Dell CI Analysis Model Exercise

Larry Seale KM5990ci Tulsa, Spring 07 3/14/07 5pm

Of the discussed models in chapter 5 of Millennium Intelligence, SWOT is the model being used here to analyze the current and potential future situation of Dell Computer Corporation. SWOT is an acronym which represents the four categories of focus of the model – Strengths, Weaknesses, Opportunities, and Threats. SWOT was chosen for its simplicity, flexibility, and honesty. It requires human judgments for inputs, not “guesses disguised as facts.” This model will serve as a looking glass with which to identify and study specific indicators that will help reveal actionable intelligence to Dell executive management.

Background: Dell, founded in 1984 by Michael Dell in Austin, TX, disrupted the existing logistics, sales, and delivery model for computers to businesses and the general public. Its model created a direct relationship between manufacturer and end user, building each computer to the individual user’s specifications. Dell interfaced with end users directly via telephone and website, bypassing traditional dealer networks and the inherent inventory and time-lag problems that the traditional model struggles with. It has been so successful that it now ranks #25 in the Fortune 500, with 2006 sales of $57billion.

Growth this dramatic doesn’t come without a cost, however. Current issues/problems/challenges include accounting woes, investor disclosures, customer service complaints, and rebounding market strategies from competitors.

Strengths: Weaknesses:  Still tied for global market PC  Legal – SEC and Justice Dept leadership investigations into accounting  Established, strong global brand and reporting practices  Very efficient order>build>ship  Legal – investor class action workflow lawsuits  $12billion cash reserves  Market – slipping sales (5%  23 years of experience to draw on decline) and margins (20%  A proven in-the-water ship that has decline) good fundamentals  Capital – 40% decline in stock  Generating profits prices in last 2 years  Customer – anger over poor support, unreliable “cheaply made” products, and products and options that do not meet/cover/address customer needs/wishes  Heavy emphasis on manufacturing advantages in desktops, while market is moving from desktops to laptops, where Dell does not have a manufacturing advantage  Large and growing Customer Dissatisfaction – “Dell sucks” got 2,100,000, compared with 168,000 for Hewlett Packard, and 241,000 for Acer  Bedrock insistence on a “direct-to-the-end user” approach in all things is hampering the customer’s experience in supplies and support

Opportunities: Threats:  IdeaStorm – this blog started by  Legal – ongoing Fed Michael Dell where customers can investigations and investor voice directly to Dell their request lawsuits could result in large and complaints. Overwhelming cash fines, lower stock prices response from customers. Brilliant (more expensive borrowing) stroke of PR and Market Research and big distractions for upper genius – the opp is to actually and management as it will be demonstrably respond and act on focused on legal activities the best and most prevalent instead of customers, suggestions. This serves two competitors, and markets purposes – 1) satisfy/please  Competition – HP and Acer existing customers and their needs, have rebounded, and are now AND (maybe more important) 2) operating with comparable create huge positive buzz and efficiencies with Dell, and have street cred with customers and momentum in the marketplace potential customers  Apple is making market share  Upscale business environments gains by focusing on good and solutions where higher margins quality, high design, high live – Fed Gov’t inroads with newly performing equipment; stable acquired Alienware PC maker, and software; higher margins; and reseller agreement with Westwood a “disciplined appetite for Computer (heavyweight Fed Gov’t market share” … along with supplier) flexibility of controlling its own  Position Dell to be the ‘champion of destiny by owning its OS the people’ by offering solid, varied instead of being alternative solutions to the tied/dependent on Microsoft. Microsoft behemoth (such as Linux, Their greater profit margins or other emerging alternative OS’s and smaller overhead give to Microsoft) them flexibility to change/add  Can eliminate a current HP directions cheaper and faster advantage and create an than Dell can. advantage by offering a variety of  Trends – Del is viewed as a configurations such as Linux; no “PC” company, in an emerging operating systems; operating technology environment in system but no application software; which the PC is becoming less preloaded Open Office software as of the focus an alternative to MS Office …  Internal – Dell’s corporate  The secondary benefits of culture has become the above two opportunities is that schizophrenic – it professes it may create positive leverage in slavish focus on “direct touch” negotiating with Microsoft for more with its customer (in order to favorable terms best serve those customers),  “Apple sucks” got almost twice as but its actions reflect a focus many hits, from a much smaller unit on what’s good and efficient for population – an improvement in Dell and its management, not service/support and giving people what’s best for Dell customers what they want might pull a lot of and investors. Apple customers to the Dell community  Dell’s new management hires bring viewpoints and expertise from outside the PC world, and can inject ‘eyes up’ awareness of other technology markets – cell phones, personal IPOD-like devices, etc

Summary:  Michael Dell said that the best view of a competitor (or of your own company) is through the eyes of its customers. That visible consensus view seems to say that Dell has dropped the ball and lagged behind the pace. The market voice/view also shows some targets, though:  Pursue Linux market  Offer configuration options  Beef up customer service, and aggressively go after discontented customers one by one  Push thinking to branch beyond PC/Microsoft-centric box  Allow the flexibility to adapt the ‘direct in every situation’ philosophy to allow for different realities/requirements.