STRATEGIC MANAGEMENT REPORT ON: DELL – SWOT STRATEGIC PLAN

1. 1.  Executive summary:

 Intend of this report is to propose the understanding of the external environment affecting an organization. To define it precisely, ‘DELL’ organization has been selected to plan and implement a strategic plan for it. Report starts from briefing the background of this chosen organization. Moreover, some of the external factors have been discussed by presenting a view of SWOT analysis of the ‘Dell’. Further part of the report will illustrate the review of already existing business plan and strategy of that enterprise. After reviewing all these analysis, report will carry the discussion forward to develop the options for strategic planning. Afterwards, the report will highlight the areas to be considered whilst constructing a strategic plan. Then, report throws light on the process of building that strategic plan by reviewing all the options available. Next, it listed the factors affecting this strategic plan, in which vision & mission, objectives and other measures have been taken into account. Furthermore, the planning of implementation of that strategic plan also has been described. Lastly, an insight has been provided as a part of the conclusion of the report along with the recommendations.

1. 2.  Introduction:

Before starting the discussion about external environment factors affecting the organization ‘Dell, it is necessary to give an abstract of the company. It will then make it easy to outline the factors affecting.

Dell is a US based company which is into hardware sales and services. It conducts its business worldwide through its subsidiaries.

Through its multi segments, It proposes its customers a spectrum of solutions and services globally by itself or by other distribution channels. The solutions it provides include servers, networking and storage product. In sum, the services it offers include a series of configurable IT and other business services embracing infrastructure technology, consulting & applications, and product related support services (Market Watch, 2012). To offer these support and services efficiently, it has framed business plans and strategies. Dell built its status throughout the world as a leading technology service provider with the help of strategy and business plans set for the organization.

Consequently, Dell has experienced tremendous expansion over the past twenty years. The values, vision and mission of the company entail the fulfillment of these well-known goals. The purpose of this report is to identify a strategic plan and to evaluate internal and external factors affecting the plan within this competitive landscape (Thomson Reuters, n.d). However, the company conducts various analysis i.e., SWOT analysis, PEST analysis, and other comparative analysis to have a general idea about the external factors distressing it. The one problem concerned by Dell is the furious competition in the industry. For this, Dell initiated the ways to overcome the weaknesses of the company and to take the advantage of its strengths over its competitors. Accordingly, company did careful analysis of the factors affecting the company and the factors contributing to the company’s success in business strategies and plans.

Firstly, factors have been determined in this coming section of the report.

1. 3.  Factors affecting the organization:

In general, DELL company is regarded as a self-motivated and complex organization because of its verified best quality services. It serves the solutions to the world with its best renowned management values. To continue with this proven quality, company determines the external factors which may affect the performance. Primarily, Dell and its competitors are affected by economic, environmental, social, legal, political, and technological factors. All these factors affect the industry to a varying degree. However, it is critical to assess whether these contextual aspects are conductive to a specific direction. Precisely, each aspect may be defined in a continuous way (GRIN Verlag GmbH, 2008).

3.1 PEST analysis

Political: The political aspects are likely to include worldwide, government directives, funding council and institutional policies. In this case, one of the biggest threat that DELL concerns about is political or legal environment because political factors involve government regulations and legal issues defining the term & conditions under which the organization has to operate. It becomes vital to take this factor into account because many countries still have some restraining policies which are maintained to defend domestic manufacturers and production.

Economic: The economic environment refers to the nature and route of the economy in which an organization competes or may contend. It includes funding mechanism and streams, company directives, budgetary restrictions and income generation targets of the enterprise. A primary threat that Dell encounter is the problem of software piracy. Moreover, it looks for the total GDP and GDP per head growth rates of the relevant country. Additional factors can be consumer expenditure, interest rates, currency fluctuations, exchange rates and other costs in order to evaluate the influence of economic factors on the organization.

PEST analysis

(Source: JISC infonet, 2012)

Social: This factor is referred as a society’s culture, attitudes and values. Particularly, it may include change in lifestyle, consumerism, attitude to work, education & health, demographic changes, distribution of income and social mobility. As a result, commoditization of the industries enables it to be accessible to the consumers earning lower income. External social factor affects the organization in terms of providing them the solution according to their demand because customers choose a single vendor to meet all of their requirements. Therefore, to remain competitive, it is essential for the company to satisfy them with the best service and solution (David, 2005).

Technological: There is barely any industry that is characterized by a quicker technological development than the computer industry. Most importantly, speed of change and adoption of new technologies by other organizations affect the organization’s effectiveness. Moreover, the rate of obsolescence and the impact of the internet use also matters in this framework.

After determining all the factors, an organization needs to review its already existing business plan and strategy. Precisely, this has been explained in further segment of the report. 

1. 4.  Review of Dell’s existing business strategy:

The organization ‘Dell’ has been leading and able to maintain its reputation through listening the customers and expanding the solutions and services that meet customer’s needs and demands. To know the company’s present position and to seek its growth, it’s existing business plan and strategy has been reviewed in this segment (David, 2005). The strategy of any organization can be analyzed by different ways as discussed below:

4.1   Value chain analysis: Simply, value chain analysis is regarded as a model that explains a range of value-adding activities to the company’s supply region with its demand side. It was noticed that in July 2002, Dell company was the world’s largest direct selling enterprise, with 34,800 employees in more than 30 countries and their customers in more than 170 countries

Further, summary of dell computers value chain analysis can be measured on the basis of this model. Talking about value chain in dell, goods and products are received from a company’s dealers. After that, they are accumulated until they are taken for production’s use and then are moved around the organization. At the time of operations, goods are manufactured and brought together. Then, to meet the customer’s expectations, dell uses its knowledge obtained from direct customer contact before and after the sale. Further, by selling directly to the customers and communicating with them continuously, it observed the sales trend and learnt about the unmet needs of customers (Kotler & Armstrong, 2003). On the other hand, the direct selling model of dell eliminated the involvement of retailers and solved the problem of extra capital required for marketing & sales activities.

Because of the dell’s employees’ nature of work, they are being encouraged to stay abreast of the tool threats and opportunities that may change the competitive background in the future. Moreover, support activities such as procurement, technology development, human resource management and firm infrastructure are also highlighted to support the review process of an organization.

4.2   Porter’s Five forces model:

Secondly, Porter’s five forces model can be selected as a medium to analyze the control reclined in a company’s situation. It helps in understanding the strong points of a company in the marketplace against its competitors, suppliers, and consumers. According to Porter “the nature of competitiveness in a certain industry can be sought as combination of five forces, rivalry among competitive organizations, possible entry of new competitors, potential growth of alternate products, bargaining power of suppliers and bargaining power of customers” (David, 2005). The relationship of Porter’s five forces model has been explored here accompanying the report.

4.2.1     Rivalry against existing competitors: The industry comprises players like Dell, IBM, HP, Toshiba, Gateway etc. The rivalry in the market is based on cost and competitive benefit.

4.2.2     Threat of new entrants: Every company tries its maximum to beat and do better than competitors by producing the most recent technology and then price them competitively. Most likely, this is the rationale that new companies find it very tough to enter the market and the existing challengers try their level best to either sustain their market.

4.2.3     Bargaining power of Buyers: In the private computer industry the bargaining power of the buyer is very soaring due to the fact that there is very less degree of brand reliability in the market because most of the producer produced alike products. In addition to deficiency of brand reliability, the switching cost is very less in the industry because most of the systems are based on the Intel processor.

4.2.4     Bargaining power of suppliers: Usually the bargaining power of traders is also elevated in the computer market. This is due to the fact that there are very few vendors who supply the major elements of the computer. Moreover the organization will tolerate considerable switching if they decided to change the element part suppliers.

4.2.5     Substitute products: Generally the accessibility of alternates does affect the sales and productivity of the computer and its various elements to large extent. The competition between the competitors can be exactly cited as oligopoly because nearly all the chief producers produce same products.

As a result, it can be pointed out that Dell’s strategy to produce continuously innovative products helped the company by defeating its rivals on non-price factors. To assess its position in the market, SWOT analysis is the best vehicle. Therefore, strengths, weaknesses, opportunities and threats of DELL company have been discussed here one by one (David, 2005).

4.3 SWOT Analysis:

This SWOT analysis chart helps evaluating the strategies it follows and what is the core Competency Company uses as strength. Distinctive competency is the key advantage that Dell enjoys in the form of low cost and better-quality product performance (Cuizon, 2009). 

4.4  Boston-growth matrix:

Besides, Boston-growth share matrix (BCG) can also be approached to determine the company situation in marketplace. It helps relating market share with business growth and depicts the level of each in high and low context.  It states that bigger the market share a product will have the faster the product’s market will grow the better (Kotler & Armstrong, 2003).

(Source: Mind Tools, 2012)

After reviewing Dell’s existing business plan and assessing its present position, alternatives can be developed for constructing a new strategic plan. Therefore, next part of the report will provide an insight of options development for planning.

5.    Develop options for strategic plan:

There can be various strategies available, from which an appropriate strategy can be opted for the organization. Primarily, Ansoff matrix strategy comes into consideration.

5.1 Ansoff matrix strategy:  It comprises of four grids; market penetration, product development, market development and diversification. This strategy is regarded helpful in crafting the product strategy of a company by assessing the market size and share for a particular product.

5.2 Mintzberg’s 5Ps strategy: Afterwards, one of the options can be sought as Mintzberg’s given strategy. It basically defines strategy in five definite terms:

• Plan
• Ploy
• Pattern
• Position
• Perspective

Concerning these terms, an organization can plan the best strategy for growing the business and maximizing the productivity.

Additionally, value based, differential, competitive and contingency strategies can be developed and taken as an option to construct a strategic plan. Contingency strategy is focused more because it is devised addition to this; company can maintain its market-share, develop the workforce competencies and can also evaluate the present portfolio matrix.

(Source: David, 2005)

With the help of this figure, market share of Dell can easily be estimated, as it is presenting the highest level of share among all its competitors. Its leading position in current market share has been noticed 18.9% as per the worldwide market share survey conducted in 2005

1. 6.    Construct a strategy plan:

Having the alternative options for strategies, company can go to construct an effective strategic plan. In this framework, corporate level strategy is applicable for a multi-business enterprise and is also concerned with the higher level strategic options. Creation of a plan usually requires a process, which may involve management strategy in terms of dividing the firm into products and services, measuring the growth rate. Further, company can review all the options developed and discussed above. The key part associated with the planning portion of strategy is the consideration of stakeholders’ participation in business. Afterwards, company should set the criteria to judge each option on the basis of company’s strengths and weaknesses, so that the best suitable strategy can be selected for the implementation. In addition, cost-benefit analysis and internal surveys can be done on the basis of its financial management system.

6.1 Internal survey: Through internal surveys, resources audit can be conducted which will include human resources, physical resources (building & equipment), financial resources (global sources and availability of finance) and intangible resources.

6.2 Scenario planning: It is decisive that in every scenario, DELL will have to persuade the proper adaptation of possible solutions that engrosses certain stagnation of the strategic development of the overall business. Therefore, dell will have to create a scenario in which it could be able to eliminate the risk associated with only direct selling model approach (Dell, 2009).

6.3 Stakeholders’ participation: Dell is committed to associating with stakeholders and has established a formal group of stakeholders. In fiscal year 2009, It partnered with many stakeholders at various locations, one of them was internal engagement in Berlin regarding Dell’s environmental strategy and another was in fiscal year 2008 in Boston, Massachusetts (Dell, 2012).

6.4 Cost Benefit Analysis: Through this analysis, dell estimates and sums up the equivalent money value of the costs associated and benefits achieved to assess whether company is worthwhile or not.

6.5 Sensitivity analysis: This study helps company determining how distinct values of an independent variable will affect a specific dependent variable under provided set of assumptions. Dell focuses more on input variables of the company.

Once company is all set with the strategic plan, it can assess the factors which may affect that plan. To make it understandable, next section of the report will discuss those factors.

1. 7.    Examine the factors affecting strategic plan:

Generally company’s vision & mission and objectives are counted as the factors which may distress the formulation of strategic plan.

7.1 Vision & Mission: The way Dell does its business, the way it interacts with the group of people and the way it interprets the world, its customer needs, future of technology and the global business environment may affect constructing the strategy and formulating it within the premises. Catering service to the customers after experiencing them by direct selling is the mission of Dell. This mission can impact the organization as it only focuses on the direct selling model (Dell, 2010).

7.2 Objectives: Every organization has a set of objectives, with which it carry on its business aiming to achieve them. Dell has framed an outline of its business given below:

• A bigger market share and size
• Faster design-to-market times than competitors
• Greater product quality than its competitors

If these objectives are defined using the SMARTER method, so that the goals are more likely to be achieved (Dell, 2010).  S-specific term states that while setting an objective establish what, why and how because it is the primary step. M-measurable depicts that it should be measurable otherwise it would not be manageable. A-assignable suggests that its allotment should be precisely defined. R-realistic states that the objective should not be too easy or too hard. T- Time bound reveals that dates and deadlines should also be set to achieve these objectives. E-extending part of this model explains that objectives should have the flexibility so that time can be extended at the time of need. R-rewarding depicts that after the achievement of each objective, reward should be provided on the basis of individual performance.

Moreover, it can have the cultural and environmental effect on the strategic plan in terms of affecting its formulation. Once the factors are determined, implementation phase comes forward. Forthcoming segment will describe the process of formulating the strategic plan.

1. 8.    Implement the strategic plan:

When an organization thinks to formulate a strategic plan within the premises, it needs general organizational agreement, consultation with stakeholders, a proper timeline to set the plan, action planning and needs to check strategic fit.  Management by objective: The key part while implementing the plan is to define the objectives set under strategy. Management by objective is the best way to decode all the points to the management and employees.

Strategic Fit: As discussed above, Dell surveyed its internal resources in order to evaluating the existing plan and developing the options for strategic plan. Here, strategic fit will express the degree to which dell is matching its internal resources and competencies with the external environmental opportunities. It helps in executing the plan in terms of viewing its effectiveness.

Further, this enables company to do PEST analysis, competitor, customer and market analysis which will help revealing the exact position of the company to get along with the strategic plan.

After implementing the plan rightly in the organization, it seeks to evaluate its effectiveness and compatibility to meet the customer’s requirement.

1. 9.    Conclusion:

Firstly, report presented a brief introduction to Dell inc company stating that it offers various solutions to the customers by direct selling. After this, PEST analysis determined the factors involved externally which are affecting the organization. In this matter, political factor leaded the legal and environmental factor affecting the production, company competencies and productivity. From a strategic point of view, the organization’s market penetration to product growth; market development to diversification was highly thriving which finally made Dell the market leader in PC. Is framework, report also presented its highest market share of 18.9% among all its rivals (Ajula, 2009). Each and every aspect of business background i.e., market growth, market share & size, technologies evolved, marketing & sales, bargaining power of buyers and suppliers, threats of new entrants have been taken into account to assess its current strategic position. Noticeably, Dell understands the need of keeping abreast with new trends & technologies and customer requirements.

 In addition to this, Dell has already been prepared on the market with influential products to utilize and rejoice this trend. Besides, evaluation noticed that dell is using direct selling approach, which also witnessed 34, 800 employee in more than 30 countries in July 2002. However, it developed various options for strategic plan and opted strategies such as, Ansoff matrix, Mintzberg’s 5Ps strategy and talked about its vision and SMARTER objectives which affects strategic plan’s formulation. These strategies defined the areas to be developed for business benefit from market perspective. To conclude Dell’s understanding of the prospect market, having strategic plan to make the most of efficiency &profit and to keep the best of human resources is their key to victory.

10. Recommendations:

Being the market leader is not easy, but upholding the position is trickier. Reason, more and more firms will try to imitate Dell’s strategy. This creates more rivalry leading to cost cuts etc. Dell requires more focusing on endorsement of their products and services. Celebrity advertising & marketing and funding is one of the best ways to catch the consideration of customers. As Dell has not been more into advertisement, it is the time when it can go and get it. As stated earlier, Dell market requires good advertising strategy for a successful and effective product. Tapping the huge customer base through developed network of resellers backed by fine marketing mix will resolve Dell’s future success and achievement.

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