Please use ideas from MGMT 451. Thanks!

Information needed for answer:

Dell, the PC maker, started by Michael Dell in his dorm room at University of Texas, was one of the great success stories of the 1990s and early 2000s. Dell grew at an astonishing rate from the 1990s to 2007, and was more profitable than most PC makers. However, from 2007 on, Dells profitability declined as new competitors like Apple and HP came into the marketplace. Why did Dells performance decline after 2007?

Dells competence was based on selling PCs direct to customers by cutting out the wholesalers and retailers to give customers lower prices (and more value) and more profits for Dell. Dells website allowed customer to mix and match product features like microprocessors, memory, monitors, etc.. to customize their own computer system. This ability to customize kept customers coming back to Dell.

Another reason for Dells rapid growth was the way it found innovative ways to manage its supply chain to minimize costs of holding inventory. Again, Dell took advantage of the internet to feed real-time information about changes in demand to its suppliers so they could alter their production of components to match Dells needs in the upcoming weeks. Also, Dells production schedules were able to take advantage of the gains from just-in-time production to allow Dell to drive down costs and prices.

What happened to Dell in the latter half of the 2000s which contributed to their declining performance? First, a large proportion of Dells sales came from business customers, and during the 2008-2009 recession, business demand dropped. Second, during the 2000s, HP also learned how to outsource PC making to reduce costs and sold business customers a bundle that included not just PCs, but also advanced servers, storage devices, network equipment, and consulting services to help businesses buy, install, manage and service their equipment. Dell lacked the competences in research and development needed to compete with HP and Apple. The increase demand for PCs forced Dell to now sell through regular retailers like Best Buy and Wal-Martwhich lowered profits. Finally, Apple was gaining market share from Dell by differentiating it products through their performance, design, and ease of use. This created the impression that PCs from rivals like Dell and HP were just old fashioned. Dell went from being the leader to playing catch up to turn around its performance as its profits continue to decline.

1. Can you cite some changes (2-3) Dell could have made to beat the economic decline and competitive pursuit? (10 points)