Dell Inc - Essay Example

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As Dell Inc works to salvage its place in the computer marketplace, the use of Porter's five forces can be a valuable tool. The analysis breaks down the market forces which act on a company into individual components to allow the company to evaluate it's response to each, and develop plans and strategies to respond to the rapidly changing marketplace…
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Dell Inc
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Download file to see previous pages The force of the buyer revolves around the relative strength which the buyer can exert on the business through the course of business transactions. The Force of the Buyer can also be applied to the business in terms of considering the business as a buyer from its suppliers, In each case, however, the relative strength of the company, both when feeling the force buyers exert on it, and as it buys from suppliers, is relatively weak. Neither the company nor the consumers can exert a high level of buying power on the company
According to Porter, the power of the buyer is strong when those who buy from the company, or the company as a buyer, exist in a limited marketplace. In other words, when the company exists as a buyer from suppliers, and the company is the only buyer, or one of a limited number of buyers of specific goods and services. (Porter, 1980) An example of this type of relationship could be the Department of Defense as a buyer from defense contractors literally is the only buyer of goods and services for the purpose of our countries defense. (QuickMBA.com, 2004) In this case, the buyer has monopolistic power over the sellers, and can dictate what it wants and how much it is willing to pay. However, no such limited monopoly exists in the computer marketplace. ...
Developed as a strategic response to the internet, Dell launched a business model which focused on 'build to order' computers. Rather than guessing what its customers wanted, and building inventory which was then stored in warehouses until ordered, Dell developed an integrated supply chain management system, and then went to the consumer and allowed the end user to drive manufacturing. The company focused on connecting with the consumer's immediate desires, and then building just what was ordered. For Dell, this decision cut costs, and increased the velocity at which the company could operate. According to Bossidy and Charan (2002) Dell became the market leader with this business model. The company turned its inventory 80 times per year, rather than 20 times which is the typical inventory turnover rate of its competitors.
Through this strategy, dell became known as the market leader in terms of getting the consumer exactly what he or she wanted, on time, accurately, and at low cost. This positioned Dell to experience the success which it is now struggling to hang onto. However, this does not make Dell a strong buyer as a buyer of goods and services when compared to its competition. Dell, HP, IBM, and Sun Microsystems are all purchasers of similar products. While the companies may have their own idiosyncrasies in terms of what specific parts and pieces they purchase, they are all purchasing the same types of products, and therefore all have similar levels of power in the marketplace as a buyer. Dell may have a larger power in the marketplace than its competitors because of their higher level of volume it consumes. However, the company is not an exclusive ...Download file to see next pagesRead More
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