CASE09_Dell - Dell Pursues Growth in a Challenging...

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Dell Pursues Growth in a Challenging Environment INTRODUCTION Dell is a leading technology provider holding a 15% share of the worldwide computer systems market. Due to a variety of challenges in the company's markets and business environment, financial indicators of performance are beginning to weaken. Consequently, Michael Dell is seeking to achieve another turnaround by initiating a new organization structure and targeting five key areas of growth. Dell has abandoned some of the tenets of its early business model in order to keep pace with shifting consumer sentiment and market conditions. This case provides an extensive look at Dell's current situation and how the company plans to overcome pressing competitive and economic threats. Realignment of operating segments with its consumer base and expansion of distribution channels have already begun to show some positive results. The potential for Dell's new strategy to help the company meet its objectives can be evaluated by considering the following questions. Based on an assessment of the threats in Dell's external environment, what actions are required of the company? In what ways is Dell's segment growth strategy likely to succeed or fail? How will competitors' strategies and actions impact Dell's ability to achieve its growth objectives? How should Dell change its business- and corporate-level strategies to enable growth and meet these challenges? ANALYSIS The primary strategic issues facing Dell stem from intense competition among computer hardware manufacturers and shifts in consumer expectations and buying patterns. The present global economic crisis magnifies the harmful effect of these forces and introduces additional concerns for management to address. Competitive Threats - The degree of competitive rivalry in the computer industry is very intense. In this hypercompetitive market, Dell faces multiple threats, including: Losing share to competitors o HP has taken over top U.S. position o Acer's PC sales are growing at an incredible pace in the U.S. (62%) and worldwide (53%) o Apple continues to grow despite economic downturn Low cost foreign producers gaining momentum and driving down prices o Average price per unit sold is declining o Eats into profit margins o Dell's margin for consumer segment estimated at 0% for FY2010 Dell Inc. - 1
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Dell Pursues Growth in a Challenging Environment Increasing competition in Dell's key customer markets o New entrants and brand name electronics makers in home user segment o Intense competition for lucrative corporate accounts o Small/medium business segment targeted by large competitors o New server entrants and consolidation in the public sector Consumer Shifts - Changes in buying behavior are having an impact on Dell's business environment in the following ways. No growth in U.S. corporate IT expenditures and spending shrinking in the
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This note was uploaded on 03/22/2011 for the course ACCT 3391 taught by Professor Turpin during the Spring '10 term at Troy.

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CASE09_Dell - Dell Pursues Growth in a Challenging...

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