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VALUE CREATION OF MARKETING DEPARTMENT OF DELL

COMPUTERS

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Introduction

Product diversification is a key strategy for Dell as it seeks to maintain a

competitive advantage in the declining PC market. Dell needs to restructure its

core business priorities and develop new structures that can help it to gain leverage in a

highly competitive industry. It needs to develop a comprehensive strategy, which can

be based upon achieving key targets through the focus on innovation and

creativity. The development of a comprehensive approach is essential because it can

lead to competitive advantage in the future.Product diversification should focus on

smart phones, tablet PCs, software, storage management solutions, enterprise

services, and supercomputers, which can help the organization to attain growth within

short periods of time. Dell’s corporate branding strategy is also essential because it

must be restructured so that it helps to target home users as well as corporate users. It

should create a competitive strategy, which should help

it to offer value proposition to its customer.

Dell’s key competitive advantages, which include a lean, supply chain

management system and lowered costs through its direct distribution model need to

be reinvented so that they can offer value added services to home users.Dell is one of the

largest organizations in the world with respect to its personal computer products. The

success of the organization has been because of its ability to reduce costs and create

a streamlined supply chain management system. The organization has been able to

offer cost effective personal computers to customers. It has a direct business model

that ensures that computers can be configured according to customer specifications

and directly delivered to them. This has helped Dell to become an industry leader for

many decades. It has created the conditions for loyal customer base and ensured its

success in a competitive industry.

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Dell faces significant threats in the form of declining PC sales. It cannot focus on

limited products while it has to rebrand itself so that it can invest in software and

enterprise solutions. Dell needs to have clear and precise goals. It needs to have a

complete strategy for success, which is based upon efficiency and effectiveness. It needs

to develop a comprehensive approach, which is based upon attaining strategic excellence

within a short period of time.

Phase 1: Situational Analysis

Internal Analysis

Dell’s business model is based upon creating a direct model according to the

requirement of its customer segments. This is done as a means of ensuring that the

organization maintains its competitive advantage in the computer industry. Dell knows

that it cannot afford to own different parts of the value chain. The direct business model

ensures high levels of speed and reliability. It reduces the inventory while bypassing the

need for dealers. It sells products directly according to the customers’ specifications. This

has enabled the organization to reduce the costs and risks of moving large finished goods

inventories. (Smith, 2012)

Competitor Analysis

Dell’s primary competitors include HP, Acer, and Lenovo. All of these

organizations have sought to find ways in which they can reduce prices. They

have ensured that innovative strategies are designed as a means of combating the low

costs of Dell. The price differential, which Dell has been known for, is slowing eroding

because of innovative strategies. (Haag, 2006)

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The competition within the computer industry is very swift which means that Dell

might lose its future competitive advantage. Dell currently has 18% share of the personal

computer market when compared with HP, which has overall 15% share. It is considered

to be the third largest personal computer vendor in the world. HP is slowly eroding the

competitive advantage of Dell through its innovative strategies. Additionally, Dell

is suffering from a decline in PC shipments while its share in the server market

has also reportedly decline. (Cooper, 2006).

Dell is also suffering from competitors like Apple which is a market leader in

technology and innovation. Apple’s emphasis on tablet computers and smart phones is

slowly eroding the competitive advantage of Dell, which continues to focus on personal

computer products.

Market Analysis

Dell has been successful in the market because of its loyal customer base and

diversified product portfolio. The organization’s main products are personal computers,

servers, network equipment, software, and computer peripherals. It also offers cameras,

printers, and other electronics. (Matear, 2002).

Dell has created a flexible supply chain management system so that its key goals

can be attained. It has been using online commerce to increase its sales and revenues. Its

build-to-order processes ensure that customers receive products according to

their specifications. (Halldorsson, 2003).

Customer Analysis

Dell’s customers belong to diverse sectors but the youth represent its main

customers. It has aggressive marketing strategies in order to target the young people. This

is in line with its belief that technology can be easily promoted among the young

customers. Dell has used clear and specific objectives in order to achieve its critical goals.

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It has crafted a superior business strategy that is based upon achieving efficiency

and effectiveness. (Halldorsson, 2007).

Environmental Analysis

Dell’s business environment has become highly competitive because of the

changes in social, political, and economic trends. The ongoing economic recession has

reduced customer spending and forced businesses to cut down their costs. Dell has also

suffered from this and has been forced to scale down its operations.

Another serious threat is that new players are emerging in the market with the

popularity of tablet PCs and smart phones. These devices are new generation, which

offers computing power in a versatile and smart manner. Hence companies like Dell are

forced to make changes that will enable them to compete effectively in the market.

(Munroe, 2011).

SWOT Analysis

Strengths

Dell is the largest PC maker in the world while it is a powerful and loyal brand

among customers. It uses a direct to customer business model that leverages technology in

order to achieve the key goals of the organization. It helps to establish direct relationships

between customers. It also provides top-notch customer services before and after the sales

process. This is an innovative mechanism that enables Dell to have

competitive advantage. (Dell, 2009)

Besides that, it has an efficient supply chain management system with respect to

procurement, manufacturing, and distribution. It leverages technology as means of

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creating streamlined distribution channels. Dell does not manufacture its own products,

which means that it assembles its products using cheap labor and components from

suppliers. This helps it to achieve strategic competitive advantage as it can assemble and

distribute products in an efficient manner.

Weaknesses

Dell is dependent upon large number of suppliers in different countries for

its products and components. It does not have any dealer or retailer relationships, which

can offer significant disadvantages. In addition to that, it does not have any

commercially developed technology, which can be its own patents. This is a

disadvantage when compared with other competitors. (Zeithaml & Bitner, 2003).

Dell’s direct method is problematic for customers who do not have high levels of

awareness and perception. The process of developing computers according to

customer specifications can cause delays for customers who want the product urgently.

(Mendelson

& Ziegler, 2009).

Opportunities

Dell can ensure product diversification as means of ensuring success. For instance,

it can offer maintenance and repair services for old products. It can also increase Internet

stores for convenience, satisfaction, and timeliness of customers. This strategy can help it

to achieve high levels of success with an emphasis on attaining key goals through

innovation.

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Software is another area where Dell can introduce its expertise as means of

combating declining sales in personal computers. Dell can also target

population segments in poor countries by offering cheap computers. Small

businesses are another niche market for the organization. (Mendelson & Ziegler, 2009).

Threats

Substitute products like smart phones and tablet PCs pose serious threats to Dell,

which has limited product categories. Competitive rivalry is strong in the PC

market throughout the world. The new entrants into the market have the potential to

challenge the hegemony of the organization. Dell’s direct model might be unsuitable for

future growth

as organizations devise new strategies to lower down their costs and pass the benefits to

the customers. The growth of the personal computer industry is slowing which

means Dell needs to focus on product diversification. This approach can help the

organization to achieve its critical goals in an efficient and effective manner. (Dell, 2009).

Phase 2: Objectives and Strategy Development

Marketing Objectives

The following are the marketing objectives of the organization:

Dell should work on corporate branding so that it can retransform itself from a

PC manufacturer to a firm that provides products and services to different niche

markets. Corporate branding is extensive and Dell should focus on enterprise level

solutions, storage networks, and supercomputers, which will target the corporate

sector.

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Dell needs to be cohesive through acquisitions and mergers.

Product diversification should be supported by innovation in the field of software,

enterprise solutions, tablet PCs and smart phones.

Innovative technologies can be developed so that they can be sold at lower costs. This

is the backbone of the organization, which has been successful because of its ability to

manage its logistics.

Dell should enhance its relationships with its customers as means of ensuring

high levels of success. (McDonald, 2002)

It should not abandon its PC hardware business but find ways to develop innovative

devices that are in accordance with current market conditions.

Dell should employ its key strengths to remove weaknesses

Targeting and Positioning

Dell needs to restructure itself so that it can create the image of a diversified

technology solution provider. Services and software will be the main backbone of

its new marketing strategy. Besides that, its core business, which is hardware, will

remain but it will provide technological and innovative solutions. Dell needs to

target home users as well as different corporate customers. The development of

a comprehensive business strategy is critical for success as it will lead to long-term

growth. (Graham, 2005).

Dell needs to conduct an analysis of the cash flows from the profitable products

and services. This will help the organization to attain strategic competitive

advantage.

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Dell should focus on its key strengths, which are to reduce costs, which can be helpful, as

it will ensure innovation, and low costs with respect to new technology. (Jobber, 2001)

Growth Strategy

Product diversification is a key strategy for Dell as it seeks to maintain a

competitive advantage in the declining PC market. Dell needs to restructure its core

business priorities and develop new structures that can help it to gain leverage in a highly

competitive industry. The development of a comprehensive approach is essential because

it can lead to competitive advantage in the future. (Khan & Khan, 2009).

Product diversification should focus on smart phones, tablet PCs, software,

storage management solutions, enterprise services, and supercomputers, which can help

the organization to attain growth quickly. Dell’s corporate branding strategy is also

essential because it must be restructured so that it helps to target home users as well as

corporate users. It should create a competitive strategy based upon the lenses of customers

and competitors. This can help it to offer value proposition to its customer.

Dell’s key competitive advantages, which include a lean supply chain

management system and lowered costs through its direct distribution model need to

be reinvented so that they can offer value added services to home users. The home

users remain the most profitable segments for Dell. (Bennett, 2003).

Cloud computing is another area where Dell can foster growth and development.

It can employ the power of software and storage technologies through the Internet

as means of attaining clear leverage in a highly competitive industry. Supporting the

cloud computing industry is another innovative way for growth in the market.

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Dell needs to appear cohesive through its mergers and acquisitions. This will help

it to have a centralized strategy for attaining growth. It should focus outwards so that its

business processes are flexible, reliable and agile. It needs to redefine its priorities and

make investments in the areas where there are potential for increased cash flows.

This will help the organization to attain success by leveraging its key products and

strengths.

(Phillips, 2005).

Selection of Competitive Advantage

Dell can attain competitive advantage by using following strategies:

Product diversification should continue but its core products of hardware should

be given priority so that it can determine profitable markets.

Niche markets need to be targeted by the organization for success.

It needs to focus on branding itself into a complete IT services and devices provider.

Dell needs to revamp its marketing and business strategies through efficiency,

competence, and professionalism.

Marketing Mix

Product

Dell’s products should offer tangible and intangible benefits to its customer

segments. New products and services can offer significant advantage and choice to

the customers. They can also provide increased loyalty and brand image for the

organization, which is needed by Dell in order to ensure that it can secure its

future. (Yasin & Zimmerer, 2005)

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Price

Dell’s pricing strategies should not exclusively focus on lower prices. But it can

devise ways to find products and services that are innovative but at low prices. In other

services, the organization needs to have clear choices so that it is able to achieve

its critical targets in a proficient manner. (Webb et al, 2000).

Place

Dell should focus on online commerce as the means to reduce its costs. This can

help the organization to offer an online business model that offers

convenience, satisfaction, and excellence for the customers. (Wilson, 2002).

Promotion

Social media is another way to promote its products and services. Moreover, the

Internet should remain the main medium for the success of the organization. The use of

different promotional strategies over the Internet and social networking sites will help the

organization to attain strategic leverage within a short span of time. (Holloway, 2006).

Conclusion

Dell has been successful in the PC market because of its supply

chain management and direct business model. It has a flexible and reliable supply

chain management system that reduces inventory and costs. It reduces risks of

operating in a competitive industry. Dell has a brand image among its customers

because of its cost effective rates. All of these factors have made the organization

very popular among the customer segments.

However, Dell has been facing stiff competition as the trend in the PC markets has

changed. It has faced new entrants and new technologies that erode its traditional

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competitive advantage. Dell needs to devise a vibrant business strategy that is based upon

product diversification. It should also continue with its primary model of computer

hardware. Furthermore, it is through the emphasis on a strategic edge that

the organization can attain success in the long term. The long-term growth should be

based upon using its competitive advantages.

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