Michael Dell and his Computer Manufacturing Company

explanatory Essay
1317 words
1317 words

Michael Dell had steered his company through many phases and obstacles, making it one of the first computer manufacturers in the world. Basing the company on a direct sales model, with Dell being the only company in the beginning to do so, he grew the business many fold and simultaneously kept cost and inventory levels at a minimum (Days of inventory at 6 days, the lowest amongst peers). This formula worked well for the company till the market dynamics were more or less the same. Dell believed in selling computers as products and relied on branding based on the ability to sell computers effectively. While doing that, other companies such as HP and Apple were turning the art of selling computers into a branding exercise. Through such efforts both companies were experiencing massive growth throughout the 2000 decade while Dell was experiencing difficulties as a company.
Hence, the current shape of the company, in which it has lost 60% of its stock value reflects the new demands of the market. There is little that Dell is doing wrong in terms of supply chain and value chain. The only problem lay at the front end, where it is not doing a good job to brand its computers and make them more attuned to public demands. By using the same techniques to appeal to their retail customers as they do to their institutional customers, the company needs to relook at the way it markets and satisfies its retail customers, as they hold the key towards future growth in the company.
External Analysis
Porters Fiver Forces
Bargaining Power of Suppliers
Bargaining power of suppliers are low overall as most of the components included in the final product have many vendors. This holds true for most of the peripherals and components included in the computer. ...

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... requires that it become stronger at marketing and treat customers like customers rather than being snobbish and expecting customers to be educated to begin with. Given that, the first alternative that of growing the retail segment presents a better opportunity to fix the problem identified. This is because increased focus on the retail segment will lead to efforts to make the brand more relevant to them, make it more appealing for the customer and allow the company to pursue various distribution channels. It is forecasted that the change will yield results in a five year time period. The first 2-3 years will be spent on building product line and value chain to support the new efforts. The next two years will result in a comprehensive marketing plan that will roll out the new customer focus of the company and make the brand more relevant to various target markets.

In this essay, the author

  • Explains that the bargaining power of suppliers is low overall as most of the components included in the final product have many vendors.
  • Explains that buyers dictate the segmentation and price points which will be accepted in the industry. all companies cater their offering to the changing trends of the market, making the bargaining power of buyers high.
  • Explains that third-world vendors can assemble computers based on any specification, so a company wanting to enter the market faces low barriers of entry. however, to challenge established companies and get market share, millions of dollars need to be spent.
  • Explains that the threat of substitute products is low because the functionality of a computer cannot be replaced with other existing technology at the moment.
  • Explains that the ebb and flow of the market, mergers and new companies are being formed and taking over the old companies, makes competition extremely strong in the industry.
  • Explains that dell's customers are divided into institutional and non-institutional customers, representing corporate clients and sme companies and retail buyers.
  • Opines that dell needs to enhance its retail distribution network and reduce its reliance on direct selling.
  • Opines that mergers and acquisitions would be a feature of most computer companies to grow in highly competitive market with little room for organic growth.
  • Explains that dell has a strong brand name and strong us market share of institutional buyers. its direct selling model helps it reduce inventory costs and keep business streamlined.
  • Explains that dell has a weak reseller network and has created distrust within such channels. customer satisfaction has decreased over the years, especially in tech support.
  • Opines that customer satisfaction becomes paramount, leading to change in customer centers to other countries with better english standards.
  • Opines that the alienation of institutional customers, who form the bulk of the customer base, could lead to a loss of trust.
  • Explains that diversifying into different countries is easy and requires little in the way of cost.
  • Explains that for dell to stem the downfall, it needed to cater to the retail segment in a more comprehensive and dynamic manner.
  • Analyzes how dell's direct sales model grew the company and kept costs and inventory levels at a minimum. the company has lost 60% of its stock value and needs to relook at how it markets and satisfies its retail customers.
  • Explains that just in time methodology helps reduce costs of production for the company. others have tried, but experience shows that this resource of dell is hard to copy.
  • Explains that dell follows a concentration strategy, concentric related diversification, and differentiation strategy on the corporate level.
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