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Revitalizing Dell Case Solution

Solution Id Length Case Author Case Publisher
2205 1303 Words (5 Pages) Jan W. Rivkin Harvard Business School : 710442
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After dominating the industry from the early 1990s till mid-2000s, Dell’s growth slowed down after Michael Dell stepped down as CEO and handed over day-to-day operations to Kevin Rollins. Despite following their traditional strategy known as the “Direct Model”, the company was unable to reach its targets, as the industry advanced to serve a different variety of customers with contrasting needs that their antiquated model could not fulfill. 

Following questions are answered in this case study solution

  1. Dell’s Performance & Strategy in the late 2000s

  2. Dell’s Corporate Portfolio & Corporate Strategy

  3. Recommendations to Michael Dell

Case Analysis for Revitalizing Dell

Hence, in January 2007, Michael Dell took charge and became the CEO again, in order to drive the company towards a new business model and to explore new avenues of growth. The industry had altered and shifted away from serving large-sized businesses as their prime audience, towards catering to the average individual who wanted a PC or laptop for their personal use. It is apparent from the case that HP spearheaded this shift through innovative marketing campaigns and unique advertising strategies, targeted towards consumers keen on using the latest technology. It can be said that HP revolutionized the industry by creating new opportunities and establishing a need for PCs for the average individual. Therefore, Dell and other major competitors had no option but to follow suit, which is why Dell was forced to revise its strategy, which ultimately proved to be successful for them. 

By hiring external talent, cutting annual costs by a huge margin, introducing their products at competitive prices within the retail channel, and partnering with resellers, Michael Dell aimed at improving the company’s performance and regaining its dominance. These decisions were taken on the basis of changes within the industry, and Dell was merely a follower of them. Previously, the company was successful in introducing a blue ocean strategy within the industry, focusing purely on direct sales and their entire business model was based on this strategy. However, the management came to a realization that this strategy will not be sustainable, and, rather than being fixated on their original idea, they decided to follow industry trends and took bold decisions to support it.

Even after making such drastic changes and revolutionizing the business model, Dell’s ROE and ROS did not improve immediately. Return on equity in 2007 was 78.9% and dropped to 58% in 2008. Return on sales in 2007 was at 5.6%, however, it dropped to 5.2% in 2008. However, the average ROE and ROS figures for major companies of the US also declined in these years; ROE fell from 15.36% to 14.7%, while ROS fell from 9.12% to 6.88%. This overall decline within the US markets cannot be ignored while analyzing Dell’s performance. 

2. Dell’s Corporate Portfolio & Corporate Strategy

Dell’s corporate portfolio consisted primarily of desktops and laptop computers, which accounted for a large chunk of its revenue. It offered four variants of desktops and laptops based on the different types of customers it served; a reliable and stable line for large organizations, another focused on the productivity needs of small businesses and home users, one focused on customers who used it for high-end gaming and entertainment purposes, and the last variant focused on fulfilling the needs of employees who worked on sophisticated applications like 3D animation. Eventually, the company also entered into markets for enterprise products and provided high-end servers, network switches, and storage devices. 

Dell was focused on creating customized PCs for customers based on their needs. They targeted mostly large and medium-sized businesses, educational and government institutions, and individual customers. Their business model was heavily tilted towards direct sales, or the “Direct Model”, as they called it. They primarily served corporate clients, carved out a niche for themselves within this industry, and focused purely on growing within this channel. Because it was following a focused strategy, Dell was successfully able to provide immaculate service to its corporate clients, through their sales representatives. Dell understood the needs and demands of its clients and provided ease and convenience to them. Dell also segmented their customers based on their sizes, regions, and countries, and sales efforts also differed amongst different regions. 

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