Introduction
Since its establishment, Dell has achieved great success as a company that specializes in the PC market. Dell struggled to maintain a competitive advantage during its privatization in 2013. Carl Icahn, an investor, broadcasted on social media how Michael Dell and Dell Inc. were trying to defraud investors. In retaliation, the management decided to restructure the company, assuming the main weaknesses were the poor attitude toward customers and stakeholders. The assumption was supported by the public scandal of 2013 and stakeholders’ unwillingness to allow the restructuring to occur privately, which was required due to instabilities in the U.S. economy (Edwards). This inaccurate information spread mistrust among consumers and investors, causing an ethical issue and tarnishing reputation. Consequently, this paper will assess the PC market after Dell’s reconstruction in terms of revenue, external and internal analysis, ethics, and governance and recommend strategies for the company to regain its competitive advantage.
Financial Analysis
Dell’s revenue has increased significantly post its restructuring period. During a recent financial analysis, the company’s revenue in 2021 was 94 million dollars compared to Hewlett Packard’s revenue, which was 63 million dollars (The Wall Street Journal). Dell’s revenue in 2020 was 92 million dollars compared to Hewlett Packard’s revenue which was 56 million dollars (The Wall Street Journal). The company’s business strategy is to continue to build a competitive advantage over others in the technology industry with its superior supply chain management, high standards for products and services, and continued emphasis on customer experiences. This increasing revenue will enable the company to pay down debt incurred from acquisitions and mergers during the restructuring process.
External Analysis
The current state of Dell company showcases features of the industry lifecycle’s maturity phase. According to Hill et al., 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. In the meantime, the PC market is represented by the industry “giants,” such as Dell, Apple, and Hewlett-Packard. Consequently, new entrants cannot withstand competition with already established companies in this market sector. The intensity of rivalry among existing competitors is fierce, with many companies going out of business, unable to compete with economies of scale, or having to partner with another company (Gara). The bargaining power of buyers demands standard-based implementation of new technologies and innovations in ubiquitous digitalization (Isabelle). Suppliers’ bargaining powers are relatively equalized: at the moment, not a single supplier possesses market dominance
Internal Analysis
Dell Inc. is a world leader in providing quality electronic products for various consumer types. The company focuses on creating value for its shareholders, customers, and employees to remain a competitive entity in the world’s electronic marketplace. Dell Inc. currently has two main growth strategies, market penetration, and product development, that ensure the company can continuously create value for its shareholders. The market penetration strategy aims to expand the company by boosting sales in markets where it currently holds a strong market dominance (Hill et al.). Flexible changing marketing efforts that ensure the company’s competitiveness against other companies in the same markets is a strategic goal connected to this aggressive strategy. According to (Neher), the strategic objective linked to this intensive strategy is flexibly adjusting marketing campaigns to ensure Dell’s competitiveness against other firms in the same markets. Product development is the secondary growth strategy pursued by the company as it aims to develop products that are better than its competition.
Ethics and Governance
The consumers and investors would not have mistrusted Dell if they had a better advertising and communications strategy for keeping stakeholders better informed regarding the reasons for privatizing the company. The company did not want to be pressured by short-term growth, profitability, and equity analysts focusing on investors’ quarterly earnings (Investopedia). The primary reason for mistrust was a flawed marketing strategy, as the company had not invested in digital marketing. The mistrust would have been avoided by investing in a digital advertisement through social media applications and print media such as The Wall Street Journal and The Economist. The corporate governance would have relayed the decision to privatize the company, thus preventing miscommunication. The trend in our culture is to go digital with advertising and innovation by having verified social media sites.
SWOT Analysis
Dell Inc.’s strengths include brand recognition, product personalization, expertise in mergers and acquisitions, and a direct selling business strategy. Dell’s $50 billion brand value reflects its solid reputation for high-quality goods (Moore). The company lets people personalize their laptops which adds consumer value and improves its competitive advantage. The company has acquired 35 companies and divested them into seven ventures which add assets, new patents, and enhanced capabilities (Moore). In addition, the company sells directly to consumers and enterprises and keeps revenue for a better profit margin. Dell Inc’s weaknesses include poor customer service and low differentiation. The firm’s customer service declined as it outsourced its call centers to third parties and lacked differentiation from competitors’ products (Moore). Dell Inc S opportunities entail expanding services to offer more profitable services. There is a need to add new technology patents and capabilities by acquiring other companies. The company should reverse engineer products to strengthen its product lines and position in the market. Dell’s threats include the growing demand for smartphones and tablets that are higher in price and have enhanced capabilities leading to lost revenue. The increased price of raw materials for laptops will lower the company’s revenue margin.
Synthesis
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 reinforces the brand’s reputation through the extensive marketing campaign of the ethical changes it implemented during reconstruction (Neher). To avoid unfavorable circumstances in the U.S. market, it should continue to increase its market share in other countries. This plan will help to improve the customer base, which will be in accord with the current industry phase.
The internal analysis of Dell is that the company harnesses the operational efficiency of the Just in Time (JIT) delivery model and its Buy Direct program. This delivery model helps Dell maintain their competitive advantage due to the unprecedented laptop demand due to the Covid pandemic and the digitization of teaching. The recommendation for a corporate-level organizational strategy would be a centralization approach. This approach has decision-making powers concentrated with a few leaders at the top of the organizational structure (Neher). The rationale for a centralizing approach is to facilitate coordination, have consistent decisions, avoid duplication of activities, and focus power and authority on one manager or management team.
Business Model Recommendations
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, the company 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 regarding 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.
Dell should adopt a centralized business model organizational structure approach because it would benefit the company. This organizational structure has numerous positive potential, with mid-level management not having to develop financial solutions (Neher). The negative drawbacks are that executives may not want to share power and authority with other levels of the company, or mid-level management decisions will not be effective or efficient. The consequence of Dell’s lack of strategy change is developing a poorly managed company that has lost sight of its mission, values, and goals. The company can adapt its model to formulate sales channel strategies that optimize sales’ organizational structure in specific multinational markets. This strategy can enable the company to increase revenue and optimize products and services’ global value to customers.
Conclusion
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. Furthermore, the business model recommendation would make Dell a greater technology company with continuous improvement standards to achieve its mission, vision, and goals.
Works Cited
Edwards, John. “How Dell Stock Ceased to Exist.” Investopedia, 2021. Web.
Gara, Antoine. “Deal of the Century: How Michael Dell Turned His Declining PC Business into a $40 Billion Windfall.” Forbes, 2021.
Hill, Charles W. L., et al. Strategic Management: An Integrated Approach: Theory et Cases. 13th ed., Cengage Learning, 2019.
Isabelle, Diane, et al. “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, vol. 10, no. 6, 2020, pp. 28–41.
Moore, Corbin. “Reduce Product Development Costs and Increase Innovation.” Dell Technologies, 2017.
Neher, Krista. “Twelve Digital Marketing Trends for 2022 and How to Take Advantage of Them.” Forbes, 2021.
The Wall Street Journal. “Dell Technologies Inc. Cl c Annual Income Statement.” WSJ, 2022.