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Matching Dell: Hbs Case Study: Presented By: Sujata Sharma Abanty Majumdar Oindrila Dasgupta Rajshree Suvam Dey

Dell's direct sales model has led to strong growth and market share gains against competitors like Compaq, IBM, and HP who rely on channel partners. However, competitors are attempting to copy Dell's model and the industry is maturing. Dell faces challenges around maintaining its pricing and productivity advantages as the industry evolves. The case discusses Dell's history and competitive environment, as well as alternative strategies for Dell to consider going forward such as expanding into new products, markets, and through acquisitions to drive continued long-term growth.

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2K views

Matching Dell: Hbs Case Study: Presented By: Sujata Sharma Abanty Majumdar Oindrila Dasgupta Rajshree Suvam Dey

Dell's direct sales model has led to strong growth and market share gains against competitors like Compaq, IBM, and HP who rely on channel partners. However, competitors are attempting to copy Dell's model and the industry is maturing. Dell faces challenges around maintaining its pricing and productivity advantages as the industry evolves. The case discusses Dell's history and competitive environment, as well as alternative strategies for Dell to consider going forward such as expanding into new products, markets, and through acquisitions to drive continued long-term growth.

Uploaded by

sujata shah
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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MATCHING DELL: HBS CASE STUDY

Presented By:
Sujata Sharma
Abanty Majumdar
Oindrila Dasgupta
Rajshree
Suvam Dey
“It’s amazing to me that our competitor think the
customers are the dealers”
-Michael Dell
Products

• Two lines of products; choice within a broad menu of features.


• Support pages for self-help, 90% support tickets closed on phone, remaining outsourced.
• High customer perception of quality of products, services and support
• Dell’s commitment to consumer value, to the team, to being direct, to operating
responsibly and, ultimately to winning continues to differentiate it from other companies.
Competitions
• Compaq (no.1 – wide range)
• IBM (no. 3 – sales and service leader)
• HP (no.4 - quality leader, closely tied to channel)
• All above prisoners of channel and channel culture
• All started variants of direct model – AAP (IBM), ODM (Compaq), ESPP (HP) but no major
headway
• Gateway: Direct player, biggest threat but management weaknesses and operational
execution pushed it down
Background
• Time period of this case – 1984-1999. Alternative strategies and recommendations for
long term, 10 years out, from 1999 onwards.
DELL
• An entrepreneurial company started by Michael Dell who founded it in 1984 with just
$1,000, out of a dorm room.
• DIRECT MODEL: Build relationships directly with consumers - Cut out the middleman.
Outside sales process for relationship, inside sales for transaction segments.
• Production processes to cut inventory, suppliers co-located, close collaboration with
suppliers for efficient logistics
• DELL eliminated the need for inventory or middlemen and gave itself a built-in price
advantage, which it in part keeps as profit and in part passes on to customers.” Used
customer funds received for 5 days before passing on to suppliers.
• Global player, markets all over the world with manufacturing facilities in Ireland,
Malaysia and Austin, US.
Industry

• Products: Based on well-defined, Wintel based standards first established by IBM. Wide
range of configurations, highly competitive global markets for components except Wintel
(processor and operating system)

• Evolution: 1975-81 start-up 1981-86 – Early explosive growth, high margins, IBM enters
in 1981 1990-95 – Crest because of economy but prices keep falling 1995-99 – Growth
recovery but industry at late-growth maturity stage

• Customers: Large / medium companies / government, small business, consumer,


education • Channels: Retail, distributors small resellers, integrated resellers, direct

• Manufacturing: Assembly-line, low entry barrier, Asian manufacturers capacity


Concerns and Challenges
• Competitors are poised to copy and succeed in direct model
• Price and productivity advantage with competitors is narrowing.
• Maturing industry

Problems
• How to deploy a global strategy to manage sales in international markets?
• How to leverage growth in Internet usage that is promoting PC ownership?
• How to leverage growth in Asia? • How to take advantage of growth in IT
industry?
• What will drive growth in future? Are we betting on the right products by
still promoting Wintel laptops and PCs?
Market Analysis - PC Market Size
Share of the U.S. PC Market
Segmentation Analysis
*Graphs are prepared with the help of excel sheet with the reference to Exhibits in
the case study.
*Price Index = Market Share (by value) / Market Shares (by
units)
Porter’s Five Factor model of market profitability
Competitive Analysis
Understanding Competitors
Objective &
Commitment

Exit Barriers Image & Positioning

Size, Growth &


Cost Structure
Profitability

Organisation & Strengths & Weakness


Culture

Current & Past Strategies


Competitive Strength Grid
DELL Compaq IBM Gateway HP
User Satisfaction
Overall
Raw Technology
Sys. Speed, Reliability, Compability, Configurability, Upgrades, Hardware quality and Sys. Manag.

Pricing

Service & Support


Warranties, Support Staff, Repair times, Channel & Web based Support, Overall service/support
Customer Relationship
Performance Cost Structure
Low IBM HP Compaq Gateway Dell High
Performance Performance

28.70% 26.30% 21.40% 13.80% 12.40%


Competitive Analysis Notes
Competitors struggled to follow and replicate the Direct Model of DELL
• Gateway is a serious challenge in 1999.
• DELL challenged Compaq market share. However, DELL is followed closely by both HP and
Gateway.
• All big players tried to move partial sales to model similar to Direct.
• Competitors had similar organization, culture and values (all from US)
• New industry where no clear barrier (customers segment overlapping)
• Reliance and degree of affiliation with channel can act as a strength as a well as a
weakness, mainly a weakness.
• Use of technology to achieve operational growth may vary.
• Level of investment in overseas markets determined the growth of Dell as compared to
gateway which remained formidable in US but failed to become a major global company.
• Overseas investment in manufacturing as well as sales was a great decision of Dell.
• Remaining steadfast to direct is a major focus point kept its differentiation in place and
proved to be a SCA.
Environmental Analysis
• Technological .
The computer market was influenced technologically by:
• Better performance of products increase both storage and HD, faster
speed both microprocessor and CD-ROM, enhance monitor resolution etc.
• Miniaturization of devices less space and weight > cheaper freight
• Moore’s Law Better performance and cheaper price

• Customer Trends: In the mid 1990’s demand growth due to :


• Strong economic growth
• Emergence of new, popular services involving computer networks
• Proliferation of electronic mail and WWW

• Governmental/Economic Trends: US market was characterized by stable


both economic and legal system.
Factors affecting current performance and long term profit

In commercial market, Dell won a very high reputation on their PC.


Customer satisfaction / brand loyalty
● User satisfaction - Ranked 1st overall in 1998, and ranked evenly 2nd in from high to low
price point. HP ranked 1st in high price point, and Gateway ranked 1st in midrange and low
price points.
● Customer relationship – All ranked 2nd. HP ranked 1st.

 Product / service quality


● Raw technology – Ranked all aspects 1st.
● Pricing – Mostly ranked 2nd and ownership costs ranked 1st. Gateway ranked 1st.
● Service and support – Mostly ranked 1st and 2nd except the item ‘channelbased
support’ ranked 3rd.
Alternative Strategies
Market Development
• Expand Geographically
• Target New Segments

Diversification new product and new market


• Brand name (advertising)
• Marketing skills
• Sales and distribution capacity
• Manufacturing skills
• R&D and new product Capacity
Strategic alliances
• scale economies and strategic markets.
• Fill out product line to serve market niches.
• Gain access to technology & low cast mfg capabilities.
• Access a name or customer relationship.

Product development
Add product features & refinement.
New Generation products, new form factors.
Recommendations
Product Expansion Strategies
New product design and portfolio
• According to user ( kids , students , employers , elders )
• Organic shape , colors , trend , age , gender

Diversification Strategies
Advertising to establish strong brand positioning
• On needs and wants of consumer
• Based on emotions
• Adv for “direct sale” build the brand by service, support and warranty Offering
solutions
• Lack of portfolio of offering in certain segments (E.g.. IBM has high margins
business solutions, HP expanded its technology service business)
Product and Market Diversifications
• Laptop, server, PlayStation, Smart phone
• Printers, Servers, Projectors, TV’s, Handhelds, Software, Peripherals,
Storage, Networking, Workstations and more.
• Asia , Middle east
• Defense, Media, hotel, universities, schools

Growth Strategies
Acquisitions, Strategic partnership
• E-Business, Storage, Security, Network
Thankyou

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