Dell Case Study

1063 words - 4 pages

3Dell Personal ComputersDell accounts for 18 % of the global market in personal computers (PCs) with a 34 % market share in America. It assembles its computers from parts sourced around the world. Dell uses a direct-selling business model. Orders are placed direct over the phone and the Internet, bypassing retailers and therefore cutting costs. This allows Dell to undercut competitors on price, provide better service and still have higher profit margins.In 2005, Michael Dell targeted sales growth of $80 billion over four years, mostly in Asia and Europe. However, despite the best market in PCs for five years, Dell's revenue growth was less than expected. The arrival of low cost Asian competition, such as China's Lenovo and Acer of Taiwan, threatens Dell's market dominance. Dell is a victim of its own success, becoming increasingly hard to manage because of its size, broadening product line and its international expansion.Online sales of all products are growing rapidly worldwide with e-commerce sales in the American market growing by 56 % during 2005. The growth of faster broadband networks means "on-line window shopping" is quicker and easier. Dell is forecasting 400 million broadband subscribers worldwide by 2009.[Source: adapted from: The Sunday Times, 24 April 2005 and 11 September 2005]1. Explain what is meant by the term "profit margin".[2 marks]2. This is profit expressed as a percentage of sales revenue. It can be calculated as a total sum or per unit. Profit margin may be identified as gross profit or net profit margin.[2]3. Examine two reasons why increasing size makes Dell harder to manage.[4 marks]4. As an organization grows some of the following problems may occur:• the resources increases as does the administration required to record and control these leading to more bureaucracy and costs• if expansion is quick and significant as in the case of Dell, control systems may be inadequate• changes in product ranges, may mean Dell lose control of stock, which may become obsolete as a result• employees become more remote from management and the objectives of the business becoming more difficult to disseminate• increases in size may lead to larger spans of control and longer channels of command• physical distances may increase making communication slower, more expensive and possibly inefficient• expansion overseas may lead to cultural and language difficulties. Sourcing of parts from overseas, requires greater administration and recording systems.5. Analyse the advantages and disadvantages of Dell targeting overseas markets for future sales growth.[6 marks]6. Overseas markets may carry certain problems either absent in the domestic market, or present to a lesser extent. These include:• language and cultural differences• the presence of import controls• economic and/or political instability• additional documentation• transportation and insurance costs• exchange rate...

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