Dell Inc: Changing the Business Model (Mini Case)
In 1984 Dell Inc. was founded by University of Texas freshmen, Michael Dell. Dell would buy computers from the excess inventory of local retailers and revamp them to sell out of his trunk. Dell was able to sell his computers at 10%-15% below retail price. After Dell’s freshmen year he dropped out to run his business full time.
By 1995 Dell had sales of nearly $3.5 billion and was one of the top five PC vendors in the world. Dell focused on customer support and service and became the master of process engineering and supply chain management. Dell has faced many challenges including distribution through US retail stores, management changes, and keeping up with its competitors. Since consumers aren’t willing to pay huge amounts of money for computers unless they were unique, Dell is at a crossroads. Which road Dell chooses ...view middle of the document...
These competencies have helped Dell become a leader in the computer industry.
Finding of Fact:
Dell is currently at a crossroads; the company’s margins aren’t in a favorable position for the company. In 2010 yes their net income rose, but was still only 2.91% of net revenue. Dell’s consumers are no longer willing to pay top dollar for a computer, unless it was unique. Competitors are selling laptops for around $300. Tablets have pushed Dell’s laptop sales down as well. Many more competitors have stepped into the industry since Dell first was founded. Dell also spends about 1% of its sales on research and development, while other companies spend about 5%.
Dell should invest more of its money into research and development for its products. Technology is constantly changing and for Dell to stay ahead or at least at the same pace, research and development is a must. I’m not saying Dell needs to go out and hire some new employees for this team. Dell could use members from each of its sections to help brainstorm and come up with new and innovative ideas. Innovative employees are invaluable to a company.
Dell’s management should perform environmental scanning both internally and externally to find Dells SWOT (strengths, weaknesses, opportunities, threats). Once SWOT is determined management could strategically figure out how to move forward. Environmental scanning shouldn’t be done just when a company finds it has “hit a bump in the road”, but periodically to keep the company innovative and make sure it is on the correct path.
Dell should also perform an industry analysis. This analysis will review potential entrants, buyers, substitutes, suppliers, other stakeholders, and competitors. By completing the analysis a company can determine the high and low forces against the company. The low forces could be turned into a possible opportunity or based on the analysis results, the company could switch strategies.