PLANNING AND

STRATEGIC MANAGEMENT
DELL COMPUTERS (A CASE
STUDY)

Presented by:-
 AN INTRODUCTION
 In 1994, DELL was a struggling second-tier PC maker, the
company ordered its components in advance and manufactured
to inventory.

 DELL had no choice: It had to find a way of operating with no

inventories in order to raise desperately needed cash.

 DELL began to implement a new business model: It converted

its operations to a build-to-order process, eliminated its
inventories through a just-in-time system, and sold its products
directly to consumers.
 DELL Computers, today is now among the first companies to
provide its customers with the next level of industry-standard
Pentium processor power, while many vendors are still
struggling to broaden their processor-based product lines.

 However, the company had to make a series of very difficult

strategic tradeoffs to bring its functional activities into
alignment with its new business model.
 THE INITIAL STRATEGY
 DELL carefully targeted corporate relationship customers that
had predictable, budgeted needs and that wanted a
predetermined set of product models.

 The company also selected individual customers who were

high-end, repeat purchasers with a preference for early
technology adoption.

 Both account segments had the stable, predictable purchase

patterns that DELL needed to make its joint build-product-to-
order/buy-component-to-plan system work.
 Effective in-customer operations require powerful technical
capabilities, crucial customer knowledge, and the ability to fit
into the customer's organization and work processes their unique
customer knowledge and customer relationships created a set of
barriers to entry that others could not overcome.

 DELL differentiated itself in the corporate market by developing

a set of extremely effective customer-specific intranet Web sites.

 Each Web site was highly tailored to the customer's individual

situation. DELL worked with each customer to specify a
particular set of product configurations that would work best in
the customer's network.
 THE CHANNEL STRATEGY
 DELL's direct-to-customer channel strategy certainly is a
breakthrough in the industry.

 DELL developed a set of new operations capabilities in five

crucial areas as it created the flawless make-to-order system
that has been widely noted (but in fact is only one part of its
business model.
 An innovative direct channel strategy gave DELL these crucial
elements of its powerful business model:

Ø      Real-time customer feedback and market insights

Ø      The ability to "sell what you have"-- that is, using day-to-
day pricing and sales incentives to shift demand toward
products that are currently makeable
Ø      Extremely crisp product life cycle transitions
Ø      Elimination of the obsolete and excess dealer stock that
plagues the non-direct competitors
Ø      The ability to control pricing on a real-time basis.
 THE IMPLEMENTATION
 The heart of DELL's model is the critical weekly supply-
demand matching session in which the top managers from sales,
marketing, manufacturing, and purchasing collaboratively
decide the company's activities.

 The key to successful implementation of the new business

model was to utilize a team approach with explicit behavioural
drivers.

 DELL has used the team approach very effectively not only in
creating its masterful strategy but also in ensuring business
model alignment on an ongoing basis.
 DELL manages demand by using day-to-day price changes and
sales rep incentives to steer customer orders to the makeable
product set (this is the "sell what you have" system).

 DELL maximizes its flexible-response capabilities by

outsourcing component-part manufacturing.

 DELL's brand image was and is shaped by customer feedback.

 DELL uses the Internet to change prices and delivery times for
different PC configurations regularly, based on demand and
component availability.

 The Internet makes information located at a central source (the

seller's Web server) available to anyone with Internet access, so
that a change in price, product portfolio, or promotions only
requires one database entry.

 As a result, DELL enjoys higher margins than do traditional PC

manufacturers that must share some margin with retailers.
 STRATEGIC PROCESS
 DELL has tight competency with other big computer sellers like
Compaq and HP.

 Invested in door-to-door or face-to-face operations to gain consumers’

faith and consumers trust in the company and its product.

 DELL also has achieved the ISO 14001 Environmental Management

System (EMS).

 It has extended its brand leveraging its reputation as an e-commerce

leader.

 Developed their own e-commerce capabilities

 DELL SWOT ANALYSIS
 "SWOT" analysis constitutes one of the most important aspects
in the strategic management process.

 SWOT analysis is important in assessing DELL strengths,

weaknesses, opportunities and threats, a critical phase in the
general planning process as it helps determine exactly where the
organization is and what resources it may or may not have.
 STRENGTH assessment identifies what the department tends to do
well and can include a skilled, professional staff and a modern, well-
equipped facility.
 WEAKNESS denote what the company may not do so well or what
diminishes its effectiveness.
 OPPORTUNITY reflects what the organization might seize upon to do
better.
 THREATS are environmental factors that may hinder performance as it
could include a rising demand for service or increased legislative
mandates that can impact resources.
 SWOT ANALYSIS
 STRENGTHS
Strengths are internal resources and capabilities that have the
potential to be core competencies.
DELL’s core competencies are their cost strategy. In consistent
to being an integrated cost leader, DELL also produce high
quality PCs by using their Direct Business Model approach and
sells them directly to the customers. With this innovative
process, DELL cuts out the intermediary, excluding the
associated cost as the company can understand the customers’
needs better and can provide the most effective computing
solutions to meet those needs.
 WEAKNESS
DELL’s weaknesses are single sourcing, new product market
and reliance on corporate clients.
 OPPORTUNITY

DELL has many opportunities such as potential growth in

overseas markets, the industry is still in a growth phase and the
entering  to the new product markets.
 THREATS

DELL’s threats are technological changes that are expected

since technology can only get better. Global economy and
increased competition in which DELL’s financial ratios
identifies that they are no match for their competitors.
 CRITICAL SUCCESS FACTORS
 Direct-to-customer business model is the key to the company’s
dramatic growth and success and has focused on selling directly
to customers

 DELL provides the mode to custom the computers of the

customers’ choice and taste and deliver the system to the
customer

 The direct model enabled DELL to develop a thorough

understanding of customer expectations which strengthens
customer relationships and increases customer satisfaction and
loyalty.
 DELL’s most competitive force is the Direct-Model concept
which helped them to reach above-average returns and remains
in business today.

 Global economy and increased competition in which DELL’s

financial ratios identifies that the company is no match for their
competitors.

 DELL relies on reputation in the US market of award-winning

service and a high-quality product.
 CONCLUSION
 The best competitive strategy is not to directly engage in a fight.
 In terms of designing a competitive intelligence system,

First: Define the competitive areas that are important at an

offering, market and company level.
Second: Make someone accountable for monitoring each area.
Third: Determine the best sources to collect info competitor
Web sites, trade journals, press releases, financial reports, etc.
Finally, create a few pro forma competitive intelligence reports
that you can use to evaluate and track trends and material
changes.
THANK YOU FOR YOUR
PATIENCE…