Business and IT Alignment
Name of Institution
Business and IT Alignment
What business is this organization in?
Dell Computers was founded by Michael Dell in 1984 with the aim of providing consumers with computers that meet their needs. The Dell organization is in the business of making personal computers. Dell does not make most of the parts it uses for the computers but buys them from other companies. The computers are then assembled from stock parts. The company has become synonymous with customer satisfaction since it was established in 1984. The developments made by Dell computers on the personal computer market are ...view middle of the document...
Despite the nonrestrictive regulations, companies have failed to penetrate the PC market in China since the market is colonized by the leading personal computer sellers like Lenovo, which is the biggest operator in China and Dell.
Is the threat posed by each of these entities high or low? (Use Industry Competitive Forces Model to illustrate your response.
The threat of new entrants into the personal computers business raises the competitiveness of the industry. The competition is high due to the high level of commoditization. Commoditization is how uniform and differentiated the products that the PC industry produces. This makes results in minimal customer switching costs. This makes It easy for any computer vendor to get into the personal computer business quite easily. Economies of scale do not offer Dell competitive advantage and neither does the fact that the assembly business does not require a lot of capital to venture into. The threat of substitutes is also high since there is great similarity in the types of products that Dell assembles to those of other manufacturers like HP. Even under these threats, Dell has been able to capitalize on customer preferences. Dell is able to sell its products at lower margins since it is afforded lower margins by its suppliers. Suppliers do not have a high degree of bargaining power since in the PC business here are many suppliers are few assemblers. Dell decides on the terms and also the schedules of delivery of supplies. The customers do not also have a bargaining power since there are many customers ranging from individuals to corporate and even government and educational institutions.
How does this organization compete in the marketplace?
Dell is able to compete in the market through its Direct Model that gives the company a great competitive advantage over its competitors. When Dell entered the market, the players were very aggressive and competitive. Dell decided to deal with the competition by using the Direct Model that differentiated the products it solved. The Direct Model eliminated the retailers and allowed dell to sell its products at lower markups. Lower markups enabled Dell to sell its products at a price cheaper than most competitors and it quickly attracted a loyal customer base (Freedman, 2000). The users were also offered great customer assistance in case of hardware problems. This has earned Dell a cult following among the customers. All these measures served to reduce manufacturing costs, delivery times and increase product reliability. All these strategies help Dell compete in the market effectively. The highly efficient business model has enabled Dell to stay above most of the companies in the PC business. Customer reliability has made sure that many companies cannot grab Dell’s market share. The diagram below shows the forces that the Dell Company has been able to overcome in order to stay ahead of the competition (Chaffey, 2008).
Which strategy is being...