STRATEGIC DECISION MAKING

Strategic decision making

Strategic decision making

INTRODUCTION Dell was founded in 1983 by Michael Dell, an 18 year old college freshman from Texas who started out upgrading hard drives for IBM compatibles on nights and weekends. Within a year, his service business had grown to an incredible $6 million from performing computer upgrades for local area businesses and he dropped out of school to concentrate on the business. When Dell changed his strategy and started offering custom built-to-order machines, the business exploded, with $70 million in sales by the end of 1985. Evolving into an assembler company, Dell was able to exploit certain events occurring in the industry and swiftly adapted to meet market conditions. Five years later, total sales had grown to an unbelievable $500 million and Dell became nationally known as a supplier of state-of-the art desktop and portable computers. Dell continually achieved phenomenal records in sales and profit growth, eventually making it the most successful company ever in the PC industry, surpassing $25 billion in 2000. As one of the world's premier providers of computer products and services, Dell was the US market leader in its core products, the desktop and laptop markets by 2001.

Problem Identification

Although Dell is seen to be a highly successful company, analysts worry that the recent slumping economy in the 4th quarter of 2000 and the market saturation in the technology arena could prevent Dell from achieving its prior growth rates and profits. Can it continue to maintain its stellar track record in light of the sudden decrease in demand, especially with lower and lower profit margins resulting from price wars in the industry ?

ANALYSIS -Dell's Competitive Position

Dell's success is directly attributable to its "direct model." Customers have the ability to contact Dell directly and order technologically advanced systems at competitive prices. This direct contact with consumers gives Dell the unique opportunity to know exactly what its consumers want and offer products that would satisfy their specific needs. Dell responded to market slowdown indicators by pursuing an aggressive pricing strategy designed to increase profits through volume. Management felt that they could still thrive and dominate the highly competitive market even during the tough times, functioning as the lowest cost producer. Continually trying to improve their position in the PC marketplace, Dell pursued a multi-pronged growth strategy looking to gain domestic marketshare in the storage/server and computer service markets, as well ...