Dells strategy in the past had been to improve profitability and not focus on market share, but they

have moved away from the practice by deeply discounting computers to capture business. Unfortunately for Dell, theyve struggled with misalignment by failing to link their strategic goals to their operations, derailing the successful execution of strategy. A recent Wall Street Journal article noted this point: Dell said profit dropped 4.8% in its fiscal fourth quarter even as a surge in holiday computer demand lifted revenue 11% from a year earlier. The decline can be traced to the steep discounts that Dell is offering customers. In particular, Dell's consumer divisionwhich accounts for about a quarter of the company's revenuesaw sales increase by 11% from a year ago to $3.5 billion, but its profit dropped more than 80% to $9 million.
The chief impediment to Dells strategic change has been its inertia over time, as it continued to focus on optimizing the efficiency of its operating model. This is referred to as inside-out hubris in a new book by Wharton Marketing professor George Day & Christine

Moorman of Fuqua School of business. They write that Dells plight is typical of a company which becomes so good at what it does, in Dell case every process, every incentive; every cultural norm was optimized to deliver efficiently, bypassing the retail channel. Dell missed the cues from its market and when its strategy changed the organization continued along the old inertial path and failed to steer its competencies to adapt to the changing business environment.

Background: Dell, Inc was founded by Michael Dell with $1,000 in his University of Texas dorm room. Today, Dell has global revenues of $60 Billion and employs more than 105,000 employees. The majority of Dells revenues come from the mature markets in US, Europe and Japan. We will explore the strategic position of Dell Inc to gain an understanding of how the strategic misalignment developed.

Dells Strategy:Dell has refocused its strategy to rejuvenate growth by providing solutions that meet the customer needs. This change was to shift their portfolio to higher margins enterprise business and maintain a balance between liquidity, profitability and growth. The Strategy is built around:-

1) Efficient Enterprise Solution & Services: - Focused on expanding the Enterprise Solution &
Services which includes storage, servers, networking and services. 2) Flexible Value Chain: - Profitably grow the desktop and mobility business and enhance the buying experience of customers online. 3) Profitability and Growth: - Shift portfolio focus more to enterprise solutions and services to improve profitability, financial flexibility. The above strategy shifts it towards becoming a diversified IT company and focuses on the higher margin segment of the computing industry. Customer expectations in the industry have created a growing demand for low-priced, differentiated products. As a result, Dell needs to be able to perform value chain activities that simultaneously yield low costs and differentiated features, or an integrated cost leadership/differentiation strategy.

Analysis of Dells internal & External environments:The sources of a firms success can be understood by identifying the full set of alignments between its strategy and its environment (internal & external) which complement each other and enable the firm to achieve its goals. Conversely, understanding the sources of disappointing performance is a matter of identifying critical misalignments. Some misalignments are internal to the firm (for example, between goals and resources) or between any of the firms internal elements and its environment. The next step in a strategic analysis, therefore, involves asking two questions about alignment, the first focusing on internal alignment among firm elements, and the second between firm elements and features of its environment.

The Porter five forces for Dell

As shown in Porters five forces model for the PC industry, Dell operates in a highly competitive industry where the main focus is on the buyers and the suppliers, and an increasing threat from new entrants in China and Taiwan and substitute products. Among the forces in the Porter Model, the intra-industry rivalry remains the top priority for most PC manufacturers. The main competition is between the manufacturers themselves as they choose between product differentiation and low cost as primary strategy. The right choice of business strategy will propel growth and sustain market share in the industry. This is further compounded by the threat of substitutes where a major share of the computing devices is being garnered by alternate devices.

SWOT Analysis: The SWOT Analysis of Dell indicates that its traditional strength of direct sales is
being challenged by its traditional rivals as well as online retailers. The competitors have also adopted direct sales model and affected the growth of Dell. Although Dell has been able to keep its costs down through outsourcing parts to its suppliers and effectively managing its Supply chain this has reduced its differentiation as the same part are available to its competitors. This has created a challenge to its Enterprise Server market which is dependent on on-site service and customization.

Strengths
1. Dells diverse product and services lineup and large PC and server installed base create opportunities to up sell professional services Leverage traction in servers, coupled with improving service and software portfolios, to meet growing demand for datacenter infrastructure build outs and boost corporate top-line growth. Supply Chain management Latest Technology

Weaknesses
1. Reliance on Corporate and Institutional Sales 2. Dells lack of profitability in consumer PCs takes a toll on its gross margin. No presence among key student market. 4. 5. Weak presence in Retail Segment Heavy reliance on shrinking PC market which accounts for 20% of revenue

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