Dell Case Study Challenges Facing Case Study

Excerpt from Case Study :

In particular, Wyse gave Dell a better foothold in the sprawling segment of cloud computing. This area has helped companies save money through the delivery of affordable services and software over internet-based infrastructures (Ignatiuk, 2008).

Dell will also benefit from the prior experience of Silver Lake expertise that has revived several tech companies such as Skype. This wrenching would typically change Silver Lake to be tricky for a public corporation anxious to help shareholders not to panic. If such challenging maneuvers were dealt with, it would assist Dell under the covers (Bamford & West, 2010). While this is true, it is clear that taking Dell private will not solve the strategic web of troubles surrounding the company. The company will still be forced to ensure it swings the axe carefully in light of PC segments. This is because Dell will require cash to help service the enormous debt. In addition, Dell's margins could be squeezed tighter by rivals companies in Asia that have beaten Dell in the industry by maintaining low costs via effective supply chain management. In addition, Dell would still lack a strong foothold in the segments for tablets and smartphones; growth in this industry depends on these segments (Kouzes & Posner, 2010).

Dell's prospects appear to be promising in the cloud computing market. However, the company is facing a lot of rivalry from giant rivals that made head-start in the industry although some of them have been struggling too. For instance, HP has been operating in turmoil because of its enormous write down in the Autonomy value, which is its latest acquisition. After Dell announcing its buy out plans, HP published that its competitors are currently battling an extended duration of transition and uncertainty that will have a negative impact on its customers (Flanagan, 2004).

Strategic and competitive position

Competitive position

A detailed analysis of Dell reveals its competitive position. As the main strategy, Dell uses product differentiation in the markets for PCs. With the direct marketing business model, Dell can provide a high level of customization to its clients on their PCs. Rival providers have challenges providing such product customization because retail chains play a critical in their market offerings. Initially, manufactures of PC s made the final decision about elements of PCs specifications. In the case of Dell, its direct sales model enables consumers to decide the specifications (Besanko, 2010). Dell offers customers with latest and updated versions of flexibility in terms of computer prices and components. Recently, the industry for PCs tends to drive down prices of computers. This has forced Dell to shift its strategies towards minimal cost to battle competition in the industry. In terms of supportive strategies, Dell has adopted the three: alliance, growth, and innovation. For profit maximization, Dell pursues innovative tactics in implementing information systems in cost cutting. Dell's growth is visualized through Dell's diversified product line. For alliance strategies, Dell had maintained positive connections with all its hardware suppliers. Good relationships allow the company to purchase computer accessories at relatively minimal costs. Dell's combination of these strategies enables them to maintain a competitive position in the industry, constantly providing the best product value for customers (Bamford & West, 2010).

Strategic position

The sales and marketing strategy for Dell involves selling its offerings directly clients, whether individuals or corporate. The company sales its products through telephone, official website, and established retailers such as Best buy and Wal-Mart in U.S. markets. Different marketing channels have enabled Dell to reach a wider clientele because the numerous channels are based on extensive distribution channels. This is true as Dell's desktop and notebook generates approximately sixty percent of the overall revenue every year (Flanagan, 2004).

Dell aims to achieve mass sales and mass production. R&D fosters its market penetration after products mature in their lifecycle. This means that Dell spends minimal money unlike rival firms such as Apple, which has a tendency of entering a market in the initiation phase. While such an approach has its drawbacks to first movers, the principal advantage Dell obtains from the strategy is the ability to avoid risks related to product failure besides the low profit margins. Unlike other players, such as HP, Apple, and IBM Dell makes minimum investment in research and development. Compared to HP, Dell spends one percent of its revenue on research and development while HP spends three percent and IBM seven percent. This is a justification to why Dell has approximately three thousand patents while HP has forty thousand patents (Cohen, 2004).

Some companies have tried to emulate Dell's business model without success. This has paved way for Dell to capture a greater market share in the PC market segment. While rival firms are busy duplicating Dell's business model, Dell is busy expanding in its application of direct sales and marketing model to incorporate other computing accessories and associated products (Bamford & West, 2010). Direct sales and marketing business model has generated expandability potentials for Dell. It cannot be underestimated for this reason.


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