Since its establishment, Dell achieved great success as a company that specializes in the PC market. However, in 2013, Dell found itself struggling to maintain competitive advantage (Case study). To retaliate, Dell’s management decided to restructurize the company, assuming the main weaknesses to be poor attitude toward customers and stakeholders. The assumption was supported by the public scandal of 2013 and stakeholders’ unwillingness to allow the restructuring occur privately, which was required due to instabilities in the U.S. economy (Case Study). Consequently, this paper will assess the PC market after Dell’s reconstruction in terms of industry lifecycle and Porter’s five forces and propose several global and functional strategies that will allow Dell to address its weaknesses and regain its competitive advantage.
The current state of Dell company showcases features of the industry lifecycle’s maturity phase. According to Hill et al. (2019), these features include limited possibilities for growth and high barriers to market entry for new competitors. The price war in the competition for customers showcases an attempt to increase revenue through the customer base (Case Study). In the meantime, the PC market is represented by the industry “giants,” such as Dell, Apple, or Hewlett Packard (Case Study). Consequently, new entrants cannot withstand competition with already established companies in this market sector.
Dell’s analysis from the perspective of Porter’s five forces model in many ways correlates with the industry lifecycle. According to Isabelle et al. (2020), the forces analyze the market in terms of the threat of new competitors, buyers and suppliers’ bargaining powers, substitute products’ threat, and the state of actual market competition. As was already mentioned, new entrants do not display any danger for Dell. The bargaining power of buyers demands standard-based implementation of new technologies and innovations in the context of ubiquitous digitalization (Isabelle et al., 2020). Suppliers’ bargaining powers are relatively equalized: at the moment, not a single supplier possesses market dominance (Case Study). Nevertheless, Dell might be threatened by the increasing popularity of smartphones and tablets as a company that concentrates on PCs. Finally, the actual state of market competition benefits economies of scale; thus, Dell can be considered favorable in this regard.
Dell’s poor attitude toward stakeholders and customers resulted in a reputation loss due to low business transparency and customer service outsourcing. In addition, the contemporary U.S. economy’s issues forced Dell to restructure privately, distancing from America-based operations. Consequently, global strategies following Dell’s return to the public should include promoting the company’s ethical and social responsibilities and orienting toward the global environment. In the former case, Dell’s reinforcement of the brand’s reputation can be done through the extensive marketing campaign of the ethical changes it implemented during reconstruction. Regarding the latter, Dell already has factories worldwide (Case Study). To avoid unfavorable circumstances in the U.S. market, it should continue to increase its market share in other countries. It will also help to improve the customer base, which will be in accord with the current industry phase.
In its functional strategies, Dell should focus on creating value activities to increase its competitive advantage. One possible way is to target the customer needs regarding the adherence to new digitalization standards, such as cloud-based services. This way, Dell can digitally compete for new customers with its rivals, simultaneously increasing the retention of the existing customer base (Neher, 2021). Another possible functional strategy revolves around answering the replacement demand (smartphones or tablets). The ability to supply a variety of substitutional products has a great potential to attract new customers while increasing brand reputation and market share.
In summary, the consequences and effects of the proposed strategies might greatly benefit Dell. The global strategies would enable Dell to increase its share worldwide while rebuilding connections with customers and stakeholders. The functional strategies would allow Dell to regain its competitive advantage and increase revenue by supplying new value activities. Overall, Dell can be considered capable of restoring its public image and reputation since the market state allows for the mentioned focus shifts.
References
Case Study. (n.d.) Dell going private then public story [Course handout].
Hill, C. W. L., Schilling, M. A., & Jones, G. R. (2019). Strategic Management: Theory & Cases: An Integrated Approach (13th ed.). Cengage Learning.
Isabelle, D., Horak, K., McKinnon, S., & Palumbo, C. (2020). Is Porter’s five forces framework still relevant? A study of the capital/labour intensity continuum via mining and IT industries. Technology Innovation Management Review, 10(6).
Neher, K. (2021). Twelve Digital Marketing Trends For 2022 And How To Take Advantage Of Them. Forbes. Web.