1)

Given the case of Dells successful push through the industry of personal computers, the

Porters five forces model is put to great effect. Porters five forces model consists of: a) Rivalry among competitive firms b) Potential entry of new competitors c) Potential development of substitute products d) Bargaining power of suppliers e) Bargaining power of consumers.

Present at each industry, competition is just about the most commonly found force. Competitive forces in each industry bring about rivalries among the players who compete vigorously for market share and profitability. With regards to Porters Five Forces model, during the 1990s the personal computer industry was relatively favourable/attractive for firms to enter as evidenced by the profitability of the industry. Brand loyalty and economies of scale were the major barriers to entry. Power of suppliers was relatively high considering that only Intel and Microsoft was the major suppliers at the time. Intel for microprocessor and Microsoft for software programs such

as office. These companies were able to charge higher prices for their products and services; however industry players were still able to attain margins. Dell was able to exhibit the power of buyers when it made its prices lower than the norm in the industry through their cost leadership strategy and direct selling. In the case, it was observed that Dell had the lowest cost structure of all the major players. While most of the players in the industry was trying hard to come up with ways by which they could recover from the currently slowing down of demand in the industry, Dell stepped in and aggressively went through with its delivery system which was basically enabled them to lessen or avoid some prices increases usually related to retailing or reselling which was commonly done by the other players. Through the direct selling approach, Dell was able to offer lesser prices to its customers which made it appeal to the masses and at the same time enabled them to apply what they have learned from the industry in their past operations. Furthermore, Dell was also able to gain great information by directly interacting with its customers which could have been lost had it made use of the retailer/reseller way of product delivery. Threat of substitutable products was not really evident at the time as desktop personal computers were relatively irreplaceable by any other product which could provide the same set of functions that personal computers offer. The absence of such a threat made it easy for Dell to capitalize on the demand for personal computers. Additionally, Dell was able to implement a cost leadership strategy to put itself ahead in the industry especially during the year 2000 as industry growth began to slow down. As such, new entrants were hesitant to enter the slowing industry especially since firms were having a difficult time to attain high margins as well as the exit of some firms from the industry. Furthermore, new entrants needed to enter in a large scale to compete with existing industries which also had a decade to hone their skills and capabilities in the industry. Though major suppliers like Intel and Microsoft had a strong bargaining power, Dell with its low cost strategy was able to lessen cost increases from these suppliers. Additionally, with this strategy, Dell was able to purchase in large quantities lessening the power of the suppliers. In terms with the buyers, Dell was able to mitigate their bargaining power by providing lower prices compared to its competitors, thus ensuring a substantial stake in the market.

As the cost leader, Dell had the ability to lower prices to maintain their position in spite of the possible entrance of new product substitutes, and could position itself to invest in making a substitute or buy patents for such substitutes. Furthermore, as a cost leader, other competitors were not able to compete with Dell in terms of price, thus Dell, at that time could still achieve high margins and generate more revenue compared to its other competitors. Dell, ultimately changed the rivalry in the personal computer industry. 2. Is the sixth force of complementors relevant in this case? If so, who are the complementors

and what effect do they have on the industry?

Yes. Complementors add more value to existing products and services in the market which drives additional sales for these firms. Additionally, without these complementors, personal computers will not function optimally and also with lacking features will not fully satisfy the needs of its users.

The major complementors in this case are Intel and Microsoft, which supplies the processor and software for personal computers, respectively. Since all of the computer companies buy their processors and software from Intel and Microsoft, respectively, there is no product differentiation at all. These two firms were the equalizer of all computer companies when it comes to the technologies they provide which they have no any competitor at all.

But because of no product differentiation, the rise of price war came especially when the computer industry was slowly declining. The declining demand was all because of the maturity of the market and almost of the businesses and 65 percent of homes in the US had personal computers.

As a strategy to maintain its market share, and prices and profits from the declining demand of personal computers, Dell initiated a price war in the market. The firm was successful with this strategy and was able to attain its goal. Since Dell has the lowest cost structure in the industry, the company has the potential to last in the market even other companies had already lowered their prices.

3) The following are the macro-environmental issues that could affect Dell in the future: a) technological issues, b) global issues, c) socioeconomic issues, d) legal/political issues, e) demographic issues and f) cultural issues. a) Technological Issues One major macro-environmental issue that could affect Dell is the fast-paced technological innovation especially among computers and other substitutes. Dell should always catch up with the latest innovation to keep its name on the forefront of the industry. Emergence of new players which was easier in the later century due to changing technology, and the emergence of new products and substitutes pose a great danger for the success of Dell. Dell should maintain a high rank technology for its product and for its process to keep other companies and new entrants behind the race.\ b ) Global Issues Global factors which could strongly affect the growth of Dell could be relationships between countries, the economic growth of the potential market, the low cost labour in developing countries which Dell can use to its advantage and lastly, the global competition among firms in the same industry. c) Socioeconomic Issues Socioeconomic factors such as the personal income rate of the customers and the employees, the disposable income and the personal saving rate of its buyers, the unemployment rate of its market, inflation rates, interest rates, and exchange rates of the market could also greatly affect the operations of Dell in the future. Economic downturns such as the recession may have greatly affected Dell as it has affected all the other companies in the world. d) Legal/Political Issues The legal and political issues of the market could also pose risk for Dell. The

government policies such as labor laws, taxation laws and legislative changes could cause legal disputes with other companies especially with the emergence of very similar products in the market and copyright and patents becomes an issue.

e) Demographic Issues As Dell expands its market globally, it would encounter some of the demographic issues faced by firms such as population growth, age mix of population, geographic distribution of population and the type of skills present in the community which is required by Dell in its operations. f) Cultural Issues A cultural issue faced by Dell is on how personal computers be adapted by newly emerging markets with different cultures globally. Also, the attitudes to work life of employees in this global industry could affect the management and organization of the company. Other factors could be the workforce diversity among employees and the shift in preference for product or service of customers due to some cultural influences.