DELL: Potential for New Advertising Agency

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DELL Potential for New Advertising
Agency Executive Briefing Report
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Table of Contents
Serial Number Topic Page Number
1 OVERVIEW ADVERTISING FACTS 3
2 SCOPE FOR NEW AGENCY CUSTOMER SERVICE TROUBLES 5
3 SCOPE EXPANDING PRODUCT LINE 7
4 SCOPE GEOGRAPHIES 10
5 SCOPE DELLS CONCERNS 11
6 SCOPE CHIPS, SERVERS AND LAPTOPS 12
7 SCOPE EMERGING COMPETITION 13
8 CMO-SPEAK 14
9 EFFECTIVENESS OF ADVERTISEMENTS 16
10 PC SEGMENT UPDATE 17
11 SERVER SEGMENT UPDATE 18
12 ORGANISATION STRUCTURE 19
13 SWOT ANALYSIS 20
14 MANAGEMENT PROFILE 21
15 FINANCIALS 23
16 PRODUCT AND SERVICES SEGMENTS 29
17 GOALS AND BUSINESS MODEL 35
18 ONLINE MARKET SEGMENTATION 37
19 BUSINESS STRATEGY 39
20 MARKETING 41
21 INTERNET ADVERTISEMENTS 44
22 MANAGEMENT THINKING 48
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Overview

• Dell, Inc., formerly known as Dell Computer
  Corporation, designs, develops, manufactures,
  markets, services and supports a range of
  computer systems, including enterprise systems
  (servers, storage and networking products and
  workstations), notebook computer systems,
  desktop computer systems and software and
  peripherals.
• Became a Fortune 200 company in 14 years.
• Second largest and fastest growing PC company in
  the world.
• The worlds largest Direct PC company.
• Manufactures most of the products it sells.
• Has six manufacturing locations worldwide to
  service its global customer base. The company is
  managed on a geographic basis the Americas,
  Europe and Asia Pacific-Japan. 
• Manufacturing process consists of assembly,
  functional testing and quality control. Testing
  and quality control processes are also applied to
  components, parts and subassemblies obtained from
  suppliers. Quality control is maintained through
  the testing of components, parts and
  subassemblies at various stages in the
  manufacturing process.
• Is certified worldwide by the International
  Standards Organization to the requirements of ISO
  9001 2000. This includes the design, manufacture
  and service of computer products in all Dell
  regions.

Source Nexis - Datamonitor
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Dells Advertising Key Facts

• Agencies
• Critical Mass Inc. - Calgary, AB, T2G OY4 Canada
• DDB Chicago - 200 E Randolph St, Chicago,
  Illinois, 60601-6436 United States

AD BUDGET Adv. Expenditures FY 2004 473,000,000

• Vehicles Used
• Business Publications
• Consumer Magazines
• Direct Mail to Business Establishments
• Direct Mail to Consumers
• Internet Adv.
• Network Television

Source
5
Scope for New Advertising Agency Customer
Service Troubles - 1

• Absence of middlemen, a key ingredient of Dells
  sales strategy, means that Dell takes all the
  kudos as well as the brickbats for its customer
  service standards.
• John Dickinson, an industry veteran and
  columnist, in an open letter to M. Dell on Dec
  23, 2003 complained about how service levels have
  deteriorated. His registration system broke down.
  It turned out that Dells database had no record
  of his computer's existence. None in Dell could
  figure out what to do to get his computer
  properly registered.
• In early 2004, in two surveys that rate the
  satisfaction of PC buyers, Dell's scores
  declined.
• The March issue of Consumer Reports, in a survey
  of 4100 consumers, gave Dell 62 points out of a
  possible 100 for its support on desktop PCs. In
  June 2003, Dell had scored 64. The slippage has
  been steady over the last 3 years. Dell had a
  score of 74 in Dec 2001.
• In another survey done by Technology Business
  Research (TBR), in the fourth quarter of 2003,
  Dells satisfaction rating among corporate buyers
  slipped to 80.98, down from 83.4 in the third
  quarter of 2003. TBR's survey polls buyers on
  eight aspects of support, including their overall
  satisfaction with a company's support service.
  However, in TBRs third quarter report for 2004,
  Dell scored 83.61, marginally up from 82.27 in
  the second quarter.
• Dells images deterioration was exacerbated by
  occurrences such as computer worms and shortages
  of replacement parts.
• Dell was forced to relocate some part of its
  support service center in India back to the US
  after escalations in complaints. Calls from US
  purchasers of Dell's OptiPlex desktop and
  Latitude notebook personal computers will be
  handled from existing facilities in the United
  States brand PCs. Some experts argue why should
  Dell seek to cut costs of support service when it
  is making handsome profits?

Source Nexis search, cnet.com, news.com
6
Scope for New Advertising Agency Customer
Service Troubles - 2

• Dell's goal is to solve each problem within a
  12-hour period. Right now it meets that goal only
  about 96 of the time, globally, for its server
  and storage products.
• Dell could face more problems with customer
  service in future. Its focus on growth naturally
  means that it will attract more consumers who are
  less skilled in operating PCs and thus need more
  assistance. As the proportion of the consumers
  in the mix rises, there is going to be an
  increase in complaints, even if Dell isn't doing
  anything differently," says Roger Kay, an analyst
  at IDC. That's because increasing market share
  requires a "devil's bargain. Dell has to support
  inexperienced buyers in order to get their
  business.
• Apart from increasing the size of its support
  service staff, Dell has shifted its priorities to
  resolving problems on the first call. The company
  is also examining how its customer care
  organization can resolve order-related problems
  more quickly.
• Some customers have said that while dealing with
  Dells support staff, they felt they were being
  talked down to, as if they have never experienced
  technology. They compared this to rival HPs
  friendly neighborhood personnel for support
  service.
• Dell plans to offer a free security software
  bundle that will combine a firewall, antivirus
  and antispyware software. Spyware problems
  account for 20 of the company's support calls
  now. And each spyware call takes about 20 minutes
  on an average. Given the no charge nature of
  this segment, Dell will have to seek ways to
  limit the pressure of spyware issues on support
  staffs time.
• Experts feel that Dell's rapid unit shipment
  growth in recent years and the resulting rapid
  influx of new business customers, are the root
  cause of its customer relations problems.

Source Nexis search, cnet.com, news.com,
asia.cnet.com
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Scope for New Advertising Agency New Product
Lines - 1

• Printers
• Currently, Dell is in Phase 2. Phase 1 of rolling
  out the product has already happened.
• In Phase 2, Dell aims to boost printer sales
  significantly by expanding the number of models
  it offers and the numbers of countries in which
  it markets. Dell will take most of the profits it
  makes on printers and reinvest them in the
  business by offering lower prices or bundling
  printers with its PCs, all with the idea of
  pumping up unit shipments.
• Phase 3 will arrive once Dell builds a large
  customer base, which would increase its sales of
  supplies such as ink, toner and paper.
• According to Tim Peters, head of printing and
  imaging, the company is also nearly ready to
  enter the Chinese market.
• In Nov 2004, Dell launched Wireless Printer
  Adapter 3300 that allows users to print, scan or
  fax without being connected to their printers.
  The computer needs a wireless card and must be
  connected to a wireless network.
• TVs
• The main customer for Dell TVs may be consumers,
  but Dell sees a potential among its business
  customers as well. A number of hotels, financial
  institutions, restaurant chains and retailers are
  known to have expressed interest in Dell TVs.
• Business customers with chains of outlets (like
  McDonalds) could offer huge business.
• Dell recently announced plans to add two new
  42-inch plasma-screen TV models to its TV line
  up. It is likely to add a few more TV models over
  time.
• Dells high-definition plasma TV will sell for
  US3,499, a relatively modest price that Dell
  believes will help boost demand.

Source Nexis search, cnet.com, news.com,
asia.cnet.com
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Scope for New Advertising Agency New Product
Lines - 2

• Smart Phones
• Smart phones, which combine the attributes of a
  cellular phone and a PDA like Dell's Axim,
  represent a potential opportunity for Dell,
  executives say. But Dell will carefully examine
  what it can do to differentiate its products from
  those of incumbents such as Nokia.
• Media Center PCs
• In Oct 2004, Dell rolled out a new line of Media
  Center desktops, wrapped around Microsoft's
  Windows XP Media Center 2005 operating system.
  The PCs will function more like entertainment
  devices that can record, show TV programs, and
  play DVD movies or music CDs.
• It follows a good, better, best model strategy
  to sell Media Center PCs. Basic utilities come
  with the cheap good bundle. It won't include a
  remote control or tuner for watching and
  recording television, as in full-fledged Media
  Center PCs. However, it will let people view
  photos, home videos and other media content using
  the Media Center interface, designed for viewing
  while sitting back in a couch or chair. The
  upgrade from a traditional Windows operating
  system costs only 39.
• The best offers the entire package for a higher
  price. The aim is to offer the product across
  price segments.

Source Nexis search, cnet.com, news.com,
asia.cnet.com
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Scope for New Advertising Agency New Product
Lines - 3

• Others
• Dell recently introduced Inspiron 9200, a new
  notebook for consumers that offers a 17-inch
  display, with a list price that starts at
  US1,699. Dell aims to attract buyers interested
  in using a notebook to watch movies or to
  manipulate multimedia files. The machine also
  comes with Wi-Fi, allowing it to connect to home
  networks and share files.
• Dell wants to provide its consumers with a menu
  of in-home services. It plans to offer to do jobs
  such as installing home networks for consumers in
  conjunction with a new suite of services that
  will allow customers to pay a set price for a
  certain job. Under the program, a Dell
  representative will pull up in the van and take
  care of the problem.
• Dell also offers discretionary services -
  professional consulting, SAN (storage area
  network) design and deployment, application
  development, managed services. It's about a 2.6
  billion business and growing at roughly double
  the rate of Dells product business.
• Dell is also eyeing a movie download service. It
  has been exploring partnerships that would offer
  its customers access to movie downloads, similar
  to how it provides music downloads through a
  partnership.
• Dell recently launched the Axim X50 handheld and
  refreshed its Dell DJ music line with two models,
  including the miniature Pocket DJ 5. The DJ 5,
  about the size of a deck of cards, will sell for
  US199 and come with 5GB of storage.
• What Dell will not get into
• Utility computing. While other competitors are
  embracing the trend, Dell has decided not to.
• Dell is not interested in lower-priced standalone
  devices like DVD players.
• Digital cameras. While Dell will have alliances
  to bundle digital cameras with its products, it
  will not go into it alone.

Source Nexis search, cnet.com, news.com,
asia.cnet.com
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Scope for New Advertising Agency Geographies

• In China, already the worlds second-largest
  market, Dell is the largest non-domestic company,
  after Legend.
• In September 2004, Dell opened a command center
  to offer improved services to its business
  customers in China. The new facility, located at
  Xiamen, is the second Enterprise Command Center
  (ECC) that Dell has set up besides the one at
  Round Rock, Texas. The centers provide
  around-the-clock spares and service support to
  server and storage customers.
• More centers will be opened in Europe and Japan.
  The European center will be at Limearick,
  Ireland the location of the Japanese center is
  yet to be announced.
• One more ECC is slated to be established in the
  Asia-Pacific region in early 2005.
• The idea behind the ECCs across geographies is to
  help Dell take better and quicker care of
  problems for its high-value customers. Its
  American ECC has seen a 25 improvement in
  resolving initial customer problems since it was
  set up in November 2003.
• In Japan, with 50 of consumers using their PC as
  a television, Dells TV and Media Center software
  could have a big market potential.
• Printers and enhanced services are showing
  particularly strong growth in Europe, Middle East
  and Africa region. These services include backup
  services, Windows migration services Active
  Directory services and the like. In the third
  quarter of 2004, Dell saw a 72 growth in this
  segment in EMEA region. Taken together with the
  core PC, server and laptop segments, maintaining
  the absolute, year-on-year revenue growth rate in
  EMEA is likely to get harder because it will be
  growing from a larger base.
• A more immediate concern In EMEA, in the third
  quarter of 2004, Dells PC shipments growth was
  below Gartner's expectations. Gartner expected a
  14 growth. Dell clocked 12.6 translating to
  14.3 million units.

Source Nexis search, cnet.com, news.com,
asia.cnet.com
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Scope for a New Advertising Agency Dells
concerns

• Dell is accused of neglecting independent
  research. As of August 2003, in 19 years, Dell
  had only been awarded 867 patents -- less than
  the total many of its closest competitors receive
  in a year. In response, Dell says it doesn't need
  to take that route. Since it relies on
  standardized components, it doesn't need to spend
  money on research and development. Dell also
  claims that it manages higher return on RD than
  any rival, about 5 times the profit for every RD
  dollar spent.
• According to a HP representative, despite the
  hype surrounding cost-efficient direct selling
  strategy, PCs from Dell cost more than those from
  HP - sometimes as much as 250 or more for
  equally configured machines.
• In UK, in June 2004, Dell was ordered to change
  its advertising following an objection to an
  Internet promotion and three national press
  advertisements for its computer systems. Retail
  chain DSG Retail Ltd challenged the availability
  of a free gift that was promoted on Dell's web
  site, and whether the free upgrades and savings
  advertised in the press were only available
  online as the ads implied. The UK's Advertising
  Standards Authority upheld both complaints after
  Dell acknowledged that the free gift was not
  available with the Dimension 2400 system and that
  in some cases telephone customers also received
  the upgrades and savings offered only for online
  customers.
• Peter Shankman, president-CEO of marketing agency
  the Geek Factory, sees inconsistency in Dell's
  approach to branding over the last several years.
  Steven, the Dell Dude, did well, till Dell was
  told that it was pushing away adults. So Dell
  turned its efforts to small businesses and
  succeeded again until someone suggested Dell was
  losing kids and college students. Now Dell is
  trying to balance both.
• Dell comes a relatively lowly 25th in terms of
  brand value. Its closes competitors in the PC
  market fare much better. IBM is third with a
  brand value of 53.7 bn. HP comes at 12th
  position with a value pegged at 21 bn. Dell
  comes 25th with 11.5 bn.
• Dell has consistently lost market share in the
  fourth quarter over past years due to lower
  levels of sales outside the consumer market.

Source Nexis search, Factiva, cnet.com,
news.com, asia.cnet.com http//www.businessweek.co
m/magazine/content/04_51/b3913048_mz011.htm
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Scope for a New Advertising Agency Chip, Servers
and Laptops

• According to analysts, one of the chief questions
  in the PC market for the next couple of years
  will be whether Dell will incorporate Opteron or
  Athlon chips from Advanced Micro Devices (AMD)
  into its systems. AMD is gaining customers in the
  corporate world--20 of the Fortune 100 have
  installed Opteron servers. Intel's release of
  chips that can provide a similar 32-bit/64-bit
  functionality--one of the key factors of
  Opteron's popularity--has likely tabled the issue
  for now. Whichever way Dell goes, it may have to
  announce its enhanced prowess effectively through
  advertisements.
• Although Dell sells directly to customers, retail
  market data offers some indication of how
  consumers are reacting to its new 17-inch
  notebooks. The average price of about 2000 has
  limited sales to 6 of total US retail notebook
  sales in the past 15 months, according to data
  from market researcher NPD. The average selling
  price for all notebooks sold at retail stores is
  much lower, hovering around 1350 during the
  last few months.The price differential is
  substantial and if it is not narrowed, it may
  need advertisement support to sustain growth.
• Dell has entered the blade server segment with
  its PowerEdge 1855. But it is not the most dense
  of the blade servers available on the market.
  While blade servers are by no means a high volume
  part of the server market, they are an important
  sector for the high performance computing market
  (where density and management are increasingly
  important) and for the more sophisticated data
  centers who are struggling with server sprawl and
  are trying to consolidate their machines down to
  the fewest number of CPUs. With up to 60 blades
  per standard 42U rack, Dell says that the
  PowerEdge 1855s will save customers as much as
  25 on blades compared to buying a similar number
  of 1U, two-way Xeon servers. Dell also says that
  the blades can cut down on power consumption
  compared to an equal number of Xeon processors in
  regular servers by 13.

Source Nexis search, Factiva, cnet.com,
news.com, asia.cnet.com
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Scope for New Advertising Agency Emerging
Competition Concerns

• In the past couple of years, the increasing
  sophistication of search technology and
  comparison-shopping sites have allowed online
  businesses cheaply and effectively to market
  their products to millions of potential
  customers. Dell has thrived on this strategy so
  far. Now, this strategy could be under attack
  from both growing internet usage, search options
  and smaller players.
• Lenovos purchase of IBM's PC division, expected
  to be completed during the second quarter of 2005
  poses both a threat and an opportunity to Dell.
  IBM has taken measures to ensure that the
  transition is as painless as possible Several
  customers have said they expect no reason to
  change brands. But the deal could still help Dell
  or HP gain if Lenovo and IBM drop the ball during
  the hand-over.
• Dells competitive edge of direct selling appears
  to be getting blunted. Dells direct selling,
  online-dependent selling strategy can be easily
  emulated. Lenovo has restructured its sales
  divisions and begun direct sales to large
  companies and institutions in February 2004 to
  blunt Dells competitive edge. In consumer
  electronics area, where Dell is taking on the
  likes of Sony and Samsung, rivals have adopted
  Dells online sale strategy.
• In Music, Apple manages to stay ahead of Dell. In
  Oct 2004, Apple Computer's iTunes Music Store
  sold its 150 millionth song. Dell introduced a
  200 Pocket DJ digital music player that stores
  about 2,500 songs on a 5GB hard drive. But
  Apple's iPod Mini line which costs 250 and has
  4GB of storage is ahead in the race.
• Dells revealed reluctance to go whole hog on
  consumer electronics because, taken all together,
  the business generates only about 15, could
  hamper growth in the segment.

Source Nexis search, cnet.com, news.com,
asia.cnet.com
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Michael (Mike) George - CMO Important Quotes -
1

• Mike George is an ex-McKinsey consultant. Joined
  Dell four years ago.
• Ken Rollins and Michael Dell, the two CEOs work
  closely with him on major initiatives to ensure
  the integrity of the brand -- for example, its
  ability to tap into consumer emotions. The
  following quotes were attributed to him in 2004.
• On peripherals built around PC We are really
  focused on the top three or four usage models
  around the PC, trying to make sure we
  have--either through Dell directly or through our
  partners--the right products and services.
• On Dell decides what to get into We look at
  every category in the digital home and ask a
  series of questions. Can we add a lot of value to
  that marketplace, or do we think there is a big
  price umbrella to go after? Or do we think we've
  got some unique supply partnerships or advantages
  in the market? We rank order the priorities.
• On why Dell goes for partnerships in some
  peripherals and not in others We also sell a
  lot of digital cameras. That business has really
  grown. Today, that is all through partners like
  Canon and Kodak. I don't anticipate at this point
  a change because I think those companies have
  great camera lineups.
• On TVs The reason I put the focus on big-screen
  digital TVs is, that's where they're getting all
  of their gross margins. That spells opportunity.
  Our plasma launch was a great example. We came in
  with an absolutely awesome quality 42-inch plasma
  TV for US3,499. Sony's product is US7,999, and
  the other guys are in the US5,000 to US6,000
  range.
• On brand strategy The vast majority of
  customers that spend more than US2,000 on a PC
  come to Dell. I don't think you'll see us pushing
  any radical new solution. It's not how we think
  our brand adds value to customers. We will stay
  away from most first-generation usage ideas
  because it's highly unpredictable what will
  happen. If the usage model isn't exactly right,
  it will end up in someone's closet, and people
  would say, "Why the hell did I spend 1,000
  bucks?"
• On Dell entering videos We're not ready to
  announce anything yet, but we are kind of talking
  to a bunch of folks, and I think we will have
  some video partnerships in the near to medium
  time frame.
• On the ad focus in 2004 This year we focused on
  giving all Dell ads-Web, TV, print and catalog-a
  uniform look and feel to drive the Dell brand
  across all areas of our business. Whether we're
  talking corporate systems and servers or consumer
  products, Dell's approach is simple Everything
  begins and ends with the customer.'

Source Nexis search, cnet.com, news.com
15
Michael (Mike) George - CMO Important Quotes -
2

• Reacting to Sony and Samsung adopting the Dell
  strategy of selling over Internet But they
  haven't faced the years of competition in the PC
  market. PC makers have learned to interact with
  customers on a personal basis and establish
  strong customer service support for questions.
  The great advantage we have is that we don't have
  to deal with the retail channel, so we are not
  busy trying to satisfying them.
• On marketing campaign types in 2003Over the
  last year, we launched two different marketing
  campaigns one focused on enterprise server and
  storage products and the other on our growing
  line of consumer products.
• On Dell not having a track record of designing a
  lot of products for the home and making emotional
  connection with consumers We are not overly
  concerned. We think this market will mature like
  most other markets are maturing.I honestly think
  that 10 years ago, when you were looking at
  buying a US3,000 to US4,000 PC, some people
  said direct sales wouldn't work. We've seen a
  high level of interest in our products.
• On consolidation and price declines in consumer
  electronics We will absolutely see it in this
  market. This is the only prediction I'll make
  today. A margin decline is a good thing because
  we have structurally the lowest costs.
• On Dells overall strategy I would view (our
  strategy as, first and foremost, win the business
  customer, and win the enterprise customer. Second
  is, win the consumer of PCs. Third would be to
  win the consumer with consumer electronics. In
  some of our more mature international markets
  with the most developed consumer businesses--like
  the United Kingdom, Japan, Canada and
  Australia--we definitely see a big opportunity in
  those markets for consumer electronics.
• On music Music players are not in the Dell
  scale. They're not a particularly large market.
  They are huge for smaller companies, but for us,
  they will never be a large market.
• On share of new and existing customers for Dells
  new products We have recently measured a few of
  our newer categories, like music players and
  TVs--and 52 are going to NEW customers. While
  it's too early for this to be really definitive
  data, it appears that those customers have a
  disproportionately high likelihood of then coming
  back to us and buying the PC. It's given us more
  confidence to be bolder in how we talk (in
  advertising) about our electronics.
• On ad inserts One of our most important
  advertising vehicles is the Sunday newspaper
  insert. By putting a TV on the cover of a Sunday
  insert, we sell more PCs than when we have with a
  PC on the cover.
• On price being Dells main asset Dell's great
  secret and success in the PC market is that we
  have a fairly low market share among value-price
  PCs and an absolutely dominant market share among
  high-end PCs.

Source Nexis search, cnet.com, news.com
16
Effectiveness of Advertisements

• Total budget for advertisements in 2004 was
  pegged at 473 mn. Dell spent 116.7 mn in
  direct response ads alone in 2003.
• According to a Nielson survey in Sep 2004, based
  on data from AdRelevance, Dell ranks second in
  terms of impressions (1614351 impressions).
• According to a Reputation Quotient Survey
  conducted in the US, only Coca-Cola Co. and Dell
  Inc. were the only two big firms in the top 10
  companies with the most memorable campaigns and
  the greatest sincerity in their corporate
  communications.
• Dell markets via TV, e-mail, online and print. In
  2004, it began regularly using free-standing
  inserts (FSIs) and radio. The radio ads drive
  traffic to an easy-to-remember URL and according
  to the company spokesman, the results have
  exceeded goals.
• Dell discovered that banner ads were actually
  cannibalizing business. So it pulled back
  investments there.
• Dell's television commercials ranked seventh in a
  survey of Singapore television viewers' ad recall
  levels by market research firm Asia Market
  Intelligence released in November 2003.
• Memorable television commercials have contributed
  to Dell's increasing consumer market share in the
  US, which has grown from 16 in 2001 to 23 in
  2003.
• Steven, the dude in Dell commercials had become
  so popular in the US that he has spawned his own
  website and even a line of "Dudewear" clothing
  and accessories. He was later found to be
  involved in a Marijuana incident but by then,
  Dell had moved to different advertisement themes
  to lure business users and adults.
• Dell follows local ethos and considerations while
  chalking out advertisement strategy for specific
  regions. For example, in Asia Pacific it had not
  used Steve the Dude.

Source Nexis search, cnet.com, news.com,
asia.cnet.com
17
PC Segment Competition Update
US Market PC Sales Third Quarter 2004

Worldwide PC Sales - Third Quarter 2004

Company Unit sales Market share Growth
Dell 7.8 mn 16.8 20.9
HP 7.1 mn 15.0 9.5
IBM 2.6 mn 5.6 16.6
Company Unit Sales Market Share Growth
Dell 4.9 mn 30.4 14.5
HP 3.1 mn 19.1 1.6

Source Gartner
Source Gartner
Asia Pacific PC Market in Third Quarter 2004
Company Market share
Lenovo 12.1
HP 11.1
IBM 7.8
Dell 7.4
Dell grew by 38.8 in Asia Pacific Market in the
3rd Qtr 2004
Source Gartner
18
Server, PDA Segments Competition Update

• Worldwide Server Market in 3rd Quarter 2004

Company Revenue in Revenue Growth Market share
IBM 3.7 bn 6.3 31.7
HP 3.1 bn 2.9 26.8
Sun Micro 1.2 bn 0.1 10.2
Dell 1.2 bn (6 mn behind Sun) 14.1 10.1
Comment Given the growth rates, Dell is likely
to overtake Sun Microsystems in the fourth
quarter of 2004. Dell has been steadily
expanding its share of the server market, with
emphasis on "industry standard components"
Source Gartner
PDA Market Growth in 3rd Quarter 2004
Company Market Share
PalmOne 34.7
HP 30.6
Dell 8.9
Dells PDA shipments grew by 44 during the qtr
Source Gartner
Source Nexis Factiva
19
Organization Structure
Dell, Inc. Operations Areas
Products for Home Home Office
Customer Service Support
Products for Small Businesses
Products for Medium Large Businesses
Products for Govt. Education Healthcare

• Low-end products for the entire family.
• Desktops
• Notebooks
• Printers
• Electronics Accessories
• Handheld (PDA)
• Monitors
• LCD TV

• Technology solution for businesses from 1 to 200
  employees.
• Desktops
• Notebooks
• Workstations
• Printers
• Servers
• Software

• Scalable enterprise solutions for businesses over
  200 employees.
• Servers
• Storage
• Networking tools
• Desktops
• Notebooks
• Workstations
• Printers
• Software
• Service Training

• Special purchase programs and contracts for
  organizations. Includes
• State Local Govts.
• Federal Govt.
• K-12 Education
• Higher Education
• Healthcare

• Solves problem by using following online tools
• Online Support
• Troubleshooting
• Service Warranties
• Downloads
• Software Peripherals
• Upgrades
• User Guides

Sources Dell.com
20
SWOT Analysis

• STRENGTHS
• Number one direct sale computer vendor
• Strong in enterprise storage and server markets
• Low cost operating model
• Profitable 

• WEAKNESSES
• Low RD spending
• Weak services position
• Small inventories 

• OPPORTUNITIES
• Target low end and mid range segments
• New markets
• International expansion
• Cyclical demand
• PC upgrades/replacement demand 

• THREATS
• Strong competition
• Interest and foreign currency exchange rates
• Slow growth in PC market and IT spending
• environment 

Source Nexis Datamonitor
21
Management Profile
Name Designation
Michael S. Dell Chairman CEO
Kevin B. Rollins President COO
James M. Schneider CFO Sr. Vice President
Randall D. Mott CIO Sr. Vice President
Michael A. George Chief Marketing Officer VP-US Consumer Mktg eBusiness
Thurmond B. Woodard Chief Ethics Officer VP-Global Diversity
Thomas B. Green Sr VP-Admin Sec
William J. Amelio Sr. Vice President
Paul D. Bell Sr. Vice President
Jeffrey W. Clarke Sr. Vice President
Martin J. Garvin Sr. Vice President Worldwide Procurement
John S. Hamlin Sr. Vice President
Joseph A. Marengi Sr. Vice President
Paul D. McKinnom Sr. Vice President - HR
John K. Medica Sr. Vice President
Glenn E. Neland Sr. Vice President
Rosendo G. Parra Sr. Vice President
Charles H. Saunders Sr. Vice President Dell International Services.



Source Nexis Standard Directory of Advertisers
22
Management Profile
Name Designation
Elizabeth Heller Allen Vice President Corporate Communication
Colin P. Buechler Vice President Corporate Strategy
Robert W. Davis Vice President Corporate Finance
Joan Hooper Vice President - Finance
Mark Vena Dir-Digital Home Marketing



Source Nexis Standard Directory of Advertisers
23
Financials



Source Annual Report 2004
24
Financials 2



Source Annual Report 2004
25
Financials 3
Region-wise Sales Summary FY 2003-2004



Region-wise Contribution FY 2003-2004
Source Hoovers.com
26
Financials 4
Product wise Sales Summary FY 2003-2004



Product wise Contribution FY 2003-2004
Source Hoovers.com
27
Financials 5
Sales Trend from Jan 95 to Jan 04



Source Hoovers.com
28
Financials 6



Source http//www1.us.dell.com/content/topics/glo
bal.aspx/corp/background/en/facts?cuslenscorp
section002
29
Desktop Range
INCREASING IMAGE STABILITY



INCREASING TECHNOLOGY REFRESH

• OptiPlex
• Stable PCs for your connected environment
• Easy To Transition To New Technologies
• Maximized Uptime
• Easy to Manage
• Broad portfolio meets wide range of customer needs

• Precision
• Ultimate performance and scalability for
  workstation class applications
• Performance
• Scalability
• Optimized Solutions
• Application Focus

• Dimension
• Focused for personal and small office use
• Short product, peripheral, and OS lifecycles
  driven by rapid advancement of consumer market
• Limited support for network peripherals

Source www.its.uq.edu.au/itlo/dell.ppt
30
Desktop Range 2
Dimension 2400 Dimension 4600C Dimension 4600 Dimension 8400 Dimension XPS Gen 3
Specification - Intel Pentium 4 Processor (2.66GHz, 533 FSB) Microsoft Windows XP Home Edition 128MB Shared DDR SDRAM at 333MHz (Performs at 266MHz for 400FSB systems) 40GB Ultra ATA/100 7200RPM Hard Drive FREE 3-5 Day Shipping on orders over 649 Online Only! FREE Kodak Digital Camera! FREE CD-Burner Upgrade - Online Only Specification - Intel Pentium 4 Processor (2.80GHz, 533 FSB,1MB Cache) Microsoft Windows XP Home Edition 256MB Dual channel Shared DDR SDRAM at 333MHz (2X128M) 40GB Ultra ATA/100 Hard Drive FREE 3-5 Day Shipping on orders over 649 Online Only! FREE Kodak Digital Camera! FREE CD-Burner Upgrade - Online Only Specification - Intel Pentium 4 Processor (2.80GHz, 533 FSB) Microsoft Windows XP Home Edition 256MB Dual Channel DDR SDRAM at 333MHz 2x128M) FREE 3-5 Day Shipping Online Only! FREE Kodak Digital Camera! FREE 2nd Bay CDBurner - Online Only! Specification - Pentium 4 Processor 530 with HT Technology (3GHz, 800 FSB) Microsoft Windows XP Home Edition 512MB Dual Channel DDR2 SDRAM at 400MHz (2x256M) 80GB Serial ATA Hard Drive (7200RPM) FREE 3-5 Day Shipping - Online Only! FREE Kodak Digital Camera! FREE 2nd Bay DVDBurner - Online Only! Specification - Pentium 4 processor 540 with with HT Technology (3.20GHz, 800 FSB) Microsoft Windows XP Home Edition 512MB Dual Channel DDR2 SDRAM at 533MHz (2x256M) FREE 3-5 Day Shipping - Online Only! FREE Kodak Digital Camera! FREE 2nd Bay DVD-Burner - Online Only!



Source http//www1.us.dell.com/content/products/c
ategory.aspx/desktops?cuscs19lensdhs
31
Desktop Range 3
Precision



Optiplex
Source http//www1.us.dell.com/content/products/c
ategory.aspx/desktops?cuscs19lensdhs
32
Notebook Range
Inspiron 1000 Inspiron 1500 Inspiron 600m Inspiron 8600 Inspiron XPS
Specification - Mobile Intel Celeron processor,2.20GHz,15 inch XGA Microsoft Windows XP Home 512MB, 2 DIMMS 24X CD-RW/DVD Combo Drive FREE 3-5 Day Shipping on orders over 999 - Online Only! FREE Wireless Card! Specification - Mobile Intel Pentium 4 Processor 2.80GHz, 14.1-inch XGA Microsoft Windows Home Edition 256MB Shared DDR SDRAM, 1 Dimm 24X CD-RW/DVD Combo Drive with Sonic RecordNow FREE 3-5 Day Shipping - Online Only! FREE Wireless Card! Specification - Intel Pentium M Processor 715(1.5GHz) 14.1-in XGA w/32MB Video Microsoft Windows XP Home Edition FREE 3-5 Day Shipping Online Only! FREE Kodak Digital Camera! FREE Combo Drive Upgrade - Online Only! Specification - Intel Pentium M Processor 705(1.5GHz), 15.4 in WXGA Microsoft Windows XP Home Edition FREE 3-5 Day Shipping Online Only! FREE Kodak Digital Camera! FREE Combo Drive Upgrade - Online Only! Specification - Pentium4 w/HT Technology 3.4GHz,15.4 WUXGA Microsoft Windows XP Home Edition FREE 4x CD/DVD burner (DVDRW/R) Upgrade! (from Combo Drive) 60GB Hard Drive 3 Year Limited Warranty plus 3 Year At-Home Service FREE 3-5 Day Shipping -Online Only! FREE Kodak Digital Camera! FREE DVD Burner Upgrade -Online Only!



Source http//www1.us.dell.com/content/products/c
ategory.aspx/notebooks?cuscs19lensdhs
33
Services

• The companys services are grouped under four
  titles
• Dell Managed Services
• IT management services
• Planning, deployment, maintenance, asset
  management, on-site field services and other
  related services
• Dell Professional Services
• Design, development and implementation of
  end-to-end technology solutions 
• Deployment Services
• Factory integration services
• Custom asset management and recovery services
• Custom delivery services
• Installation services
• Managed deployment services
• Image management services 

Source Nexis Datamonitor
34
Goals

• Most efficient path to the customer
• Single point of accountability
• Build-to-order
• Low-cost leader
• Standards-based technology
• Establish relationships with leading technology
  providers in education.
• Provide the best teaching and learning computing
  solutions tailored to needs.

Source www.homepages.wmich.edu/c1yon/dellpresent
ationfinal5B15D.ppt, www.qeddata.com/Presentatio
ns/bruett_02.ppt
35
Business Model

• Business to Business (B2B)
• Business to Consumer (B2C)
• Demand-pull company
• Pure play internet company

Source http//www.ism.ws/ConfPastAndOnlineDaily/F
iles/Nov03/TBGray.pdf
36
Online Market Segmentation
Dell Homepage
Home Home Office
Small Business
Medium Large Business
Govt. Education Healthcare
Customer Service Support
Personal / End Users
Products Services
Products
Products Services
Government
Special Offers
Dell Deals
Home Home Office
Federal
Business Solution Centre
New at Dell
Shopping Alternatives
State Local
Featured Solutions
Small Business
Education
Business Technology Solutions
Shopping Alternatives
Solution categories
IT Professionals
K-12
Medium Large Business
Service Support
Service Support
Support Information
Business Affiliates Programs
Purchase Information
Government
Higher Education
Consumers options when they go to www.dell.com.

Health Care
Education
Partners and Programs
Health Care
Source www.its.uq.edu.au/itlo/dell.ppt
37
Principles of SCM_at_DELL

• Buy to Plan Build to Order
• Forecast Buy Sell
• Reality based conversations Be Direct
• Relentless Demand Supply Balancing

• Synchronization between manufacturing and sales
• Meaningful collaboration across the supply chain

Source http//www.ism.ws/ConfPastAndOnlineDaily/F
iles/Nov03/TBGray.pdf
38
Business Strategy

• Dell has announced a comprehensive business
  strategy to capture a larger portion of the B2B
  (Business to Business) internet-related market.
• Web Related Capabilities Dells advantage is
  based on direct relationships, low cost, speed to
  market and e-commerce expertise as much as it is
  on Internet hardware, appliances and customers
  services and support. Included in this strategy
  is "Service Provider Direct," a three tiered
  package of
• Service
• Support and
• Co-marketing programs for ISPs, ASPs and Web
  hosting companies.
• Infrastructure Computing Dell has introduced its
  Power Application appliance servers designed for
  specific Internet infrastructure tasks such as
  Web serving, caching and load balancing. This
  will provide customers will a full range of
  server and storage solutions for building their
  Internet infrastructure.
• Expert Services A new offering that will help
  businesses take advantage of the power of the
  Internet.
• Universal Access Universal Internet access
  through a combination of leading-edge devices,
  connectivity offerings and access choices,
  encompassing narrow band services, broadband
  offerings and wireless products and services.
• Dell Ventures Through strategic links to
  companies with technologies, products and
  services that create breakthroughs related to the
  Internet, Dell will provide equity investments
  and incubation services for selected early-stage
  private companies to accelerate development

Source http//www.internetnews.com/xSP/article.ph
p/3411_336641
39
Competitors

• HP
• NEC
• Toshiba
• Fujitsu and
• IBM (now Lenovo).

Source Nexis - Datamonitor
40
Marketing Internet Strategy

Integrated Customer Experience


Source http//www.ucisa.ac.uk/groups/cisg/ppt/MIS
G00-04.ppt
41
Marketing Online Integration Strategy
Dell
Customer



ERP
XML
webMethods B2B for Partners
webMethods B2B
Dell Store
webMethods B2B upgrade from Dell
Source http//www.ucisa.ac.uk/groups/cisg/ppt/MIS
G00-04.ppt
42
Marketing Strategy

• A kiosk-concept programme in the US with 21
  outlets set up in various shopping malls. This
  concept debuted in Asia with Dell setting up a
  kiosk in Singapore's Suntec City Shopping Mall.
  Since its pilot, the original 21 kiosks in the
  programme have expanded to 71.
• Dell's kiosk programme in Asia has been more
  tentative. Singapore's single kiosk is "part of a
  three-month feasibility test in Asia-Pacific".
  Jim Skelding, Dell's general manager of home
  office and small business products, tells The
  Edge Singapore "The kiosk concept in Singapore
  right now is an experiment, as well as to meet
  the festive shopping season. Company wants to
  see what the take-up rate is like, and then
  decide if it makes sense in our marketing plans."
  Penang-based Skelding oversees Singapore,
  Malaysia, and Thailand.
• In kiosks, Dell showcases a range of consumer
  notebooks, desktops and other computer
  peripherals including printers. Skelding doesn't
  consider the kiosk concept a diversion from
  Dell's philosophy of direct sales over retail
  outlets. "Everything Dell do stands behind their
  direct-selling model," he says.
• Kiosks had worked well in markets where
• Dell has reasonably low brand recognition
• Dell has stopped expanding its market share
• Placing a kiosk in one location has hit a large
  portion of the population
• Online purchasing habits are not very strong

Source Nexis The Edge
43
Internet Advertisements


Dell rely heavily on their Internet
Advertisements.
Source
44
Internet Advertisements


Source
45
Internet Advertisements


Source
46
User Segment
Segment characteristics Site use (work vs. play) Buying Behavior Characteristics
Business buyers Represent large businesses Company-wide or departmental buying responsibility Goal-directed (work) Researching price and volume purchasing options Analyzing department-specific component needs
Small business users Small business owners Work-from-home independents Mix of goal-directed and experiential (work and play) Researching component, price, and shipping options Learning about Dell small business programs
Home users Professionals wanting home PC for secondary or recreational use College students Mix of goal-directed and experiential (work and play) Researching general hardware information Comparing prices Researching company news and info about CEO
Non-buyers Recreational Web surfers Students, children Experiental (play) Following up on word-of-mouth references Researching general computer and company information



Source www.elab.vanderbilt.edu/.../novak/online_c
b2001/Midterm20Presentations/section20120group
20120dell.ppt
47
Globally Integrated Communication



Advertising
Sales Promotion
Global Marketing Communication
Direct Selling
Public Relations
Personal Selling
48
Management Secrets

• Leave Ego at the Door Dell favors
  two-in-a-box management in which two executives
  share responsibility for product, a region, or a
  company function.
• Dell management believes that collective
  knowledge is created by working in teams.One has
  to be trained to understand the importance of
  team dynamics and participate in productive
  dialogues and discussion. I am important, or
  I am an expert attitude leads to ones ego
  preventing team learning and knowledge creation.
• No Excuses This is about taking responsibility
  and being accountable for ones actions.
  Employees are encouraged to admit their
  weaknesses and take actions to minimize or
  eliminate them. There should be no them
  syndrome.
• No Easy Targets Employees must contribute to
  profit and growth. In practice this means
  incorporating stretch objectives in appraisal
  plans. S.M.A.R.T objectives in this case should
  be translated as Specific and Stretch Measurable
  and Meaningful Attainable and Aligned Realistic
  and Time and Target-related.
• No Victory Laps. The founders mantra
  Celebrate for a nanosecond, then move on. A
  number of organizations, after winning quality
  awards or Best Company to Work For awards,
  drift into complacency. Achievements should be
  followed by further achievements and this in
  practice necessitates implementation of
  continuous improvement principle.
• Worry about Saving Money, Not Saving Face
  Employees should be trained to pull the plug on
  disappointing new ventures. This requires a
  business mindset and tolerant culture.
• Dells management principles are reflection of
  the five disciplines of the Learning Organization
  presented by Peter Senge in The Fifth Discipline
  (1990). These five disciplines are Personal
  Mastery (individual growth and learning), Mental
  Models (attitude and behavior), Shared Vision
  (direct and honest communication) Team Learning
  (creating synergy within teams) and System
  Thinking (seeing the big picture organizational
  core competence).

Source Nexis Business Week
49
Some Marketing Questions that Keep Dell Awake at
Night
Do I have the right communication partner? Dells communication is focused more on the Internet users. In order to reach to the masses in the US and to all of their target audience in other parts of the world, Dell should concentrate more on the print and the electronic media.
Do I know enough about my target consumer? Am I reaching them? Dell has focused more on the US market. Dell rely more on their Internet strategy and their campaigns are also net savvy. However, computer literacy in other markets could be much less than in the US market. Dells media plans may not be reaching people across the globe.
Have I invested enough in my brands? Dell believe in customization of products rather than innovating new products based on feedback. There is not much of RD spends in the company.
Are my media agency and creative agency working together to achieve greater overall results? Dells creative outputs have been largely appreciated by analysts. Company grew by about 17 in 2004 because of their effective media plan in the US market.