Term Paper on "Dell Computer 2004"

Term Paper 22 pages (6047 words) Sources: 1+

[EXCERPT] . . . .

Dell

Current Situation

Goals Objectives, Policies and Strategies

Strengths

Maintained No. 1 position in the computer hardware industry

Introduction and sell of 2 million printers

Increased Revenues

Increased Year over Year Shipments

Weaknesses

Decline in revenue growth

Decrease in Investment Income

Opportunities

Increasing the company's presence in existing markets

Entering new markets,

Pursuing additional product and service opportunities

Threats price wars (competition)

Inability to handle product transitions risks associated with doing business abroad

Instability in the infrastructure

Terrorism

Alternatives

Implementation

Evaluation and Control

Current Situation

Historical Background

Dell Inc. is the leading manufacturer in the computer hardware industry. The company specializes in the development, design, manufacturing, marketing, and selling of an expansive product line built according to customer requirements ("Full Company Description"). These products include both enterprise and client systems. The products sold to enterprises include storage servers, networking products and workstations ("Full Company Description"). Client systems include desktop and notebook computer systems ("Full Company Description"). Dell also offers a wide array of printers, MP3 players, projectors, handhelds and wireless products ("Full Description").

In addition, the company offers various support programs including 24-hour around the clock support ("Full Company Description").

The company is able to maintain such a support system because it has Command Centers throughout the world including China, Japan, Ireland, the United States ("Full Company Description"). Additionally, all computer systems have a limited warranty and the company offers both telephone and online support. It also offers a helpdesk for all software and peripherals ("Full Company Description").. Dell's customer support system has long been the benchmark in the computer hardware industry ("Full Company Description").

In January 2004, Dell announced partnerships with Fuji Xerox, Kodak and Samsung (Hachman). These partnerships were initiated to allow Dell to add new products to its already expansive product line (Hachman). By the end of 2004 these partnerships resulted in the addition of digital media adapters and video players to the company's product line (Hachman). These partnershipt aid Dell in maintainng a competitive advantage (Hachman).

Goals Objectives, Policies and Strategies

Currently, your company is divided in three geographic subdivisions including Europe, the Americas, and Asia Pacific (Japan) ("Dell Annual Report 2004"). Inside the Americas, the company is further divided into Business and U.S. Consumer subdivisions ("Dell Annual Report 2004"). The objective of the company is to increase stockholder value through the implementation of a strategy, whose foundation is based on the direct model ("Dell Annual Report 2004." This model is concentrated in three areas including growth, profitability, and liquidity ("Dell Annual Report 2004"). In addition, your company's business strategy seeks to merge its direct customer model with an efficient manufacturing and supply chain management organization emphasizing standards-based technologies. ("Dell Annual Report 2004")

Another lofty objective of the company came in 2002 when the company declared that it would double sales to $60 billion in five years. Although many scoffed at the idea, today Dell is on its way towards meeting this objective. Indeed the company's strategy involves identifying a small number of priorities, directing resources to them, then measuring and holding ourselves accountable for significant progress toward them. Dell's efforts remain focused on four strategic initiatives: driving global growth, attaining product leadership, continuously improving the customer experience and enhancing Dell's winning culture. We've long understood the powerful global relevance of the unique, direct way we do business, for customers and for Dell. Direct is not an exclusively American or European or Asian concept. It is a customer concept, rooted in understanding and meeting individual needs, at ever-higher levels of value ("Dell Fiscal 2004 in Review")."

Additionally Dell's strategy involves being the low-cost leader in the computer hardware industry. The company accomplishes this by implementing a direct to customer model, which allows the company to maintain the lowest cost structure in the industry and pass these savings on consumers ("Dell Fiscal 2004 in Review). In addition, the company has implemented a strategy that focuses on cost control, which in 2004 garnered the company the lowest operating expense in its history and in the lowest amongst its competitors in the computer hardware industry ("Dell Fiscal 2004 in Review"). In addition, the company offers financing alternatives to businesses and consumers through Dell Financial Services LP, which is a joint venture between CIT Group and Dell Inc. According to "Dell Fiscal 2004 in Review" the ultimate objective of Dell objective is to be a great company in all ways. We maintain very high expectations for operational excellence. For customer value and experience. And for providing superior shareholder return over time. But it's equally essential to be known as an exceptional place to work. As responsible citizens in all of the markets we serve. And as ethical in everything we do ("Dell Fiscal 2004 in Review")."

SWOT Analysis

All information contained in the following SWOT analysis is derivative of Dell's 2004 Annual Report filing with the Securities and Exchange Commission on April 12, 2004. This financial data fiscal year ended January 30, 2004, January 31, 2003 and for the purpose of comparison, the data includes financial information from 2002, 2003 and 2004.

Strengths

According to your annual report, the company has done well in protecting its position in the industry as the premier manufacturer of personal computers. In addition, the company is second in worldwide market share for notebook computers with net unit growth of 35%, in comparison to 20% in fiscal 2003("Dell Annual Report 2004"). This increase occurred as a result of customer trends shifting toward mobile computing. Furthermore, the addition of printers to the Dell product line has resulted in shipment of more that two million printers and makes Dell No. 3 in printer sales in the United States. Your annual report asserts that for the year (2004) the company was successful at utilizing the direct to customer model to decrease costs while simultaneously sustaining profitable market share growth ("Dell Annual Report 2004").

For 2004 your companies Return on Assets (ROA) was 14.74% and Return on Equity (ROE) was 49.15% for fiscal year ending 2004 (Key Statistics). This illustrates the strength and proficiency of Dell's Business strategy and management. Additionally the company does not payout dividends so the dividend yield is 0.0%(Key Statistics).

Profit margin is 6.18 and the operating margin is 8.65% (Key Statistics). Total debt to equity ratio is 0.078. Diluted EPS is 1.19 (Key Statistics).

Other key ratios are as follows (taken from "Dell Annual Report 2004"):

These ratios provide evidence, which suggest that the company has been extremely stable over the past three fiscal years. All ratios are in a healthy range. The number of days for which supplies remain in inventory are particularly short and this is the type of direct to customer model that allows the company to experience increased cost savings and remain as the low cost leader.

As you can see from the table below (taken from ("Dell Annual Report 2004"), total net revenue has increased drastically from 2002 ($31.1 billion) to 2004 ($41.4 billion).

This was an improvement of 17% from fiscal year 2003 ("Dell Annual Report 2004"). In addition, Gross margin and Operating Income and Net income have increased since Fiscal 2002. There is also a marked increase in the Income per common share up from $0.48 in 2002 to $1.03.

Your annual report also asserts that year-over-year net unit shipments improved 26% during fiscal 2004. This improvement was a result of, strong growth in the subdivisions of U.S. Consumer, Asia Pacific-Japan, and Europe ("Dell Annual Report 2004"). Additionally your enterprise was able to increase its worldwide market share by nearly 2 points during the calendar year with a market share position of 16.7% ("Dell Annual Report 2004").

In addition to increased revenues, the company was also able to lower operating expenses to 9.7% of net revenue, the lowest it has ever been in the history of the company ("Dell Annual Report 2004"). There were also record-breaking operating profits of $3.5 billion and net income of $2.6 billion ("Dell Annual Report 2004"). During 2004, the company was also strong in the area of liquidity reporting an operating cash flow of $3.7 billion ("Dell Annual Report 2004").

Furthermore, your company saw record cash and investments of $11.9 billion by end of the year ("Dell Annual Report 2004"). The following is a comparison chart of net revenue and annual market share according to your company's various subdivisions for 2004, 2003 and 2002:

As is evident in the table (taken from "Dell Annual Report 2004"), market share in the subdivision of U.S. consumer has improved greatly from 11.9% in 2002 to 23.4% in 2004. The annual report explains that the year-over-year increase in revenue was initiated by a growth in the sell of enterprise systems of 28% ("Dell Annual Report 2004"). This increase in revenue also occurred as a result of the company's increased focus on enterprise systems, such as servers, which accounted for greater than half of the improvement in revenue in the Americas ("Dell Annual Report 2004"). Within the Americas, an increase in net revenue occurred as a result… READ MORE

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