Dell Marketing Strategy

From the beginning Dell has been focused on customer service by understanding the customer’s needs and providing the most effective computing power to meet those needs. Even until this day Dell has held on to this viewpoint and they have gone from a dorm room based business to a multibillion dollar giant of the industry. The Dell Company we know today has maintained their competitive edge by using their easy to use customization interface along with maintaining relatively low costs by shipping directly from the supplier to the customer.

Today Dell Company has seemed to be taking a step back from being such an aggressive competitor, to being just another company in the market. To regain our place at the top in the modern day Computer industry, we are very much looking forward to our many innovations and new products. Of these new innovations we will be opening up new retail stores at key locations that will also serve as sites to bring broken computers and desk tops to be repaired.

We will also be branching the company into two separate directions Dell Home and Student, and Dell Professional to better serve these two markets with their vastly different needs and wants.

With this separation the two departments will begin to work independently on several new product lines and software contracts so we can offer the customer anything they can want at the best price available. We hope that with these innovations we will be able to regain our competitive edge and bring our already exceptional customer service to a whole new level.

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The American upper class describes the sociological concept pertaining to the “top layer” of society in the United States. This social class is most commonly described as consisting of those with great wealth and power and may also be referred to as the Capitalist Class or simply as the rich. (Thompson) People of this class commonly have immense influence in the nation’s political and economic institutions as well as public opinion. (Gilbert) If there is any market that can be considered as mass high end consumers, this is it. The majority of the members of the 10 million households that earn between $100,000 and $199,999 annually.

The top of the upper class accounts for only 2 percent of all United States households, and make 200,000 dollars or more a year. While those in this upper echelon share a lot demographically with their slightly less wealthy counterparts, those who earn between $100,000 and $199,999, but the two groups are not exactly the same. For one thing, while both tend to be concentrated in the power centers of America – New York, Washington and San Francisco – the super-wealthy individuals also have homes in sunny, leisure locales. Among them: Naples and West Palm Beach in Florida, and Santa Barbara in California.

The majority of the individuals considered to be super rich tend to be older, more than one third of them are over 55. The American middle class is an ambiguously defined social class in the United States. (Thompson) While the concept remains largely ambiguous in popular opinion and common language use, (Thompson) contemporary sociologists have put forward several, more or less congruent, theories on the American middle class. Depending on class model used, the middle class may constitute anywhere from 25% to 66% of the total households in the country with the largest concentration of middle class citizens is in the mid west.

The middle to upper middle class is dominated by people who identify as Caucasian. – 82 percent of people in this category identify with that race group, a larger share than in the nation total population. Of the roughly 26 million households in this income group, about 11 million have an income between $60,000 to $74,999 (representing 43 percent of this segment); 10 million have an income between $50,000 and $59,999 (representing 37 percent); and 5 million have earnings between $45,000 and $49,999 (20 percent).

Since the world is so diverse and a chart with all the demographics for it would be almost impossible to find here is a population growth chart of the top 25 countries so you can see exactly what countries are growing and leading the world in population. By these countries leading in population also help Dell define what countries to target when trying to get new overseas customers. As always further investigation needs to be done for each country but as an overview, the majority of future sales should be directed to the Eastern hemisphere. Rank CountryPopulation 1China1,338,612,968 India1,166,079,217 3United States307,212,123 4Indonesia240,271,522 5Brazil198,739,269 6Pakistan176,242,949 7Bangladesh156,050,883 8Nigeria149,229,090 9Russia140,041,247 10Japan127,078,679 11Mexico111,211,789 12Philippines97,976,603 13Vietnam86,967,524 14Ethiopia85,237,338 15Egypt83,082,869 16Germany82,329,758 17Turkey76,805,524 18Congo, 68,692,542 19Iran66,429,284 20Thailand65,905,410 21France64,057,792 22United Kingdom61,113,205 23Italy58,126,212 24South Africa49,052,489 25Korea, South48,508,972 Source- CIA World Fact book (Table 1 Demographics of Top 25) Economic Environment.

Demand in the computer market been steadily increasing since the mid-1990s along with the positive trend in the economic recovery. Furthermore, the share of households owning a computer was lower in Europe and Asia, than in the United States. The boom in the information technology sector has increased as the demand for computers and has become a basic commodity for the common man. The computer industry expects a growth of approximately ten percent over the next few years. (Dell pg. 5) This is said because of the economic situation in other countries having an impact on the purchasing power of potential customers.

This will then cause the inflation rates to change and value of country’s currency to fluctuate which will determine the profitability of a company. Computers have become a necessary tool in everyday life. In schools, teachers use computers every day whether if it is for communication or posting educational notes, computers are a necessity in the modern day classroom. Computers are also essential in the workplace for most of the same reasons. In other words it seems that the demand for computers and technology are growing larger with each passing year. 2009 marked the first year in the post-World War II era that global output – and per capita income – declined; output contracted 1% year-over-year, compared with average increases of about 3. 5% per year since 1946. And global trade plummeted nearly 25% from 2008’s level, the largest single year drop since WWII. Among major countries, the biggest GDP losses occurred in Russia (-7. 9%), Mexico (-6. 5%), Japan (-5. 7%), Italy (-5. 0%), and Germany (-5. 0%), while China (+8. 4%), India (+6. 1%), and Indonesia (+4. 4%) recorded the biggest gains. Among all countries, output increased the most in Macau (+13. %) – top for the second consecutive year – Azerbaijan (+9. 3%), and Qatar (+9. 2%). In 2009, global per capita income fell about 2% to US$10,500, as global unemployment rose from just over 7% in 2008 to nearly 9% in 2009 – underemployment, especially in the developing world, remained much higher. Global gross fixed investment fell about 4% year-over-year, or by roughly $800 billion. World trade and financial imbalances unwound: from 2008 to 2009 current account surpluses or deficits fell for 4 out of every 5 countries as lower commodity prices, tighter credit, and, to some degree, greater protectionism reduced demand for traded goods.

World external debt dropped more than 6% from the previous year, as new international lending disappeared. The global recession was a result of widespread uncertainties in the financial markets, bank failures, tighter credit, falling home prices, collapsing asset prices, lowered consumer confidence, and the drop in trade. In response to these conditions, many, if not most, countries pursued expansionary monetary and fiscal policies, and attempted to avoid protectionist policies. By the second half of 2009, the global economy appeared to be making halting, but forward steps”. CIA World Fact book) Technological Environment. Technology and innovation are one of the most important factors in the constantly changing computer industry. Increased Research & Development have caused permanent innovation processes which lead to short product life cycles resulting in a faster depreciation of the products. (Dell pg. 6)  The size of the computer industry and information technology industry has led to a differentiation among customers, technology, innovation, new services, business research etc (such is the size of the industry).

At one point in time Dell was strictly selling PC’s and now has moved on to selling almost any type of electronic device. Thus the major manufacturers like IBM, lost market share and were a victim of cloning as other competitor companies are constantly trying to use the latest innovations in terms of software or microprocessors to maintain or increase their share. For example, Apple with all of its different types of iPods, iPhones, and now the new iPad are just a few good examples of how competitors keep using the latest innovations to increase and maintain their share.

Social-Cultural Environment. The Information technology sector has four customer segments: large firms, SMEs, individuals and educational institutions. (Dell pg 3) Initially only large corporations and some individuals who had enough money were able to experience computers and were passionate about them. But in recent years, individuals and educational institutions represent an increasingly important market; and computers in general are becoming a bigger demand due to the fact of that they are a lot cheaper now and all of the different things they can do for an individual and/or for a firm.

The national demand for computers is dependent on the educational level in that particular country. The higher the educational standards the more of a demand that country will have for computers. In today’s society children are getting very familiar with computers at a very young age. Many of these children are playing video games on computers, searching the web, and some children even have their own lap tops, which is not an uncommon thing these days in this society. These children represent a generation where no matter what type of job they end up having, they will be able hardly live or work without a computer.

With the huge demand for the use of email along with the new thing of “Skype” where you can see each other’s face or body and talk like you are talking in person all through your PC or your laptop and now some companies even offer it through your cell phone. Also the popularity of the Internet and all the options, continue to give customers the multiple needs and reasons to buy a computer. Political/Legal Environment. The political environment is one of Dell’s biggest threats in the computer market. Political factors include government regulations and legal issues determining the conditions under which companies have to operate.

There seems to be a lot of red tape involved in securing government contracts. In this field, the computer industry has to face certain restraints. Problems can arise in countries where political stability is not guaranteed, no matter whether companies operate production facilities or if they do business with that country through exports. For example, Chinas government regulates the usage of internet which is another type of threat to the internet. Since this happens it then causes a domino effect with computers because without computers there really is no internet.

Many countries still have restrictive policies which are maintained to protect domestic manufacturers and production. Such policies often hinder foreign companies from entering into these markets. The only possibility to do business in those countries is to establish partnerships with local companies, where they are additionally forced to accept minority shares and to provide money and technological know-how. However, the computer industry sees great potential in those countries which lose their restrictions. (Dell pg. ) In the course of globalization trade barriers decline and new markets emerge, allowing free trade to expand in all of these foreign countries with government regulations and restrictions. Competitive Analysis Industry Analysis. The PC industry is one of the most unique industries in the world. There is no other type of product that is as technologically advanced which is sold for as much money and yet is sold by so many companies for so little profit. Dell, Gateway, Compaq, HP, and Apple are the main rivals in this industry.

Dell and Gateway have been the most innovative by including the just in time manufacturing methods to meet consumers specific wants and needs. The PC industry is a complex network of companies involved in different industry segments, from micro processors and other components to complete systems to operating systems and applications. Depending on the industry segment, these firms specialize in different activities , from research and development to design, manufacturing, assembly, logistics, distribution, sales, marketing, service, and support.

PC makers are having tendencies towards the integration across borders of markets for labor, capital goods and services. PC makers are using globalization to enter unsaturated markets, for cheaper production costs, faster growth, low labor costs, and overall need to stay ahead of competition. Most major corporations in this industry reach across national borders, international sales normally account for a large percentage of most hardware companies. There are some key factors in the electronic computer manufacturing industry a company needs to have in order to be successful and remain competitive.

A company needs to establish its brand name in order to gain a reputation in the industry; also a company needs to have effective cost controls due to the competitiveness of the industry. A company in the electronic computer manufacturing industry must have the latest innovations available to them and substantial technology in order to have products with a high demand from consumers. Internet usage as a part of people’s everyday lives is increasing abroad around the world; e-commerce is more than ever a part of everyday business.

The rapid adoption of Internet-based electronic commerce has had multiple major impacts on the way companies do business worldwide. Selling directly through the Internet has accelerated the industry’s clock speed by shortening the communication distance between the PC vendor and the end customer to mere seconds away. It also has further increased the demand for customization as customers can easily configure products and compare prices online. On the other hand, e-commerce and the Internet have made it easier for PC makers to respond to the pressures of clock speed and customization.

By doing this online configuration systems have replaced telephone sales representatives, online support replaced call centers, and e-commerce technologies link PC makers with both suppliers and service partners in real time. Supply chain integration through electronic commerce responds to the industry’s product cycle and customization trends. These include changes in the internal organization of firms, helping to link all of the firm’s activities and allowing for better communication, sharing of information, and coordination of activities within the organization.

The expected impacts also include changes in the external organization of economic activities. As companies apply IT internally, they have also developed electronic linkages with suppliers, customers, and business partners to pursue similar improvements in performance in the entire value chain. The personal computer industry because it is a leading-edge user of e-commerce for business and consumer transactions and because it represents the cutting edge of a time-oriented business model that might have implications for other industry sectors. It is also a very homogeneous industry, with companies producing similar products based on common echnology standards and components for a well-defined market of consumers and organizations. This helps to reduce the variance caused by environmental factors and allows close analysis of the interaction of firms’ business strategies, e-commerce strategies, and execution of those strategies, and the resulting performance outcomes (Ransford, 2003). Key Competitor Analysis The personal computers industry is having an interesting time this year. The global economy seems to be strengthening once again, consumer spending is rising and businesses are starting to invest in software and hardware.

Industry giants Dell Inc. and Apple Inc. are working hard to reclaim their market share and if possible grab each other’s in the process. One inherent fact about this industry that continues to be spot on is that products are evolving faster and competition is growing even fiercer. A leading new set of products is tablets. Companies have been hoping for years to achieve this and technology has finally caught up. There is now a flurry of activity in the market as competitors release their versions of the new desirable product.

Some are trying to capture corners of the market by making their tablets suited to specific areas such as business or games while others are maintaining a broad approach in the hope of attracting the masses rather than just a niche market. Another expanding area is cloud computing. Cloud computing promises improved flexibility, reduced software and hardware costs as well as lower demand for management. Companies and government offices are all looking to improve efficiency so cloud computing is proving to be an enticing option. Here too computing companies are battling it out to ensure their market share (Brooks, 2010).

Dell Computers Limited, in its 20 years of its existence, is considered as a pioneer in direct marketing. The company has always focused on improving its supply chain by reducing costs through direct selling. Dell’s mission is focused on the concept of the direct-to-market strategy. The company’s direct model has become a global benchmark in supply chain management, and many other organizations worldwide have incorporated it to improve their supply chains. Gateway Incorporated also started its business as a direct seller of computer systems. However, by the year 2000, the focus of the ompany shifted from ‘direct marketing’ to ‘research and development’ Finally, looking at the SWOT analysis of the company, it is evident that Dell does still hold a very strong competitive position. The strength of the company consists of single sourcing, efficiency, and relationship with customers and partners, after sales service, Internet leveraging, and product quality. Their weaknesses are new product market has hurt entry, and reliance on corporate clients. Dell has many opportunities, such as potential growth in overseas markets, the industry is still in a growth phase, and entering into new product markets.

Meanwhile the threats are technological changes that are expected since technology can only get better. Next, global economy and increased competition in which Dell’s financial ratios clearly identifies that they are no match for their competitors. Customer Analysis Dell’s growth relies mainly in part by keeping their customers satisfied, by meeting all of their needs when it comes to PCs. Because of this relationship with the customers, it allows the company to have an easier time to collect information.

The results of this closeness allow for better market segmentation, for better forecasting, and for better value to a customer. Dell’s most competitive force is the direct-model concept, which has helped them to reach above average returns and still in business today. Though many competitors have tried to copy this concept, it doesn’t seem to be working as well as it does for Dell. By now customers have developed a brand loyalty to Dell because of their low cost differentiation strategy. Secondly, Dell’s culture is never to be satisfied, just happy when the firm does well.

As Micheal dell has mentioned before “to be competitive, a firm must stay ahead of the game” to stay ahead of their competitors, this company always kept aware of what is happening externally. Internal Analysis For a strategy to be properly accepted in a corporation, one must analyze many different aspects of the company. The history, mission, objectives, performance, and resources of a company are all necessary in order to develop a strategic plan. Dell is a large corporation who stand for innovation, and being environmentally “Green”. Brief History Dell traces ts origins to 1984; when Micheal Dell created PCs Limited while a student at the University of Texas at Austin. The dorm-room headquartered company sold IBM PC-compatible computers built from stock components. Michael Dell started trading in the belief that by selling personal computer systems directly to customers, PCs Limited could better understand customers’ needs and provide the most effective computing solutions to meet those needs (Euro. dell. com, 2010). Michael Dell dropped out of school in order to focus full-time on his fledgling business, after getting about $300,000 in expansion-capital from his family.

In 1985, the company produced the first computer of its own design — the “Turbo PC”, sold for US$795(Koehn, 2010). PCs Limited advertised its systems in national computer magazines for sale directly to consumers and custom assembled each ordered unit according to a selection of options. The company grossed more than $73 million in its first year of trading. The company changed its name to “Dell Computer Corporation” in 1988 and began expanding globally—first in Ireland. In June 1988, Dell’s market capitalization grew by $30 million to $80 million from its June 22 initial public offering of 3. million shares at $8. 50 a share. In 1992, Fortune magazine included Dell Computer Corporation in its list of the world’s 500 largest companies, making Michael Dell the youngest CEO of a Fortune 500 company ever(Lee, 2006). In 1996, Dell began selling computers via its web site, and in 2002, Dell expanded its product line to include televisions, handhelds, digital audio players, and printers. Dell’s first acquisition occurred in 1999 with the purchase of Converge Net Technologies. In 2003, the company was rebranded as simply “Dell Inc. ” to recognize the company’s expansion beyond computers.

From 2004 to 2007, Michael Dell stepped aside as CEO, while long-time Dell employee Kevin Rollins took the helm. During that time, Dell acquired Alien ware, which introduced several new items to Dell products, including AMD microprocessors. To prevent cross-market products, Dell continues to run Alien ware as a separate entity but still a wholly-owned subsidiary. Lackluster performance, however, in its lower-end computer business prompted Michael Dell to take on the role of CEO again. The founder announced a change campaign called “Dell 2. 0,” reducing headcount and diversifying the company’s product offerings.

The company acquired Equal Logic on January 28, 2008 to gain a foothold in the iSCSI storage market. Because Dell already had an efficient manufacturing process, integrating Equal Logic’s products into the company drove manufacturing prices down(Gonsalves,2007). In 2009, Dell acquired Perot Systems, a technology services and outsourcing company founded by H. Ross Perot. On September 21, 2009, Dell announced its intent to acquire Perot Systems (based in Plano, Texas) in a reported $3. 9 billion deal. [9] Perot Systems brought applications development, systems integration, and strategic consulting services through its operations in the U.

S. and 10 other countries. In addition, it provided a variety of business process outsourcing services, including claims processing and call center operations. On August 16, 2010, Dell announced its intent to acquire the data storage company 3PAR. On September 2, 2010 Hewlett-Packard offered $33 a share, which Dell declined to match (Perot Systems, 2009). Mission “At Dell our Mission Statement is to provide customers with superb value, high quality, relevant technology, customized systems, superior service and support, and products and services that are easy to purchase and use. We consider our commitment to our planet, our communities and our people integral parts of our business strategy. It’s a commitment driven by the types of goals, strategies and accountabilities that characterize every part of our business. And it’s one that persists through all business cycles. Each year we strive to be better, to create technology that can change the world, and technology that makes a positive difference in the lives of our customers. It’s our commitment to being a responsible corporation.

In fiscal year 2010, we continued our corporate responsibility work to guide us in better understanding and balancing our needs as a business and our role in improving the lives of those around us (Reporting on Corporate Responsibility). Objectives * Contributing in Every Community Dell believes in contributing positively in every community that we call home. Dell employees help their neighbors through our Neighbor to Neighbor program for volunteerism and personal giving. The Dell Foundation is focused on equipping youth for the digital economy. Dell also has a number of community partnerships that help address he needs of the community and the company. * Workforce Diversity Dell values the diversity of its global workforce. The company’s approach to diversity is defined by a recognition of both similarities and differences, inclusiveness, respect, and a company culture that allows each individual to contribute to his or her fullest potential. * Respecting Every Nation’s Laws, Values and Cultures Dell adheres to laws regulating wages, hours, and working conditions, and requires by contract that all partners and suppliers also comply with all applicable laws and regulations where they conduct business.

In addition, Dell’s partners and suppliers are expected to embrace high standards of ethical behavior and treat their employees fairly and with dignity and respect in accordance with Dell’s Code of Conduct and Supplier Principles. * Integrating Environmental Sustainability Dell’s mission is to fully integrate environmental stewardship into the business of providing quality products, best-in-class services, and the best customer experience at the best value. Dell strives to be a careful steward of its communities’ natural resources and build its products with sensitivity to the environment (Global Citizenship).

PerformanceOver the last 10 years our company has grown in revenue from $12 billion to $61 billion – a remarkable achievement by any count. In fact, in terms of organic growth we stand apart as the fastest-growing technology company in history. But it is also fair to say that as we got to the end of that 10-year period, our strategy wasn’t working as well as it had previously. Moreover, as we evolved we lost focus and allowed our cost structure to become non-competitive. As I returned as your CEO just more than a year ago we undertook a thorough process to reevaluate every element of our business.

We listened hard to our customers, employees and partners. And we began a significant evolution that is delivering positive results. Last year, we generated $61 billion in revenue and grew our earnings per share by 15 percent to $1. 31. At the end of the year, we were again the No. 1 supplier of personal computer systems in the United States and the No. 2 supplier worldwide. Unit shipments were up nearly 19 percent in FY08 Q4, and according to industry estimates we have begun the current year growing faster than the industry.

We continued to maintain strong liquidity with cash flows from operations of $3. 9 billion, and we believe our ability to generate cash flow from operations on an annual basis will continue to be solid. During fiscal 2008 we invested $4 billion on share repurchases and a net $2. 2 billion on strategic acquisitions. We ended fiscal 2008 with $9. 5 billion in cash and investments compared with $12. 4 billion at the end of fiscal 2007. We are committed to a long-term share repurchase program as part of an overall capital allocation plan to support growth and to return value to shareholders.

In December 2007, our Board of Directors approved an additional $10 billion for share repurchases (Financial reporting, 2008). (Picture 1 Market Share Analysis) ResourcesTo deliver effective solutions that meet customer challenges, Dell focuses on pivotal standards that drive future technology innovation. Dell’s industry leadership places it in a unique position to help establish the core building blocks for the future innovation – in the home, the office and the enterprise.

With a long track record of pioneering work and wide network of strong industry alliances, Dell can drive adoption of open standards that give customers more choices, lower costs and complexity, and interoperability. Working collaboratively with leading suppliers and standards organizations, Dell has driven standards that not only benefit customers, but often result in industry-changing developments such as: * Display Port digital display interface to support high-performance, high-resolution digital flat panel displays and application. Standard formatting for sorting RAID configuration information to enable interoperability between different RAID suppliers. * Standard systems management instrumentation on managed nodes, such as servers, storage, switches, client systems and printers (Dell Corporation. 2010). Dell is uniquely positioned to impact industry trends. We maintain strong internal development capabilities. We partner, rather than compete, with top industry technology suppliers and original development manufacturers. We steer enabling industry standards and technologies through industry groups and strategic partners.

In this way, Dell spurs innovation and delivers value to customers. SWOT Analysis SWOT Analysis of Dell Strengths| Weaknesses| * Direct Model * Supplies directly to customer * Award winning customer service| * Absence of retailers * Institutional recognition| Opportunities| Threats| * Global Markets * Rising demand for computers| * Price wars * Technological Advancement | Table 2 SWOT Analysis Strengths Direct Model The model itself could be considered one of the company’s greatest assets. The direct Model allows consumers to fully customize their PC.

The market is becoming more educated, and now more than ever individuals want a product that can target their specific needs. In the case of laptops, this means that customers want more options in terms of both performance and portability. By cutting out the retail seller as a distributer, Dell has made it possible for each buyer to order directly from the factory, thus giving them the opportunity to fully customize their