Report On Dell Company

1
Project Report On:

Dell Company
Submitted To:
Mr. Shahid Mehmood
Submitted By:
Mr. Imtiaz Ali
Roll No: 79
Mr. Arslan Ayub
Roll No: 58
BS-ommer!e "#$enin%&
Session: '((7-'())
*e+artment o, ommer!e
-ro.e!t Re+ort on *ell om+any
2
Preface
The primary function of this report is to share the process of
learning and knowledge which I underwent during my research on
this project. The purpose of this report is to enhance personal skills
and knowledge about the compilation of data and information
about an organization into a summarized form. The organization
chosen is a multinational organization. The report focuses on the
putting together or composing from materials gathered from many
sources.
3
Executive Summary
Masters in commerce is a professional degree. According to the
nature of our subject which is a credit one, the research is being
undertaken on Dell ompany. !ne of the world"s leading
corporation.
Dell computer corporation was established in #$%& and today ranks
among the world"s largest computer systems company. Dell
ser'ing the selling of personal computers directly to customers,
pro'iding direct toll free technical support and on site ser'ices.
Dell offers build to order computer systems to customers. Dells
complete range of high(performance computer systems include)
Dell Dimension and !pti*le+ desktop computers, ,atitude
notebook computers, and *ower -dge network ser'ers.
This report co'ers the contents of current and past o'er'iew of dell
company, its offerings, financial analysis and many more.
4
Experience is not what happens to you, it is what you do with what
happens to you.
-Aldous Huxley
Acknowledgement:
.y the grace of Allah who has pro'ided me with the skills and
abilities to be able to complete this report and present a clear
picture of what I ha'e been doing during the course of my project.
I would firstly like to thank the Department of Commerce for
making this learning e+perience a part of our education and
specifically thanks to Mr. Shahid for his ad'ice and assistance in
helping us a'ail this opportunity.
I would like to thank all those who helped me for the entire course
of my project, my group fellows who cooperated me throughout
the project and became my one of the best companions.
5
DEDICATED TO:
MY BELOVED
PARENTS
AND
RESPECTABLE
TEACHERS
6
Tale of Content!
Introduction /%
Dell Inc. /%
0istory #/
*roducts #1
2cope and .rands #1
!rganization #&
ompetitors #3
Dell"s 2trategy #4
.usiness ,e'el 2trategy #5
Total 6uality Management #%
orporate ,e'el 2trategy #$
2econd or ,ate Mo'er 2trategy 77
Mission 8 9ision 2tatement 71
Mission 2tatement 71
9ision 2tatement 7&
:inancial Analysis 73
:inancial 2tatements 73
Income 2tatement 73
7
.alance 2heet 75
ash :low 1#
;atio Analysis 1&
ompetiti'e Analysis 14
*ositioning 2trategy Analysis 14
*roduct<2er'ice 2trategy Analysis 14
*ricing 2trategy 14
Distribution 2trategy Analysis 15
2=!T Analysis 1%
2trength 1%
=eakness 1$
!pportunity &/
Threat &#
;eferences &1
8
"ntroduction
Dell Inc. is an American multinational information technology
corporation based in ;ound ;ock, Te+as, >nited 2tates, that
de'elops, sells and supports computers and related products and
ser'ices. The founder of Dell Inc. is Micheal Dell. This is one of
the world"s largest corporation employing more than #/1,1//
employees worldwide. As of 7//$, the company sold personal
computers, ser'ers, data storage de'ices, network switches,
software"s and computer peripheral de'ices. The company is well
known for its inno'ation.
Dell "nc.
Type
*ublic
?A2DA6) Dell
0@-A) &11#
28* 3// omponent
"ndu!try omputer 2ystems
omputer *eripherals
9
omputer 2oftware
IT consulting
IT ser'ices
#ounded
Austin, Te+as
?o'ember &, #$%&
#ounder$!% Michael Dell
&ead'uarter!
# Dell =ay
;ound ;ock, Te+as, >.2.
B#C

Area !erved =orldwide
(ey people
Michael Dell
Dhairman 8 -!E
)roduct!
Desktops
2er'ers
?otebooks
?etbooks
*eripherals
*rinters
Tele'isions
2canners
2torage
2mart *hones
*evenue F4#.&$ billion D7/##E
B7C
+perating income F1.&1 billion D7/##E
B7C
,et income F7.41 billion D7/##E
B7C
Total a!!et! F1%.3$ billion D7/##E
B7C
Total e'uity F3.4& billion D7/##E
B7C
Employee! #/1,1// D7/##E
B7C
Su!idiarie!
Dell 2er'ices
Alienware
-e!ite Dell.com
10
&i!tory
Micheal Dell being the founder of Dell Inc. transformed his idea in
to reality in #$%&. 0e was student in >ni'ersity of te+as, Austin,
when he realized that selling personal computers directly to
customers may fulfill the needs of them in order to pro'iding pcs"
according to there e+pactations. =ith an initial capital of F1//,///
he commenced his business of *s limited.
In #$%3, the company produced the first computer of its own
design GTurbo *cH sold for >2 F5$3. The company ad'ertised its
system in ?ational omputer Magazines for its selling of *s"
directly to consumers, assembled according to their needs. :or the
'ery first year of its business the company grossed F53 million.
11
The company changed its name to IDell omputer orporationI in
#$%% and began e+panding globally, first in Ireland. In June #$%%,
DellKs market capitalization grew by F1/ million to F%/ million
from its June 77 initial public offering of 1.3 million shares at
F%.3/ a share. In #$$7, :ortune magazine included Dell omputer
orporation in its list of the worldKs 3// largest companies, making
Michael Dell the youngest -! of a :ortune 3// company e'er.
In #$$4, Dell began selling computers 'ia its web site, and in 7//7,
Dell e+panded its product line to include tele'isions, handhelds,
digital audio players, and printers. DellKs first acLuisition occurred
in #$$$ with the purchase of on'erge?et Technologies. In 7//1,
the company was rebranded as simply IDell Inc.I to recognize the
companyKs e+pansion beyond computers. :rom 7//& to 7//5,
Michael Dell stepped aside as -!, while long(time Dell
employee @e'in ;ollins took the helm. During that time, Dell
acLuired Alienware, which introduced se'eral new items to Dell
products, including AMD microprocessors. To pre'ent cross(
market products, Dell continues to run Alienware as a separate
entity but still a wholly owned subsidiary.
12
!n August #4, 7/#/, Dell announced its intent to acLuire the data
storage company 1*A;. !n 2eptember 7, 7/#/ 0ewlett(*ackard
offered F11 a share, which Dell declined to match.
13
)roduct!
Scope and rand!
Its .usiness<orporate class represent brands where the company
ad'ertises emphasizes long life(cycles, reliability, and
ser'iceability. 2uch brands include)
!pti*le+ Doffice desktop computer systemsE
9ostro Doffice<small business desktop and notebook
systemsE
n 2eries Ddesktop and notebook computers shipped with
,inu+ or :reeD!2 installedE
,atitude Dbusiness(focused notebooksE
*recision Dworkstation systems and high(performance
notebooksE,
*ower-dge Dbusiness ser'ersE
*ower9ault Ddirect(attach and network(attached storageE
*oweronnect Dnetwork switchesE
Dell<-M Dstorage area networksE
-Lual,ogic Denterprise class i22I 2A?sE
DellKs 0ome !ffice<onsumer class emphasizes 'alue,
performance, and e+pandability. These brands include)
Inspiron Dbudget desktop and notebook computersE
2tudio Dmainstream desktop and laptop computersE
A*2 Dhigh(end desktop and notebook computersE
2tudio A*2 Dhigh(end design(focus of A*2 systems and
e+treme multimedia capabilityE
Alienware Dhigh(performance gaming systemsE
Adamo Dhigh(end lu+ury laptopE
DellKs *eripherals class includes >2. keydri'es, ,D tele'isions,
and printersM Dell monitors includes ,D T9s, plasma T9s and
projectors for 0DT9 and monitors. Dell >ltra2harp is further a
high(end brand of monitors.
14
+rgani.ation
A board of directors of nine people runs the company. Michael
Dell, the founder of the company, ser'es on the board. !ther board
members include Don Carty/ -illiam 0ray/ 1udy 2ewent/
(lau! 2uft/ Alex Mandl/ Michael A. Mile!/ and Sam ,unn.
2hareholders elect the nine board members at meetings, and those
board members who do not get a majority of 'otes must submit a
resignation to the board, which will subseLuently choose whether
or not to accept the resignation.
The board of directors usually sets up fi'e committees ha'ing
o'ersight o'er specific matters. These committees include the
Audit Committee, which handles accounting issues, including
auditing and reportingM the Compen!ation Committee, which
appro'es compensation for the -! and other employees of the
companyM the #inance Committee, which handles financial
matters such as proposed mergers and acLuisitionsM the
0overnance and ,ominating Committee, which handles 'arious
corporate matters Dincluding nomination of the boardEM and the
Antitru!t Compliance Committee, which attempts to pre'ent
company practices from 'iolating antitrust laws.
15
The corporate structure and management of Dell e+tends beyond
the board of directors. The Dell Nlobal -+ecuti'e Management
ommittee sets strategic directions. Dell has regional senior 'ice(
presidents for countries other than the >nited 2tates, including
David Marmonti for EMEA and Stephen 1. #elice for
A!ia31apan. As of 7//5, other officers included Martin 0arvin
Dsenior 'ice president for worldwide procurementE and Su!an E.
She!key D'ice president and hief Information !fficerE.
Competitor!
DellKs major competitors include)
0ewlett(*ackard D0*E
Acer
Toshiba
Nateway
2ony
Asus
,eno'o
I.M
2amsung
Apple
2un Microsystems.
16
Dell and its subsidiary, Alienware, compete in the enthusiast
market against A9ADirect, :alcon ?orthwest, 9oodoo* Da
subsidiary of 0*E, and other manufacturers.
Dell4! !trategy
DellKs business strategy is a successful cost leadership strategy.
The companyKs formula for success has been based upon its uniLue
customization, deli'ery, and cost proposition. In reaction to
faltering performance and the need to pursue new growth
opportunities, a dual(strategic approach is reLuired to confront
rapidly changing market conditions. :irst, Dell must integrate its
cost leadership skills with differentiated product features and
related ser'ices to create 'alue for its customers and achie'e the
benefits of an integrated cost leadership<differentiation strategy.
Additionally, becoming a di'ersified IT company opens up
opportunities in related businesses, where similar products, buying
processes, target customers, or other operationally(related acti'ities
can produce synergies. This business(le'el and corporate(le'el
strategy combination offers Dell a method of dealing with the
companyKs competiti'e realities. .oth strategies are discussed
below.
17
5u!ine!!62evel Strategy
ustomer e+pectations in the industry ha'e created a growing
demand for low(priced, differentiated products. As a result, Dell
needs to be able to perform primary and support acti'ities that
simultaneously yield low costs and differentiated features, or an
integrated co!t leader!hip3differentiation !trategy. The
objecti'e of using this strategy is to efficiently produce products
with attributes that boost product Luality or performance. -fficient
production is the source of maintaining low costs, while
differentiation is the source of uniLue 'alue. 2uccessful use of an
integrated cost leadership<differentiation strategy has the added
benefit of building skills that can help Dell adapt more Luickly to
new technologies and rapid changes in the e+ternal en'ironment.
2imultaneously concentrating on de'eloping two sources of
competiti'e ad'antage Dcost and differentiationE increases the
number of primary and support acti'ities in which the company
must become competent, which contributes to greater fle+ibility.
:le+ible manufacturing systems, information networks, and total
Luality management systems can also yield a more fle+ible
organization. -ach type of initiati'e should be considered by Dell
as it tries to balance the objecti'es of continuous cost reductions
and continuous product enhancements.
18
Dell already utilizes a customized assembly process based upon a
:M2 to fill customer orders. To increase fle+ibility, the company
should look for ways to enhance the effecti'eness of information
networks Dlinking the supply chain through to the customerE to
impro'e work flow and communication among employees to
identify and resol'e problems that emerge. Impro'ements in
information linkages would pro'e particularly beneficial as Dell
seeks to impro'e ser'ices for its corporate customers.
Total 'uality management $T7M% is another managerial
inno'ation that emphasizes an organization"s total commitment to
the customer and to continuous impro'ement of e'ery process
through the use of data(dri'en, problem(sol'ing approaches based
on empowerment of employee groups and teams. The de'elopment
and use of T6M systems at Dell would align actions with the
companyKs strategic needs and would concurrently ser'e to D#E
increase customer satisfaction, D7E cut costs, and D1E reduce the
amount of time reLuired to introduce inno'ati'e products to the
marketplace. All of these objecti'es ha'e been identified as critical
factors that will influence DellKs future success.
T6M systems result in the enhancement of inno'ati'e abilities, the
ability to e+ceed customers" Luality e+pectations Ddifferentiating
the company from its competitorsE, and the elimination of process
19
inefficiencies to cut costs Dallowing Dell to offer better performing
features at the relati'ely low prices e+pected by its customersE.
Thus, an effecti'e T6M system will help Dell de'elop the
fle+ibility needed to identify opportunities to implement its
integrated cost leadership<differentiation strategy. .ecause T6M
systems are a'ailable to all competitors, they may help the
company maintain competiti'e parity, but rarely will they
unilaterally lead to a competiti'e ad'antage.
Corporate62evel Strategy
A corporate6level !trategy specifies actions a firm takes to gain a
competiti'e ad'antage by selecting and managing a group of
different businesses competing in different product markets.
orporate(le'el strategies help companies select new strategic
positions to increase the firm"s 'alue. They are also a means to
grow re'enues and profits.
.y 7//4, Dell has already di'ersified from a purely desktop *
pro'ider to operating in the following additional product
categories) mobility, ser'er, storage, printer, enhanced ser'ices,
software, and consumer electronics. More than thirty percent of its
re'enue is generated outside of its dominant business. .ecause of
this ratio and because there are e+isting links between its
di'ersified businesses, a related con!trained diver!ification
20
!trategy is being employed. =ith a related constrained
di'ersification strategy, Dell will be able to e+pand the 'alue of its
resources and capabilities by sharing acti'ities and e+ploiting
economies of scope between its businesses. A'ailable to
companies operating in multiple product markets or industries,
economie! of !cope are cost sa'ings that the firm creates by
successfully sharing some of its resources and capabilities
Doperational relatednessE or by transferring one or more corporate(
le'el core competencies that were de'eloped in one of its
businesses to another of its businesses Dcorporate relatednessE. To
create economies of scope both tangible resources Dsuch as plant
and eLuipment or other physical assetsE and intangible resources
Dsuch as knowledge or other bases of core competenciesE can be
shared. In at least two ways, the related linked di'ersification
strategy can help Dell create 'alue. :irst, because a core
competence has already been de'eloped Dand paid forE in one of
the company"s businesses, transferring it to a second business
eliminates the need for that second business to allocate resources to
de'elop it. ;esource intangibility is a second source of 'alue
creation through corporate relatedness. Intangible resources are
difficult for competitors to understand and imitate. .ecause of this
difficulty, the unit recei'ing a transferred corporate(le'el
21
competence often gains an immediate competiti'e ad'antage o'er
its ri'als. !ne thing to keep in mind, howe'er, is that it can be
difficult for in'estors to actually obser'e the 'alue created by a
firm as it shares acti'ities and transfers core competencies. :or this
reason, the 'alue of DellKs assets being used to create economies of
scope may be discounted by in'estors.
DellKs business model became successful in the * industry as
personal computers gained acceptance in the market. The
companyKs growth was achie'ed by taking away share from
industry leaders and IcommodifyingI the product. ;ather than
being the market leader in other consumer electronic products
D0DT9, digital cameras, etc.E when new product prices are high
and consumers are doing e+tensi'e research prior to the purchase
Dneeding retail outlets to touch and feel the productE, DellKs place
might be to jump into the market as consumer electronic products
begin to transition into commodities. The company can be
prepared to capture the second wa'e or tier of consumers who ha'e
not adopted new technologies and products until prices lower and
technology becomes accepted Dcapturing the market after the
product<technology is pro'en, offering low prices, great Luality,
new features, and complementary ser'ices at this timeE.
22
This !econd $or late% mover strategy is a competiti'e response to
first mo'ersK competiti'e actions and is typified by imitation.
Taking the time to monitor customer reaction to product
inno'ations and a'oiding the mistakes and costs of new product
introductions are compatible with DellKs successful business
model. The approach also pro'ides Dell with time to de'elop more
efficient processes and technologies or create additional 'alue for
consumers.
!'erall, the outcomes of first mo'er competiti'e actions can
pro'ide an effecti'e blueprint for DellKs late mo'er approach,
especially as the consumers get comfortable with making
in'estments in new technologies and begin to eLuate dependable
Luality and good 'alue with the Dell brand. It is also going to be
important for Dell to properly scale its aging businesses Dsuch as
*KsE to the size of the replacement market. B!f course, the
company should always continue to look for ad'ancements that
might breathe life into mature products ( such as it has done by
turning home *Ks into media centersE.
23
Mi!!ion and 8i!ion Statement
Dell Mi!!ion Statement
9To e the mo!t !ucce!!ful computer company in the
world at delivering the e!t
cu!tomer experience in market! we !erve.9
Dell
Mi!!ion Statement
Dell"s mission is to be the most successful omputer ompany in
the world at deli'ering the best customers e+perience in markets
we ser'e. In doing so, Dell will meet customer e+pectations of)
0ighest Luality
,eading technology
ompetiti'e pricing
Indi'idual and company accountability
.est(in(class ser'ice and support
:le+ible customization capability
2uperior corporate citizenship
:inancial stability
24
8i!ion 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. !ur
customers needs, the future of technology, and the global business
climate. =hate'er changes the future may bring our 'ision. Dell
9ision will be our guiding force.
2o Dell needs full customers satisfaction. In order to become the
most successful computer company, they need the newest
technology and loyal customers.
25
#inancial Analy!i!: #inancial Statement!: "ncome Statement
Currency in
Millions of
U.S. Dollars
As of Feb 01
2008
USD
Jan 30
2009
Reclassified
USD
Jan 29
2010
Reclassified
USD
Jan 28
2011
USD
!e"enues
#$,$%%.
&
#$,$&$.& '(,)&(.& #$,*) *.&
+,+A- !E.E/UES
#$,$%%.
&
#$,$&$.& '(,)&(.& #$,*)*.&
Cost of 0oods Sold
*),*#(.
&
*),))1.& *%,*&*.& '&,&*$.&
0!,SS 2!,34+
$$,#5$.
&
$$,$&%.& ),*)1.& $$,*'%.&
Sellin6 0eneral 7
Ad8in Expenses,
+otal
5,**#.& #,)##.& #,((5.& 5,(%*.&
!7D Expenses #$&.& ##'.& #$5.& #'%.&
,+9E!
,2E!A+4/0
E:2E/SES, +,+A-
1,&'#.& 5,#%$.& #,1**.& 5,115.&
,2E!A+4/0
4/C,ME
%,#$'.& %,*5(.& (,#'*.& %,'##.&
4nterest Expense -*'.& -)%.& -$#&.& -$)).&
4nterest and
4n"est8ent 4nco8e
*)#.& $1&.& '5.& *5.&
/E+ 4/+E!ES+
E:2E/SE
*'$.& 15.& -$&%.& -$'(.&
Currency Exchan6e -%&.& $$'.& -').& *.&
26
0ains ;-oss<
,ther /on-,peratin6
4nco8e ;Expenses<
-*1.& -'1.& $(.& -$%.&
E=+, E:C-UD4/0
U/USUA- 4+EMS
%,)11.& %,#$#.& (,'&*.& %,*&'.&
Mer6er 7
!estructurin6
Char6es
-)(.& -(1(.& -*1(.& -#$.&
0ain ;-oss< on Sale
of 4n"est8ents
$*.& -$&.& (.& #.&
,ther Unusual 4te8s,
+otal
-1%.& -- -- --
4n 2rocess !7D
Expenses
-1%.& -- -- --
E=+, 4/C-UD4/0
U/USUA- 4+EMS
%,1(5.& %,%(*.& (,&(*.& %,%'&.&
4nco8e +ax Expense 11&.& 1*#.& ')$.& 5$'.&
Earnin6s fro8
Continuin6
,perations
(,)*5.& (,*51.& $,*%%.& (,#%'.&
/E+ 4/C,ME (,)*5.& (,*51.& $,*%%.& (,#%'.&
/E+ 4/C,ME +,
C,MM,/
4/C-UD4/0 E:+!A
4+EMS
(,)*5.& (,*51.& $,*%%.& (,#%'.&
/E+ 4/C,ME +,
C,MM,/
E:C-UD4/0 E:+!A
(,)*5.& (,*51.& $,*%%.& (,#%'.&
27
4+EMS
5alance Sheet
Currency in
Millions of
U.S. Dollars
As of Feb 01
2008
USD
Jan 30
2009
Reclassified
USD
Jan 29
2010
Reclassified
USD
Jan 28
2011
USD
Assets
Cash and E>ui"alents 5,5#*.& 1,%'(.& $&,#%'.& $%,)$%.&
Short-+er8
4n"est8ents
(&1.& 5*&.& %5%.& *'(.&
+,+A- CAS9 A/D
S9,!+ +E!M
4/.ES+ME/+S
5,)5(.& ),&)(.& $$,&&1.& $*,%#'.&
Accounts !ecei"a?le ',)#$.& *,5%$.& ',1%5.& #,*)%.&
+,+A-
!ECE4.A=-ES
',)#$.& *,5%$.& ',1%5.& #,*)%.&
4n"entory $,$1&.& 1#5.& $,&'$.& $,%&$.&
2repaid Expenses %5&.& **5.& '%).& %5*.&
3inance Di"ision
-oans and -eases,
Current
$,5%(.& $,5$(.& (,5&#.& %,#*%.&
Deferred +ax Assets,
Current
')#.& *)).& ***.& ''1.&
!estricted Cash ()*.& ($%.& $*5.& ('.&
,ther Current Assets $,55'.& (,')&.& (,'$%.& (,(#(.&
28
+,+A- CU!!E/+
ASSE+S
$),11&.
&
(&,$'$.& (*,(*'.& (),&($.&
0ross 2roperty 2lant
and E>uip8ent
*,#$*.& *,'$&.& *,#'(.& *,5().&
Accu8ulated
Depreciation
-$,)*#.& -(,(%%.& -(,*5$.& -(,55#.&
/E+ 2!,2E!+@
2-A/+ A/D
EAU42ME/+
(,##1.& (,(55.& (,$1$.& $,)'%.&
0oodwill $,#*1.& $,5%5.& *,&5*.& *,%#'.&
-on6-+er8
4n"est8ents
$,'#&.& *'*.& 51(.& 5&*.&
3inance Di"ision
-oans and -eases,
-on6 +er8
*&5.& '&&.& %%(.& 5)).&
Deferred +ax Assets,
-on6 +er8
*1'.& '#1.& (%5.& 5'.&
,ther 4ntan6i?les 51&.& 5(*.& $,#)*.& $,*)'.&
,ther -on6-+er8
Assets
$%%.& 1).& $&5.& $15.&
+,+A- ASSE+S
(5,'#$.
&
(#,'&&.& %%,#'(.& %1,')).&
29
LA!L"#S $ #%U"&
Accounts 2aya?le
$$,*)(.
&
1,%&).& $$,%5%.& $$,()%.&
Accrued Expenses %,'%*.& %,&&).& (,1#'.& %,&55.&
Short-+er8 =orrowin6s ('.& $$%.& ##%.& 1'$.&
Current 2ortion of -on6-+er8
De?tBCapital -ease
(&&.& -- -- --
Current 4nco8e +axes 2aya?le )).& #.& *(#.& '().&
,ther Current -ia?ilities, +otal #)&.& 5($.& ')%.& '5'.&
Unearned !e"enue, Current (,*1#.& (,5&$.& %,&*&.& %,$'1.&
+,+A- CU!!E/+ -4A=4-4+4ES
$1,'(#.
&
$*,1').
&
$1,)#&.& $),*1%.&
-on6-+er8 De?t %#(.& $,1)1.& %,*$5.& ',$*).&
Unearned !e"enue, /on-
Current
(,55*.& %,&&&.& %,&().& %,'$1.&
,ther /on-Current -ia?ilities (,$#*.& (,*5(.& (,#&'.& (,#1%.&
+,+A- -4A=4-4+4ES
(%,1(#.
&
((,(().
&
(1,&$$.& %&,1%%.&
Co88on StocC
$&,'1).
&
$$,$1).
&
$$,*5(.& $$,5)5.&
30
!etained Earnin6s
$1,$)).
&
(&,#55.
&
((,$$&.& (*,5**.&
+reasury StocC
-
(',&%5.
&
-
(5,)&*.
&
-(5,)&*.& -(1,5&*.&
Co8prehensi"e 4nco8e and
,ther
-$#.& %&).& -%5.& -5$.&
+,+A- C,MM,/ EAU4+@ %,5%'.& *,(5$.& ',#*$.& 5,5##.&
+,+A- EAU4+@ %,5%'.& *,(5$.& ',#*$.& 5,5##.&
+,+A- -4A=4-4+4ES A/D
EAU4+@
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&
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Ca!h #low
Currency in
Millions of U.S.
Dollars
As of Feb 01
2008
USD
Jan 30
2009
Reclassified
USD
Jan 29
2010
Reclassified
USD
Jan 28
2011
USD
/E+ 4/C,ME (,)*5.& (,*51.& $,*%%.& (,#%'.&
Depreciation 7
A8ortiDation
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A8ortiDation of 0oodwill
and 4ntan6i?le Assets
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32
!e"enues
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and E>uip8ent
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33
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34
*atio Analy!i!
!atio data ++M as of &$B(1B(&$$
PROFITABILITY - DELL INC (DELL)
Retu'n on Assets
4ndustry Co8parison
#.$5H
Retu'n on #(uity
4ndustry Co8parison
%).%$H
Retu'n on )a*ital
4ndustry Co8parison
$1.)1H
MARGIN ANALYSIS - DELL INC (DELL)
+'oss ,a'-in
4ndustry Co8parison
$1.#(H
#!"DA ,a'-in
4ndustry Co8parison
5.%1H
ASSET TURNOVER - DELL INC (DELL)
"otal Assets "u'no.e'
4ndustry Co8parison
$.5x
Accounts Recei.ables "u'no.e'
4ndustry Co8parison
$&.&x
Fixed Assets "u'no.e'
4ndustry Co8parison
().1x
n.ento'y "u'no.e'
4ndustry Co8parison
*(.#x
35
CREDIT RATIOS - DELL INC (DELL)
)u''ent Ratio
4ndustry Co8parison
$.'x
%uic/ Ratio
4ndustry Co8parison
$.%x
LONG-TERM SOLVENCY - DELL INC (DELL)
"otal Debt0#(uity
4ndustry Co8parison
55.%x
/ot 8eanin6ful
"otal Liabilities0"otal Assets
4ndustry Co8parison
5).)x
Competitive Analy!i!
36
)o!itioning Strategy Analy!i!
Dell"s uniLue selling proposition has always been defined by its
direct business model. Its founder, Michael Dell, lead the way
using the direct(sales approach for computers. Dell has a simple
formula) Geliminate the middleman and sell for lessH D0oo'ersE.
Dell keeps it simple by pro'iding customers with built(to(order
bo+es that help with lower in'entories, lower costs, and higher
profit margins.
)roduct!3Service! Strategy Analy!i!
Dell is the major player in the personal computer industry and its
aim is to market both *s and ?on(*s related products to the
consumers. It uses to target its market the differentiated approach.
2uch as it pro'ides the products to the markets according to the
needs to consumers, as according to home, health, go'ernment,
small and large scale markets etc. It differentiates its products from
others which is the key point to target its market.
)ricing Strategy
Dell made F#%.7 billion in re'enue with a net profit margin of %O.
In 7//4 their re'enue was almost tripled to F33.$ billion, but with
a lower net profit margin of 4.&O. Dell"s net income has almost
constantly risen throughout the years, due to their highly
37
competiti'e cost structure. Their elimination of the middleman
keeps their costs low and profits high.
Di!triution Strategy Analy!i!
Dell"s main factory is located in Te+as with its regional
headLuarters in Te+as, Tennessee, and .razil. Dell always tries to
centralize its headLuarters to where it can pro'ide the ser'ice to its
customers in timely and effecti'e manner. Dell"s location has
helped the company organize its distribution model. =hen Dell
Americas operations were e+panded, Dell chooses middle
Tennessee because the transportation infrastructure allowed Dell to
reach 5/O of its customer base within twenty(four hours by
ground. =ith the Internet and the phone as its biggest distribution
channel, Dell is able to reach customers faster and with its
distribution network streamlined it can meet each customer"s
demand successfully and speedily.
All these strategies not only made possible for Dell Inc. to be
among the world"s leading orporations in the omputer Industry
but 1%
th
largest orporation in >nited 2tates.
S-+T Analy!i! of Dell Computer
38
Strength!
DellKs Direct Model approach of enables the company to offer
direct relationships with customers such as corporate and
institutional customers. Their strategic method also pro'ides other
forms of products and ser'ices such as internet and telephone
purchasing, customized computer systemsM phone and online
technical support and ne+t(day, on(site product ser'ice. This
e+tensi'e range of products and ser'ices is definitely one of Dell"s
strengths.
Dell omputerKs award(winning customer ser'ice, industry(leading
growth and consistently strong financial performance differentiate
the company from competitors for the following reasons)
*rice for *erformance P Dell boasts a 'ery efficient procurement,
manufacturing and distribution process allowing it to offer
customers powerful systems at competiti'e prices.
ustomization ( -ach Dell system is built in order to meet each
customer"s specifications.
;eliability, 2er'ice and 2upport P Dell"s direct customer allows it
to pro'ide top(notch customer ser'ice before and after the sale.
39
,atest Technology P Dell is able to introduce the latest rele'ant
technology compared to companies using the indirect distribution
channels. Dell turns o'er in'entory for an a'erage of e'ery si+
days, keeping in'entory costs low.
The companyKs application of the Internet to other parts of the
business ((including procurement, customer support and
relationship management (( is growing at a rate of 1/ percent. The
companyKs =eb site recei'ed at least 73 million 'isits at more than
3/ country(specific sites.
-eakne!!e!
Dell"s biggest weakness is attracting the college student segment
of the market. Dell"s sales re'enue from educational institutions
such as colleges only accounts for a measly 3O of the total. Dell"s
focus on the corporate and go'ernment institutional customers
somehow affected its ability to form relationships with educational
institutions. 2ince many students purchase their *s through their
schools, Dell is ob'iously not popular among the college market
yet.
:or home users, Dell"s direct method and customization approach
posed problems. :or one, customers cannot go to retailers because
40
Dell does not use distribution channels. ustomers just can"t buy
Dell as simply as other brands because each product is custom(
built according to their specifications and this might take days to
finish.
+pportunitie!
*ersonal computers are becoming a necessity now more than e'er.
ustomers are getting more and more educated about computers.
2econd(time buyers would most likely a'ail of Dell"s custom(built
computers because as their knowledge grows, so do their need to
e+periment or use some additional computer features.
Demand for laptops is also growing. As a matter of fact, demand
for laptop has o'ertaken the demand for desktops. This is another
opportunity for Dell to grow in other segments.
The internet also pro'ides Dell with greater opportunities since all
they ha'e to do now is to 'isit Dell"s website to place their order or
to get information. 2ince Dell does not ha'e retail stores, the
online stores would surely make up for its absence. It is also more
con'enient for customers to shop online than to actually dri'e and
do purchase at a physical store.
Threat!
41
In a 'olatile market such as personal computers, threats abound.
omputers change in a constant sometime daily basis. ?ew
software, new hardware and computer accessories are introduced
at a lightning speed. It is essential for Dell therefore to be always
on the lookout for new things or introduce new computer systems.
The threat to become outmoded is a pulsating reality in a computer
business. ?ot only that, companies must produce products that are
high in Luality but low in price. This is one challenge that Dell
contends with.
!ne of the biggest e+ternal threats to Dell is that price difference
among brands is getting smaller. Dell"s Direct Model attracts
customers because it sa'es cost. 2ince other companies are able to
offer computers at low costs, this could threaten Dell"s price(
conscious growing customer base. =ith almost identical prices,
price difference is no longer an issue for a customer. They might
choose other brands instead of waiting for Dell"s customized
computers.
The growth rate of the computer industry is also slowing down.
Today, Dell has the biggest share of the market. If the demand
slows down, the competition will become stiffer in the process.
Dell has to work doubly hard to differentiate itself from its
42
substitutes to be able to continue holding a significant market
share.
Technological ad'ancement is a double(edge sword. It is an
opportunity but at the same time a threat. ,ow(cost leadership
strategy is no longer an issue to computer companies therefore it is
important for computer companies to stand out from the rest.
Technology dictates that the most up(to(date and fastest products
are always the most popular. Dell has to always keep up with
technological ad'ancements to be able to compete.
*eference!
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43
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