Vikas Kumar Tyagi

Do you think personal computer sales will increase in the near future? Or do you think

expanding to the information services is inevitable for survival for companies like

Dell?

If not by direct selling which channel Dell could have distributed its systems

efficiently, suggest any?Vikas Kumar Tyagi

Vikas Kumar Tyagi

DELL sells personal computers, servers, data storage devices, network switches, software, and computer peripherals HDTVs, cameras, printers, MP3 players

1984 -age of 19- Michael Dell (youngest CEO to guide a company to a Fortune 500 ranking ) founded under brand name PCs Limited

With simple vision—that personal computers could be built to order and sold directly to customers bypassing intermediaries & reduction costs and risks associated with carrying large inventories.

Struggled during its early years But later declared stock of the decade in

90’s.Vikas Kumar Tyagi

…….Always listen to the customer

……Never sell indirect

……Disdain inventory

Vikas Kumar Tyagi

Monitoring Customer preferences. Extremely fast services i.e. 36 hour

turnaround Sensing Market Changes

Internet Model-50%-2000. Server market in 1996, and within 3 years,

servers accounted for 12% of its sales. Workstation market - 1997 by 2000

worldwide market leader. Direct Model approach for major

markets, Distributors for smaller markets

Vikas Kumar Tyagi

Vikas Kumar Tyagi

Lowest operating cost 11.5%. Consumers valued the ability to customize their

computers and purchase them directly from the manufacturer.

Uses telephone and internet in selling model. Internet sales leadership.

Nearly two-thirds of Dell's sales are to large corporations, government agencies and educational institutions. Customer list included Toyota, Boeing, Microsoft, Unilever, Deutsche Bank, Sony, and Wal-Mart.

Retail concept may have instantly available products and offer more comprehensive support, but cannot profitably stock as many different products as direct sellers.

Difficult to copy SCM model.Vikas Kumar Tyagi

Lower facility and inventory costs but higher transportation costs.

Technology follower. High dependency on component suppliers. The company has such a huge range of products

and components from many suppliers from a plethora of countries, that there is the occasional product recall that can cause Dell some embarrassment.

Dell’s focus on the corporate and government institutional customers somehow affected its ability to form relationships with individual customers.

Retail format not developed fully.Vikas Kumar Tyagi

Expansion into Service Sector. After smart phones i.e. Venue & pro, is

planning to come in made to order smart phones.

Strong potential market in Europe, China and India.

Growth in business, education and government markets.

Second Time buyers. More and more people are moving for

online shopping , giving added advantage to Dell’s established internet model.

Vikas Kumar Tyagi

Slowdown of corporate computer business. Saturated PC market. New products are coming out all the time, the

competition is brutal, and customers are changeable, and technology obsoletes overnight.

More affordable personnel computers- reduced profit margin.

IBM sold its laptop business in 2005 to focus more on customized IT solutions

Hewlett-Packard purchased Electronic Data Systems

Entry of new players like Samsung and HCL.Vikas Kumar Tyagi

Dell sources from Far Eastern nations where labour costs remain low, but there is nothing stopping competitors doing the same - even sourcing the same or similar components from the same or similar suppliers.

New software, new hardware and computer accessories are introduced at a lightning speed.

One of the biggest external threats to Dell is that price difference among brands is getting smaller. Dell’s Direct Model attracts customers because it saves cost. Since other companies are able to offer computers at low costs, this could threaten Dell’s price-conscious growing customer base. With almost identical prices, price difference is no longer an issue for a customer. They might choose other brands instead of waiting for Dell’s customized computers.

Vikas Kumar Tyagi

Vikas Kumar Tyagi

Vikas Kumar Tyagi

Indirect PC Value Chain

Dell Value Chain

Vikas Kumar Tyagi

CMs/OEMs

Dell

Distributors

Logistic Companies

Final CustomerComponent

Suppliers

Repair & Support Co.

Third party H/W & S/W

supplier

System Integrators

Physical flow Including Goods & Services

Information Flow

Dell selected i2 technologies for its SCM system.

i2 serves almost 70% of the SCM market. Every 20 seconds the software

aggregates orders, analyzes material requirements, compare Dell’s on hand inventory with its supplier’s inventory and then creates a supplier bill of material to meet its order needs.

Instead of forecasting the daily supply needed, Dell receives the exact material every two hours to fulfill actual customer order while industry average is 40-70 days.

Vikas Kumar Tyagi

Acquired Alienware in 2006-Gaming.

Acquired Perot Systems for $3.9 billion in 2009.

Acquired Boomi (SaaS) in 2010.

Acquired Compellent Technologies for $960 million in 2010.

Vikas Kumar Tyagi

Feedback from Customers, Retailers and Suppliers.

Focus on specific customer types as narrowly as you can afford. Higher segmentation leads to more customized programs and solutions for that segment, at added cost.

Centralize database, where practical, to more fully understand your customers.

Take inventory of every customer touch point. Every interaction with a customer makes an impression or leads to learning

Vikas Kumar Tyagi

Long term relationship with vendors.

No effect of market demand and supply.

Dedicated Engineers to 0Dell.

Just in Time.Vikas Kumar Tyagi

Vikas Kumar Tyagi

Globalized business with integrated R & D, marketing and sales.

Focus on “Killer” products, next generation materials, shorter development cycle, solutions and advantaged costs.

Build portfolio for long term growth by adding new capabilities.

1 to 2 partners in the top 20 markets – with 10,000 stores by year end.

Vikas Kumar Tyagi

Vikas Kumar Tyagi

• Lead in customer segments most important design and features to create brand lust.

• Lead in next generation WiMAX, 4G.

• Tailor mobile devices for customer segments.

• Bring products to customers 40-50% faster.

• Expand the range of products sold globally.

Dell Inc plans to cut more jobs than the 8,800 it had targeted as it seeks to reduce expenses by at least $3 billion annually by 2011

Build-to-Order Manufacturing and Mass Customization.

Direct Sales Market Segmentation Customer Service Virtual Integration and Information-Sharing Demand Forecasting Research and Development Comparative Advertising Work towards employee satisfaction as happy

employees lead to satisfied customers.

Vikas Kumar Tyagi

Vikas Kumar Tyagi

Vikas Kumar Tyagi

Company Market Cap Net Income P/E Ratio EPS

Apple 309.64 16.64b 18.77 17.91

HP 99.69b 8.76b 12.33 3.69

Dell 25.38b 1433.00m 12.64 0.95

Lenovo 5.729b 129.4 26.91 0.44

Vikas Kumar Tyagi

Vikas Kumar Tyagi

Vikas Kumar Tyagi

Dell altered its direct approach by selling computers in CompUSA and Sam’s Club in 1992, but entry into retail channels was not successful

In 2007, Dell partnered with computer retailers, including Wal-Mart, Best Buy, Gome Electrical Appliances & Tata Croma, also started opening its own retail stores starting from Russia.

Dell stock price, October 2005 to October 2007Vikas Kumar Tyagi

Dell still enjoy competitive advantage. Hybrid model includes both direct and

reseller channels. Retailer Model. Medium and Large business as target

model. 24-hour technical support services ,

customizability and ease of ordering. Leasing PCs to individuals, financing

PCs on low monthly payment. Low price marketing strategy.

Vikas Kumar Tyagi

Impressed many in early years with distinct model of supply chain management, selling customized computers directly to customers to meet burgeoning PC demand.

By using this innovative sales model, Dell became an industry and shareholders’ darling, a high-tech pioneer with seemingly limitless growth. But later Dell’s profits and shares dropped considerably from their peaks.

Vikas Kumar Tyagi