Dell Company and Product Analysis - Case Study Example

Export Report Part 3 University Name Table of Contents 2.0 Introduction 6 3.0 Dell Company and Product analysis 7 3.1 Market trends 8 3.2 Overseas Export Markets 8 4.0 SWOT ANALYSIS 9 4.1 Strengths 9 4.2 Weaknesses 10 4.3 Opportunities 10 4.4 Threats 11 5.0 Global Market search 11 6.0 Conclusion 12 7.0 In-Depth Market Analysis and Selection of target market 13 7.1 Entry strategy 13 7.2 Distribution Strategy 14 7.3 Exchange rate strategy 14 7.4 Marketing strategy 15 7.5 Cultural strategy 15 7.6 Corporate Social Responsibility strategy 15 8.0 Conclusions and recommendations 16 9.0 References 17 1.0 Executive Summary This report describes the position of Dell in the current market. Dell seeks to export computers to the East African market as a process of getting serious with doing business globally. Dell’s competitive advantage is known as the direct model, that is, cost effective, faster and friendly in manufacturing and distributing its products. In addition, the SWOT analysis has been conducted for Dell showing its major strength being the direct model of distribution. Its major weakness is lack of a better relationship with institutions in East Africa. Additionally, a number of market trends have been discussed including the decreasing demand for PCs. Several competitors for Dell have also been discussed, and their strengths have been described. The global market search has been conducted, and Kenya has been viewed as a perfect market due to the growing number of institutions, and informed computer purchases. Other management strategies have also been discussed where the four major entry strategies have been reviewed. These are partnerships/alliances, direct exportation, use of agents, and use of retailers and wholesalers. The major distribution strategy that was recommended was the direct model used by Dell. Moreover, the cultural strategy has been reviewed showing the cultural patterns in Kenya that include language, cultural background and religion. Finally, the corporate social responsibility has been discussed following the market strategy that recommends use of online advertisement, using television and radio as the marketing mix. 2.0 Introduction Doing business in a foreign market is a move that has been prioritized by large companies with the ambition to go global which becomes an adventurous experience with its own benefits. Market diversification is one benefit of exporting products to new foreign markets. Dell will have a wide market base by exporting its products to East Africa in comparison to doing business locally. Through exportation, Dell will create the opportunity of higher profits, and hence the company is likely to grow rapidly. This is because companies that operate in international markets have a wider customer base that is associated with higher returns. Thus, they are more likely to develop faster than companies that only operate in local markets. In addition, globalization has a positive effect through further risk management through market diversification. This is because changes and fluctuations in the domestic markets will be compensated by foreign markets that will be doing well at the moment. Diversification is easily explained using the statement that proposes that one should avoid using the same basket for storage of all the eggs (Chandra, 2008). Markowitz Harry was an economic guru who discovered the diversification method of risk management. It is important to understand that diversification lowers the level of risk when returns are not positively correlated (Chandra 2008). This is the reason why investors and firms hold a portfolio of securities and business units. Therefore, the expected return that exists in a portfolio is usually the average returns that are expected on the individual securities that are in that portfolio (Chandra 2008). Therefore, diversification is usually used to lower the amount of risk involved where the number of unexpected outcomes will be reduced. It has also been proven that competition in the international scene is greater than competition in the domestic market. Therefore, through exportation of products to a foreign market, Dell is likely to compete with other big companies like Lenovo, Apple and HP. Thus, it will gather better experience that is likely to help it improve continuously in terms of quality of the products it exports. Dell uses the direct model as its major competitive edge with the attributes of speed, cost effectiveness and customer friendly ways of distribution/ manufacturing. 3.0 Dell Company and Product analysis The major competitive edge of Dell Company is the use of direct model which is attributed by the elements of cost effectiveness, speed and friendly means of manufacturing and distribution. Its products like XPS, Inspiron and Dimension emphasize on performance, expandability and value. These products are also students oriented and home-office environments oriented. Dell faces competition from various companies for a number of years. This is with reference to the global business environment. The market has been constantly changing with evidence based on the unique products such as Tablets that are being produced by other companies like Apple where these companies are in an attempt to overthrow Dell’s dominating Direct Model. This is a signal showing that there is a change in market where there is a decline in growth of personal computer market. This is after the rise of mobile gadgets like IPhone and IPods including tablet devices. This has wholly led to the PC market being what it was not before. Hewlett Packard, also known as, HP is presently aware of this decline. In May, the Chief Executive Officer of HP made it clearly that the PC market has continued to be very challenging even more than they expected. In addition, PC shipments went down by 17.8% across Western Europe in the first quarter of the year (Kobie, 2011). The United Kingdom shown the worst decline in sales of personal computers across top markets and Germany and France also reported weak sales (Kobie, 2011). There is a strong surge in sales of Mac book’s, MacBook pro’s and the early MacBook Air is doing very well in the market (Webster, 2011). Apple is climbing into the top 5 since presently, Macs are doing amazingly well in the market compared to personal computers which are selling less and less in the same market noting that PC sales are going down by 18% whereas Mac sales are up by 9% but these figures do not include tablets (Kobie, 2011). On the other hand, Dell has reintroduced XPS in order to feature in the competition where it targets the gaming market. Dell sells the precision, Optiplex and Latitude based on an advertisement that is inclined to serviceability, reliability and a long life cycle. 3.1 Market trends It is acknowledged that customer demands have led to a higher growth in the PC market where they have become more informed especially in selecting their purchases. Sales of laptops are going up in comparison to the sale of desktops. 3.2 Overseas Export Markets East Africa is a major prospect for exportation of Dell products due to the increased embracing of information and communication technology. Steve Mackenzie is the region manager and he acknowledges that there is existence of various companies in Kenya. Therefore, Dell is going to offer alternative superior products that will be acknowledged by the market in a big way. This move is in a big ways associated with sale of Dell Inspiron, in which, Dell believes it will boost Dell’s sales in East Africa. It is a new technology that is expected to influence customers’ preference choice when buying a personal computer. The company has about 10 years experience in the region and has been an active player in the last five years. In addition, it has many experiences in South Africa where it has received attention from over 40% of Africa’s revenue base. In Africa, Dell faces competition from companies such as Hewlett Packard, Fujitsu, Acer and IBM. It also offers to offer customer service via the phone as a way of offering technical support to the customers. This is complemented by qualified technicians who will be offering customer care services. It shall also be collecting feedback during buyer panels and during events. This information will be relied upon during research and development projects. 4.0 SWOT ANALYSIS 4.1 Strengths Dell uses the direct model that is attributed to speed, cost effective and customer friendly manufacturing and distribution which is greatly appreciated by its customers. The company has removed the retailer, and hence customers directly order from the company itself. Thus, the customers can be able to order for customized products that fit their use. Many people today want products that perfectly match their needs in terms of performance and enhanced features. Therefore, Dell has the strength of ensuring that the customer can get what he exactly needs. Direct model of distribution ensures there is no inconvenience in delivery. One can receive the customized product that he ordered on time. Therefore, the direct model has the advantage of quick delivery. Other products from other companies have to go through the wholesaler, retailer and sub-retailers before reaching the end user. This is time consuming. 4.2 Weaknesses Many students buy their laptops and PCs trough school programs. However, Dell does not take advantage of this system. This is because Dell has a weak relationship with colleges and schools. As a result, only 5 percent of its total revenue is received from schools and other institutions. In addition, many customers have a tendency to touch and view the product they are buying. This is where most customers walk to a shopping mall, and choose the product of their own. The direct model discourages this because one orders directly from the producer without touching or viewing the product they are buying. 4.3 Opportunities Laptops are selling at a higher rate when compared to desktops. Thus, many customers in East Africa are knowledgeable or rather informed on the kind of purchases they are making especially on grounds of technology. Many buyers are learned people who are pursuing different courses that are even related with IT. Therefore, this will favor the direct model of distribution where informed buyers can directly give their specifications to Dell, and receive their ordered products within a short time. 4.4 Threats The PC industry is ever-changing since it is affected by millions of dynamics. In such an unpredictable market as PC’s, threats are many. Because of the ever-changing character of the computer industry, corporations are constantly undergoing challenges to produce high quality and low-priced products. One of the key outside threats to Dell is that the value difference among brands is getting smaller all the time. Dell’s Direct Model benefits the customer in many ways, one of which is cost savings. Now that the companies are looking for ways to fight the low prices of Dell, they too can pass on savings to their clients. Therefore, price differential is becoming less of an issue, if not non-existent for consumers. In addition, Gartner a leading analyst company/firm passed the blame on the decline to the tablets increase in the market. They claimed that consumers now prefer tablets to personal computers (PC). Gartner also stated that personal computer shipments were going down 25% as the business market fell 8% in Western Europe. The analyst company had also noted that between 2001 and 2002 the UK PC market declined for almost four consecutive quarters (Kobie, 2011). 5.0 Global Market search Dell has over 10 years experience in East Africa. Therefore, it understands the market of East Africa and the dynamics of doing business in Kenya. Kenya has a stable political foundation that allows foreign investors to invest in the country. Moreover, despite the normal crime rate security is not a major concern for a company that relies on direct model of distribution. Security is a big problem to companies that rely on retailers and wholesalers for distribution purposes. The demand for PCs and PC-related services and products has registered a noticeable increase in East Africa owing to the ongoing process of computerization that is sailing through most African countries now. The following table summarizes the economic, political and social indicators of the three countries. Kenya Uganda Tanzania Projected population 2025 51,3 million 56,4 million 58,2 million GDP Billion USD 2009 63,7 43,2 57,8 School enrolment ratio 87 27 32 Internet users 2008 3,3 million 2,5 million 520 000 Ranking in global corruption 146 130 126 Ranking in global competitiveness index 2009-2010 98 128 100 As observed, Dell is likely to succeed doing business in Kenya than Uganda or Tanzania, because of its market based economy and relaxed external trade system. Moreover, there is a high level of computer literacy, particularly among the youth. Kenya’s government is generally thought of as investment friendly and to simplify both local and foreign investment, it has enacted a number of regulatory reforms. Lastly, Kenya has a well-developed physical and social infrastructure. 6.0 Conclusion Dell’s opportunities and strengths can overpower its weaknesses and threats through control monitory systems that help the company to investigate the market dynamics. When properly utilized, the direct model can be a great asset in East Africa where many people value exclusiveness and uniqueness. Consumers who have bought computers in the past know what they want, and Dell can supply to them. Dell products Cutting edge scientifically based organizational practices have to be employed as illustrated in this paper by business firms if they are to be successful and profitable. 7.0 In-Depth Market Analysis and Selection of target market Kenya has liberalized economy backed up by political stability. Most of trade barriers have been eliminated since Kenya is a major tourist destination. Investors are welcomed to improve the economy through setting up businesses and infrastructure in the country. Kenya has contracted various international companies especially from China to lay infrastructure in the country. Democracy is maturing in the country observing the media freedom today in the country. The rate of unemployment and inflation is not as high as compared to other East African states. Kenya is not a landlocked country. It is easily accessible through the Indian Ocean and acts as a door to the East African community. In addition, the country has faced a breakthrough in the level of education where the level of illiteracy was reduced by free education at the primary and secondary level. Moreover, the number of universities has been increased, and hence the number of graduates in the country has increased. In addition, the number of institutions in the country has grown. The institutions can act as a direct market of PCs in Kenya through school programmes that support buying of PCs for the students. 7.1 Entry strategy Exporting directly using a distributor, using an agent, direct exporting/ direct model and partnerships are the four major methods of entering further into the Kenyan market. Direct exporting is the same as direct modeling where Dell will be contacting customers directly with institutions and consumers, and then transport the products ordered without involving a retailer. Online selling can be utilized here where the buyers can be placing orders through the internet. Specifications can be included in the order so that Dell can know what the customer wants. Another strategy is the use of a distributor where Dell can sell the products to a wholesaler or a retailer who resells the product to the end user. In addition, Dell can use an agent who will be acquiring orders from Kenyans being a representative of Dell. Dell can also form alliances with other companies that are established in Kenya. These companies can be making transactions on behalf of Dell (New Zealand, 2012). 7.2 Distribution Strategy Dell uses the direct model as its major competitive edge with the attributes of speed, cost effectiveness and customer friendly ways of distribution/ manufacturing. 7.3 Exchange rate strategy Use of a foreign currency would be inconveniencing when entering records and accounting for expenses. Therefore, Dell should use Kenyan currency to ease buying by the customers, and for developing of accurate financial reports. It is also important to note that prices fluctuate from time to time. It would be necessary to put in place methods of controlling price fluctuations for Dell to avoid losses. This could be through signing contract to sell a give computer at a given price for sometime without considering the prevailing market prices. 7.4 Marketing strategy Dell will rely on advertisement using online companies like Google. Advertisements can also be made using Television and radio stations in Kenya. This is a common form of advertisement in Kenya. Event sponsorship like sponsoring football matches and offering scholarships to students in given institutions that will work together with Dell is also a wise alternative. 7.5 Cultural strategy It will be important for Dell to respect the Kenyan culture in terms of race, religion, values and culture. Kenyans speak in English, and Swahili could be impressive to many. Most of the people are Christians, about 70%. Muslim community is the second largest. Organizational commitment and corporate culture are essential elements in financial performance of a given organization (MD Zabid, 2003). Corporate culture relates to a set of beliefs, values and behavioral patterns that usually form the identity of companies, and they help in molding the behavior of workers (MD Zabid, 2003). It is also known as a cognitive map influencing the environment of an organization through provision of mechanisms and values that employees enforce in actual events. It can also be considered as a pattern of symbols, myths, practices and beliefs that evolve in an organization over time (MD Zabid, 2003). 7.6 Corporate Social Responsibility strategy Corporate social responsibility involves a company like Dell conducting its operations in a positive manner that does not negatively influence the welfare of the consumers. Employees should be treated will. The company should avoid employing insensitive policies that do not allow fair competition in the market. Products sold should be of prescribed quality. The companies can also initiate projects that improve the living standards of Kenyans. It can sponsor football matches in the country. It can also hold events that attract food for hunger-stricken communities. 8.0 Conclusions and recommendations Organizational commitment and corporate culture are essential elements in financial performance of a given organization (MD Zabid, 2003). Corporate culture relates to a set of beliefs, values and behavioral patterns that usually form the identity of companies, and they help in molding the behavior of workers (MD Zabid, 2003). It is also known as a cognitive map influencing the environment of an organization through provision of mechanisms and values that employees enforce in actual events. It can also be considered as a pattern of symbols, myths, practices and beliefs that evolve in an organization over time (MD Zabid, 2003). 9.0 References Chandra K. (2008). Investment Analysis 3/E. UK: Tata McGraw-Hill Education, pp 219,218 Kobie N. (2011). UK leads fall in European PC Market. Copyright Dennis Publishing Limited licensed by Felden. Retrieved from: http://www.pcpro.co.uk/news/367456/uk-leads-fall-in-european-pc-market [accessed 15th Nov 2012] MD ZABID, A.R., SAMBASIVAN, M. and JOHARI, J. (2003). The influence of corporate culture and organizational commitment on performance. The Journal of Management Development. 22(7). pp. 708-728. New Zealand Trade and Representative (2012). Choosing Market strategies. Retrieved from: http://www.nzte.govt.nz/develop-knowledge-expertise/export-guide/ways-of-entering-a-new-market/pages/choosing-market-entry-strategies.aspx [accessed 15th Nov 2012] Webster (2011). Apple Increase UK market Share. Web Design Newcastle. Retrieved from http://www.website-design-newcastle.co.uk/articles/150 [accessed 15th Nov 2012] Read More