Dell case4

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Running Case with Real Data Dell Direct

Dell Inc. is the world's number one direct-sale computer vendor and competes with Hewlett-Packard in that segment. Dell offers network servers, workstations, storage systems, and Ethernet switches for enterprise customers, in addition to a full line of desktop and notebook PCs designed for consumers. It also sells handheld computers and markets third-party software and peripherals. Dell's growing services unit provides systems integration, support, and training.

Michael Dell, the flamboyant founder and chairman of Dell, started college at the University of Texas as a pre- med student but found time to establish a business selling random-access memory (RAM) chips and disk drives for IBM PCs. Dell bought products at cost from IBM dealers, who were required at the time to order large monthly quotas ofPCs from IBM. Dell then resold his stock through newspa- pers and computer magazines at 10 to 15 percent below retail. By April 1984, Dell was grossing about $80,000 a month--enough to persuade him to drop out of college. Soon he started making and selling IBM clones under the brand name PC's Limited. Dell sold his machines directly to con- sumers, rather than through retail outlets as most other man- ufacturers did. By eliminating the retail markup, Dell could sell PCs at about 40 percent of the price of an IBM.

Michael Dell renamed his company Dell Computer and added international sales offices in 1987. In 1988, the company started selling to larger customers, including government agencies. That year Dell Computer went public. In 1996, Dell started selling PCs and notebook computers through its Web site. This channel of order confirmation and shipping and handling is still the bread- and-butter means of addressing Dell's consumer and enterprise customers' requirements. In 1997, Dell entered the market for workstations and strengthened its consumer business by separating it from its small-business unit and launching a leasing program for consumers. In order to diversify its revenue sources, in 2001 Dell expanded its storage offerings when it agreed to resell systems from EMC. To grow its services unit, Dell a'cquired Microsoft software support specialist Plural in 2002.

Despite its success at grabbing PC market share, Dell continues to attack new markets. It bas put increasing emphasis on server computers and storage devices for enterprises. Furthering its push beyond PCs, Dell bas introduced a handheld computer, a line of Ethernet switches, and consumer electronics such as digital music players and LCD televisions. It originally partnered with

u.s. PC Shipment Estimates for Q3 2008

774

• Dell

• Hewlett-Packard

Apple

• Acer

Toshiba

Others

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DeU-Financials-U.S. Dollars (in millions)

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70,000 -,---------------

50,000

60,000+---------------

40,000

30,000

20,000

10,000

o Feb07 Feb06

Lexmark to develop a line of Dell-branded printers, and it has formed additional partnerships to quickly grow its printing line. On the services front, Dell has mirrored its straightforward approach to hardware sales, embracing a fixed-price model for offerings such as data migration and storage systems implementation. Dell is currently looking to international revenue to supplant sales in the PC-saturated U.S. market. Sales inside the United States were about 53 percent of consolidated net revenue in fisca12008.

Dell has thrived as downward-spiraling prices and commoditization washed over the PC industry, benefiting the company's customers and bashing its competitors. Instead of battling the tide by attempting to erect proprietary systems, as HP and IBM often did, Dell used its low-cost, direct- sales model to ride the wave. In 2008, Dell announced PartnerDirect, a global program that brought their existing partner initiatives under one umbrella. Dell intends to expand the program globally. Continuing their strategy and efforts of better meeting customers' needs and demands, they began offering select products in retail stores in several countries in the Americas, Europe, and Asia during fiscal 2008. These actions represent the first steps in their retail strategy, which will allow them to extend their business model to reach customers that they have not been able to reach directly.

Of late, with all the brand equity Dell has built up, Dell Inc. is pushing into consumer products. Dell has recently made a move into manufacturing flat-screen TVs. With TVs that use the newest technology, Dell is now diversify- ing even further. The latest battle in the PC business isn't in computers but in printers. Dell is now waging war on HP's vaunted imaging and printing division, which produces

• Net revenue • Gross margin

Jan 05 Jan 04

some 70 percent of HP's operating profit. In the case of printers, the printer cartridges is where HP has the biggest margins, and Dell seems to be focused on making inroads into this market, over which HP has had a strong hold.

With such an intense competition for market share and customer patronage, Dell is conducting a survey of recent purchasers of Dell PCs and notebooks. Dell wants to understand their consumers' primary usage of their computers for Internet and other usage. Based on that, Dell wants to understand the satisfaction that their consumers are deriving from Dell products. Dell wants to estimate their customers' probability of repeat buying of Dell products and the extent to which their current customers will recommend Dell to their friends and., family. Finally, Dell wants to understand if there is any correlation on any of these identified usage factors and the underlying demographic aspects of the classification of their customers.

Questions The questions are given in the Dell Running Case contained in the chapters.

References 1. www.gartner.comlitlpage.jsp?id=777613.accessedNovember IS,

200S. 2. www.deU.comJdownloads/globallcorporate/seclproxyOS.pdf,

accessed November IS, 200S.

Note: This case was prepared for class discussion purposes only and docs not repre- sent the views ofDeU or their affiliates. The problem scenario is hypothetical and the name of the actual company has been disguised. However, the questionnaire and the data provided arc real. Some Questions have been deleted. while the data for other Questions arc not provided because of proprietary reasons.

776 CASE 1 • RUNNING CASE WITH REAL DATA

DELL COMPUTERS Internet Interview

Thank you for your interest in our study.

Burke is an independent marketing research firm that has been commissioned by DELL Computers to get the honest opinions of recent purchasers of DELL personal computer systems. You will be asked to offer your views about DELL and describe your Internet usage.

This survey should only take a few minutes of your time. By completing this survey, you will be automatically entered into a drawing for $100 gift certificates that can be used at a variety of major online retailers. If you don't complete the survey, you may qualify for the drawing by writing to the address contained on the email inviting you to participate in this project.

Unless you give us your permission at the end of the survey to release your name to DELL along with your responses, your individual responses will kept confidential.

INTERNET USAGE Q1. Approximately how many total hours per week do you spend online? This would be the total from all the locations you might use.

Less than 1hour 0-1 1 to 5 hours 0-2

6to 10 hours 0-3 11 to 20 hours 0-4 21to 40 hours 0-5

41 hours or more 0 -6

Q2A. Following is a list of things people can do online. Please indicate which of these you have ever done on the Internet. (Rotate responses.}

Don't Know = 0 Ask First

Communicated with others via newsgroups or chat rooms - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Looked for a job - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Planned or booked trips - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Downloaded a picture or graphic - - - - - - - - - - - - - - - - - - - - - - - Downloaded sounds or audio clips - - - - - - - - - - - - - - - - - - - - - - Looked up information about a TV show or movie - - - - - - - - - - - Downloaded a video clip - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Yes No

0-1 0-2 0-1 0-2 0-1 0-2 0-1 0-2 0-1 0-2 0-1 0-2 0-1 0-2

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Q3. What other type of things do you use the Internet for? _

DELL SATISFACTION AND LOYALTY Q4. Overall, how satisfied are you with your DELL computer system?

Very satisfied 0-1 Somewhat satisfied 0-2

Somewhat dissatisfied 0-3 or Very dissatisfied 0-4

Q5. How likely would you be to recommend DELL to a friend or relative?

Definitely would recommend 0-1 Probably would 0-2

Might or might not 0 -3 Probably would not 0-4

or Definitely would not recommend 0-5

.... 1:'1

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Q6. If you could make your computer purchase decision again, how likely would you be to choose DELL?

Definitely would 0-1 Probably would 0-2

Might or might not 0 - 3 Probably would not 0-4

or Definitely would not 0-5

Q7. Deleted (Open ended) _

COMPUTER MANUFACTURER IMPORTANCE/PERFORMANCE RATINGS Q8. The following set of statements refers to personal computer manufacturers. For each statement, please first indicate to what extent

you agree that DELL Computers meets that requirement.

To do this, please use a scale from 1 to 9, where a "1" means you do not agree at all with the statement, and a "9" means you agree completely. Of course, you may use any number between I and 9 that best describes how much you agree or disagree with the statement. Don't Know = 0

A. How much do you agree that DELL Computers does (insert statement)?

(Rotate statements.)

Ask First Rating

Make ordering a computer system easy Let customers order computer systems customized to their specifications Deliver its products quickly Price its products competitively Feature attractively designed computer system components Have computers that run programs quickly Have high-quality computers with no technical problems Have high-quality peripherals (e.g., monitor, keyboard, mouse, speakers, disk drives) "Bundle" its computers with appropriate software "Bundle" its computers with Internet access Allow users to easily assemble components Have computer systems that users can readily upgrade Offer easily accessible technical support

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Q9A. If the price of the DELL computer system you purchased had been 5% higher, and all other personal computer prices had been the same, how likely would you have been to have purchased your DELL computer system?

Definitely would have purchased 0-1 Probably would have purchased 0-2

Might or might not have purchased 0-3 Probably would not have purchased 0-4

or Definitely would not have purchased 0-5

Q9B. If the price of the DELL computer system you purchased had been 10% higher, and all other personal computer prices had been the same, how likely would you have been to have purchased your DELL computer system?

Definitely would have purchased Probably would have purchased

Might or might not have purchased Probably would not have purchased

or Definitely would not have purchased

0-1 0-2 0-3 0-4 0-5

..

778 CASE 1 • RUNNING CASE WITH REAL DATA

EARLY ADOPTOR AITRIBUTES QI0. Following is a series of statements that people may use to describe themselves. Please indicate how much you agree or disagree

that they describe you. To do this, please use a scale of 1 to 7 where a "1" means you disagree completely and a "7" means you agree completely. Of course, you may use any number between 1 and 7.

Don't Know = 0 The first/next statement is (insert statement). What number from 1 to 7 best indicates how much you agree or disagree that this statement describes you?

Ask First Rating

Market Maven Items r like introducing new brands and products to my friends I like heJping people by providing them with information about many kinds of products PeopJe ask me for information about products, places to shop, or sales My friends think of me as a good source of information when it comes to new products or sales

Innovativeness I like to take a chance Buying a new product that has not yet been proven is usually a waste of time and money If people would quit wasting their time experimenting, we would get a lot more accomplished J like to try new and different things I often try new brands before my friends and neighbors do J like to experiment with new ways of doing things

Opinion Leadership When it comes to computer-related products, my friends are very likely to ask my opinion I am often used as a source of advice about computer-related products by friends and [leigh bars I often tell my friends what I think about computer-related products

.,

DEMOGRAPHICS Qll. These next questions are about you and your household and will just be used to divide our interviews into groups.

What was the last grade of school you completed?

Some High School or less 0-1 High School Graduate 0-2

Some Collegeffechnical School 0-3 College Graduate or higher 0-4

" ....•.

Q12. Which of the following best describes your age?

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18 to 19 20 to 24 25 to 29 30 to 34 35 to 39 40 to 44 45 to 49 50 to 54 55 to 59 60 to 64 65 to 69 70 to 74 75 to 79

80 or older Q13. Which of the following best describes your household's total yearly income before taxes?

Under $20,000 $20,000-$29,999 $30,000-$49,999 $50,000-$74,999 $75,000-$99,999 $100,000 or over

NoAnswer-O

Q14. Are you ... ?

Male 0-1 Female 0-2

This completes all the questions. Thank you very much for your assistance with this interview!

0-1 0-2 0-3 0-4 0-5 0-6 0-7 0-8 0-9 0-10 0-11 0-12 0-13 0-14

0-1 0-2 0-3 0-4 0-5 O-ti

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