Strategic Management Industry Structures And Dynamics Business Strategy Essay

Strategic Management Industry Structures And Dynamics argumentation Strategy judgeIntroduction dingle Company was founded in 1984 by Michael dingle. It is the worlds giantstdirect-sale calculator vendor dell Inc. is straight off alike the leading seller of estimator systems in theworld, capturing a global market share of more(prenominal) than 15 percent. Dell markets desktop personalcomputers, notebook computers, ne twainrk servers, workstations, handheld computers, monitors,printers, high-end storage products, and a variety of computer peripherals and software. In thispart I entrust use Porters Five shoves to analysis Dells great success in the effort.Force 1 The Degree of Rivalry.The PC industry consists of a number of companies hence the threat from industry competitorsis high. Due to the product being highly like and shifting costs among blots is low, in that respect is fierce competition which leads to lower margins and profitability in the market. The PCindustr y faeces be described as a high competitive industry. For Dell the main competitors are IBM,Apple, HP, TOSHIBA, Gateway etc. Dell uses some(prenominal) strategies to reduce the competitive rivalrybetween existing players.Firstly Dell differentiated its sales from new(prenominal) competitors. Dell used the direct sales dodge since1984. To sell PCs directly to consumers, by passing retail stores and system integrators and religious offering special(a) customer concomitant but dramatic on the whole(a)y lower prices. For classs, that direct, low-costsales model worked perfectly. It allowed Dell to make high margins while selling computer gearfor less than its rivals. As a result, it now holds a leading 17.9% share of the world PC market andhas grown a good deal faster than competitors Hewlett-Packard and IBM. With thousands of ringand fax orders daily, $5 million in daily Internet sales, and daily contacts between the field salesforce and customers of all types, the telephone r kept its finger on the market pulse, cursorilydetecting shifts in sales trends and getting prompt feedback on any problems with its products. Ifthe company got more than a few similar complaints, the reading was relayed immediatelyto design engineers. When design flaws or components defects were found, the factory wasnotified and the problem reverse within a matter of days. Management believed Dells abilityto respond quickly gave it a signifi raftt favour over rivals, particularly over PC makers in Asia,which made large production runs and sold standardized products through retail channels. Dellsaw its direct sales approach as a solely customer-driven system that allowed quick transitions tonew generations of components and PC models. iSecondly Dell provided good customer overhaul to compete with its rivals. In 1986 the companybegan providing a guarantee of free on-site improvement for a year with most of its PCs after userscomplained about having to ship their PCs back to A ustin for repairs. Dell contracted with localservice providers to handle customer requests for repairs on-site service was provided on anext-day basis. Dell also provided its customers with technical support via a toll-free number, fax,and e-mail. Dell received close to 40,000 e-mail messages monthly requesting service andsupport and had 25 technicians to process the requests. iiBundled service policies were a majorselling point for winning corporate accounts. If a customer preferred to work with his or her ownservice provider, Dell gave that provider the training and spare separate needed to service thecustomers equipment.Force 2 The Threat of new Entry.Firstly, Dell created a reproach plan to reduce the threat of new entries by advertising. Dell was thefirst computer company to use comparative degree ads. Its advertisements have appeared in severaltypes of media including television, the Internet, magazines, catalogs and newspapers.Secondly, Dell cuts its price or offering free bonus products in the effect to fight back its marketshare. In 2006, Dell cut its price in an effort to maintain its 19.2% market share. However, thisalso cut profit-margins by more than half, from 8.7 to 4.3 percent. To maintain the strategy Dellcontinuing to strike the online and telephone purchase.The brand loyalty and the low price built up a barrier of admission for the new companies.Force 3 The Threat of Substitutes.Other devices like PDA, handheld electronics etc. are now coming out with features similar toPCs. The mobilebility is the key factor of the competition. Dell generate a smaller size laptopcalled mini which only has a 10.1 inch screen and only sells at the price down the stairs 200 which iseven lower than some of the handheld electronics. With the efficiency of mobile and the samefunction, for example Wi-Fi and Bluetooth, Dell protects its market share against thosesubstitutes.Force 4 Bargaining Power of Customers.Dell built up its brand loyalty to reduce the b argaining power of customers.First, Dell had its own system and strategy to manage the kinship with customers. Since Delluse the direct sale strategy, customers female genitals buy Dells products from the website or ordered byphone or fax. The customers then thunder mug personalize their computer by choosing the configurationof the computer (e.g. RAM, processors, and hard-disk capacity). On the Dells website from which batch can directly choose, buy and give feedback, it separate the customers into four majorgroups home users, small moderate bank line, public sector and large enterprise. Dell then treatsdifferent groups differently by offering the supernumerary service they need from different groups. Forinstance, Dell provides special solutions and services for higher education. Such as dataconsolidation and management, HPC (high performance computing environments), wirelesssolution, connected classroom etc. Because of its direct sale strategy, Dell can easily track theser vice for any individual buyers. All the buyer information will be stored in its system dell candifferentiate customers and send relevant product information and services to differentcustomers. These special strategies in selling upgrade its brand image among customers.Second, Dell uses the advertisements to serve building up its brand image. On the website, TV,newspaper, high street, people can easily find dells advertising. Those can not only increase dellsmarket activity but also increase its brand pride.Force 5 Reducing the Bargaining Power of Suppliers.Dell has a special understanding on the SCM (supply filament management). Dells strategy is to limitthe amount of provider but pick up some outstanding supplier all over the world. Each supplierhas a very close relationship with Dell in long-term. Dell uses its huge globe market to share itsbusiness with its entire suppliers. For instance, Dell built a assemble factory in Malaysia, itssupplier from Ireland soon built a factory i n there as well in order to gain a geographic efficiency.Dell had its assemble factories all over the world which relatively close to its suppliers. This willsave a lot of transport costs. The double-win strategy makes the supply chain works well. Withthe double-win strategy and constant relationship, Dell will be able to imagine lower price from thesuppliers and reduce the bargaining power from them.Market part SegmentationIntroduction Michael Dell emphasized the significant status of customers to the companysbusiness by stating Finding ways to get close to your customers is tiny to your success. Sincedifferent people would have different need from the computer, Dell divided its customers intoseveral segments by discovering special needs from each segment. In the year 1994, thecustomer group was only divided by two capital customer and normal customer. In that yearthe assets of Dell is 3.5billion USD. In July 1996 Dell launched its online website www.dell.com.On the website pri mary client are divided into three segments which are large company, mediumcompany and government education. Customers can easily choose and buy the productsdirectly with advices and helps from dell.com. The assets of Dell rocketed up to 7.8 billion USD inthat year. However in 1997, Dell continued differentiating its customer for more segments.Government education segment was divided to State local anaesthetic Government, FederalGovernment and education. Small company and home users were also been created as individualsegments. The net tax income of Dell was 12 billion in that year.On todays Dells website, people will be able to come with the tips and choose a suitable computer infew minutes. Whats more, customers can personalize their chosen computer by changing theconfiguration of the computer (e.g. color, RAM, processors, and hard-disk capacity). With thisdirect sale through different segments, Dell can start to assemble the computer once thetransaction has been made. The in ventory can then be limited as low as zero. Not like Dellscompetitors, Dell does not need many warehouses all over the world which will save a lot ofcosts for the company.Although on todays Dell.com, customers are divided into a lot segments. However, literallycustomers are differentiated into two segments Relationship customers in opposing dealings customers. Although Dell intends to build and maintain a good relationship with allcustomers, it also becomes clear, that the company would regard some customers morerelationship worthy than others, by analyzing customer value.The relationship customers are mainly large enterprise and government etc. which occupied 40%of Dells entire customer. Transaction customers are small business and home users which havepercentage of 30 among customers. The remaining 30 percentage customer is regarded as amixed customer.The advantage for dividing customers in different segment is that the company would be able toanalysis how it can encourage the cus tomers to buy its product. For individual users or smallbusiness price is the priority. Those customers are regarded as more price insensitive. So forhome and small business users the price is slightly lower than its competitors e.g. HP, Toshibaand Sony. For strikingger customers such as the government or enterprise, they consider more thanthe price but consequent services and supports. make for large enterprise for instance, Dell supportsa lots of specific services and solutions for running the business. Like understructure Consultingservice which is basically a plan for simplifying IT infrastructure, helping reduce operating costswhile discharge up resources for new business initiatives.iii Also, Dell runs a program called Dellbusiness Creditiv. This is the same as a loan offered by Dell, but with no interest rate and anytimeto pay off the balance. Business without enough cash flow would like to take that program.One of the Dells competitors is IBM, it has a clearly customer naval division but different fromDell. IBM is more focusing on Business and Industry market. In a barely word it is even morefocusing on the Big customers. Similar as Dell did for big client, but even did more specific forthe segmentation. For Dell there is no segment for industries like Aerospace, Chemicals andpetroleum. more(prenominal) segmentation on large customers also brings more services and solutions for allkinds of industries. One of IBMs famous solutions is offering the security management forWimbledonv. It provided the security solution for players, staff, media and spectators around theworld.Conclusion Dells market share was No.2 in 2009, IBM was remote behind. But since Dells customergroups is much bigger than IBMs. In 2006 IBM sold its PC department to Lenovo, Lenovo usedIBMs brand to product and sell IBMs ThinkPad series. It is very difficult to compare whichsegmentation is better. But for the large business users, IBM is a very strong competitor againstDell, Its high performance computer and advanced technical solutions and services makes IBMthe biggest company for larger business and industries.i scribd.com Dell operationii McGraw Hill Dell Computer hatfulmhhe.com/business/management/thompson/11e/case/dell5.htmliii Dell.com Large Enterprise serviceiv Dell.com business confidencev IBM.com Wimbledon case study