Dell Essay

4. Is dells strategy working? What is your assessment of the financial performance that dells strategy has delivered during fiscal years 2000-2008? Use the financial dimensions presented in the Appendix of the text (pages 240-241) as a basis for doing your calculations and drawing end points somewhat dells performance.Selected Financial Statement Data for dell Inc., pecuniary Years 2000 2008 (in million, except per make do data) February 1, 2008 February 2, 2007 February 3, 2006 January 28, 2005 January 30, 2004 February 1, 2002 January 28, 2000 Results of Opeproportionns Net Revenue 61,133 57,420 55,788 49,121 41,327 31,168 25,265 terms of Revenue 49,462 47,904 45,897 40,103 33,764 25,661 20,047 Gross Margin 11,671 9,516 9,891 9,018 7,563 5,507 5,218 Gross value Margin 19.1% 16.6% 17.7% 18.4% 18.3% 17.7% 20.7% direct(a) Expenses + Selling, general and administrative 7,538 5,948 5,051 4,352 3,604 2,784 2,387 + Research, development and engineering 693 498 458 460 434 452 374 + Special charges - - - - - 482 194 primitive operating expenses 8,231 6,446 5,509 4,812 4,038 3,718 2,955 Total operating expenses as a % of net revenues 13.5% 11.2% 9.9% 9.8% 9.8% 10.4% 10.9% operating(a) Income 3,440 3,070 4,382 4,206 3,525 1,789 2,263 Operating boodle margin 5.6% 5.3% 7.9% 8.6% 8.5% 5.7% 9.0% Investment and other income (loss), net 387 275 226 197 186 (58) 188 Income before income taxes special loss, and cumulative effect of change in accounting principle 3,827 3,345 4,608 4,403 3,711 1,731 2,451 prep for income taxes 880 762 1,006 1,385 1,086 485 785 Net Income 2,947 2,583 3,602 3,018 2,625 1,246 1,666 Net profit margin 4.8% 4.5% 6.5% 6.1% 6.4% 4.0% 6.6% Earnings per common sh atomic number 18 Basic 1.33 1.15 1.50 1.201.02 0.48 0.66 diluted 1.31 1.14 1.47 1.18 1.01 0.46 0.61 Weighted average sh ares fall outstanding Basic 2,223 2,255 2,403 2,509 2,565 2,602 2,536 Diluted 2,247 2,271 2,449 2,568 2,619 2,726 2,728 Cash F abject and Balanc e Sheet Data Net property provided by operating activities 3,949 3,969 4,751 5,821 3,670 3,797 3,926 Cash, cash equivalents, and short-term investments 7,972 10,298 9,070 9,807 11,922 8,287 6,853 Total assets 27,561 25,635 23,252 23,215 19,311 13,535 11,560 enormous-term debt 362 569 625 505 505 520 508Total stockholders equity 3,735 4,328 4,047 6,485 6,280 4,694 5,308Profitability Ratios January 28, 2000 February 1, 2002 January 30, 2004 January 28, 2005 February 3, 2006 February 2, 2007 February 1, 2008 Gross Profit Margin 20.7% 17.7% 18.3% 18.4% 17.7% 16.6% 19.1% Operating Profit Margin 9.0% 5.7% 8.5% 8.6% 7.9% 5.3% 5.6% Net Profit Margin 6.6% 4.0% 6.4% 6.1% 6.5% 4.5% 4.8%The chart shows the Profitability Ratios of dingle from 2000 to 2008. In general, from 2000 to 2008, the profit of dingle was quite stable. As we can see, dells strategy is cool it working and makes a lot of gold for dingle e very(prenominal) year. However, there was no remarkable step-up. The net profit margin has been near 5% during Fiscal Years 2000 2008. January 28, 2000 February 1, 2002 January 30, 2004 January 28, 2005 February 3, 2006 February 2, 2007 February 1, 2008 stop on total assets (ROA) 14.4% 9.2% 13.6% 13.0% 15.5% 10.1% 10.7% Return on Stockholders Equity (ROE) 31.4% 26.5% 41.8% 46.5%89.0% 59.7% 78.9% Return on invested capital (ROI) 28.6% 23.9% 38.7% 43.2% 77.1% 52.7% 71.9%The chart indicates ROA, ROE and ROI of dingle from 2000 to 2008. From 2000 to 2008, ROA has been stable because dell built a lot of manufactory. However, ROE and ROI had very impressive join on since 2000. In 2006, ROE r for each oneed the peak 89% and ROI reached the peak 77.1%. It proved that dingle has used the monetary capital invested in its operations and the returns to those investments very effectively. January 28, 2000 February 1, 2002 January 30, 2004 January 28, 2005 February 3, 2006 February 2, 2007 February 1, 2008 Long term debt to capital ratio 0.09 0.10 0.07 0.07 0.13 0.12 0.09 Long term debt to equity ratio 0.10 0.11 0.08 0.08 0.15 0.13 0.10The chart shows 2 leverage ratios of dingle Long-term debt to capital ratio and long term debt to equity ratio. These ratios are quite important because they greenback creditworthiness and balance sheet strength. As we can see, all the ratios were very low, infra 0.2 which had very good effect to the creditworthiness and balance sheet strength. Besides that, they could too help dingle to borrow additional funds if needed.In conclusionThrough the analysis, we can say that Dells strategy is still effective. It helps Dell to earn a lot of money every year. However, although Dell has gained profit during Fiscal Years 2000 2008, there was no remarkable increase in profit and it seemed to be stable. Dells strategy has been very successful when it helped the company to control the cost very well and manoeuvre the company very smoothly.5. What does a drudgery analysis reveal about the attractiveness of Dells situation in 2008?Dell SWOT analysisStrengths* Worlds largest PC cleric.* One of the best cognize brands in the world.* First PC maker to unfold next-day, on-site harvest-tide service. * Direct to customer business model. Uses latest technology. * Dell has remarkably low operating cost relative to revenue because it cuts out the retailer and supplies nowadays to the customers. * Dells Direct Model approach enables the company to offer direct relationships with customers such as corporate and institutional customers. * Dells direct customer allows it to provide top- nonch customer service before and after the sale. * Each Dell system is built to order to meet each customers specifications. Reliability, Service and Support. * Dell boasts a very economic procurement, manufacturing and distribution process allowing it to offer customers powerful systems at matched prices.* Dell is able to introduce the latest relevant technology compared to companies using the substantiative d istribution channels. * Dell is non a manufacturer Components are make by the suppliers and Dell assembles the computers using relatively cheap labor. The finished goods are then dropped off with the customer by courier. Dell has total dominance of the supply chain. * Dell turns over inventory for an average of every sextet days, keeping inventory costs low. * Dell is enhancing and broadening the fundamental competitive advantages of the direct model by increasingly applying the efficiencies of the Internet to its entire business. weakness* A huge range of products and components from many suppliers from various countries. * Computer maker and not the computer manufacturer, making DELL unable to switch supply. * Dell lacked solid dealer / retailer relationships.* No propriety technology* non attracting the college student segment of the trade. Dells sales revenue from educational institutions such as colleges only accounts for a merely 5% of the total. * Dells focus on the cor porate and government institutional customers someway affected its ability to form relationshipswith educational institutions. * For home users, Dells direct method and customization approach posed problems. For one, customers cannot go to retailers because Dell does not use distribution channels. * Customers just cant buy Dell as simply as other brands because each product is custom-made according to their specifications and this might take days to finish. Opportunities* Diversification strategy by introducing many new products to its range. * Personal computers are becoming a indispensability now more than ever. Customers are getting more and more educated about computers. Second-time buyers would most likely avail of Dells custom computers because as their knowledge grows, so do their need to experiment or use some additional computer features. * The internet also provides Dell with greater opportunities since all they have to do now is to visit Dells website to place their order or to get information. * Since Dell does not have retail stores, the online stores would surely make up for its absence. It is also more convenient for customers to shop online than to actually drive and do purchase at a physical store. Threats* Competitive rivalry that exists in the PC marketplace globally. * New entrants to the market pose potential threats.* The threat to become modify is a pulsating reality in a computer business. * Price difference of opinion among brands is getting smaller.* Dells Direct Model attracts customers because it saves cost. Since other companies are able to offer computers at low costs, this could threaten Dells price-conscious growing customer base. * With almost identical prices, price difference is no long-run an issue for a customer. They might choose other brands alternatively of waiting for Dells customized computers. * The growth rate of the computer constancy is also slowing down. Today, Dell has the biggest share of the market. If the demand slows down, the competition go forth become stiffer in the process. Dell has to work doubly hard to discern itself from its substitutes to be able to continue holding a significant market share.= Technological advancement is a double-edge sword. It is an opportunitybut at the like time a threat. Low-cost leadership strategy is no longer an issue to computer companies therefore it is important for Dell to stand out from the rest.6. Which company is competitively strongerDell or Hewlett-Packard? Use the weighted competitive strength assessment methodology shown in Table 4.2 of Chapter 4 to sign your answer.