users.

(Dell.com)
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Product
Strengths Dell is a major player in the business computer market for several reasons. Dell has a market share of 13 percent, which makes them the worlds second largest PC vendor behind HP (Burt). Dell has maintained its large market share by offering several product lines that are positioned for specific users. Dells wide variety of product lines and ability to customize each product helps Dell maintain its competitive edge. Dells product lines provide products for small offices (1-9 employees), small and medium business, public sector, and large enterprises (Dell.com). According to EWeek.com, Dell told the Financial Times that, like HP, Cisco Systems and others, his company is looking to become less a seller of computers and more of a solution provider to businesses, offering everything from software and services to servers, networking and storage. Dan Wood, Sr. Client Technology Analyst, states companies need hardware assurances that are only available on enterprise level laptops. Dell provides these assurances with their product lines which include the Vostro, Latitude, Optiplex and Precision lines. Dell guarantees that these lines will have the same hardware available in them for most of their lifespan. IT organizations are able to save money because they dont have to constantly update their images with new drivers and helps with troubleshooting, says Dan Wood. IT departments prefer Dell computers for their interchangeability and low maintenance costs. By allowing companies to customize their computers, each company has a large supply of one specific model. IT departments only need to stock certain parts for maintenance and Dell computer parts are easily attainable without needing to involve Dell.
Figure 1.1

Weaknesses One of the most significant weaknesses with Dell is the lack of proprietary software. Most Dell computers are shipped with a Microsoft Windows operating system (Ladendorf). This
Figure 1.2

represents a major dependence on a suppliers product. Not only does Dell not play a significant role in the design of Windows, but Microsoft also has a say in the configuration of Dell products. In addition to a heavy dependence on Microsoft, Dell has lost large market share with college age customers (Higgins). Dells sales revenue from educational institutions such as colleges only accounts for a meager 5% of total sales. Dells focus on the corporate and government institutional
Figure 1.3

customers somehow affected its ability to form relationships with educational institutions (Cuizon). The larger implication is that these students might have a negative opinion of Dell when they
95%

Revenues
5% Education Rest of Business

graduate. This will not only hurt current product performance, but could hurt large enterprise sales in the future.

Opportunities Dell has many opportunities that include targeting educational institutions, improving the look of products, and continuing to incorporate innovating software. Investing in research and

development is an opportunity Dell can take advantage of. This will lead to competitive advantage and help them increase their innovation. The easiest way for Dell to expand into these markets it to promote its dependable and low-cost products. With the economy on the rebound, Dells custom product
Figure 1.4

lines have the ability to regain lost and capture market share. Cloud computing is upcoming technology that business are starting to use. Dell has started incorporating cloud computing in their computers. Specializing in their cloud computing service can lead to product strength. Creating partnerships with other businesses is also another opportunity. Dell is in the works with HP to create a strategic alliance (Dell.com). Dell has a page on their website where partners can contact Dell if they want to be business partners. Through a string of 10 acquisitions in less than two years, Dell has branched into areas such as IT services, computer networking and data storage (Ricadela).

Threats There has been a rapid change in how customers view computers. Many customers have turned to Apples more aesthetically pleasing product lines over Dell. Apple.com describes their products being made from aluminum, which is a breakthrough in technology. Apple provides a wireless mouse and keyboard that Dell does not. There is a built in camera and microphone in an Apple monitor that lacks in a Dell monitor. The debate of Mac vs. Dell has been a topic of discussion. A weakness of Dell

Figure 1.5

products on Apple.com states, Unlike a PC, a Mac comes with everything you need to send email, manage your calendar, organize your contacts, and more minutes after you take it out of the box. PCs do not have Apple proprietary software which can be a weakness being that Apple has created their software. This includes iChat, iMessage, iTunes, Facetime, Safari, and
Figure 1.6

other Apple programs that are already built into Apple products. Dell lacks in graphic features that graphic designers and tech savvy companies look for. Apple.com describes, The foundation of the Mac Pro graphics architecture is the latest generation of GPUs connected to the system via a fast and wide PCI Express 2.0 16-lane bus. Couple that with Core Animation, Core Image, and Core Video technologies in Mac OS X Snow Leopard. The result is a graphics platform that allows applications to seamlessly tap into a teraflop of graphics power. Apples brand loyalty plays a big role in Dells influence on end users. The PC vs. Mac is a debate, which can threaten Dells images. If Dell continues to improve their product reputation they can overcome their loss of reputation when they had a recall on their computers. Threats of competitors, substitute products, and past recall items can negatively impact Dell if they dont use their strengths.

Price
Strengths Although finding exact prices for business to business sales is nearly impossible, as the price is highly dependent on what programs are needed for a specific business, one can understand overall pricing strategies by looking at consumer pricing strategies. Dell has created a huge strength for itself regarding price. Overall, the company practices a low cost, low price strategy. Figure 2.1 displays the lowest laptop prices of Dells major competitors. Brand Acer Apple Asus Dell HP Lenovo Samsung Sony Toshiba Lowest Laptop Price $328 $1199 $543 $399 $399 $399 $449 $469 $348

Although Dell is not the cheapest laptop available, the company does an excellent job of offering discounts and coupons on their already low priced computers, which will be discussed in greater detail in the Promotions section. When comparing a Dell computer to others, customers will see Dell at a low price in the market. Even the most expensive computer Dell

offers is only $2,000. Dell offers a huge range of prices, which makes it easy to appeal to all types of markets, unlike companies like Apple whos prices make it impossible to target markets seeking low prices. Figure 2.1 displays Dells highest and lowest priced laptop for the public consumer market (Dell.com). Figure 2.2

Weaknesses Low prices do not always give a company the ultimate competitive advantage in an industry. Although Dells low price strategy is in most cases considered a strength, it can be a weakness as well. Higher priced brands such as Apple carry a certain prestige and high class appeal with them. Consumers want to be a part of this prestigious club. They love the look that owning a high priced computer brings with it. Comparing Dells low prices to Apples high prices may also give businesses the idea that Dell computers are priced lower because they are poorly made. Low prices can be considered either a strength or a weaknesses for Dell, depending on what consumer or business is examining it.

Figure 2.3

Dell Inspiron Computers: Normally $500

Apple Macbook Pro 13 in screen: Normally $1500

Opportunities Dell obviously appeals to consumers who are price conscience, but the company does not appeal to those who seek the most innovative products. Consumers who buy Apple products like the appeal of being in the prestigious club of Apple owners. Dell has the opportunity to target these niche customers, who want innovation over low price. Perhaps Dell can create a segment with higher prices while using its mass customization strategy to find new potential businesses to target.

Threats A threat to Dell is its direct selling model. While this method helps keep Dells pricing low, analysts are seeing less of a price difference in computers today (Cuizon). Dells customizable computers do take longer to get to businesses. Should they be in a hurry, and not extremely cost conscious, businesses may choose a competitor whos prices are only slightly higher than Dells, but whos delivery time is considerably shorter. Although Dell does now give businesses and consumers the opportunity to buy their computers in Walmart and Best Buy, most businesses will need a large amount and will still need to order directly from Dell.

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Place
Strengths
Figure 3.1

Managing distribution channels is part of what Dell does best. Dell doesnt actually manufacture a product of its own; instead Dell relies on a vast network of suppliers to provide components to assemble Dell products (Enderle). These suppliers help Dell produce a product with very little inventory carrying costs, which also decreases the need for large production facilities. Dell has used this advantage to consistently undercut the competition on price. Every day the world becomes more reliant on the Internet, Dell found this out earlier than most. In 1996, Dell created Dell.com to allow customers to customize a computer to fit their needs. This has been enormously successful for Dell and many competitors quickly followed this model. Recently Dell revamped their website to include support for more than just average customers, but added support for various types of enterprise clients. The new menu allows home users, small business, public sector and large enterprise clients a customized page for quick navigation. This new interface reflects Dells dominate

market, enterprise sales make up two-thirds of Dells computer revenue (Agnello). With the new website,

enterprise clients can research new products/services and get specialized technical support. These innovations are part of what makes Dell such a major player in the technology industry.
Figure 3.2

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Weaknesses Dell has profited from many of its strengths throughout the years, but these strengths can also bring great weaknesses. Dells supplier network forces Dell to rely on third-party

manufactures to assemble a product. This arrangement has worked fine for Dell through the years. Now, with suppliers being spread throughout the world, coordinating errors between supplier and assembling facilities could severely disrupt a JIT production system. Part of Dells business model is allowing customers to customize a computer; Dells customers give up fast delivery for a unique product. Any disruptions in the supply chain would increase an already extended assembly process (Cheung). In figure 3.1, you can see that Dells suppliers are

scattered throughout the world, and with JIT production any delay has the potential to affect how fast Dell can the

assemble

customers product.

Figure 3.3

Opportunities The technology sector is constantly changing and developing new opportunities. Because of Dells market dominance, Dell has the luxury of expanding through mergers and/or acquisitions. With more and more businesses moving towards cloud computing, Dell has the capital to acquire the means to enter into this market as a leader (Thompson). By partnering with other companies looking to get into this market, Dell has a great opportunity to develop

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significant distribution channels through its vast supplier network. One of the biggest opportunities for Dell is the economy. Since 2008 the economy has dramatically affected how much businesses spend on acquiring new equipment. With the Great Recession officially over, companies are starting to hire again and buy new computers for additional and existing staff (Shah). Dell is in a great position to fill this new growing demand. Although the recession did affect the technology industry, Dell has remained a dominant force in the industry.

Threats
Figure 3.4

With new opportunities come new potential threats. Not many other companies profited like Apple during the recession. Posting record profits and with billions in cash on hand, Apple has become a legitimate Dell competitor. Perhaps taking cues from Dell, Apple has recently started adding business friendly additions to their website (Dalrymple). With the demand slowly increasing, Apple has already begun to capture enterprise clients from Dell. Apple corporate sales have surged 66% in the past year and show no signs of slowing down (Evans). Another great threat to Dell is the current political turmoil throughout the world. Fluctuating exchange rates represent a clear threat for a company like Dell (Dobson). Countries across the world are being affected by fear of another global recession. Companies like Dell have suppliers and export products across the globe. Any significant change in currency would have a profound effect of revenue. These represent very real threats to Dell, no one being less important than the other.

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Promotion
Strengths Dells promotional strategy and offerings are much stronger than that of Apple. Dells deeper product line gives it an advantage over Apples limited offerings. Apple only offers five products (apple.com) none of which are fully customizable. In addition, prices are extremely expensive for the market norm. Dells product line however, contains over ten different models that can be fully customized and tailored to the end consumers need. Comparing promotions and coupons of the two companies, Dell presents a much greater amount of cost cutting offers, from free shipping on orders, to actual money back rebates. Figure 4.1 displays just one of the many Dell coupon promotions.
Figure 4.1

Directly through Dells website are navigation portals set up for easy access to products geared towards small, medium, and large businesses, as well as to the public. The website is well designed to promote Dells customizable products. Dell purposefully uses its website to promote the companys unique Dell Member Purchase program that allows companies of all sizes to join a program exclusively offered though Dell to get better competitive pricing on both individual and bulk orders (Dell.com).

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Figure 4.2

Apple has restricted promotional allowances to drive an image of prestige and high pricing. The company has promoted their products as very high end with price ranges from $999 laptops to $2499 stock desktops (Apple.com). Dell, on the other hand, has promoted its lines starting at $293 PC towers and rising to a sensible $1224.02 stock desktop (Dell.com). By keeping prices low, Dell has created a more easily affordable product line that can be tailored to the end users individual needs.

Weaknesses As of January 13, 2006 Apple officially passed Dell financially. By May 1, 2008 Apple quadrupled Dell by earning a registered $158.66 billion versus $38.97 billion (Yahoo). These figures show that Dell has lost its hold on the market. To compensate for Apples ability to charge consumers high prices while ignoring promotions, Dell has implemented more frequent promotions that continue to slash prices. Yet Apple repeatedly produces considerably higher profit margins and market share. Promotionally, Apple has pinned its ads directly against Dell. Figure 4.3 displays Apples ad campaign against PCs, personifying the PC computer as an old fashioned, injured old man, as compared to the young and hip Apple computer. Traditionally, Dells ads have taken a more informative approach and obviously, this tactic is no longer

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effective in todays IT world. While Dells frequency of ads is considered a strength for the company, the content of these ads is now considered a weakness.
Figure 4.3

Opportunities Dell continues to lose its appeal to college students. The company should follow suit with Apple to create a larger presence in this market. College students will soon be a part of corporations, and if the Dell brand is placed unfavorably in their minds, when these students become CEOs, they may make the decision to buy a competitors computer. Of course, more coupons and offerings are always opportunities. If Dell can position itself as an innovative, low cost yet high worth company, business to business sales will naturally increase.

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Threats The major threat in Dells promotional strategy is the success of Apple. Though Dell is, in retrospect to the overall market, not doing horribly, when it comes to its own competitive market it is suffering. Apple has steadily become a titan in the computer technologies market. Dell needs to focus in on having the affordable product lines that are fully customizable. Dell With todays bad economy now is the perfect time for Dell to shine. With a bad economy nationwide and unemployment so high, Dell has a chance to capture higher margins of profit if it were to gear promotions towards those segments. The worsening economy is paralleled by an increasing need for technology so the want is present in the market for cheaper, more tailored to specific use, computers. If promotions do not do well Dell will be under a threat of a buyout by one of the larger PC competitors like Hewlett Packard.

Figure 4.4

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Customer Service
Figure 5.1

Strengths Dells customer service aspects cannot be overlooked when analyzing the company. Dell specializes in mass customization and selling directly to customers, so they can get exactly what they want in their computer. This mass customization/direct selling strategy gives Dell a huge advantage over other computer companies. For support features the company has recently implemented its Listening Command Center (shown in Figure 5.1), which uses social media outlets to engage with customers (Dell.com). The company now has the option of free next day shipping, so businesses can receive their computers as soon as possible. In addition, company computers can come equipped with a variety of special security suites. Yet another feature Dell offers to help consumers is its free training service for business owners to increase knowledge of business technology solutions (Dell.com). Dell has made it obvious that it places huge importance on helping business owners who choose any Dell product.

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Weaknesses Dells only major weakness concerning customer service is not having retail stores for customers to easily go to with complaints. Apple, on the other hand, has large stores in many major cities in the world devoted to customer needs. Should Dell ever want to completely surpass Apple in this area, the company must open retail stores.

Opportunities In order to keep businesses happy with their decision to purchase Dell products, the company should be sure to have friendly tech support specialists assigned to different regions. This opportunity to make face-to-face relationships with businesses will increase brand loyalty, and thus increase profits over the years. Of course, another opportunity to increase customer service would be to make a higher quality product. This way, businesses do not have to worry about their computers breaking. If a corporation knows they will not have to worry about system failures, they will surely invest in the product.

Threats Constant threats to any IT companys customer service are the increasing number of viruses. Should a virus hit a Dell computer, or most others for that matter, even the brainiest of tech support employees may not be able to fix the issue quickly. PCs are understood to have a greater chance of viruses than Macs, so some businesses may feel the need to purchase Apple computers over Dell. Overall, overcoming viruses, and preparing for the situation if one should take over a computer is absolutely the biggest threat in the industry.

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Recommendations
Dell is a global superpower in the informational technology market. By offering highly customizable and dependable computers for a reasonable price, Dell has set itself apart from the competition in the business market. Dell has been able to offer these products largely because of its commitment to customer service and a very sophisticated global distribution network. Each Dell product is the culmination of many companys supplying Dell with quality parts that end up making a Dell. In todays global economy, companies are faced with new opportunities and threats More Focus on Enterprise Dell has profited for many years primarily off its consumer products. Dell.com has become the go-to spot for consumers to build a computer to their exact needs. With the recession came a halt in consumer spending. Dell has the infrastructure and products to potentially dominate the enterprise marketplace. In the postrecession environment companies are looking to the most value for their money. Dells ability to offer a dependable product that is catered to a clients specific need at a reasonable price is what helps set Dell apart from manufactures like HP and Apple. Customer Service For many years, Dell has consistently offered high quality customer service to any of its customers via internet, mail or phone. This service has helped many customers resolve their problems quickly and efficiently. Unfortunately some customers have become accustomed to a more personal interaction when receiving customer service. Companies like Apple have established stores

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throughout the world where anyone with an Apple product can come for assistance by a highly trained professional. If Dell wants to continue offering the best customer service in the industry, brick and mortar locations should be considered. Promotional Strategy Dell has developed a strong promotional presence throughout the years. Buyers know that Dell offers customized products at great prices. In more recent years, Dell has lost market share with the college age crowd. Apples promotional strategy portrays PCs as boring machines without personality. This represents an enormous threat, not only is Dell losing sales in the consumer market. But as these young adults grow older, they could have a negative opinion of Dell when presented with an opportunity to complete an enterprise transaction. Dell should consider promoting itself in a better light to the young adult market. Distribution Dell computers are the result of Dell bringing many suppliers products together and assembling a great product. This has helped Dell keep costs down without sacrificing quality. However, with increased dependence on suppliers comes vulnerability. If one of Dells suppliers cannot deliver an order as promised it could delay products even more. Dell should consider becoming less reliant on third-party suppliers.

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Mueller, Jim. "Apple: Strengths, Weaknesses, Opportunities, Threats." The Motley Fool. 07 July 2010. Web. 7 Nov. 2011. <http://www.fool.com/investing/general/2010/06/07/applestrengths-weaknesses-opportunities-threats.aspx>. Ricadela, Aaron. "As PC Market Changes, Dell Tries to Adjust." SFGate. Business Week, 11 Sept. 2011. Web. 07 Nov. 2011. <http://www.sfgate.com/cgibin/article.cgi?f=/c/a/2011/09/10/BUED1L22QD.DTL>. Shah, Agam. "Dell Results Boosted by Enterprise Sales | PCWorld Business Center." PCWorld.com. PC World, 15 Feb. 2011. Web. 06 Nov. 2011. <http://www.pcworld.com/businesscenter/article/219744/dell_results_boosted_by_enterp rise_sales.html>. Thompson, Damiam. "Technology M&A: Bad News For Cisco As Intel Buys Fulcrum Microsystems, Dell Grabs Force 10 Networks In Cloud Computing Efforts | Markets | Minyanville.com." Minyanville. 22 July 2011. Web. 06 Nov. 2011. <http://www.minyanville.com/businessmarkets/articles/tech-m2526a-intel-fulcrumfulcrum-microsystems/7/22/2011/id/35892>.

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