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SWOT analysis of Dell

By Ovidijus Jurevicius | 16.02.2013

This is Dell Inc. SWOT analysis for 2013. For more information on how to do SWOT analysis please refer to our article.

Company Background

Name Dell Inc.
Logo Dell Inc. logo
Industries served Computer hardware, Computer software, IT consulting, IT services
Geographic areas served Worldwide
Headquarters U.S.
Current CEO Michael Dell
Revenue $ 63.07 billion (2012)
Profit $ 3.49 billion (2012)
Employees 110,000 (2012)
Main Competitors Apple Inc., Samsung Electronics Co., Ltd., Lenovo Group Limited, Hewlett-Packard Company, Sony Corporation, Fujitsu Limited and many others.

Dell Inc. is an American multinational computer technology corporation that develops, sells, repairs and supports computers and related products and services. The company is one of the largest technological corporations in the world and is listed as number 44 in the Fortune 500 list. It is the third largest PC vendor in the world after HP and Lenovo.
You can find more information about the business in its official website or Wikipedia’s article.

SWOT

Dell SWOT analysis 2013

Strengths

Weaknesses

  1. Brand name valued at $7.5 billion
  2. Product customization
  3. Environmental record
  4. Competency in mergers and acquisitions
  5. Direct selling business model

Weaknesses

  1. Commodity (computer hardware) products
  2. Poor customer services
  3. Low investments in R&D
  4. Weak patents portfolio
  5. Too few retail locations
  6. Low differentiation

Opportunities

Threats

  1. Expand services and enterprise solutions businesses
  2. Obtain more patents through acquisitions
  3. Strengthen their presence in emerging markets
  4. Tablet market growth

Threats

  1. Growing demand for smartphones and tablets
  2. Profit margin decline on hardware products
  3. Slowing growth rate of the laptops market
  4. Intense competition

Strengths

  1. Brand name. Dell has a very strong brand reputation for quality products. Its brand is valued at $ 7.5 billion.
  2. Product customization. Dell allows its customers to customize their laptops. Such services were not originally found within any other major computer retailer (and currently only Sony and Toshiba allow that), but add great value to the customers and provides Dell with a competitive advantage.
  3. Environmental record. Dell is engaged in many green initiatives and has received many rewards for being an eco-friendly business. This is a benefit when working with public and government agencies.
  4. Competency in mergers and acquisitions. Over the last five years Dell has spent $13 billion for successful mergers and acquisitions, which brought patents, new capabilities, assets and skills to the business.
  5. Direct selling business model. Dell doesn’t sell its products through big-box retail outlets but instead sells directly to consumers and enterprises, keeping their already thin profit margin to themselves.

Weaknesses

  1. Commodity products. The large stream of Dell’s revenues comes from computer, especially laptop, sales, which is a commoditized product. Computer hardware (commodity) products are sold with a very low profit margin.
  2. Poor customer services. Once praised, Dell’s customer services deteriorated due to outsourcing its call centers offshore. Dell invested a large sum of money in fixing this, but hasn’t yet regained its previous reputation for customer services.
  3. Low investments in R&D. The company spends a much lower percentage of its income on R&D that its main competitors and thus, missed an opportunity to develop strong products for smartphones and tablet markets as well as to learn new skill and capabilities.
  4. Weak patent portfolio. Due to low spending on R&D Dell hasn’t acquired a strong portfolio of patents and is now finds it hard to compete in lucrative smartphones and tablets market.
  5. Too few retail locations. Selling products online saves money and allows for product customization but provides less visibility for the products. The consumer finds it hard to trust the products if it can’t hold it first in his hands.
  6. Low differentiation. Low price was once Dell’s competitive advantage but the company is no longer able to provide competitive prices. Apart from the price, Dell’s products are little differentiated from competitors’ products and are in competitive disadvantage if the price offered by competitor is lower.

Opportunities

  1. Expand services and enterprise solutions divisions. Dell provides various services (cloud, security and infrastructure) and enterprise solutions (servers, networking and storage), which are the most profitable Dell’s business at the moment. Dell business should focus on growing these divisions as they promise better growth opportunities and higher profit margins.
  2. Obtain more patents through acquisitions. If Dell wants to diversify, it needs new technology patents and new ideas. Dell hasn’t properly established its R&D facilities to discover new technologies and patents, so the only feasible way to obtain patents and technologies is to acquire other companies.
  3. Strengthen their presence in emerging markets. Emerging economies are the fastest growing markets for laptops, tablets and other electronic devices. Dell has a good presence in these markets but should strengthen its position as the company experiences declining market share.
  4. Tablet market growth. Tablet market is expected to grow in double digits for the next few years and the company has a great opportunity to release new tablet models and benefit from the market growth.

Threats

  1. Growing demand for smartphones and tablets. With a lower price and strongly improved capabilities, consumers often choose tablets and smartphones over laptops. The growing demand for the previous devices takes a share out of laptops, the main stream of revenue for Dell.
  2. Profit margin decline on hardware products. Dell’s main income is from selling hardware products, which prices will increase in the future due to rising raw material prices. This will add to costs for Dell and will further cut the profit margin.
  3. Slowing growth rate of the laptops market. Growth rate of the computer market is slowing down and in the near future the markets will become saturated. It will prove hard for Dell to compete in such market or at least fight back the lost market share.
  4. Intense competition. The company faces intense competition in all its business segments. It competes in terms of price, quality, brand, technology, reputation, distribution and range of products, with Acer, Apple, HP, IBM, Lenovo and Toshiba.