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Dell's Competitive Edge in the Computer Industry

Explore how Dell leverages direct sales and efficiency to gain a competitive advantage in the computer industry amidst intense rivalry. Learn about industry dynamics, supplier and customer power, new entry threats, and substitutes. Compare Dell with IBM, Compaq, HP, and Gateway in terms of advantages and disadvantages.

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Dell's Competitive Edge in the Computer Industry

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Presentation Transcript

  1. Dell CaseKey Issues

  2. Matching Dell • Industry Dynamics • How to attain advantage • How to protect advantage

  3. Industry Dynamics • 5 Forces Model – Gauges the degree of competitive rivalry in industry. • Bargaining Power of Suppliers. • Bargaining Power of Customer. • Threat of new entry. • Threat of substitutes. • Intensity of Rivalry.

  4. Bargaining Power of Suppliers • Proprietary Standards from Microsoft and Intel - Extract profits • Other inputs are commodities • Thus Bargaining Power of Suppliers is Very High

  5. Bargaining Power of Customers • Standardized product means its easy to switch brands • Resellers and retailers have grip on channels. • Corp. users buy direct based on price since little differentiation • Over BP of customers is high and rising.

  6. Threat of new entry. • Increasing with rise of internet and direct channel. • Main barrier is capital needed for manuf. facility. • Only real barrier are economies of scale. • Threat is fairly high.

  7. Threat of substitutes. • Within product category, few direct substitutes.

  8. Intensity of Rivalry. • Rivalry is very high due to: • Lack of differentiation. • Reliability and Service are only diff’s. • Price is similar for all competitors • If prices are similar, this is a signal of rivalry. • Do prices go down or up? • Tend to fall.

  9. Dell’s Advantages/Disadv. • Direct to order • Efficient (best cost position) • Effective (for some customers - best) • Focus! • Not distracted by other channels • Maybe not competent in other channels? • Service • By from Dell, deal w/ Dell.

  10. IBM’s Advantages/Disadv. • Direct Salesforce. • Well regarded laptop. • Costs are higher • Few non-corporate customers

  11. Compaq Adv/Disadv. • Cost position is good • Retail relationships • Poor quality • Poor reputation

  12. HP Adv/Disadv. • Quality reputation • Higher cost • Resellers

  13. Gateway Adv/Disadv. • Price – lower • Service • Image?

  14. Example of Unit Price and Cost Analysis

  15. For all firms Note: IBM numbers are likely inflated by Mainframe and service being included.

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