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Presented by:
• Amit Kumar(03)
$2.0B • Prashant Goel (18)
• Vishwa Vibhuti(36)
• Ajay Jain(42)
Mission Statement: “To provide customers with superb value,
high quality, relevant technology, customized systems, superior
service and support, and products and services that are easy to
purchase and use.”
Strategy Statement: “To do business with its consumers one-on-
one, through the phone or internet.”
• Highest quality
• Leading technology
$2.0B • Competitive pricing
• Individual and company accountability
• Best-in-class service and support
• Flexible customization capability
• Superior corporate citizenship
• Financial stability
DELL Inc - TIMELINE
1983-- Michael Dell starts business of pre-formatting IBM PC HD’s on
weekends
1996-- Dell goes online; $1 million per day in online sales; $5.3B in annual sales
1997-- Dell online sales at $3 million per day; 50% growth rate for 3rd
consecutive year, $7.8B in total annual sales.
www.dell.com 3
Dell Computer Corporation
www.dell.com 4
DELL Brand-Names for Its product ranges
www.dell.com 5
Odds Improve for the Top 10
Q1'05 y/y
WW Vendor Ranking 1995 Q1'05 Rank Growth
Dell 7 1 13.6%
HP (Merged) 1 2 10.6%
Dell Takes No.1
IBM 3 3 2.2%
Position in 2004
Fujitsu Siemens n/a 4 14.0%
Acer 6 5 39.1%
Toshiba 8 6 22.6%
NEC 2 7 23.9%
Apple 4 8 42.5%
Legend / Lenovo 46 9 19.9%
Gateway 9 10 -20.0%
www.dell.com 7
$2.0B
Dell’s Global Presence
The Americas EMEA Asia Pacific China
Austin Limerick
Texas Ireland
Xiamen
Nashville
Tennessee China
www.dell.com 9
Dell’s Competitive Advantage
www.dell.com 10
Dell’s Direct Approach:
A Fundamentally Different Model
Dell Direct Model
Suppliers Customers
Competitor Model
www.dell.com 11
Benefits of Dell Direct
Model
www.dell.com 12
The Benefits of Low
Inventory
Relative 110
Component 105
10-12% Cost
Cost 100
Advantage
With 3 Days
95 Inventory,
90 Dell Buys Here Typical
Dell
4
0
-8
-6
-4
-2
0
-1
-1
-1
Suppliers
Local Suppliers
Customer
Supplier Owned Dell Owned
www.dell.com 14
How the Model drives Market
Share
Pass cost Industry's most
savings on Efficient efficient
to customer Model with lowest procurement,
Cost Structure manufacturing
and distribution
process
Improved
Competitive
Pricing Customer Help
Drive
Experience Supplier
Business
www.dell.com 16
Dell’s organizational structure:
The virtual company
Direct relationship with customer is strategic; rich
information flows
Outsource non-strategic functions
Information flows substitute for physical flows
Coordinate value network thru IT-enabled information
processes
Logistics
Component System
companies
suppliers integrators and
resellers
Dell Order
management
Operations Customer
Component and supply relations Customer
Manufacturer chain
Repair and
Third party
support providers
HW and SW Distributors
suppliers
www.dell.com 17
Dell Growth
FY05 revenue of $49.2 billion
$55 20%
Market Share FY05 = 17.8 %
$50 18%
$45 16%
12%
$30
10%
$25
8%
$20
$15 6%
$10 4%
$5 2%
$0 0%
FY92 FY93 FY94 FY95 FY96 FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05
(Annualized)
www.dell.com Source: IDC All Form Factors 18
DELL Growth Highligh
Growth Highlights
www.dell.com 19
Q2FY06 Financial
Performance
Liquidity: Growth:
$0.9B in Cash from
9.1M Units (up 25%)
Operations
Revenue $13.4B
$
$12.7B in Cash and
15% Revenue growth
Investments
** Note:
Note: New
New Dell
Dell Record
Record
Profitability
GM = 18.6%
OPEX = 9.9% of revenue
OpInc = $1.2B, 8.7% (up 10 bps Y/Y)
Net Income = $935M
EPS $0.38*; 23% Y/Y growth
Note: Q2 Financial performance excludes the impact of an $85M dollar tax benefit related to a revised estimate of taxes on the
www.dell.com repatriation of earnings under the American Jobs Creation Act of 2004 20
PROFITABILITY
COMPARISON
Profitability Dell Hewlett-Packard IBM Sun Microsystems Industry Market
Median Median2
www.dell.com 21
Using IT and e-networks strategically
with customers
Internet based customer services
• Online ordering, asset tracking, product road maps, technical support,
highly tailored information, all provided online.
Diversification into non-PC businesses for “one-vendor solution”
• Changed name from Dell Computer to Dell, Inc.
• Dell sells PCs, servers, printers, storage, networking, software (e.g.,
network management), services
• Sells add-on software, peripherals, PDAs, cases, cameras, TVs
Promote Dell as company that “knows how ‘E’ works”
• Run’s Dell on Dell; corporate customers come to Dell for advice
• Dell has e-services business in partnership with consulting firms (e.g.,
Accenture) to capitalize on Dell’s reputation as e-commerce leader
Results:
• Dell now #1 PC vendor with Market Share 34.4% in US and 18%
globally
• Revenue of $49.2 billion in 2005; growth over 30%(units) annually
www.dell.com 22
Coordinating the virtual company
with
IT and e-networks
Speed
• Order-driven processes linked by internal IT and external
networks allow only 7 hours of inventory in factory and orders to
be filled in 5 days or less
• Entire value network linked by EDI, Internet, extranets
Quality
• Bar coding allows components to be tracked to suppliers when
problems occur, stop production and notify suppliers
• Cell assembly allows problems to be fixed on the spot without
shutting down production
Cost
• Online sales and support saves on call center costs
• Supply chain coordination substitutes information for inventory
Results
• Overhead 8% compared to 15% for others
•122 inventory turns annually minimizes depreciation
•New technologies can be introduced immediately
www.dell.com 23
www.dell.com 24
www.dell.com 25
www.dell.com 26
Dell’s Direct vs. Industry Indirect
model
Strengths of the direct model
•Most efficient method of distribution
•Extremely low inventories.
•Rapid response to customer changes.
•Strong relationship with customers and
suppliers.
Weaknesses of indirect model
• Time = money (rapid innovation by
parts suppliers send value of newly
built PCs plummeting quickly).
• Have to discount old technology.
• Retailer sends unsold units back to
manufacturer.
Results:
Direct vendor Dell has best performance.
Dell has forced other vendors to go direct.
Industry as a whole has improved performance.
www.dell.com 27
Industry improvement: Inventory
turns
www.dell.com 28
DELL Inc – Company Comparison
DIRECT COMPETITOR COMPARISON
DELL HPQ IBM SUNW Industry
Market Cap: 89.29B 60.17B 121.16B 11.79B 112.93M
Employees: 55,200 151,000 329,001 32,600 341
Rev. Growth 18.70% 9.40% 8.00% -2.20% 6.20%
(ttm):
Revenue (ttm): 49.21B 81.85B 96.95B 11.20B 116.36M
Gross Margins 18.32% 23.87% 37.42% 40.88% 23.94%
(ttm):
Net Income (ttm): 3.04B 3.50B 8.25B 645.00M -153.00K
www.dell.com 29
Less than 50/50 for Short-Term IT
Industry Survival
400
350
300
250 247
200 New Entrants:
Low Barriers to Entry
150
241
100
50 111
0 Survivors
# of WW PC # of WW PC
Vendors Tracked Vendors Tracked
by I DC in 1995 by I DC in 2002
Strengths
www.dell.com 31
Weaknesses
www.dell.com 32
Opportunities
Kevin Rollins replaced Michael Dell in 2004 as Dell's Chief Executive Officer.
Michael Dell remained the company's Chairman. Despite founder Dell's massive
success, new blood and a change in management thinking could lead the
company into a new, even more profitable period. Dell was born in 1965, and
founded Dell in 1984 with $1000 whilst studying at the University of Texas. He
became the youngest Fortune 500 CEO in 1992, and will be a tough act to follow.
Dell is pursuing a diversification strategy by introducing many new products to
its range. This initially has meant good such as peripherals including printers and
toners, but now also included LCD televisions and other non-computing goods. So
Dell compete against iPod and other consumer electronics brands.
Dell is making and selling low-cost, low-price computers to PC retailers in the
United States. The PC's are unbranded and should not be recognized as being
Dell when the consumer makes a purchase. Rebranding and rebadging for
retailers, although a departure for Dell, gives the company new market segments
to attack with the associated marketing costs.
The established value web corporate model have also allow Dell to have global
wide access to customers and market. Reaching any niche market in any
continent is therefore not a problem for Dell's marketers.
www.dell.com 33
Threats
The single biggest problem for Dell is the competitive
rivalry that exists in the PC market globally.
Retaliation from competitors and new entrants to the
market pose potential threats.
Dell sources from Far Eastern nations where labour
costs remain low, but there is nothing stopping
competitors doing the same - even sourcing the same
or similar components from the same or similar
suppliers.
Dell, being global in its marketing and operations, is
exposed to fluctuations in the World currency
markets. Changes in exchange rates could leave the
company exposed to potential loses in parts of its
supply chain.
www.dell.com 34
Porter’s Five Forces & Analysis: DELL
www.dell.com 35
Rivalry: HIGH
High concentration
Decreasing profitability
Low differentiation
www.dell.com 36
Threat of Substitutes: LOW
www.dell.com 37
Bargaining Power of Buyer: High
www.dell.com 38
Bargaining Power of Suppliers: HIGH
www.dell.com 39
DELL INDIA
As part of this globalization strategy, Dell established a sales &
marketing office in Bangalore in 1996, and its first India customer
contact centre in Bangalore in May 2001 followed by a similar centre in
Hyderabad in 2003, and in Mohali on 21 March 2005
Manufacturing facility in India in 2007. It will be Dell’s fourth plant in
Asia after two in China and one in Malaysia
Due to competitive pricing strategy in INDIA, sales jumped 63 per cent
year on year and achieved 82 per cent growth in shipments.
The company gained on the back of the customers’ strong preference
for standards-based technology and Dell’s direct model in India.
Shipment growth in the country was biggest among the three emerging
markets — China, Brazil and India. Also it is likely to capture 20-30 per
cent of the market share in India in the next few years.
www.dell.com 40
DELL Inc – The Success
Secret
Internet coupled with Direct Business Model
- sell directly to end customers instead of intermediate distributors, resellers.
Virtual Integration
- using sophisticated CRM, SCM systems at respective ends as well their integration
- already integrated with 38 procurement and ERP systems across all its clients
- vendors – Ariba, SAP, PeopleSoft, J.D. Edwards – Dell integrated with their ERP
(Source: Rob Rosenthal, Dell’s B2B web site strategy, October 2003, IDC #30202)
Selling Points
- Internet, B2B (Premier Pages), Phone-calls, Mass catalog mailings
Do not Just sell Products – sell Values
- client asked to put tags on their computers
- proactive in solving clients pain points – preloaded software
Dell was much less mature compare to IBM and HP at time when Internet took off –
required much less effort to adapt its systems to Internet technologies.
IBM and HP’s core competency was product innovation and development, Dell’s
expertise was in assembling and catering to business needs.
www.dell.com 41
Dell Inc – Boundaries of Direct Business Model ?
Have other manufacturers been able to do this? Why or why not? Is this model
bounded in the PC industry?
• Presently HP is using the Direct Model. Supposedly Compaq’s strong direct
sales model helped HP after the merger. Prices are in comparison to Dell.
• Source - www.ecommercetimes.com/story/19385.html
• Compaq emulated the model before merger with HP.
• Dell had better profitability management.
• Source -
http://www.findarticles.com/p/articles/mi_m0DTI/is_12_31/ai_1
11163644
• Local computer vendors
• B2B markets – common meeting point for manufacturers and institutional
consumers.
www.dell.com 42
Customer Lessons Learned
www.dell.com 43
Dell Inc – Key Questions
Is the Direct Business Model a new model ?
No, its not ! – all the primitive businesses used to trade like this – today hotdog
stands all over Manhattan is an example of that model on small scale
www.dell.com 44
Three golden rules at Dell :
`Disdain inventory'
`Listen to the customer'
`Never sell indirect'