Dell & HP are always abreast when it comes to market positioning. Dell regained its No.1 position with a market share of 17% worldwide. The growth for the industry will remain strong and this it is expected to grow at 6%.With major growth being registered in the Asia /Pacific region. (Datamointor)
2(B) PEST ANANLYSIS
A. Political – Legal Forces
Different countries have different legislations and these in some ways restrict the companies or give opportunities to the company.
B. Socio – cultural
Demographic & Cultural aspects of the macro-economic environment
For instance change in consumer preferences.
C. Technological
Technology is evolving at a rapid pace today ,and people appreciate more & more advances in their systems ,and are switching over to new information appliances for e.g. palmtops & net organisers.
D. Economic Forces
The industry is marred by the economic recession the reason being low consumer spending.
2(C) Michael Porters Five Forces Model
Micro –environment analysis of the Personal computers industry
- Rivalry
Competition among the giants is fierce ,everyone aiming for a larger market share ,intensive price cuts & changes.
B. Threat of Substitutes
The new forms of Information appliance like Digital TV / HDTV Digital set- top box & Internet screen phones are gaining increasing popularity this might hamper the growth of the PC industry as a whole.
C. Buyer Power
Due to high number of other suppliers in the industry the customer has the options to take the cheapest and the best.
- Threat of entry.
The firm does not face threats alone from competitors in the industry
but also from new entrants. In the PC market any firm that discovers a new technology that is efficient in terms of price & performance is an immediate threat to the industry.
- Supplier Power
Since the industry is highly dependent on component suppliers a powerful supplier could exert pressure on the market, by supplying
components at a higher price to increase his profits.
3. The Competition
The company faces cutthroat competition from three big companies
Apart from these it faces competition regionally by local manufacturers which occupy 60% of the global market share.(IDC)
The Key Market Players
3(A). Dell faces major competition from three major companies worldwide namely From Hewlett Packard(HP),IBM & Apple computers. Hewlett Packard came into existence in 1939 and has since them gone out to be a very crucial player in the PC market. Its strong presence can be felt worldwide, with its recent acquisition of Compaq it has almost doubled in size. Before the entry of Dell in the Personal computers market HP together with Compaq enjoyed a larger portion of the PC market ,since Dell’s entry HP has almost 3 % of its Global market to Dell. IBM on the other hand remained the same.Apple computers although has some market share but it is currently hit by the economic conditions in its home country. The company reported a 30 % drop in sales in 2001 when compared to 2000,mainly due to low consumer spending.(Datamonitor)
Major Competitors Sales & Profit Trends
3(B). Hewlett Packard personal computers division posted sales of 21.9 billion US$ for the year ended 2002 , down by 18% from 2001,In 2001 the company posted sales to the tune of 26.8 billion US$. HP posted losses on both these years of around 532 million US$ and $933 million respectively, this was due to acquisition write off of Compaq computers.(www.hp.com)
IBM’s Personal systems division reported sales of 11.2 billion US$ for the year 2002, down by 7.5% when compared to 2001 sales of 12 billion US$.The decrease again goes onto show the severe economic downturn. The companies PC division showed profits of 57 million US$ for 2002 when compared to a loss of 153 million US$ for 2001.(www.ibm.com)
Apple computers reported net profits of $65 million on revenues of $5.74 billion for 2002, compared to a net loss of $25 million on revenues of $5.36 billion in 2001.(Wall Street)
We can see from the above results that all these companies show a negative growth in sales as well as profits, reasons as given above. Dell managed to register strong growth through out.
Market Positioning & Shares
3(C) HP currently holds to the No.2 slot globally in the Personal computers market with sales of almost $22 billion (US) rough estimates of industrial sources suggests that HP currently holds 16.1% of the global market while Dell the market leader in the personal computers globally with sales of a staggering 25 billion US$ and has a market share of 17.1%.While IBM and Apple hold 7% and 3% respectively. (IDC)
New Markets For DELL
3(D) Printer Market .Dell recently launched four printers and are just the first models in what will be a broad line of products that meet the needs of all customers, from individuals to large corporations. Dell will face stiff competition from the already matured printer market. HP did respond to this by launching six more printer models. The printers feature the Dell Ink Management SystemTM or Dell Toner Management SystemTM , which simplify the purchasing process by displaying ink or toner levels on the status window during every print job and pro-actively prompting users to order replacement cartridges. Dell’s also targeted the Enterprise Market ,and has gained recognition from the industry well in terms of technology & Networking solutions. The enterprise market is currently led by IBM which holds the major portion of the market. This market is about providing networking solutions for large corporations and enterprises.
MARKETING STRATEGY
4 The success of Dell’s ongoing growth despite the economic recession is not only due to its marketing intelligence but also due to its marketing intelligence. A company about to double in size has some strategies which will contribute to achieving its goals.
Market Segmentation
Dell currently segments the market in three broad segments as seen below,
Segment 1:-Includes educational institutions ,Large Corporations & governments uses.
Segment 2:- Includes Small Businesses & Home Users
Segment 3:- Individuals or Small to Medium size Business.
As we can see above that all the above segments have some similarities Dell designs its marketing mix according to of these segments.
Marketing Strategy Targeting
4(B) As we have seen Dell’s marketing segmentation, Dell accordingly offers different products for each of these segments.
Now the systems that dell offers for all these segments have unique characteristics and are designed and advertised keeping in mind the needs of these particular segments ,likewise :-
Segment 1:Customers who need highly reliable systems within networked environments. Industry-wide compatibility contributes to the high dependability of OptiPlex systems.
Segment 2: Customers requiring fast technology turns and high-performance computing. The product line commonly features the latest relevant PC technology on an award-winning platform.
Segment 3: Targeted at customers who require high-performing computer systems at aggressive prices, along with industry-leading service and support. & Optimum performance for their system investment.
As seen above different segments targeting different parts of the market with the best available technology is Dell’s current strategy. But only having a strategy alone does not help to market a product better, a product has to have some differentiation with its current competitors and some unique features as well.
What sets Dell apart from its competitors?
4(C) Dell's award-winning products and customer service, industry-leading growth and consistently strong financial performance differentiate the company from competitors. At the core of those characteristics is Dell's unique direct-to-customer business model. "Direct" refers to the company's relationships with its customers, from consumers to the world's largest corporations. The direct model eliminates retailers or other resellers that add unnecessary time and cost, which can hamper Dell's understanding of customer expectations.
Growth Strategy
4(D) Dell is extending the fundamental advantages i.e. focused on expansion of direct business model. Current Dell initiatives include moving even greater volumes of product sales, service and support to the Internet.Dell still has significant opportunity for expansion in all parts of the world and has expanded the reach of the direct model to new countries and regions that have great growth potential, such as Latin America and India. Opportunities for expansion also exist in all customer segments and in all product categories, from home PCs to enterprise products that play a key role in the build-out of the Internet infrastructure.
5) MARKETING MIX
Dells Marketing mix is a perfect blend of its 4 (P)`s with its main aim
Remaining customer service & value for customer, making it the future
Market leader.
PRODUCTS
5(A) . Inspiron notebook computers are targeted at customers who require high-performing computer systems at aggressive prices, along with industry-leading service and support. Such customers are typically individuals or small- to medium-sized businesses that are looking for optimum performance for their system investment.
OptiPlex desktop computers & Latitude notebook PCs provide large corporate, government and education customers with reliability, stability for complex networked environments. Important Latitude features include lower total cost of ownership, outstanding network connectivity and broad operating-system support.
Dell offers a more than adequate range of products so customers have more choice. Moreover Dell offers customisation on all its products so customers can easily configure their systems as per their needs and budgets. All of Dell’s products can be either be bought online or by calling the company.
PRICING
5(B) Dell's pricing strategy is among the most competitive in the industry. Its leading business to consumer direct model not only implies higher than industry-average profit margins on its wide array of laptops. Both the Inspiron and Latitude series deliver style and affordability. Dell's price for performance is centred upon eliminating resellers, retailers and other costly agent steps. Together with the industry's most efficient procurement, manufacturing and distribution process Dell offers its customers more powerful, more richly configured systems for the money than competitors.
PROMOTION
5(C) Dell advertises in most consumer oriented computer magazines. It also mails monthly catalogues to certain prospective customers. The Dell web site has excess of product information. Dell’s advertising strategy is long on information and short on hype. One of the main attractions of Dell is the level of customisation it provides to customers. Whether you are browsing the web site or looking at a print advertisement, you’ll have a good idea if what your dream machine will cost. Additionally, Dell’s advertising is honest. There are no hidden charges and there’s no small print ,so giving the customer its value.
PLACE (Distribution)
5(D) Dell’s leading direct to consumer model states that no resellers ,no retailers or agents should separate the company from its customers. This sought of a customer care and service is achieved by Dell marketing its products through the internet and by telephone. With sales of a remarkable 55 million US$ per day through its websites speaks for itself .Half of Dell’s revenues today come from its websites. This not only reduces costs but it gives Dell a direct feel of the consumer’s demands and trends. Many of Dell`s competitors have followed the same suit but Dell remains the market leader for now.
Evaluation of Dell`s Strategies
6(A) After reviewing Dells performance, its evidential, its been performing better than the market analysts expectations for a decade and has performed better than expected. With its current magnitude of growth its poised to reach $60 billion in revenues. Its because of Dell’s current marketing mix that has added to its success, and it wants expand on these marketing principles, and in doing so I don’t think there’s anything stopping this company except for factors outside its control.
Evidence of Dell’s Success
6(B)
As we can see above Dell has doubled in size from the year 1999 to 2003.This is incredible. We should consider that the industry is currently in recession and in the financial year2000-2001 where all of Dell’s Competitors reported high losses and negative growth Dell reported a $2.3 Billion US profit with a growth rate of 24%. Now how astonishing is that!!
DELLS FUTURE PROSPECTS
6(C) Dells growth strategy is to double in size in the next 5 years !! It sees huge potential in diversifying like its recent entry into the Printer Market and its expansion in the Enterprise market where more & more customers are turning to Dell for networking solutions. Dell’s strategy is to keep costs low, while not compromising on quality and implementing the latest technology as far as possible. With this sought of strategy it’s a growing threat to IBM’s business which is the market leader in Enterprise network solutions.
