Table of Content

I.

Companys History and Growth.........................................................................................1

II. Strengths and Weaknesses within the Company.................................................................1

III. Companys External Environment......................................................................................1
IV. Analysis of Strength, Weaknesses and External Environment............................................1
V. Business Level Strategy......................................................................................................1
VI. Analyze Implementations....................................................................................................1
VII. Recommendations..............................................................................................................1

I.

Companys History and Growth

Through the years Dell went from producing PCs to software, hardware, workstations,
electronics, printers, tablets, mobile devices networking, storage devices, servers, security
products and other electronic devices and information technology systems but it all started
with just building computer systems. Dell doesnt just sell products to personal consumers,
Dell also targets government, healthcare, education and small and large corporations.
Michael Dell founded Dell Company; hence the name of the company derived from his
family name but the company wasnt known as Dell back in 1984 when it was founded. In
1984 the company was known as PCs Limited which designs, manufactures and sells
technologies that has a dedicated founder who left his university to commit his time and
effort for the company. What separated Dell from other firms in the industry in 1985 is their
unmatched service for their customers in their first PC, Turbo PC (Dell 2012). Dell
provided a risk-free returns and next-day-at-home product assistance (Dell 2012). From
that Dell continued to grow by providing what was back then the PC with the fastest
performance and opening branches internationally.
One of the significant time and moment in Dells growth is in 1988. Dell was able to do their
public offering which upped their capital from 1 thousand to 85 million dollars and Dell was
growing at about an 80 percent rate (Dell 2012). By this time PCs limited officially changed
their name and since then, has been known as Dell Computer Corporation. As Dell grows
in the next years, the company opened more branches in different parts of the world such as
Ireland and Africa and sales just kept on increasing. Dell grew increasingly fast that by 1992
Dell was featured in the Fortune 500 magazine with Michael Dell as the youngest CEO who
has ever received such recognition.
Another significant time in Dells growth is when they were able to provide the longest
battery life compared to other competitor firms in the industry by providing a Lithium-ion
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made battery. Dell was unstoppable and they kept on expanding their operations by
penetrating Asia. To support their fast growth Dell reached their customers globally by doing
their key business operations online and that just made the world a little bit smaller. Dell.com
is another significant contribution in Dells growth. Sales increased by 1 million dollars per
day because of this website and continued to increase as sales reached 40 million dollars per
day (Dell 2012). The website allowed customers to customize depending on their own liking
and provided tech support to customers around the world. By this time, Dell just kept
introducing new product lines that dominated the industry and by 1999 Dell received
recognition for being the top PC producer in the US and other awards globally.
Another Milestone for Dell was when it became the number 1 world-wide in providing
computer systems by 2001. Dell started to partner with successful firms like EMC and other
firms in the industries to be able to attain affordability in storage for customers and raise
conditions in the workplace, society and the environment. Dell became dedicated in
preserving the environment in manufacturing their product and they proved that by being the
first to produce a desktop with a monitor thats free of lead and by providing in 2006 a
recycling for free to consumers around the world.
In 2010 Dell won 300 awards and one of those is being No. 1 healthcare information
technology services provider in the world (Dell 2012). BY 2011 Dell again proves their
customer orientation and commitment by investing 1 billion dollars in providing their
customers around the world with solutions to various problem and issues that they encounter.
Its obvious that one of the key successes to Dells growth over the years is their unmatched
dedication and commitment to their customers thats seen first in their CEO and in the whole
organization.

II.

Strengths and Weaknesses within the Company

Strengths:
One of the strengths of Dell and what really separates them from other companies is their
customer intimacy. Dell allows their customer to personally customize and design the laptop
that they want. This type of strategy is called product differentiation and customer
relationship management and Dell is doing exactly what it takes to build an intimacy and
good relationships with their customers and at the same time differentiating their products
from others. Their direct model approach allowed Dell to be able to provide customization to
their customers, particularly the home users. By allowing the customers to be able to
customize their laptop online or through the phone according to what they want it enabled
Dell to provide a laptop to each customers that has the exact performance, capability and
affordability that they need/want from a laptop.
The direct model approach also allowed Dell to get rid of distribution channels and retailers,
which cut a lot of costs for Dell and resulted in being able to provide their customers with
laptops at a very reasonable price. Allowing customers to customize the performance of their
own laptop also helped Dell to offer reasonable price for each of their customers because the
customers can minimize their laptops capabilities in a way that will fit their budget. The
ability of Dell to provide relatively low-priced laptops to their consumers gives them a great
advantage. Also, by giving their customers payment options, such as monthly payments, it
made their pricing even more attractive.
Dell provides what may be one of the best customer services in their industry. Whether its
about tech support, order support, employee representatives, sales agents and other customer
service, Dell is right in front of the line. Dell.com provides an all day support for customers
who may have questions or complaints about their order. It also provides a 24/7 tech support
for customers who may be having a hard time understanding or using Dell products or who
may be having problems with the products. Dell.com is very interactive and user friendly and
so it can be easily accessed and used by any customers who needs support from Dell. Their
services deal with various questions and issues like, delivery options, return policies, tracking
orders, shipping methods, payment options, customer accounts and tech support for home
users, small businesses and enterprises. Dells customer service is definitely one of the
unmatched strength of Dell.
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We personally found out how Dell deals with customers online. One of our group members
chatted with an employee at Dell named Christopher R. who is responsible for answering any
sales related questions. He was very polite throughout the conversation and even if the
questions we asked werent related to sales he stayed polite and represented Dells known
good customer service very well. This kind of customer care leaves an impression to
customers and may lead to repeat purchases.
Another strength of Dell is that unlike other competing firms who offer hardware warranty on
their equipment whereas Dell provides warranty on the whole package which includes the
hardware, software, storage, management and maintenance.
Weaknesses:
Dells direct model approach can also be considered a weakness if viewed at a different light.
Personal consumers who may need a laptop right there and then will not have time to
customize their laptop and wait for what may be days to get their laptop. They cant just
simply go to an outlet store, pick a laptop and go home with it, which is something that they
can do with products of other competitor firms. Its a bit more difficult for consumers to buy
from Dell because Dell does not use distribution channels like other firms. Anxious
customers would specifically have a problem with Dells direct model approach.
Another reason why not having a physical retail store is that the customers cant personally
see a technician or employee that can help them or even show them how to fix problems with
products theyve bought. Its very time consuming and might even be costly to constantly
ship their products back to Dell and back at them whenever there is a problem. Especially in
our time where people are generally busy, its very frustrating to constantly wait.
Dell was able to differentiate itself from competitors by offering customized laptops and topnotch customer service but when it comes to innovation, Dell cant compete. Yes,
customization differentiates their products but only to the extent that each laptop suites the
capability, performance and design that each particular customer wants. But unlike innovative
laptops like Apples it doesnt fully differentiate its products from competitors and so their
customization strategy will not be sustained in the long run.
Weak internal control is another one of Dells weaknesses. Back in 2006 Dell had to recall
about 4.1 million notebooks, which included lithium-ion battery that theyve sold (bbc.co.uk,
2006). Dell wasnt able to thoroughly check if their notebooks are ready for sale. This
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destroyed the image of Dell and definitely shook the trust of Dells customers. Even though it
happened 6 years ago, this type of failure on Dells part will always be talked about and
considered whenever an individual thinks about purchasing Dell notebooks. This recall may
probably be the largest amount of recalls concerning notebooks ever.

III.

Companys External Environment

Opportunities:
One of the target market of Dell are university students and Dell hasnt really gotten the
loyalty of this particular target market and so Dell has the opportunity to do market research
and find out what they can do in order to really capture this target and this will help Dell
increase their market share especially because more and more university students around the
world use laptops because of the trend in our modern world.
Another opportunity is for Dell to explore other markets, maybe in Asia or Africa where a
low-cost product is of outmost importance to the consumers. If Dell is able to enter a new
market quicker than its competitors and establish its brand and gain customer loyalty itll give
Dell a competitive advantage and widen its pool of revenues.
Dell can also strengthen itself by pursuing and maybe even concentrate more on their
products that serves enterprises. Obviously, Dell isnt winning when it comes to laptop
usability, innovation or specifications. However, Dell is trusted and established when it
comes to offering products for enterprise users because design and innovation doesnt really
top the list of requirements of enterprise users. Dell should try to beat the competitors where
theyre vulnerable and that in the products for enterprise users.
Threats:
As new technology arises and as its developing so fast nowadays, it helps a lot of companies
to minimize their cost of production and make it more efficient. Moreover, it also intensifies
the competition among the companies in the market. However, it can cause Dell to fall behind
if Dell isnt able to take advantage of new technologies before the competitors. It also gives
pressure for Dell to be quicker in offering new and more advanced technological products to
its customers in order to keep them satisfied.
Competitor companies who have intensive distribution by having retail stores around the
globe is a definite threat to Dell as having retail stores provides convenience and makes it
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easy for consumers to try out and purchase the products of Dells competitors. Because of
retail stores, Dells competitors are able to quickly get their products to the final customer
faster than Dell is able to.
Another threat is that Dell have so many competitors who are using the same costleadership/differentiation strategy and Dell isnt the best in this strategy. When comes to
differentiation, Apple is definitely number one and when it comes to cost leadership, other
brands such as HP, Lenovo, Acer and Toshiba. There is serious competition within the
industry and Dells differentiation strategy can easily be copied by competitors since their
strategy is not that difficult to imitate.
Also, Dells strategy to offer products at a low-cost isnt a strong strategy anymore because
there are so many other companies who are able to match the products they are offering at the
price its offered at. Their cost-leadership strategy isnt really giving Dell a strong
competitive advantage in these days.

IV.

Analysis of Strength, Weaknesses and External Environment

To summarize the strengths of Dell, there are basically three strong points and that is their
customer service, customer relationship and their direct model approach. However Dell has
generally four weaknesses and those are, limitation of their direct-selling approach, lack of
innovation, absence of retail stores and their weak internal control. We have seen that their
direct model approach is both strength and a weakness of Dell and so its not really a strong
strategy that can give them a competitive advantage. Dells customer service and relationship
is definitely what gives Dell a competitive edge over the other companies since Dell really
intensely and continually provide the best service they can for their customers as well as
potential customers.
Dell doesnt have much opportunities left to explore in the personal user demographic in the
areas that they currently operate and so the three opportunities that we believe Dell can
pursue is to enter a new geographic locations where consumers are price sensitive,
concentrate on winning the college students and build a competitive advantage by
strengthening itself with the enterprise users. With Dells strength in building excellent
customer relationship and with their praise-worthy customer service we believe that Dell can
pursue these opportunities and gain a competitive advantage within the industry. However,
threats competitors are intense especially because Dells competitors are more innovated,
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their products are more differentiated, the price is very similar to Dells offerings and the
main threat is that the competitors can easily copy Dells strategy if they decide to. Dell is
really in a vulnerable position and Dell is slowly losing its competitive edge within the
industry.
Looking at the strengths, weaknesses, opportunities and threats, its obvious that Dell is not
competitive anymore. Dell is slowly losing its competitive edge because of its highly
innovated competitors and because competitors such as Apple are able to capture the
consumers attention by offering differentiated and innovated products in the market.

V.

Business Level Strategy

Listen, Learn and Deliver are the three core values 1 of Dell Company, which made
this company very successful in supplying IT, related products and services. In the long
run of its business journey, Dell empowered people around the world to adapt as well as
to realize their dream with technology. The company's formula for success has been based
upon its unique customization, delivery, and cost proposition. Dell also strive to provide
the best possible customer experience by offering superior value; high-quality, relevant
technology; customized systems; superior service and support; and differentiated products
and services that are easy to buy and use. As in any company, in order to become a
successful company, Dell has set its goals and objectives clearly for the entire company
and executes a specific business level strategy.

1 Dell Hompage: www.dell.com

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Business level strategy refers to an integrated and coordinated set of actions the firm uses
to gain a competitive advantage by exploiting core competencies in specific product
markets. In theory, customers are the foundation of a successful business level strategy of
each firm, thus each company need to have their own core competencies and use it to
satisfy customers needs. The fast growth in technology and the supply of technology
related products push customer to have more expectations but demands for low-priced
and differentiated products. In response to the change in market condition and customers
buying behavior, Dell combines together its cost leadership skills with differentiated
product features and related services to create value for its customers, thus means that
Dell is using an integrated cost leadership/differentiation strategy2 as their business
level strategy. Integrated cost leadership/differentiation strategy is an action plan the firm
develops to produce goods or service, with strong emphasis on both differentiation and
low cost. With this strategy, the firm produces products that have some differentiated
features (but not as many as offered by firm using differentiation strategy) and that are
produced at a low cost (but not as low as those firm who use the cost leadership) 3. This
strategy requires Dell Company to perform its primary and support activities that
simultaneously yield low costs and differentiated features compared to its competitors.
With a successful implementation of this strategy, Dell gains a lot more benefits of
building skills that can help it adapt more quickly to new technologies and rapid changes
in the external environment. By implementing this strategy, Dell has considered three
initiatives such as information networks, manufacturing system, and total quality
management system, to make it more flexible as it tries to balance the objectives of
continuous cost reductions and continuous product enhancements.
The company decided to enhance the effectiveness of information networks (linking the
supply chain through to the customer) to improve work flow and communication among
employees to identify and resolve problems that appear. The improvements in information
linkages would prove particularly beneficial as Dell seeks to improve services for its
customers. Moreover, Dell utilizes a customized assembly process based upon a flexible
manufacturing system to fill customer orders for their manufacturing system. The third
2 http://www.wikinvest.com/stock/Dell_(DELL)/Business_Strategy
3& 4: Understanding Business Strategy: Concepts and Cases, By R. Duane Ireland, Robert E. Hoskisson, Michael A. Hitt,
page 100 & 120

initiative that Dell takes in consideration is total quality management (TQM). It is a

managerial innovation that emphasizes an organizations total commitment to the
customer and to continuous improvement of every process through the use of data-driven,
problem-solving approaches based on empowerment of employee groups and teams4. By
practicing TQM, Dell increases their customers satisfaction as it can reduce cost by the
elimination of process inefficiencies, thus the company can offer better performing
features at the relatively low price expected by its customers. TQM system also plays an
important role in the enhancement of innovative abilities, the ability to exceed customers
quality expectations by differentiating the company from its competitors.
Since Dell highly value its customers, the company also set some other customer-related
strategies. For instance, direct relationship with customers and offering them choices;
Dell is using direct selling, customers can purchase systems and services from Dell via
telephone, at a growing number of retail stores, and through its website, where they may
review, configure, and price systems within the entire product line; order systems online;
and track orders from manufacturing through shipping. Customers can also give their
feedback or suggestion for current and future Dell products and services through an
interactive portion of their website called Dell IdeaStorm. This helps the company reduce
distribution cost and give an advantage of predicting changes in customer requirement
and in their needs immediately.
As a result of practicing these initiatives, in May 2008, Dell announced a $3billion cost
reduction initiative, which includes both cost of goods sold and operating expenses. In the
fourth quarter of fiscal year 2009, Dell identified additional saving opportunities and has
increased its cost-reduction target to $4billion by the end of Fiscal year 20115.

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5 http://www.wikinvest.com/stock/Dell_(DELL)/Business_Strategy
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VI.

Analyze Implementations

VII.

Figure 1 Dell's hierarchy

As mentioned above that Dell is using customer satisfaction as the main important concern to
integrate each of their operations, to understand and try to produce as well as deliver products
and services that captures their customers trust and satisfaction. Along with that we find that
Dell is using cost leadership/differentiation strategy as its business level strategy. So at this
point, we are going to analyze how Dell does its daily business work and implements their
strategy in their current situation.
First, Dell is able to product their products with comparatively lower price by assembling the
products by themselves, placing importance in research and development department and
selling their products directly to the customers. Dell does these things to undercut the prices
charged by other competitors. The choice of Dell to cut out retailers enabled them to cut out
unnecessary costs.
Low-cost strategy and product customization is one of the reasons why middle-income
people choose to purchase from Dell. Lets take for example such developing countries where
people are sensitive to price. Those customers will likely choose Dell as it has different price
options, not like other brand that has a higher fixed price. Manufacturing and distributing
their own products allows Dell to be sensitive and flexible in changes in customer demand
and needs. In addition, only Dell uses this king of differentiation technique by having its
products with different colors and letting customers have more choices to satisfy their
purchase by simply providing them with their favorite colors. So here it is, Dell is having the
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color for customers, so that they will not somehow need to go to the shop and spending extra
money for this. This simple specification shows that Dell is really out to satisfy their
customers and in the long run get more market share respectively.
More than this, TQM is also used to implement their strategy because Dell believes that
customer prefer products with quality product regardless of Dell offering them a lower cost.
TQM ensures effective production by reducing or eliminating any processes that is inefficient
or that does not add value to the product. Using TQM ensures that every process and
employee of all level are involved in making sure that they deliver value to the products and
that this will all result in satisfying the customers. TQM also helps ensure that the culture and
the environment within Dell company is satisfying to their employees so that it results in
efficiency and productivity. We see that this is successful as Dell won a recognition by Fort
Magazine by being Americas most admired company (Dell 2012).
Last but not least, about direct selling strategy that Dell is using, it is very reliable and easily
accessed. Dell uses their website in order to effectively implement their direct selling strategy
(website strategy) Customers are able to monitor their order at anytime because the website is
managed 24/7. Also Dell efficiently uses their website by providing excellent assistance from
trained employees to any of their customers any time of any day. Dell probably uses the
website strategy in the best possible way and in enforcing their strategies and reaching out to
their customers.
Companies always concentrate and focus on creating, implementing and controlling their
strategies however giving benefits to their employees is also a very important part because
they are the ones who are works directly in the daily production and more importantly with
the customers. So Dell doesnt just give their employees monthly salaries, theyre also given
extra benefits such as medical care, retired plan, saving plan as well as some specific
discounts on computer and available products. All of the benefits given to their employees
acts as incentives for their employees to really work hard and commit to their responsibilities
and try to improve. In fact, in 2005 Dell was number one in the list of fortune magazine as
Americas most admired companies and one of the reasons may be because Dell really
takes care of their employees and provide them with benefits and a good working
environment (Dell 2012).

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