Scope and Rationale of the Project
The PC business is mature and its biggest players are desperate for new sources of growth, even if that means taking on entrenched players in an equally cutthroat business.
Technological innovations that began as early as the 1600's - such as the first mechanical calculating device - have ushered our society into what is now called "the information age."(Malowski, 1986) The microcomputer or personal computer industry has undergone major changes in its market structure. The market structure changed in the computer industry as the PC segment developed (Cohen, 1988). According to Cohen (1988), the industry has grown substantially from its beginnings in January 1975, when the first microcomputer, the Altair 8800, was introduced. During its early development, the industry was dominated by a few small-scale companies, mainly hobbyist-run. Entry into the market was determined by technological innovation and the availability of system-compatible software. Companies tended to design their own software, with little compatibility among systems.
In the PC market, few such technical barriers to entry were present. Existing technology typically has been widely available and components often manufactured by other firms. Despite the seemingly easy entry into the market, however, firm entry and new product introduction required sunk entry costs, such as establishing retail channels and advertising. With the continuously evolving market, few companies managed to survive in the market beyond one or two years.
Increased sales in the computer industry have stemmed from the public's demand for affordably priced computers that are faster and more powerful so that users can retrieve and send data, play games, and run programs. Businesses have found that computers can save them money by automating many tasks and allowing owners to analyze and retain many crucial records. One of the most important advances is the speed at which computers are capable of processing data.
The extraordinary speed of today's computers is not the only important development. The rapid decrease in cost, spurred on by a fiercely competitive market also is critical. Lower prices of computers occur when new technology is introduced at lower prices, which pushes the prices of existing technology even lower. As each new technological breakthrough makes its way into the market, the previous "best product" becomes very affordable. One company enjoyed an edge in the market when they introduced the next generation in microprocessors. It was not long until competitors caught up and introduced similar microprocessors at lower prices. To stay competitive, manufacturers must quickly slash prices and start planning their next better, faster product. This constant pressure has led the computer industry to reduce prices while continuing to improve their products.
In the PC market, existing firms have significant advantages over potential entrants (Eaton and Lipsey, 1979). For example, consumers are more likely to buy familiar brands, and older firms may have long-term contracts with distributors, lowering their costs relative to those of new firms. According to Eaton and Kierzkowski (1984), because of such considerations, new entrants may be forced to search for empty market segments to avoid price wars with more established firms. Hence, incumbents would be expected to distribute their models along the entire spectrum to make entry difficult for new firms (Prescott and Visscher, 1977).
Dell Computer, consistently growing annually, has become the nation's largest PC supplier. The PC supplier, growing two to three times faster than its rivals, boasts of earnings and unit shipments that is escalating at four times the industry average. Dell's continued innovation and its unique direct marketing model are credited with sustaining the company's unmatched success (Maglitta, 1997). And electronic commerce is emerging to afford the company significant sales gains along with increased distribution and manufacturing efficiencies. Company officials assert that leveraging its build-to-order manufacturing with electronic commerce enables it to compress its supply chain and become much closer to its customers.
Dell Computer may be growing consistently growing however in the business reality there are intense rivalries between the players in the industry which may hinder the continuous success of the company. The paper attempts to identify these challenges and problems in which the PC supplier may face and to recommend strategies that would enable the company to survive the rapid phase in the market environmental changes.
The objective of the paper is to analyze how big computer companies, like Dell Computer, survive in the fast moving PC industry. This would involve a case study of Dell Computer. The case study would include its company background and analysis of its problems encountered.
Dell Computer is a leading company in the computer market. However, with the presence of competitors and in competing in the price war market, this has created a difficulty on the Dell Computer to sustain its previously created competitive advantage. Currently, Computer is facing a tough challenges coming from the new industry standard and the profit of the PC become smaller.
This paper attempts to analyze problems encountered by Dell and suggest strategies which it may adopt to enable it to stay competitive and achieve continuous growth in computer industry. In addition, the paper analyzes how Dell Computer can use these strategies to create its innovative and technological competitive advantage.
The literature review would primarily focus on the research on the Personal Computer industry investigating the current market environment and the current market structure using PEST Analysis
To analyze the microenvironment of the company, the paper will be using SWOT analysis and Porter's Five Forces model to analyze the external and internal environment of the company and to identify the company's market position. The critical success factors and the strategic gap will also be identified. Bench marking against peer companies in the industry will be conducted for assessing the company's performance.
In the formulation of strategies, models such as BCG matrix, TOWS matrix, GE matrix or Ashridge model will be used. The strategies will be evaluated for their advantages and disadvantages and the most appropriate strategies will be recommended to the management.
The primary source of data will come from published articles journals and magazines, theses and related studies regarding management strategies. The researcher will gather data, collate published studies from different local and foreign universities and articles from business and management journals; and made a content analysis of the collected documentary and verbal material.
Data sources would also include published articles about the company. It would include online articles, written articles from magazines and newspaper and other printed materials. It would also consult computer industry profiles.
Aspects of MBA syllabus used
The project will involve aspects in the courses in Finance and Strategic Management, and elective in Management Accounting.
Proposed Chapter Headings and Sub headings
2.1 Project Background
2.3 Terms of Reference
5.1 Company Background
5.2 Identification of Problem
7.1 SWOT Analysis
7.2 Porter's Five Forces Model
8.1 BCG Matrix
8.2 TOWS Matrix
8.3 GE Matrix
8.4 Ashridge Model
Proposed Time Frame