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DELL INC.2008: CAN IT OVERTAKE HEWLLET-PACKED AS THE WORLDWIDE LEADER IN PERSONAL COMPUTER
This is a case study to determine whether Dell Inc can outcompete rival personal computer producer Hewlett-Packed.
In 1984, young Michael Dell founded a business concept of building personal computers; according to his concept the personal computers will be beneficial to users. By 1994, the company had build up infrastructures and establishes its market outlets, by the year 2003; dell was competing favorably with other personal computer producers. The Dell’s business model of building order business and their sell-direct method motivate the sales and help company in distribution. By 2005, dell outcompeted Hewlett-Packed to become a leader in personal computer sale. (Thompson 2008).
It is true to make prepositions that dell will outdo its Hewlett-Packed (HP) in production and sale of personal computers (PC). To support this preposition I will give analysis of Dell’s market landscape, since 1990s, Dell has been leading in servers; the large percentage of servers sold were machines carrying customized Unix Operating Systems, which were relatively expensive, changes in server technology in 1999-2004 saw production of low cost servers like x86 machines, which contained standardized components and technology. The x86 machines are able to run Lux and windows operating systems, by 2007 Dell ranked second in its server traffic, which command large share of market, through this Dell command good share of the market and out did its competitor Hewlett-Packed (HP).
Dell also made large benefits in selling of data storage devices, in 2001-2002 dell started sell low cost data routing switches a product of Cisco systems, which was the global leader. Also in 2003, Dell started marketing Dell printers and cartridges; this pushed the sales of Dell and helps to curb the rival HP who had made considerable fortunes in selling of printers and cartridges. In 2003, dell move further ahead; they began selling electronic data registers, flat screen LCD TVS, computer peripherals, specialized software and other services. In 2004, Dell ranked second in behind apple iPod in selling of dells MP3 players, Dell dj and plasma screen TVS. Dell also benefited tremendously by marketing products of affiliated with manufacturers. These products included printers, scanners, modems, memory cards, digital cameras, speakers, monitors, CDS and DVDs drivers. Through investing on the above categories of products, Dell outcompete its competitor Hewlett-Packed (HP) . (Thompson 2008).
Between 1990s to 2007 Dell manage to sell its products in more than 170 countries. According to information as given in exhibit 1 (Thompson 2008), Dell leads other personal computer (PC) producers in United States in personal computer vending from 1998-2005. In 1998 for instance dell commanded 13.2% of market of U.S market share against its closest rival Hewlett-Packed (HP) trailing at 7.8% of total market share. According to the same exhibit Dell commanded market share of 8.5% in 1998 of total market of personal computer vending in the worldwide market. Although the same grid shows the dwindling in the sale of Dells products in the worldwide market in 2007, in favor of Hewlett Packed products, this insignificant in comparison to Dells market command of 28% against Hewlett Packed 23.9% market command in United States. Critical analysis of these results also showed that dell’s sales have been showing positive figures in United States from 1998 to 2007. For instance, in 2007 the total market share of dell double 13% in 1998. (Thompson 2008).
These analyses support my statement that Dell continues to dominate the word market share in personal computer vending; Dell has competed favorably with its close rival Hewlett-Packed (HP). Innovation, creativity, and invention have help Dell to produce products which are efficient and effective, this has enabled products gain customer loyalty.
The management of Dell Company has also contributed to its efficiency and quality production; this has enabled them produce high quality products which outsmarted products in the market. Michael Dell the proprietor and the owner of dell company posses’ technical skills in the market know how and technological prowess. He manages the company tactically; his views on the internet, personal computers and e-commerce were. Proper management featured in results of operations as shown in an exhibit 2, (Thompson 2008). The net revenue of the company rose from $ 25,265 in 28th january2000 to $ 61133 in 1st February 2008. (Thompson 2008). This result showed dells positive performance in the market. Increase in revenue was as a result of engagement in a variety of activities which enable them counter activities rival companies.
Dells strategy and business model they adopted can be used to argue that it will overtake its rival Hewlett-Packed in market share. Dell adopted strategies like offering added value to their products including helping customers profit from investment in IT products and services. Highly efficient chain of distribution and manufacturing which adopted low cost structure which translated to lower prices of their commodities. Also, their strategy of allowing customers to purchase the customers tailored products which were effective to customers. Direct sales of their production enable them to understand and deal with customer expectations and needs. Dell adopted their cost-effective Build-to-Order Manufacturing enable to assist their customers to equip their products. Customers are able to configure their laptops and desktops with microprocessors, random-access, graphic cards and software, in 2008, dell also commence a plant to install the assembling plants in different places to U.S to enable easy customer accessibility, all these strategies enable dell to maintain customer loyalty.
Another important issue to consider in analyzing whether the dell will overtake the HP is to consider the how dells strategies put pressure on the competitors. Dell offered direct services to its customers by creating the customer based products, most of the products manufactured according to customer’s preference. This created the customer loyalty which made it hard for other rival companies to convince customers to accept their products while the Hewlett-Packed and other companies needed to conquer the market, dell expanded their market margin. Dell also affiliated with other specialized manufacturers, to market their products for instance dell marketed data storage devices, this enable them to increase their market horizon, the rival companies found it harder to access the market.
Although dell has been successful in its strategy of maintaining market share it has fall short in producing the notebooks cost effectively, the laptops were not easy to manufacture as it required high labor and expensive. To deal with this problem dell contracted Asian company to assemble its products, which are then shipped to dells facilities for final assembly, this strategy prove to be expensive than the expectation of dell.
Since 1990s to 2008 Dell has been in the forefront in the sale of PCs, it commanded large share of market in both United States and the worldwide market, however, with the introduction of laptops, notebooks the market preference has shifted. My recommendation is that Dell Company should put measures to improve on their production of laptops. This will enable them gain market confidence.