Strategic Options for Dell Computer

How Dell Can Address Challenges and Threats

Mar 6, 2009 Gwendolyn Cuizon

Maintaining sustainable competitive advantage in a cutthroat business is a huge challenge for Dell Computer. Strategies need to be implemented to continue its edge.

Dell’s business model needs to present a sustainable competitive advantage. Dell Computer has won the e-business battle for one sole reason: Dell was “playing alone because competitors are, at the moment, trapped with their traditional off-line channels and they can’t move because they would lose all their actual sales; they are trapped in what Lester Thurow defines “Hobbesian choice” (Sloan Management Review, 2001, Vol.42, No.2 pp.112).

Threats to Dell Computer

But, as customers are using the internet more and more, the competitors will be forced to stop using the traditional distribution channels and focus on selling online. This is where the problem will start for Dell. Once key competitors will play the same e-game like HP and IBM, Dell’s e-business operational advantages will be reduced drastically or worse, disappear. Those who differentiate themselves will be the only ones who can survive the intense competition.

Strategies to Remain Competitive

In order for Dell Computer to improve its product differentiation, it needs to do the following:

  • Control R&D patents in key industry technologies. They have to give up its extreme outsourcing and standardization strategy;
  • Introduce new innovative services instead of just offering standard services based on software packages of which it does not have any patent.

The strategic positioning of Dell in the actual e-business does not allow the company cost advantages nor product differentiation. Dell should affiliate with other players in e-malls and compete using the combination of huge range of products offered by their multiple malls partners. A company web site is not enough for Dell.

  • Rethink its Virtual Network

Dell’s e-business strategy consists of outsourcing almost all the value chain activities in order to lessen price. This is a short-term (tactical) cost view and may not be effective in the long run as competitors are getting more resourceful in providing lower-priced products.

Dell should reconsider the “make or buy” strategic thinking focusing primarily on activities and components that are could potentially introduce future technological breakthroughs in PC industry.

  • From Hardware to Software

It is high time for Dell to start developing proprietary software that provides supply chain and integrated solutions (E-crm, e-commerce, etc.).

  • Functional Strategies

Online “Platinum Councils”. Dell has its regular council face-to-face meetings that are intended as brainstorming process to be able to determine problems. A good strategy would be adding a forum on their intranet which would allow them to share ideas and problems immediately as they arise.

  • From “Internet CRM” to “Ubiquitous Marketing”

Dell should utilize a wider array of strategic points such as branching out into similar businesses that would enable them to come in contact with more prospective customers such as :

- UMTS phones;

- Interactive TV;

- Internet-enabled POS terminals;

- E-wallets.

Dell can introduce and develop ways to offer a customized approach to any media.

  • E-marketing

Dell could tie up with Microsoft or make use of popular social networking sites to advertise their products.

Dell, for instance, could negotiate with Gates to include a Dell logo or a window in Windows desktops showing the latest Dell’s e-ads any time customers connect on the internet.

  • Enhancing Customer Purchase Experience

Strategic ways to attain this would include:

a) Providing link to complementary products (i.e. Microsoft software) in their websites;

b) Providing customer with a choice of system based on their needs such as creating custom computers designed mainly for computer engineers or construction engineers not based on product specifications such as the kind of processor or size of monitor.

  • Dell should explore emerging computer markets in other parts of the world such as Europe, China and India.
  • It should also explore ways to generate attention from education markets particularly college students. Product differentiation through more aggressive sales marketing strategies could do this.

The copyright of the article Strategic Options for Dell Computer in Business Profiles is owned by Gwendolyn Cuizon. Permission to republish Strategic Options for Dell Computer in print or online must be granted by the author in writing.
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