global project

Dell (Introduction): 

Dell (Introduction) Mission Statement: “Dell’s Mission is to be the most successful computer company in the world at delivering the best customer experience in the markets we serve.” Vision Statement: “It’s the way we do business. It's the way we interact with the community. It's the way we interpret the world around us-- our customers’ needs, the future of technology, and the global business climate.” Dell was founded in 1983 by Michael Dell, an 18 year old college freshman from Texas

Dell In China: 

Dell In China Founded in 1984 World’s largest computer vendor Revenues of $41 billion in 2004 Operates in 13 Asia Pacific markets with sales of $4.3B in 2004 Entered China in 1995 via export Started focusing on China in 1998 In 1998 established a local manufacturing and distribution operation In 2004, Dell PCs captured 7% share in China Dell competes in the PC industry, selling enterprise systems, desktop computers and notebook computers.

Dell strategies in China: 

Dell strategies in China Dell advertisement have appeared in several types of media including TV, the internet, magazine, catalogs and newspapers. Some of Dell Inc's marketing strategies include lowering prices at all times of the year, offering free bonus products (such as Dell printers), and offering free shipping in order to encourage more sales and to stave off. To maintain its low prices, Dell continues to accept most purchases of its products via the internet and through the telephone network. Dell has been focusing on m.commerce and social media strategies to reach customers and potential customers with marketing offers. Dell reportedly earned $1 million in revenue from transmitting messages about sales and discounts to its Twitter followers.

Key Strategic Issues: 

Key Strategic Issues Taking advantage of an international opportunity in a high growth market Adjusting business-level strategy in light of a rivalry Leveraging core competencies in a foreign market

External Analysis: Key Environmental Factors: 

External Analysis: Key Environmental Factors Demographic factors: Chinese population is 23% of world total Main opportunities will be in the larger cities where incomes are higher

External Analysis: Key Environmental Factors: 

External Analysis: Key Environmental Factors Sociocultural : Purchasing expectations (try before they buy) Chinese attitudes and culture becoming more similar in purchasing patterns and work ethic to U.S. Economic: Chinese economy grew 9.8% in 2005 Total retail sales increased 13% China’s PC market estimated to grow 19% in 2004-2005 Low per capita incomes and unevenly distributed Average US $1,583 Urban US $5,000 Middle class (200 million people) US $8,000

External Analysis: Key Environmental Factors: 

External Analysis: Key Environmental Factors Political/Legal (new member of WTO but…) China’s political system controls unions and financial institutions Legal and regulatory systems can be inconsistent Business based on relationships ( guanxi ) Intellectual property at risk Technology Just 2.5% of urban Chinese own a computer Access and use of the internet is increasing Global Sales opportunity (Asia/Pacific just 10% of Dell) China’s attractive low-cost manufacturing capabilities

External Analysis: Porter’s Five Forces: 

External Analysis: Porter’s Five Forces Bargaining Power of Customers – MODERATE Few buyers purchase a large portion of industry output State-owned companies, MNCs and educational institutions Sales account for a large portion of Dell’s sales revenue 50% from government, education, telecoms, power and finance. Brand reputation and product differentiation effecting Substitutes – None Competitive Rivalry – Intense High profit potential due to industry growth Main buyers are institutions with more resources than individuals Price pressure from local competitors High fixed costs of production capacity Aggressive competitive response Lenovo adopting Dell’s direct sales model in China Lenovo’s joint venture with IBM to increase it’s share Lenovo’s brand campaign to improve recognition

Competitors: 

Competitors Future objectives: Build market share rapidly Current strategy: Cost leadership (Lenovo, Founder, Tongfang ) Differentiation (HP, IBM & Compaq) Focused on consumer market Lenovo positioning itself to challenge in high-end

Competitors: 

Competitors Key Strengths: Chinese competitors: market knowledge and low cost advantage. American competitors: technology and brand recognition Key Weaknesses: Chinese competitors: brand recognition American competitors: higher costs

Customer: 

Customer High-end Customers State-owned companies MNCs Government Educational institutions Large Corporate Accounts (1,500+ employees in Telecoms, Power and Finance Individual Consumers Behavior: Consumer market is price sensitive Prefer a trial use of PCs before purchase Internet purchases were uncommon but internet users increasing Best way to reach is through retailing (Kiosks) Value product quality, especially high-end customers Brand loyal

PowerPoint Presentation: 

Internal Analysis

Key Resources: 

Key Resources Key tangible resources: WW (world wide) market leadership & financial resources ($8B in China) Direct sales system and customer service Local production plant in China Alliance with Oracle Manufacturing (“Build-to-order) and low inventory” strategy “Just-in-time” model (6 days vs. 40 days of supply) Portfolio of award-winning products Key intangible resources: Strong brand Reputation (“Dell experience” of high-quality products, support and service) Innovative in its technology, business practices and customer service http://www.dell.com/content/topics/global.aspx/corp/en/home?c=us&l=en&s=corp

Core Competencies: 

Core Competencies Ability to simplify PCs and the supply chain since their beginning Ability to understand customer needs and deliver innovative technology and services Ability to use technology to simultaneously improve customer experience and contain costs Ability to operate a direct business model All are valuable, rare, costly to imitate and nonsubstitutable.

Value Chain Analysis: 

Value Chain Analysis Primary activities of value: Operations: Manufacturing processes contain costs well Outbound logistics: Direct sales model Service: High responsiveness to customer needs Support activities of value: Technological development: Innovative web site and IT infrastructure Firm infrastructure: Visionary founder and management team

PowerPoint Presentation: 

Summary SWOT

Strengths & Weaknesses: 

Strengths & Weaknesses Strengths: Reputation Manufacturing plant (build-to-order capability, JIT) Direct sales model (on line and phone order capability) Strong sales revenue in 2003 ($8 Billion) Strategic alliance with Oracle Product performance (Best Overseas PC Corporation Award) Weaknesses No low cost advantage that will allow them to compete in the consumer segment Possible cost advantages not realized from their China plant

Opportunities: 

Opportunities Large population in China and economic growth potential (Dell’s fourth largest market) PC market expected to grow by 19% Only 2.5% of urban Chinese own PCs Sales potential in larger cities Reduction in tariffs on IT products makes it less costly to export to China Expansion into Japan, Korea and Taiwan

Risks/ Threats: 

Risks/ Threats Low GDP per capita in China Weak government protection of IP Moderately high threat of entry of new competitors Intense rivalry among competitors Lenovo-IBM joint venture Lenovo’s copying of Dell’s direct sales model Lenovo’s attempts to boost brand recognition

Financial Ratios of Dell In China (Stock Exchange database verified ): 

Financial Ratios of Dell In China (Stock Exchange database verified )

PowerPoint Presentation: 

Recommendations Continue Dell’s business level strategy of differentiation Continue to innovate and outpace the Lenovo-IBM partnership Build brand recognition in China as Lenovo’s doing worldwide Grow direct ordering via the internet (increasing Chinese web usage) Challenge Lenovo in other important Asian markets while increasing product quality and services in China Prepare for wireless/mobility trend and strengthen notebook offering Eventually broaden reach to penetrate low-end and rural areas Develop the infrastructure to service, support and sell (different than urban areas) Requires a low-cost, differentiated product line Learn the Chinese market to overcome local rivals Explore alternative sales channels (besides direct) to reach small cities