Matching Dell Harvard Case Solution & Analysis

Overview of the situation

Dell Computer Corporation was developed in 1984 by Michael Dell. He started off the part time business from his dormitory room where he formatted hard disks for personal computers and he also offered disk drives, extra memory and modems to different IBM clones where he sold all these services at lower price as compared to the IBM machine. Moreover, Dell started off the company with $80,000.

The company decided to assemble Dell branded PCs rather than upgrading competitor machines. The business model that has been followed by the company in the past has been its Direct Model. This model allowed the company to deal with the customers directly. The company even offered corporate customers with high performance PCs at quite reasonable and cheaper prices. The PCs in the market were basically designed to fulfill customer needs directly. Dell took orders directly from the customers.

In the year 1990, the company decided to move away from its Direct Model and actually entered into the retial channel. The idea or the logic, which encouraged the company to enter into retail model, was to create new opportunities and increase the penetration in the market. However, the idea to move into retail model did not show success to the company.

In the year 1996, the company launched its own website where transaction buyers were offered product information, the configuration, check price, place order and keep a check over the progress of the order. The revenues for the company between 1994 and 1998 rose from a total of $3.5 billion to $18.2 billion.

Moreover, the profits for the company increased from $149 to $1.5 billion during the same period. The stock prices also increased by 5600%. During the period stated above, Dell tripled the market share and grew twice the rate of its rivals in the market. Dell has been the pioneer in taking orders directly from the customers.

Problem Statement

            The major problem that has been identified in the case “Matching Dell” discusses the issue where the overall PC industry has been facing low average profitability where all the firms in the industry have been trying to compete for the market share. Dell, however, has been unique with the strategy of Direct Approach has been gauging customers with large market share.

            With the success of Dell, competitors have been imitating the similar approach of the company. In order to sustain itself in the market, Dell has been trying to find methods and ways which can offer competitive advantage for the company in the PC industry.

Alternatives are as follows:

      Sell directly to the customers

      Focus on innovation

      Focus on large customers and institutions  

Alternatives

Sell directly to the customers:

            The first alternative which is already the strategy followed by the company Dell computers is to sell the customers directly. This has been the major advantage for the company where customers have been offered products directly (Dev, 2005).

Pros:

      Direct contact with customers

      Align with the vision of the company

      Customer centric

Cons:

      Costly method

      Can be exploited

Strategic planning

Mission Statement:

            The mission statement of Dell is to become the most successful firm in the Information Technology industry by delivering the customers with utmost excellence in all the markets. Moreover, the company has been offering competitive pricing, superior corporate citizenship, service and support, leading technology and innovation

Vision Statement:

The vision of Dell has been to provide the functionality and structure to the computers to actually visually impair individuals in all the markets. The major focus of the company has been to think about the future.

Porter Five Forces Model

Bargaining Power of Buyers: High

The bargaining power of buyers for the industry is high. The reason why it is high is because of the low switching cost. Moreover, the technical innovation in the industry provides the customers to go for the best technology more often. The brands that are available in the market make it difficult for them to retain buyers or the customers. Since the rivalry has increased, therefore the overall prices have reduced and the customers have also become quite price sensitive (Porter, 2008).

Bargaining Power of Suppliers: Low

The bargaining power of suppliers in the industry is low. The reason for it being low is the fact that the number of suppliers in the industry is quite high. The companies have the leverage to quote prices as per their needs and wants.......................

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