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Dell Computers presents a useful company to perform a strategic management analysis upon. The personal computer industry has changed and evolved considerably in the past years and the market conditions today are also presenting new and exciting problems for this organization. The purpose of this essay is to examine Dell and its industry in terms of its current strategic outlook. The essay will present information on the personal computer industry, the competitive forces that make up that industry and the strategic outlook for Dell within this specific area.
Dell Computer Corporation is a company that provides computer products and services for customers worldwide that provide these customers with their information-technology and networking infrastructures. Dell's ascension to market leadership is the result of a constant and effective approach to delivering the best possible customer experience by directly selling standards-based computing products and services. According to Bloomberg, revenue for the last four quarters totaled $41.4 billion and the company employs about 46,000 team members around the globe.
Dell was founded in 1984 and began by selling computer systems directly to customers. Dell had a unique skill that could understand customer's needs and efficiently and provide the most effective computing solutions to meet those needs. Dell Computer Corporation is one of the world's largest computer systems organizations. Dell has a unique and systematic way of design as the company can customize products and services to satisfy a range of customer requirements. Dell approaches business directly with customers, one at a time, and believe they do it better than any of their competitors.
This direct business model eliminated retailers that added extra costs and diminished their ability to relate to the customer in the direct fashion that Dell wanted. The direct model allows the company to build every system to order and offer customers powerful, specifically designed systems at very competitive prices. Dell also provided themselves with the latest applicable technology much more quickly than companies with slow-moving, indirect distribution channels, turning over inventory every three days on average.
Dell is considered an industry leader due to their large range of high quality products. Individuals and small-businesses benefit from the high-performance and value of Dimension desktops and Inspiron notebooks. Dell also offers printers, projectors and other complementary products. Dell offers customer support with a broad range of services designed to help customers simplify complex computing.
Dell is also committed to a culture of environmental sustainability and responsibility. This approach helps Dell minimize its impact on the environment through product design, manufacturing and operations, product ownership experience, and product end-of-life solutions. Dell also recognizes that as a company with a broad global supply chain, they have a responsibility to work with their suppliers to encourage high standards of behavior, including sustainable environmental practices, the health and safety of people and fundamental human rights and dignity.
Besides seeking to deter entry, companies within the personal computer industry have also developed competitive strategies to manage their competitive interdependence and decrease price rivalry. These tactics consist of price signaling, price leadership, and non-price competition such as through product development, all of which Dell has been involved with at some point or another in its history.
Price signaling is the process by which companies increase or decrease their product prices to express their intentions to other companies in order to influence the way they price their products. Dell has been involved in such price strategies by using a copycat strategy where a company does exactly what its rivals do. Dell has been doing this for many years, matching prices with HP and Compaq, who are now merged under the HP name. This accomplishes several things. It will match any pricing strategies they undertake. Since they realize that Dell will match their every move, the companies know that by cutting their prices will only cut into their profits rather than actually gain a larger market share, so they are less likely to undertake such tactics.
Price leadership is another tactic that Dell uses to reduce price rivalry and thus enhance the profitability of companies. Prices within the personal computer industry are typically set by imitation. This means that the price that is set by the weakest competitor is used as the basis for competitors' pricing. Therefore, when weak rivals set their prices to a specific median value, large competitors, such as Dell, Gateway and HP are willing to match the price because the size of their operations allows them to retain significantly lower costs than smaller competitors.
This pricing is done by market segment. The prices of different types of personal computers, whether they be desktop systems, servers, or notebooks, indicate the customer segments that the companies are aiming for and the price range they believe the market segment can tolerate. Each manufacturer prices their systems in the segment with reference to the prices changed by its competitors, not by reference to competitors' costs.
Dell has also used product development, a method of non-price competition to manage rivalry within the industry. Product development is the creation of new or improved products to replace the existing ones. Due to the constant evolution of technology, new and improved hardware components are released constantly. In order to keep up with upcoming technologies without isolating their existing customers, Dell cycles out its systems every twelve to eighteen months, providing an increase in their market share as they release new products which target specific customers or customer needs. Dell also persuade their large clients to recycle their old systems allowing them to remain relatively up-to-date in a world where technology is constantly changing. It is significant for Dell to maintain product differentiation and continue to build market share in an industry that is experiencing shakeout.
Dell's best strengths lie in their are their strategy. In consistent to being an integrated cost leader, Dell produces high quality PCs by using their direct business model approach and sells them directly to the customers. Dell's weaknesses are single sourcing, new product and reliance on corporate clients. Dell has opportunities like the potential growth in overseas markets as the industry is still in growth phase and the entering of the new product markets. The threats are technological changes that are expected since technology can only get better. Global economy and increased competition in which Dells financial ratios identifies that the corporation is no match for their competitors. Dell's most competitive force is the direct-model concept which helped them to reach above-average returns and remains in business today. Customers have developed a brand-name loyalty to Dell because of their low cost differentiation strategy.
The huge threat faced by Dell is the severe competition in the industry. If Dell enters into a merge it would not have to spend so much money and time trying to develop a face-to-face communications, if the local business is already well-known. According to cost saving benefits, the company will not have to spend any extra money for product development if it is already developed.
Dell developed ways to conquer its weaknesses and use its strengths to gain advantages over its competitors by careful analyzing of the factors that contribute to the company's success in business strategies that had implemented created the path for the company's continued success. Today, in fast-moving areas such as wireless and hybrid cars, you can see how market windows open and close fast. Profits and success come to those who can thoughtfully scan the market environment and quickly spot profitable opportunities. Dell is facing many challenges right now due to some strategic failures. Somner (2013) reported that Dell has " lagged in a crucial area of corporate strategy as well, said Shaw Wu, an analyst at Sterne Agee in San Francisco. While Mr. Dell has always been attuned to the needs of corporate clients, he is 20 years behind I.B.M. In…[continue]
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