Environmental Analysis: Dell Corporation

Focusing on three categories, the remote environment, the industry environment, and the operating environment, will help to identify key macroeconomic variables that affect the computer industry environment. Discussion will then turn to the opportunities and challenges facing Dell , the leading computer manufacturer within its operating environment. Key Macroeconomic Variables Remote Environment The computer Industry has experienced a slight decrease In profits within the last few years. In the first quarter of 2007, share declined from about 18% to approximately 15% (Unknown, 2008).

The decrease In profits is due to the recent economic downturn resulting in a decrease in consumer spending. Strategy to overcome the slow economy is to produce higher quantities of servers at lower operating costs, then sell these goods Just above cost to China, India, and other third world countries in an effort to increase their global market share. Dell currently has a growing presence in the fast-growing markets of India and China. With the global expansion of the Internet market, Dell knows that maintaining success in the global market is possible through the use of e-business.

With presence In the global market, more business and production facilities will be penned worldwide to Increase the globalization system, and meet the global demand for years to come. Industry Environment The competition wealth the computer Industry Is high between the market leaders within the industry. With a lack of differentiation of products, barriers to enter this industry are high because of the market control the industry leaders maintain, and the high start up cost associated with these products.

The bargaining power of suppliers is also high because suppliers are few and are heavily relied on. The bargaining power of customers is high as well because of the availability of many gig quality computer products. Consumers perceive the products as similar so switching from one company to another is relatively easy. Therefore, the availability of supplementary products is high, and the threat of substitutes is low because they are virtually nonexistent. Dell has been able to maintain It success over the competition by employing a direct marketing strategy. Imitators have tried to duplicate this marketing strategy but with limited success. This direct marketing strategy has allowed Dell to be competitive with its pricing by waiting for orders to be placed inventory costs. Suggest obstacle with this strategy is the expansion of their products in the other areas of the technology industry and gaining the trust of consumers so they can increase their market share within that market. Operating Environment Within the computer industry, main competitors are Hewlett- Packard, Gateway, MM, and Compact.

Consumers view Dell computers as having quality value for the price, and even though their competitors may be more expensive, they still offer a quality brand. Dell has innovated the way consumers purchase their computers because the ordering is done online which offers nonviolence and minimizes inventory. In order for Dell to keep its cost down on materials, Dell incorporated a system when ordering materials, which are broken down into two categories, product type and geography.

Product type deals with Dell wanting to select the supplier that specializes in the product they need for a particular computer, and the geography category focuses on minimizing the freight cost on shipment of materials. In order for Dell to remain successful within the operating environment, Dell will need to implement several changes so that it can further develop its operating system. By reducing costs, improving customer service, and having more control over its suppliers, Dell will lead the technology industry by producing this technology at a lower cost forcing the competition to make changes in order to remain competitive.

Gross Domestic Product and Inflation GAP Impact on the Industry GAP is defined as the total market value of all final goods and services produced within a country (McConnell & Bruce, 2004). GAP is used to measure the size of oneГ? economy, and this is the strongest influencing factor affecting the growth of an industry within that economy. A growing economy occurs when the money applies and consumer spending increases resulting in a higher GAP. A slowing economy occurs when the money supply and consumer spending decrease dramatically resulting in a lower GAP.

When the economy slows down, higher prices tend to develop which leads to inflation. Thus, changes in GAP impact the economic environment and the industry of a business, which leads to challenges and opportunities that need to be dealt with so one can remain competitive in the business market. According to preliminary estimates released by the Bureau of Economic Analysis, the real GAP fourth quarter 2007 results increased at an annual rate of 0. % (BEA, 2008). Estimates of GAP by Industry showed GAP growth declined in the private goods-producing sector to 0. % in 2006, down from 1. 3% in 2005. The computer industry contributed 0. 18% to the fourth-quarter growth in real GAP after contributing 0. 28% to the third-quarter growth. The domestic profits of financial corporations decreased $32. 5 billion in the third quarter, from an increase of $52. 7 billion in the second quarter of 2007 (BEA, 2008). Inflation Impact on the Industry As U. S. Imports have increased in comparison with its exports, the import prices of oil or example, have increased which impacts the economies inflation.