Michael Dell the Henry Ford Michael Dell the Henry Ford

of the Information Ageof the Information Age

DELLDELL

Group B 13Group B 13Masato ShiraiMasato Shirai

Andrea TellariniAndrea TellariniVasilis KykrilisVasilis Kykrilis

Gabrielle NgGabrielle NgMatthias KuhnMatthias Kuhn

Dell’s historyDell’s history1984 - Michael Dell founds Dell Computer Corporation

1985 - First Dell designed PC is introduced: the Turbo, featuring Intel 8080 processor

1987 - Dell is first PC company to offer next-day, on-site service Subsidiary in United Kingdom opened

1988 - Organization around customer segments IPO

1990 - Manufacturing center in Limerick, Ireland

1991 - Dell’s first notebook PC

Dell’s HistoryDell’s History

1993 - Dell among the top-five PC makers worldwide Subsidiaries in Australia and Japan mark entry into Asia-Pacific market

1996 - Manufacturing center in Penang, Malaysia Launch of dell.com Dell added to S&P 500 index

1997 - Introduction of first workstation systems

1998 - Manufacturing center in Xiamen, China First enterprise storage product

Product SegmentationProduct Segmentation

PERSONAL COMPUTERPERSONAL COMPUTER

WORKSTATIONSWORKSTATIONS

STORAGESTORAGE

CONSUMER ELECTRONICSCONSUMER ELECTRONICS

SERVERSSERVERS

Personal ComputersPersonal Computers

Laptops and desktops constitute core products

80% of sales in 2003

Key strategyKey strategy • Direct Sales

• Aggressive Price Cut

ImplicationsImplications • Market share growth

• Brand Awareness

WorkstationsWorkstations

Enterprise and medium business segment

Key strategyKey strategy • Powerful

ImplicationsImplications By 2000 Dell was the US and worldwide leader of in Windows NT workstations

• Cost Effectiveness based on Windows usage

ServersServers

Enterprise and medium business segment

Key strategyKey strategy • Open architecture system

ImplicationsImplications By 1999 Dell gained 12% of sales

• Entry-level servers

StorageStorage

Enterprise and medium business segment

Key strategyKey strategy • Linux

ImplicationsImplications Broader target market including small-medium business

• Alliance with EMC

• Standardisation

Consumer ElectronicsConsumer Electronics

Individual Consumers

Key strategyKey strategy • Narrow range of standardized products closely integrated with computer technology

ImplicationsImplications Challenge for the future – The biggest test of the Dell business model

• Direct Sales

Customer SegmentationCustomer Segmentation

RELATIONSHIP RELATIONSHIP BUSINESSBUSINESS

• Global Enterprise and Large Corporate Accounts (Fortune 5000 companies)

• 60% of Dell North America revenues

• Execution - Key Success Factor

• Equipment needs to be deployed globally in timely basis

• Longer payment cycle

SMALL-MEDIUM SMALL-MEDIUM BUSINESSBUSINESS

• Preferred Account PAD (400 – 3500 employees)

• Business System Division BSD ( 10 - 400 employees)

• 30% of Dell North America revenues

• Efficient Customer Database - Key Success Factor

CONSUMER BUSINESSCONSUMER BUSINESS

• Individual customers

• Transaction Segment

• 10% of Dell North America revenues

• Ability to convert sales into cash within 24 hours

• Customers less educated

SupplySupply Chain ValueChain ValueINBOUND

MANUFACTURING

OUT BOUND

SERVICES SALES

BTO Direct Sales Investment on

customer services

Inventory Cost Cut

Mass Customization

Steady Deliver

y

Channel Cost Cut

Orders on the Web

Sale People for relations

customer

Low Price

Convenience to

order

Fulfilling Request Customer

Reliability with

deliver

Best Customer Services

Good Reputation in Service

Price

Keeping Good

Relation

Technical Quality

Timing quality

Servicequality

Reputation

quality

Relationship

quality

COMPETITIVE ADVANTAGE

VALUE PROPOSITIONS

Industry Analysis Industry Analysis MainMain CompetitorsCompetitors

HP Hewlett HP Hewlett PackardPackard

45$ Billion Revenues

• Global provider of a broad range of computing system

• Segments: enterprise, commercial and consumer markets

IBMIBM89$ Billion Revenues

• Desktops, portables, servers, storage

• Offering of a variety of tech solutions (systems, products, services, software and financing)

Sun MicrosystemSun Microsystem16$ Billion Revenues

• Scalable computer and storage system, high-operating network computing equipment

• Broad range of services including support and professional services

Gateway Corp.Gateway Corp.7$ Billion Revenues

• Direct marketer of PCs and related product and services

• Servers, workstations

Industry forcesIndustry forces

BARRIERS TO ENTRYMEDIUMMEDIUM

High investment required with

moderate tech levelSUPPLIERS

MEDIUMMEDIUMSuppliers size comparable to manufacturers

SUBSTITUTE PRODUCTSLOW/MEDIUMLOW/MEDIUM

• No substitutes for PCs, network computers potential substitute

CUSTOMERSHIGHHIGH

Customers have choices

RIVALRYHIGHHIGH

Many players with relatively low differentiation

SWOT AnalysisSWOT AnalysisStrengthsStrengths

DIRECT MODEL Complicated and time consuming transition for competitors in the short term

SUPPLIER RELATIONSHIP

PRICING

INVENTORY MANAGEMENT

• Pull System

• Shared demand information with suppliers

FOCUS ON CUSTOMER VALUE ACTIVITIES

• Outsourcing of non-core activities

Ability to exploit the high elastic demand of the industry undercutting prices

SWOT AnalysisSWOT AnalysisWeaknessesWeaknesses

R & D• Limited ability to innovate

• High reliance on suppliers

SERVICES

• Not complete solutions

• High client retention effort

SWOT AnalysisSWOT AnalysisOpportunitiesOpportunities

INTERNATIONAL INTERNATIONAL EXPANSIONEXPANSION

• Further penetration in non US markets (only 33% of total revenues come from EMEA and APAC/Japan)

• Growing telephony and internet infrastructure – Indonesia, India

• Selling of high-end systems to global customers and local enterprise in China market

SERVICES AND SERVICES AND SOLUTIONSSOLUTIONS

• Complete solutions

• Consulting and Support

9%

21%

70%

APAC/Japan EMEA AMERICAS

SWOT AnalysisSWOT AnalysisOpportunitiesOpportunities

ENTERPRISE ENTERPRISE PRODUCTSPRODUCTS

• Small-medium segment is growing

• Open architecture systems are emerging in response to increased storage demand and need for standard solutions

EMC PARTNERSHIPEMC PARTNERSHIP

Extends Dell’s capabilities and drives additional customer value in:

• R&D

• Sales

• Service

• Manufacturing

SWOT AnalysisSWOT AnalysisOpportunitiesOpportunities

CONSUMER ELECTRONICSCONSUMER ELECTRONICS

• Huge number of potential customers

• $800 bn market

• Products highly integrated with PCs

• Improvement of customer segmentation leverage

• Shift from analogue to digital technology plays to Dell’s strengths

AdvantagesAdvantages IssuesIssues

• High reliance on third manufactures

• Products not individually configured

• Direct Sales as new channel distribution for c.e.

• Brand Awareness?

• PDAs market entry

Other IssueOther Issue PrintingPrinting

At the beginning of 2003 Dell decided to enter the computer printer market

• Analysts view the market as flat in the short-term and declining in the long term

• Fierce competition (HP over 50%)

• Reduced flexibility

• Higher inventory costs

ConcernConcernss

SWOT AnalysisSWOT Analysis ThreatsThreats

PCs Saturated market with declining demand

MARGINS Increasing size of rivals through consolidation potential squeeze in market share and margins

DIRECT MODEL Duplication in the long term

ConclusionsConclusions

CONSUMER CONSUMER ELECTRONICSELECTRONICS

SERVICESSERVICES

• New source of revenues

• Educate the customers

• Fierce competition

• Lucrative margin

• Complexity

• Differentiation

AS IS

PCs MARKETPCs MARKET DIRECT MODELDIRECT MODEL

• Commodity

• Low margin

Mid-term Duplication

AS TO BE