The most important lesson ^_^

Tháng Hai 19, 2011

Everyone's dream

Where Dell went wrong?

Tháng Hai 4, 2010

With the resignation of Kevin Rollins as Dell’s CEO, one of the oldest yet most important adages of PC industry is proven: no company can stay on top forever. Relentless competition, product commoditization, prickly customers and the aggressiveness to become number one or two in the fields always tend to bring down a company.

So where did Dell go wrong?

In a common way of speaking, Dell succumb to the belief that its business model would always work and keep it far ahead against other competitors. It clung too narrowly to its own founding strategy, forgetting to search or develop future sources of growth.

While Dell indeed broaden its product lines, it never really used it lead in products direct sales to invest in new business lines, talent, or innovation to deal with the constant improvement of its competitors.

Dell is a textbook example of single-formula growth, “We make PCs cheap. This is what we do, and we do it a lot” said Jim Mackey, MD at Billion Dollar Growth Network.

Although single-formula can help a company grows very fast during certain stage, once it reaches certain point of development, single-formula simply doesn’t have the ability to expand or create new growth.

Together with that, one of Dell’s fatal mistakes is that it hired too many “former management” consultants like Rollins himself. While having great credentials themselves, those consultants are usually very disconnected from people and only associates themselves with their fellows. In their mind, their top priorities is how to cut back on services to reduce cost without anyone noticing.

Unfortunately, with the overgrowing Internet these days, customers become more educated, and they have easy access to communities sites to share their thoughts and experiences. With the changes in Dell’s way of treating its customers, there is no surprise that they will turn to other brands like Hewlett “the computer is personal again” Package, Lenovo or Acer.

With its secret weapon for decades, the customer trust and satisfaction, backfired on itself, Dell faced a great downfall in business.

Although there have been many efforts from Dell, like having Michael Dell himself in the call center answering call, customers’ trust will still take a while to win back.

A second mistake is that Dell has no style itself. For half a decades, despite being a very profitable major PC company, Dell didn’t invest that money into researching for new product lines but rather return those as earning for stakeholders. Because of that, the company has been a boring PC maker for a very long time. While PCs and electronics consumers have become a large part of business in the recent years, Dell could only come up with TVs, but still in a very low market share, 15%.

Dell didn’t begin an orderly evolution during its prime time, now it is paying for the consequences.

Dell is also a people-intensive business that doesn’t benefit from the expertise of efficient manufacturing, making it a very hard time to move up the value chain. While other competitors like HP can reduce its products price with the advantage of being a manufacturer itself, Dell’s computer price gradually become “un-cheap” if not more expensive than others’ computers. Statistic showed that in the year of 2002, Dell’s average price was $1084, while HP is only $1009. For a long time cheap price is one of Dell’s key advantages, but that advantage has faded.

Not being a manufacturer also works against Dell, because by no mean it can improve its PC capabilities by utilizing new technologies and such, Dell’s PCs fall out of strict customer favor quickly.

These are the kind of challenges that Dell has to face for years. How well its founder handles them will determine whether his legacy is building a great company that lasts or just having a great idea that ran out of steam. We will wait and see :)

Dell SWOT analysis

Tháng Hai 3, 2010

Dell Computer Corporation was founded in 1984 by Michael Dell with a very simple premise: computers should be built and sold directly to customers. By doing this, Dell has become one of the world’s largest PC maker as well as one of the best well known brands. Dell now employs more than 76000 people world wide, nine manufacturing plants and provide 24/7 customer supports. The company ships approximately 140000 custom-made computers per day and has over 2 billion interactions with customers every year.

Dell’s Direct model enables them to interact with customers directly, providing them with fast and reasonable priced products and distribution.

Strengths

Direct sell models meaning that Dell build computers based on customer provided specifications, allowing customers to make their own computer interactively on Dell website or telephone. Over 85% of Dell’s sale are made through their website using this method, allowing customers to make their own computer with competitive price, since this cuts down the cost arise from retailers. 

This method also allows more customer interaction, helping Dell provides top-notch customer service both pre-sale and post-sale.

Computers are made by Dell affiliated manufacturer with relatively cheap labour. This will cut down the cost of inventory managements, as a result, Dell only has to keep an average of 5 days inventory in comparison to the usual 30-40 days of its competitors like HP. This also means Dell can quickly introduce the latest relevant technology without worrying about leftover inventories.

Weaknesses

Custom made computers are Dell’s strength but also weakness. Because every product is built by customer, no customer can buy a pre-made Dell product like other companies with retailers system. Custom made products also might take up to several days to finish.

The above also means that Dell is very dependent on its suppliers, or manufacturer, which come from a wide range of countries, and very hard to control the quality consistency amongst them. There has been case of massive recall due to defective products happen in 2004 when Dell has to recall 4.4 million laptops adapter in fear of them overheating, causing electric shock or fire.

Dependence on suppliers and not being able to produce computers itself make Dell unable to switch supply and locked with certain core suppliers for a period of time.

Another of Dell weaknesses is the relationship with college student segment. Since most of students purchase their computers through their schools or institute, Dell’s Direct Model approach is obviously not popular. As a matter of fact, this segment earn only 5% of Dell’s total revenue while remaining a very potential market segment for other companies.

Despite being a very successful company, Dell does not hold its own trademark or patent or any copyright technology at all. All of its technologies are also used by all other industry competitors.

Opportunities

While there are still defects with Dell’s Direct Model, personal computers are becoming more and more necessary and commonly used, customers are getting more and more educated about computer. As their knowledge grows, they will seek out for Dell’s custom made computers the fit their need to experience additional use of computer features.

The overgrowing Internet also provides Dell with more opportunities since the majority of Dell businesses are done over the net.

Moreover, while already been one of the world’s largest computer providers, Dell’s market still has many potential areas to explore. By providing low cost, low price computers directly to retailers, Dell would gain a substantial segment of the market. And by sponsoring educations purpose, Dell could gain more popularity amongst students.

Together with the pursuit of diversification in technologies by introducing new products such as printers or toners, LCD televisions and other non-computing goods, Dell now can compete in a wide range of market areas.

Threats

Like any other companies in the ever-changing fields of computer business, Dell face the competition from rivalries existing in the PC market globally. Although Dell’s model has been proven to be effective, there is no stopping its competitors to adopt a similar, if not the same, strategy with a better suppliers.

Also, in global trend, the price difference among brands are getting smaller and smaller, making Dell’s main attraction, the build cost, become less obvious. There might come a time that all the price difference disappear, leaving customer choice purely dependent on the brand’s name, and as other brands can provide pre-made computers unlike Dell’s several-day-to-build custom made products, Dell is at a disadvantage here.

Being a globally recognized brand, Dell is also exposed to the fluctuations in the World currency exchange market. The system where orders are placed before being charged could leave the company in potential loss in part of the supply chain if there is changes in exchange rates.