able of Contents
Table of Contents
Step One – Financial Analysis
Step Two – External Business Environment Analysis
Concluding Identification of Current External Business Competitive Issues
The Matching Dell Business case by (Rivkin.J & Porter, M) defines the personal computer industry and outlines its history and development, with focus on Dell Computers. This paper will analyze the case study by means of the Strategic Situation Analysis and Planning Method (SSAP), by portraying and comparing Dell with its main competitors, namely: IBM, Compaq, Hewllet-Packard and Gateway. Approaching the strategic situation from SSAP method’s step number one, Financial Analysis, step number two, External Business Environment Analysis and step number three, Business and Corporate Strategy Analysis, an external analyst perspective will be drawn based on past , present and future trends that will be used to give recommendations of investments to potential investors.
The Personal Computer Industry
From its inception the computer industry was mainly composed of large corporations such as IBM and DEC and unaffordable, heavy hardware such as mainframe computers. Having a personal computer at home was a mere aspiration those days.
Between 1975 and 1981 many discoveries occurred that gained popularity with electronic hobbyists, when pre-assembled personal computers entered the market. These computers were pioneered by firms such as Apple Computers, MITS and smaller ones such as Tandy/RadioShack and Commodore. Almost immediately, other major electronic firms entered the market of personal computers. These companies focused their business on other electronic industries before this.
The pioneer of the first personal computer was IBM in 1981 and its success translated to a market share of 42% of the market two years later. Although, IBM produced most of the components for its mainframes computers, for PCs it purchased from others the required parts and then assembled the machines.
The operating software for IBM’s first PC was custom-made by Microsoft, which was then just a start-up software firm. The microprocessor for the operating system (OS) was designed by Intel, another corporation that benefited from the partnership with IBM. Microsoft’s first operating system to IBM is the backbone structure for all the current versions of operating systems (OS) implemented by Microsoft.
A proprietary system developed by Apple, held 20% of the market by 1983. In 1982, another firm named Compaq entered the market with a low-priced portable clone and had $100 million in revenues during its first year, which turned out to be the fastest growing company in American history. By 1984, Dell Computer Corporation entered the market and transformed the way PCs were assembled and distributed.
Historically, what has really revolutionized the PC industry was the establishment by IBM of an open architecture for their first PC, making its operating system and other proprietary information available to encourage software developers to write programs for the IBM PC and to motivate other firms to make compatible peripherals. Moreover, the unforeseen business strategy at IBM caused the company to become vulnerable to other market entrants and lost their sustainable competitive advantage, since many other IBM clones were manufactured. This cased the company to lose market share to competitors.
Step One – Financial Analysis
Dell's financial history, like most company's, changes over different periods. These changes can be attributed to changes in the demand of the product, technological advancements, manufacturing costs, competition, and economic conditions. In 1999, the approximate cost of manufacturing a basic personal computer was between $800 and $900 (Kwak & Yoffie 1999). Dell sold computers directly, and through retail distributors. In 1994, Dell actually lost money on retail sales. When comparing...