Market Performance of Dell Computers - Case Study Example

Executive Summary The purpose of this paper is to conduct an intensive industry, customer and value creation analysis for Dell Computers in order to ascertain its existing market position while still making sure to provide relevant recommendations. Industry analysis indicates that Porters’5 forces remain to be very high due to the existing economies of scale and a larger number of competitors and suppliers. Recommendations provided include the following; It is important that SMEs contemplating entering the market ensure that they enjoy stable liquidity position that will facilitate possible growth from areas of investments and, also to make certain that they can access readily available resources for operations. It is also recommended that the established companies within the industry ensure that they cut down on their market niche by way of formulating and implementing unique competitive advantage that is totally different from others. Recommendations for Value Creation/ Measurement for Dell The company ought to find distinctive ways of connecting the entire system with objectives of management through a cross-functional financial measure chain. The value creation system should show clearly the direct effects it has on the overall management metrics in place. The firm should ensure that necessary resources are allocated to ensure that the entire value creation measurement relates specifically to each task in place. For instance, enough personnel should be employed to help with customers calling for technical assistance at any given moment. Customer Analysis: Recommendations The company should ensure that their virtual platform remains as active as ever in order to eliminate costs related to middlemen The company should also equally invest in physical stores as a way of developing firsthand customer relations. The firm should ensure to employ distinctive improvements in its online purchasing systems in order to prevent possible hindrances that might compel customers to seek alternatives Introduction Dell Computers was founded in 1984 by Michael Del for the purpose of manufacturing and selling customised personal computers to potential customers in the United States and the world over. Presently, the firm is one of the leading hardware manufacturers that its operations in numerous countries across the globe (Kwatinetz & Schutte, 1992). The firm is engaged in the development, manufacturing and providing services for a given range of computer systems that include; desktops and note books. Subsequently, using a direct-marketing approach, it also provides software, market peripherals and other services. Just like other companies in the industry, Dell Computers sells most of its products and services to a different set of customers that include; larger corporate, government agencies as well as SMEs and personal users. The company’s main competition arises from such other companies as IBM, Compaq and HP (Kwatinetz & Schutte, 1992). Thus, the purpose of this paper is to conduct an intensive industry, customer and value creation analysis for Dell Computers in order to ascertain its existing market position while still making sure to provide relevant recommendations (Kwatinetz & Schutte, 1992). Industry Structure & Analysis Porter’s 5 Forces & Recommendation i. Threat of Entry by Other Competitors Economies of Scale: the firm’s immediate competition entering into the personal computer manufacturing business is considered to be highly positioned. However, for SMEs intending to enter the market will be met with high cost of goods of sold since they will only sell fewer units hence a need to improve on their relative gross margins to ensure future survival (Park & Young, 2004). A classic example of this is Ideasign that was later phased-out of the market when the costs of goods sold become extremely higher prompting them to increase prices for the products hence lowering their competitiveness. Product Differentiation: remained to be very high in the late of 1980s but currently has experienced a lower activity. Nowadays, most of the firm’s computer components are compatible with ones produced by other competitors like IBM especially the Microsoft Windows OS that remains to be compatible with the Intel microprocessors. Capital requirements: for this industry is quite hence enormous financial resource-based in regards to technological prowess and inventory employees will always be needed in case the competitors will need to enter the market (Park & Young, 2004). Notwithstanding, with the present availability of outsourcing for assembly purposes of PCs and servers and the easier adoption of E-commerce to conduct online sales can lower the existing capital requirements in a high degree. Switching Costs: for the entire industry is extremely lower especially because purchasing of compatible hardware and software from competition is affordable. ii. Rivalry Among the Existing Competitors: Market research indicates that Dell and its competitors hold at least 60% of the entire market and all of them remain to be relatively balanced. Fixed costs or storage costs: of the industry is changing in a robust way especially because of the conventional supply chain structure of PC manufacturing processess. The relatively short life cycle of modern PC products in comparison with costs of development has resulted to most competitors to balance their respective assets in a careful way while at the same time maintaining keeping overhead and operation costs down (Park & Young, 2004). Lack of differentiation & switching costs: of the industry, currently, remains to show little or no difference between Dell and Gateway PCs with the former company only showing intensive ability to customise products resulting to minimal level of switching costs. iii. Pressure from Substitute Products The future of the personal computers within the industry is expected to undergo under lots of challenge from the manufacturers of other IT based products like smart phones and TV set boxes. In fact, with the current launching of a higher bandwidth is expected to accelerate the mobile computing era and thus, availing users with other notable ways of accessing shared information. iv. Bargaining Power of Buyers The industry’s bargaining power for buyers is high due to the shortened life cycle of the products offered as well as a lower switching cost. However, the customer will at times purchase PCs regardless of prices provided it offers high quality services (Kwatinetz & Schutte, 1992). v. Bargaining Power of Suppliers The bargaining power of suppliers for the entire industry is low given that there is substantial number of them offering almost compatible components to all PC manufacturers. However, for SMEs the bargaining power is low since they mostly fall victims due to their low volume purchasing prowess, which poses a challenge to enter and succeed in the industry. Given that the future of the industry will be exposed to intensive outsourcing then there is the possibility of the power of suppliers improving altogether (Kwatinetz & Schutte, 1992). Recommendations: It is important that SMEs contemplating entering the market ensure that they enjoy stable liquidity position that will facilitate possible growth from areas of investments and, also to make certain that they can access readily available resources for operations. It is also recommended that the established companies within the industry ensure that they cut down on their market niche by way of formulating and implementing unique competitive advantage that is totally different from others. SWOT Analyses Strengths: Brand name: of the company is far much popular in comparison to such competitors as Gateway and IBM (Dell, Inc, 2008). Market Position: for the firm is highly positioned mainly due to the multi-faceted marketing techniques it uses for its different marketing niches positioned across different sections of the globe. Ability to customise products: of the firm has ensured that it enjoys a substantial amount of customers in both larger corporate and government agencies as well (Dell, Inc, 2008). Financial and thus, the firm’s liquidity position: has ensured that it remains at par with other notable competitors in relation to how easily it can access capital resources. Weaknesses Uneasiness amongst the shareholders: of Dell is likely to cause a redundancy in operations given that single shareholders hold more shares in comparison to total shares held (Dell, Inc, 2008). Inability to Change: in regards to the existing marketing composition. This has led to the company calling back its former CEO to try and maintain its former glory that seems to be fading in a much faster pace (Dell, Inc, 2008). Opportunities: New products & services: seems to be favouring most of the companies including Dell within the industry especially ones that are engaged with the launching of new strategic initiatives directed towards internet-based activities like hosting companies and ASPs (Dell, Inc, 2008). Future Possible Alliances: given that Dell is one of the most established firms within the industry. The company can form alliances with new as well as competitors alike to counter the underlying changing market conditions (Dell, Inc, 2008). Threats: The continued appreciation of the US dollar in relation to world’s major currencies: is likely to slower the level of sales for PCs across the globe especially the Japanese Yen and Euro as well. Possible Economic Downturn in the Country of Operations: the US is likely to affect the entire technology-based firms due to perceived high prices for potential and existing customers (Dell, Inc, 2008). Value Creation/ Measurement for Dell Dell provides a distinctive benchmark of a technology-based firm that has utilised the aspect related to value-linked measurement system to catapult value creation prowess. However, the current performance of the company’s stock-asset performance performed poorly while it postulated a higher level of inventories with accounts receivables surpassing the revenues growth rates (Reilly & DeRose, 2002).The firm’s value creation measurement system opts to maximise the value for its stakeholders like shareholders and customers is based on putting much emphasis on shifting away from revenue growth to ensuring that they convert order placements at a much faster pace. The system portrays an enterprise-wide, value-linked measurement system that assess on both the liquidity and cash conversion cycle capacity at all times (Reilly & DeRose, 2002). Recommendations: The company ought to find distinctive ways of connecting the entire system with objectives of management through a cross-functional financial measure chain. The value creation system should show clearly the direct effects it has on the overall management metrics in place. The firm should ensure that necessary resources are allocated to ensure that the entire value creation measurement relates specifically to each task in place. For instance, enough personnel should be employed to help with customers calling for technical assistance at any given moment. Customer Analysis The company serves both physical and online-based customers. Virtual sales are conducted using the company’s website while the physical ones are done over-counter of its stores. With the online platform in place, virtual customers have access to product information, offerings and purchase systems online. Customer analysis is mainly conducted using an object-oriented approach. Recommendations: The company should ensure that their virtual platform remains as active as ever in order to eliminate costs related to middlemen The company should also equally invest in physical stores as a way of developing firsthand customer relations. The firm should ensure to employ distinctive improvements in its online purchasing systems in order to prevent possible hindrances that might compel customers to seek alternatives. References Dell, Inc. SWOT Analysis. (2008). Dell, Inc. SWOT Analysis, 1. Park, A., & Young, L. (2004). DELL OUTFOXES ITS RIVALS. Businessweek, (3898), 54. Kwatinetz, M. K., & Schutte, R. C. (1992). Dell Computer Corporation. Black Book - Dell Computer Corporation, 1-38. Reilly, G & DeRose, C, M. (2002). The measure network: Value-linked measurement at Dell. Journal of Cost Management, 45-47 Read More