DELL INC.

CASE ABSTRACT:
Dell is the current PC industry leader. Michael Dell founder of DELL Inc. started his business with simple concept of built to order personal computers sold directly to costumers. His approach brought him two ad antages firstly he bypassed distributors and retailers which eliminated the mar!ups of resellers and impro ed his profits. "econdly by doing so he reduced the costs and ris!s associated with carrying large stoc! of parts# components and especially finished goods. $his case includes the company%s financial statements# competitor information and more for the year ended &''(. Michael Dell ser es as the chairman of the board of directors for the company. He has held his position since he founded it in )*+(. ,e in -ollins ser es the titles of president and chief e.ecuti e officer. Dell has di ided its customers in three geographic segments /mericas# Europe and /sia Pacific. Dell holds &*.)0 of the total mar!et for personal computer sales in /mericas placing it well ahead of its competitors# whereas in Europe Dell holds )).10 mar!et share for sales of personal computer placing it as the & nd largest supplier of personal computers in this segment and while in /sia Pacific Dell is the 2rd largest supplier of personal computers with +.20 mar!et share. Dell has di ided its customers in three groups3 relationship# transactional and internet. -elationship customers include large corporations# go ernmental# healthcare and educational institutions. $ransactional customers in ol e small to midsi4e businesses and indi iduals. $he internet customers can access almost all sort of information on the Dell%s website. 5 er the years Dell is seen as the better growing companies as its re enue for &''( of 6(*#&'7 million was almost ('0 increase o er its re enue for &''& of 627#('( million. $he le el of competition Dell is facing is formidable with HP and I8M being its main ri als. 9ateway and /pple computers also compete to some e.tent with Dell for their space in PC mar!et. HP by most accounts is Dell%s closest competitor. :ntil &''( Dell commands )+.20 of global personal computer mar!et as compared to HPs )7.1. Howe er HP still has certain competiti e strengths. "ales of printers and printer in! account for appro. 2'0 of HP total re enue. ;or the sa!e of competition Dell also began to sell printers but they are way behind HP as HP%s printers ran close to (2 million as compared to Dell%s 2 million in &''(. Dell%s model of slee! production and cost

DELL INC.

control is hampered by the fact that Dell purchases printers from Le.mar! and then re<brands those printers. Leno o 9roup limited the largest producer of personal computers in /sia ac=uired I8M%s personal computing di ision in &''(. Leno o en>oys significant wage ad antages o er Dell therefore this ac=uisition will pro ide Dell with increasing competition in the e.panding mar!et in /sia. /part from this Dell and I8M compete directly in computer ser er mar!et where Dell holds *0 as compared to I8M%s 2&0 mar!et# much of Dells sales are in lower less profitable end of ser er industry. I8M spends 6)billion a year in ser er research and de elopment to thri e for the upper and middle sections of ser er mar!et. /s the internet usage e.pands Dell will find itself unable to compete with more comple. offerings of I8M. 9ateway once a formidable competitor has fallen o er the past few years. $he company commands about ?0 of :" mar!et as compared to Dells &*0 with the competition growing strong it seems that 9ateway will not be able to sur i e. "imilarly /pple# a ery unli!ely competitor to Dell with >ust 70 of :" computer mar!et but still /pple%s philosophy of inno ation# e.perimentation and leading edge design is a perfect contrast to Dell%s which has its focus on cost and in entory control. Howe er the income statement of all these firms for &''7 shows that the last two firms are outplayed up till now.

DELL INC.

VISION STATEMENT:
It@s the way we do business. It@s the way we interact with the community. It@s the way we interpret the world around us A our customers@ needs the future of technology# and the global business climate. Bhate er changes the future may bring our ision ADell Cision will be our guiding force.

MISSION STATEMENT:
Dell@s mission is to be the most successful computer company in the world at deli ering the best customer e.perience in mar!et we ser e. In doing so# Dell will meet customer e.pectations ofD Highest =uality Leading technology Competiti e pricing Indi idual and company accountability 8est<in<class ser ice and support ;le.ible customi4ation capability "uperior corporate citi4enship ;inancial stability

DELL INC.

SWOT ANALYSIS:
Strengths3 Dell is the Borld@s largest PC ma!er. ;or the last couple of years it has held its position as mar!et leader and shown signs of growing mar!et share. Direct sales approach. 8uild to 5rder approach. Long term partnerships with reputable suppliers of name<brand parts and components -eputationEimage FI$# !now<how and capabilities Dell has total command of the supply chain. Weaknesses: Lac!s the product line and ser ice breadth of Hewlett Pac!ard and I8M $he direct sales approach is not the preferred distribution channel in some locations No in<house repair ser ice capabilities Opportunities3 Customers !now what they want and need to purchase. Customer%s alue con enience and one stop shopping. "er ers mar!et can be tapped. Printers mar!et can be tapped. +'0 of new computer sales are li!ely to come by &')' Threats3 9lobal economic recession. /ggressi e pricing wars Continuously changing consumer demands. "trong brand name of competitors GI8M# HPH -apid technological ad ancement. E.pected computer sales increase from 1.* million to 1+ million by &')'# many areas lac! phone and internet ser ices.

DELL INC.

EXTERNAL ACTORS ANALYSIS S!MMARY:

"e# E$terna% a&tors

Opportunities Customers alue con enience and one stop shopping Customers !now what they want and need to purchase +'0 of new computer sales are li!ely to come by &')' Printers mar!et can be tapped "er er mar!et can be tapped better Threats 9lobal economic recession /ggressi e pricing wars Continuously changing consumer demands "trong brand name of competitors GI8M# HPH -apid technological ad ancement E.pected computer sales increase from 1.* million to 1+ million by &')'# many areas lac! phone and internet ser ices

Weight

Rating

Weighte' S&ore .)7 .)' .22 .'+ .2&

.'7 .'7 .)) .'( .)?

2 & 2 & &

.)& .'* .'? .'1 .'+ .)1

2 ( 2 2 ( &

.2? .2? .)+ .&) .2& .2(

Tota%

()**

+),-

DELL INC.

INTERNAL ACTORS ANALYSIS S!MMARY:

"e# Interna%

a&tors

Weight

Rating

Weighte' S&ore .?' .7? .(+ .&) .(+ .)7 .2*

Strengths 9rowing mar!et share Direct sales approach 8uild to order approach Long term partnerships with reputable suppliers of name<brand parts and components -eputationEimage FI$ !now<how and capabilities Command o er supply Chain Weaknesses Lac!s the product line and ser ice breadth of Hewlett<Pac!ard and I8M $he direct sales approach is not the preferred distribution channel in some locations No in<house repair ser ice capabilities TOTAL

.)7 .)( .)& .'1 .)& .'7 .)2

( ( ( 2 ( 2 2

.)) .'+ .'2 ()**

) & )

.)) .)? .'2 .)(,

DELL INC.

TOWS MATRIX:
Strengths 9rowing mar!et share Direct sales approach 8uild to 5rder approach Long term partnerships with reputable suppliers of name<brand parts and components 7. -eputationEimage ?. FI$# !now<how and capabilities 1. Command o er supply Chain ). &. 2. (. Opportunities ). Customers alue con enience and one stop shopping &. Customers !now what they want and need to purchase 2. +'0 of new computer sales are li!ely to come by &')' (. Printers mar!et can be tapped 7. "er ers mar!et can be tapped Threats ). 9lobal economic recession &. /ggressi e pricing wars 2. Continuously changing consumer demands. (. "trong brand name of competitors GI8M# HPH 7. -apid technological ad ancement ?. E.pected computer sales increase from 1.* million to 1+ million by &')'# many areas lac! phone and internet ser ices S/O Strategies Weaknesses ). Lac!s the product line and ser ice breadth of Hewlett Pac!ard and I8M &. $he direct sales approach is not the preferred distribution in some locations 2. No in<house repair ser ice capabilities

W/O Strategies

). Conduct aggressi e domestic ad ertising campaign.

). Foint Centure &. 5pen couple Dell outlet stores where direct sale approach is not worthy.

S/T Strategies

W/T Strategies 1.

). Produce low price standardi4ed PC.

2.

-educe wor!force to cut some costs.

Conduct aggressi e ad campaign to promote Dell Direct "elling.

DELL INC.

RECOMMEN0ATIONS3
/lthough the figures suggest that they are going fine in personal computer mar!ets but in some areas they are facing some ery stiff competition from their main ri als HP and I8M. "ince HP%s merger with Compa= they are ma!ing huge re enues as compared to Dell%s mainly because of the printer mar!et. /lthough Dell also started to sell printers but the way they sell it is not going to get them any way closer to HP. -ather than purchasing printers from Le.mar! and then re<brand them as Dell they should also loo! forward to a merger with Le.mar! to compete in printer mar!et. "imilarly in /sian mar!et where Leno o is the mar!et leader has ac=uired I8M%s di ision will be gi ing e.treme competition to Dell where the computer mar!et is e.pected to grow abnormally in the ne.t 7 years and in places which lac! telephone and internet facilities. "o they will be re=uired to start some distributions centers o er there to capture the mar!et. ;urther they need to de elop some -ID if they want to compete with I8M in ser er mar!et.

DELL INC.

ANNEX!RE I 1ro2e&te' In&o3e State3ent

Period Ending 31 Jan 2003 35404 29055 6349 30 Jan 2004 41444 33892 7552 28 Jan 28 Jan 2005 2006 A%% 4igures in 5 49205 58062 40190 47424 9015 10638 28 Jan 2007 68513 55960.6 12552.5 28 Jan 2008 80845.4 66033.5 14811.9 28 Jan 2009 95398 77919 17478 28 Jan 2010 112569.12 91944.98 20624.13

Total revenue cost of Revenue Gross Profit !erating E"!enses Research & Development Sell n!" #eneral an$ %$m n strat ve &on recurr n! 'vents (thers )otal (perat n! '*penses !erating #n$o%e or &oss #n$o%e 'ro% (ontinuing !erations )otal other +ncome,'*penses &et 'arn n!s -efore +nterest an$ )a*es +nterest '*pense +ncome -efore )a* +ncome )a* '*pense . nor t/ +nterest )et #n$o%e fro% (ontinuing o!erations )on *e$urring events D scont nue$ operat ons '*traor$ nar/ tems 'ffect of %ccount n! chan!es other tems )et #n$o%e 1referre$ Stoc2 an$ other a$3ustments )et in$o%e a!!li$a+le to $o%%on s,ares Gro-t, *ate 2003 2004 2005

455 3050 0 0 0 2844

464 3544 0 0 0 3544

463 4298 0 0 0 4254

546.34 5071.6 0 0 0 5019.7

644.681 5984.54 0 0 0 5923.27

760.724 7061.75 0 0 0 6989.46

897.65 8332.9 0 0 8247.6

1059.23 9832.78 0 0 0 9732.12

183 3027 0 3027 905 0 2122

194 3738 14 3724 1079 0 2645

191 4445 0 4445 1402 0 3043

225.38 5245.1 0 5245.1 1654.4 0 3590.7

265.948 6189.22 0 6189.22 1952.14 0 4237.07

313.819 7303.28 0 7303.28 2303.53 0 4999.75

370.31 8617.9 0 8617.9 2718.2 0 5899.7

436.96 10169.08 0 10169.08 3207.43 0 6961.64

018 0 0 0 2122 0 2122 .ales 35404 41444 49205 /verage

0 0 0 0 2645 0 2645 Gro-t, 0.1706 0.18726 0.18

0 0 0 0 3043 0 3043

0 0 0 0 3590.7 0 3590.7

0 0 0 0 4237.07 0 4237.07

0 0 0 0 4999.75 0 4999.75

0 0 0 0 5899.7 0 5899.7

0 0 0 0 6961.64 0 6961.64

DELL INC.

ANNEX!RE II
Pro0e$ted 1alan$e .,eet Period ending 31 Jan 2003 30 Jan 2004 28 Jan 2005 28 Jan 2006 28 Jan 2007 28 Jan 2008 28 Jan 2009 28 Jan 2010

/ssets $urrent assets cash & cash e4u valents Short term nvestment net rece va5les nventor/ other current assets total $urrent assets 6on! term nvestment propert/ plant an$ e4u pment #oo$7 ll ntan! 5le assets accumulate$ amort 8at on other assets Deferre$ lon! term assets char!es total assets lia+ilities $urrent lia+ilities accounts pa/a5les Short,current lon! term $e5t other current l a5 l t es total $urrent lia+ilities 6on! term $e5t other

4232 406 2586 306 1394 8924

4317 0.13107904 0.18321309 0.06184331 0.62446132 10633

4747 5060 4414 459 2217 16897

5601.46 5970.8 5208.52 541.62 2616.06 19938.46

6609.7228 7045.544 6146.0536 639.1116 3086.9508 23527.3828

7799.4729 8313.7419 7252.3432 754.15169 3642.6019 27762.312

9203.37803 9810.21547 8557.76503 889.898992 4298.27029 32759.5278

10859.986 11576.054 10098.163 1050.0808 5071.9589 38656.243

5267 913 0 0 0 366 0 15470

6770 1517 0 0 0 391 0 19311

4319 1691 0 0 0 308 0 23215

5096.42 1995.38 0 0 0 363.44 0 27393.7

6013.7756 2354.5484 0 0 0 428.8592 0 32324.566

7096.2552 2778.3671 0 0 0 506.05386 0 38142.988

8373.58115 3278.47319 0 0 0 597.14355 0 45008.7257

9880.8258 3868.5984 0 0 0 704.62939 0 53110.296

6282 0 2651 8933

9935 0 961 10896

14136 0 0 14136

16680.48 0 0 16680.48

19682.9664 0 0 19682.9664

23225.9 0 0 23225.9

27406.5624 0 0 27406.5624

32339.744 0 0 32339.744

506 1158

505 538

505 2089

505 2089

505 2089

505 2089

505 2089

505 2089

10

DELL INC.

l a5 l t es $eferre$ lon! term l a5 l t/ char!es m nor t/ nterest ne!at ve #oo$7 ll Total &ia+ilities .to$2,olders E3uit4 . sc Stoc2" opt ons" 7arrants Re$eema5le 1referre$ Stoc2 1referre$ Stoc2 9ommon Stoc2 Reta ne$ 'arn n!s )reasur/ Stoc2 9ap tal Surplus (ther Stoc2hol$er e4u t/ Total .to$2,olders E3uit4 Total &ia+ilities and .E E')

0 0 0 10597

1092 0 0 13031

0 0 0 16730

0 0 0 19274.48

0 0 0 22276.9664

0 0 0 25819.9

0 0 0 30000.5624

0 0 0 34933.744

0 0 0 6018 3486 04539 0 092 4873

0 0 0 6823 6131 06539 0 0135 6280

0 0 0 8195 9174 010758 0 0126 6485

0 0 0 9670.1 10825.32 012694.44 0 0108.56 7692.42

0 0 0 11410.718 12773.8776 014979.439 2 0 0128.1008 9077.0556

0 0 0 13464.647 15073.176 017675.738 0 0151.15894 10710.926

0 0 0 15888.2837 17786.3472 020857.371 0 0178.36755 12638.8922

0 0 0 18748.175 20987.89 024611.69 8 0 0210.4737 1 14913.893

15470

19311

23215

26966.9 426.8

31354.022 970.544

36530.826 1612.1619

42639.4546 2369.27107

49847.636 3262.6599

11

DELL INC.

ANNEX!RE III
*atios Profita+ilit4 ratios &et prof t .ar! n #ross prof t mar! n Return on nvestment return on e4u t/ 2005 13.1079 18.32131 6.184331 62.44613 : : : :

&everage *atios $e5t to assets $e5t to e4u t/ 6on! term $e5t to cap tal t mes nterest covera!e of f *e$ char!es current l a5 l t es to e4u t/ 72.06547 343.3203 53.2321 0 0 290.0882 : : : t mes t mes :

;e 2no7 that < = 1.2*1>1.4*2>3.3*3>0.6*4>1.0*5

56150.25

*1 = 7or2 n! cap tal,total assets *2 = reta ne$ earn n!,total assets *3 = De5 t,total assets *4 = mar2et value of e4u t/,total l a5 l t es *5 = sales,total assets

12