A Direct Threat to theStatus QuoAn Analysis of the PC Industry and Dell, Inc.Eric LalondeI. Personal Computer Industry Summarya. Industry Profileb. Typical Industry Competitive Strategyc. Porter Model Evaluationd. Globalization of the Industrye. Importance of I/T to the IndustryII. Dell, Inc.a. Dell Company Profileb. Market and Financial Performancec. Competitive Strategy Statementd. Significance of Information Systemse. Strengths and Weaknesses of Dell, Inc.III. Structured Analysis of Information Systems Usea. Strategic Option Generatorb. Roles, Roles and Relationshipsc. Redefine/Defined. Significance of Telecommunicationse. Success Factor ProfileIV Final Analysisa. Success of Business Strategy and I/T Use to Dateb. Have the Above factors Positioned Dell for the Future?Objective of this paperA thorough analysis of the PC Industry yields a unique look at the most dynamicmarket arena in the last 25 years. This analysis paper seeks to offer just that: an in depthview of what it takes to succeed in this marketplace. While focusing on the internationalend-user and corporate markets, important topics such as threats, tactics, and futuretrends of the core market players will be scrutinized. Further, we offer an in-depth look athow Dell Inc., one of the market’s most successful players, deals with these threats andcompetition. In section I, an overview of the industry, its major players, and recent historicalperformance will be examined in order to offer a firm understanding of the PC Industry.Further, recent and upcoming trends in this market will be explained. An examination ofthe industry’s competitive forces, using Porter’s competitive model, will be used in orderto properly understand the threats facing the vendors within the industry.Section II will feature a company perspective and report on Dell’s leadership,competitive strategy, and market performance. Finally as we compare Dell’s tactics tothose common throughout the industry, a review of Dell’s strengths and weaknesses willcomplete this section.In section III, a report on the role of information systems at Dell will be includedin order to understand an extremely important contributor to Dell’s success. This reportwill include a strategic option generator and summary, a look at the roles of seniormanagement and relationships between managers, a detailed view of the majorinformation systems within Dell, and the significance of telecommunications to Dell’soverall success. Finally, a success factor profile will be used to conclude the majorstrengths of Dell’s business model in the computer hardware industry.In its conclusion, this paper will cover a final analysis of Dell’s success in thecomputer hardware industry and how the company’s business strategy and IT usecontributes to their competitiveness. These perspectives will help motivate anunderstanding of why Dell is postured for a future of success in the PC industry.Section I: The Computer Hardware Industrya. Industry ProfileThe computer hardware industry has evolved in a dramatic fashion over thedecades, as market players are forced to shift strategies and product lines in order to focuswhere the market demand is most concentrated. This can be easily seen from thetransition of mainframe supercomputers in the 70’s, to examples abounding today:increasingly fast personal computers, mp3 players with gigabytes of storage, and PDAcell phones. This is an industry whose players have had to adapt quickly in order tomatch the constantly changing market demand.Financial success within the PC industry has historically depended heavily upon avendor’s ability to market computing technologies at a high quality for consumer andenterprise customers. While quality is certainly still a factor in today’s computingmarkets, recent trends in aggressive price competition have shifted vendors’ focus onentering or creating new PC peripheral product markets. Further, this increased globalcompetition between international vendors has made market dominance, here in the U.S.,a difficult standard to maintain. The demand for new peripheral tools and technologies byend-users and enterprises alike has introduced new opportunities for vendors to increasetheir profits and revenues; Along with such opportunities comes risk, as businesses investheavily in retooling their focus into becoming suppliers of more diversified technologies.Dell and HP are the two international PC market leaders who exchange the topspots in total shipments on a quarterly basis; Fujitsu, IBM, and Toshiba round out the PCmarket’s major worldwide corporations. As the table below illustrates, there was a sharpdecline during the economic downturn during 2001. After the negative marketperformance that reigned in 2001, the PC market was described as having “nowhere to gobut up”1. Indeed, some gains were seen in 2002, and the industry in 2003 surprisedanalysts with its large increases in major vendor sales growth and total units shipped.PC shipment sales from 1975-2000.2 In 2003 a record 156.2 million PCs were shipped worldwide. This is over 15million more units than the year previous. However, due to a much higher degree of1 “PC Market has Nowhere to Go but Up” ©2001 Jupitermedia Corporationhttp://cyberatlas.internet.com/big_picture/hardware/article/0,1323,5921_960231,00.html2 “Personal Computer Market Share: 1975-2002” ©Pegasus3d.comhttp://www.pegasus3d.com/total_share.htmlcompetition within the industry, prices were slashed and buyers gained more value for thesystems they purchased. The result of this competition is that the total value of PCshipments in 2003 was $51 billion less than in 2002.3 This has an enormous significanceto vendors, and has motivated many of the tactics today’s market competition.Due to aggressive pricing tactics, most vendors were forced to into diversifyingtheir product offerings with PC-related peripheral components, in order to maintain long-term stability and growth.Trends over the last five years tell the story of Dell’s increasing market share, atthe cost of its competitors. This degree of competition prompted a merger between HPand Compaq in 2002, which accounts for HP’s apparent explosion in PC sales in thegraph above.
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