Personal Touch With Customers O Dell example essay topic

Q # 1 What is your evaluation of Michael Dell as CEO? How well has he performed the tasks of Strategic management discussed in Chapter 1? o He is an excellent CEO At age 33, he is a multi-billionaire, one of the richest people in the world and one of the most respected CEOs in the world. He has done his job in the best way he could because given the age and lack of experience, we think he has done what he could. Assessment of his job as CEO o Company's chief strategic visionary o In 1990, Michael Dell set an objective for Dell Computer to become one of the top three PC companies. o Company's financial position has improved with the passage of time o He is the chief architect of the company's strategy o Michael Dell has pushed the company to revamp the traditional industry value chain, shortening it and slashing out cost-producing activities. o He is pushing the concept of "Virtual Integration" o Best execution of Just in Time inventory concept and reduction in the number of days of parts of inventory o Very aggressive in advertising and always pushing for communicative and forceful ads o Close personal touch with Customers o Dell has responded to changes in the PC marketplace by pursuing greater and greater market segmentation. o On the whole, Michael Dell is a very effective CEO and has performed his job quite well.

Q # 2 What are the elements of Dell's strategy? How well do the pieces fit together? Is the strategy evolving? Vital Elements of Dell's Strategy; o Build-to-order manufacturing and mass customization o Partnerships with suppliers o Just -in-time delivery of inventories o Direct sales o Market segmentation o Customer service and Technical support o Virtual integration and information-sharing o Demand forecasting o Research and development o Advertising o Servers Yes, in our opinion the pieces fit together beautifully. The strategy is evolving which has been witnessed by the recent entry into servers and the move to virtual integration. Q # 3 What does a SWOT analysis reveal about the attractiveness of Dell Computer's situation?

Strength o Product quality o Efficient, low-cost assembly o Global manufacturing and global sales capabilities o Efficient cell-manufacturing assembly o Just-in-time inventory know-how and capabilities o Long-term partnerships with key suppliers o Capability to load customer software and install asset tags; lowers customer costs o First hand information of what are the customer requirements, needs, wants and information o Dell's global manufacturing and global sales capabilities o R&D capabilities o Expansion into servers gives Dell ability to serve wider range of customer needs o Reputation / image o Use of Internet and corporate intranets to make sales and provide information o Customer service and Technical support o Just-in-time inventory practices (no one in the PC industry does it better - or even comes close to matching what Dell can do) o Build-to-order manufacturing and mass customization (Dell is the industry standout, but rivals are working to close the gap) o Virtual integration - weaving a partnership with both suppliers and customers o Direct sales capabilities (no rival can yet match Dell on this, although some are trying) Weaknesses o No in-house repair service capabilities (as some rivals have) o Lacks the product line and service breadth of Compaq Computer and IBM Opportunities o Continue to take market share away from rivals in PCs in all of the world's major markets o Make further inroads in servers Threats o A long-term slow-down in global sales of PCs and servers o Competition because competitors have strong product lines and service breadth Q # 4 What does a competitive strength assessment reveal about Dell, as compared to Compaq, IBM, Hewlett-Packard, and Gateway? Among these five competitors, who enjoys the strongest competitive position? Who is in the weakest overall competitive position? Q # 5 Has Dell's strategy resulted in a substantial competitive advantage over its rivals? What is the basis for whatever competitive advantage it has?

Competitive Strength Assessment o Build to order approach o Direct sales approach o Attractive price and strong brand name o Ability to save customer's money -- loading customer software and technical support o First hand information of what are the customer requirements, needs, wants and information o Close working relationships with suppliers and customers o Long term relations with suppliers We believe that the strongest competitive strength for Dell is its entire business model. Everything is working in an order so we cannot say that one or two components of the strategy are best. Dell's entire business model is based on the strong vision of Michael Dell and the employees are very much dedicated to it so everything seems like working for them. Q # 6 What is your assessment of the company's financial performance the past five years? Short Term Solvency Ratios 1999 2000 Current ratio = current assets / current liabilities 1.571583 1.479391 Quick ratio = (C. A - inventories - prepaid expenses) / C. L 1.4977 1.404083 Long term Solvency Ratios Debt Equity ratio = (C. A + L. T Liabilities) /Stockholder's equity 1.812581 1.073851 Profitability Ratios Gross Profit Margin = (Sales -cost of goods sold) /sales 0.225073 0.206531 20.65308 Percent Operating Profit Margin = (net operating income / sales) 0.112153 0.089571 8.957055 Percent Net profit margin = net income / sales 0.080031 0.065941 6.594103 Percent Return on Assets = net income / total assets 0.212302 0.145236 Return on Equity = net income / total equity 0.629039 0.313866 Asset Utilization Ratios Average collection period = A. R / (sales/365) 41.89607 37.67742 Days Inventory Turnover = cost of goods sold / inventories 51.78388 51.2711 We are given the balance sheet for only two years whereas income statement is of four years. So it is pretty difficult for us to find the ratios for previous years like 1998, 1997.

But by looking at the revenues row we say that there are very high percentage chances that the company will be doing well in coming years. In the previous years the company has been performing well. Its revenues have been increasing. Let's look at the year to year increase in revenues.

Revenues increased by 37% from 1997 to 1998, 32% from 1998 to 1999 and 27% from 1999 to 2000. The revenue is increasing but in a declining rate because the industry is has experienced a slump especially technology and PC industry. Prices have come down so these are few reasons why revenues increasing rate has come down but Dell is still doing better than its competitors. This suggests that not only revenue increasing rate has declined but also the rate of cost for generating revenue has come down.

This represents a health picture of a company which has succeeded in cutting the cost and has increased its revenue over the period of time. Q #7 What are Dell's chances for becoming the global market leader in PCs? Is its strategy potent enough to overtake Compaq Computer? The Dell's chances for becoming the global market leader in PCs market are very bright. It is already grabbed the second spot and its market share is increasing with passing years as compared to Compaq, which is the market leader now. Compaq's market share in 1998 was 14.5% and in 1999 14%.

Its market share has decreased by 0.5%. Whereas Dell's market share in the same years has increased by 2% i.e. from 8.5% to 10.5%. But Dell's strategy seems better than Compaq's strategy in the PC segment. So in the near long term it seems that Dell will takeover as the market leader in PCs from Compaq.

From above data it seems quite appropriate to believe that Dell will overtake Compaq in the PC industry. Q # 8 Would you buy stock in this company? As it is a growing and will be market leader so if we get a chance to buy its share, we will love to buy it. The point here, however, is that our analysis of Dell and its future prospects indicates this is a company where stock ought to yield attractive long-term returns to shareholders. i dont have one.