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After a sloppy 2 year period without Michael Dell, How could Dell revitalize his struggling company that had long, defin

After a sloppy 2 year period without Michael Dell, How could Dell revitalize his struggling company that had long, defined success in its industry? . Structure of Presentation. What are the components of the personal computer industry Business Models Customers Manufacturing, R & D, Marketing

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After a sloppy 2 year period without Michael Dell, How could Dell revitalize his struggling company that had long, defin

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  1. After a sloppy 2 year period without Michael Dell, How could Dell revitalize his struggling company that had long, defined success in its industry?

  2. Structure of Presentation • What are the components of the personal computer industry • Business Models • Customers • Manufacturing, R & D, Marketing • What was Dells approach-through mid 2000’s • Customers • SWOT Analysis • Dell’s Value Chain • Products and Services

  3. Structure of Presentation • Competitors-IBM/Lenovo, Compaq/HP, Gateway • How does the PC Market look? • Was it the best thing for Michael Dell to return to the company? • Why Does Dell want to get away from their trademark Direct Sales program? • Where does Dell Go from here? • Recommendation

  4. What are the components of the personal computer industry?

  5. Business Models • Dell and Gateway-Direct • IBM and Compaq- Indirect through Retailers Dell Competitors

  6. Dell’s Approach • Dealt directly with end user • Served Primarily Corporate Customers with High end computers at low costs • Assembly started after order was placed

  7. Relationship Buyers Transaction Buyers Small-to-Medium Businesses Home computer users Online or called in specified order Encourage more advanced PC’s to buyers Avoided inexperienced buyers • Large Organizations • Repeat Orders • Outside and Inside Sales Reps for each account • Customized Web based stores Two types of Buyers Dell wanted to work with up to 2000, they need to expand their horizons to maintain growth

  8. Even though they sold the same product, Users felt they had control over how “good” of a computer they were getting for their money

  9. Customers Education needs to be focused on, every other market has been capitalized on. The focus needs to be on education and customer retention for the business’ you have currently.

  10. Consumer Ratings (100 point scale) Dell needs to improve its brand image and surpass their highest rating on 80 in 2000

  11. Marketing and Sales • HP- 1billion,2008 • Apple-500 million,2008

  12. What was Dell’s Approach through the mid-2000’s?

  13. SWOT Analysis Dell Has room to grow in the retail segment

  14. Dell Value chain Dell Microsoft Windows Sony, Global Market Dell Dell Dell Testing FedEx Dell controls all parts of the Chain, saving time during shipping and keeps inventory low having monitors shipped directly to customer.

  15. Production and Logistics • Tailored to each customers needs • Holds no finished goods inventory • Only took hours rather than days • Carried 4 days inventory vs. 20-30 days of competitors • Shipment went from Dell to pickup monitor to customer, no need to have extra inventory Dell’s Direct Model was superior to all other competitors

  16. Competitor’s IBM/Lenovo, Compaq/HP, Gateway

  17. IBM and Lenovo • Relied on Channel partners- Distributers and Resellers • Tried shipping heavily configured PC’s • AAP-Authorized Assembly Program • Lightly configured PC’s • Other companies finished the computer • Poor logistics for building PC’s caused higher prices • Tear downs and rebuilds cost time and money • Ventured into direct sales

  18. Compaq and HP • 1994-Worlds Largest maker of PC’s through full line of PC’s

  19. Optimized Distribution Model • PC’s were built only after an order was received • Deliveries continued to go through distributers and resellers-SLOW • Direct Plus Program-designed to sell directly to small and mid size businesses. • Tried to keep everyone happy By 1999 Compaq had shot itself in the foot and reported significant losses trying to please everyone

  20. High Quality and High Performance • 75% PC’s sold through distributers and resellers • Aimed at the high end user • HP Sticks with resellers and distributers • Average computer sold was 35 days old

  21. Gateway/Acer • Very similar to Dell • Focused on home users and small businesses rather than large corporations • Acer became 100% Indirect and “Un-Dell” • Very inexpensive PC’s sold through retailers to consumers. • 2nd Largest Producer of PC units

  22. Apple • Sleek Design • High Cost • Ease of Use • Opened on retail stores in 2008 • Increased market share by ~5% in one year after release of iPod and iPhone

  23. How does the PC market look? Compaq/IBM Dell High Lenovo/HP Acer Apple Low High Low Differentiation Cost

  24. Was it the best idea for Michael Dell to return to the company?

  25. Rollins sticks to Dell’s Historical Strategy and kept missing expected earnings. • Pricing Mistakes, Bad Sony Batteries, Poor customer service ratings, poor accounting practices, no volume increases. As soon as Michael Stepped down, problems surfaced that had been going on before he left the company

  26. Michael Dell’s Return • Brings in outside talent • Ronald Garriques from Motorola • Mike Cannon, from Solectron • Brian Gladden , from GE • Ed Boyd, from Nike • Direct Model was a revolution, not a religion. • Opened channels to retailers • Launched a new line of laptops • Purchased Perot Systems • Decreased Sales, Decreased Returns

  27. Why Does Dell want to get away from their trademark Direct Sales program?

  28. Market Share for Each Distribution Dell needs to shift to Retailers in the US and Globally. People want to see and touch what they are buying

  29. Dell’s New Value chain Contractors Contractors Global Market Microsoft Windows Retailers Dell gave up all parts of the Chain, saving over $3 billion dollars on costs.

  30. Where does Dell go from here?

  31. Optimally • Dell would continue growth with new/ hip generation while innovating products around their new team • Dell would expand into the global market via retail sales • Dell would expand into the global market via better customer service and scrapping their direct end user sales model • While also breaking into the retailing world and creating Dell stations rather than Dell vs. HP vs. Acer • Possibly look to buy Acer to take more of the market

  32. Recommendation

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