Dell Inc Case Study

When Dell started his business with the simple concept of built-to-order personal
computers sold directly to customers. Michael Dell believed his approach to the personal
computer business had two advantages. Firs, in bypassing distributors and retailers, he
eliminated the markups of resellers. There by improving his profits. In addition, by
building computers only when ordered, Michael Dell greatly reduced the costs and riss
associated with carrying large stocks of parts, components, and especially finished goods.

When Dell shifted to large-scale operations, the company initially retained the direct-to-
consumer strategy. However, between 1990 and 1994, Dell Computer did distribute its
computer products through such retail outlets as Wal-Mart, Staples, and in several Latin
American countries, Xerox. However, by 1994 Michael Dell had realized that the profit
margins associated with selling through retail distribution channels were too tight.
Therefore, the company discontinued retail sales to refocus on its direct selling efforts.

Dell initially started direct sales via mail and phone orders. However, in 1988 the same
year Dell had its initial public stock issuance Del added a sales force to focus on the sales
and service relationships with the company’s large corporate and government customers.
In 1994, Dell became the firs computer company to list a Web site. Initially, Dell’s Web
site merely listed price and product information. However, Dell quickly recognized the
advantages of direct sales via the company’s Web site. Due mostly to the difficulties and
lower profits of selling to single house-holds and consumers, Dell largely ignored the
consumer market. However, direct sales to consumers via the company’s Web site began
to increase dramatically in 1996. By 1999 Dell Computer was the largest retailer then on
the Internet.

Dell’s direct- to-consumer strategy has given the company a substantial cost and profit
margin advantage over its rivals. Companies such as Compaq, IBM, and Hewlett-Packard
manufacture personal computers in large volumes and keep their distributors and retailers
stocked with ample inventories. In contrast, Dell manufactures computers only when an
order is received. In doing so, Dell has virtually eliminated finished product and
component parts. These cost and profit advantages have allowed Dell to prosper and
grow during the past several years, while many of its competitors have weakened or gone
out of business.

In March 2004, Gateway completed its acquisition of eMachines, Inc., a privately-held

computer manufacturer and distributor. Ted Wait, CEO of Gateway, hoped the merger
would allow Gateway to better compete with Hewlett-Packard and Dell. In December
2004, it was announced that Lenovo Group Limited, the largest information technology
company in China, would acquire IBM’s Personal Computing Division. While its rivals
have continued to struggle, Dell has grown to be the largest PC suppler in the world with
just under 18 percent of the global market.
Management Issues ( Vision Statement )
It’s the way we do business. It’s the way we interact with the community. It’s the way we
interpret the world around us our customers’ needs, the future of technology, and the
global business climate. Whatever changes that future may bring, our vision Dell Vision
will be our guiding force.

Mission Statement
Dell’s mission is to be the most successful Computer Company in the world at delivering
the best customer experience in markets we serve. In doing so, Dell will meet customer
expectations of:

Highest quality
Leading technology
Competitive pricing
Individual and company accountability
Best-in-class service and support
Flexible customization capability
Superior corporate citizenship
Financial stability

Organizational Structure
Michael Dell is the chairman of the board of directors of Dell Inc. He has held this
position since he founded the company in 1984, In July 2004, Kevin Rollins assumed the
titles of president and chief executive officer. Kevin Rollins has been with Dell since
accepting the position of senior vice president, corporate strategy, in 1996. Headquartered
in Round Rock, Texas, Dell Inc. is managed on a geographic basis. The three geographic
segments are the Americas, Europe, and Asia-Pacific.

Dell Inc. maintains more than 7 million square feet of office, research, manufacturing,
and distribution space in the United States. In addition, a new half-million square-feet
manufacturing facility is under construction in North Carolina and is expected to begin
operations in late 2006.

Dell’s sales in America are reported in two different categories, Business and U.S.
Consumer. The net revenue for business sales of $25,339 million in the Americas
segment is by far the company’s largest segment, accounting for almost 52 percent of
total net revenue for 2004. With $2,579 million in operating income, business sales in the
Americas segment accounted for almost 61 percent of total operating income for 2005.
The net revenue for consumer sales in the Americas segment was $7,601 million,
accounting for just over 15 percent of total net revenue for 2004. Consumer sales in the
Americas segment generated $399 million and accounted for just over 9 percent fo total
operating income for 2004. Dell holds 29.1 percent of the total markets for personal
computer sales n the Americas, easily placing Dell ahead of its competitors. With total
sales of $32.940 million, the Americas segment accounts for almost 67 percent of Dell’s
total net revenue. Combined operating income for the Americans segment of $2,978
million accounted for almost exactly 70 percent of Dell’s total operating income for
2004.In addition to its Americas-based operations, Dell maintains almost 4.5 million
square feet of office, research, manufacturing, and distribution space in 43 locations
around the glob. The European segment based in Blackwell, England, covers the
European countries and also some countries in the Middle East and Africa. In 2004, sales
in the European segment generated $10,787 million in net revenue, accounting for almost
22 percent of total net revenue. In 2004, sales in the European segment generated $818
million in operating income, accounting for just over percent of total operating income.
Dell’s11.7 percent market share for sales of personal computer sales in Europe means
that Dell is the second-largest supplier of personal computers in the segment.

The Asia-Pacific segment, based in Singapore, covers the Pacific Rim, including Japan,
Australia, and New Zealand. In 2004, sales in the Asia-Pacific segment generated $5,478
million in net revenue, accounting for just over 11 percent of total net revenue, In 2004,
sales in the Asian-Pacific segment generated $458 million in operating income,
accounting for almost 11 percent of total operating income. Dell’s 8.3 percent market
share for sales of personal computer sales in the Asia-Pacific segment means that Dell is
the third-largest supplier of personal computers in this segment.

Manufacturing
Dell manufactures its computer systems in six locations: Austin, Texas; Nashville,
Tennessee; EL dorado do Sul, Brazil (Americas):Limerick, Ireland (Europe, Middle East,
and Africa); Penang, Malaysia Asia-Pacific and Japan; and Xiamenm China. The
manufacturing process at Dell’s worldwide manufacturing facilities comprises assembly,
testing, and quality control of its computer systems. Parts, components, and
subassemblies purchased form suppliers are tested and held to quality standards. Because
of its build-to order manufacturing process, Dell quickly produces customized computer
systems while achieving rapid inventory turnover and reduced inventory levels. These
attributes lessen Dell’s exposure to the risk of declining inventory values. Another
advantage of this flexible manufacturing process is that Dell can quickly incorporate new
technologies or components into its product offerings. To ensure a defect-free product,
testing is performed at various points during the assembly process and on the final
products.
 Apple Case Study 2006

Apple Computer 2006, Case study

I believe many of us are using Apple’s products these days. Personally,
I have an iPod touch and iPod Nano, and currently I am thinking of
getting a MacBook. To be honest, I did not really like Apple’s products
till 6 years ago when they released the iPod Nano. I remember my very
first computer being an Apple PC. It was around 20 years ago and I
was so disappointed with the PC. I threw the Apple PC a year later and
brought an IBM PC. Why? Simply because I could not play most of the
games on the Apple PC and exchange files with my other friends who
used IBM PCs. The worst of all, I paid premium price for the Apple PC. It
was like spending a lot of money to buy a digital prison for myself.
Therefore, my impression of Apple’s products was very poor. I would
use “the producer of premium rubbish” to describe Apple in the past.
So, how did Apple turn-around from producing “premium rubbish” to
“premium wonder”? A Harvard Business School case study titled
“Apple Computer, 2006” written by David B. Yoffie and Micheal Slind
describes the amazing transformation of Apple. This case study offers
a very good insight as to why entrepreneurs should learn and progress
from both their successes and failures.

1) Solid founding teams are far more important than solid

business ideas.

The founding team of Apple Computer was very powerful, because

each founder contributed to the business in various ways . This
powerful team consisted of three people:

Steve Jobs had amazing ability to understand and reframe the PC

industry. This allowed him to set the unique vision and mission for the
company. He was also responsible in keeping the company on track
with the ir vision and mission.

Steve Wozniak was a technical genius. He and Steve Jobs managed

to invent a computer circuit board named “Apple I” at the Job’s family
garage in Los Altos, California. His talent helped Apple produce state of
the art hardware and software throughout the years.

Makkula, Jr. was a millionaire and experienced IT businessman. He

had retired from Intel at the age of 33 and joined Apple. His experience
in Intel and ability to attract venture capital provided invaluable
knowledge and resources for company at the beginning.

These founders had specific skill sets, and most importantly these skills
complemented each other very well. Steve Jobs provided a direction
 for the company, and then supported Steve Wozniak and Makkula Jr.
technically and financially. This powerful team dynamic allowed Apple
to achieve success within the first 4 years.

2) Clear and insightful mission statements empower start-up

companies to achieve impossible

Apple Computer was a classic example of a company which truly

believed, understood and acted on their mission statement. Mission
statements are essential for any successful businesses, because they
provide reference points for owners to make decisions, and they also
provide guidelines for employees to define what are productive and
non productive behaviors. Therefore, clear and insightful mission
statements help entrepreneurs to manage their limited resources more
effectively and efficiently. On the other hand, if mission statements
were misinterpreted, it would cause much devastation in companies.
(One sentence to point out the contrary?)

The Apple’s mission statement is “to bring an easy-to-use

computer to every man, woman and child”. This played a crucial
role in the history of the company. It helped Apple achieve early
success between 1976 and 1980. Until a powerful alliance appeared in
1981, IBM, Microsoft and Intel worked together and invented open
operating system computers. It allowed thousands of programmers to
write applications for the PCs. This added enormous value for end
users. Most importantly, the PCs’ users could exchange files with other
users regardless of brands, excepted Apple’s computers. It changed
Apple’s strategic position from offering easy-to-use computers to
offering state-the-art expensive non user -friendly machines. It drove
the company into crisis for almost 17 years.

Why that long? During the crisis period, a number of CEOs (including
Steve Jobs) tried many different approaches to turn the company
around. However they all seemed to overlook onone very important
problem. Apple was no long be true to their mission statement
anymore. Losing the identity of its own caused the company to lose 1.6
billion in 1997.

In 1997, the co-founder who wrote the mission statement, Steve Jobs
came back to rescue Apple from the crisis. This time he successfully
reallocated all the resources and effort to deliver their mission
statement. He reinterpreted and broke down the mission statement
into piece and made sure the company could deliver what it said.

The first part of the statement was “to bring their products to their
customers”. Steve Jobs launched an online store and Apple retail
 chain stores around the world. It allowed Apple to control and manage
their sales, catering to multiple customer groups directly.

The second part was “easy-to-use computer”, he reinterpreted

computers as digital devices in the new era of the PC industry. This
created a lot of space for Apple to step into many industries and
inspired them to invent innovative products.

The last part of the mission statement was “every man, woman and
child will use their products”, he realized that people chased after
technology era was long gone. In the new era, PC companies had to
create technology which was suitable to people. Therefore, he made
sure every product (hardware and software) does eventually solve end
users’ problems and improve their life experiences. In other words, he
focused on delivering value propositions to customers, and avoided
developing state-of-the-art technology which had little use for end-
users like the old Apple did.

3) Avoiding direct competitions and reframing playing fields are

the secrets for success

In 2000, as most the PC makers focused on cost cutting and offering

competive prices , Apple refused to engage in the intense price war
within industry. They continued charging premium prices for their
products, and their revenue and growth outpaced/ surpassed the
industry average. The secret was that Steve Jobs reframed the industry
from a traditional PC’s manufacturing paradigm to one off digital
entertainment. This allowed Apple to step outside the competition zone
and attackfrom the fringe. As a writer noted, “Mr. Jobs has created a
fusion of fashion, brand, and industrial design and computing. If he is
to successfully revamp Apple, he will ultimately win not by taking on
PC rivals directly, but by changing the rules of the game.”

Another writer also commented on Apple’s operations, “Stop and look

at Apple for a second, since its odd company… Apple makes its own
hardware (iBooks and iMacs), it makes the operating system… It also
makes the consumer-electronics devices that connect all those things
(the rapidly multiplying iPod family), and it runs the online service that
furnishes content to those devices (the iTunes Music Store). If you
smooshed together Microsoft, Dell and Sony into one big company, you
would have something somewhat the diversity of the Apple
technological biosphere… Apple is essentially operating its within own
closed miniature techno-economy.”

The lesson of this story is that companies who fight against direct
competitions have a good chance to lose it all. Mostly because of their
often predictable actions . However, when companies can change the
rules of the competition, everything will become unpredictable. Thus,
the chance of winning increases drastically.