SWOT Analysis of Dell Computers

Dell Computers relies on its Direct Method to sell its products. This model is not perfect.. Addressing its flaws is key to maintaining Dell's competitive edge.

Dell Computer Corporation started in 1984 by Michael Dell with this very simple premise as its basic foundation: that personal computers could be built and sold directly to customers and by doing this, Dell could address their specific needs and provide the best computing solutions that meet those needs.

Dell’s Direct Method provides two distinct advantages: 1. reducing marketing and sales cost by eliminating markups of distributors and retailers and 2. building to order reduced inventory costs and risks of retaining inventories.

Dell’s Direct Model is the main reason why it has achieved its stellar status in business today. This strategic model enables Dell to interact with customers directly providing them with fast, reasonably-priced and friendly means of production and distribution.

SWOT Analysis of Dell Computer

Strengths

Dell's Direct Model approach of enables the company to offer direct relationships with customers such as corporate and institutional customers. Their strategic method also provides other forms of products and services such as internet and telephone purchasing, customized computer systems; phone and online technical support and next-day, on-site product service. This extensive range of products and services is definitely one of Dell’s strengths.

Dell Computer's award-winning customer service, industry-leading growth and consistently strong financial performance differentiate the company from competitors for the following reasons:

Price for Performance – Dell boasts a very efficient procurement, manufacturing and distribution process allowing it to offer customers powerful systems at competitive prices.

Customization - Each Dell system is built to order to meet each customer’s specifications.

Reliability, Service and Support – Dell’s direct customer allows it to provide top-notch customer service before and after the sale.

Latest Technology – Dell is able to introduce the latest relevant technology compared to companies using the indirect distribution channels. Dell turns over inventory for an average of every six days, keeping inventory costs low.

The company's application of the Internet to other parts of the business --including procurement, customer support and relationship management -- is growing at a rate of 30 percent. The company's Web site received at least 25 million visits at more than 50 country-specific sites.

Weaknesses

Dell’s biggest weakness is attracting the college student segment of the market. Dell’s sales revenue from educational institutions such as colleges only accounts for a measly 5% of the total. Dell’s focus on the corporate and government institutional customers somehow affected its ability to form relationships with educational institutions. Since many students purchase their PCs through their schools, Dell is obviously not popular among the college market yet.

For home users, Dell’s direct method and customization approach posed problems. For one, customers cannot go to retailers because Dell does not use distribution channels. Customers just can’t buy Dell as simply as other brands because each product is custom-built according to their specifications and this might take days to finish.

Opportunities

Personal computers are becoming a necessity now more than ever. Customers are getting more and more educated about computers. Second-time buyers would most likely avail of Dell’s custom-built computers because as their knowledge grows, so do their need to experiment or use some additional computer features.

Demand for laptops is also growing. As a matter of fact, demand for laptop has overtaken the demand for desktops. This is another opportunity for Dell to grow in other segments.

The internet also provides Dell with greater opportunities since all they have to do now is to visit Dell’s website to place their order or to get information. Since Dell does not have retail stores, the online stores would surely make up for its absence. It is also more convenient for customers to shop online than to actually drive and do purchase at a physical store.

Threats

In a volatile market such as personal computers, threats abound. Computers change in a constant sometime daily basis. New software, new hardware and computer accessories are introduced at a lightning speed. It is essential for Dell therefore to be always on the lookout for new things or introduce new computer systems.

The threat to become outmoded is a pulsating reality in a computer business. Not only that, companies must produce products that are high in quality but low in price. This is one challenge that Dell contends with.

One of the biggest external threats to Dell is that price difference among brands is getting smaller. Dell’s Direct Model attracts customers because it saves cost. Since other companies are able to offer computers at low costs, this could threaten Dell’s price-conscious growing customer base. With almost identical prices, price difference is no longer an issue for a customer. They might choose other brands instead of waiting for Dell’s customized computers.

The growth rate of the computer industry is also slowing down. Today, Dell has the biggest share of the market. If the demand slows down, the competition will become stiffer in the process. Dell has to work doubly hard to differentiate itself from its substitutes to be able to continue holding a significant market share.

Technological advancement is a double-edge sword. It is an opportunity but at the same time a threat. Low-cost leadership strategy is no longer an issue to computer companies therefore it is important for computer companies to stand out from the rest.

Technology dictates that the most up-to-date and fastest products are always the most popular. Dell has to always keep up with technological advancements to be able to compete.