Revitalizing Dell Harvard Case Solution & Analysis

Competitor analysis:

Dell faces an intense level of competition from diverse players in the market. Some of them are;

  • IBM and Lenovo
  • Compaq and HP
  • Acer
  • Apple
  • Gateway

IBM and Lenovo:

IBM initially lost market share after 1980s. But they were then targeting MIS managers. They were relying on their supply chain for almost 90 percent of their PC sales.

In response to Dell’s customization approach, it relied mostly on channel partners. They enhanced the level of integration with resellers and distributers and asked them to meet customers’ customization requirement.

IBM had set a pricing strategy in which the company assembled PC and the channel assembled PCs were sold for the prices. IBM also tried to open a direct sale channel by launching a website.

While opening and strengthening the direct sale channel, IBM did not want to be like Dell but profit from its strategy and hence, came up with a middle way of direct as well as indirect sales channel.

But IBM soon started losing money and then partnered with Lenovo. However, the business did not return to profits as IBM was managed by headquarters in North Carolina but its operations were in China.

Compaq and HP:

Compaq and HP merged in 2001 and since then are being considered as the most important rival for Dell. HP also hired Compaq with a vision that its own sales model was entirely destroyed and the Compaq’s strategy of direct distribution could benefit HP. However, many people criticized the merger and for a small period of time critics were proved correct as Dell surpassed merged company in the market.

HP gained the market share again by adopting corporate level strategies of cost-cutting and organizational re-designing. They adopted separate strategies for selling PC for individual customers and business customers. They targeted individual customers with extensive marketing campaign which Dell was not doing. For business they adopted the Dell’s direct selling model.

Gateway:

Gateway also adopted the direct selling approach of Dell. However, it targeted home and small office users. In 1977, its growth declined and net income also fell. Gateway was finally sold to Acer.

Acer:

Acer became the fastest growing PC Company after acquiring Gateway. Acer was previously a contract of companies like IBM. It now launched its own brand and the giant firms dropped them as their contractor. Thus, then Acer also started focusing on designing, branding and marketing PCs manufacture by others.

As contrary to Dell, Acer adopted an indirect approach and adopted individual customers as its target market. Acer’s partnership permitted it to customize products according to targeted segments and geography.

Apple:

Apple distinguishes its products from Dell by making them sleek, easy to use, providing integrated experience, distinct OS, proprietary architecture and high prices. Customer’s take more interest in Apple’s PC after the launch of new OS and usage of Intel’s microprocessors. Apple used both direct and indirect sales channel.

Conclusion:

All the competitors gave tough time to Dell. The mergers and acquisition in the computer industry also made it hard for Dell to play in the PC market. Most of them tried to copy Dell’s direct selling strategy but in most cases these companies didn’t get the same success as Dell achieved. However, all of these re-organized their strategy and surpassed Dell (Refer to figure 1).

Internal Analysis

Dell’s Direct Model had remained a core competency throughout the last three decades. Sales and marketing had remained at the core of Dell’s strategy. For managing sales and marketing, they have managed the relationship by dividing them in two types; relationship buyers and transaction buyers.

Management team is another resource of Dell. They hired experienced people of the IT arena from all over the world. All the senior level positions were changed and a new management team was formed including: a new Head of Consumer Division, Chief of Global Operations, Chief Financial Officer and Chief Consumer Designer.

Production, logistic and procurement are also resources of Dell. These resources were critical to operate the direct sales model of Dell. Dell had production plants all over the world including US, Asia and Europe which helped in fulfilling customized customers’ orders. The order receiving system was highly automated and one of its kind in the entire PC industry. The delivery process was also linked to procurement system. The main competency that provided competitive advantage to Dell was it’s after sale services..................................

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