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Dell - Strategic Audit

Essay by   •  August 14, 2011  •  Case Study  •  3,825 Words (16 Pages)  •  2,715 Views

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Strategic Audit

Intro

Dell was founded in 1994 by Michael Dell, as a freshmen at University of Texas Michael Dell started buying leftover Personal Computers from local retailers and upgrading them, then selling them out of his trunk. Michael Dell tasted success with this method and decided to go even further when he took a bank loan for $1,000, hired a few friends and started targeting local business. Michael Dell started selling the PCs at 10-15% cheaper than retail and by his first year had reached $600,000 in sales. As the business grew, Michael dropped out of college after his freshmen year to tend to the company fulltime (Wheelen & Hunger, 2009).

A year later, Michael Dell started manufacturing his own computers, he advertised through computer trading publication, and two years later he was able to launch his own catalog where people could order directly from it. As this was happening Michael decided to change the company name from PCs Limited to Dell Computer Corporations. With this remarkable change, Dell was able to go public, and open it's first international subsidiary in Great Britain by 1987. With the success of his company came many award and recognition, such as being name "Entrepreneur of the Year" by Inc. in 1989, "Man of the Year" by PC Magazine 1992, and "CEO of the Year" by Financial World in 1993 (Wheelen & Hunger, 2009).

Sales of $3.5 billion dollars by 1995 made Dell the world's leading direct marketer of personal computers, and in 1996 Dell added online ordering on top of it's mail and telephone ordering methods that was already put in place. And 10 years later, in 2006 Dell Inc. $3,572 million in net income, it shipped more than 10 million systems during the fourth quarter of 2006 and was put on the list of "Most Admired Companies," by Fortune Magazine (Wheelen & Hunger, 2009).

I. Current Situation

A. Current Performance

* In 2005, Dell's sales growth was 18.7%, compared to 13.6% in 2006. There were 10 million units shipped during the fourth quarter of 2006, making it the best sales quarter in Dell's history. During the 2006 fiscal year, Dell's share price fell because its sales and profits were lower than analysts' expectation, yet they were still profitable. Due to a more competitive market, with more products being introduced from HP, Lenovo/IBM, Dell's more business sales oriented design is trailing to the more consumer oriented market.

B. Past Corporate Performance Indexes

* In 1992 the company was included for the first time among the Fortune 500 roster of the world's largest companies. Sales jumped from $546 million in fiscal 1991 to $3.4 billion in 1995 making about seven times increment for the company. By 1995 the company was the world's leading direct marketer of personal computers and one of the top five PC vendors in the world

C. Strategic Posture:

* Dell's mission is to be the most successful computer company in the world (Farfan, B., 2006). To become successful Dell has to master in the most important part of business which are the customers. They want to provide customers with long lasting products with lowest possible cost. Customers want computers that will not break down easily, have better quality, and more cost efficient. Keeping the wants and needs of their customers are important to them and that is one of the main reason why Dell sells their computers 10%-15% below retail price. Their objectives are to be number one in customer satisfaction by adding more service people and having zero transfers in calls. Having more service people will allow Dell to have no customer complaints. Also Dell's machines are made to order and be delivered directly to the customers to make it more convenient for them.

* Dell established its first international subsidiary in Britain and currently structured into three geographic units (Dell Americas, dell Asia Pacific, and Dell Europe). They follow traditional marketing (Ex: catalogs) and internet marketing (Ex: ads in computer trade publications) strategies. The policies of the company are to listens to customers and deliver innovative technology. This will provide the company with information of consumer preference. Also Dell's R&D is slow because they focus on improving its manufacturing process instead of spending its money on new computer technology, and waiting until new technology became a standard.

SWOT Analysis Begins:

II. Corporate Governance

A. Board of Directors

* Dell, Inc. was founded in 1984 by Michael Dell at the age of 19. Michael was the CEO of the company and later became the Chairman of the Board (Internal member). In 2004, Kevin Rollins replaced Michael Dell as Chief Executive Officer. There are eleven other board members which are formed by internal and external members. Some of the board members are international member such Donald Carty from Dell Singapore (Dell Inc, 2006). The board members work together to make decision that will be in the best interest of the company.

B. Top Management:

* The top management of Dell is team of experienced executives from outside companies such as Motorola, HP and Apple. Their main purpose is to focus on direct distribution with a concentration in customer service. Customer service is a top priority for Dell and with unsatisfied customers Dell would suffer. Also the managements are responsible for current situation of regaining sales growth and cutting costs. Managers are responsible for implement the company policies.

III. External Environment (EFAS): Opportunities and Threats (SWOT) (Yasin Mahamed)

A. Natural Environment

* Natural Environment is a combination of opportunity and threat variable that are outside the organization. They are further broken down into two more sections that are Social Environment and Task Environment. Dell's Natural Environment is it's business ideology of dealing directly with the customers and cutting the middle man out, by doing this it has a unique concept of sales and makes it a wonderful opportunity to surpass the competition.

B. Social Environment

* Social Environment is focused on the long-term picture, which includes a PEST (Political and Legal Economic Socio Cultural Logical and Technological) analysis, Dell had

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