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Question:

Discuss about the Strategic Analysis Dell Inc.
 
 

Answer:

Introduction

Dell Inc. is an American multinational, founded in the year 1984. The company is into computer and related products. Dell is also moving into new areas such as cybersecurity and data center design and management, and letting those new units operate more autonomously. The company has a revenue of $54 billion and it has close to100000 employees. Dell Inc. is in the elaboration stage of organizational lifecycle. In this stage part of the organization many split or be reformed such as Dell is doing (Bull & Jobstvogt, 2016).  Since this is so, this explains the process Dell is going through by seeing there are problems and producing formal solutions and controls to safeguard the organizations. Dell has its subsidiaries in various markets. The objective of this paper is to discuss the strategic analysis framework for one of the subsidiary of Dell Inc. The paper would discuss various internal and external factors that affects Dell Inc. in Indian market. It would include the factors like PEST, SWOT, etc. Based on the strategic analysis, the paper also discusses some of the recommendations for Dell Inc. in Indian market.  

Strategic Analysis Framework

The decision to return Dell back to the company’s “entrepreneurial roots” by affording divisions a level of autonomy similar to start-up companies could be seen as a wise move based on strategic decision making by founder Michael Dell. The PEST analysis for Dell’s subsidiary in Indian market can be discussed as:

 

PEST analysis

The factors under the PEST analysis can be discussed as:

Political & Legal: The political and legal factors are positive for Dell Inc. as governments want that the companies in computer and IT sector to grow as it would mean more job opportunities in the region (Cricelli & Greco, 2013). India is a developing country and current government is pro development. The Indian government has opened its arms for foreign players.

Economic: The economic factors are positive and it is expected that the economy of developed and developing nations would continue to grow at decent growth rate. It is expected that Indian economy would continue to grow at a CAGR (Compounded Annual Growth Rate) of 6% (Kiron & Kruschwitz, 2013).

Social: Today, laptops have emerged as a necessity for different people. Therefore, the social factors can be termed as positive. In India, the laptop has become a necessity product for high class people, students and upper middle class. It is expected that the penetration of laptop would further increase in the Indian market.

 Technological: There has been several advancements in IT industry. The technology factors are positive for players in this industry. However, the only factor of concern is the low product life. India has seen various technological advancements and it is expected that the technological factors would remain positive for Dell in India market.

SWOT analysis

The SWOT analysis for Dell Inc. India subsidiary can be discussed as:

2.2.1 STRENGTHS

The ability to provide customized laptops with minimum lead time.

The effective and efficient supply chain that helps Dell to optimize its cost of operation be it in any part of the world

The strong legacy of Dell and its brand name in the market

The cost leadership advantage that Dell has in various markets

2.2.2 WEAKNESSES

It seems to me that Dell, Inc. is an organization in the midst of what Daft (2015) described as the elaboration stage.  One of major weaknesses of Dell is its internal bureaucracy.

Another weakness of the company is limited visibility of mid-level management in the organizations.

2.2.4 THREATS

The biggest threat for Dell is the threat from competition like HP and Sony. HP and Sony are big name in Indian market and captures a good amount of market.

There also exists threat from the external factors like legal factors in different regions, the government regulations, fluctuating market conditions, etc.

There also exists some threat from the suppliers as they can increase the cost of raw material (Cricelli & Greco, 2013)

Another threat is the low switching cost of customers. Indian consumers are price sensitive and they have less brand loyalty

2.2.3 OPPORTUNITIES

Huge opportunity of standard products in emerging markets: When Dell first come out it only offered products that were custom built and had to be ordered direct from Dell.  Although this strategy worked well at the onset, consumers often do not want to wait and are happy with the off-the-self model that could be found in their local area at retailers even it is a limited selection as it competitors have.

 

 

Porter five forces analysis

The five forces analysis for computer and electronics industry can be discussed as:

Bargaining power of suppliers: The bargaining power of suppliers is average. The companies like Dell has the options to choose from number of suppliers. At the same time, there also exists some threat from the suppliers as they can increase the cost of raw material. Dell does not have its suppliers base in India. However, it has to source materials form its international supplier base.

 Bargaining power of buyers: The bargaining power of buyer is high as customer switching cost is very low. Indian consumers are price sensitive and they have less brand loyalty. They would easily switch to HP or Sony or any other brand,

Threat of new entrants: The threat of new entrants is average. The entry barriers are limited. However, it is difficult to achieve the scale of large companies like Dell and HP (Colombo, 2016).

Threat of substitutes: The threat of substitute is high in this industry. In recent times, the tablets and mobile phones have emerged as biggest substitute to laptops. The mobile penetration is very high in Indian market. There are few segments Indian consumers who would often want to have mobile phone or tablet with an Internet connection rather than a laptop.

Industry rivalry: The industry rivalry is high in the industry. The competition is really in this industry. HP and Sony are big name in Indian market and captures a good amount of market.

 

Four corner analysis

Porter's four corners model is a predictive tool designed by Michael Porter that helps in determining a competitor's course of action. The four corner of Porter’s four models can be discussed as:

2.4.1 Motivation – Drivers

This helps in determining competitor's action by understanding their goals and current position. A gap between these two would mean that competitor is likely to reach to the external threats. A narrow gap could mean that competitor would have a defensive strategy (David & David, 2014). In Indian context, the gap is high as HP is one of the largest player in Indian market.

2.4.2 Motivation – Management Assumptions

This corner focuses on perception of competitor about its strengths and weaknesses, culture, belief and goals, etc. (Landoni & Dell'Era, 2016). Dell India is a known player in Indian laptop market; however, it cannot ignore the competition as competition is high.

2.4.3 Actions – Strategy

It means the strategy with which the competitor is operating in the market. It could be cost leadership strategy, product differentiation or any other strategy. The players like Apple and Sony focuses on ‘product differentiation’ in Indian market. The players like HP, Lenovo focuses on ‘cost leadership’ in Indian market.

2.4.4 Actions – capabilities

It means the ability of competitor to respond to external threats and external forces. The competitors like HP, IBM, Apple are big names that can address external threats very swiftly. These companies have deep pockets and high risk appetite to keep continue in the Indian market (Gormley, 2010).

Value chain analysis

The value chain for Dell Inc. can be shown as:

Dell being in the elaboration stage; which is a do or die stage for most organizations. As they are pressured to adjust to the industry overall as a whole the organizations have taken a major hit on the side of profitability.  In this stage of elaboration this is critical because of the moral of the company. Management may be challenged to adjust to a more organic style of management, which would be great however, it may be too late for Dell, Inc.  However, they could try the collectivity stage where it’s the responsibility of leaders and marketing managers to take all the people together (Purkayastha, 2016).  It is important to mention that revisiting the vision and the mission may require if Dell changes its product lines. The marketing activities at Dell can also change based on the vision and mission and this can only be successful if top level management are open to the input from its lower level employees. 

 

Recommendations

The key recommendations for Dell Inc. can be discussed as:

  1. Dell should certainly increase its focus in the emerging markets. Trying a new market such as corporate mighty be a good experience however, with HP as a competitor it’s going to be difficult to keep up (David & David, 2014). Dell India is doing good and it is recommended that Dell Inc. should increase its focus on its Indian subsidiary.
  2. It is recommended that Dell India must continue its path of cost leadership. The customers in the Indian market are cautious about the pricing of the product. Therefore, a good strategy for Dell India in Indian market would be to use the cost leadership strategy.
  • Dell must invest on its research and development. In this industry, the product lifecycle is low and every year there are new and upgraded products in the market. It is critical to keep an eye on the emerging markets and then develop the firm level strategy (Abraham, 2013).

Conclusion

The above paper discusses the strategic analysis for Dell India. The Dell Inc. scenario is a good example of a company that had great performance when the personal computer was introduced. However, it appears that the company was having internal struggles with the demands regarding the growth of the computer industry.  The paper highlights that firms must have a control over its internal factors and a close watch over the external factors. Dell, Inc. by seeing this lack of alignment between its structure and process, decided to be flexible by changing its structure. That might be the best chance Dell has to get ahead of its larger tech rivals like HP. It is important that Dell must continue its strategy and focus to keep moving forward in the tough market condition.

 

References

Abraham, S. (2013). Will business model innovation replace strategic analysis?. Strategy & Leadership, 41(2), 31-38.

Bull, J. W., Jobstvogt, N., Böhnke-Henrichs, A., Mascarenhas, A., Sitas, N., Baulcomb, C., ... & Carter-Silk, E. (2016). Strengths, weaknesses, opportunities and threats: A SWOT analysis of the ecosystem services framework. Ecosystem services, 17, 99-111.

Colombo, G., Dell’Era, C., Frattini, F., & Landoni, P. (2016). Understanding virtual knowledge brokers and their differences with traditional ones. International Journal of Innovation Management, 20(01), 1650015.

David, M. E., David, F. R., & David, F. R. (2014). Mission statement theory and practice: A content analysis and new direction. International Journal of Business, Marketing & Decision Science, 7(1), 95-110.

Greco, M., Cricelli, L., & Grimaldi, M. (2013). A strategic management framework of tangible and intangible assets. European Management Journal, 31(1), 55-66.

Gormley, T. A. (2010). The impact of foreign bank entry in emerging markets: Evidence from India. Journal of Financial Intermediation, 19(1), 26-51.

Kiron, D., Kruschwitz, N., Haanaes, K., Reeves, M., & Goh, E. (2013). The innovation bottom line. MIT Sloan Management Review, 54(3), 1.

Landoni, P., Dell'Era, C., Ferraloro, G., Peradotto, M., Karlsson, H., & Verganti, R. (2016). Design Contribution to the Competitive Performance of SMEs: The Role of Design Innovation Capabilities. Creativity and Innovation Management, 25(4), 484-499.

Purkayastha, A., & Sharma, S. (2016). Gaining competitive advantage through the right business model: analysis based on case studies. Journal of Strategy and Management, 9(2), 138-155.

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