Dell’s SWOT Analysis 1 Strength

5.1. Unique direct model

Dell’s business direct model is the envy of many competitors. Most other competitors are in the process of developing a direct market strategy, but the transition from existing sale channels is not simple. Dell continues to gain market share by using its knowledge about its customers.

5.1.2 Good supplier relationships

Dell’s integrated supply chain allows it to keep only four days of inventory. Component price in the computer industry falls almost 6% a week. The company can provide the component price decline to its customers quickly. In addition, Dell shares demand information with suppliers, so ensuring that inventory is kept to minimum.

5.1.3 The Lowest Price

Dell has developed a process whereby Dell can assess the lowest possible price within an hour. Dell’s e-commerce infrastructure allows dynamic pricing strategy, whereby the same product and service can be sold at different prices, depending on the buyer.

PC demand is seen as price elastic (prices drop,

demand increases). Dell’s price cutting strategy aims to keep demand away from competitors. Gateway’s withdrawal from European market and consolidation of HP and Compaq are indications that PC market is in the process of consolidating. In addition, Dell should be able to capitalize on the uncertainty surrounding the early HP/Compaq merger.

5.1.4 Customization

Dell can customize the computer products for its consumers. Consumers only select what kinds of product’s features they want by phone or Dell’s Website. Then, Dell will ship the goods for you.

5.2 Weakness

5.2.1 No Proprietary Technology

Dell purchases computer materials from a group of hi-tech component manufacturers. Dell relies on a few large suppliers, and Dell is unable to switch supply dues to the lack of large suppliers in the world.

5.2.2 Dependence on Microsoft and Intel

Majority of PCs is based on platforms created by Microsoft and Intel. New processors and OS do not boost the market demand, and they rely on vendors to promote new technologies. Dell must look into forming strategic alliances with rivals Linux and AMD in order to mitigate some of the market power its current suppliers have.

5.3 Opportunities 5.3.1 New Products

Dell is pursing a diversification strategy by introducing many new products to its range such as printers, toners, LCD HDTV, and MP3 Player to compete with its rivals.

5.3.2 Strong Potential Foreign Markets

Dell can use its direct model in Europe, China, and India to increase Dell’s global market share. Dell has a lot of room to expand its overseas businesses.

5.4 Threats

5.4.1 Fierce Competition

Dell has a lot of competitive rivals that exists in the PC market globally. Dell’s sources from Eastern nations where labor costs remain low, but there is nothing stop rivals doing the same.

5.4.2 Component Price Fluctuation

Dell is a global corporation. If the cost of the component changes, it may affect Dell’s price. Dell’s orders have to be placed some time ahead due to its size or value. Changes in exchange rates could leave Dell exposed to potential loses in parts of its supply chain.

5.4.3 Political Instability

If the government changes or revises the regulations and rules of importing and exporting businesses, it will threaten to Dell’s market.

5.4.4 Segmentation Variables

Dell Inc. is a world-wide corporation, which includes South America, Asia Pacific, Europe, Middle East, and Africa (Dell.com, 2007). Dell is a global company and has developed a direct-sell philosophy through its Website. Researchers do not think Dell has geographic segmentation variables because Dell Inc. was evolved into an online corporation.

Researchers think Dell’s demographic segmentation variables include gender, age, race, birth era, marital status, income, education, and occupation. For the gender variable, Dell believes both men and women are very important customers and segments. However, men have shown more desire to purchase personal computers, personal digital assistants (PDA), and other electronic products. On the other hand, researchers can see the number of women who purchase electronic goods is increasing. Dell Inc. can classify age into (1) under 10 years old, (2) 11-20 years old, (3) 21-30 years old, (4) 31-40 years old, and (5) above 41 years old.

Researchers believe Dell provides different products

and services for different customers because Dell understands its consumers needs and wants.

Teenagers and university-aged customers are the largest segment, and people older than 51 are the lowest group of consumers for Dell.

Dell has customers of every race. It is important to note the largest segment of customer race is white, and the smallest is African American.

Dell’s birth era variable includes baby boomer, generation X, and generation Y. With respect to marital status variable, no matter you are a single, married, separated, or divorced person; Dell will provide the best product and deal for you. Any income-level consumer can afford Dell’s computers.

A vast majority of Dell’s consumers are college students. All occupations are target markets for Dell as there is need for technology in most occupations today.

5.4.5 Segmentation Risks

Researchers believe if Dell cannot succeed in research and development, Dell could encounter and face a lot of risks such as Dell may lose its customers, Dell will turn into a follower instead of a leader, and Dell may lose profit. Therefore, researchers think investing in research and development (R&D) is very important for Dell. Dell’s consumers may face some risks as well. For instance, if the quality of computers decline, it could hurt the consumers and their confidence in Dell. If Dell runs its business not very well, the customers may lose their benefits.

5.4.6 Segmentation Strategies

Researchers believe Dell has two critical strategies. The first strategy is Dell offers computers at affordable prices. The second strategy is Dell provides customized service for its consumers. For instance, if you want a laptop computer that has a 17.1 widescreen display, 1 GB DDR 2 memory, 120 GB hard drive, DVD RW, built-in wireless g, and Intel Core 2 Duo mobile processor 2.33 GHz, you

can inform Dell. Dell will customize it for you. It will take about one week. Researchers think this kind of service is very flexible and convenient because Dell listens to what their customers want.

5.4.7 Positioning/Promise

Researchers believe Dell’s computer positioning is a low-price, high-quality, and 100%

customer satisfaction product. Some of Dell’s rivals want to follow Dell’s position, but not everyone can succeed due to different strategies, skills, and networks. Besides Dell’s position, Dell also has an important direct model (direct sale) because this direct model does not need any middleman.

Therefore, it can save a lot of time and money for Dell and the consumers.

5.4.8 Packaging

Dell computer cares about its packaging very much. Dell owns a worldwide packaging engineering team, which is responsible for optimizing packaging materials throughout Dell’s supply chain and for finished product packaging. Packaging is necessary for product protection during shipping and handling.

Dell’s packaging engineering team already tests many times on packaging in order to protect products and minimize the use of packaging materials (Dell.com, 2007). Researchers believe Dell did a very good job on its packaging.

Packaging engineering team tests the worst-case shipping and handling environments in order to enhance and improve the product packaging (Dell.com, 2007). Researchers think it is necessary for Dell to test many times in order to increase the quality of packaging, and decrease the waste of the packaging materials. Dell’s packaging engineers also measure the shock and vibration inputs during testing until requirements are met (Dell.com, 2007). The goal for Dell is to use the right amount of protective packaging to deliver a quality product to the consumers (Dell.com, 2007). Inbound packaging was

redesigned to reduce packaging and increase product density, which can lead to fewer truck shipments, less gasoline consumption, and reduced emissions (Dell.com, 2007). Researchers believe that less gasoline consumption and reduced emissions can save money for Dell and save air pollution for the society.

Dell saved over 24,000 tons of packaging material by annual reduction and elimination of corrugated, plastic foam, and wood materials in 2006 (Dell.com, 2007). Dell plans to save more packaging materials next year. Dell’s efforts will continue to save at least 17,000 tons of wood yearly. Researchers believe Dell does its packaging plan and program very well and systematically. Researchers also think Dell can save a lot of money and packaging materials on its packaging design. In addition, Dell recycles the unused materials.

5.4.9 Channel Choice

Researchers think there are two channel choices that you can purchase personal computer (PC), PDA or other products by (1) surfing the Website of www.dell.com, and (2) calling the phone number of 1-800-WWW-DELL (1-800-915-3355).

Dell is a direct-sell corporation; therefore, there is no middleman for Dell.

5.4.10 Distribution

Dell owns a distribution center in West Chester, Ohio in order to support its printer and computer accessories businesses in the United States. This distribution center will support distribution and warranty fulfillment on select electronics and accessories orders. The center is very closed to the airport; therefore, it can ship the goods to Dell’s customers by overnight. Researchers think Dell’s strategy is right because the shipment is very fast.

Researchers believe that closer to the transportation carrier is a good idea in that it can

shorten customer delivery times, and minimize logistics and freight costs. APL Logistics has worked with Dell since 2001 to develop an international logistics network. The network provides control over product flow origin through distribution and delivery to Dell’s consumers.

Dell’s warehouse keeps 13-day inventory in case of mass demands. If a customer orders a computer from Dell, the product’s materials will be arrived at Austin, Texas in 15 minutes. Then, operators will assemble the product, and ship the goods to the customer by UPS. The product will be shipped by Texas’s headquarter or Ohio’s distribution center, which depending on the customer’s location.

Dell offers overnight shipment, 2 business day delivery, and 3 to 5 day ground delivery. Different shipping day has different price.

5.4.11 Advertising

Dell advertises on TV and the Internet. Dell spent $1.1 billion on advertising expense in 2005, which making Dell the world’s #28 advertiser.

Researchers believe Dell’s advertising is very successful because majority of people know Dell nationally and internationally. Besides, Dell uses news releases, advertising, donations to charities, and Energy Star Program to market Dell’s name.

5.4.12 Sales Promotion

Dell’s sales promotion includes free memory and optical drive upgrades on most of Dell’s desktop computers and notebooks, up to a $250 mail-in rebate, free shipping and handling, instant rebate, and $300 off if consumers purchase more than $1,000 on selected products during specific time period.

5.4.13 Point-Of-Purchase Display

On the homepage of Dell’s Website, the consumers can clearly see the slide shows of Dell’s personal computers, notebooks, servers, storages, networking, printers, HDTV, software, and

accessories from left to right hand side. If the consumers click on the Web page of notebooks, it will show the prices of the notebooks, screen sizes of the notebooks, notebook usage, and the weights of the notebooks on the left-hand side, as well as notebooks’ features, price after instant rebate or mail-in rebate, and the limited time offer on the middle of the Web page, and it will show categories of products, services, support, solutions, purchase help, and account on the top of the Web page.

Researchers think Dell puts its personal computers, notebooks, servers, and HDTVs on the homepage is to maximize the consumers’ attention.

5.4.14 Integrated Marketing

Dell’s integrated marketing have advertising, personal selling, sales promotion, public relations, and direct marketing to provide a consistent message across all audiences. Dell’s call centers include Round Rock, Texas, and Nashville, Tennessee in the United States; Limerick, Ireland; Bracknell and Bray, U.K. in the Europe/Middle East/Africa (EMEA); as well as Bangalore, and India in Asia-Pacific. If the customers need to buy the products or need any technical support, consumers can call Dell’s phone number anytime. When the consumers call Dell’s salesman, the salesman will introduce the product the consumers want, and hear the potential buyers’

reaction. Researchers believe the personal selling is a two-way communication, and it has an advantage of a salesman can control the presentation, and a disadvantage of the high cost.