Dell Lion Batteries

Executive Summary

Dell is at crossroads. Although laptops PCs are growing at a faster rate than desktop PCs in last few years, Dell is moving in wrong direction. Contrary to forecast of 20-25%, Dell’s share of laptop PCs has fallen to 2% of its sales. Competition has dwarfed the mighty Dell and Dell needs to recapture its brand image with a high quality product (exhibit A: 5 forces). Opportunity has come along with the invention of Sony’s LiOn batteries, which could be a game changer for Dell if deemed successful. However, Dell can not afford yet another failure. SWOT analysis (exhibit B: SWOT) shows that Dell has ability to deliver the right product and opportunity exists in the market.

After a through risk analysis (exhibit C&D: Risk matrix & RWW) and cost-benefit analysis (exhibit E: cost-benefit), it is recommended that Dell should pursue a dual development strategy and develop two products – one with NiHi and other with LiOn – independently until results from Sony’s testing are known. Based on the results, Dell could stop one of the product developments.

Scenario Analysis

Dell has four alternatives to choose from. First alternative is to continue using NiHi battery power. This is the least risky, proven option (refer exhibit C&D). Although Dell could produce a “good’ product with NiHi, this option offers a low payoff (expected profit margin of $485m) compared to other alternatives (refer exhibit E) and does not differentiate Dell’s laptop from competition. At present, Dell is facing cutthroat competition from the rivals and buyer power is extremely high (refer exhibit A). Lack of differentiation could mean the difference between success and failure. Going with NiHi batteries is a guarantee that Dell Latitude line will not get acclaims, even in the best case scenario. Moreover if LiOn batteries become successful, competitors might be able to get into a locking agreement with Sony, preventing Dell from using LiOn technology for another two years.

Second...