Business Strategy - The Performance of Dell Company in the Computer Industry - Case Study Example

Strategic plan To: From: Date: Subject: Table of Contents Implications of SWOT analysis 7 6.0 Marketing strategies 12 6.2 Generic analysis 15 References 22 Appendices 24 Appendix 1 24 Appendix 2 29 Executive summary PART 1.0 Introduction Dell Company is a very complex and dynamic organization since it has proven that it can offer quality services and is dedicated to giving the best to its customers. It’s well established management values have kept the company well ahead of other competitors as well as gaining a market leadership in the computer industry business. Change management and process analysis is an essential process in a business environment. Dell is the organization that is being chosen in the computer industry. In a business organization, change process involves a reality of events behind every process. It is considered to be a daily cycle that helps in dealing to various concerns and issues of any organization since it depends on actions of management. By choosing the organizational process of DELL as the focus of discussion and analysis, my major role is to deal with both the external and internal changes. DELL is the only computer company that listens to its consumers and collaborates well with partners, and delivers innovative technology in an efficient and effective way. The company has managed to spread its wings and advance to attain the number one position in the computer industry across the world. From a very small company that was established by the sole efforts of an undergraduate student from the University of Texas, Dell Company has grown into a huge computer corporation that employs well over 55,000 employees with an annual turnover rate of $ 50 billion annually. The corporation was started by Michael Dell in 984, as a retail shop for selling computer systems. Today, DELL is the most successful company dealing in computer products. The company’s headquarters are based in Round Rock, Texas. The main objective of this report is to give an analysis of the performance of Dell Company in the computer industry that has stiff competition. It also analyzes the factors, which have made Dell to successfully take full advantage of the business structure it formulated. Furthermore, the report will provide a full detail of both the external and internal analysis. The future developments and a detailed five year plan of Dell Company and the general computer industry will also be examined. 2.0 key issues DELL is a leading computer manufacturer and distributor. It is among the top five companies that provide customers with the most recent standard Pentium processors. The unique ability of the company to take a strategic market positioning is based on the company’s ability to of build-to-order process of manufacturing that allows the company integrates the next level technologies into the existing systems. The company uses a direct-to –customer marketing strategy that provides the company with a powerful business model. The company however faces stiff competition from other computer companies although it has numerous opportunities, which if it capitalizes on could help in maintaining its number one position in the computer industry. 3.0 vision, mission and corporate objectives 3.1 visions To be a leading manufacturing and distribution company in the computer industry by providing our customers with valuable computer products that are inline with the company’s competencies of cost/strategy 3.2 mission statement DELL designs, develops, and distributes innovative computer products that are functional, beautiful developed products such as portable laptops, PC’s, notebooks, and netbooks. The company provides a respectful and rewarding and chain of product distribution, which it aims to maintain because it is well endowed with benefits and competitive compensation. 3.3 objectives -To be an innovative leader in the computer industry, and own a measurable market share by the end of 2015. This will depend on both design and development of new products. SWOT Analysis Any business organization must set goals and determine its future plans. It must carry out an assessment of its current position as part of its strategic planning process. Such an assessment can be carried out by the SWOT team, which mainly assesses the strengths, weaknesses, opportunity, and threats. This is a vital process in the general planning strategy because it helps the organization to determine its position as well as the resources it may have or lacks. Strength assessment involves the identification of what a particular department tends to do. It includes the services of a skilled professional staff. Weaknesses on the other hands denote what the organization might not do well or what forces are diminishing its efforts. This category is mostly characterized by inadequate financial resources. Opportunities are the available resources that if the organization seizes them, then it can perform better. This section includes taking advantage of grants as well as increasing community interactions. Last but not least, threats reflect environmental factors, which may hinder the organization’s performance. It includes increased legislations, increased demands for services, and competitive forces. SWOT is an important aspect when it comes to strategic management planning. Managers should take SWOT into consideration when carrying out both internal and external analysis of the organization. 4.2.1 Threats The major threats Dell is exposed to are the ever changing technological aspects. Since technology keeps on getting better, keeping up with the pace of change is what most organizations have found difficult to. Increased competition and global economy, which are the key identities of DELL, are of no match to their potential competitors. The threat of becoming outmoded has become a pulsating reality that the computer industry cannot avoid. DELL’s Price difference among its major brands is decreasing and getting smaller. Dell’s Direct Model is good in that it attracts more customers because of its cost-effectiveness. This could actually prove to be a major devastating challenge for DELL since most competitor companies offer computers at lower costs. The price-conscious customer base that is currently increasing on could turn away from DELL’s products. 4.2.2 Opportunity DELL has got much potential at its disposal. For instance, the company has expansion potential especially in overseas markets. Since the computer industry is still in its growth phase, gaining the first entry into the new markets would be advantageous. The diversification strategy adopted by DELL has been key in introducing a range of new products. 4.2.3 Weakness: DELL tends to rely so much on corporate clients and new markets. It also concentrates on single sourcing. A huge range of products and components from many suppliers from various countries. DELL is a computer maker not a computer manufacturer. This makes the company unable to switch its supply. Dell failed to establish a strong dealer / retailer relationships on time. It does not have propriety technology Not attracting the college student segment of the market. The company has not utilized fully the student segment market in that sales revenue obtained from education institutions such only accounts for just 5% of the total. Since Dell does not use the channels of distribution in their marketing, this approach affected home users, because the direct method of customization does not allow them go to retailers in case there is a problem. 4.2.4 Strengths An organization’s strengths depend on the company’s capabilities and internal resources. These two elements have got the potential of turning into core competences. The core competence of DELL lies in their cost strategy. The company produces high quality PCs via their Direct Model Business approach. The company sells its products to the consumers directly and has managed to maintain a consistent cost leadership. In addition, DELL is the largest PC maker in the world. It develops and distributes some of the best brands in the world. It was the First PC maker to on-site product service. Direct to customer business model. Uses latest technology that is direct business models of he customers. The company has remarkably incurs low operating costs that relative to the revenue generated because it supplies directly to its customers, thus cutting on the retailers. In addition, the direct customer approach is advantageous in that it allows the company to offer its customers a top-notch service. Implications of SWOT analysis SWOT analysis has been found to be a useful tool that helps companies understand the business situations of their organizations. The SWOT analysis for DELL indicates that the company has a potential of expanding but is face immense competition from the organized and unorganized competitors. The company therefore, has to come up with unique brands that will make it different from the rest of the competitors for it to gain a competitive advantage in the international market (Hiteshi 2010, P.1) 4.3 market analysis The computer industry is a quasi-oligopolistic structure dominated by five main players globally. However, there are other smaller companies that only serve their region markets. DELL enjoys the lions share according to the 2005 market researcher. Being the world’s largest computer manufacturer, DELL has been able to extend its lead through a growth of 2.16 % making it attain an overall market share of 18.9 percent. Its closest competitor Hewlett Packard has a market share of 15%, third is IBM, which now has a 5.1 % after losing 7.3 percent ranks. Fujitsu Siemens has been able to improve its market share by 2.2 %, and now it owns a 4.6 % market share. Acer recorded the biggest growth of all times with 21.2 percent growth margin but still lies in the fifth position despite this huge increase. It has a market share of 5.0%. The other computer manufacturers share a market share of 52.0 %. . Porter’s Five Forces Analysis 4.3.1 Competitive Rivalry from within the Industry The computer industry has been in business for quite some time and has matured enough. The industry is now facing a downtrend in pricing, an indication that more consolidation will be brought into the industry through aggressive pricing and in the end reduce development costs. There has been a concentration of PCs since 2006, and this trend is still continuing. Standardization of Windows PCs has lowered switching costs making the competition in the industry to be driven by product pricing instead of differentiation. DELL and Apple on their part compete on product differentiation through premium product promotions rather than pricing. This is the only strategy that DELL needs to employ if it still needs to maintain its number one position in the computer market. The reason being that price competition leads to manufacturers developing low quality product, which can be sold at cheap prices but do not last. 4.3.2 Bargaining Power of Suppliers The increased commodization of computer products such as hardware components has limited the bargaining power of competitor’s suppliers. For instance, the two main suppliers of microprocessors Intel and AMD, often find themselves competing for the market share. Their power is however limited due to the increased need for product promotion. Lack of branding for finished product has also reduced the bargaining power because will often need product promotion campaigns. This therefore, means that if prices are less competitive, suppliers might lose out to their rivals. DELL dominates the computer industry that is why it has exerted a considerable purchasing power on its consumers. 4.3.3 Bargaining Power of Customers Customers bargaining power is often larger than that of the manufacturers because most of the PC sales come from buying from businesses. The consumer bargaining power also extends to dictating buying preferences and dictating demand. A continued demand for cheaper costs leads to creation of new products and aggressive pricing. For instance, DELL has been forced to create new categories such as notebooks so as to influence the consumer buying behavior. In addition, the change in consumer behavior in the developing markets made DELL to start selling its products through retail stores. 4.3.4 Potential new entrants Any organization that is making its first appearance in a new market faces numerous constraints ranging from huge capital requirements to advanced technological know-how. These are the obvious barriers to potential new entrants. Besides, they need a sophisticated skilled labor to support their operations. Companies that are well established can make further steps that can help them suppress the influence of the new entrants in the market or prevent their entry. This is what most computer manufacturers such as HP, Toshiba, and Acer do to prevent the influence of new entrants. 4.3.5 Threat of substitutes The new emerging trends such as cloud computing has posed as a new threat to the computer industry because it has reduced the need for portable computing powers such as laptops. Other advances such as the development of the 3G and WiMax technologies has enhanced mobile phones such as smart phones to give laptops a stiff competition because they provide similar functions. For instance iPhones have laptop capabilities reducing its need. 4.5 summary of current situation The global computer industry market for the PCs including the portable laptops segment, has been dominated by five main competitors; DELL, HP, Acer, Toshiba, and Levono. These five major players enjoy a 60% market share. Apple has in the recent past been gaining a considerable market share courtesy of its positive brand reputation. Based on global PC volume, Hp tops the list in terms of market share at 18.9% followed closely by Dell at 15.5%. Other minor actors in the market such as MSI and ASUSTek have been making some good progress in market shares in the past few years due to the netbook segment. The top manufacturers have remained successful in the market because they share key success factors and certain characteristics that distinguish them from the rest. DELL for instance, has remained competitive and acquired the top manufacturing position because of its efficient production strategy, and distribution capability. The reduction in ASPs on PCs and laptops is slowly gaining commodization, a strategy that has been viewed as the primary means of reducing costs of production and supply chain expenses. DELL realized that this was possible when it found out that production costs lies in the procurement of production. It is possible to achieve such an objective if a company engages in exploiting the benefits that are associated with mass production, better global networks of distribution, more bargaining with suppliers, and cheaper production costs. What computer companies need to establish is that product innovation and consumer needs identification capabilities are important factors that should be considered. It has been found out that these factors have a great influence when it comes consolidation process of the computer industry. Such efforts have been associated with a positive growth progress in the computer industry in that the larger firms continue to grow and become bigger. For instance, the analysis of the 2007 market share indicates that the top five manufacturers which had a 50% market share accounted for a 60% market share in the preceding year. Based on KSF factor analysis, the results of competitive strength analysis indicated that in the coming future three competing companies will dominate the market. These include DELL, Acer, and HP. This is because this top firms show a similar level of strength in their operations. What DELL therefore, needs to do is to look for ways that will make it a bit different from its competitors so that its level of weighted strength will increase. The top five firms have the same weighted strength particularly due to product commodization in the industry By 2015, the market share of netbooks is forecasted to at least 30% of the global computer industry. Netbooks have influenced the computer industry in two ways: through price reduction in all computer categories, and changes in consumer tastes and preference. In spite of decreased PC demand, DELL has announced that it is planning to come up with a new line of thin notebooks and net books so as to maintain their profit margins even. This is because the current market trend indicates that here is a sharp decrease in profit margins, which is set to continue indefinitely. This is the only viable future strategy of maintaining profitability. Nothing clearly indicates that there the market segment for the PCs and laptops will increase. The future demand for notebooks and netbooks is also not clear whether it will be sustainable. Manufacturers will have no option but shift their focus onto the service segment (Natalie & Kelber 2005, P.98-106). 5.0 marketing objectives 5.1-Innovative, functional, durable and technologically manufactured products such PC’s 5.2 -To increase the company’s annual sales by at least 10% in the next five years 5.3 -To attain sales margins of $250,000 by the end of five years of operation 5.4-To maintain the same level of direct-to-customer service so as to enhance the company’s marketing strategy 6.0 Marketing strategies An effective marketing strategy for the computer product companies only requires low-cost options. Formulating a marketing strategy requires clear set goals. The computer industry market is substantial and showing some signs of flourishing in the coming future. Currently, the market is worth well over $ 1.5 billion. The markets are however, mature and still offer exciting growth prospects. As a result manufacturers of computer products and service providers are trying to penetrate related markets in order to increase their growth sales by extending brands into computer services sector. For instance, Apple has stepped up its presence by entering the lucrative Smartphone manufacturing business. As a result, these new products have continued to rise over the use of portable laptops and PC’s because these phones perform similar functionality. 6.1 Market Target The various market segments as outlined above were considered in order to establish brand recognition, reliability and credibility. As soon as the products are established within the targeted market segments, the organization will be able to these products to individual consumers who regard their pests as part of the family members, and ones who are status and style conscious. This strategy will be supported by attending numerous trade shows besides taking part in design competitions. Through this strategy, the organization will be in a position of forming partnerships with other firms and people who can help DELL establish high level customer service and product performance. For DELL to obtain markets for their products they need to identify a viable market target. In Asia-pacific for instance, consumers prefer going to specific retail chains and visually obtain the product they want, or information pertaining to a particular product. DELL does not have such an option. In order for the company to obtain customers in this region, it will have to partner with the local retail chains for them to provide their customers with the products, information, or service they are seeking for looking for. Dell does not offer this option, so in order to gain customers in this region Dell will have to partner with retail chains in this region in order to offer its products to its customers (Scheck 2008, P. 8) Dell targets two market segments which include consumers and corporate. This two market segments differ in a big way. Corporate customers account for 85% of DELL’s sales. It is quite obvious that business corporation will be eager to spend more on purchasing computer products as opposed to individual buyers. Businesses are repeat customers because they buy regularly while individual consumers may only purchase a single computer product for personal use. It will be several years later when such an individual will consider buying another product. Businesses are not only interested in the prices, but also the available options that the computers come with and they can be easily upgraded. Dell market segments are also classified based on the national culture. For instance, Dell realized that in India, the consumer is interested more in the technical aspect of the computer while in china, price is what matters most. These differences in consumer preferences are important because they help in strategizing promotional materials and advertisements so that each segment of the market is served equally and duly satisfied. DELL has divided its market segmented into two main categories which are business market and consumer market. This has helped the company in satisfying its existing customers as well as winning new ones. This has been supported by different market communication activities based on geographical region. The strategy the country uses to market its products back at home may not work well in the global market. As such DELL is required to change its marketing model so as to gain the trust and faith of the customers in the target market. In order to gain customer loyalty, the strategies must be adjusted accordingly so as address the special needs of the market (Kotler & Keller, 2009, P.102) 6.2 Generic analysis Generic strategies depend on how a business organization responds to the structure of the industry in which it is operating. For a company such as DELL, it should follow one of the generic strategies that were developed by porter so as to gain a competitive advantage that is sustainable. The cost leadership strategy is one of the most vital strategies that the company can strive to obtain the lowest costs in the pet care product industry. This will enable the company to offer both its products and services at the lowest prices to the international market. This strategy will however, be based on the company’s ability to take control of their operating costs in a way that they are able to competitively price their products and still generate high margins of profits. This will enable the company to have a significant upper hand in the pet product industry in the form of competitive advantage. The other strategy can either be differentiation or cost leadership that is aimed at narrowing on a focused market. If the company chooses to pursue the cost leadership strategy, it will have to focus on creating internal efficiencies, which will enable them to withstand any external pressures. This therefore means that DELL will hold frequent interactions with regulatory/government sectors. According to this kind of framework, both differentiation and cost leadership strategies focus on the broad market. However, DELL has the option of confining its products to market areas that are specific or decide to offer small line products to the international markets. However, most organizations find them stuck in the middle when they adopt the use of these strategies. In the case of DELL, this danger is not appropriate because the company has clearly set business strategies and a market segment that has been clearly defined (Lee 2006, P.14-18). 7.0 Marketing Mix DELL Major marketing decisions are normally classified through product, price, place, and promotion. These factors are what are referred to as the marketing mix. For managers to best satisfy the needs of their customers in the target market, they should take full control of the 4p’s of marketing mix. For DELL to generate positive responses in their target market they should blend these marketing mix variables optimally. Dell being one of the leading computer manufacturers, it produces durable Consumer brands. DELL’s marketing mix talks about the way the firm has improvised its products and marketing strategy so as to gain a competitive advantage over its competitors. 7.1 Product: The product refers to the physical commodity, or service that a firm offers to the consumer. In this case DELL will be offering computer products and services that are related to it. Product decisions involve packaging, service warranty, appearance, and functional aspects. Dell believes that, ‘a good marketing does not involve providing only products or services, but is concerned with providing changing benefits in response to the changing preferences, needs, and demands of the customer’. Dell mainly concentrates on providing its business and corporate customers with different varieties of both business class and, or consumer class products or services. Dell designs, manufactures, develops, supports, markets, and sells a wide range of computer products, which in most cases are customized to meet individual customer requirements. Here is a list of the examples of products that dell provides for individual and professional customers; latitude notebooks, Inspiron, Dell Precision workstations, Dimension desktops, and OptiPlex desktops. 7.2 Price: When making price decisions, profit margins should be taken into account and also considering the prices offered by the competitors. Pricing encompasses a wide range of factors such as lasing, financing, and discounts besides the list price. DELL believes that product prices and pricing strategies usually undergo changes as the product is passed on through its life cycle from one product line to the other. This is because constrains are always encountered and limits the company’s freedom of imposing prices on products at different stage. DELL’s main objective is to produce low price PC products that are profitable for both the customers and businesses. Based on the above reasons Dell’s product pricing principle reflects product affordability to the local consumers. Because Dell has customized products on its products the pricing largely depends on the services and options that have been added to the product. The strategy that has been used by Dell is that of undercutting its competitors in price so as to rapidly gain market a bigger market share. 7.3 Place: Placement or place refers to any aspect that is associated with distribution channels, which serve the purpose of getting products or services to consumers in the target market. Distribution includes channel member selection, levels of service, logistics, and market coverage. This channel also performs logistical, transactional, and facilitating functions. Place or intermediary refers to the mechanism of moving goods and services from the service provider or manufacturer to the final user or consumer. Dell has succeeded in affecting the locational strategy aspects for its marketing campaigns. Dell’s products are always made available to its nearest dealers. This makes customers to develop loyalty and trust for the company. This enables it to achieve the objective of gaining the customer’s trust products and services developed by Dell. This helps in establishing a large and more diversified consumer base. 7.4 Promotion: Product promotion involves communication and selling aspects that are meant to convince the potential customer to purchase a particular good. A break-even analysis should be carried out when formulating promotion decisions because these costs can be relatively large when compared o the product price. Product promotion forms another one of the 4 P’s. It includes all available tools that will steer the marketer for marketing campaigns through communication. In the past Dell never concentrated on carrying out extensive marketing campaigns, however, this has since changed since the revolutionaries of 1999 which caused Dell to change its promotional tactics and started engaging in extensive marketing campaigns. Dell markets use television advertisement to market its products and also via mailing, print media, publications, catalogs, customer newsletters, and the internet. Recently, Dell started promoting its products using retailers such as Best Buy, Wal-Mart, Staples, Carrefour, and GOME. 8.0 Budgetary requirements In 2011, DELL’s board of directors authorized a repurchase of shares of roughly 5.0 million and the company still has close to $ 2.16 billion under the existing buyback plan. Following this announcement, the company’s shares increased by 2.29% in its after-market trade. The company’s efforts of streamlining operations has enabled it generate strong operating cash revenues. The company has resolved to spend more of its resources on research and development, stock repurchases, and capital and acquisition expenditures. The 2011 2Q12 financial results for DELL are as follows: repurchases. On August 16, 2011, DELL announced its 2Q12 financial results. Highlights are as follows: Total revenue rose by 1.0% y/y to reach 15.7 billion. Reported net income for the year was 0.49 per share, compared to $0.24 per diluted share, in 2Q11. Non-GAAP net income was 0.54 per diluted share, compared with $0.32 per diluted share in 2Q11. Short-term investments and cash equivalents were 15.1 billion, compared to $14.5 billion in 1Q12. Operating activities revenues was $2.37 billion, versus $465.0 million in the last quarter On 2011, Dell Inc. announced that it will provide Watson Towers advanced computer platforms that will help in transforming the company’s date center. On June 2011, the company outlined five year plan for increasing its returns from investments by focusing on small and medium businesses. The company also plans to increase its Enterprise Business from the current $18.0 billion to $ 30.0 billion by 2015. The company also expects its service business to double and reach a high of 9% over the next five years. This long-term financial targets ere reaffirmed by the management. This includes the 5-7% financial targets, operating costs that are in excess of the total net income, and 7% operating margins. A bigger share of the total budgets will be directed to research and development especially in the servers and storage (Xignite 2011, P.1). 9.0 control, milestones and corrective action DELL recognized that important to get a first hand customer experience. As such, the company established a customer advisory panel to get to know how customers feel about their products and services. This is part of the business transformation plan efforts and is set to continue. Previously, customer experience through technical support from pre-sales to the post sales was found to be undermining customer relationship. The process was slow, and DELL acknowledged this fact and tried to look for ways of providing solutions so as to maintain a good customer relationship (Gardner 2011, P.1). The company established a social media training team who can understand customer experiences through the internet. Customers can now air their views and experiences through social net works such as twitter, face book, and LinkedIn. DELL reached several milestones in2011 especially in environmental sustainability. The company recycled close to 150million pounds in terms of e-waste. The company is still looking forward to close on this goal by 2014. The company will make this possible through it computer recycling programs such as DELL reconnect (Mwannisa 2012, P.1). References Aditya, A 2008. Worldwide market share. Retrieved on 10/01/ 2012 from http://srl.gatech.edu/Members/ashah/laptop_industry_analysis_aditya_abhinav.pdfhttp://srl.gatech.edu/Members/ashah/laptop_industry_analysis_aditya_abhinav.pdf Gardner, D 2011, Dell Customer Advisory Panel Executive Summary. Retrieved on 11/01/2012 http://www.fastcompany.com/1661180/dell-customer-advisory-panel-executive-summary Hiteshi, B 2010, SWOT analysis of DELL, Retrieved on 10/01/ 2012 from http://www.marketing91.com/swot-analysis-of-dell/ Koehn, N 2001, Brand New: How Entrepreneurs Earned Consumers' Trust from Wedgwood to Dell, Harvard Business Press, London. p. 287. Kotler, P. & Keller, K. 2009, Dell, Inc.  A framework for marketing management, Pearson-Prentice Hall, SaddleRiver. P, 102 Kraemer, D 2002, Dell Computer: Organization of a Global Production Network, Center for Research on Information Technology and Organizations, New York. Lee, L 2006, Dell Goes High-end and Hip". BusinessWeekly, McGraw-Hill, New York: NY. P. 2 Mwannisa, H 2012, Dell nears e-waste recycling milestone. Retrieved. 2012 from http://www.mnn.com/green-tech/computers/blogs/dell-nears-e-waste-recycling-milestone Natalie, S. & Kelber, S 2005, The Dell Company - A Strategic Analysis,GRIN Publishing GmbH, Munich P. 98-106. Scheck, J 2008, Dell Plans to Sell Factories in Effort to Cut Costs, Wall Street Journal, vol.8, no.3.P.23-32. Xignite A 2011, DELL INC (NASDAQ: DELL). Retrieved on 10/01/ 2012 from http://finapps.forbes.com/finapps/BuyHoldSellAnalysis.do?tkr=DELL Appendices Appendix 1 4.0 situational analyses Before entering a new market, business managers must gain a thorough understanding of both the internal and external factors of the business environment they are operating in. this will enable the company to profitably meet their customer needs. A forecast of the trends in the dynamic business is also necessary. The computer industry is moving fast an unprecedented pace of technological development. In addition, the competition is very stiff and this requires firms to develop unique product differentiations so as to gain a competitive advantage over their rivals (Natalie & Kelber 2005, P.98-106). 4.1 macro economical analysis 4.1.1 External analysis External factors refer to external environmental conditions that affect an organization’s performance. By analyzing the external environment, a firm is able identify any condition that is far beyond its control and elements that it can take control of. An analysis of the major external environment gives DELL the ability to identify threats and opportunities that affect the computer industry. PEST-analysis The PEST analysis deals with the analysis of the political, economic, social and technological factors. This describes the general macro environment DELL and that of the whole computer industry. Political factors Political factors in this case encompass legal issues and government regulations that are the key determining factors and conditions under which organizations have to operate. Political and factors impose some restraints on companies because they influence the market conditions, customer taste preferences, and to some extend prices. In countries where there is political instability, problems can arise irrespective of whether company’s foreign countries carry out business with that particular country or operate production facilities. A number of countries impose restrictive policies that are meant to protect and maintain the production from their domestic manufacturers. If such policies are put in place, foreign companies find it difficult to enter these markets. The only solution and available option is for them to establish partnerships and collaborations with local companies. But, with globalization such trade barriers are removed and this allows for the expansion of free. One of Dell’s biggest challenges involves the legal/political environment. For instance, china prefers to promote PC vendors into foreign companies. As such, this threatens the government’s ability to secure contracts. The Chinese government on the other hand favors local firms. Removal on import duties often result in increased growth of business sales. For instance, in 2005 when Indian removed import duties on all laptops, Dell registered a sales growth of 94%. The current increased focus on the impact of high-tech wastes on the environment has led to formulation of stringent regulations, which has directly affected the supply of computers. Economic Factors: The global economy has a great influence on various factors that affect the operations and the growth of the computer industry. For instance, there has been a slow economic growth since early 2008, and this has been the reason behind the decrease in capital spending and a consequent low demand for computers. Dell is expecting a considerable growth on its business operations at a considerable growth of approximately 10% in the next years. This expectation can only be influenced by the economic situation in their home country a well as their target markets. This will also be greatly determined by the currency fluctuations and inflation rates which normally have an impact on consumer purchasing power. Social Social-cultural factors such as preference, income levels, education, and other cultural elements influences the demand patterns at specific regions. This affects a company’s operation in a given area. The income levels and education have been found to affect brand perception. For instance, those households with high levels of income are in a position to afford expensive computer brands. This is what has enhanced the premium pricing strategy of DELL compared to other PC companies. It has also allowed the company to increase its market share. Cultural aspects also play a key role in determining product preference and demand for a specific region. This seasonal sale has a significant impact on the computer industry sales in general. For instance, in the United States, the most significant periods for the computer industry are November to December and the back to school season of August. Educational level is the key determinant for the national demand for computers. If the education standard is high, the demand for these gadgets will also be high. In addition, computers have found wide applications in the day-to-day activities. Most societies have had small children who are as young as ten years but have some computer knowledge. This vividly represents an emergence of a generation that will dependent on computers in their working environment. The brand image of a specific computer company has also a lot to do with the purchasing decision made by potential consumers. Dell for instance has adapted to this trend by devising a wide range of notebooks in order to capture the attention of more customers through variety. The company has heavily invested on developing a string brand name for its products, and this is the reason why it has gained a more decisive market recognition compared to its competitors. The social cultural segment is also concerned with cultural values and attitudes of the society. In china for example, there is a huge potential for internet growth. This has given foreign companies such as DELL a great opportunity for expanding into this new market. What computer companies ought to know is that the people in china are not sure about the future of card sales because computers incur huge expenses in china. Dell opted to carry out face to face operations as well as invest in-door-to door operations so as to gain the trust and faith of the locals in their products. Technological factors This element is concerned with activities and institutions that are involved with the creation of new products, materials, and processes. The current trend indicates that technology in the computer industry is changing at a very fast pace and is becoming much smaller and faster with time. Most governments have realized that the key resource in development is to provide a viable access to technologies that are being developed by institutions. The computer industry is characterized by a rapid technological advancement through increased research and development. This is what has caused permanent innovation processes that also lead to decreased product lifecycles and faster depreciation of products. 4.2 industry analysis Internal Analysis Computer manufacturers and dealers have projected that across the world, business owners will be spending over $30 billion by 2015 for purchasing office equipment, and at least 50% of the total expenditures will go to the purchase of computer products. The actual spending on computers in the past few years was around $ 29.4 billion, which is slightly higher than the actual estimates. Researchers in this industry estimate that it will experience an annual growth of 5% to 15% in the next few years. Experts in this industry have reported that the computer product business environment is highly fragmented and competitive. It is an industry that has no well established brand leadership and has marketing opportunities that are underutilized. Before entering this market, there are numerous opportunities that DELL will be eyeing on and take advantage. Under this category, the industry under which DELL Company is operating in is examined. It is essential for the crucial factors that influence this industry to be examined analyzed so that this business environment can be understood. This is because these factors have a great impact on Dell and the business of its computer products. Worldwide market share 2005; Market researcher IDC (2005) Appendix 2 Porter’s five forces A better overview of the computer industry can be obtained by looking at the Porter’s five forces model Read More