Dell Inc Business Plan

1. Introduction

Dell Inc. (formerly PC’s Limited) has grown from a $1000 startup in 1984, to a $61 billion global conglomerate 1. Currently Dell Inc. holds third position globally in PC sales, and it has consistently been among the top three PC companies in the world for more than 15 years 2. As of end of 2011, it employed 103,300 employees worldwide. However, given the rapid growth in the semiconductor industry and new players entering the PC industry, the last 28 years have been particularly challenging for the company, forcing it to evolve continuously, and outperform the competition. The success of the company is largely dependent on two other disruptions - the disruption in the computer industry, and that in the internet technology.

The current study focuses on the challenges faced by the company between 1997 and 2004, when Dell was faced increased competition in the industry driving down its prices, increasing cost base, and the dot com bubble burst. It throws some light on how the industry structure evolved during this period, and how Dell strategically adapted it to leverage its strengths.

2. History

Michael Dell, a pre-med at the age of 19, founded PC’s limited in his dorm room in University of Texas at Austin. He assembled PCs from components and sold it to his fellow students. He got success early on, not only because of the computers he sold but also because of this business style. PC’s limited took orders over phone and deliver it to the customer’s doorstep, eliminating all the retailers and the middlemen. The word of mouth spread fast, and Dell, although did not finish this medical school, joined the club of tech entrepreneurs of his generation, that included Steve Jobs, and Bill Gates.

This innovative business model disrupted the PC industry in 1984, when most of the PC sales occurred through local retail shops and personal selling by representatives. Later, Dell continued to build on this model to provide ever increasing value to its customers. Providing multiple customization options to the end user helped Dell leapfrog in the evolving PC maker industry. Later Dell leveraged the power of internet to improve the efficiencies of its “direct selling” and “customization” business models.

Today Dell has the one of the most efficient Supply Chain organizations globally which has helped it pursue a low-cost leadership position in the industry. It has arguably the most innovative procurement, production and distribution network ever built 4.

3. Industry Analysis

3.1. The evolving PC industry (1997-2004)

By mid 1990s, players like Commodore and Atari (and many more) had exited the PC market mainly because of increasing clout of IBM PC clones and downward pressure on prices thereby reducing profitability. Those who were left had