M

Michael Dell, born in February 1965, is the chairman of the Board of Directors and chief
executive officer of Dell, the company was founded in 1984 with $1,000 on a simple
concept : by selling computer systems directly to customers, they could best
understand their needs and efficiently provide the most effective computing solutions
to meet those needs. Their evolving business strategy combines their revolutionary
direct customer model with new distribution channels to reach commercial customers and individual consumers
around the world. In 1992, Mr. Dell became the youngest CEO ever to earn a ranking on the Fortune 500.

In our report, we will try to analyze the crafting and executing strategy of Dell Incorporated, by answering
to the following questions :

What is our assessment of the job M.Dell has done as the company’s leader?

What grade we’d we give him for his leadership of the company?

What are the elements of Dell’s strategy?

What does a SWOT analysis reveal about the attractiveness of Dell’s situation?

What is our assessment of the job Mr. Dell has done as the company's leader?

As the leader of the Company, M. Dell has developed a new style of management based on both technical
knowledge and marketing know-how.
He had lot of good marketing ideas that allow the company to be a strong competitor on the I.T. especially
in PCs, internet and e-commerce practices.
As he was the youngest CEO, he worked very hard to be able to overpass his weaknesses.
So he became familiar with all parts of the business, he overcame his shyness and learned to control his
ego.
He was very clever when he choose to use a social strategy that allow him to motivate people winning
their loyalty and respect. He was also considered as a very accessible CEO because he chooses to delegate authority
to subordinates.
I think that being a risk taker and meeting customers all over the world was very helpful for the company
to be a big competitor in PCs industry.
What are the elements of Dell’s strategy?
Dell’s executives believe that five tenets were the key to delivering superior customer value:
A direct relationship is the most efficient path to the customer;
Allowing customers to purchase custom built products and custom-tailored services is the most effective
way to meet customer needs;
Non proprietary, standardized technologies deliver the best value to customers
Searching a low-cost structure where cost savings can be passed along to customers in the form of lower
prices;
Dell should endeavor to deliver added value to customers by: researching all the technological options,
trying to determine which ones are "optimal", and being accountable to customers' for helping them obtain the
highest return on their investment in information technology (IT) products and services.
In accordance with these tenets, Dell's strategy had seven core elements: a cost-efficient approach to
build-to-order manufacturing, partnerships with suppliers aimed at squeezing cost savings out of the supply chain,
direct sales to customers, award-winning customer service and technical support, customer-driven R&D, emphasis
on using standardized technologies, and product-line expansion aimed at capturing a bigger share of the dollars, its
customers spent for IT products and services.
Cost-Efficient Build-To-Order Manufacturing
Dell built its computers, workstations, and servers to order; none were produced for inventory. Dell
customers could order custom-equipped servers and workstations according to the needs of their applications.
Dell was regarded as a world-class manufacturing innovator and a pioneer in how to mass-produce a
customized product. Dell's build-to-order strategy meant that the company had no in-house stock of finished goods
inventories and that, unlike competitors using the traditional value chain model; it did not have to wait for resellers
to clear out their own inventories before it could push new models into the marketplace-resellers typically
operated with 30 to 60 days inventory of prebuilt models. Equally important was the fact that customers who
bought from Dell got the satisfaction of having their computers customized to their particular liking and
pocketbook.
All assembly plants had the capability to run testing and quality control process on components, parts, and
subassemblies obtained from suppliers, as well as on the finished products Dell assembled.
Partnerships with Suppliers

-2-
 Michael Dell believed that it made much better sense for the company to partner with reputable suppliers
of PC parts and components than to integrate backward and get into parts and components manufacturing on its
own.
Dell management evaluated the various makers of each component; picked the best one or two as
suppliers; and then stuck with them as long as they maintained their leadership in technology, performance, quality
and cost.
Dell just-in-time inventory emphasis yielded major cost advantages and shortened the time it took for Dell
to get new generations of its computer models into the marketplace. New advances were coming so fast in certain
computer parts and components (particularly microprocessors, disk drives, and wireless devices) that any given
item in inventory was obsolete in a matter of months, sometimes quicker.
Dell's Direct Sales Strategy and Marketing Efforts
With thousands of phone, fax, and Internet orders daily and ongoing field sales force contact with
customers, the company kept its finger on the market pulse, quickly detecting shifts in sales trends, design
problems, and quality glitches. Management believed Dell's ability to respond quickly gave it a significant advantage
over PC makers that operated on the basis of large production runs of variously configured and equipped PCs and
sold them through retail channels. Dell saw its direct sales approach as a totally customer-driven system, with the
flexibility to transition quickly to new generations of components and PC models.
Dell's Customer-Based Sales and Marketing Focus whereas many technology companies organized their
sales and marketing efforts around product lines, Dell was organized around customer groups. Dell had placed
managers in charge of developing sales and service programs appropriate to the needs and expectations of each
customer group.

Customer Service and Technical Support

Service became a feature of Dell's strategy in 1986 when the company began providing a year's free onsite
service with most of its PCs after users complained about having to ship their PCs back to Austin for repairs. Dell
contracted with local service providers to handle customer requests for repairs: onsite service was provided on a
four-hour basis to large customers and on a next day basis to small customers. Dell was aggressively pursuing
initiatives to enhance its online technical support tools and reduce the number and cost of telephone support calls.
The company was adding Web-based customer service and support tools to make customers' online experiences
pleasant and satisfying.
Customer-Driven Research and Development and Standardized Technology
Dell's R&D focus was to track and test new developments in components and software, as certain which
ones would prove most useful and cost-effective for customers, and then design them into Dell products.
Management's philosophy was that it was Dell's job on behalf of its customers to sort out all the new technology
coming into the marketplace and help steer customers to options and solutions most relevant to their needs. The
company talked to its customers frequently about "relevant technology," listening carefully to customers' needs
and problems and endeavoring to identify the most cost-effective solutions.
Studies conducted by Dell indicated that, over time, products incorporating standardized technology
delivered about twice the performance per dollar of cost as products based on proprietary technology. The
company's R&D unit also studied and implemented ways to control quality and to streamline the assembly process.
Expansion into New Products
Dell's recent expansion into data storage hardware, switches, handheld PCs, printers, and printer
cartridges represented an effort to diversify the company's product base and to use its competitive capabilities in
PCs and servers to pursue revenue growth opportunities.
Michael Dell tends to look at what is the next big opportunity all the time. They can't take on too many of
these at once, because it kind of overloads the system. But they believe fundamentally that if you think about the
whole market, it's about an $800 billion market, all areas of technology over time go through a process of
standardization or commoditization. And they try to look at those, anticipate what's happening, and develop
strategies that will allow Dell to get into those markets.
Other Elements of Dell’s Business Strategy
Dell's strategy had three other elements that assisted the company's drive for industry leadership: the use
of the Internet and e-commerce technologies, entry into the white-box segment of the PC industry, and advertising.
Pioneering Leadership in Use or the Internet and E-Commerce Technology Dell was a leader in using the
Internet and e-commerce technologies to squeeze greater efficiency out of its supply chain activities, to streamline
the order-to-delivery process, to encourage greater customer use of 1ts Web site, and to gather and use all types of
information.
Dell's Entry into the White-Box PC Segment Dell's thinking in entering the white-box PC segment was that
it was cheaper to reach many small businesses through the white-box dealers that already served them than by
using its own sales force and support groups to sell and service businesses with fewer than 100 employees. Dell
believed its low-cost supply chain and assembly capabilities would allow it to build generic machines cheaper than
white box resellers could buy components and assemble a customized machine.
Advertising Michael Dell was a strong believer in the power of advertising and frequently espoused its
importance in the company's strategy.
What does a SWOT analysis reveal about the attractiveness of Dell’s situation?
Presentation of the SWOT analysis:

-3-
 “SWOT” analysis is a strategic planning tool used to evaluate the Strengths, Weaknesses, Opportunities,
and Threats involved in a project or in a business venture. It involves specifying the objective of the business
venture or project and identifying the internal and external factors that are favorable and unfavorable to achieving
that objective. The technique is credited to Albert Humphrey, who led a research project at Stanford University in
the 1960s and 1970s.
Strengths: attributes of the organization which are helpful to achieve the objective.
Weaknesses: attributes of the organization which are harmful to achieve the objective.
Opportunities: external conditions which are helpful to achieve the objective.
Threats: external conditions which are harmful to achieve the objective.
Also, a SWOT analysis is a simple and a flexible framework for generating strategic alternatives from a
situation analysis. However, it could be applicable to either the corporate level or the business unit level and
frequently appears in marketing plans. Because it concentrates on the issues that potentially have the most impact,
the SWOT analysis is useful when a very limited amount of time is available to address a complex strategic
situation.
Indeed, it can serve as an interpretative filter to reduce the information to a manageable quantity of key
issues. The SWOT analysis classifies the internal aspects of the company as strengths or weaknesses and the
external situational factors as opportunities or threats. “Strengths” can serve as a foundation for building a
competitive advantage, and “weaknesses” may hinder it; while “opportunities” can arise when changes occur in the
external environment, and many of these changes can be perceived as “threats”. By understanding these four
aspects of its situation, a firm can better leverage its strengths, correct its weaknesses, capitalize on golden
opportunities, and deter potentially devastating threats.
The following diagram shows how a SWOT analysis can be profiled:

The SWOT analysis of Dell’s situation:

Strengths Weaknesses

Direct business model: Just-in-time High dependency on component

manufacturing and Build to customer order suppliers and manufacturers of subassemblies
Competitive pricing and other devices (drivers, printers, scanners,
Cost/ differentiation strategy modems, memory cards, data storage, etc…)
Highest quality and technology
Best-in class service and support
Flexible customization capability
Superior corporate citizenship
Real time adaptation to environmental
changes
Effective leverage of skills, technologies
and core competencies while competing against
rivals
Highly qualified and professional
employees
Overall operating and cost efficiency

Opportunities Threats

Mass customization Fierce competition (prices and market

shares)
Potential growth in overseas markets
Emerging of new competitive forces
Perpetual expansion of Pc’s industry
market Tariffs, taxes and trade barriers

Currency fluctuation

Political instability in some countries

-4-
 Dell’s attractiveness analysis:

Looking at the SWOT analysis of the company’s business, it is evident that Dell does still hold a very strong
competitive position. The key factor of the company’s success is its “Direct Business Model” concept, in addition to
the close relationship both with customers and supply partners, but definitely a better understanding of its business
and the ways to keep it efficient everlasting.

Indeed, Dell’s business model proved its efficiency and its attractiveness since the company entered to the
“Fortune Global 500”, and especially when its major competitors started copying it, but never succeed in
implementing Dell’s innovative concept correctly: they didn’t realize that it’s a matter of a whole different way of
operating.

Finally, Dell Incorporation should profit from all the different opportunities of expansion and growth to
make its business more profitable, and should try to reduce as much as possible the negative impacts of the
weaknesses and the threats revealed by the SWOT analysis on its business.

-5-