5% market share compared to 9.6% market share in 2002 ("Dell Annual Report 2004"). In deed the company's globel presence is increasing at a remarkable rate.
In 2004 your company's Gross margin as a percentage of net revenue increase to 18.2%, compared to 17.9% in 2003 and 17.7% in 2002("Dell Annual Report 2004"). In addition, your company's cost savings initiative drove the year-over-year improvement for fiscal 2004 and 2003 ("Dell Annual Report 2004").
The company also made a concerted effort to improve margins by implementing four main cost reduction initiatives ("Dell Annual Report 2004"). These cost reduction initiatives affect warranty costs, manufacturing costs, design costs, and operating expenses ("Dell Annual Report 2004"). In addition, the cost savings initiatives also incorporate providing some customer technical support and back-office tasks from cost effective locations and driving more capable tools and processes throughout the world ("Dell Annual Report 2004"). According to the annual report
Dell's general practice is to aggressively pass on declines in costs to its customers in order to add customer value while increasing market share. Dell currently expects the component cost and competitive pricing environment will continue to be challenging. However, management believes that the strength of Dell's direct-to-customer business model, as well as its strong liquidity position, makes Dell better positioned than its competitors to continue profitable market share growth in any business climate ("Dell Annual Report 2004")."
Cash flow from operations allowed your company to further strengthen its liquidity ("Dell Annual Report 2004"). This is evident with a cash flow from operations of $3.7 billion, which is an increase from the $3.5 billion reported in fiscal 2003 ("Dell Annual Report 2004"). Furthermore, your company ended fiscal 2004 with $11.9 billion in cash and investments, which showed an improvement of $2.0 billion over fiscal year 2003. The chart below (taken from "Dell Annual Report 2004") is illustrative of your company's ending cash, cash equivalents, and investments as well as the results of Dell's consolidated statements of cash flows for 2004, 2003 and 2002:
All of the aforementioned strengths have allowed the company to remain a dominant force in the computer hardware industry.
Weaknesses
The company's position as the most profitable company in the computer hardware industry is evidence that the company does not have many weaknesses ("Dell Annual Report 2004"). However, a few weaknesses were found in the annual report. The first of which is the decline in revenue growth during fiscal 2004, in comparison to fiscal 2003 ("Dell Annual Report 2004"). This decline was a result of the increased force of the competitive pricing environment coupled with your company's concentration on profitable growth ("Dell Annual Report 2004"). In addition, although the company produced strong year-over-year net unit growth of 67% in the area of consumer notebook computers during fiscal 2004, the growth was somewhat offset by a 13% year-over-year decrease in average revenue per-unit sold due to a change in product mix in favor of lower-priced systems ("Dell Annual Report 2004").
Another area of weakness was found in the decrease in investment income for fiscal 2004, in comparison fiscal 2003 ("Dell Annual Report 2004"). The main reason for this decrease was the decrease in interest rates on investments, offset by an increase in investments and cash equivalents throughout the year ("Dell Annual Report 2004"). The annual report explains that the fiscal 2002 loss in inclusive of a $260 million impairment charge in the second quarter for other-than-temporary decreases in fair value of Dell's venture investments ("Dell Annual Report 2004").
These decreases were caused by investees' inability to implement their business plans and the conditions of the market ("Dell Annual Report 2004").
Opportunities
As in previous years, your company has an opportunity to expand its profitability by adding additional products to the already existing product line. According to the annual report, "opportunity exists for Dell's continued profitable growth by increasing its presence in existing markets, entering new markets, and pursuing additional product and service opportunities ("Dell Annual Report 2004")."
In existing markets such as the United Kingdom, Japan and China, the company has the opportunity to gain a greater percentage of the market share and the number one positions. It also has the opportunity to expand its product line in certain existing markets. The company is also yet to expand into some new markets; there are countries where Dell computers are not yet sold. In addition, the company has the opportunity to create new products and offer new services. It also has the opportunity to apply the company's strategy...
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,
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