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CONTENTS Product and Market Description3 About Dell4 Marketing Objectives of DELL5 Products and Services6 DELL’s Competitors and Market Players7 Aggregate Market Forces8 Microenvironment Analysis10 Macro environment Analysis13 Marketing Program, Strategy, and Tactics (4 Ps):15 Dell Market Strategy16 Value Chain Analysis18 Differential Advantage for each company20 Expected Future Strategies22 Segmentation23 Targeting24 Positioning24 Consumer Behavior26 Assumptions in Planning Process30 Value Proposition31 Competitor’s Targeting32 Conclusion33 Product and Market Description
Laptop also known as notebook is a small portable computer compared to a desktop. Although the concept of a laptop was introduced as early as 1971, the first commercial portable computer, Osborne 1, was available only in 1981. Before Windows 95 came out, laptop was used by research institutions and untouchable to general public. As technology innovation has been repeatedly occurred, laptop became portable, inexpensive, and user-friendly. Desktop computers serve all the purposes a laptop does but with their bulk and masses of cables they’re not very portable.
That’s where laptops gain prominence. Today Laptop PC industry is dynamic and has high demand from personal users in home and business users in their office. Its portability provides advantage for the users in terms of business communication tools anywhere, anytime. Marketing strategy including price war and brand-value creation is more common in laptop PC industry among major players in 21st century. In India laptops still form a very miniscule portion of the Indian PC market.
Call it a fad, or the emergence of a new breed of technology conscious IT users (or both), a shift in working styles and the need for “anytime-anywhere” access to information-all these factors are pushing laptop sales to dizzying heights in India. Another factor which has been driving sales of laptops is the recent need for mobile computing and mobile connectivity. The government’s focus on improving the IT infrastructure has brought in technologies like wider wireless network (WAN, Wi-Fi), which allows linking up of mobile devices to the internet at any place. This has propelled sales like never before.
Also, with their fast paced lives, many professionals and businessmen need access to computers while they are on-the-move. In the future, we expect that with the advent of technologies that make mobile internet connectivity more efficient and cost effective, laptops and notebooks will be more popular. Increasing incomes and a further reduction in prices will also make laptops more affordable. The inclusion of vernacular content and local language support will make laptops useful in the rural areas as well. About Dell Corporate Objectives Dell’s corporate-level strategy is one of growth.
Dell’s corporate website defines its global strategy as “Our global strategy is to be the premier provider of products and services, including those that customers require to build their information- technology and Internet infrastructures. ” Below are the core elements of the Soul of Dell: 1. Customers Dell believes in creating loyal customers by providing a superior experience at a great value. People at Dell are committed to direct relationships, providing the best products and services based on standards-based technology, and outperforming the competition with value and a superior customer experience. 2. The Dell Team
The firm believes that their continued success lies in teamwork and the opportunity each team member has to learn, develop and grow. They are committed to being a meritocracy, and to developing, retaining and attracting the best people, reflective of their worldwide marketplace. 3. Direct Relationships They believe in being direct in all they do. They are committed to behaving ethically; responding to customer needs in a timely and reasonable manner; fostering open communications and building effective relationships with customers, partners, suppliers and each other; and operating without inefficient hierarchy and bureaucracy. . Global Citizenship They believe in participating responsibly in the global marketplace. They are committed to understanding and respecting the laws, values and cultures wherever they do business; profitably growing in all markets; promoting a healthy business climate globally; and contributing positively in every community they call home, both personally and organizationally. 5. Winning Employees at Dell have a passion for winning in everything they do.
They are committed to operational excellence, superior customer experience, leading in the global markets they serve, being known as a great company and great place to work, and providing superior shareholder value over time. Marketing Objectives of DELL Dell has laid out broad long term companywide goals to drive shareholder value including ???Deliver sustained unit growth at a premium to the market ???Execute against its $3 billion cost opportunity ???Deliver sustained EPS growth ???Execute on its five core growth initiatives ???Grow its retail and the channel for scale and profit
To achieve all these goals, Dell has defined a few marketing objectives. They have been elaborated upon below: Customer Retention Dell’s business model appeals to customers desire to save money ??? the industry has had the reputation of selling equipment at reasonable prices, then picking up profits by charging an arm and a leg for supplies, maintenance services, and other add-on services. Dell applies its “sell the best stuff, at the lowest price possible” philosophy to all its goods and services, which appeals to the customer desire for best value for the money. Dell believes in built to order manufacturing; this reduces the supply chain time constraints and delivers products faster to the customer. ???The online model ??? Direct from Dell gives customers better purchasing experience by reducing forward supply chain constraints. ???Allows customer a generic upgradeable PC model, wherein accessories/components could be added over the base models. This allows them to meet the needs in better way. ???Dell maintains quality by choosing the best in class component manufacturers (Intel & Microsoft) and leveraging their scale investment in R&D. By reducing supply chain components and reducing manufacturing lead time, Dell has been able to manage its prices competitively. ???Uses knowledge gained from direct customer contact before and after the sale to provide reliable and tailored customer service. Intermediary Retention The Soul of Dell is a statement of its corporate philosophy that defines the kind of company Dell is and aspires to become and serves as a guide for its actions around the world. Excerpts from this corporate philosophy that help defines Dell’s approach to supply chain management include: “We are committed to behaving ethically… nd building effective relationships with customers, partners, suppliers and each other. We believe in participating responsibly in the global marketplace. We are committed to understanding and respecting the laws, values and cultures wherever we do business… promoting a healthy business climate globally; and contributing positively in every community we call home, both personally and organizationally. We are committed to being a great company and great place to work… ” Channel retention Dell has recently entered the channel business while trying to attract various channel partners and expand their business globally.
Channel business, however, has contributed well to Dell’s growth strategy. ??? Global channel revenue $100B; >$200B w/ services Channel Retention strategy Dell uses a three pronged strategy in order to retain its channel partners, while continuously expanding them. One of them is detailed below: Flexible Engagement Model ???Minimize conflict, build trust and create mutually beneficial relationships ???Program Office: This ensures that partners meet minimum qualifications to support Dell business in the given region. Ensures registration of qualified partners and conducts Marcom/Events as interface between Dell and registered partners. Solution Center: It is responsible for training of registered partners, providing technical support to them. Solution center also supports partners by providing direct service and support to the channel partners. ???Operations Center: This ensures smooth operation of partner business and continuously evolves business strategy for them ???Online Portal: Dell uses online portal to smoothen the communication with channel partners. Registered Partners and Certified Partners are differentiated through online portal. Supplier retention strategy Dell is committed to communicating its requirements to its suppliers and orking collaboratively with them to promote high standards of work and behavior. While the principles do not vary regardless of the level of supplier, its focus on communicating and reviewing performance against those standards is at target supplier list. Suppliers on this list are selected based on location, manufacturing processes, business relationship, and commitment to adhere to EICC provisions. Despite this focus, violation of Dell’s Supplier Global Citizenship expectations at any level of its supply chain is unacceptable. Dell’s approach to global supplier management is built around two key areas: Supplier Global Citizenship Commitment ???Electronic Industry Code of Conduct Products and Services Dell designs, develops, manufactures, markets, sells, and supports a wide range of products that in many cases are customized to individual customer requirements. Their product categories include desktop PCs, servers and networking products, storage, mobility products, and software and peripherals. In addition, it offers a wide range of services. To name a few- Infrastructure Consulting Services, Deployment Services, Asset Recovery and Recycling Services, Training Services, Support Services, Managed Services and Financial Services.
DELL’s Competitors and Market Players Hewlett-Packard/Compaq HP provides personal computers, imaging and printing products, access devices, consulting, and IT infrastructure services to both individual and enterprises customers. The company, founded in 1938 and based in Palo Alto, California, has a presence in 170 countries across the globe. The company recorded revenues of $104. 3 billion in 2007 and employs 309,000(2008) people worldwide. HP maintains excellent account management for its largest global enterprise. HP is setting the standard in the notebook industry with the est combination of advanced features and extremely competitive prices. Apple Apple Computer is well known for being the most visible dissenter to the Windows/Intel standards that dominate the PC business. The company designs, manufactures and markets personal computers and related software, services, peripherals, and networking solutions. Apple also designs, develops, and markets portable digital music players along with related accessories and services, including the online distribution of third-party music, audio books, music videos, short films, and television shows. It is headquartered in Cupertino, California.
The company primarily operates in the Americas, Europe and Japan. Apple recorded revenue of $24. 01 billion in 2006 and employs 17,787 full-time and 2,399 temporary people. Apple’s marketing strategy has always be giving away (or nearly so) software to get people to buy hardware. Apple has been widely acknowledged as the leader in computer design and innovations. Apple’s contrary view of marketing may be the wave of future, even as it looks to the past, where the value is placed on the hardware. Apple believes that typical notebooks have become commoditized. They sell for discounted prices and bring in tiny profits.
But when laptop is unique, there can be a justifiable premium, and customers are willing to pay that. Toshiba Toshiba Corporation is a Japanese multinational conglomerate manufacturing company, headquartered in Tokyo, Japan. The company product line includes digital products, digital telephony, electronic devices & components, home appliances and others. It recorded revenue of $52. 265 billion during the fiscal year ended in March 31, 2006. Toshiba pursues a tightly focused, two-fold strategy. Through its “Differentiation Strategy”, Toshiba seeks to offer new value through innovative products that create and develop new market.
In its “Commodity Strategy”, it seeks to advance the overall business through economies of scale that support worldwide delivery of competitive products. In developing its new mobile PCs, Toshiba is providing a product embodying its “True Mobility” concept: thin, light, with long battery life. Toshiba has also added body strength, superb quality, advanced security, network connectivity, and usability. With the resulting PCs, Toshiba will seek to bring new levels of value to the notebook PC market and to increase market share. Lenovo/IBM Lenovo Group Limited is the largest personal computer manufacturer in the Asia-Pacific region as of 2006.
The company produces desktop, laptop, servers, handheld computers, imaging equipment, and mobile phone handsets. It also provides information technology integration and support services, and its QDI unit offers contract manufacturing. The company has executive headquarters in Beijing, China and in Morrisville, North Carolina, USA. It is incorporated in Hong Kong. The company recorded revenue of $13 billion during 2005 and employs 19,000 people. On May 1, 2005 Lenovo Group Limited, the leading PC brand in China and across Asia bought IBM’s PC division.
Lenovo’s consumer strength and market leadership in China can let Lenovo and IBM successful in the world fastest growing IT market. IBM will be the preferred services and customer financing provider to Lenovo. The promise Lenovo brings to the channel is of a well-capitalized company with low production costs that can go toe-to-toe with Dell. Since Lenovo is now a global brand name, the company cannot count simply on high-end models for the business sector, and hence, has to develop Lenovo-branded notebooks targeting the consumer segment, a weak segment for the ThinkPad line. Aggregate Market Forces
Market Size and Growth Growth is evident in the computer industry, especially in laptops. Some of the salient features of this growth are: ???Indian Laptop market in now in sync with global market. It was in 2005 that sales of laptops surpassed the sales of desktop computers for the first time in India. ???The Laptop market is growing at a fast rate because of change in work life of consumers. As the need for “anytime anywhere” access to information is increasing, the sales of Laptops are also increasing. ???Other factors that are responsible for the hike in sales figure are reduction in prices and affordability.
Laptops are now sold at approximately half the price at which they were sold two years ago. Laptops prices are now almost at par with the desktop computer prices. ???Most important factor is duty free import of Laptops as a personal baggage that has helped a lot in increasing the penetration level of the product among the consumer population. Awareness about laptops has also increased over the years. ???Spending on computer hardware is expected to grow to $2. 5 trillion in 2008. Global PC shipments grew by 15. 5% in the fourth quarter of 2007. In Europe and Middle East the sales grew more than 20% in 3rd quarter of 2007 subsided.
Other markets also performed well with growth in the United States rising to 8. 8% and also there are strong results in Japan and Latin America. On an annual basis, total sales reached 269. 0 million units in 2007 with growth of 14. 3%. Growth in Sales by Regions ???The United States growth in sales rose to nearly 9%, this is mainly due to expansion of retail channels and competition among major vendors drove volume. Dell, improved sales by over 15% and expanding its lead following gains by HP over the past year. Overall market growth is a good sign and shows the impact of competition and holiday demand. EME saw a strong year end supported by Christmas sales and active vendor marketing across consumer and business channels. Notebooks continue to be the most sold PCs with growth of 35%, though somewhat slower than a peak of more than 48% during the third quarter. Overall growth of PCs amounted to 15% which is the fastest since mid 2006 ???In Japan Growth jumped to roughly 10% from a decline of about 4% in the past two quarters. The improved growth is partly due to a weak market a year ago. ???Asia/Pacific (excluding Japan) continued to grow by more than 20% with steady growth in the major markets.
Sales in Australia and Indonesia grew in the fourth quarter while growth in several fast growing markets remained above 20% despite slowing from mid-year peaks. Stage in Product Lifecycle Product Life Cycle is very short in case of PC and Laptops Main competitive advantage in the industry used is technology. It is highly protected; there are variety of formats and systems that do not support each other. Increased competition in PC industry accelerated technological advancement which leads to the fact that once we have bought a PC it is pretty much out dated in the following 3-7 month.
Furthermore once PC producers consolidated and were able to spent more on R everyone was able to reproduce any technology of any competitor. High pace of technological advancement have also reduced the life cycle of products, reducing time to market time. Now we can see that there are several trends in the industry in terms of technology. There has been considerable technology convergence in the industry. Dell is producing TVs and Servers which is a base for virtual computing where PCs would disappeared from household and replaced by smart TV through which users would be able to subscribe to online computer services.
Another trend is portability, compatibility and greenness. Customer is pushing firms for more compatibility and mobility. Life pace has increased, people want to be able to talk to each other, write instant messages, exchange images and videos, read news and do it on the while walking or travelling to work, plus they want to be fashionable and trendy. All that pushed companies to come up with smaller, sleeker devices that can connect to each other wireless and it does not matter if the format is different, for example iPhone. Profits CompanyOperating IncomeRevenues DELL Inc$3. billion $ 62. 49 billion Hewlett-Packard$7. 3 billion $ 104. 3 billion Lenovo$499 million$ 16. 4 billion Apple$4. 41 billion$ 24. 01 billion Toshiba$1. 274 billion$ 76. 68 billion Brief Analysis of DELL’s Income Dell’s operating income Operating income was $3. 4 billion for Fiscal 2008, or 5. 6% of net revenue compared to $3. 1 billion for Fiscal 2007, or 5. 4% of net revenue, and $4. 4 billion or 7. 9% of net revenue in Fiscal 2006. Net income Net income was $2. 9 billion for Fiscal 2008, or 4. 8% of net revenue compared to $2. 6 billion for Fiscal 2007, or 4. 5% of net revenue, and $3. billion or 6. 5% of net revenue in Fiscal 2006. Microenvironment Analysis Threat of New Entrants: Low Low capital investment for independent stores It is very easy to set up a new PC company. As a result, there are tens of thousands of companies making PCs that perform similar functions causing the market to be extremely price competitive. Virtually every components part of a PC, such as the motherboard, hard disk, DVD drive, monitor, and battery (for notebooks), can be sourced from outside while an operating system can be licensed from Microsoft or Linux vendors. High Economies of Scale
Though it is easy to manufacture laptops and PC, however, to compete with big players, economies of scale are high which include cost reductions through mass-producing computers and different software. Brand name may be a barrier to entry Although the industry is providing positive numbers, it is controlled by 5 key manufacturers that construct a barrier to entry for smaller computer manufacturers. Each firm has strong brand names and has the right mixes of resources and capabilities. Small firms lack the resources and capability of acquiring enough capital to compete with the larger firms. The top five firms own 50. % of market share while the other 49. 1% are held by smaller firms throughout the world. Dell in particular, would be hard to compete against. Most firms already in the market are finding it hard to learn the lessons Dell is teaching. Dell? ??s brand loyalty is very high. They have produced many ads and slogans to boost their name, as well as high customer satisfaction with a high quality product. Advanced Technology Since technology changes at such a rapid pace the main factor of a new comer really making a different would be for this newcomer to find a niche in technology and a customer base that has not already been highly established.
The main challenge for new computer industries are that many established firms, like IBM and Apple, have had the financial resources to invest early in both marketing and research which they would not have now. High Switching Costs Switching costs are also high because certain programs can only work for certain computers. This causes a customer to be locked into the product because it can get expensive to buy all new software for a new system. Moreover, Dell has created a unique value for its products and hence Dell customer would face a very high switching cost while going for a different brand Huge Profits And Market Growth
Huge present and potential customer base with high profit margins, hence players are always seeking opportunities to capture market share in foreign markets. In the fourth quarter of the PC market in 2006, the U. S. domestic industry recorded 3% unit growth. Any smaller firm with the right resources and capability may be able of achieving economies of scale given the openings of the foreign market. Threat of Substitutes: Moderate Strong Presence There is a strong presence of PC’s throughout society. It has very few substitutes are paper and pencils or singing to yourself.
There are plenty of competitive choices among technology products to do work or be entertained but it’s hard to find a complete substitute. Customer Preferences However customers initially buy laptops and PC for the low cost and usually choose a company that can add value in the particular department that meets their technological needs. As technology changes, prices decrease, and standardization takes place then computer companies have to keep customers from substituting their product by offering more choices at reasonable prices.
Thus, substitutes are dependent upon three factors namely prices, comparable or better products and cost of switching to a new product line. Handheld Devices as future substitutes Also it is believed that in the near future the PC and laptops will be completely replaced by a new generation of hi-technology, digital and hand-held products which perform all of the major functions yet would be more user friendly, have a greater portability, smaller in size, and offer more communicational features. Bargaining Power of Suppliers: High Intel and Microsoft as the Powerful Suppliers
Though there are lot of items/commodities the key input, which is the processing unit, is limited to very few key suppliers (Intel) who take the major share of the industry’s profit. Further, lack of substitutes for the processing unit vests more power to the supplier. Also there are Microsoft standards for all PCs and laptops as it supplies operating system to 85 to 90% of the market. Low Margins for suppliers Due to cutthroat competition such as price wars, the price for computing power has decreased while the demand for computer hardware has increased and lower prices should continue to limit revenue growth for vendors.
To become profitable, vendors must request lower costs from suppliers with a combination of efficient distribution channels. For suppliers to completely understand consumer demand, they must collaborate with the entire supply chain network of each vendor. The demands of the consumers can then be linked more closely to the suppliers through the valued networks. Strategic Alliances Dell uses partnering with its components suppliers as a key strategy to be the low-cost/high-quality leader in the market. Partnership reduces inventory costs for Dell by providing just-in-time deliveries.
Dell is also able to enhance the value of goods and services supplied by effectively using information from suppliers about customer needs and preferences. Moreover bargaining power of suppliers kept under check and an uninterrupted supply of requisite parts and components maintained Bargaining Power of Buyers: High Highly price sensitive The PC market is highly price sensitive and pricing wars are a common occurrence. The goal for any consumer is to receive the desired reliable computer hardware at inexpensive prices.
Consumers have the option to buy the hardware through direct or indirect marketing. Due to the ease of internet most companies such as Dell and Hewlett-Packard have sold directly to yield savings by maintaining low inventory levels. This reduction in costs equally affects the desired low cost of computer hardware by consumer demand. Insignificant Switching Costs Buyers want low prices and value for money and will not hesitate to switch brand if the price is raised too high. There is practically no switching cost involved.
Apple, however stands out in this regard as switching from a Mac Book to a PC can involve significant costs. But Dell’s product, are very reliable and has satisfactory customer service. These two factors help Dell to create certain brand royalty, but that is, given the fact that the Company set the prices very low. If the price goes up high enough, customers will not hesitate to switch. Corporate and Institutional Deals Large customer size can leverage selling efforts with larger orders. Business to business sales usually requires less effort per sales dollar.
Dell has chosen to solicit a large part of its sales from large institution and industrial customers, (78% of US sales are to businesses, and that ratio holds for most foreign sales as well). Laptop not treated as a commodity With large corporations, Government sectors, educational and business institutions being the concentrated buyers and with the individual consumers treating laptops much as a commodity; the industry provides a high bargaining power to its buyers. This effect is attributable to very low prospects of backward integration and ample information available to buyers.
Rivalry and Competition in the Industry: High Unique Marketing Strategies Laptop industry is unique in its sense of rivalry among the key players. Though competitors are fighting to capture their projected share of the market, the key players are quite diverse and rely on their own strategy. Corporations like Dell are holding on to their market share owing to its unique and innovative supply chain. IBM/Lenovo on the other hand has been relying on its customer satisfaction services and response.
Apple once again stands unique owing to its own OS and entirely different configuration Advanced Technology War Due to the small amount of industry competitors, the computer hardware industry is a very competitive and strict industry that must create innovative products and provide productive services that add value. The technological requirements for all computer companies have increased each year and are predicted to only get more intense and competitive. Every computer company in the industry wants to be the first to introduce the newest technology at the lowest possible price.
Since consumers are better informed about the computer industry as a whole they are better able to put pressure on firms to truly compete aggressively for their business and loyalty. Price and Publicity Wars Firms take active and constant fresh actions to increase their market shares and block their rivals. To differentiate in quality, speed and service is fast moving work with a rapidly changing technological landscape and increasingly standardized products. Firms race to introduce new products, advertising and promotions are constant. Strong Supply Chains
Companies that have the proper capacity are using direct sales method to reduce costs and to deliver the best possible customer experience. This leads to greater perceived value and savings. As the industry grows, companies will have to deal with informational complexity of their distribution channels, especially in the foreign markets. Proper supply chain collaboration should be planned to formulate the proper plans for consumer demand. Big Players The computer industry has a few main firms that compete competitively in the in the computer market for PC, servers and technology services.
The relative size of the competitors in the computer industry, for example, IBM, Dell and HP is very large in terms of the top companies being well established and earning revenues in billions of dollars. However, there is a large network of lesser known manufacturers also competing for profit as well as market share. As a direct result, the rivalry is intense. Therefore, the highly standardized product offering, low profit margins and an excessive oversupply characterize the PC industry currently, that is ill-prepared for near-zero revenue growth.
Dell is at a constant advantage in the way of technology. They have the inside track on the latest and greatest. They can also get the new products to market faster, because of the supply chain process. All of this adds up to, their ability to anticipate any potential risks the Dell Computers may experience, and try to resolve any issues before they come to fruition. Macro environment Analysis In 2007, some of the world’s computer industries experienced expedited border integration and softened industry structure, with more notable industry cluster effect and finer division of work.
Computer products present the trend of mass production and personalized design. Innovation and convergence are trend in the industry, and stepping up efforts to build industry chain becomes part of enterprises’ competition strategy. The external environment of a company consists of outside conditions that affect the firm’s performance. An analysis of this external environment allows a firm to identify the key conditions that affect it and the industry. The external environment of the computer industry has been analyzed in the light of political and legal, economic, social, technological and environmental factors.
Such external factors usually are out of the firm’s control and sometimes present themselves as threats. Political and Legal Political factors include government regulations and legal issues determining the conditions under which companies have to operate. In this field, the computer industry has to face certain restraints. Problems can arise in countries where political stability is not guaranteed, no matter whether companies operate production facilities or if they do business with that country through exports. Many countries still have restrictive policies which are maintained to protect domestic manufacturers and production.
Such policies often hinder foreign companies from entering into these markets. The only possibility to do business in those countries is to establish partnerships with local companies, where they are additionally forced to accept minority shares and to provide money and technological know-how. Hardware industry gets considerable support from the Governments in Eastern countries leading to high production and reduced cost of product in the region. Now more than ever government agencies are seeking assistance with technology and project support.
Policies such as duty free import of Laptops in India as a personal baggage have helped a lot in increasing the penetration level of the product among the consumer population. Schemes like One Laptop Per School in India and One Laptop Per Child by UN may prove to be a big opportunity Laptop industry also faces stringent environmental laws in many countries due to hazardous material found in some computers Both Japanese and American companies are forming alliances with European companies to strengthen their ability to compete in 25-nation EU and capitalize on the opening up of Eastern European markets.
Economic The computer industry expects a growth of approximately ten percent over the next few years. This growth is influenced by the economic situation in a specific country, having an impact on the purchasing power of potential customers. Price is an important factor and hence inflation or fluctuating currency rates in a country might adversely affect the industry and margins The Import-Export liberalization, Exchange Rate fluctuations also impact the sales in computer Industry because their supply chain is globally integrated. The GDP growth rate of counties also impacts the sale of computers.
Spending on computer hardware is expected to grow to $2. 5 trillion in 2008. Real GDP (Gross Domestic Product) growth, rising consumer confidence and currency exchange rates all provide insight into the health of the computer hardware industry. India has low technology penetration and much room for industry growth. Social National demand for computers is dependent on the educational level in a country. In the past the demand for laptop computers comprised only of businesspeople. Now, college students’ demand represents a considerable percentage of the total demand for laptop computers.
Also children are getting familiar with the use of computers at a very young age. Executives and managers are spending more time working away from the office. These executives are managing entire departments from home offices in a sign that telecommuting is going increasingly more main stream. Also laptops are getting more and more involved in daily life with increasing complexity of work, the increased acceptance of IT has provided impetus to the industry. The brand image of a computer and lifestyle trends get more and more decisive for the purchasing decision.
The computer industry adapts to this trend, example by offering a wider range of notebooks and by trying to create a strong brand name. Technological Because the rate of technology innovation has greatly slowed, the opportunity for companies to compete on the basis of rapid, significant changes has almost completely been eliminated. Even then, technology is the most important determinant in laptop industry as crucial low cost leadership can be achieved through technological advancements and it also provides easy differentiation to the company.
Increased Research & Development have caused permanent innovation processes which lead to short product life cycles resulting in a faster depreciation of the products. Wide reach of internet provides a great impetus to the industry. Dual-core technology, the most influential technology in laptop industry had been transited from high-end server to laptop for mass consumption. The upgrade cycle drives waves of new purchases among business and consumer customers as technological change transpires.
The educational potential of computer based technologies is wide-ranging. Introducing computer based systems not only to manage student interactions, but also to support differences in learning paths and styles, will allow more effective accommodation of a wider range of student experiences and preferences. Environmental The computer industry has over time identified many environmental and energy concerns associated with the manufacturing and use of equipment; including potential phases for recycling, remanufacturing, and reuse.
New designs often require rethinking the materials selection choices for electronics, the kinds of resources and substances used in manufacture, and also the creation of new production techniques. Therefore, the industry has begun to coordinate supply chain analysis of environmental issues so that final manufacturers have better knowledge of the impacts of the components they purchase from suppliers around the world, which consequently leads to a positive image in the industry. Traditionally, the impact of wastes, including pollutants, was being controlled after they had been generated.
Now computer industry is trying to use cleaner production to try to minimize the potential and/or actual economic and environmental impacts of the resources used, the volume and type of pollutants and wastes generated, and the product itself during and after the production process. Considering alternative technologies, materials, and processes that reduce releases of toxic chemicals, conserve resources, and lower risks to human health and the environment will help meet the growing global demands for extended product responsibility.
The third most important factor is duty free import of Laptops as a personal baggage that has helped a lot in increasing the penetration level of the product among the consumer population. Awareness about laptops has also increased over the years. Spending on computer hardware is expected to grow to $2. 5 trillion in 2008. Marketing Program, Strategy, and Tactics (4 Ps): Product Dell provides a wide variety of both business class and home/consumer class products and services. The company markets specific brand names to different market segments.
Some examples of Dell products typically sold to corporate clients are Dell Power Edge servers, Power Vault, Dell EMC storage systems, and Power Connect switches. A few examples of products for individual and professional customers are Dell Precision workstations, OptiPlex desktops, Dimension desktops, and Inspiron and Latitude notebooks. Dell’s obvious cash cow is its PC business. Dell has always been associated with the ability to customize their products and services in order to atisfy a wide range of customers, including individual consumers, corporate businesses, and retailing businesses. Dell’s unique approach to manufacturing separates the different processes so that Dell is not reliant on singular production or supplier’s chain for equipment production. Though there is no segregation of the different products and services but nevertheless in separating the components enabled it to target the customers based on the regions in which the products are manufactured.
By assigning each regionalized production center particular component for production not only has diversified the risk of concentration of labor and production costs but also depending on particular infrastructure. Price Price reasonability and the availability of support, after sales services and parts have alleviated Dell’s position from others. When Dell decides to enter a particular market, it consistently uses the Direct Model approach, pricing their product below that of their competitors.
Because Dell products are so customizable, the price is largely dependent on the options and services added to the product. Businesses and individual consumers are able to tailor their products and services to meet their needs. The price increases as more options are added, but it gives the consumer the ability to customize the computer with the options that are most important to them and still get the computer within their price-range. In addition, Dell is a direct supplier, meaning the consumers can order their computers directly from Dell instead of going through a retailer.
Finally, since Dell builds computers on a just-in-time, built-to-order basis, it does not have to keep a stock of components and ready-made computers. Keeping a stock of parts and pre-built computers costs money, which ultimately gets passed on to the customer; since Dell doesn’t do this, they are able to sell their computers at a lower price. Place Various ways you can order through DELL are On-line, telephone, mail-order. Until fairly recently, Dell computers were only available to be ordered on their website or by phone.
While this gave Dell’s customers the ability to customize their order to meet their needs, it also kept some people from buying computers from Dell if they wanted to see and touch the computer before buying it, or if they weren’t willing to wait the extra time for Dell to build the computer and ship it to them. In response to this, Dell recently began offering its products in several physical locations, such as Wal-Mart, Target, and Costco. Dell has been able to affect the location strategy aspect of its marketing campaign.
As Dell’s products are always available at the nearest dealer’s customers develop trust for the “local Dell” thereby achieving the objective of gaining their trust in Dell products and services, and forming a large and diversified consumer base. Promotion Dell uses two main avenues to get its advertisements to potential customers: direct mail and online. Direct mail includes and promotional material sent through the post office. Other channels are On-line model, special training and certifications, word-of-mouth, editorials, reviews, sales reps, and awards
Dell in the past have not concentrated on extensive marketing campaigns but this revolutionarized in 1999 when Dell changed its tactics by engaging in extensive marketing campaigns. “Dude, you should have bought a Dell”, became a very popular television advertisement for Dell back in 2002. That one advertisement brought Dell’s market share up 16. 5 percent, which was more than double the previous year, according to The Wall Street Journal. In fact, these commercials had an addictive effect on the consumers that bought Dell products, and Dell used this ad and others to capitalize on the consumer computer market.
Dell also used television advertisement in a slightly different way to sell their computers to the general public. Dell computers can be found on the popular QVC and QVC. com Dell also used the Internet very successfully to market their computer products. One of Dell’s most successful advertisement ideas came from the “Taguchi method”, which was an Employee Purchase Program email advertising campaign. Dell also has a website that they use quite effectively to allow consumers and businesses looking for computers to purchase them online.
Dell’s website is very sophisticated as it allows you to choose a bone stock computer, and add or subtract hardware so that the consumer or business person can build the computer the way they want it. Dell always has computers on sale, and Dell also almost always has some promotion offering free shipping, free memory upgrades, free CRT monitors, and free printers. Dell knows that selling the computer is the most important part, and is willing to give an incentive to make a sale. These incentives work very well, and make Dell computers very appealing to all of Dell’s target markets.
Dell also sends out a monthly publication called “Power Solutions” which is a magazine that provides clear, timely, and accurate information and support for issues related to Dell computers. Dell Market Strategy Evolution of a strategy When Michael Dell first started selling computers and components back in the late 1980’s, he laid out the strategy model of direct sales to customers and build-to-order manufacturing. However, in the early 1990’s there was concern that direct sales to consumers would not grow fast enough, so sales were promoted through the distribution channel of large warehouse type stores like Costco and Best Buy.
By 1994, economic problems and thin margins pointed the company back to direct sales and large industrial and institutional customers. The internet web site was established in 1995 and sales to individuals took off. In early 1997, the consumer market got dedicated marketing attention and the production assembly plants were re-vamped from a traditional linear assembly line to a cell manufacturing process which cut assembly time by 75%. Dell managed to stick with a pretty close identity to their original strategic plan, even though it has been tweaked and refined continuously.
And, with each step in improvement, they have become harder to catch. Dell designs, builds and customizes products and services to satisfy the end-user requirements and offers an extensive selection of peripherals and software directly to its customers. Dell Direct Model The primary method Dell uses in order to realize and sustain their competitive advantage is a distinctive, direct to consumer business model. The model is known as Dell Direct, this refers to their relations with their customers as being “direct. The direct-sales model is based upon selling directly to the customer. The customer is able to browse the products and options, respond via selection and complete a payment. Dell will then build the computer to the exact specification and deliver to the customer. This build-to-order (“pull to order”) system helps Dell focus on the price for performance, customization, service and support. Additionally, Dell is able to differentiate itself from its competitors with its customized just-in time manufacturing.
Dell effectively recognized the two key areas of the mass customization concept: ???Effective interaction with the customer to allow them to decide upon their product ???Highly efficient, flexible manufacturing techniques One of the key benefits of the direct sales model is it negates the ‘middle men’. The after sales support of Dell had built up an excellent reputation in the industry. This reputation increased the brand value of Dell which encouraged sales and repeat buyers through brand loyalty. Dell’s unique capability was not only through its direct selling but also its efficient manufacturing line.
Through collaboration with suppliers, Dell coordinated its supply chain and manufacturing line to reduce its days of inventory to 7 days Cost Leadership Strategy Dell Computers have been the industry leader with their cost-leadership strategy. They strive to provide technology and support at a lower unit cost than their competitors. They are a direct model company. Their unique relationship with customers gives Dell the opportunity to know exactly what their customers want and offer products that their customers need.
They have a strong focus on being a “market taker” rather than a “market maker”. Using on-line and telephone sales and support, Dell has managed to help keep internal costs low, increase value to the customer and provide increased returns to their shareholders. Their low-cost competitive advantage is working because they have been able to successfully provide their products and services more efficiently in an extremely competitive market. A successful Supply chain management has lead to decreased cost in inventory reducing the overall cost.
Dell has reduced its turnaround time to less than 5 days with their state of the art real time communications with their suppliers. Business and Global Strategy Dell? ??s global strategy is to be the premier provider of products and services, including customers require building their information-technology and Internet infrastructures. With manufacturing facilities and sales offices throughout North America, Europe, Asia and South America, Dell is responsive to their customers wherever they are. This concept is indicative of an international strategy.
Also the concept of online buying gives it an edge in distribution network across globe. As Dell being one of the big gamers in the computer market and to keep its increasing market share and revenues that Dell gained due to its strategy that is often called as a singular strategy which is to build and sell products cheaper and more efficiently than their competitors. Dell uses scalable enterprise strategy which is similar to dynamic computing strategy but with more connection to consumers, where dell built its customers loyalty program by trying to be more in touch with their customers with its customer service lines.
Dell’s primary resources include the most up-to-date technology and IT tools that allow it to effectively move along their advanced supply chain and attain the value they are reaching for. Dell’s value chain allows Dell and its suppliers to exchange information and interact with each other. The Internet, Dell’s key IT factor in its success, results in lower costs to customers than other retailers because customers tell Dell precisely what they want and Dell builds PCs for the customer without experiencing inefficient resources in production. Value Chain Analysis
By reconfiguring the traditional “build-to stock” value chain model of computer manufacturers, Dell Computers defined its biggest core competency and the activity in which it can pursue its competitive advantage. First Dell gained cost advantage from its competitors by understanding cost drivers (retailers) in its production and squeezing them out. The implementation of the direct to consumer model solved the problem of expensive computer born out of the margins asked by the middlemen. Dell Computers also realized the differentiation advantage by focusing on their efficient model as its core competency which resulted to Dell outperforming ts competitors. Primary Activities Inbound Logistics Here goods are received from a company’s suppliers. They are stored until they are needed on the production/assembly line. Goods are moved around the organization. Dell relies mostly on its highly reliable supplier, where Dell streamlines its operation and relies on its computer monitor supplier to ship directly to the customer. As long as its supplier retains its leadership position, Dell would collaborate with it to achieve mutual success. Operations This is where goods are manufactured or assembled. Every Dell system is built to order. Customers get exactly what they want.
Dell uses knowledge gained from direct customer contact before and after the sale to provide award-winning reliability and tailored customer service. Outbound Logistics When Dell introduced the direct model, its competitors were selling computers to end consumers via distributors. Dell, on the other hand, sells directly to consumers and is continuously communicating with them and benefiting, especially in two areas, seeing sales trends and learning about unmet customer needs. The company also relies on customers’ knowledge of what they want to purchase and when they want to complete the transaction to drive the direct business model.
Dell leverages this source of customer knowledge by making it as easy as possible for a customer to place a customized order electronically. Marketing and Sales Dells direct to customer model solve the problem for additional capital for marketing and sales. By selling directly to consumer it eliminated retailers along the way. One advantage of this kind of system is that the firm is continuously in contact with its customers and they are benefiting in two areas concerning sales and marketing, seeing sales trends and learning about unmet costumer demands. Service
Dell spent dollars training well-educated business segment managers provide state-of-the art advice to customers. The company also initiated a collaborative customer-solution teams that collaborate with customers to fulfill any unmet customer needs. Because of the nature of work of Dell’s employees they are continually being inspired to stay abreast of technology threats and opportunities that may alter the competitive landscape in the future. Support Activities Procurement It is on this activity that Dell is weak because Dell do not enjoy protected by trademark or patent or copyright technology.
The technology being used in the industry is shared by all industry players. Technology Development Technology is an important source of competitive advantage. And here is one strength of Dell for the firm enjoys better access to technology. Dell introduces the latest relevant technology much more quickly than companies with slow-moving indirect distribution channels. Human Resource Management (HRM) Dell’s mission statement is “to be the most successful computer company in the world at delivering the best customer experience in markets we serve”.
Dell employees, direct salespeople, help-desk operators, engineers, and the like all have to be knowledgeable and customer focused to ensure Dell’s continued competitiveness. Firm Infrastructure Dell revolutionized the traditional value chain of computer manufacturing industry by introducing the direct to customer model. Dell also employed a global business consultancy, to help it develop a set of metrics to judge business-unit performance. By doing so, daily decision making were more efficient. The chief financial objective that steered managerial evaluation at Dell was return on invested capital (ROIC).
Which leads to no inventory build-up, Dell turns over inventory every six days on average, keeping related costs low. Differential Advantage for each company Ability to design new products a)Focus On the Best Solution, not just the Best Technology A Dell mantra is that today’s technology is tomorrow’s commodity. Dell waits until the cost of that technology falls low enough for it to be stuffed into computers at state-of-the-art factories and then sold direct at a cheap price, which allows the company to drive for share. b)Dell’s innovation approach is Listen ? Solve ? Impact.
They started their innovation process with asking their customers “What would you really want this thing to do? Is there a different way to accomplish that? ” Then they meet with their suppliers and ask, “Can we do this in a different way? ” Then they try to come up with a totally different approach that exceeds the original objectives. By questioning all the aspects of its business, they continuously inject improvement and innovation into their products as well as culture. Ability to deliver the service a)Dell’s build-to-order manufacturing and sales model changed the way companies buy computers.
Dell has excellent supply chain for notebook products and strong marketing execution capabilities. Dell remains the leader in service and support for the largest global enterprises. b)Dell’s climb to market leadership is the result of a persistent focus on delivering the best possible customer experience by directly selling computing products and services online and through catalogs. c)Dell are strong in the hardware business and have established their own speedy distribution and low cost manufacturing system. Ability to Market a)Dell’s marketing strategy is simple: satisfying customers and making a profit.
By focusing on product customization, customer needs and customer service, Dell is still one of the most customer-centric companies in operation today. b)Dell’s sales and marketing efforts are organized around the needs, trends, and characteristics of our customers. Their direct business model provides direct and continuous feedback from customers, thereby allowing them to develop and refine our products and marketing programs for specific customer groups. Customers may offer suggestions for current and future Dell products, services, and operations on an interactive portion of our website called Dell IdeaStorm.
This constant flow of communication allows them to rapidly gauge customer satisfaction and target new or existing products Ability to manage a)Ensuring that customers are satisfied every time they interact with Dell is a goal owned by every Dell team member. The Dell Executive Leadership Team sets the strategic direction for how they’ll continue to keep customers at the forefront of all we do – from designing and delivering services and solutions that meet the unique and evolving needs of our customers to developing innovative new products that deliver a superior customer experience.
Ability to design new products a)HP’s efforts are focused on identifying the areas where they believe they can make a unique contribution and the areas where partnering with other leading technology companies will leverage their cost structure and maximize customers’ experiences. b)HP Labs, together with the various research and development groups within the five principal business segments of HP, are responsible for their research and development efforts. Ability to deliver service HP’s customers are organized by consumer and commercial customer groups, and distribution is organized by direct and channel.
Within the channel, they have various types of partners that they utilize for various customer groups. The partners include: i. retailers that sell products to the public through their own physical or Internet stores; ii. resellers that sell products and services, frequently with their own value-added products or services, to targeted customer groups; iii. distribution partners that supply our solutions to smaller resellers with which they do not have direct relationships; iv. original equipment manufacturers (“OEMs”) that integrate their products with their own hardware or software and sell the integrated products; v. ndependent software vendors (“ISVs”) that provide their clients with specialized software products, frequently driving sales of additional non-HP products and services, and often assist us in selling our products and services to clients purchasing their products; and vi. systems integrators that provide various levels and kinds of expertise in designing and implementing custom IT solutions and often partner with HPS to extend their expertise or influence the sale of our products and services. Ability to Market HP is focused on driving efficiencies and productivity gains in both the direct and indirect business.
The mix of HP’s business by channel or direct sales differs substantially by business and region. Some of the business segments that caters to different markets i. Technology Solutions Group (TSG) manages enterprise and public sector customer relationships and also is charged with simplifying sales processes across our segments to improve speed and effectiveness of customer delivery. ii. Personal Systems Group (PSG) manages SMB customer relationships and commercial reseller channels, due largely to the significant volume of commercial PCs that HP sells through these channels.
In addition to commercial channel relationships, the volume direct organization, which is charged with the management of direct sales for volume products, is hosted within PSG. Ability to manage To create an organization that could sustain its competitive advantage regardless of marketplace whims and what their competitors were building, HP founders based their corporate culture on the integration and reinforcement of critical opposites. This became known as the Hewlett-Packard Way.
HP has achieved “what appears to be the greatest dichotomy: creating an environment that celebrates individualism, but at the same time one that is also wholly supportive of teamwork. Although HP people are taught to engage in cross-functional teams, they are also rated on the performance of decentralized business units and personal achievement. ” Expected Future Strategies Dell has had a strategy of moving to the services market for years. Businesses, corporations and governments need three things in order to recover from a disaster – servers (or mainframes), storage and communications.
Dell has all three, in impressive quantities. Dell might release a digital music player meant to compete with Apple’s famous iPod. Dell is also reported to be working on software for a range of portable PCs, which will make it possible for users to organize and download media content from several online resources. After introduction of computer peripherals like printers and toners, Dell can look at diversifying into LCD and other non-computer goods through strong supply chain giving direct competition to iPod and other consumer electronics brands Open up Dell Retail Stores
Dell has invested in door-to-door sales calls. If Dell were to open up retail outlets they would be able to keep the costs of their computers down and they would be able to remain loyal to their three golden rules. The computers in the store could serve as models and sales representatives would be able to assist customers with making the online purchase right there in the store, allowing the customer to get a customized computer. There would be a large financial investment with this option, but it may compare with the amount of money that they are spending with their current door-to-door pproach. Focus on Involving Customers in Leasing Computers through Dell Financial In some of the regions that Dell operates, they have a leasing program through Dell Financial. Leasing allows a company to transfer residual risk and implement a disciplined approach to technology rotation, and it provides flexible end-of-lease options. If Dell were to allow this to occur in other markets too, customers may be more likely to choose Dell products because this is in a sense a “try before you buy” opportunity for potential customers, which offers the customers a little more security.
Also, since customers are making monthly lease payments, there isn’t as much of an upfront capital investment. In addition, this option helps Dell establish longer term relationships with their customers because when it comes time to upgrade their computer systems, customers will likely stay with Dell products; though this may be a difficult option to implement as Dell would be introducing a system that is foreign to its customers. Further Segment and Build Relationships with the Large Corporate Accounts (LCA) Segment The LCA segment is where Dell is seeing some repeat buyers.
Trust and confidence are important to LCA customers. If Dell were to further segment this market, they would have a better understanding of those customers and what their specific needs are. By segmenting their markets, they will be able to build real and meaningful relationships directly with their customers and present even more tailored offerings. It will reduce the amount of cost savings associated with having all corporate accounts in one segment. This will, however, allow Dell to gain a more intimate knowledge of their customers and continue with the direct business model.
It will allow Dell to capitalize on a strategy that has already proven to be successful even more. Segmentation Segmentation on the basis of usage Dell divides their market into four segments: 1. Home & home office Home & home office consumers are interested in custom PCs, and they don?? t need much technical supports afterwards. The price matters a lot to them. 2. Small business Small business usually has particular requirements but limited budgets, and they need more service. 3. Medium & large business Medium and large businesses are willing to spend more for professional products and services.
They usually purchase to an agreed plan and they repeat purchases. 4. Government, education & healthcare. Government, education & healthcare have strict requirements for PC and PC systems. They spend large amount of money for certain quantity and variety. They require special technical support and lifecycle management. When you visit Dell’s website, you need to identify the segment of yourself before seeing products. How good is the market segmentation criterion? To be useful, market segments must rate favorably on five key criteria: ???Measurable ???Substantial Accessible ???Differentiable ???Actionable. From home & home office to government, education, and healthcare, Dell’s segment’s size, purchasing power, and characteristics is ascending. ???Each is the largest possible homogeneous group worth going after with a tailored marketing program. ???The segments can be effectively reached and served as the other segments. ???All the segments are distinguishable and effective programs can be formulated for attracting and serving the segments. Overall, Dell has effective market segmentation. Segmentation on the basis of geography
Dell seemingly segments geographically adopting different strategies in the three different regions it targets. The US market is its strongest market however this is slowly becoming saturated, while the APJ segment is seemingly the one with the highest growth potential due to the relatively large sectors of the APJ that are untapped. Dell does not employ a innovation strategy in that it strives to produce new products however that does not mean it does not st