Recommend How Dell Should React To Slower Growth And Increased Competition In Its Core Market Segments. Explain How Your New Or Modified Positioning Strategy Enables Dell To Leverage Some Of Its Existing Advantages.This essay Recommend How Dell Should React To Slower Growth And Increased Competition In Its Core Market Segments. Explain How Your New Or Modified Positioning Strategy Enables Dell To Leverage Some Of Its Existing Advantages. is available for you on Essays24.com! Search Term Papers, College Essay Examples and Free Essays on Essays24.com - full papers database.
Autor: anton • November 28, 2010 • 1,064 Words (5 Pages) • 535 Views
Recommend how Dell should react to slower growth and increased competition in its core market segments. Explain how your new or modified positioning strategy enables Dell to leverage some of its existing advantages.
DellÐ²Ð‚™s advantage is primarily due to cost drivers rather than differentiation drivers. DellÐ²Ð‚™s cost advantage in 1996 was estimated at 13% of revenues and was derived primarily through lower component prices, lower carrying costs and reduced distribution costs all linked to shorter cycle times. Per Exhibit 11, DellÐ²Ð‚™s S&A of 10% was appreciably lower than rivals Compaq (16%), IBM (20%), HP (17%) and Gateway (14%) due to their direct sales model. Approximately 70% of the firmÐ²Ð‚™s revenues were attributable to large corporate purchases in which Dell could maintain a negative cash conversion cycle.
In response to lower growth, Dell should isolate the key cost drivers as follows:
Ð¿‚§ Current Cost Drivers:
o Inputs Ð²Ð‚" low due to short lead time
Ð¿‚§ COGS lower due to short lead time for components which fall in price by 27% annually
Ð¿‚§ Co-location of component suppliers minimizes inventory & cycle times and associated carrying costs
o Processes Ð²Ð‚" efficient due to tight integration
Ð¿‚§ Direct sales minimize channel mark-ups & advertising
Ð¿‚§ Tightly integrated order entry, production and shipping minimized inventory buffers and cycle times
Ð¿‚§ Tight control of cash via inventory metrics
o Scale & Scope Ð²Ð‚" adequate but growth is slowing
Ð¿‚§ Scale Ð²Ð‚" 7.4 mm units worldwide, ~8% WW share, #2 WW behind Compaq (13.4mm) and about even with IBM (7.4)
Ð²Ð‚Ñž 70% of revenues from large corporate clients
Ð²Ð‚Ñž 63% of revenues from US (40% WW market)
Ð¿‚§ Scope Ð²Ð‚" narrow with primarily corporate equipment
Ð²Ð‚Ñž 2 Desktop lines Ð²Ð‚" highly stable/high tech
Ð²Ð‚Ñž 2 Notebooks line Ð²Ð‚" highly stable/high tech
Ð²Ð‚Ñž Servers & Workstations
Ð²Ð‚Ñž Software & Install
The cost driver examination shows that Inputs, Process and Scale/Scope all contribute in some way meaningful to DellÐ²Ð‚™s advantage. A graphical analysis of DellÐ²Ð‚™s value chain highlights the key support and primary activity interactions.
Having isolated the key elements to DellÐ²Ð‚™s success, we can further leverage these by repositioning in the following ways:
Ð¿‚§ Continue working closely with component suppliers with a focus on integrating the supply chain even more efficiently. Deploy supply chain specialists close to component suppliers to tightly integrate logistics, design integration and provide on-going incentives such as long term share commitments at market prices.
Ð¿‚§ Target segments carefully to maintain short lead times.
Ð²Ð‚Ñž Leverage website to cultivate the consumer direct market.
Ð²Ð‚Ñž Align with specific retailers to carefully target consumer segments. For example, SamÐ²Ð‚™s ClubÐ²Ð‚™s has a high percentage of small businesses customers. Consider targeting the small business segment with a limited number of SKUs which best meet the needs of this segment. Furthermore, work closely with SamÐ²Ð‚™s Club, which is know for outstanding logistics, to use point of sale information to create a retail demand pull system similar to the current direct model.
Ð¿‚§ Minimize retail channels to one warehouse and one consumer electronics outlet only to minimize the complexity of the order fulfillment process.
Ð²Ð‚Ñž To target consumers, we would recommend aligning with Best Buy due to their skill in market segmentation. Cooperation with Best Buy can allow Dell to minimize SKUÐ²Ð‚™s by selecting those with the broadest appeal to a finite number of well understood segments. Understanding segmentation can allow Dell to price discriminate so that WTP matches the targeted segment.
Ð¿‚§ Utilize the retailersÐ²Ð‚™ websites to allow