Dell in India – Business and Marketing Strategy

Business Strategy – Strategic Marketing

Dell’s Entry in India

Dell International started in India about seven or eight years back by opening a customer contact center at Bangalore in 2001. In 2003, the second contact center was opened at Hyderabad. The company operates its services from four centers based at Bangalore, Hyderabad, Chandigarh and Gurgoan. Dell started in Bangalore providing customer support to English speaking countries and later also began providing technical support, procurement of financial back office and Knowledge process outsourcing. After the U.S., Dell India is the second biggest centre with 13,000 employees. The strategic importance of India to Dell is evident from the fact that India was one among three locations (the other two being US and UK) where Dell’s Latitude E series and Precision notebooks were launched.

Manufacturing – The first Dell ‘Made in India’ desktop

“The Chennai operation reaffirms the strategic importance of India to Dell, providing significant impetus to our growth plans and prospects here, where we are already among the fastest growing computer systems suppliers.“– R Anandan, VP & GM, Dell India

In July 2007, Dell began production at its new manufacturing facility in Chennai (Dell’s third manufacturing location in Asia-Pacific and Japan region and eighth overall). The Sriperumbudur plant (50-acre site with a planned five-year investment of about US$ 30 million) was chosen for manufacturing in September 2006. The planned initial capacity was around 400,000 desktop computers per year. The company has doubled its production capacity since then from 400,000 in 2007 to the 1 million units in June 2008. Infosys, one of Dell’s largest customers in the country, was presented with the first ‘Made in India’ desktop computer system.

Dell’s Market Share in India

“India is the fastest growing market for Dell worldwide and laptops have emerged as the fastest growing form factor.” – Rajiv Ahuja, Director Communications of Dell APACS

“By 2015, the number of PCs in India will grow 10 times and in the last year our personal computer sales in India grew by 99% compared to the previous year” ” – Michael Dell.

“We have gone from zero to 10 per cent share in the government segment and we’re the largest player in the large enterprise space” – Sameer Garde, India General Manager for Dell.

In March 2007, Dell was roughly a half a billion dollar enterprise in India and has expectations to touch revenue of $1 billion within the next year. (Within three years of launching its products in the Indian market, Dell crossed the $1-billion sales mark in India.) In 2008, Dell ranked third in the Indian market with a 7.6 percent market share compared to about 4 percent market share two years ago. In Q2, 2008, Dell had a 16% share in the Notebooks segment and 6% share in Desktops segment as compared to 8% and 4.5% share in Q2, 2007 respectively.

Dell’s new retail strategy and Direct-only model

Dell’s innovative direct- sales model with good sales growth had been successful until the mid-2000s when the company’s profits and share prices began dropping considerably. Dell was selling PCs directly to customers by phone and online. On May 24, 2007, Dell disclosed its plans to sell PCs in the US, Canada, and Puerto Rico through Wal-Mart and Sam’s Club retail stores. This announcement came soon after Michael Dell returned as CEO replacing Rollins.

In India, as part of the retail initiative, Dell tied up with Tata Croma (the Tata-owned electronics retail chain) in July 2008 and with select Staples stores. By the end of 2008, Dell planned to increase its presence to100 Indian cities by increasing its channel partners. In October 2008, Dell announced the opening of the first Dell exclusive stores in India at New Delhi and Coimbatore. Dell also tied up with 600 systems integrators all over the country who could take orders on its behalf.

Dell’s New Marketing Strategy in India

Dell is targeting the small and medium businesses (SMB) in smaller towns in India as its main driver for growth as the company believes this market sector is growing rapidly and is not exposed to global shocks making it a much more stable market. Dell India is focusing on simplification of the business processes (basic areas to improve cost efficiencies) as part of its new rollout plan. It has even tied up with Tally to offer accounting solutions online. For an initial period, customers get a Tally subscription free along with select Dell Vostro systems. Dell has also increased its SMB team to 200 and expanded its presence to about 600 tier-II and tier-III cities. Dell will also introduce a portal titled “Dell 360” (with discussion forums) where SMBs can educate themselves on benefits of IT to their businesses.

Dell’s New Advertising Campaign for SMBs

First launched in India, Dell’s new advertising campaign is titled – “Take Your Own Path”. The campaign targets Indian SMBs with a new range of laptops.

Testimonial Advertising instead of Transactional

In December 2007, Dell partnered with WPP (after withdrawing its advertising responsibilities from over 800 different agencies worldwide) which launched its own specialist unit Enfatico with Dell as its only customer. Enfatico’s first international campaign for Dell targeted SMBs featured successful Indian faces (like P Rajendran – NIIT’s co-founder and COO, Raman Roy – CEO of Quattro among others with their testimonials) and aimed at establishing an emotional connect with brand Dell.

Related Reading:
Download PDF file on:

Dell’s Turnaround Strategy in 2008

Business Management Article

Dell’s new retail business and supply chain approach

Dell is taking steps to turnaround its business and recovering from losses and decline in its profit margins. Dell had first announced cost-cutting measures as early as May last year. In 2007, Dell changed its direct-sales model to offer computers in retail outlets, after losing the title of top PC maker to Hewlett-Packard Co (HP). Dell is now beginning to supply similar products to retailers like Wal-Mart, but as a smaller percentage of its business. Dell is currently the second largest computer retailer in the world behind HP.

Dell’s well-established direct-sales model allowed buyers to custom-build and purchase computers online or by phone. Customers could choose custom PCs (almost 500,000 configuration options or combinations that were assembled) direct from its factory. On the other hand, competitor HP also sold configure-to-order models but also supplied fixed-configuration PCs direct to retail.

Dell’s new retail business is not profitable as of now. So Dell aims to make its retail computer business cost-effective by aligning (reducing) manufacturing costs (cost of goods sold) with its competitors. But this will be challenging since Dell does not have the same volume in retail globally (as competitors), and therefore a smaller fixed base to spread costs. Secondly, Dell’s supply chain had not exactly been designed for mass distribution. HP uses a diversified supply chain unlike Dell’s one supply chain approach. [Download Case Study on Dell’s Supply Chain Management Strategy
(pdf file)]

The return of Michael Dell and the Turnaround Plan

Michael Dell, the founder of Dell returned as the CEO in January 2007, and the company has a turnaround plan which it promises will yield $3 billion in annual savings over the next three or four years. Dell’s plans include depending more on resellers and contract manufacturers to cut costs and boost sales of which the consumer personal computer business is expected to contribute more than the current 15 percent of total revenue. (At HP, consumer sales of PCs and printers account for about one-third of revenue. Industry-wide sales of consumer PCs are growing at about twice the rate of PCs for businesses.) Contract manufacturers who manage large volumes of orders for big PC makers like HP will be given more work. But apart from concentrating on designing and manufacturing to cut costs, supply chain and logistics (distributing PCs for retailers) are key focus areas as scale is less of an issue. The cost-cutting exercise would also include restructuring of its logistics network and outsourcing more of its manufacturing operations. Dell also announced its intentions to install a logistics hub in Dubai to cater to the emerging market regions and also into the east African regions. Developed economies like the US (though the biggest) are the slow in growth. Last year, the EMEA region made up less that 25 per cent of its total revenues (70 per cent growth) and is estimated to be $61 billion in 2008.

Dell’s Turnaround Plan:

Cutting costs: Cutting costs is very important because competitors like HP use the money from profitable printers operations and take more market risk with designing innovative products. Moreover the prices of computers keep going down. One can buy a Dell laptop now for less than $500.

Moving away from computers internally and outsourcing more of its manufacturing operations: Dell has manufacturing facilities in Texas, North Carolina, Tennessee, and in Malaysia, Penang, China and Poland. Its manufacturing operation in Austin, Texas will shut down. Also HP, IBM and Sun Microsystems already have long-standing partnerships with outside manufacturing partners. These partners offer customers bundles of computer hardware, software and services. Dell on the other hand is relatively a new player in this field and has traditionally depended on its own businesses to design and make computers.

Moving into indirect sales channels like computer resellers and retailers.

Introducing more products: New product introduction is vital since major PC manufacturers realistically only make money in the first three months (or six in some cases) of a new product.

Analysts predict that it will take Dell one more year for its PCs to be as cost-effective as its competitors and stage a recovery.

Alarm Bell for Dell

Business Turnaround Strategy – February 26, 2009

“Within our business, we’re being very disciplined in managing costs, generating profitability and cash flow, and investing in ways that separate Dell from others today and when the economy inevitably improves.”
– Founder and Chief Executive, Michael S. Dell.

In February 2009, Dell Computers announced that it would strive to cut an additional $1 billion a year from the company’s costs by 2011. Earlier in 2007, Michael Dell, had returned as CEO and began an aggressive cost-cutting program to turnaround the company. To counter the economic downturn,
Dell’s strategy was to try and keep profits high even if it meant missing out on some sales. The company also wanted to increase its services and software businesses by making
acquisitions. Dell is also looking at reducing the cost of its components. The average cost per computer has fallen by 5% in the past year.

However, Dell is facing the heat as businesses and other customers are sharply cutting spend in technology. Sales in all of its major hardware businesses fell (Dell’s server, software and services businesses declined as well, while storage sales rose). Other leading companies in the PC business like
Hewlett-Packard, reported a drop in PC sales during (19% drop in its fourth quarter revenues of $8.8 billion). Dell reported a 48 percent drop in net income of $351 million from $679 million for the same period last year. Dell’s revenue in the quarter ended Jan. 30, dropped by 16% to $13.4 billion from the $16 billion reported last year. Since 2005, this is Dell’s lowest total and the lowest fourth-quarter profit since 2002.

Dell Sales drop across major business areas

Foreign Retailers in the U.S.

Fashion Retailing- March, 2009

How are foreign retailers like Zara, Hennes and Mauritz (H&M), Mango, Uniqlo, Kira Plastinina and Topshop performing in the U.S.? What are their expansion plans and their entry year in the U.S.? Can they compete with The Gap, the U.S. local retail chain which has more than 3,000 stores and has been a preferred shopping destination for U.S. customers. Some of them have defied global recession and are faring well. Here’s a snapshot:

Foreign Retailers in the U.S.

Future expansion plans of foreign retailers in the U.S.

Keywords: Retailing, Zara, H&M, Hennes and Mauritz, Mango, Uniqlo, Kira Plastinina, Topshop

GlaxoSmithKline (GSK) and Dual Headquarters in London and US

January 14, 2008 – Business Management Article

Since its formation in 2001, GlaxoSmithKline (GSK), the pharmaceutical giant, for the first time will run from its London headquarters. GSK will continue to operate from its dual headquarters, in London and Philadelphia. GSK’s CEO, Andrew Witty (who joined Glaxo UK in 1985) has decided to remain in London, partly for family reasons. CEO Witty will travel to the U.S. regularly. It is believed that the highly and increasingly regulated U.S. market offers less lucrative returns for large pharmaceutical firms. Big pharma companies are looking to expand in other regions like the Asia-Pacific region. Perhaps, GSK’s move is indicative of this growing belief which is one of UK’s biggest businesses. GSK UK business is worth about £76 billion.

GSK Struggling

Despite annual sales of £20 billion and one of the strongest drug pipelines in the industry, GSK is struggling. Sales of GSK’s second biggest selling product Avandia (diabetes drug) collapsed, after the drug was linked to a significantly increased risk of heart attack last year. GSK is also currently undertaking a £1.5 billion cost-cutting drive. This cost-cutting plan includes cutting workforce by at least 5,000 jobs from 102,000, closing a few sites from its 99 sites and outsourcing drug manufacturing partly.

GlaxoSmithKline GSK, Pharmaceutical Industry

HP’s business strategy in a challenging marketplace

Business Strategy – India – November 2008

How is HP dealing with a challenging economy?

Leading tech companies (including Intel and Cisco) believe that given the constraints of the economy today and the likely global recession, customer spending on technology will decline rapidly impacting both consumer and corporate purchases. Declining sales figures in October and November (2008) reflected on this fact. Hewlett Packard (HP) on the other hand has delivered a contrastingly optimistic forecast and expects significant growth with respect to the negative outlook for the coming quarter. How is it able to do so? A look at some components of HP’s business strategy:

HP and its Business Strategy

Wide Variety

H.P. offers a wide variety of products to consumer and corporate customers which means that strength in some businesses can offset weakness in others.

Repeat/Recurring Sales and Long-term deals

HP’s stable revenues come from a large amount of recurring sales – about 40 percent (65 percent of its profits) from long-term deals.

Declining sales of major printer and PC products

At HP, printers are often sold at a loss. Fewer printers sold imply higher HP profits. On the other hand, PC losses have a marginal effect on H.P.’s overall profits.

What the CEO and Analysts say?

Mark Hurd, Chairman and CEO of HP remarked that HP’s ability to execute in a challenging marketplace helps it to differentiate against its competitors and therefore it is able to increase its market share and earnings. Other analysts opine that HP is a really well-run company perticularly from a cost perspective.

Cutting costs and layoffs

The company was aggressively cutting costs and even began laying off workers (around twenty-five thousand) before the declining economy had its effect on the tech industry.

HP is optimistic, but will it be able to match its 5 percent (approx.) growth in recent quarters. Given the economic gloom, at least it has done well competitively and probably will emerge from the current economic environment as an even stronger force.

Related Articles

Hewlett-Packard’s retail channel advantage over Dell

February 21, 2008 – Business Management Article

HP’s retail channel strategy is working

Hewlett-Packard (HP), the world’s largest personal-computer maker (based in the Palo Alto, California), beat Dell in PC sales for the sixth straight quarter and posted a fiscal first-quarter profit (February, 2008). The results which topped analysts’ estimates on orders for PCs, servers and storage show that HP’s retail channel strategy (to rely on a network of retailers) is working. The option to view and touch the machines before buying is helping HP win customers. Furthermore, HP’s PCs and notebooks are sold in about 110,000 stores; 10 times as many stores as Dell. Dell has its PCs selling in more than 10,000 stores. Even in terms of desktop and notebook models offered through retailers, HP offers twice as many as Dell does. Shoppers, therefore have more choice. Last year, Dell discarded its much renowned direct-sales strategy and began forging partnerships with retailers in an attempt to win back shoppers.

Dell’s unique ‘direct build-to-order’ sales model?

Dell had been following its unique ‘direct build-to-order’ sales model for more than 20 years. Dell’s customers could plan their own configuration and place orders directly with the company via the phone or its Web site. Over the years, Dell’s supply chain efficiencies and direct sales gave it a competitive advantage. In 2006 however, Dell faced several problems. Many customers complained about long delays in supplies. Increasing discontent of customers led to a slowdown in sales. Consequently, Dell lost its market leadership to Hewlett-Packard Co. (HP). Dell will have to bear additional costs with its foray into retail distribution thereby minimizing its cost advantage. Besides, profit margins of Dell will drop further since it will have to offer incentives to compete with HP in retail stores. Read full-text of this case study on Dell’s Supply Chain Management Strategy.

Strong order book lifts profit at Hewlett-Packard

HP’s first-quarter net income increased 38 percent to $2.13 billion from $1.55 billion. Chief executive Mark Hurd who succeeded Carly Fiorina in April 2005 has topped his profit forecasts in each quarter since taking over. This only underscores the huge challenge Michael Dell has in turning around Dell.

First-quarter sales increased 13 percent to $28.5 billion. PCs account for about a third of Hewlett-Packard’s sales and it benefited from a decline in the cost of parts for PCs (memory prices fell by almost 45 percent last quarter). Even concerns about reduced U.S. spending were partly offset as Hewlett-Packard gets more than two-thirds of its revenue from fastest-growing economies outside the U.S. Countries like Brazil, Russia, India and China account for approximately 9 percent of the HP’s sales.

Related Stories:
Is Dell’s Retail Strategy paying off?
HP and Green Environment Initiative
Lenovo new European production facility
Dell gets serious about storage services

keywords: Computers, Dell, HP, PC Manufacturing, Retailing

IBM acquires NIT, targets small business sales

January 18, 2008 – Business Management Article

IBM and importance of small and medium businesses

Out of IBM’s total sales, Small and medium business (SMB) revenues account for about 19%. In the fourth quarter 2007, IBM reported that SMB revenues increased by 11% to $5.4 billion. Overall, IBM reported that fourth quarter revenues increased 10% year-over-year to $28.9 billion. Michael Rodin, GM for IBM’s Lotus Notes unit said that, “Small businesses need superior collaboration technology as much as large companies do.”

IBM’s second announced acquisition in 2008

With sales to small businesses becoming increasingly important to IBM, the company announced that it had made its second acquisition of 2008. IBM acquired Toronto-based Net Integration Technologies (NIT). NIT is a developer of an all-in-one business server aimed at small- and mid-sized companies. Financial terms of the deal were not disclosed. IBM expects to close the acquisition in the first quarter of 2008.

Nitix, NIT’s small all-in-one business server, (Linux based system ) is for companies with little or no in-house IT support. It includes Lotus Notes e-mail, file management, directory services, back up and recovery tools, and optional business applications. NIT’s mainly sells to small business environment customers (small- and mid-sized companies) like auto dealerships, law offices, real estate agency branch offices, and others.

IBM recently acquired XIV Ltd., a Tel Aviv-based manufacturer of high-performance digital storage systems earlier this month. Last year, IBM had also acquired Cognos, a Canadian developer of business intelligence software in a $5 billion deal. In 2007, IBM made nine acquisitions.

IBM, Mergers and Acquisitions, small and medium businesses, Net Integration Technologies (NIT)

Business Restructuring at L&T

August, 2009 – Business Strategy, Strategic Management Article

Larsen and Toubro (L&T), the engineering and construction giant wants to reposition itself and be a more focused value-added engineering company. L&T is a USD 8.5 billion company and has 12 operating companies and three subsidiaries. The company was mainly into engineering, procurement and construction segments. It also has a large exposure to commodity businesses such as cement and ready-mix concrete. In the year 2000, L&T began implementing its business restructuring exercise with its first two five year plans. The restructuring plans had set a target to reach a business volume of Rs 35,000 crore annually which the company achieved and exceeded by 15-20%. As per the restructuring plans, L&T had divested its cement business in favour of the Aditya Birla Group and its ready-mix concrete business in favour of Lafarge SA. The third five-year plan of the company will be executed from 2010 to 2015.

L&T’s operating divisions

  • Engineering & Construction Projects (E&C)
  • Heavy Engineering (HED)
  • Engineering Construction & Contracts (ECC)
  • Electrical & Electronics (EBG)
  • Machinery & Industrial Products (MIPD)
  • Information Technology & Engineering Services

As part of its Business restructuring exercise L&T plans to:

  • Revise the status of each of its 12 operating companies, depending on financial performance, size and strength. A threshold value of Rs 5,000 crore has been fixed for identifying size. Only a company having a certain size and strength will be called a “L&T-promoted company”.
  • Executive vice presidents running operating companies will be upgraded to senior VPs based on performance.
  • A succession plan, with chairman A M Naik retiring in September 2012.

In August 2009, L&T had announced an internal restructuring exercise wherein it planned to form a new entity within the company to cater to the growing opportunities from the railway sector. The new entity was to be formed from L&T’s existing arms which were currently involved in railway work, including the manufacturing, design and marketing arms. The company had also announced plans to enter the general insurance business.

Keywords: L&T, Business Restructuring, engineering and construction

McDonald’s International Innovations

July, 2009 – Strategic Management, Innovation Article

McDonald’s, the fast-food retailing giant has a proven formula for doing well in a recession – courting consumers globally by targeting local tastes with global menus. McDonald’s has expanded its global appeal which has resulted in good results, even though almost every type of industry is seeing widespread sales dips and tougher times.

While still strong in the United States, McDonald’s sales growth has dipped but has been saved by strong international sales. More than half of the McDonald’s total sales have come from abroad since the late ’90s. In 2008, of the total revenues of $23.5 billion, sales abroad accounted for more than 60%. McDonald’s did particularly well in Europe where even the analysts were not expecting good results. McDonald’s has managed to improve its image in France where earlier it was traditionally met with disdain and seen as a symbol of global capitalism. The company also did well in the U.K. which is seen as a tough market with strong competition and the most skeptical customer base. The company’s sales also rose in Asia/Pacific, Middle East and Africa segment.

McDonald's International Innovations

Download Case Study PDF

Download Management Case Study on McDonald’s – Business Strategy in India
17 pages, PDF file

Keywords: McDonald’s, fast-food retailing, global menus, Innovation, globalization, adapting to local tastes, International expansion strategy
«‹ 5 6 7 8›»