1 – Describe and analyze main strategic maneuvers in the last 5 years. Causes and consequences.
Michael Dell created DELL in 1984, based on a revolutionary, but simple concept, which was to sell custom-built computers directly to customers. This direct model, eliminating the intermediary between manufacturer and client, would allow him to be closer tocustomers, to their needs and concerns, increasing efficiency and effectiveness of the response to satisfy these needs. This vertical model, combining direct customer contact, new distribution channel and innovative product assistance/after-sale service allowed DELL to offer commercial and individual clients one of the most sophisticated and satisfying product in the personal computer industry.
After afew years of developing the activity and growing capital, Dell began in the late 80s to start strategic planning in order to expand market shares and profitability, through cost reduction (direct model and “just-in-time” model with custom-built computers and low inventory), innovative technologies, new markets (strong global expansion late 80s/early 90s, cross-cultural viability for businessmodel), loyal customers (massive use of Internet, e-commerce & customer support) and finally a measured diversification (early 2000’s, with extension of firm’s product portfolio). Combining a change at the top of the company in 2004 and several bad performances during this period, Dell lost its leader position, conceding it to HP. With the comeback of founder Michael Dell as CEO in 2006, majorchanges in strategy have been established in order to win back confidence of shareholders and investors, and intend to recover leading position in the computer and peripheral industry. We are now going to analyze the company’s main strategic manoeuvres in the last five years and their causes/consequences in order to better understand how come the firm is one of today’s leaders in the computer andperipheral industry, for private clients as well and commercial customers around the globe. Moreover, we will try to understand how DELL is planning its future recapture of world leadership.
DELL’s most important strategic maneuver in the past 5 years is certainly the major diversification of the product portfolio operating since 2002/2003. In fact, this expansion beyond the solecomputer industry leads to a change in the company name in 2003 from DELL to DELL Inc. in order to recognize such an evolution.
This diversification occurred towards multimedia, home-entertainment, television flat screens, mp3 audio players, computer flat screens and personal printers. This large diversification, allowing Dell to concoct attractive offers combining these peripherals with computerhardware makes its products more interesting for private customers. Moreover, Dell also entered a major new trend, “Information Technology” (IT), mostly software applications, but also data management and storage services for professionals. In fact, these new services are necessary for many small and medium businesses in order to help them manage data, storage or other ITs for which they either donot have financial resources or human skills.
People & Management Change
This major change in company orientation was followed in 2004 by an important iconic change in persons, the founder Michael Dell stepping down his CEO position, replaced by Kevin Rollins.
This modification at head of executive preceded a tough period for Dell Inc. In fact, performance in 2005 was very much under theprevisions, attributed by CEO to a too high focus on low-end PC’s.
This bad performance was followed by an acquisition of high-end computer hardware manufacturer Alienware in 2006, specialized in top performances computers essentially used for gamers. This was a first response to the focus on low-end machines.
Most stakeholders calling for Kevin Rollins’ resignation after no evolution in...