Crafting and Executing Case #6: Dell Inc.

1. What problems and/or strategic issues are facing the company?

1) One of Dell’s business strategies is a selling direct to customers. This strategy eliminates the processes of wholesalers and retailers so that Dell can sell its products to customers directly without unnecessary time and cost; however, this strategy would be a disadvantage in appealing to small business customers and individual customers in some countries since most of these customers are not willing to place orders by phone or over the Internet. According to the example in textbook, “It takes two years of a person’s saving to buy a PC in China”. PC is a luxury good for those people so they want to go to a store to touch and try it before they decide to purchase it. In addition, Dell has difficulty to market the company’s products to geographic areas in which Dell has no presence or no internet access. People living in these areas don’t even know the Dell’s products. Thus, the direct sales strategy becomes an issue in order to expand the company’s business worldwide.

2) Although Dell was continuously searching for ways to reduce costs, the company had difficulty in lowering unit costs in fiscal 2007-2008. Exhibit 2 table shows that out-of-proportion increases in operating expenses in the year of 2007 and 2008 so that the company was not able to cut prices in order to preserve its operating profit margins. The primary problems of this increment of operating expenses were the company’s manufacturing approaches and production methods. When individual consumers shifted to purchase laptop PCs instead of desktops, Dell begun having Asian contract manufactures for partially assemble its laptop because laptop PCs were more complex and labor intensive. The partially assembled laptop units were shipped to Dell’s own plans and then completed to assemble laptop PCs. This “two-two” system seemed to be efficiently; however, the system was more costly than simply having an Asian contract manufacturer for...