Dell Summary

DELL INC STRATEGIC POSITION, CHOICE AND FINANCIAL ANALYSIS Table 1: PESTEL | | |Meaning to dell? |Dell’s ability to | | | | |address. | |Political Factors |China’s five-year plan has a clear set of social objectives. 23) |Good chance for Dell to grow |Very good. | | |Increased government spending helped China for the first time to beat the US to become the |in BRICS nation. | | | |world’s biggest PC market. (24) | | | | |Restrictive policies in many countries for the protection of domestic companies. 25) | | | | |BRICS sign framework pact for local-currency credit lines. (26) | | | | |European Commission Unveils New intellectual property rights (IPR) Strategy (27) | | | |Economic |The US Debt Crisis and Downgraded Credit Rating. 28) |Global consumers spending |Moderate | |Factors |Global Economy growth forecast 4 % in 2011 and 2012. (Advanced economies 1. 6% and 1. 9 % |less Increased competition. | | | |Emerging and developing economies 6. 4% & 6. 1% ,US 1. 5 % & 1. 8%,China9. 5 9. 0 ) (29) | | | | |Canalys predicts 14% growth in PC market for 2011. 30) | | | | |China has topped the US as the largest PC market worldwide (31) | | | | |Economies in developing countries like growing at faster rates than developed countries. (32)| | | |Social | Education affects brand consciousness, product demand. 42) |Consumers willing to pay more|Very good. | |Factors |Income levels (40) |for higher quality. | | | |Cultural aspects affect sales. (39) | | | |Technological Factors | Fast technological advances (33) |Needs continuous products |Good. | |Increased research and development. (33) |innovation and redesigning. | | | |Short product life cycle. (41) | | | |Environmental | Adds to Global warming. (34) |Requires focus for |Moderate. | |Factors |High Environmental effects. 35) |sustainability. | | | |The global volume of e-waste generated is expected to reach 93. 5 million tons in 2016 from | | | | |41. 5 million tons in 2011 at a CAGR of 17. 6% from 2011 to 2016. (36) | | | |Legal Factors | Minimum wages restrictions in many countries. Effects to its profit margin. |Good. | | |Strict recycling laws in some countries. (37) | | | | |Existence of consumer rights and labour rights. (38) | | | | |Competition laws, employment laws, health and safety legislation. 38) | | | Table 2: Porter’s 5 Forces | |Forces |Factors |Strength | |1 |Threat of New Entrants | |Low | | | |In PC industry, not many competitors emerging on a yearly basis. 17] | | | | |Chance of a new PC vendor entering the market and gaining significant market share is pretty| | | | |slim. [18] | | | | |Entry barriers are higher now than they ever have been. [18] | | | | |Capital required is huge. 18] | | | | |Cost and distribution are two of the entry barriers that are making entry into the PC market| | | | |tough. [18] | | | | |Computer industry is highly competitive with continuing developments. 17] | | | | |People likely to go with big brands they ‘know’. [17] | | |2 |Power of Suppliers |Suppliers such as INTEL and Microsoft holds significant amount of power. [17] |High | | | |Intel’s microprocessor chips are used in approximately 80% of personal computers. [18] | | | | |Microsoft operating systems are used in 90% of computers. 18] | | |3 |Power of Buyers |PC has become a commodity. [19] |Moderate | | | |There is no brand loyalty among PC users. [19] | | | | |Use of industry standard hardware and software means a user can easily switch from one brand| | | | |to another. 19] | | |4 |Threat of Substitute | Organizers, PDAs, blackberries and Tablets are the substitutes of PC industry. [20, 21] | | | | |PC market growth has been impacted by media tablets and next-generation smartphones. [21] |High | | | |It is anticipated that tablets will Cannibalize 10 % of PCs by 2014. [21] | | |5 |Existing Rivalry |1. 6Acer, Apple, Hewlett-Packard and Lenovo are the major competitors of Dell. [17] | | | | |1. 17 Attractive new gadgets such as Apple’s iPad making PC industry saturated. [22] |High | Table 3: Value Chain Analysis |Primary Activities: | | |Inbound logistics |Higher density container & trailer shipment via sea, air & road to reduce fuel consumption. 1] | | |Use of foam pallets instead of wood for shipping, which reduce cost of freight by reducing weight. [1] | | |Dell relies on its highly reliable suppliers for materials. [2] | |Operations: |Produce built to order computers according to individual costumers needs. [2] | | |Use the knowledge from direct contact with its customers. 2] | |Outbound Logistics: |Logistics teams leverage the best transportation and logistics providers available in the industry. [1] | | |Dell sends computers monitors directly from its supplier to customers reducing the cost of storage and time of transfer. [2] | | |Use of direct selling models reduce coast to customers. 2] | |Marketing and sales:|Expanding relationships with retail partners around the world [1] | | |Use of direct selling model thereby reducing cost of distribution channels and communication gaps between customers and company. | | |[2] | | |Direct selling models helps to understand unmet customer needs. 2] | | |24000 retail outlets worldwide, including contracts with Walmart Brazil and Maxico , and Gome Group, the largest electronic | | |seller in Chaina. [16] | |Services: |Dell spent lot of money in training segment managers to provide state of the art customer advice. 2] | | |Customer solutions team collaborate with customers to fulfil there unmet needs. [2] | |Support Activities: | | |Procurement: |Material used is not protected under any trade mark or copy right. [2] | | |Any competitors can use the same materials from same suppliers as suppliers tend to sell generally to all players in industry. | |[2] | |Technology: |Introduce new and relevant technology much more quickly than competitors who use slow moving distribution channels. [2] | |Infrastructure: |Revolutionized computer industry’s traditional value chain by introducing direct selling model. [2] | | |Use ROIC as mean of managerial performance and individual business units performance. [2] | | |Inventory turnover is 6 days. 2] | |Human Resources: |Dell staff has to be knowledgeable and customer focused to provide best outcome. [2] | | |Train its segment managers to provide state of the art customers’ service. [2] | Table 4: Generic Forces | | | | |Broad |COST LEADERSHIP DIFFERENTIATION | |Market | | | | |Supply chain efficiencies. [62] |Unique Customer services. [63] | | |Direct sales model allowed Dell to pursue Cost |Dell (PRODUCT)RED signature products contribute directly to Global Fund to help | | |Leadership Strategy. 62] |eliminate AIDS in Africa. [64] | | | |Robust market share by holding 12% of worldwide pc market. [65] | | | |Alienware M11x the first ultraportable gaming notebook. [66] | | | |Dell precision Mb6400 a high-performance mobile workstation. 67] | | | |Dell Streak 7 is the first 7” tablet that has dual-core processor that supports 4G. [69] | |Narrow |FOCUSED LOW COST |FOCUSED DIFFERENTIATION | |Market |Introduced low-cost notebooks for consumers and small |Dell first introduced Streak Android-based tablet computer for doctors and other | | |businesses in Asian markets. [66] |clinicians. 70] | Table 5: Ansoff Product Market Matrix: | |Existing products |New Products | |Existing |1. 1. $155 million acquisition of MessageOne Inc(industry leader in |1. 4 Announced new tablet latitude XT3 for business customers that allows | |Market |SaaS) enables enterprise level email business continuity, |grater mobility, security and manageability. 6] | | |compliance, archiving, disaster management. [4,5] |1. 5 Announced 24 new products including smart phone, tablets, netbooks, | | |1. 2. Introduced existing alienware and XPS laptops with HD 3D |desktops etc. [7] | | |screen. [9] | | | |1. Unveiled new series of printers, projector and monitors in | | | |2011. [12] | | |New Market |1. 6 Introduces 4 new low cost PC for emerging markets like China. |1. 10 Introduced new android based smart phones and windows phone. [8] | | |India etc in 2008. 11] |1. 11Introduced android based streak tablet designed for doctors and | | |1. 7 Launched comprehensive rage of printers in India in 2011. [12] |clinicians. [10] | | |1. 8 Contracted with Gome Group, the largest electronic retailer in |1. 12 Introduced cloud computing that provide IaaS based on VMware. | | |china. 16] |[14,15] | | |1. 9 Only 5. 1% Indians and 9% Chinese have computers. 75% Americans| | | |have computers. [16] | | Table 6: Boston Construction Group Matrix |Relative Market Share (Cash Generation) | |Market Growth Rate |HIGH |HIGH |LOW | |(Cash Usage) | | | | | | |Stars: |Question Marks: | | | |Personal computers [43] |Dell tablet [45] | | | |cloud computing services[44] | | | |LOW |Cash Cows: |Dogs: | | | |Customised systems [46] |Printers [48] | | | |Ink cartridge [47] |5 inch Streak Smartphone [49] | Table 7: Dells Acquisitions. Success of Dell’s Acquisitions | |Ingredient acquisitions [72] | |Acquired KACE in 2010 increases 1200 business customers and tripled in value. [72] | |HP doubled the Dell’s bid for 3PAR INC. a storage network company. [73] | |Made 12 acquisitions in last year. [74] | |Virtually all acquisitions were successful [74] | |Acquired ‘equal logic’ 3 years ago and turned revenue of $100 m into $1 Billion post acquisition [75] | Table 8 : Suitability, Acceptability, Feasibility | | | | |GENERIC STRATEGIES |BCG MATRIX STRATEGIES | | | | | | | | | | |Cost Leadership|Differentiation |Focus / Low Cost |Focus / Differentiator |STARS |CASH COWS | |  |  |YE 30/1/09 |YE |YE 28/1/11|YE |YE |YE |YE 31/10/08 | | | | |29/1/10 | |31/12/08|31/12/09|31/12/10| | Table 10: Financial Ratios for DELL Inc (2006-10) |  |  |2006 |2007 |2008 |2009 |2010 |Industry Average|Ref | |  |Profitability Ratios |  |  |  |  |  |  |  | |2 |Net profit margin (%) |4. 5 |4. 82 |4. 05 |2. 71 |4. 28 |6. 7 |[51,52] | |3 |Return on total assets (%) |13. 05 |3. 89 |12. 54 |6. 01 |8. 68 |8. 14 |[50,52] | |4 |Return on capital employed (%) |43. 22 |42. 86 |29. 35 |14. 87 |18. 57 |16. 42* |[50] | |5 |Return on equity (%) |58. 19 |76. 97 |58. 02 |25. 4 |33. 93 |13. 65 |[50,52] | |6 |Solvency ratio (%) |17. 32 |13. 89 |16. 12 |16. 76 |20. 12 |25. 9* |[50] | |  |Efficiency Ratios |  |  |  |  |  |  |  | |8 |Net asset turnover |7. 32 |6. 77 |5. 25 |3. 6 |3. 22 |1. 51 |[50,52] | |9 |Debtor days (days) |30 |36 |29 |41 |39 |45. 25* |[51] | |10 |Creditor days(days) |80 |86 |61 |97 |84 |52. 5* |[51] | |  |Liquidity Ratios |  |  |  |  |  |  |  | |12 |Quick ratio |1. 08 |1. 01 |1. 3 |1. 22 |1. 42 |1. 15 |[51,52] | |  |Stability Ratios |  |  |  |  |  |  |  | |14 |Interest cover |68. 22 |76. 44 |34. 3 |13. 57 |17. 25 |2. 5 |[50,52] | |15 |Debt/Equity(%) |12. 82 |9. 45 |44. 44 |60. 57 |66. 26 |21. 43 |[51,52] | |  |Investors Ratios |  |  |  |  |  |  |  | |17 |P/E ratio |23. 16 |15. 48 |7. 45 |17. 61 |9. 64 |14. 2 |[50,52] | |18 |Dividend yield |0 |0 |0 |0 |0 |2. 09 |[50,52] | [pic][76] 77] Figure 3: Financial Rations (Table 10) |REFERENCES | | |http://content. dell. com/ – Accessed 6 October 2011. |http://www. oppapers. com/essays (accessed: October 8, 2011) | |http://ivythesis. typepad. com/ Accessed 6 Oct 2011. |http://www. scribd. com/doc (accessed: October 9, 2011) | |http://www. businessweek. com/ – Accessed 27 September 2011. |http://2point8. blogspot. com/2006 (accessed: October 9, 2011) | |http://www. dell. com/us/ Accessed 17 Oct 2011. |http://knol. google. om/k (accessed: October 9, 2011) | |http://www. gartner. com/ Accesses 17 Oct 2011. |http://it. tmcnet. com/topics (accessed: October 9, 2011) | |http://techmento. com/2011/02/14/ Accessed 17 Oct 2011. |http://www. usatoday. com/tech (accessed: October 9, 2011) | |http://www. pcmag. com/ Accessed 17 Oct 2011. |IPPR, China in the global economy, July 2011 | |http://www. unwiredview. com/2011/09/30/ Accessed 17 Oct 2011. |Owen Fletcher, China Passes U. S. as World’s Biggest PC Market, 24th August 2011, | |http://www. engadget. com/2011/01/06/ Accessed 17 Oct 2011. |Wall Street Journal. |Reuters, Dell Streak Tablet Computer Expands into Medical Market, 15 September 2010. |BBC, US companies criticize Chinese regulations, 19 Jan 2011. | |http://news. cnet. com/ -Accessed 23 October 2011. |Reuters, BRICS sign framework pact for local-currency credit lines, 14th April | |http://www. ekantipur. com/2011/09/21/ -Accessed 23 October 2011. |2011. | |http://www. stinkyinkshop. co. uk/ -Accessed 23 October 2011. |J. Ball, L. Mucha, European Commission Unveils New IPR Strategy 20th July 2011. | |http://cloud-computing. learningtree. com/ -Accessed 23 October 2011 |Euromonitor, the US Debt Crisis and Downgraded Credit Rating, 31st August 2011. | |http://en. ommunity. dell. com/ – Accessed 23 October 2011 |IMF, World Economic Outlook, September 2011. | |http://www. wikinvest. com/stock/Dell_(DELL) –Accessed 27 October 2011. |Palo Alto, Canalys predicts 14% growth in PC market for 2011, 15 march 2011 | | |http://online. wsj. com/ -Accessed 15 September 2011. | | |IMF, World Economic Outlook, Sept 2011. | | |http://www. bls. gov/ – Accessed on October 11th 2011. |REFERENCES | | |Howard B C, 5 Signs the Computer Industry Is Going Green [Online]. |Dell’s Turnaround Strategy, Raj Sheelvant, April 08, 2008 | |SE Smith, Guardian, Dirty, dangerous and destructive – the elements of a technology boom, |http://www. scribd. com/doc/27249321/Dell-Competencies -Accessed 16 October 2011 | |September 26th 2011 |http://www. dell. com/ -Accessed16 October 2011 | |Report linker, Global E-Waste Management Market (2011 – 2016, 8 Sept 2011 |http://worldwidegadget. blogspot. com/ -Accessed 16 October 2011 | |http://www. ecyclingresource. org/ – Accessed on Sept 29th 2011. Dell plans low-cost laptops for Asian Market, Sumner Lemon, IDG News, Feb 29,2008 | |http://www. ifg. org/ -Accessed on Sept 29th 2011. |http://aecmag. com/ -Accessed 20 October 2011 | |Thomas W Smith, Industry Surveys, Standards & Poor’s, 28 October 2010. |http://www. notebookreview. com/ -Accessed 20 October 2011 | |http://www. enotes. com/ -Accessed on September 12th 2011. |Dell (BUY): Dell focuses on the tablet market, RobertJakobsen, feburary 2nd, 2011 | |Eastwood M, IDC, Analyze the future, March 2007. |Dell Streak Tablet Computer Expands into Medical Market, Contributed by Reuters, | |http://www. articlesbase. com/ -Accessed on October 29, 2011. September 9th, 2010 | |http://www. dailytech. com/Dell -Accessed 20 October 2011. |http://www. computing. co. uk/ -Accessed 4 November 2011 | |http://www. computerweekly. com/ -Accessed 30 October 2011. |http://www. statesman. com/ -Accessed 7 November 2011. | |https://jyskebank. gi/ –Accessed 20 October 2011. |http://www. statesman. com/business/dell-following-a-new-path-on-acquisitions-149000| |http://www. theinquirer. net/ -Accessed 20 October 2011. |1. html -Accessed 7 November 2011. | |http://www. viewpoints. com/Dell -Accessed 20 October 2011. |http://www. datamation. com/ -Accessed 7 November 2011. | |http://www. forbes. om/sites/greatspeculations/2011/04/20/dell-should-be-22-but-no-thanks-to-pr|http://en. community. dell. com/ – Accessed 7 November 2011. | |inters-and-monitors/ -Accessed 30 October 2011. |http://martinhingley. wordpress. com/2011/06/05/pc-market-q211/- Accessed on | |http://gadgetmania. com/ -Accessed 31 October 2011. |November 3rd ,2011 | |Osiris, Dell Inc-All Rations, 28 October 2011. |http://martinhingley. wordpress. com/2010/12/02/dell-q410, Accessed on November 3rd,| |Dell-Fiscal Year 2011 in Review,http://content. dell. com -Accessed 28 October 2011. |2011. | |Financials: Dell Inc (DELL. O),http://www. reuters. com/ -Accessed 28 October 2011. | |Osiris,DELL INC- Key Ratios,Accessed on October 18th, 2011. | | |Osiris,ACER INC -All Ratios,Accessed on October 18th, 2011. | | |Osiris,HEWLETT-PACKARD COMPANY-All Ratios,Accessed on October 18th, 2011. | | |Osiris,LENOVO GROUP LIMITED- All Ratios,Accessed on October 18, 2011. | | |HEWLETT-PACKARD Annual Report 2010,http://h30261. www3. hp. com,Accessed on October 19th,2011. | |IDC, Worldwide Quarterly PC Tracker, October 12th, 2011. Press release. | | |ACER Annual Report 2010,http://www. acer-group. com,Accessed on 19th,2011. | | |http://rates. cx, Accessed on October 19th, 2011 | | |http://www. exchange-rates. org/ -Accessed 23 October 2011. | | GROUP MEMBERS LCA REFRENCE NUMBERS 1. SAAD BAKHTIAR RANA 2. JAHAARA AHMED SIDDIQUI