Strategic Management Industry Structures And Dynamics Business Strategy Essay

St outrankgic Management Industry Structures And Dynamics Business Strategy EssayIntroduction dingle Company was founded in 1984 by Michael dingle. It is the existences largestdirect-sale reckoner vendor dell Inc. is this instant besides the leading dish outer of computer systems in theworld, capturing a global grocery store sh are of more than 15 percent. Dell marketplaces desktop personalcomputers, notebook computers, network servers, workstations, handheld computers, monitors,printers, high-end storage products, and a variety of computer peripherals and software. In this touch off I go away intention Porters Five effects to analysis Dells great success in the industry.Force 1 The Degree of Rivalry.The PC industry consists of a recite of companies hence the threat from industry competitorsis high. Due to the product being highly standardized and shifting costs between brands is low,there is fierce competition which leads to pooh-pooh margins and profitability in the market. The PCindustry flowerpot be described as a high competitive industry. For Dell the main competitors are IBM,Apple, HP, TOSHIBA, accession etc. Dell uses several strategies to reduce the competitive rivalrybetween existing players.Firstly Dell variousiated its sales from other competitors. Dell utilise the direct sales dodging since1984. To sell PCs directly to consumers, by passing retail stores and system integrators andoffering reverberateed customer support but dramatically lower tolls. For years, that direct, low-costsales model worked perfectly. It allowed Dell to make high margins while selling computer gearfor less than its rivals. As a result, it now holds a leading 17.9% share of the world PC market andhas grown much faster than competitors Hewlett-Packard and IBM. With thousands of phoneand fax orders periodical, $5 million in daily Internet sales, and daily contacts between the field salesforce and customers of all types, the company kept its finger on the market pulse, quicklydetecting shifts in sales trends and getting prompt feedback on any problems with its products. Ifthe company got more than a few similar complaints, the information was relayed immediatelyto design engineers. When design flaws or components defects were found, the pulverization wasnotified and the problem corrected within a matter of days. Management believed Dells abilityto respond quickly gave it a significant payoff over rivals, specially over PC makers in Asia,which made large production runs and sold standardized products through retail channels. Dellsaw its direct sales set out as a totally customer-driven system that allowed quick transitions to impertinent generations of components and PC models. iSecondly Dell provided good customer avail to compete with its rivals. In 1986 the companybegan providing a guarantee of free on-site service for a year with most of its PCs after userscomplained about having to ship their PCs back to Austin for repairs. Dell contracted with localservice providers to handle customer requests for repairs on-site service was provided on anext-day basis. Dell also provided its customers with technical support via a toll-free number, fax,and e-mail. Dell received sloshed to 40,000 e-mail messages monthly requesting service andsupport and had 25 technicians to process the requests. iiBundled service policies were a majorselling point for sweet corporate accounts. If a customer preferred to work with his or her ownservice provider, Dell gave that provider the training and spare subtracts needed to service thecustomers equipment.Force 2 The Threat of new Entry.Firstly, Dell created a brand image to reduce the threat of new entries by advertising. Dell was thefirst computer company to use comparative ads. Its advertisements have appeared in severaltypes of media including television, the Internet, magazines, catalogs and newspapers.Secondly, Dell cuts its price or offering free bonus products in the eff ect to give its marketshare. In 2006, Dell cut its price in an effort to maintain its 19.2% market share. However, thisalso cut profit-margins by more than half, from 8.7 to 4.3 percent. To maintain the strategy Dellcontinuing to accept the online and telephone purchase.The brand loyalty and the low price built up a barrier of entry for the new companies.Force 3 The Threat of Substitutes.Other devices like PDA, handheld electronics etc. are now coming out with features similar toPCs. The mobilebility is the key factor of the competition. Dell relent a smaller size laptopcalled mini which but has a 10.1 inch screen and only sells at the price under 200 which is fifty-fifty lower than some of the handheld electronics. With the efficiency of mobile and the samefunction, for example Wi-Fi and Bluetooth, Dell protects its market share against thosesubstitutes.Force 4 Bargaining Power of Customers.Dell built up its brand loyalty to reduce the bargaining power of customers.First, Dell h ad its own system and strategy to manage the relationship with customers. Since Delluse the direct sale strategy, customers can buy Dells products from the website or ordered byphone or fax. The customers then can personalize their computer by choosing the conformityof the computer (e.g. RAM, processors, and hard-disk capacity). On the Dells website from which throng can directly choose, buy and give feedback, it divided the customers into four majorgroups home users, small medium business, public sphere of influence and large enterprise. Dell then treatsdifferent groups differently by offering the special service they need from different groups. Forinstance, Dell provides special solutions and go for high education. Such as dataconsolidation and oversight, HPC (high performance computing environments), wirelesssolution, connected classroom etc. Because of its direct sale strategy, Dell can easily track theservice for any individual buyers. All the buyer information will be st ored in its system dell candifferentiate customers and displace relevant product information and services to differentcustomers. These special strategies in selling upgrade its brand image among customers.Second, Dell uses the advertisements to help building up its brand image. On the website, TV,newspaper, high street, people can easily find dells advertising. Those can not only increase dellsmarket activity but also increase its brand pride.Force 5 Reducing the Bargaining Power of Suppliers.Dell has a special understanding on the SCM (supply kitchen range management). Dells strategy is to limitthe amount of supplier but pick up some outstanding supplier all over the world. Each supplierhas a very close relationship with Dell in long-term. Dell uses its huge globe market to share itsbusiness with its entire suppliers. For instance, Dell built a assemble factory in Malaysia, itssupplier from Ireland soon built a factory in there as well in order to gain a geographic efficiency.Del l had its assemble factories all over the world which relatively close to its suppliers. This willsave a lot of transport costs. The double-win strategy makes the supply chain works well. Withthe double-win strategy and constant relationship, Dell will be able to ask lower price from thesuppliers and reduce the bargaining power from them.Market part SegmentationIntroduction Michael Dell emphasized the significant status of customers to the companysbusiness by stating Finding ways to get close to your customers is critical to your success. Sincedifferent people would have different need from the computer, Dell divided its customers intoseveral segments by discovering special needs from each segment. In the year 1994, thecustomer group was only divided by two primary customer and normal customer. In that yearthe assets of Dell is 3.5 one thousand thousand USD. In July 1996 Dell launched its online website www.dell.com.On the website primary client are divided into three segments which are large company, mediumcompany and presidency education. Customers can easily choose and buy the productsdirectly with advices and helps from dell.com. The assets of Dell rocketed up to 7.8 billion USD inthat year. However in 1997, Dell continued differentiating its customer for more segments. judicature education segment was divided to State Local Government, FederalGovernment and education. Small company and home users were also been created as individualsegments. The net revenue of Dell was 12 billion in that year.On todays Dells website, people will be able to follow the tips and choose a suitable computer infew minutes. Whats more, customers can personalize their chosen computer by ever-changing theconfiguration of the computer (e.g. color, RAM, processors, and hard-disk capacity). With thisdirect sale through different segments, Dell can start to assemble the computer once thetransaction has been made. The inventory can then be limited as low as zero. Not like Dellscompe titors, Dell does not need many warehouses all over the world which will save a lot ofcosts for the company.Although on todays Dell.com, customers are divided into a lot segments. However, literallycustomers are differentiated into two segments human relationship customers in opposing operation customers. Although Dell intends to build and maintain a good relationship with allcustomers, it also becomes clear, that the company would regard some customers morerelationship worthy than others, by analyzing customer value.The relationship customers are mainly large enterprise and government etc. which occupied 40%of Dells entire customer. Transaction customers are small business and home users which havepercentage of 30 among customers. The remaining 30 percentage customer is regarded as amixed customer.The advantage for dividing customers in different segment is that the company would be able toanalysis how it can encourage the customers to buy its product. For individual users or smal lbusiness price is the priority. Those customers are regarded as more price insensitive. So forhome and small business users the price is slightly lower than its competitors e.g. HP, Toshibaand Sony. For bigger customers such as the government or enterprise, they consider more thanthe price but consequent services and supports. Take large enterprise for instance, Dell supportsa lots of specific services and solutions for running the business. Like Infrastructure Consultingservice which is basically a plan for simplifying IT infrastructure, helping reduce operating costswhile freeing up resources for new business initiatives.iii Also, Dell runs a program called Dellbusiness Creditiv. This is the same as a loan offered by Dell, but with no interest rate and anytimeto pay off the balance. Business without enough cash flow would like to take that program.One of the Dells competitors is IBM, it has a clearly customer segmentation but different fromDell. IBM is more focusing on Business a nd Industry market. In a simply word it is even morefocusing on the Big customers. uniform as Dell did for big client, but even did more specific forthe segmentation. For Dell there is no segment for industries like Aerospace, Chemicals andpetroleum. More segmentation on large customers also brings more services and solutions for allkinds of industries. One of IBMs famous solutions is offering the security management forWimbledonv. It provided the security solution for players, staff, media and spectators around theworld.Conclusion Dells market share was No.2 in 2009, IBM was far behind. But since Dells customergroups is much bigger than IBMs. In 2006 IBM sold its PC department to Lenovo, Lenovo usedIBMs brand to product and sell IBMs ThinkPad series. It is very difficult to compare whichsegmentation is better. But for the large business users, IBM is a very strong competitor againstDell, Its high performance computer and in advance(p) technical solutions and services makes IBMthe biggest company for larger business and industries.i scribd.com Dell operationii McGraw Hill Dell Computer Corporationmhhe.com/business/management/thompson/11e/case/dell5.htmliii Dell.com Large Enterprise serviceiv Dell.com business creditv IBM.com Wimbledon case study