1. What competitive forces are shaping the computer industry in 1993?

 
Competitive forces shaping computer industry in 1993:

Threat of New Entrants:

The entry of new manufacturers boosted the public demand for computers. This led to increasing
product differentiation and competitive pricing posed a threat from new entrants.

Threat of Substitutes:
Increasing number of software applications and operating systems were acting as substitutes in
the software industry.

Bargaining power of buyers:

As many number of manufacturers were coming up in the industry the buyers had increasing
bargaining power. The customers were less willing to pay for service and handholding.

Bargaining power of suppliers:

There was an increase in number of manufacturers; the suppliers had the bargaining power
because of increase in demand of the raw materials.

Rivalry within Industry:

Tough competition between IBM, Apple, and Texas increased rivalry within industry.

Increasing clockspeed: Shorter PC product cycles have enhanced the importance of

depreciation and time-to-market considerations in determining location decisions. In the words
of a Taiwanese PC executive, “Even if you manufacture a machine at very low cost in Asia and
save 5% on the manufacturing cost, by the time it gets shipped to the U.S., the price erosion is
10%.”

Mass customization: The build-to-order strategies of PC makers such as Dell and Gateway have
segmented the PC market into individual customers, creating a demand for more customized PC
configurations. This puts greater pressure on the entire supply chain to respond quickly to shifts
in demand for particular components, peripherals and software, rather than just general product
lines.

Outsourcing: Some PC companies have long outsourced much of the production process,
relying on contract manufacturers (CMs) to produce subassemblies and complete products. Other
companies such as Compaq, IBM, Apple and Toshiba relied more on in-house production,
including motherboard assembly (motherboard production is often considered the dividing line
between manufacturing and simple assembly in PCs). In recent years, however, these PC makers
have sold off board assembly plants to CMs, turned notebook PC production over to Taiwanese
suppliers and even turned to outside suppliers for design, engineering and logistics services. PC
makers still do much of their own final assembly for desktop and laptop PCs, especially for more
complex build-to-order models, but even final assembly is being outsourced in some cases.
Electronic commerce: Selling directly on the Internet has accelerated the industry’s clockspeed
by shortening the distance between the PC vendor and end customer. It also has further increased
the demand for customization as customers can easily configure products and compare prices
online. On the other hand, e-commerce and the Internet have made it easier for PC makers to
respond to the pressures of clockspeed and customization. Online configurators replace
telephone sales representatives, online support replaces call centers, and e-commerce
technologies are used to link PC makers with suppliers and service partners in real time. Supply
chain integration through electronic commerce is being used to respond to the industry’s product
cycle and customization trends.

2. What has been the state of Dell prior to and in 1993? Its customer base? Its product
quality and product development process? Contrast that with the new development
process.
 

State of Dell prior to and in 1993:

 
Financial Situation:
In 1991 dell’s annual sale were $890 M. And it increased to $2 B in 1992. In 1993 dell’s
sales were $2.8 B. However, the net income (after taxes) in 1991 was $51 M, in 1992 it was
$102 M and in 1993 it decreased to $10 M. Its stocks from $12 plunged to $7 a share in 1993
after the announcement of profits.
 
Customer Base:
Following is the market info. Of Dell prior to and in 1993:

 
Product Quality:
Dell assured product quality by extensively pre-testing all the configuration options it offered.
Customized products depending upon customer’s configuration were provided to them in early
1990s. However, in 1993 designed products were frequently “thrown over the wall” to
manufacturing, and in some cases quality issues were addressed too late in the Development
process.
 
Product Development process:
Product development at Dell in the early nineties i.e. before 1993 had remained an informal
process, run by autonomous teams that often centered around experienced developers.
While such an approach delivered several successful products, the results were neither consistent
nor predictable.
Dell management started in early 1993 to organize product development around “core teams” of
development professionals from several different functions. These teams, led by
nominated core team leaders, were to take charge of the product’s success from start to
finish. Thus, through daily contact between different core team members, and through phase
reviews, core teams hoped to avoid the pitfalls of the previous era.

3. Why has Dell’s senior management introduced the new 18-month development process?
What are they trying to change or improve?

Dell’s senior management realized the need for a more structured approach adapted to the
increasingly rapid product development cycles in the computer industry. Through daily contact
between different core team members, and through phase reviews, core teams hoped to avoid
pitfalls of the previous era. A part of the reason for the reorganization was to speed decision-
making in an industry with ever-shortening product development cycles.

4. Which battery option should Holliday’s team select? Stay with the proven NiHi battery
technology? Go with the new LiOn battery technology under development at Sony? Or
should they defer the decision until the qualification phase review? What are the
advantages and disadvantages of the three options?

Holliday’s team should select defer commitment until qualification phase review. By using this
method, the gross margin (if LiOn) works = $594 M, and if LiOn fails = $495 M. If the LiOn
fails, then Dell can drop them and move on to option 1 i.e. NiHi technology.