Business Strategy

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Dell: Changing Strategy

Submitted To: Submitted By Dr. P Prabhakar Nandamuri Rahul Shukla -12BSPHH010820 Akshay Rawat -12BSPHH010815 Rashmi Dubey -12BSPHH010805 Rakesh M G - 12BSPHH010802 Ritika Khurana -12BSPHH010841 Varun Porwal -12BSPHH011168 Ridhima Plah -12BSPHH010825

Dell: Changing Strategy Executive Summary Since 2007, dell has been progressively executing a strategic plan designed to diversify their company beyond a traditional computer business. This plan resulted in the acquisition of at least 25 small companies for example in 2005, KACE Networks in 2010 so on. These acquired companies have consisted primarily of providers of software, storage and other tech services business that dell can grow rapidly by leveraging the larger company’s global footprint. The process so for appears to be working for the company, as Dell has touted rapid sales growth for nearly all of its acquisitions and it’s because software tends to be more profitable than hardware. Dell spent $13 billion since 2008 and $5 billion in the past year on acquisitions. These acquisitions contributed dell’s earning more than doubling over the past two years. The increased revenue from the acquired companies has barely offset the slowing PC sales. Dell slipped from 1st position in 2006 to 3rd in 2012.According to the informationweek.com article dated 12th July 2013 Lenovo accounted for about 16.7% where HP and Dell at 16 and 12% in global shipment. Tablet sales, for example, have grown from 17 million in 2010 to 122 million in 2012, according to a report from Business Insider There following are four reasons which shows that PC market will never rebound. 1. All-in-ones are nice 2. Tablets will continue to encroach on the PC's territory. 3. Tablets are just the beginning. 4. The tech powers have already conceded the future. Dell is being particularly hard hit as it does not have an entry in the smartphone contest. Investors fear that as the PC era wanes, Dell and rivals such as Hewlet-Packard will slowly fade from view. Issues 1. Dell Potter’s Five Forces Study.

We will identify the five factors that act together to identify the nature of competition within the PC industry and major threats to Dell.

2. Shifts of dell Business Strategy from a PC manufacturer to an Enterprise Solution Provider. As we all know the Dell is a PC manufacturer and what made dell to acquire 25 small companies in the various IT sectors like database, cloud services, software services, network securities etc. 3. Reasons for Dell buyout. In January news came that Dell want itself to move from Public to Private. The $24.4 billion proposal to privatize U.S. technology giant Dell is part of founder 's efforts to transform the company into a 'mini IBM', said analysts, as the world's third largest (PC) maker struggles to protect its market share against competitors.

Industry Profile The IDC released its latest quarterly report, stating that the PC market had slumped a record 13.9 percent in the previous quarter, before further stating that PC shipments this year would decrease by 1.9 percent. (Refer Exhibit 1 for Units Shipped per year, 1975-2011) But now, things have taken a sharp turn for the worse, with IDC releasing revised figures showing that the PC shipments will in fact drop by a massive 7.8 percent in 2013, double the decline from the previous year. But that’s not even the worst of it, because from here on in, things are only going to get worse. The firm predicted that PC shipments would decline by another 1.2 percent in 2014, and a further 1.5 percent in 2015. The reason for the PC’s sickness is the rapidly growing mobile market, particularly where consumers are concerned. These days, people are engulfed in a world full of apps and social media and many of them are content with palm-sized devices to cater for their needs. People no longer see the need to shell out their cash on expensive, bulky PCs, since most of the things that they do online can be done using smartphones or tablets that are far easier to carry around and generally cost a lot less money. PCs are still important but they’re no longer the kind of device that constantly needs replacing with a newer model. The vast majority of people are happy to hang on to their older model, whilst supplementing it with a tablet or some other device. Laptops and desktops just aren’t cool anymore, nor are they essential, and the result is that people will only buy them when they really need a new one. Today, most people are more focused on replacing their smartphones or tablets with the newest model – after all, these are the devices have almost become fashion accessories, and they just have to be had, no matter what the cost. Laptops don’t even come close. The prospects for PC makers are not good. While the market certainly won’t go away for a long time yet, it’s undoubtedly undergoing a rapid transformation – one that could ultimately lead to some PC makers (notably Dell) falling by the wayside Nevertheless, it seems there’s always someone willing to buck the trend. Defying all the odds, Chinese manufacturer Lenovo seems on especially solid ground. While everyone else loses money with declining sales, Lenovo has actually recorded growth in PC shipments, establishing its brand as the top PC maker in Asia.

Company Profile Dell Inc. (Dell) is a global information technology company that offers its customers a range of solutions and services delivered directly by Dell and through other distribution channels. Dell is a holding company that conducts its business worldwide through its subsidiaries. The Company operates in four segments: Large Enterprise, Public, Small and Medium Business, and Consumer. The Company’s Large Enterprise customers include global and national corporate businesses. Its Public customers, which include educational institutions, government, health care, and law enforcement agencies, operate in their own communities. Its SMB segment is focused on helping small and medium-sized businesses by offering products, services, and solutions. Its Consumer segment is focused on delivering technology experience of entertainment, mobility, gaming, and design. On February 3, 2012, it held a worldwide portfolio of 3,449 patents and had an additional 1,660 patent applications pending. The Company also hold licenses to use numerous third- party patents. The Company designs, develops, manufactures, markets, sells, and supports a range of products, solutions, and services. It also provides various customer financial services to its Commercial and Consumer customers.

Enterprise Solutions and Services The Company’s enterprise solutions include servers, networking, and storage products. Servers and Networking portfolio includes rack, blade, and tower servers for enterprise customers and value tower servers for small organizations, networks, and remote offices. During fiscal 2012, it expanded its PowerConnect campus networking product offerings with a suite of Dell data center networking solutions. It offers a portfolio of advanced storage solutions, including storage area networks, network-attached storage, direct-attached storage, and various backup systems. During fiscal 2012, it shifted more of its portfolio of storage solutions to Dell-owned storage products. The Company’s services include a range of configurable information technology (IT) and business services, including infrastructure technology, consulting and applications, and product-related support services. The Company offers a variety of services to its customers as part of an overall solution. It offers services that are tied to the sale of its servers, storage, and client offerings. These services include support and extended warranty services, managed deployment, enterprise installation, and configuration services. Its outsourcing services include data center and systems management, network management, life cycle application development and management services, and business process outsourcing services. It also offers short-term services that address an array of client needs, including IT infrastructure, applications, business process, and business consulting. The Company will classify its services as Support and Deployment services, Infrastructure, Cloud, and Security services, and Applications and Business Process services. Support and deployment services are tied to the sale of its servers, storage, networking and client offerings, as well as multivendor support services. Infrastructure, Cloud, and Security services may be performed under multi-year outsourcing arrangements, subscription services, or short-term consulting contracts. These services include infrastructure and security managed services, cloud computing, infrastructure consulting, and security consulting and threat intelligence. Applications services include such services as application development and maintenance, application migration and management services, package implementation, testing and quality assurance functions, business intelligence and data warehouse solutions, and application consulting services. Software and Peripherals The Company offers Dell-branded printers and displays and a multitude of competitively priced third-party peripheral products, such as printers, televisions, notebook accessories, mice, keyboards, networking and wireless products, digital cameras, and other products. It also sells a range of third-party software products, including operating systems, business and office applications, anti-virus and related security software, entertainment software, and products in various other categories.

Client Products The Company offers a variety of mobility and desktop products, including notebooks, workstations, tablets, smartphones, and desktop personal computers (PCs), to its Commercial and Consumer customers. Its Latitude, Optiplex, Vostro, and workstation lines of mobility notebooks and desktop PCs are designed with its Commercial customers in mind. The Vostro line is designed to customize technology, services, and expertise to suit the specific needs of small businesses. It also offers the precision line of mobile and desktop workstations for professional users. During fiscal 2012, it introduced the Vostro 3000 series notebooks, and the Dell Precision M4600 and M6600 mobile workstations, and made enhancements to E-family of notebooks. For its Consumer customers, it offers the Inspiron, XPS, and lines of notebooks and desktop PCs. The Company targets sales of its Alienware line to customers seeking advanced multimedia capabilities for gaming. During fiscal 2012, it introduced desktops and notebooks in each of its consumer brands, including Inspiron and XPS notebooks. Financial Services The Company offers or arranges various financing options and services for its Commercial and Consumer customers in the and Canada through Dell Financial Services (DFS). DFS offers a range of financial services, including originating, collecting, and servicing customer receivables primarily related to the purchase of Dell products. DFS offers private label credit financing programs to qualified Consumer and Commercial customers and offers leases and fixed-term financing primarily to Commercial customers. Financing through DFS is one of many sources of funding that its customers may select. Product Development The Company focuses on developing technologies. It employ a collaborative approach to product design and development, in which its engineers, with direct customer input, design solutions and work with a global network of technology companies to architect system designs, and integrate technologies into its products. In fiscal 2012, it opened the Dell Silicon Valley Research and Development Centre, bringing the total number of global research and development centres the Company operated to 12. Manufacturing and Materials Third parties manufacture the client products the Company sells under the Dell brand. Its manufacturing facilities are located in Austin, ; Penang, Malaysia; Xiamen, China; Hortolandia, Brazil; Chennai, , and Lodz, Poland. Its manufacturing process consists of assembly, software installation, functional testing, and quality control. Testing and quality control processes are also applied to components, parts, sub-assemblies, and systems obtained from third-party suppliers. Quality control is maintained through the testing of components, sub-assemblies, and systems at various stages in the manufacturing process.

Major Acquit ions: In 2009, Dell acquired Perot Systems, based in Plano, Texas, in a reported $3.9 billion deal, and amalgamated into Dell Services. The acquired business provided Dell with applications development, systems integration, and strategic consulting services through its operations in the U.S. and 10 other countries. In addition, the acquisition of Perot brought a variety of business process outsourcing services, including claims processing and call center operations. On February 10, 2010, the company acquired KACE Networks a leader in Systems Management Appliances. The terms of the deal were not disclosed. On August 16, 2010, Dell announced plans to acquire the data storage company 3PAR. On September 2, Hewlett-Packard offered $33 a share for 3PAR, which Dell declined to match. On November 2, 2010, Dell acquired Software-as-a-Service (SaaS) integration leader Boomi. Terms of the deal were not disclosed. In February 2011 Dell completed the acquisition of Compellent extending the storage solution portfolio. In August 2011 Dell completed the acquisition of Force10 networks changing the name in Dell Force10.[94] By acquiring this company Dell now has the full Intellectual property for their networking portfolio, which was lacking on the Dell PowerConnect range as these products are powered by Broadcom or Marcell IM. On February 24, 2012 Dell acquired backup and disaster recovery software solution provider AppAssure Software of Reston, VA. AppAssure delivered 194 percent revenue growth in 2011 and over 3500% growth in the prior three years. AppAssure supports physical servers and VMware, Hyper-V and XenServer. The deal represents the first acquisition since Dell formed its software division under former CA CEO John Swainson. Dell added that it will keep AppAssure’s 230 employees and invest in the company. In March 2012, USA Today said that Dell agreed to buy SonicWall, and the acquisition was completed on 9 May 2012. A company with 130 patents, SonicWall develops security products, and is a network and data security provider. On April 2, 2012, Dell announced that it wants to acquire Wyse, global market-leader for thin client systems. On April 3, 2012, Dell announced that it acquired Clerity Solutions. Clerity, a company offering services for application (re)hosting, was formed in 1994 and has its headquarters in Chicago. At the time of the take-over approximately 70 people were working for the company. On July 2, 2012, Dell announced that it was buying . The acquisition was completed on 28 September 2012. On November 16, 2012, Dell announced it was acquiring Gale Technologies, a provider of Infrastructure Automation Products. Gale Technologies was founded in 2008 and is headquartered in Santa Clara, California. On December 18, 2012, Dell announced it was acquiring Credant Technologies, a provider of storage protection solutions. Credant is the 19th acquisition in four years. Dell spent $13 billion since 2008 and $5 billion in the past year on acquisitions.

These acquisitions have contributed to Dell’s earnings more than doubling over the past two years. Unfortunately, the increased revenue from the acquired companies has barely offset slowing PC sales

Conclusion

Our Project will ask open ended questions from the readers (i) Why is Dell going private? (ii) How will going private help the company change that trajectory? (iii) Dell’s Future based on changed strategy. Exhibits The Graph Shows the Units Shipped per year (1975-2011) which indicates that the PC market has reached its maturity stage and the iPad and Android started is in growth stage.