DELL Strategic Analysis

| Updated: July 10, 2019 |

Strategic Analysis of Dell Technologies

INTRODUCTION:

Dell is known worldwide as a major computing and IT brand. Michael Dell founded the company in 1984. He remained the CEO of Dell from the year of foundation till 2004. Again he resumed his position as chairman and CEO in 2007. Dell is among the top players in the computing industry. Prior to 2016, it was a private company. In 2016, it acquired EMC to grow its product range. After it merged with EMC, the brand was renamed Dell technologies. Dell’s revenue saw an impressive rise this year. It provides products and services that are organized in three main groups. They include Client Solutions Group, Infrastructure Solutions Group and VMware Group. Dell is a global brand with its headquarters in Round Rock, Texas. The PC industry is marked by heavy competition as well as high level of regulation. Intense competition has led to higher expenditure on sales and marketing as well as research and innovation. Dell is focusing on the emerging markets to find faster growth. As a PC brand, it has maintained excellent focus on product quality. This is why it enjoys high level popularity in the international market. It is among the top five players in the industry rivalled by HP, Lenovo, Apple and Acer. It is an innovative brand that holds a large portfolio of patents. Dell is planning faster growth. Its business model has undergone some significant alteration during the recent years. The PC market is full of significant risks where even the smallest moves matter. Dell is a strong brand and must remain steady to survive upcoming risks and challenges.

DELL STRATEGIC ANALYSIS

SWOT ANALYSIS of DELL INC.:

STRENGTHS:

  • Brand image :- Dell has maintained a strong brand image as a global PC and IT business. Its focus on quality and innovation are the reason behind its popularity. Dell’s popularity can also be attributed to its pricing strategy. It has brought a wide range of products. However, it makes products for the higher end as well as the lower end market. A strong brand image has resulted in higher sales worldwide.
  • Product Portfolio :- Dell has maintained a large product portfolio which it has continued to grow through acquisitions. Its business is divided into four segments that include Infrastructure solutions group, Client Solutions Group, VMWare and Other businesses. The Client Solutions Group offers  PCs, notebooks, branded peripherals like monitors and projectors as well as third party software and peripherals. Dell formed its Infrastructure Solutions Group after the acquisition of EMC and its merger with Dell’s Enterprise Solutions Group. ISG offers  cloud and big data solutions, which are built upon a modern data center infrastructure for enterprise customers. “VMware offers compute, cloud, mobility, networking and security infrastructure software to businesses” (Dell Annual Report, 2018). Its other businesses include RSA, Pivotal, Secure Works and Boomi. RSA and Secure Works provide security solutions. In its PC business, the brand has brought both high end and low end products. Its alienware laptops come with a large price tag. However, it has also brought  a large number of products in the lower price range too.
  • Focus on innovation :- Dell is an innovative brand and invests in innovation for continuous expansion of its product line. Its focus is on the development of scalable technology solutions at competitive prices. Dell incorporates customer input into the research and design process. Moreover, its engineers collaborate with a large network of technology companies globally to create new designs and bring hi-tech solutions. In the recent years, it has increased its investment in Research and development. For 2016, 17 and 18, its investment in research and development was 1.1, 2.6 and 4.4 Billion dollars. In 2018, it has sharply increased its investment in research and development.
  • Global expansion :- Dell is a multinational brand with operations across several countries in Americas, Europe, Middle East, Asia and other geographic regions.  US is its main market. However, the brand is trying to expand its business faster across newer areas. It is focusing on emerging markets outside US, Japan, Canada and Europe. China and India are among the fastest growing markets currently. Dell is trying to increase its presence there.
  • Efficient manufacturing and supply chain :- Dell has an extensive and efficient manufacturing and supply chain. The company owns manufacturing facilities in the United States, Malaysia, China, Brazil, India, Poland, and Ireland. Its manufacturing process consists of assembly, software installation, functional testing, and quality control.

WEAKNESSES:

  • High operating expenses :- Operating expenses of Dell Inc have grown very high which has resulted in operating losses for previous several years. In 2018, the operating expenses of Dell Inc have grown as high as 23.4 Billion Dollars leading to a loss of 3.3 Billion dollars.
  • Over-dependence on Michael Dell for decision making:-  Dell depends too much on Michael dell for decision making who is both the CEO and the largest stockholder of the company. Sudden loss of his services may result in major difficulties for the  brand.
  • Lack of differentiation: – Dell is not a very highly differentiated brand. Moreover, it failed to enter some of the most profitable business segments like smartphones. Most of the products and services it offers have several substitutes in the market.
  • Dependence on US market :- The brand earns a very large part of  income from the US market. In 2018, nearly 48% of the brand’s income came from United States. Dell currently depends heavily on United States. Apart from that Western Europe, Japan and Canada are also important markets for the brand. It is trying to increase its presence in the Asia Pacific market. However, Dell’s main market are still the Americas.

OPPORTUNITIES:

  • AI and emerging technologies: – Dell can use differentiation to grow its business and expand faster. It can venture into new areas and invest in the development of new technologies. There are several emerging areas from AI to mixed reality that offer new growth opportunities. The brand can invest in these areas to grow its business. Investing in the emerging technologies can help the brand be more competitive.
  • Asia Pacific markets:- The Asia Pacific markets are growing faster and Dell must  focus on the emerging markets like China and India to find profitable growth. These markets are growing at the fastest rate and investing in them will also work to increase Dell’s income from international markets.
  • Differentiation: Dell must try higher differentiation to create a distinct brand image. It is facing high level competition in the world market because most of its products have several substitutes. Differentiation will help the brand grow its product line as well as  open new channels of revenue.

THREATS:

  • High level of competition :- The level of competition in the PC industry has grown very high. Dell is facing heavy competition from other brands like HP, Lenovo, Acer, Apple and Asus. It has increased its expenditure on research and innovation as well as marketing. However, dell still does not spend much on Promotions. Its advertising expenditure for 2018 was just around 1 Billion dollars. Its R&D expenditure on the other hand has grown a lot reaching 4.4 Billion dollars in 2018.
  • Shrinking PC market :- The PC market has declined fast during the recent years. this has happened due to several reasons. The biggest reason is the rise of mobile computing which has led to growth in use of smartphones, tablets and other mobile computing devices.
  • High level regulation :- The level of legal and political regulation in the PC industry has grown very high. There are several laws in each area and apart from that laws related to international trade have also grown very high. This has led to higher compliance related costs as well as higher operational costs and pressures.

PESTEL Analysis of DELL INC.:

Political:

Political factors have grown highly important in the context of business worldwide. Their role has grown central to operating successful international businesses. The political environment worldwide is having a direct effect on global businesses. It is why certain foreign markets are more difficult to penetrate than the others. The geopolitical factors too can have a heavy impact on businesses. Today, companies are operating in a heavily controlled environment. The level of government oversight is much higher than it used to be some years ago. There are several reasons that governments are exercising heavier control. Several changes in the 21st century political environment have influenced this change. Political stability has also grown important to conducting business peacefully and successfully in 21st century. Political chaos on the other hand can  disrupt sales and supply chain network. Dell is a global brand with operations in nearly every part of the world. As such politIcal factors and the political environment of these nations has  direct impact on its business.

Economic:

Economic factors too are playing a central role in the context of business. Their impact is most direct on global businesses. It is why changes in the economic environment worldwide matter the most to businesses and investors.  The world economy has been through a  recession. During that period employment level fell worldwide leading to decline in people’s income. This was a period when spending on electronic items grew lower. As such most businesses saw heavy losses. The world economy has returned on track in the recent years and the level of employment has also grown higher. People are having more disposable income and global brands are enjoying higher sales and revenue. Dell has also seen a fast rise in its net revenue during the recent years. Its 2018 revenue rose to 78.6 Billion dollars, rising  from 61.6 Billion dollars in 2017. Economic stability is important for growth and most of the world economies are seeing faster growth including the Asia pacific region. Dell  has its headquarters at Texas in United States. US is also its main market which accounts for 48% of its net revenue. Economic activity has grown a lot in US during the recent years. The overall economic outlook is also a lot better than the recessionary period. Some of the world markets are still seeing economic fluctuations but economic growth in the Asia Pacific markets has brought fresh opportunities for brands like Dell. In this way, the role of economic factors in the context of international business is very important.

Social:

Social factors are also growing important in the context of business. Their role has grown manifold in the last few decades. A good social image is now more important than ever for businesses and particularly the large and global companies. Businesses like Dell are investing millions in building a strong social image. They invest in social responsibility and other areas of philanthropy. Sociocultural factors are also playing a major role in the area of marketing. Dell operates across several countries. Culture differs from country to country. It is why a company like Dell would need to adjust its business and marketing strategies to suit its markets and cultures. It also invests in communities and local economies where it operates. This has helped the brand build a great reputation and image. Social trends also affect businesses. This century has seen the rise of the millenial generation and the middle class. Customers’ taste and preferences have changed a lot. Dell and its competing businesses are building models that suit the millenials’ taste. Society and culture are now more important factors than ever in the field of business.

Technological:

Technology is now a central pillar of business strategy for global businesses. Brands are investing heavily in Information technology. Dell is a technology brand that has brought a large range of hardware, software and cyber security products. It also invests heavily in technological innovation. This has helped the brand grow its revenue faster. Technology is now  driving the business world. It has become a key source of competitive advantage for companies. Every brand is investing in technology to create sustainable sources of competitive advantage. Even Dell has raised its investment in Research and innovation. In 2018, its investment in R&D reached 4.4 Billion dollars rising from 2.6 Billion dollars. Dell has brought a large range of technology products including software, hardware and cyber security products. It also serves a large number of firms globally through its global sales and service network.

Environmental:-

Environmental factors have also grown in importance in the twenty first century. Businesses are taking environmental forces more seriously than ever. It is because while on the other hand the government has formed strict laws regarding environment and emissions, brands themselves are cautious regarding their social image and their environmental impact. They are also investing in environmental issues and the protection of their community and environment. Dell has also invested in environmental issues in several areas from sustainable production to green packaging and reduction of carbon footprint. It is also investing in renewable energy and energy efficient production. While this is great for the environment, it is also good for the brand in several ways. It gives rise to higher trust, better social image and higher customer loyalty. Governments around the world are encouraging businesses to invest in the environment and build an environment friendly image. In this era, investing in the environment is great for any brand.

Legal:-

Law and legal factors have grown central to business in the 21st century. The level of legal oversight in the PC industry is also very high. Governments and legal agencies around the world have tightened their grip on businesses. Major global businesses and mainly the technology companies have felt string pressure and several of them have also incurred huge fines in various areas. The legal environment in EU is being seen as an attempt at stifling growth of the large technology brands. Even in US, businesses are complaining of  an outdated regulatory model that does not suit the needs of the modern business scenario. From labor to environment and product safety, legal issues are causing significant financial pressure for businesses. Dell’s image in this area has remained relatively clean. This is because of the company’s focus on compliance. While compliance adds to operational costs still brands cannot afford to lose focus on local and international laws governing their businesses. It can lead to major fines and losses. [Continue reading on next page…]

Abhijeet Pratap

I am Abhijeet Pratap, editor of notesmatic. I am an MBA with marketing (major). Apart from writing on various topics in business management, marketing and English literature, I like to read and write about technology.