Strategy Assignment

Matching Dell

November, 10th, 2010


Question 1 3

Question 2 4

Question 3 5

Question 4 6

Question 5 6

The first step in the formulation of a good business strategy for any firm is the comprehensive assessment of two key parameters – industry attractiveness and the firm’s competitive advantage. Subsequently, in order to ensure long-term profitability, the firm also needs to establish the extent to which it can sustain its competitive advantage against competitors.   In question 1) of this report we use the Porter’s Five Forces framework to analyze the attractiveness of the PC industry in the 90s. In question 2) we establish Dell’s competitive advantage and consequently it’s strategy in the PC industry. In question 3), we identify some of the barriers to imitation which enable Dell to sustain its competitive advantage identified in question 2). Question 3 and 4 explore the recent developments in the PC industry and Dell’s performance in the industry.

Question 1: How would you describe the PC industry in the 90´s?

Please refer to Exhibit 1 for the Porter’s Five Forces analysis of the PC industry in the 90s. Below we summarize the major conclusions:
1. Product
Since all innovation was concentrated with industry wide Wintel supplier and all other components were commoditized, the PC was a commodity product with no significant product differentiation - the industry had low margins, was susceptible to price wars and all cost savings from suppliers & production were passed onto end consumers. Due to commoditized nature of the value chain, a low cost product was critical for profitability.
2. Consumers
The PC industry had two contrasting end consumer segments – 1) home consumers that were brand conscious but price-sensitive and 2) business consumers who were brand indifferent but drove prices down through bulk orders.
Demand for PC increased a lot especially in the late 90’s.
Consumer segments demanded...