A- from the case study below please Identify the strategic choice implemented by the company ; cost leadership or differentiation or an integrated cost/ leadership strategy.

INTRODUCTION

Dell is a leading technology provider holding a 15% share of the worldwide computer systems market. Due to a variety of challenges in the company's markets and business environment, financial indicators of performance are beginning to weaken. Consequently, Michael Dell is seeking to achieve another turnaround by initiating a new organizational structure and targeting five key areas of growth. Dell has abandoned some of the tenets of its early business model in order to keep pace with shifting consumer sentiment and market conditions.

This case provides an extensive look at Dell's current situation and how the company plans to overcome pressing competitive and economic threats. Realignment of operating segments with its consumer base and expansion of distribution channels have already begun to show some positive results. The potential for Dell's new strategy to help the company meet its objectives can be evaluated by considering the following questions.

1. Based on an assessment of the threats in Dell's external environment, what actions are required of the company?
2. In what ways is Dell's segment growth strategy likely to succeed or fail?
3. How will competitors' strategies and actions impact Dell's ability to achieve its growth objectives?
4. How should Dell change its business- and corporate-level strategies to enable growth and meet these challenges?

ANALYSIS

The primary strategic issues facing Dell stem from intense competition among computer hardware manufacturers and shifts in consumer expectations and buying patterns. The present global economic crisis magnifies the harmful effect of these forces and introduces additional concerns for management to address.

Competitive Threats -The degree of competitive rivalry in the computer industry is very intense. In this hypercompetitive market, Dell faces multiple threats, including:

1. Losing share to competitors
   1. HP has taken over top U.S. position
   2. Acer's PC sales are growing at an incredible pace in the U.S. (62%) and worldwide (53%)
   3. Apple continues to grow despite economic downturn
2. Low cost foreign producers gaining momentum and driving down prices
   1. Average price per unit sold is declining
   2. Eats into profit margins
   3. Dell's margin for consumer segment estimated at 0% for FY2010
3. Increasing competition in Dell's key customer markets
   1. New entrants and brand name electronics makers in home user segment
   2. Intense competition for lucrative corporate accounts
   3. Small/medium business segment targeted by large competitors
   4. New server entrants and consolidation in the public sector

Consumer Shifts -Changes in buying behavior are having an impact on Dell's business environment in the following ways.

1. No growth in U.S. corporate IT expenditures and spending shrinking in the European market (80% of the company's sales come from corporate buyers)
2. Home computer buyers exhibiting a preference for purchasing at retail outlets to allow product comparisons
3. Small/medium business segment becoming more price-sensitive
4. PC sales declining (Dell's largest product revenue stream)

Major Economic Downturn - Conditions in the worldwide economy have important financial ramifications for Dell, and the company's performance figures are showing signs of strain. Economic threats facing the company include:

1. Falling revenues in each business segment
2. Revenues estimated to drop in all product categories for FY2010
3. Reduced spending expected to be greatest in Dell's primary PC and server markets
4. Home computer buyers seeking reduced prices and features
5. Supplier insolvencies likely to cause supply chain disruptions
6. Customer insolvencies expected to further reduce demand
7. Increasing risks of international exposure (volatile exchange rates impact nearly half of Dell's revenue)

Suggested Actions - The barrage of threats confronting Dell call for a series of competitive moves to strengthen the company's ability to maintain its leadership position in the industry, identify new drivers of growth, stimulate consumer interest, and address the issues laid out above. The situation calls for efforts to:

> improve cost competitiveness

> seek differentiation

> fortify customer relationships

> expand retail distribution and front-line marketing programs

> cultivate key accounts

> aggressively pursue growth segments, and

> weather economic hardships.

Each of these suggested actions is discussed in more detail below.

Improve Cost Competitiveness

Cost cutting initiatives are critical to competitiveness in today's global markets. They are needed to combat the success of low cost producers and improve margins against falling average prices. With a lower cost position, Dell will be better able to pursue high growth, price-conscious emerging markets. Some distinct opportunities that exist for Dell include:

• Integration of "design-to-value" concepts backward in supply chain with supplier partners
• Use of global operations to generate resource advantages
• Adoption of sophisticated inventory practices to manage logistical complexities associated with build-to-order strategy and to improve liquidity ratios
• Outsourcing of non-critical or non-strategic activities to fully concentrate on functions that create value

Seek Differentiation

A simple box of technology no longer appeals to most consumers.Differentiation based on advanced computing capabilities will enable the company to target more technologically-sophisticated customers. Upgrading products with superior features adds value and allows premium pricing over low-end models to boost margins. Broadening the product portfolio will enable Dell to package customized IT solutions to meet the specific needs of a variety of customer segments. Seeking simplified and creative solutions for price sensitive buyers and an evolving corporate market will improve Dell's ability to hold on to critical customer bases. Perhaps most importantly, the addition of services that support or enhance the company's product mix will promote sales in both stagnating and growing market segments.

Continued increases in R&D investments are necessary to insure the discovery of innovative products with exciting new designs and features. Innovation is the key to developing revolutionary new platforms and achieving first mover status (as Dell has done by taking the lead in mobile computing, storage offerings, and networking solutions). The benefits of being a successful first mover can be substantial, especially in fast-cycle markets where it may be virtually impossible to sustain a competitive advantage for any meaningful length of time.

Fortify Customer Relationships

Dell's direct customer interactions are an important component to identifying consumer preferences and reacting to industry trends.Having direct relationships with customers empowers the company to detect changing market sentiments. With increased speed and flexibility, the possibility to reduce product development time will also contribute to the company's ability to gain first mover advantages and compete more effectively.This capability is considered to have the potential to make a competitive advantage for Dell.

Expand Retail Distribution and Front-Line Marketing Programs

Because consumers prefer hands-on purchases and Dell is now competing with powerful electronic brands, increased retail distribution meets two objectives. It allows the company to reach a broader customer base and presents an opportunity to expand Dell's brand exposure. Retail sales are especially important in China, the biggest open market for future PC growth, where buyers are unfamiliar with or unable to engage in direct sales transactions.It is also important for Dell to purposefully establish a strong point-of-purchase merchandising campaign to maximize customer attraction and establish a compelling brand image.

Cultivate Key Accounts

The heart of Dell's business is serving large commercial and institutional customers.In fact, Dell sells more computers to businesses than any other company in the world. Its greatest area of vulnerability as sales in this segment decline, the company clearly needs to maintain market leadership and retain its core base of enterprise accounts to secure a consistent revenue stream. The enterprise market is experiencing a transformation which demands a decrease in corporate IT costs and complexity. Hyper-scale data centers for businesses are seeking innovative enterprise-wide computing solutions. In order to meet their needs, Dell must focus on IT partnerships with key accounts to facilitate long-term relationships and to develop products and services aimed at simplifying the enterprise IT environment.

Drawing from an expanded portfolio of products and services can produce comprehensive data center offerings to meet the unique needs of Dell's key accounts. Dell has the ability to differentiate by designing creative products and services tailored to each customer's specific requirements. Customizing solutions for the largest buyers in the IT industry can introduce switching costs to secure Dell's domestic foothold in corporate accounts. And creating expansive and value-added services for the enterprise market offers Dell an opportunity to increase profitability to offset reduced hardware revenues. Service support for commercial-class products is essential to customers looking for new ways to design, deploy and maintain their IT infrastructures. Dell should establish a focused Services team which can provide next generation support services (such as remote management, diagnostics and problem resolution) for Dell's customers. Information linkages with corporate customers would prove particularly beneficial as Dell seeks to improve services for this group.

Aggressively Pursue Growth Segments

To reduce Dell's overdependence on the enterprise customer, the company should intensify its expansion into other segments with the potential to grow.Based on market projections, product categories which are experiencing growth include mobility, software and peripherals, services, and storage. The most promising customer segments include SMB's, the public sector, and international expansion.

1. With the potential to reach 72 million customers worldwide, small and medium businesses represent the fastest growing IT market. Their spending is double the amount being spent by large enterprises. These organizations have limited internal IT resources and are seeking IT solutions. For SMB leaders, Dell can expand its role as a solutions provider by offering an ecosystem of products, tools, support and resources exclusively designed for small businesses. Technology solutions can be packaged in a way that allows small businesses to focus on their customers, rather than worrying about their IT needs.For example, simplified storage consolidation solutions can be designed specifically for small and medium businesses that are challenged with storing and managing exponentially growing data.
2. Dell earns its highest margins in the public sector. Attempts at economic recovery have led to a growth in federal government spending. Opportunities in this market also depend on the creation of simplified, standardized solutions.
3. To pursue growth geographically requires further international expansion beyond North America. Opportunities are most notable in emerging global markets where the customer is looking for basic computing functionality.
   1. identify growing markets,

Weather Economic Hardships

Despite tough economic times, homes and businesses have become heavily dependent on computer electronics. There is no direct substitute for their computing needs. Using its strong cash position, Dell is not only equipped to brace for the impact that the immediate business climate will have on sales, but is also in a good position to invest in the development of innovative products during this sluggish sales period. Balancing short-term opportunities with long-term prospects, the company should be positioned to leap ahead of competitors when the economy takes a positive turn. In addition, Dell should continue to scan the environment for opportunities to diversify into products with growth potential and a natural fit with Dell resources and capabilities. Increasing the percentage of revenues derived from new lines of business will protect the company from future downturns in the computing industry.

Competitor Analysis

Conducting a comparison of major rivals across key competitive dimensions can highlight the specific threats posed by each competitor.Market dependence and market commonality are two important indicators of the intensity with which competitors will defend their markets and the degree to which they will engage in competitive rivalry.

The table below evaluates the product lines and global sales of Dell's key rivals and identifies the specific strategic threats presented by each of these competitors.

Top Compet.	Product Line (% Sales)	Am. Sales	EMEASales	APJ Sales	Sales Trend	Strategies & Threats
Acer Taiwan	PC 17% Laptop 68% Periph. 12%	30%	49%	21%	Down Q1 09	Moving into direct selling (acq. Gateway) Customer segmentation based on needs Differentiating channel strategy
HP U.S.	PC/Hand 35% Img/Print 25% Services 19% Storage 16%	42%	42%	16%	Up 2008	Invested $13 billion in service business Broader product line Restructuring to reduce costs Using portfolio to become exclusive IT resource for enterprise customers Touch screen innovation Good cost position to gain in SMB segment
Apple U.S.	PC <5% Laptops iPhones iPods	45%	23%	12%	Up 68% 06-08	Innovation (highest R&D expenses by 4) Differentiating features Comprehensive solutions for user needs Cost reduction without restructuring (taking on some risks by outsourcing) Product diversification
Lenovo HongKong	PC's	28%	22%	50%	Up 07-08	Cost leadership - aimed at PC market Competitive advantages in China "Worldsourcing" business model Growing focus on innovative and rapid product enhancements and customer intimacy
Dell U.S.	Mobility 31% PC 29% Sftw/Prph 17% Servers 10% Services 9% Storage 4%	47%	22%	12%	Flat 08-09

As the sales figures above indicate, Dell's lead is slipping in America, and the company is nowhere near leading firms in the other regions.The analysis emphasizes Dell's need to maintain its dominant U.S. position and to make greater inroads into foreign markets. Dell's standard equipment remains the most popular desktops and laptops found in North American and European businesses (with more than double the planned computer purchases than any of its competitors). But Dell's ability to fund portfolio investments and growth into new markets is highly dependent upon maintaining a steady flow of revenue from this segment as well as meeting the competitive challenges that its rivals pose in each of the action areas discussed in the section above.

Goals to retain and/or gain enterprise and small/medium business accounts will find stiff competition against HP's broad product line and new focus on enhanced services. However, Dell still holds a significant lead over HP in the enterprise market. And restructuring at HP may be disruptive to the organization, allowing Dell to seize opportunities to fill any availability, quality, or service gaps. Given the strategic direction that the two companies are taking, Dell should anticipate head-to-head competition with this worthy opponent.

The home user segment, despite its smaller size, is expected to expand faster than the public and corporate enterprise segments. Dell should expect to encounter Acer in this market, and efforts to penetrate consumer and mobile computing growth segments will pit Dell against Apple and its innovative products and marketing approaches.

In emerging countries, it is Lenovo who will hamper Dell's expansion pursuits. Without cost containment and resource advantages, Dell will find it difficult to meet the expectations of these price-conscious markets. And it will be especially challenging to compete on Lenovo's turf in China. Nonetheless, Dell has seen some positive response to its marketing and product development initiatives with BRIC customers. The company can use this momentum to pursue new sales in developing markets.

STRATEGY

Building upon its reputation for products which are affordable, reliable, scalable, and customizable to individual needs, understanding level, and usage requirements, Dell plans to generate new revenues through its reorganization and renewed focus on growth segments. Market segmentation of customer groups enables the company to identify and better serve the unique requirements and needs of individual groups with common characteristics. Success will depend not only on these factors, but on the company's ability to:

1. combat intense competitive rivalry,
2. improve cost competitiveness,
3. respond to the rapid pace of technological and industry change and shifts in consumer preferences, and
4. differentiate Dell's portfolio of products and services.

Establishing new functionalities for users produces the greatest potential for increased revenues and profits. Therefore, inspiring customer-driven, rapid, and innovative product development is one of the most critical elements of Dell's strategy. The company needs to strengthen its culture of strategic entrepreneurship, encourage autonomous strategic behavior within the organization, and promote the discovery of radical technological breakthroughs and creation of new knowledge to overcome competitive hurdles.

Business- and corporate-level strategy design also plays a crucial role in achieving growth objectives and tackling the challenges in the external environment. The needs of Dell's current situation can be best met by implementing an integrated cost leadership/differentiation business strategy and arelated constrained diversification corporate strategy.

Business-Level Strategy

Customer expectations in the computing industry have created a growing demand for low-priced, differentiated products. As a result, Dell needs to be able to perform primary and support activities that simultaneously yield low costs and differentiated features, or an integrated cost leadership/differentiation strategy.The objective of using this strategy is to efficiently turn out products with distinctive attributes. The elimination of process inefficiencies produces low costs, while differentiation creates unique value. To be successful and realize the benefits of this strategy,Dell must integrate its cost leadership skills with differentiated product features and related services to create value for its customers.

Successful use of an integrated cost leadership/differentiation strategy has the added benefit of building skills that can help Dell adapt more quickly to new technologies and rapid changes in the external environment. By simultaneously reducing costs for the price-conscious consumer and increasing features for customers willing to pay a premium for new and advanced technological features, Dell is developing multiple skill sets which will enhance the company's responsiveness to new market needs as they emerge.

Total quality management (TQM)is a managerial tool that emphasizes total commitment to the customer and to continuous improvement of all organizational processes. An effective TQM system provides flexibility needed to identify opportunities to implement an integrated cost leadership/differentiation strategy. The development and use of TQM systems at Dell would align actions with the company's strategic needs and would concurrently serve to (1) increase customer satisfaction, (2) cut costs, and (3) reduce the amount of time required to introduce innovative products to the marketplace. All of these objectives have been identified as critical factors that will influence Dell's future success. However, because TQM systems are available to all competitors, they may help the company maintain competitive parity, but rarely will they unilaterally lead to a competitive advantage.

Corporate-Level Strategy

Companies can gain a competitive advantage and increase value by strategic positioning in different markets. Becoming a diversified IT company opens up opportunities in related businesses, where similar products, buying processes, target customers, or other operationally-related activities can produce synergies. Dell has diversified from a purely desktop PC provider to operating in the following additional product categories: mobility, server, storage, printer, enhanced services, software, and consumer electronics. More than 30 percent of its revenue is generated outside of its dominant business.Because of this ratio and because there are existing links between its diversified businesses, Dell's corporate strategy is a related constrained diversification strategy. This approach enables the company to expand the value of its resources and capabilities by sharing activities and exploiting economies of scope between business units. With the variety of target segments being pursued by Dell, the ability to successfully share resources and capabilities (operational relatedness) or to transfer corporate-level core competencies across divisions (corporate relatedness) generates intangible resources which cannot be imitated by competitors and adds value to the organization.

RECOMMENDATIONS

Additional areas worthy of consideration include expansion opportunities in related growth product categories (such as media PC, digital entertainment, gaming, and Internet services) and expansion of cooperative networks which can augment technological pursuits where internal development efforts fall short. Growth should continue both organically and through strategic partnerships and selective acquisitions, which offer additional technology and people that will help accelerate Dell's position in the industry.

In all of its efforts, listening to customers remains central. Soliciting direct feedback and communicating the customer's voice throughout Dell can and should be done in increasingly innovative ways. And again, product innovation should be driven by customer ideas.

One of the most important opportunities before the company is harnessing Dell's unique ability to simplify information technology for common consumption. Today, enterprises of all sizes and individuals are hampered by the sheer complexity of IT. By focusing on removing complexity and building different kinds of services that will help customers spend more time on innovating and growing their own businesses and less time on managing their IT infrastructures, Dell can be a valuable resource in the marketplace. In the future, IT could be less about technology and more about the business value it provides, and IT simplification should become an organizing principle for Dell.

In addition, the company's ability to see opportunities for IT simplification can also contribute to one of the most significant challenges facing the industry - how to create energy-efficient, environmentally friendly IT infrastructures.Projects, which are focused on offering simpler, more energy efficient technology, will benefit the communities served by Dell for years to come. They can be critical components to both growing its business and making Dell a model for corporate leadership.

Finally, Dell has assembled a very strong top management team, well suited to guiding the company in its chosen strategic direction. Michael Dell himself provides the wisdom of industry tenure, offset by an entrepreneurial personality and the willingness to change. Schuckerbrock brings expansive knowledge from outside of the company, where he interacted with a variety of enterprises in his consulting role and also managed in the retail world of mass-distributed consumer products. Garriques' consumer-driven product development experience gleaned from his years at Motorola will be particularly useful in the development of innovative mobile computing products. His engineering background can also contribute in the company's "build-to-value" efforts. And board member Lafley brings consumer marketing expertise to the table. The strategic leadership available from this team will serve Dell well in pursuing the strategic goals laid out in the discussion above.