Value Chain Analysis : The Computer Industry Essay

I am choosing to do my Business Analysis paper on e-commerce. I will explain the importance of it as well as the effects on the global economy. I will discuss the advantages of telecommunications and information technologies in a business versus those businesses without e-commerce. I will also discuss the marketing strategies involved with e-commerce and how it helps businesses. Due to the global nature of internet business, electronic commerce (e-commerce) standards have become a priority on the national and international level. While most traditional businesses are subject to local, state, and national

Dell is a computer corporation recognized for manufacturing computer systems through parts assemble. In 1983, Michael Dell saw an opportunity in using IBM compatible computers for a new assembly line that can be sold to local businesses. The idea as explained by Michael Dell, in one of his interview, is that in the early days of computers' manufacturing, companies had to be able to produce every part of the system. As the industry matured, companies started to focus on single parts and to become specialized in creating items that can be assembled with other parts to prepare a computer. As a result, Dell understood that to have a competitive edge in the market, they needed to

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.

Founded in 1984 by Michael Dell with the aim of building relationships directly with customers. Dell is a premier provider of PC products and services sought by customers worldwide to build their information technology and internet infrastructures. Through its direct business model it designs, manufactures and customises products and services to customer requirements and offers an extensive selection of software and peripherals.

The ‘digital economy’ can be defined as the global network of economic and social activities that are enabled by digital technologies, services and content. Internet commerce, or e-commerce, is one of many aspects of the digital economy. The internet allows consumers to purchase goods and services in a borderless marketplace, whether based locally, interstate or overseas.

Electronic commerce has been there for a long time now, and it is a practice that is practiced by peoples from Germany, France, and the US on a daily basis. Since its inception around 40 years ago, e-commerce has continued to grow as innovations, technologies and a lot of business reverting to the use of the e-commerce. The aspect of buying and selling of goods in the early 1960s was sluggish with the traditional way of mailing of documents being replaced with the Electronic Data Interchange (EDI), which would later pave a way to the electronic commerce. After the e-commerce, however, the practice was not more reliable as it still had many challenges (Tsolis, 2009). For instance, it was not easy for buyers to see products from the comfort of their homes and more so, the methods of accessing the information were limited.

Dell is the most successful company in PC industry of 21st century. It has shown phenomenal growth record over the past decades & listed as America’s third most admired company. Their core strength lies in Direct model offering closer customer interaction and Virtual Integration. This is giving a low cost advantage to Dell and its competitors are not able to imitate this model for all these years.

In 1991, the internet became available for commercial use, which introduced the possibility for what we now know as electronic commerce, or e-commerce. By 2000, “a great number of business companies in the United States and Western Europe represented their services in the World Wide Web” and it was at this time that the e-commerce that we utilize in today’s business world took shape (e-commerce Land, n.d.). “People began to define the term ecommerce as the process of purchasing of available goods and services over the Internet using secure connections and electronic payment services” (e-commerce Land, n.d.). Through continued growth of the internet, brick and mortar stores came to realize that electronic representation would be an

The continuous development of Internet leads to the growth of e-commerce. The electronic commerce is growing constantly due to the continuously increasing number of mobile and online users in the market, primarily the emerging markets. Besides that, the development of the Information Technology (IT), such as the advance of paying processes and the improvements of shipping method also the main reason to cause the growth of electronic commerce (John Ingham, 2015). Most consumers accept e-commerce as their feasible alternative in the purchase of goods and

This enabled strong customer relationships and increased customer satisfaction. One of the characteristics that distinguishes Dell from its other competitors is that Dell provides the facility to customize computers of their choice and taste and deliver the system to the customer as it is. This is the most crucial and critical success factor behind Dell Computers. Dell’s direct to consumer model concept helped them reach above-average returns and remain in business today. Customers have developed a brand-name loyalty to Dell because of their cost efficient differentiation strategy. Their strategic moves for their products created an image for themselves in the market and is the reason for their dominant existence. This enabled them to earn more market share in the industry. The customer segmentation that Dell focuses on is the corporate segment and large businesses form the majority of its clients. This customer segment targeting is more likely a result of its operational strategy and not the other way round. However, with corporate segment customers seeking high performance, reliable, affordable solutions, Dell fits in comfortably. Dell also appeals to those customers who want hands on experience of the latest technology and the idea of customized computers is very appealing. For Dell, it focused on providing superior quality services to its customers through its sales representatives. It also shifted

Electronic commerce or e-commerce is the buying and selling of products and services via the internet. Nowadays the thought of living without e-commerce seems complicated, unfathomable and inconvenience for many. Internet and the virtual companies are changing traditional economic way and making competition ever fiercer than it has ever been in the past.

With the development of society, e-commerce, a new type of business in Marketing emerges. It stands for Electronic Commerce. Rayudu (2009), the author of E-Commerce: E-Business, states that “E-commerce is a selling and transfer process requiring several institutes. It is a systematic and organized network for the exchange of goods between producers and consumers. The Net embraces all those related activities which are indispensable for maintaining a continuous, free and uninterrupted distribution and transfer of goods.” However, both the advantages and disadvantages exist in this new business type. (p. 1)

Value chain analysis, which constitutes the basis of strategic cost management, includes the value creation chain for a corporation, composed of all activities that create value, from the supply of raw materials to the supply of the product to the final consumer. (Yüzbaşıoğlu 2006, 402) In other words, value chain analysis is defined as a strategic tool used to comprehend the competitive advantage of an enterprise, to determine which stage of the value chain may be improved or in which stage the costs may be reduced, and to better apprehend the relationship of the corporation with the suppliers, customers and other enterprises in the sector. . (Blocher et al. 2005, 40).

Jim Riley published study notes about value chain analysis and he teaches that value chain analysis describes the activities that take place in a business and relates these activities to an analysis of the competitive strength of the business. This paper includes comparing and contrasting two articles. The first article is “The 7 Steps of Software Development Case Study-Chapter 1” but the second one is “Value Chain Analysis” by Jim Riley. Also, these two articles will be applied to the company Pep Boys, which I chose to do the value chain analysis to. Since I do not work yet, I chose Pep Boys because my close friend works there as a vice president of marketing.

Another point of view is to take a look at the value chain analysis which helps to identify the most valuable activities of a firm. Wheelen, Hunger, Hoffman, & Bamford (2014). In the case of Electrolux, it would appear that they provide considerable value to the appliance market however; the struggle (as previously mentioned) has been breaking into emerging markets in this case, China. With considerable middle class growth in China, the standard of living is rising exponentially; therefore, a large number of new households will be able to invest in appliances and other household products. The second point in the value chain analysis begs the question of rarity or more succinctly, can resources be acquired by one or limited organizations. Resources which are rare and valuable can provide a temporary competitive advantage. Conversely, when more than a few companies posses the same resource or utilize the same capability, this can lead to competitive parity. Wheelen et al (2014) Therefore, one must ask several questions in order to find rare resources. For example; how many companies own a resource or can perform capability in the same way as Electrolux? And, can a resource be easily bought in the market by rival companies? In the case of Electrolux the rareness component is nonexistent because other companies e.g., LG Electronics, Whirlpool and Haier already have a stronghold in the global market with similar products. Furthermore, China has been known to