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.
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.