Restructuring / Turnaround Strategies Case Study

Dell's Turnaround Strategy

Abstract:
During the late 80s, Michael Dell and his company, Dell Inc., revolutionized the global PC market by the latter’s ‘Dell Direct Business Model’, where it eliminated all kinds of middlemen and directly supplied customized PCs to the customers. For the last two decades, the company continued to be the market leader in the small household PC segment. However, after enjoying the supremacy for two decades since 2005, it started facing competition. The company’s revenue and profit failed to match the expectations. Besides, it had to write off US$ 450 million (mn) for the installation of defective capacitors in its computers and opt for workforce alignment. The analysts were thus,, skeptical about the future of the organization. The company was termed as less innovative than its competitors as it failed to launch innovative products in the market. To be on the growth trajectory again, it planned to enter into the consumer electronics segment. But the analysts were doubtful about the success of Dell’s ‘Direct Business Model’ in the consumer electronics segment. The case deals with Dell’s business model and its success in the consumer electronics segment. It provides a scope for discussing whether the turnaround strategy of Dell would be successful and about the scenario of global PC industry and global consumer electronics market.

Pedagogical Objectives:

• To discuss the idea of ‘Direct Business Model’ which revolutionised the global PC market by eliminating all kinds of middleman and by supplying customised PCs to customers
• To discuss in details about trends and patterns of US and global PC industry
• To discuss the strategy adopted by Dell to become the market leader in household PC segment
• To discuss how the company’s market share was eroded and the company started to face the heat due to aggressive marketing strategy of its competitors
• To discuss the company’s decision to enter into consumer electronics segment, strategy adopted by the company and apprehension among the analysts
• To discuss whether the company’s decision to enter into the consumer electronics market will help the company to turnaround or not.

Keywords : Dell Inc; Apple; Hewlett Packard; Direct business model; Workforce alignment; Consumer electronics; Original equipment manufacturer; Fortune 500; Restructuring / Turnaround Strategies Case Study; Media-PC (personal computer); Microsoft; Wintel; Media Centre System; Macintosh; Customer relationship management; IBM