Doing Business In Silicon Valley Case Study

Dell uses a just in time order fulfillment policy and accurate forecasting of sales to minimize inventories. This allowed Dell to hold inventory of finished products far below levels of their competitors (10-20% compared to 50-70% industry level) and furthermore allowed them to quickly implement changes to their product lines as new technologies became available. This quick inventory turnover also allowed Dell to retain more capital. Finally, this policy enabled Dell to respond immediately to technological progress in components and deliver state of the art new finished products (e.g. Pc’s holding the newest Pentium microprocessors) while competitors

For instance (ceteris paribus), if the transportation of the HP products were air shipped, and the lead time passed from four and a half weeks to three days, logically stock levels would decrease. The same would happen if we reduce the time between orders or the level of satisfaction that we want to assurance to our customers.

The product chosen for the decline in consumer appeal is "a personal computer" (PC). This product is chosen because its sales and revenues are overall decreasing in the US market. Consumers are losing interest in using PC, due to obsolesce. PC is a technological product in which innovation and advance technology play an important role. New products are coming in the market with latest technological

The PC industry has started to develop fast in the 80 's when IBM launched its first PC series and later on when numerous small companies entered the market. PC is a new product and companies had to create the demand to it from the scratch.

• At the beginning life cycle (ramp-up) of product, the cost of stock out would be high because for every order lost would not only result in lost in revenue but also future revenue. The theory is the customers tend to buy similar product and/or brand to keep consistency. In addition, it takes over four life cycle of product before that customer returns to HP.

With time, the PC continued to evolve and newer models offered better speed, color screens, more memory and larger hard drives. Further technical evolution continued to deliver higher speeds, larger storage capacity both internal and external. In addition to the hardware progression, the PC world continued to see progress with operating system solutions and advanced software catering to both large and small businesses as well as the home owner.

The large capital requirements to enter the computer industry combined with established brand identities of the current incumbents make barriers to entry high, not to mention the economies of scale and distribution channels that incumbents enjoy which make entry barriers even higher. The current PC incumbents enjoy demand-side benefit of scale in the business sector where PC buyers prefer to buy products from large trusted companies, raising the level of entry barriers.

Dell Computer Corporation was founded in 1984 by Michael Dell. From the early 1990s until the mid-2000s, Dell was ranked as a PC market leader relying on their distinctive marketing pattern “Direct Model” which undertook direct communication with customers and provided customized products. Recently, the PC industry is facing inconceivable worldwide competition, and Dell is gradually losing their competitive advantages by using its direct model in critical business segments. The company is facing shrinkage of growth, increasing competition, declining quality of customer service, and limitation of expansion. These issues have an enormous impact on Dell’s position as a technological giant in the PC industry.

• DELL experimented with retail channel in 1990, resulting in brisk sales, but lower margins, resulting in retail losses, in 1993, DELL withdrew in 1994.

The PC industry is highly competitive and constantly changing as technology evolves and customer needs change. Some of the top competitors in the PC industry are IBM, Hewlett-Packard, Dell and Apple. Theses rivals are constantly jockeying for the top competitor’s position. They compete in prices, product innovation, advertising, etc.

In the commercial environment Apple are known not only for their innovative products: they are also known for their highly effective inventory control. The system utilized by the firm means that at any point in time there is a minimal amount of capital tied up in the inventory, holding only sufficient inventory to support sales for five days. The ability of the firm, to operate consistently in this manner without suffering significant 'stockouts', especially when the demand for the products does not remain the same through the year, is a credit to the organization and ability to adapt to the demand, indicating a strong understanding of the way inventory needs vary. To appreciate the way this may occur it is possible to look at the firm and examine the way inventory is used, assessing the level of seasonality and looking at the stock management in this context.

. The first month, sales of Pc’s Limited was $180,000 and increased to $265,000 in the second month. After a full year, sales of PC Limited was $6 million and the number of computers sold every month was 1,000 units which other companies took many year to reach it. In the computer boom of the late 1980s and early 1990s, his company developed significantly and become the largest PC maker, passing Compaq Computer. Dell was the youngest CEO of a Fortune 500 company when he was 26 years old.

Although both companies have diversified into other industries, PC industry is still their most important source of revenue. For years, these two giants are battling for lead in PC market. When measured by market share, HP has taken place of Dell as No.1 seller in PC market since 2007 (FIGURE 1). When measured by revenue, HP also wins over Dell for almost five years (FIGURE 2). Also, Acer grew rapidly in market share partly because of its merger with Gateway in 2007 (Einhorn 2007), and almost matched Dell in 2009.

2.Successful strategic acquisitions: In 2002 HP acquire the Compaq and become the largest PC manufacturer by replacing the Dell. In November of 2009, Hewlett Packard announced that it had reached an agreement to acquire 3Com, a provider of computer network equipment, for $2.7 billion in a deal that H.P. plans as a the beginning of an assault on the market leader in networking, Cisco Systems. Computer networking is a

Price had never been this low where a desktop costs only $499, whereas laptops are hovering around $1100. Yet do not forget the $500 Apple mini sub compact laptop or the Apple iBook laptop that sells for $650, and the stripped down $400 after rebate laptops companies like Gateway and eMachine are flooding the market with to make money on volume of sales instead of a high price margin. The problem is even if the price of PCs plummets the effect is not felt immediately, because people do not rush to change their PC despite the fact they are getting it cheaper, which means the PC turnover rate is low like most durable goods. That might be what is contributing to the declining of prices, as the assumption of the manufacturers might be that if the price goes low enough people might want to change their computer to avail themselves the latest add-ons. Even the add-ons themselves seem to have reached their zenith some time ago and the latest most alluring gadget that came into existence was CD/DVD RW and every reasonably priced desktop or laptop is equipped with it. However, it does not mean the makers of PCs are not coming up with new functionality, add-ons, and price reductions to woo buyers. The other recent addition was Wi Fi that got boost from the introduction of Intel 's Centrino mobile technology chip and it had added a lot to the mobility of laptops, which can access the Internet wherever hot spots are available. Other than that, the overall performance of PCs despite