Dell Case Study Analysis

950 Words 4 Pages
According to Thomke, Krishnan, & Nimgade (1999), in 1983, Michael Dell started buying and assembling the components to build personal computers. He then started selling the personal computers to local business. The computers used latest technologies at lower costs which proved to be a competitive advantage against its competitors. By 1992, it was one of the Fortune 500 companies. However, by 1993, as the market for portable devices was booming, Dell computer was not able to provide sustainable portables to its customers. Therefore, after analyzing the customers’ needs from Exhibit 6, it decided to focus on improving the battery life of the portables which was the third most important factor for the customers on the list.
Competitive forces
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However, by 1990, to compete with its rivals, Dell entered into the retail market as well to attract smaller customers. Its financial situation was strong as the new market increased its sales from $890 in 1991 to over $2 billion by 1992. However, after fourteen successive quarters of profit, in 1993, it did not make a profit as expected. Its stock price dropped from $25 to $7. The customer base of Dell started with individual customers. Then it expanded its base to small businesses, larger oil companies, universities and government agencies. It operated by eliminating the middleman to reduce the product’s price and by used mail to reach out to its customers. It provided its customers with a 24-hour telephone support service as well. The product quality of the desktops initially was good. However, as the technology kept on changing which decreased the price of the microprocessor, introducing friendlier interfaces, and changing customer needs, it decided to enter into the portable devices industry. However, the portable devices had technical issues such as smoke coming off it. This led Dell to recall 17,000 portables in 1993. Dell had a very informal and unstructured product development process. The product development team often had experienced developers. The results were neither consistent nor …show more content…
The first one was to continue with the proven HiNi technology. The second one was to go with new LiOn technology. The third one was to defer commitment until the qualification phase review results. From Exhibit 8 in Thomke, Krishnan, & Nimgade (1999), a decision tree can be constructed. For the third option, either dual development or overdesign could be chosen. However, when dual development is followed, there is an additional $2.5 million cost. For the overdesign option, an additional variable cost of 0.5% of revenue is predicted. As at the end of qualification phase Lion technology will either work or fail, the probability is 0.5 whether it works or fails. From the decision tree below, the best option to choose would be the third one as it has the largest margin. By choosing the LiOn technology, it would gain an additional revenue of $100

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