Corporate Strategy Case Study

Dell: From a Low Cost PC Maker to an Innovative Company

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Abstract:
During the late 80s, Michael Dell and his company, Dell Inc., revolutionized the global PC market by the latter’s ‘Dell Direct Business Model’, where it eliminated all kinds of middlemen and directly supplied customized PCs to the customers. For the last two decades, the company continued to be the market leader in the small household PC segment. However, after enjoying the supremacy for two decades since 2005, it started facing competition. August 2006 was the cruelest month for Dell as the company’s bottom line experienced an unprecedented decline. The company’s revenue and profit failed to match the expectations. Besides, it had to write off US$ 450 million (mn) for the installation of defective capacitors in its computers and opt for workforce alignment. It also recalled lithium batteries manufactured by Sony from its laptop. The analysts were thus, skeptical about the future of the organization. The company was termed as less innovative than its competitors as it failed to launch innovative products in the market. To be on the growth trajectory again, it planned to enter into the consumer electronics segment. But the analysts were doubtful about the success of Dell’s ‘Direct Business Model’ in the consumer electronics segment. The case deals with Dell’s business model, viable alternative of Dell’s business model and its success in the consumer electronics segment. It provides a scope for discussing whether the turnaround strategy of Dell would be successful and about the scenario of global PC industry and global consumer electronics market.

Pedagogical Objectives:

• To discuss how Dell revolutionized the global PC market
• To analyse Dell’s Direct Business Model
• To understand the global PC industry
• To discuss the challenges faced by Dell
• To debate on Dell’s turnaround strategies.

Keywords : Dell Inc; Apple; Dell business model; Personal computer; US computer industry; IBM (International Business Machines Corporation); Server; Printer; Innovation Management Case Study; Notepad; Sony; Graphical user interface; Gateway Computers; Premier Page web page; Product recalls