DILKAP RESEARCH

CENTRE AND INSTITUTE OF

MANAGEMENT STUDIES

TOPIC
LEADERSHIP
(MICHAEL DELL)

PRESENTED BY:
SURESH PRAJAPATI.. (45)
 “It’s amazing to me that our competitors
think the customer is the dealer.”
Michael Dell

“Sales Leader: Tops in Global Basis.”

Be Direct: DELL
 Michael Dell

The
Man
Behind
Dell
 INTRODUCTION
 NAME :- Michael Dell
 EDUCATION :- Attended university
of Taxas , Astin 1983-84.
 OCCUPATION :- CEO and FOUNDER
, DELL Inc.
 NETWORTH :- US $13.5 Million
 SPOUSE :- Susan Dell

BORN :-Feb.23, 1965 (Age – 45)

 Michael
Dell
– The
Entrepreneur
 Age 12: Started auction business

 Age16: He started selling newspaper subscriptions

 Being a computer geek, understood the functioning of

his new Apple computer

 Soon he could ‘enhance’ PCs & sold them at lower

costs

 In January 1984 he registered ‘PC’s Limited’ &

incorporated DELL in May
Michael Dell As A Leader

• Goal Oriented

• Innovative

• Forward Looking

• Proper Balance Between Work life and Personal Life

• Honest

• Competent

• Inspiring

• Intelligence
The Leadership Grid FIGURE

High 1,9 9,9

CountryClubManagement TeamManagement

5,5
ConcernforPeople

Middle-of-the-Road

Management

Authority-
ImpoverishedManagement
Compliance
1,1
Low Management
Low ConcernforResults Hig
9,1
7
h
  Before Michael Dell, innovation was about well-
schooled engineers in R&D labs inventing high-
margin products and technologies.
 Dell instead trained his eye on finding the most
efficient way to get tech products into the hands of
the consumers.

 Perfected the credo— “Cut out the middleman.”

The Challenges and Evolution of Marketing

Introduction
 Perfected the credo— “Cut out the
middleman.”
 DELL eliminated the need for inventory or
middlemen and gave itself a built-in price
advantage, which it in part keeps as profit
and in part passes on to customers.”
Fortune 11/28/2005

The Challenges and Evolution of Marketing

Introduction
 Michael Dell: “The
only constant thing about
business is that every-thing is
changing. We have to take
advantage of change and not let it
take advantage of us.”

The Challenges and Evolution of Marketing

Introduction
 “Selling tech products by
telephone and then the Internet…
Michael broke the paradigm
about how to run a computer
business; they haven’t been so
great at finding the next
paradigm.”
BusinessWeek 3/6/06

The Challenges and Evolution of Marketing

Introduction
 Michael Dell is the chairman of the Board of
Directors of Dell, the company he founded in
’84 for $1,000.
 With an unprecedented idea---build
relationships directly with consumers (born in
February ‘65).
 Dell’s commitment to consumer value, to the
team, to being direct, to operating responsibly
and, ultimately to winning. Continues to
differentiate Dell from other companies.

The Challenges and Evolution of Marketing

Introduction
 Michael Dell and Executive Management ponder:
1. Whether or not to enter new product markets with
laptops and servers?
2. A global strategy to manage the sales in the
international markets.
3. Decision making in a dynamic environment.
4. 2006 is the year they need to reinvent themselves.
HP has narrowed the gap on productivity and price.

The Challenges and Evolution of Marketing

Introduction
 DELL did not want the “unsophisticated”
customer.
 DELL wants to sell to the “educated”
customer.
 DELL wants the consumer to buy their
third or fourth system from DELL. It’s
more profitable and easier.

The Challenges and Evolution of Marketing

Introduction
 Why DELL case: We’ll look at direct
marketing and marketing strategies.
 Look at more efficient way of going to market.
 Just-in-time (JIT) manufacturing.
 VAR’s (Value-added resellers), solutions for
vertical markets like banking, manufacturing
and retailing.

The Challenges and Evolution of Marketing

Introduction
 The Future: The power of laptops
became compatible with desktops,
because of design, manufacturing
and usage.

 Added: Printers, Servers, Projectors, TV’s,

Handhelds, Software, Peripherals, Storage,
Networking, Workstations and more.
The Challenges and Evolution of Marketing
Introduction

What does SWOT analysis

reveal about Dell’s situation?

The Challenges and Evolution of Marketing

 SWOT Analysis
Business to Consumer Business to Business
Strengths Opportunities Strengths Opportunities
Customization Server Market Customization Server Market
Price International strategy Price International strategy
Customer Focused Product extensions Customer Focused Additional markets
Technical Knowledge Technical Knowledge Product extensions
Market Diversification Market Diversification Strategic partnerships
Strong Strong
Brand/Positioning Brand/Positioning
Media Savvy Media Savvy
Direct Marketing Direct Marketing Model
Model Non-myopic strategy
Non-myopic strategy

Tangibility Competition across Technology Market Competition across

TechnologyMarket markets Inventory markets
Commodity pricing Commodity pricing
Commoditization
Inventory (shrinking margins) (shrinking margins)
Complexity of Mgmt. Complexity of Mgmt.
Growth exceeding Growth exceeding
productivity productivity

Weaknesses
The Threats
Challenges and Evolution of Marketing Weaknesses Threats
Case Questions
1. What impresses you about this company?
2. What is your assessment of the job Michael Dell has
done, as CEO? Senior management?
3. How did Dell segment its customers? What types of
customers? What were they like?
4. Who’s the competition for “transaction” customers?
5. Who’s the competition of the other segmented
customer?
6. What are the advantages of this direct marketing and
direct manufacturing model?
7. With its past distribution agreements with Staples,
CompUSA, and Sam’s Clubs, why did Dell have a
problem with the retail entry?

The Challenges and Evolution of Marketing

Case Questions
8. Why did Dell fail in its first entry in
laptops?
9. What are the implications of a server
failure versus a desktop failure?
10. What are the sales and customer service
implications of a server failure versus a
desktop failure?
11. Does Dell’s expansion into other products
and services make good strategic sense?
12. Given that Dell is a global player, how
would you characterize its strategies?
The Challenges and Evolution of Marketing
Wrap Up: Now and Then
 Avoiding dealers means less mark-ups, less overhead
and delivers lower prices to the customers for DELL.
 DELL: Number One in PC Sales
 DELL is one of the Most Admired Companies
Fortune’s Annual issue
 In 2003, generated 80% of profits from sales to
businesses.
 With one week of parts on hand, DELL turns over its
inventory 52 times a year. Compaq and HP turn over
is 13.5 and 9.8.

The Challenges and Evolution of Marketing

 Wrap Up: Now and Then
 Dell’s invasion into living rooms with flat-
screens and other electronics will be a $100
Billion “free for all.”
 Consumers will benefit. Prices will drop.
Competition is Sony, Samsung and Toshiba.
 Morphing into a leading consumer-electronics
firm.
 Dell isn’t very innovative. Spends only 1.5%
on research, but “We just do it better.”
 Looking at partnerships with Microsoft, Intel.
What about new ones with google and AMD.
The Challenges and Evolution of Marketing
 Wrap Up: Now and Then
 Michael Dell cares about operating margins.
 Dell stock has been valued at a P/E multiple
above 40. Loftier than IBM, Microsoft, Wal-
Mart and GE.
 “The status quo is never good enough.”
 “Celebrate for a nanosecond.” Then move on.”
“Five seconds of celebration and five hours of
postmortem on what could have been done
better.”
 Problems dealt with: Quickly, Directly, and
without Excuses.”
The Challenges and Evolution of Marketing
Wrap Up: Now and Then
 ‘00, Dell was #6 in computer, with a market share of 6%.
 ‘03, it was #1 with a 30% share. #3 consumer brand.
 Sales in ’00: $25.2 Billion
 Sales in ’02: $35.2 Billion
 Sales in ’03: $40.8 Billion
 Sales in ’04: $41.4 Billion
 Sales in ’05: $49.2 Billion
 Sales in ’06: $55.9 Billion (est.)
“When a market is ready to explode, Dell
moves in.”

The Challenges and Evolution of Marketing

Summary

Just like in your own

businesses, windows of
opportunities open and close.
Successful companies see the
opportunities sooner.

The Challenges and Evolution of Marketing

Wrap Up: Now and Then
Michael Dell:
-Named CEO of the Year 2001
-Wealthiest individual under 40,
in 2000, 2001, 2003, 2004.
-If his DELL stock lost all value,
Michael was still be the wealthiest
person under 40, until his birthday in
2/05.
The Challenges and Evolution of Marketing
Summary

DELL is to the computer

industry what Dominos is to
the pizza business.
TIME magazine

The Challenges and Evolution of Marketing

Summary
 Heart of the case: Understanding
the DELL Direct Marketing Model.
 The question of entering new markets is in
reality looking at the Direct Marketing
model. Can it be extended into new
markets.
 Inventory has the shelf life of lettuce.
Inventory is the worst thing to have in an
industry in which value of materials and
technology declines quickly.
The Challenges and Evolution of Marketing
Summary
 Dell believes its low-cost, direct sales
approach will allow it to torpedo prices in
many markets, with emphasis on printers.
 Dell’s “all in one” printer, that can scan, copy
and fax are #2 (private label of Lexmark),
behind Lexmark.
 Rival HO gets 70% of profits from printers
and ink.
 In the Dell software, it automatically detects
when ink is running low and directs user to
the Dell website. Free shipping.

The Challenges and Evolution of Marketing

Summary
Markets evolve over time.
Anticipate and research the
evolution of customers, products,
competitors, channels and
technology.
Pioneered first money-back
guarantee ’86.

The Challenges and Evolution of Marketing

Summary
 Three Golden Rules of DELL:
1. Disdain inventory
2. Always listen to the customer
3. Never sell indirect.

The Challenges and Evolution of Marketing

Summary
It’s not enough to rack up profits or
turbo charge growth. Execs must
do both.
Miss a profit goal and you’re not
cutting costs fast enough. Overshoot it
and you’re leaving sales on the table.
Pity the execs (server, storage and
networking chiefs) who didn’t use all
of the bullets in the gun. Despite solid
results. Reassigned.
The Challenges and Evolution of Marketing
Summary
Dell-lizingPrinters
Dell entered printer market in ’03.
Market share: 19% in early 2005.
In 2004: 50% of revenue came from
desktop PC’s. Will drop to 30-35% in
coming years.

The Challenges and Evolution of Marketing

Summary
Dell is competing against 50
different manufacturers, looking to
be category killer in flat-screen,
digital market. #10 in US in 2005
with 2.4% share.
Dell uses same suppliers.
The convergence of entertainment
and computing or birth of “digital
home” should only help Dell.
The Challenges and Evolution of Marketing
Summary
Developing Dell Direct stores, and
kiosks in malls. Places to touch, see
and browse.
Offering existing customers deals,
but the purchasing
decisions/behaviors are different.

The Challenges and Evolution of Marketing

Summary
HP vs. Dell. HP’s business has long
faced the difficult choice…focusing
on grabbing market share or
improving profitability.
’03 & ’04, HP’s approach.
Aggressively battling Dell to claim
bragging rights as top PC seller.

The Challenges and Evolution of Marketing

Summary
HP is backing away from
seeking market share at all
costs or going all-out to
upseat Dell from the top.”
Investors are applauding.”
Saying it’s a positive thing for
HP. WSJ 1/19/05
The Challenges and Evolution of Marketing
Summary
Fortune cover 2/7/05
“Why Carly’s Big Bet is
Failing.”
“Buying Compaq hasn’t paid off
for HP’s investors. There’s no
easy way out.”
Carly is forced out on 2/9/2005
The Challenges and Evolution of Marketing
Summary

Hewlett-Packard plans to cut

14,500 jobs in a restructuring
plan meant to save $1.9 billion
a year.
WSJ July 19, 2005

The Challenges and Evolution of Marketing

Summary
“Our model continues to be the
best in the business.”
“In past ten years our sales are
up 15 times and earnings and
stock price are up 20 times.”

Michael Dell: Fortune 11/15/2005

The Challenges and Evolution of Marketing
Summary
 Dell remains the world’s largest PC maker:
 Not the revolutionary force it was…
 Direct (DTC) will dominate
 Partnerships with Microsoft and Intel: Microsoft
losing ground to Linux and Intel to AMD.
 Needs to increase R&D spending; Look for
future trends.
 Cutting price. Undercutting rivals. Needs to
spend more on customer service and new
product development.

The Challenges and Evolution of Marketing

 “It’s amazing to me that our
competitors think the customer
is the dealer.”

“No victory laps…It’s a

marathon…
Celebration breeds
complacency.

Michael Dell
Be Direct: DELL

The Challenges and Evolution of Marketing

 “Every company needs to
challenge and reinvent itself.”
The big question for DELL in
2006 is HOW?

Be Direct: DELL