Marketing

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Dell Corporation

Introduction

Dell Corporation has flourished into becoming the world’s leading Computer Company in the last decade. The Corporation prides itself in owning one of the largest computer institutions on the international front coupled with its customer-centric approach in marketing. Since Dell Corporation was founded by Michael Dell in 1984, it has been ranked as being among the finest innovators in computer generation and software manufacture. The concept of the Corporation began when Michael was a student at the University of Texas in Austin. He created the first personal computer (PC) fashioned to meet costumer’s needs based on his limited knowledge at the given period. Dell’s strategies, refinements and the evolution that the company has transversed through after its inception has positioned the company in the global market with such high level of competitors as IBM, HP, and Acer, just to mention but a few. With the advent of trade liberlisation and globalisation, Dell Corporation has been creating innovative ideas, strategies and re-organization of the structural and internal environment to align with the high competition evidenced in the international market. Dell trends to diversify in its business activity encomapsses such strategies as procurements in electronics arena, offering LCD televisions, projectors, and other products. Today, Dell is a multi-national company, which is ranked as the leading computer company in terms of PC sales that resulted in $80 billion by the end of 2009 trading period.

Historical Overview

            In 1983, while Michael Dell was a freshman student at the University of Texas, he invented his initial PC that gave him the capability and impetus to venture into his own business in 1984. The idea played a significnat role in Michael Dell’s life that he resorted to dropping out of school in a bid to realise his dream in the selling of computers. Indeed, he structured his own company upon the limited entrepreneurship skills and knowledge that he possessed at the given period. The main concept of his company was to accrue computer sales through computer systems or desktops, which he would deliver to costumers upon order placements. Dell employed a direct marketing strategy that did not involve the services of middle men. However, this “building-to-order” proved to be quite a task to the comapny with the intial challenge being the customization of production and delivery services to align with a customer-centic approach; this was only the most basic way to achieving operational efficiency. Secondly, Dell had to enhance its communication process by the provision of a free number that would enable costumers to call in and place their orders.

            Dell was therfore faced with the challenge of chaining the marketing strategy if he was to achieve a competitive edge against the company’s rivals. For the first challenge, a customer-centric approach that would define consumer wants and needs was the only way to achieve product customization. At the time of the company’s institution, IBM was the dominant market player having the highest PC sales and consequenly the highest market share. Dell’s intial marketing strategy involved price cuts that induced a higher demand for his products. In addtition to this, enhanced communication had been enabled by the creation of a toll-free number that allowed customers to place their orders more easily. This infused an element of credibility in the company’s image, branding and products that resulted to a gross sale of $4 million by the end of the 1984 trading period. This period acted as a major milestone in the growth and development of the company as the sales increased to $40 million between the period 1984-1985. This clearly was an indication of good trading as the market share had also increased.

By 1987, the company had risen to dominate the computer market through its customized marketing strategy but Dell also had the knowledge that with the oligopolistic setting, any form of retaliation from the competitors would lead to a significant loss in his market share as the company was in its infant stage as opposed to the rivals that were mature industries. To mitiagte this move, Dell knew that he required a strong marketing team that would ensure that they stayed ahead of their competitors. Dell hired a professional staff in marketing from Tandy Corporation, an expert institution that specializes on lowering PCs cost. The new staff established competitive prices in the market that influenced large firms into becoming prospective customers for Dell products. Since Tandy comitted to work with Dell, the comapny expanded rapidly, grossing an income that increased the market share from 23% to 31%. In addition to this, Tandy Corporation set a price related to the firm’s cost structure.  Within this growth period, Dell sold $4 million worth of computer in one month after they located the first office in London in 1988. In the year 1987, the Dell Corporation had a gross sales of $159 million. The year 1987 also marked another significant milestone in the corporation as it became a public company. In the initial public offer (IPO), 3.5 milllion shares were traded at a price of $8.5 per share.

A decade later, Dell was faced with price wars initiated by its competitors and new strategies had to be used to overcome the challenge. Additionally, the economic recession had a significant effect on the company’s growth. Dell Corporation surpassed the recession by price reductions and an extension of the warranty period offered to consumers. This created a competitive edge over the other industrial players. Dell Corporation ventured into international trade shorlty after 1993 in a bid to expand its market share by penetrating foreign markets. This strategy was quite profitable as the company accrued upto $149 million in 1995, making it one of the top 5 computer sellers in the world. Later in 1996, in order to create customer loyalty and credibility, Dell introduced the Network Server product that marked a major revolution to the company as it pushed up daily online sales to $30 million. This increase in sales accounted for 40% of the total company’s revenue. To create higher marketing avenues, the company launched its web site for customer care services. By 1999, Dell Corporation expanded its activities by opening a superstore in its web site , where the costumer could locate a variety of Dell’s products and promotional programs whilst comparing them to substitute products offered by other companies. This customer-centric approach is still practiced by the corporation to date and its merits are quite evident.

Market Segmentation

            Businesses should focus on customer needs and the relevant satisfaction. Indeed, this customer-centric culture has been upheld by Dell Corporation as it targets a wide range of consumers based on factors such as age and income status. Dell’s costumers fall under two major target groups:

1)      Large Enterprises: Dell has proved to be one of the best leading in the provision of IT infrastructure and economic solutions that have been adopted by large and accredited companies. For instance, Dell sold 90% of its total sales to governments and their affiliated institututions. To this share, large corporate institutions accounted for had 70% as defined by the fact that they purchased $1 million in PCs every year.

2)      Small Business and Individuals: Since gaining costumers trust is an important policy for Dell, the firm intends to cover all levels of society, whether low class, medium class or among the business level classes as well. Dell set up a free toll phone number in which it can achieve this goal in terms of increasing its sales in the US. Internationally, the company has extended its communication network by locating 6 call centers in Europe and Asia that costumers can call for free. These centers have been fashioned to receive costumers orders whether via phone or by fax and even to receive costumers complaints for the company to deal with. Furthermore, Dell commenced the sell of its product in its web site in 1995. Indeed, Dell’s sales increased via the internet channel especially on the international level, reaching upto $3 million a day in 1997.

Marketing Strategies

The initial marketing strategy in Dell was simple; refrain from using retailers and market the computers in cheap affordable prices to the costumers. Additionally, the Corporation was bend on the idea of offering the costumers with great services and meeting their needs. In the 1990s, this strategy was changed to the marketing motto that held the view that if you want Dell computer, go and get it from the same company by ordering it. The motto has been very succesful in its quest by revolutionising the Corporation to the leading position in computer manufacture. Note that, since Dell extended its selling via the internet resource, its had to adopt relevant strategies that would aid it to achieve its target. These strategies are:

1) Targeting Online Marketing: the company should identify its customers inorder for it to customize their website into a user friendly one.

2) Tracking Marketing: by tracking the advertisements the company will be able to monitor and extract the results that are to be used to make the necessary adjustments.

3) Relationship: the company should build a good relationship with its customers by measuring the level of satisfaction. This can be achieved through the conduction of surveys.

SWOT Analysis

Strengths: First, the company offers a 24 hours service and costumer support 7 days a week. Secondly, the company is ranked highest in the information technology industry. Thirdly, the firm has acquired a total of nine manufacturing plants. Fourth, Dell is the world’s largest PC producer. Fifth, Dell has more than 76,000 employees giving Dell efficient strength. Lastly, the firm is listed as the 25th largest company in the fortune 500 companies.    

Weaknesses: First, Dell wanted to increase its financial performance in 2006, so, the firm eliminated the bonuses. Secondly, 1,100 employees got laid off in 2003 after the company closed the biggest call center. Third, it is difficult for Dell to target students in high schools and colleges because they represent a meager 5% of total market share. Fourth, suppliers are not involved with Dell. Fifth, 1900 jobs were lost in 2009  after the company declared of closing of its manufacturing plant in Ireland that was re-locating to Poland. Lastly, claims being criticized against Dell on its notebook.

Opportunities: First, some foreign markets like India, Pakistan and Bangladesh have not been exploited. Second, there is a big opportunity as presented by the governements where Dell is able to penetrate the educational facilities. Third, there is the opportunity of partnering with suppliers. Fourth, the company has the opportunity to sell its computer and products to the retailers. Lastly, updating technology has led to cost reduction.

Threats: First, there are strong competitors in the market (such asIBM, HP, Acer), which makes the market too aggressive. Secondly, individual regulations infused by the various governments. Third, different currency fluctuations pose a major risk.. Fourth, since the last recession in 2008, many countries were negatively affected leading to the reduction of Dell’s revenue base. Lastly, Dell’s products can be obsoleted by the rapid change in the technology.

Recommendations

• •         Diversify its products.
• •         Be more innovative in the world of technology to sustain the strong competition with other computer firms.
• •         Involve retailers with Dell’s business to facilitate the seals and cover all level of costumers.
• •         Participate in outreach programs to create awareness for its products.
• •         Involve outsourcing companies to come up with studies that aid interested customers that have never used Dell computers beforehand.
• •         Expand its global network to cover most of countries who have never received Dell’s experience.
• •         Carry out extensive market research in order to match its products with customers’ expectations.