Dell's Foray into Consumer Electronics

            
 
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Case Details:

Case Code : BSTR253
Case Length : 21 Pages
Period : 2003-2007
Pub Date : 2007
Teaching Note :Not Available
Organization : Dell
Themes: Business Strategy
Industry : Information Technology and Related Services
Countries : US

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.



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Excerpts

Dell Enters the Consumer Electronics Space

Dell entered the CE market in late 2003 as a result of several factors. According to the official press release, Dell planned to sell PC-centric products - products that were to be used in association with PCs - because it felt that they were quite similar to its existing product portfolio. "We buy the most flat-panel monitors on the planet, so adding a tuner - which is not very expensive - and building flat-panel products (television) is a natural product extension for us,"said Rollins. In addition, there were other factors that might have weighed on Dell in its decision to enter a highly competitive market. In the early 2000s, corporate spending on information technology in the US saw a decline...

Business Strategy | Case Study in Management, Operations, Strategies, Business Strategy, Case Studies

Dell Proposes, Market Disposes?

As anticipated, Dell's entry into CE resulted in falling prices in the market. However, the "Dell effect"failed to help the company garner a significant market share. "They're putting pressure on the rest of the industry to respond, but they're not picking up the sales. One wonders whether the model they have put together is transferable outside of the PC industry,"said Joe D'Elia, a research director for iSuppli, a research and consulting firm that focused on the electronics supply chain...

Dell's Pc Business Faltering

Unlike in the 1990s, when the Dell stock gave record returns, its share price in the mid 2000s did not perform well. In 2005, the company faced stiff competition in the PC business. Lenovo (which included IBM's PC division), and a resurgent HP made rapid inroads into Dell's territory.

Outlook

Despite the problems and the restructuring, Dell did not completely abandon its CE business. It refuted press reports that claimed that it had exited the CE business. "Some press (reports) misinterpreted our move as Dell backing off the consumer business,"said Frank Muehleman, vice president of Dell's small-business unit. By 2003 end, Dell had managed to become the fourth largest retailer of CE products in the US after Best Buy, Wal-Mart, and Circuit City. It had achieved this position, in no small measure, by selling other brand products at the online store for CE (Refer Exhibit X for some CE brands sold at dell.com)...

In this period, the company opened a subsidiary in the UK. In 1988, Dell Corp. went public with an IPO of 3.5 million shares at US$ 8.50 each. In 1990, in order to serve the European, Middle Eastern, and African markets, Dell Corp. opened a manufacturing center at Limerick, Ireland. In 1991, it introduced the Latitude, a notebook computer...

Exhibits

Exhibit I: Break-up of Dell's Revenues in Terms of Business Segment and Geography
Exhibit II: Electronics Products Launched by IT Companies
Exhibit III: The Dell Digital Jukebox
Exhibit IV: Dell LCD TV
Exhibit V: Reasons for Not Buying Online
Exhibit VI: Top U.S. Consumer Electronics Retailers (Ranked by 2004 estimated CE sales in USD million)
Exhibit VII: Dell Stock's Performance (Between 2002 and 2007)
Exhibit VIII: Dell's Financials
Exhibit IX: Dell and the Competition
Exhibit X: Some Consumer Electronics Brands Sold at Dell.com ( As of January 2007)


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