Computer Industry Analysis Dell Computer Corporation

Computer Industry Analysis Dell Computer Company Assignment 2-5-2

Prepared for Professor Ed DeJaegher MBA 723-H2WW

Prepared By Charles Oney

December 5, 2010

Computer Industry Analysis Dell Computer Corporation Computer Industry Analysis Dell Computer Corporation

The objective of the report is to give a brief snapshot of the economic conditions of the computer industry. This report will review the market forces, current conditions and the future trends that will impact the industry as a whole. The report will then turn its focus to a specific computer manufacture within the computer industry and show how this company separates itself from the competition. Past Market Forces: From the early stages of development the computer industry has impacted every aspect of life from the business use of computers to improve and automate processes to the home office and the ability to reach out to individual around the world. With continued advancements within the industry, computers have decreased in size and their computing power has improved with each passing year. Business use of computers has steadily grown through the 1990s and with the introduction of the internet; home use of the computer has added a new mix of consumers during the next decade. With the internet boom, sales of computers added strong growth to the computer hardware industry during the late 1990s and early 2000. Unfortunately the industrys strong growth began to slow down by 2001 and the demand for computer hardware declined as a result of the global economic downturn. During the next five years the market staged a comeback but only to be turned back in 2009 with another global economic downturn. The global economic downturn knocked information technology spending down to about 4.5% for 2009, with hardware suffering more than software and service (Standard & Poor's, 2010). As the industry grew, several companies began to emerge as leaders within the industry. The top companies of the industry

Computer Industry Analysis Dell Computer Corporation consist of Acer, Apple, Dell, HP and Sony. The specific computer manufacture that will be focused on during this report will be Dell. Current Conditions: The computer industry can be broken down into several categories of hardware, software, and service. The hardware category is divided into two main categories: Personal computers (PC) and servers. Based on estimates from IDC, the value of worldwide computer hardware sales of roughly $262 billion with PCs representing 80% of total sales (Standard & Poor's, 2010). This translates into roughly 1/5 of the total IT dollars spent in 2009. During the first half of 2010, the computer hardware industry experienced substantial growth with the PC category leading the way. The growth rate of PCs shipped in the first quarter 2010 was 27.1% compared with first quarter 2009. This growth did not stop there, the second quarter remained strong with shipments of 22.9% higher than the year prior (Standard & Poor's, 2010). This type of growth has not been witnessed since 2007, the year before the economic downturn worldwide. With the addition of low-priced netbook computers, the third quarter 2010 saw the PC shipments decline over the previous two quarters. The forecast for worldwide PC shipment growth for the full year of 2010 will be around 15.3%, according to the market research firm of

Gartner Inc. (Standard & Poor's, 2010). Additionally, Gartner noted some inelasticity of demand for consumer PCs but businesses are putting off purchases to save money in such difficult economic times. Standard and Poors Equity Research is estimating that shipments will increase by 15% in 2011, further supporting that the economic recovery was continuing and the need of consumers to

Computer Industry Analysis Dell Computer Corporation maintain current technology. The chart below shows the PC shipments for the past four years and the projected shipment in the next four years.

Future Trends: As the trend for increased shipments of PC to the market place appears to be increasing, the ability of manufactures to be innovative will set them apart from the competition. As technology continues to advance the ability of manufactures to enhance the computer experience for the consumers will be in the forefront. One trend is the ability to match the needs of the consumer with the right hardware. Consumers uses computers in various ways and manufactures must be able to customize to the consumers wants and desires. The old adage of one size fits all is one that the computer industry has practiced for years. Within the auto industry, manufactures have listened to consumers by providing added features and add-ons that will enhance the vehicle they are purchasing. The computer is no different. The ability to match the bells and whistles (in computer terms hardware and peripherals) that the buyer wants will give a competitive edge over

Computer Industry Analysis Dell Computer Corporation the competition. Another trend is the ability to improve the portability of the computers. Manufactures have moved in this direction for several years with the development of laptop computers. The recent development of tablet type computers are beginning to appear on the

market. The most notable tablet type of computer is Apples IPod, which is a portable computer with tremendous functionality and ability. While many manufactures have produced a smaller version of a laptop called netbooks. The netbooks do provide portability but they lack in functionality and power of tablet computer. Dell Computer Corporation: As one of the industrys well-known names, Dell Computer Corporation has grown into one of the largest manufactures of computers in the world. Dell has seen tremendous growth since its inception in 1984. The success of Dell began with an innovative idea of building a computer to the wants and desire of the consumer. With the guidance and leadership of Michael Dell a company was developed with an unprecedented idea of selling computer systems directly to the customer(Fact About Dell, 2010). With this revolutionary thinking, Dell was able to deliver the most effective solution to meet the needs of their customers. The Direct Model that was the brain child of the founder and is still being used today. The basis of the model is to provide a fast, cost effective and customer ordinated means of production and distribution of the companys product. This innovative business model has continued to lead Dell to maintain their competitive advantage over the other companies within the computer industry. Competitive Advantage; Dell has used an ultra-efficient manufacturing process and a direct sales approach to dominate the PC market (Lanyon, 2006). Dells direct model, which reduces cost for the both the

Computer Industry Analysis Dell Computer Corporation consumer and the company by eliminating middlemen and puts an emphasis on reducing costs during production. Dells business model has not been successfully duplicated by the competition and provides the company with an advantage to drive costs as low as they can.

What differentiates Dell from other computer companies is they have successfully perfected their business model by selling to the consumers. This approach allows the company to keep the markup that normally is generated by the retailer or pass it on to the consumer by offering lower prices on their product. Additionally, the focus of providing the opportunity for the consumer to customize their purchase leads to lower costs and reduces the risk of holding inventory for long periods of time. This is vitally important in an industry where product has short shelf life due to technological advancements. Dells business model allows the company to continuously monitor the demand of the consumers. These measures allow the company to better react to changes in the market by reducing or increasing inventory more effectively. The companys advantage to maintain their dominance in the market place has been challenged. Other computer manufactures have been able to erode what once was a sizeable advantage to provide a cost effective product. The competition has improved production process in which has reduced their costs of their products. Dell has responded by expanding the products that they offer the consumer. Dell is now the second-largest global supplies or volume servers and has created alliances with numerous companies to offer more products to potential customers. One alliance that Dell has made is with Lexmark to offer a line of printers and consumables to their market base. Dell understands the global impact with the computer industry. The company has worked hard around the world to pursue new and innovative products to meet the challenges of todays

Computer Industry Analysis Dell Computer Corporation

consumer. Dells global presence gives the company an innovative edge to bring a diverse range of ideas and broadens the understanding of the global customer needs. Dells global presence offers significant advantages to consumers by providing a global supply network to improve the overall product quality and lower costs (Global Product Development, 2010). Additionally development teams around the world are able to present affordable technology to new and emerging markets. This advancement offers tremendous potential social and economic benefits (Global Product Development, 2010). Going Green: In 2007 Dell announced a program to reduce greenhouse gas emissions by planting trees. The Plant a Tree program was designed to allow consumers of Dell computers to give back to the environment (HP/Dell: environmental credential battle heats up, 2008). The principle of the program is to take $6 from each computer purchase and fund tree planting to offset the greenhouse emissions that a typical computer would generate over a typical three-year life span. To date the program has successfully planted 258,000 trees and Dell has a goal to plant more than half a million trees around the world by 2012 (Eco Engagement & Recognition, 2010). Another innovative way Dell is helping the environment is the use of bamboo in their packaging. According to Dell, bamboo packaging helps reduce environmental impact and ensures a healthier planet. This tremendous renewable source is a great alternative to other methods of packaging and is very environment friendly. Additionally the bamboo material used is highly compostable and has received certification for being such. Aside from its environmental advantages, the bamboo packaging is strong and durable. This ensures the equipment being shipped will be protected from the rigors of the delivery system.

Computer Industry Analysis Dell Computer Corporation Conclusion:

The computer industry is a highly competitive environment where innovation and advancements in technology are the backbone of the business. Companies that are able to find a market niche and capitalize on that niche are the ones that are successful in today environment. Dell Computer Corporation has not only developed that niche they have capitalized on the benefits that it provides. Dell has been a leader in the industry by providing a product that allows the consumer to make choices and develop a product that they want. This forward thinking has enabled Dell to reduce their costs in which they are able to pass those saving on to the consumer in higher quality and lower prices. Dells competitors are continually working on ways to improve their own efficiencies, in order to be competitive with the model that has been a success for Dell. As opportunities have presented themselves, Dell has made adjustments to their model and has expanded their place and role in the computer industry. Dell has created alliances and made acquisitions that enhanced their presence in the market place. This had given the company acompetitive advantage to the competition by not being only a computer company but a company that can supply all your computer and technology needs. Dells presence in the global environment is evident in their pursuit of advancements in technology by acquiring the resources to keep that market edge. Their commitment to the environment has led the company to be innovative in how they package their product. Additionally they are partnering with their customers to reduce greenhouse emissions by planting trees around the world.

Computer Industry Analysis Dell Computer Corporation Dells commitment to excellence and innovation will allow the company to continue to be successful today, tomorrow and in the years to come. They are committed to provide the best product at the highest level of customer service and this will ensure their future success.

Computer Industry Analysis Dell Computer Corporation References:

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HP/Dell: environmental credential battle heats up. (2008). Datamonitor, 13-14. Retrieved from Business Source Complete Database, December 3, 2010. Computer Makers Dell, HP and Apple Push Green. (2009). Channel Insider, 1. Retrieved from Business Source Complete Database, December 3, 2010. Eco Engagement & Recognition. (2010). Retrieved December 5, 2010, from Dell: http://content.dell.com/us/en/corp/d/corp-comm/PlantaTreeforMe.aspx Fact About Dell. (2010). Retrieved December 5, 2010, from Dell: http://content.dell.com/us/en/corp/d/corp-comm/our-story-facts-about-dell.aspx Global Computer Hardware. (2010). Computer Hardware Industry Profile, 1-38. Retrieved from Business Source Complete Database, December 4, 2010. Global Product Development. (2010). Retrieved December 5, 2010, from Dell: http://content.dell.com/us/en/corp/d/corp-comm/cto-global-prod-dev-loc.aspx Aghazadeh, S.-M. (2007). Build-To-Order Supply Chain Management: Procreating and Protracting Superb Performance in the Computer Industry. International Journal of Business Research, 192-199. Retrieved from Business Source Complete Database, December 4, 2010. Barlow, R. D. (2009). Dell, Apple, Bridge IT with Imaging. Healthcare Purchasing News, 15. Retrieved from Business Source Complete Database, December 3, 2010. Lanyon, M. (2006). Dell. Morningstar Stockinvestor, 9. Retrieved from Business Source Complete Database, December 4, 2010. Standard & Poor's. (2010). Industry Surveys - Computers: Hardware. New York: Standard and Poor's Equity Research Services. Retrieved from Business Source Complete Database, December 3, 2010.