| Name | Dell Technologies Inc. (NYSE: DELL) |
| Industry | Technology Hardware |
| Founded | 1984 |
| Headoffice | Round Rock, Texas |
| CEO | Michael S. Dell |
| Revenues | $94.3 Billion, 2021; $92.2 Billion, 2020. |
| Net Income | $3.25 Billion, 2021; $5.5 Billion, 2020. |
| Competitors | Apple, Lenovo, Toshiba, Samsung, IBM, Acer, HP, ASUS |
In 1984, Michael Saul Dell founded Dell and its head office is in Round Rock, Texas. With a market capitalization of $80.38 Billion (NYSE: DELL), Dell operates in 180 countries providing technology products and services solutions. The company portfolio includes desktops, laptops, servers, workstations, monitors, printers, software, and gateways as well as services solutions. In 2021, Dell ranked 92nd in ‘Global 2000’ and 64th for sales in Fortune 500 in the US (Bloomberg, 2021; Forbes, 2021). Let’s now go over the SWOT Analysis of the company.
Table of Contents
Dell Strengths 2021:
- A diversified portfolio and revenues streams.
According to Dell (2021), the company operates through three segments that are ‘Client Solutions Group’ (CSG) for consumer and commercial computing products, ‘Infrastructure Solution Group'(ISG) for servers, services and peripherals sales and ‘VMware’ segment that focuses on networking and management, cloud computing and end-user offering. In 2021, the revenues from the products segment were $69 Billion (74.2%) and services were $24.3 Billion (25.8%). - Direct sales model.
With forward integration, Dell sells directly to businesses and customers through e-commerce. Parvez et al (2019) stated that Dell allows personal customization of laptops which add tremendous value for customers and provide a competitive advantage. - Strong brand equity and reputation.
Dell brand has a very good reputation and its value is $7.5 Billion. Forbes (2021) stated that Dell ranked 90th world most valuable brand, 20th the most innovative company, and 12th best employers in the world. - Persistent investment in research and development (R&D).
Dell has a strong commitment and investment in R&D activities. In 2021, the R&D expenses were $5.3 Billion which increased from $5 Billion in 2020 and $4.6 Billion in 2019 (Dell, 2021). - VMware spin-out.
According to Reuters (2021), Dell announced the spin-out of VMware which has to increase Dell’s share price from $38 to $106.29 in 2021 as shown in the diagram below. The spin-out expects to generate additional growth and value for stakeholders through innovative solutions (Haranas, 2021). - Large manufacturing and distribution resources.
According to Dell (2021), the company has its manufacturing facilities located in China, the United States, Malaysia, India, Brazil, and Ireland. Moreover, it uses contract manufacturing to deliver products faster and generate cost efficiencies. Besides, Dell has a global network of 200K+ channel partners and 39,000 person sales forces.
Dell Weaknesses 2021:
- Limited or single-Supplier relationship risk.
Dell has several limited-source or single-source suppliers’ relationships because either these relationships are advantageous due to quality, performance, and capacity or multiple sources are not available. The single or limited source-critical component delay may prevent the timely shipment of related products (Dell, 2021). - 7-10 days production and distribution period.
Since Dell laptops are built on the specification and requirements of the customers. Therefore, it takes 7-10 business days to produce and deliver a system. Bhatt (2020) explained that the products are built through an outsourced manufacturer in Asia and shipped to the customers which takes 7-10 days. - The conflict between direct sales and channel partners:
Haranas & Burke (2021) analyzed that the direct sales channel makes up a large share of personal computing sales. The Dell preference for direct sales and lack of support for Dell partners account managers driving Dell partners to the competitors such as Lenovo and HP. - Lack of product differentiation in the laptop market:
Edwards (2021) explained that the personal computing market lacks differentiation and laptop brands such as Lenovo, Toshiba, Samsung, and IBM offer products that perform the same function. Features such as processor, memory, are common in most machines.
Dell Opportunities 2021:
- Inter-industry and Intra-industry alliances.
Statt (2020) analyzed that Dell has an opportunity to develop partnerships within the technology industry. For instance, a partnership with Google to provide operating systems and developing an alliance with intelligence data platforms such as Cisco and SAP would add value for customers through innovative solutions (Margalina & Lavin, 2021). - Private 5G mobile market.
The private 5G network market is expected to be worth $8.32 Billion with a CAGR of 36.8% in 2027. The 5G network has strong customer demand in high-performance industries such as robotics, sensor technology and drones (Forbes, 2021). - Global cyber security market.
The global cyber-security market is expected to grow to $350 Billion with a CAGR of 10.65% by 2026. In 2021, the major cyber-attacks were ‘Microsoft Exchange, CAN Financial, ACER, AXA are driving cyber security market growth (GlobeNewswire, 2021).
Dell Threats 2021:
- 2021 Hardware vulnerabilities and security risks.
Boris (2021) pointed out that the vulnerabilities present in Dell BIOS put 30 million users at a security risk. There were four new vulnerabilities that could lead to arbitrary code execution and malicious content delivery compromising the security of the systems. - Shrinking PC market.
According to Nuttall (2019) at Financial Times, the PC market has been reducing and continuously declining PC demand threatens the Dell CSG segment. Dell’s consumer segment for personal computing faces an uncertain future including a decline in revenues and lower shipment forecasts which adversely affect the result of operations. - Declining market share from the competition.
Dell market share is threatened by competitors such as Acer, HP, Sony, Lenovo, and Toshiba. There is intense competition in the market and brands compete on price, technology, quality, and reputation. In 2020, Lenovo has a 23.9% market share, followed by HP’s 21.8 % market share, and Dell’s market share was 19.6% (decreased from 17.8% in 2019) as shown in the diagram below (Bestglitz, 2021). - Continuously declining profits margins in the hardware segment.
There has been a constant decrease in dell income from hardware segments. In 2019, the gross margin from the product segment was $18.9 Billion (24.6%) which reduce to $15.39 Billion (22%) in 2020 and further reduced to $14.56 Billion (20.3%) in 2021 (Dell, 2021).
Dell SWOT Analysis Conclusion:
The challenges for Dell are intense competition, changing hardware market, lack of differentiation, and decline market share as well as gross margins. Nonetheless, Dell has a diversified product portfolio, strong brand equity, and proven dynamic capabilities for success in the technology hardware industry. With proven market knowledge, Dell can overcome business threats such as declining revenues, hardware quality and respond to competition to tackle threats and exploit new business opportunities.
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References:
- Bestglitz (2021). Dell lost pc market share to lenovo, hp, apple and acer.
- Bhatt, Kishor (2020). Pros and Cons of Buying Dell Laptops.
- Bloomberg (2021). Dell Inc. 2021. 2021.
- BNP Media (2021). Private 5G Network Market Size Worth $8.32 Billion By 2027.
- Boris, Teejay (2021). Dell’s BioConnect Bug Has MAJOR Security Flaws Affecting 30 Million Users — How to Fix?
- Dell (2021). Annual Report . DELL
- Edwards, Janice (2021). The Nature of the Differentiation Strategy.
- Forbes (2021). Dell Technologies (DELL).
- Forbes (2021). Private 5G Networks Are On The Rise.
- GlobeNewswire (2021). The Worldwide Cybersecurity Industry is Expected to Reach $345.4 Billion by 2026 at a CAGR of 9.7% from 2021.
- Haranas, Mark and Steven Burke (2021). Dell Direct Sales In Conflict With Channel Partners.
- Haranas, Mark (2021). Dell Stock Hits All-Time High, Up 225 Percent Since March 2020.
- Margalina, Vasilica-Maria and Jose M. Lavin (2021). Riding out the storm of industry convergence: how do alliance and acquisition experience matter for firm survival? International Journal of Organizational Analysis.
- Nuttall, Chris (2019). The incredible shrinking PC market.
- Parvez, Mahmud, et al (2019). Profit Maximization of DELL Inc. through Build-to-Order Supply Chain for Laptop. American Journal of Industrial and Business Managemen.
- Reuters (2021). Dell is spinning VMware out of its IT empire in a deal worth up to $9.7 billion.
- Statista (2021). Dell Technologies Inc.
- Statt, Nick (2020). Google, Dell, and Intel form new computing group for transforming cloud and IT tools.
