Dell Case Study
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Brief Background Summary
How would you like to take a $1,000 investment to start a company and turn it into 41 billion dollars revenue producing enterprise in just twenty years? Im sure everyone would, but it became a reality for one man, Michael Dell. Michael Dell is the current CEO of Dell, Inc, one of the largest companies in the world. He started this company back in 1984 with just $1,000 at the age of 19 and now at the age of 39 he is the fourth richest man in America. (DuBrin 313) “Mr. Dell became the youngest CEO of a company to have their company ranked in Fortune 500. (Dell Annual Report) Today, Dell Inc. is ranked incredibly number 125.
Dell Inc., which is located at Building 2 One Dell Way, Round Rock, Texas, is one of the premier companies in computer products and services. The company current employs approximately 46,000 people and is the “biggest online seller of computers. Dells primary products include enterprise systems, household PCs and notebook computers. They are also currently trying to expand their way into the printer market even further.
He started with the idea of taking plain computers and adding parts to it to make it a more appealing to computers buyers. “Dell hired a small staff and began selling his machines over the phone and through the mail. Several years later he created the industrys first on-site service program, in which the repair technician visits your office or home.” (DuBrin 313)
Problem Identification
In creating a multi-billion dollar company there were issues and problems that had to be identified and made. In being such a rapid growing company, Mr. Dell had to fill up his company with top professionals and visionaries that could continue the success. The company needed to find ways to stay competitive and stay focused on their vision. For a company to stay growing at the pace they were, which was about 50 percent a year in the 90s, it needed to continue to add strong employees and keep the motivation going.
In the computer market there are a lot of competitors, just waiting for someone to make a mistake. The fight over market share is very competitive. Dell needs to stay very aware of their business competition and what they are doing. I think that Dell has done very well picking up most of the trends and consumer needs to come out with new ideas, to stay on top. There is always room for improvement though
In the 90s the market was filled with technology companies. Microsoft, Compaq and IBM were some of the elite. Dell did what they could to pull through some of the issues at hand to grow and stay competitive. To keep up with this fast growing economy, Dell took the necessary steps they could to pull through it with great success.
Research an Internal and External Factors
Dell started off very strong bringing computer systems to the market, but Mr. Dells company was growing and needed more workers, money, basically everything. He took the company public in August of 1988 were the share price closed their first day at $8.00. (Yahoo) Two years after the stock came out on the market Michael was struggling to get it going. The stock in August of 1990 was down to $4.63. After 1990 Dell was having a lot of success and the company soared, but in 1993 Dell came to some troubles. “They attempted to sell computers through retail stores and unsuccessfully launched its first laptops.” (DuBrin 313) They definitely were in need of making some changes. In January of 1993 the company stock was valued near $49 by the end of 1993 it fell to $22. (Yahoo chart) Mr. Dell had to go back to his roots and hire qualified people that were going to push the company further than it was a year ago. He needed to fix his little mistake and he most definitely did.
If we put $100 in Dell stock back in 1990, with all the splits and price increases, it would have been worth nearly $6,000,000 by 2000. In 2001 while PC sales were starting to slow down, Dell continued success. They made the necessary changes needed like, getting in to new lines of electronics. “In 2002 HP bought Compaq and immediately became a bigger threat to Dell in PCs than before.”(Lashinsky and Lustgarten) Printers were HPs top selling items, which was a source for a large portion of their profits. Dell had to do something to stay above this competitor. “Dell went from a partner with them to a rival.” (Lashinsky and Lustgarten). Today, Mr. Dell has a very large focus on maximizing their approach of profits and revenue by putting time in the printer market.
Many factor come in mind that Dell has to be somewhat worried about. Constant merging and partnerships were forming between companies. Dell compared to other companies put considerably less money into their R&D. This is because with their partnership they have formed it leads them new products without the cost of R&D. According to Michael Dell, “The Company doesnt go searching for technology as if it were some new compound element chart that hasnt been discovered.” “They only spent about 1% on it compared to 5% for HP, 6% for IBM, and 21% for Microsoft.” (Lashinsky and Lustgarten) That is great that a company can do so well with out putting in so much into R&D, but I would be a little worried about, since technology is always changing.
Analyze the Information
The factors that influence Dell decisions and profits are known. Competition is a big factor. IBM, HP and the almighty Microsoft are the among the biggest players in the industry. According to a Direct Competitor Comparison chart (1), HPQ (Hewlett-Packard) year to date has the highest revenue growth percentage with 29.1%. Even-though Dell is doing very well also with 17.1% this may be why Dell is very focused on the revenues that printers will bring. Dells competition, Microsoft, HP and IBM, are the ones to watch out for and strive to stay one step ahead of. Following HP and increasing sales of printers is great, but following may not always work, leading will.
Another factor to look at is that Dells net income (bottom line profit they took in) is below the other big competitors. Having employees is not cheap and Dell does a great job with keeping employee costs down versus their market cap, but compared to Microsoft,