IMPACT OF E-COMMERCE

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Requirement

Need to use a company like Dell or HP, or IBM, or any other major international computer company.In task 1, you need to do a SWOT analysis and also PEST analysis and in then assess that using the companies core business functions

Solution

INTRODUCTION

Dell’s origin dates back to 1984 when Michael Dell, a student of University of Texas, created the company. Since then it has ventured into computer hardware, laptop and computer server market. It is the first company that started selling computers online in 1996. Dell empowers customers and communities everywhere to benefit from technology in order to realize their dreams. Dell have managed to build a sense of trust within its customers to deliver technology solutions that enable them to achieve more from anywhere in the world(Dell, 2016). This report focuses on Dell’s Direct Model and encompasses the opportunities of an e-commerce solution for the company.

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ENVIRONMENTAL SCANNING: PEST ANALYSIS

  1. Political-Legal Environment: Dell political environment encompasses the political stability in the U.S. and international pressure groups. Till date, Dell has never indulged into any political affair. But the technology boom can prove to be a market barrier for Dell due to political lobbying in favor of SMEs. Also the legal aspects of Dell’s business model include intellectual property rights (IPR) violation of which might be caused by illegal copying of software codes and unauthorized use of a patented technology(World Intellectual Property Organization, 2016). 

  2. Economic Environment: Dell’s business model is affected by macro and microeconomic factors in the global economy. Factors such as inflation rate, exchange rate, monetary policy, cost of labor, and disposable income of people directly affect Dell. In order to tackle exchange rate fluctuations, Dell became the largest merchant to accept Bitcoin internationally in Feb, 2015 (Marino, 2015). Any global financial meltdown, such as that of 2007, significantly affects Dell. 

  3. Sociocultural Environment: Globally, people are becoming more tech-savvy with the access to internet. This has significant impact over Dell’s business model as its future offerings of tablets and smart devices will be greatly influenced by IoT influenced next generation. Consumer attitude towards electronics and overall demographic shift towards technology-based solutions affect Dell favorably.

  4. Technological Environment:Adoption of internet, increased computer literacy and consumer shift towards technology-based solutions offer Dell a favorable marketplace. Dell’s other hardware businesses are also impacted by the same. Dell needs to adopt R&D practices to continuously innovate and offer solutions that better meet customer demands.

SWOT ANALYSIS

Strength:

  • Dell’s major strength is its supply chain – the Dell Direct Model. It has significantly lowered manufacturing cost as well as operating costs compared to its competitors by eliminating the middlemen in the supply chain. The direct distribution also enables Dell to monitor customer demands better and predict any shifts in the technology or customer preference.

  • Dell has a strong 24x7 customer care service. It is able to achieve high customer satisfaction by providing prompt customer service to its clients. 

Weakness:

  • Dell is yet to make strong grounds in the low-end server market with HP and IBM controlling the majority of the market share (Gartner, 2014).

  • Dell’s direct business model is effective for products, but it is yet to show its full potential in the services industry where the human factor comes into the play. 

  • Dell needs to improve upon its enterprise technology offerings – for e.g. cloud computing solutions such asSaaS (Software as a Service).

Opportunity:

  • Acquiring new suppliers and knowledge-rich people to excel in the services business is a major opportunity for Dell so that it can make a strong foothold. 

  • Direct distribution model by Dell can also be effectively implemented to design an integrated e-commerce solution keeping in mind the ever-changing customer demands for better quality and service along with convenience.

Threat:

  • The major threat to Dell’s model is the exchange rate fluctuations as it directly reaches out to the end customer.

  • The economic meltdown has had its adverse effects on Dell and it needs to continuously innovate by investing more in R&D. Else it faces a risk of market elimination to constantly innovating competitors.

1.1 CORE BUSINESS FUNCTIONS OF DELL

Dell’s core business functions include efficient product design, R&D, marketing and customer service. With the evolution of technology and business, Dell has become known for rapid responses. During the economic crisis of 2007, the profitability declined significantly for Dell and drop in customer satisfaction has been one of the key reasons identified by the management. In order to improve the core business functions Dell has simplified its internal organization to listen to its customers and respond promptly. Also since the economic crisis, Dell has started combining the revolutionary direct customer model with new distribution channels to reach out to customers better (Dell, 2016). Value-added resellers and retail partners in the U.S. such as Staples and Walmart are some of Dell’s new partners to achieve a better distribution. In order to achieve a higher speed-to-market, Dell have established a global operations center in Singapore.

1.2 BUSINESS AIMS OF DELL

The major stakeholders in Dell’s business model are its end customers, investors and the people associated with Dell directly as employees. Dell aims to achieve high investor returns as well as high customer satisfaction by meeting customer demands more and with the help of its employee base constantly focused on innovation and speedy delivery. Dell also focuses on the following to achieve a sustainable success –

  • Compliance with laws and rules

  • Credibility with stakeholders

  • Business ethics leadership alliance

  • Open compliance and ethics group (OECG)

All of these recognize Dell’s commitment to ethical and legal behavior in order to achieve value for its stakeholders. Dell became a private company in September 2013 by its CEO Michael Dell and American private equity firm Silver Lake Partners in a deal worth $25 billion (Forbes, 2016). Present investors’ aim is to achieve high return on investment and increase the net profit of the company globally.On the other hand, the customers expect Dell to meet the changing needs of the technology segment with its customized solutions and direct distribution system. In terms of market segments, Dell needs to improve their offerings in the low-end server market, laser printer and projector market in order to tackle the growing market share of competitors in these segments. HP, IBM and Acer are the strong competitors in these segments.

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2.1 IMPACT OF E-COMMERCE

In the present industrial landscape, e-commerce is a major area that cannot be overlooked by any firm as buying and selling are becoming more complicated day-by-day. Even if customers are not buying from online platforms, they are increasing relying on online resources to base their purchase decisions.  The social media, search engines and review sites are the major facilitators in this case. A report by the Interactive Media in Retail Group (IMRG) published in 2012 indicates that global B2C e-commerce sales are projected to surpass $1.25 trillion by 2013 with the total number of people with access to internet increasing to approximately 3.5 billion (from 2.2 billion in 2011) (IMRG, 2012). In order to adapt to this new competitive landscape Dell needs to –

  • Strengthen operation across markets and channels

  • Become adaptive and flexible to demand

  • Manage inflationary and deflationary pressures in the economy

  • Compete with global competitors

  • Provide enhanced customer service

2.2 POSITIVES AND NEGATIVES OF E-COMMERCE

The positives of this new trend in e-commerce are –

  • The customers can now make a more informed choice as information asymmetry is ruled out

  • Fraud prevention becomes more easy

  • Customers can search and compare between multiple products and their features

  • Customers can order from their own location and delivery is not an headache for them

  • For companies, a major supply chain simplification takes place with elimination of multi-tiered distribution model

  • The companies have more control over the distribution system along with a global reach

The negatives of the trend are –

  • It has given rise to new dynamics in the industry with new shopping behaviors to tackle such as showrooming and webrooming 

  • The profile of the target customer set previously has gone or a toss as convenience is not a criteria for customers anymore

  • Privacy and security is one of the major concerns for the customers as they often get misled into fraudulent transactions

  • Perception of quality is vague in e-commerce as the touch-and-feel factor is gone

  • Payment gateway costs get added over and above the product price which maybe shared by the business or customer or both

3.1 E-COMMERCE MARKET POTENTIAL

The global market potential for e-commerce in computer products is huge. Considering the likes of Amazon, its major chunk of revenue comes from the sale of electronics and computer products. According to a report fromeMarketer, the global e-commerce market is projected to grow at a compounded annual growth rate(CAGR) of 17% from $1.3 trillion in 2014 to $2.5 trillion by the end of 2018(Rogers, 2015).The United States, China, the United Kingdom, Japan, Germany and France are the most attractive markets in terms of 2015 e-commerce attractiveness index (ATKearny, 2015).

3.2 E-COMMERCE SYSTEM OF DELL

Dell already sales directly from its website and has a global reach to its end customers. Dell’s website sells directly to customers a range of products and services. Electronics and hardware, software, big data, cloud, IoT and security solutions and industry specific services are sold online by Dell on the website. It provides promotional deals and coupons, order services, warranty services and other customer care services on the website. The site has a comprehensive design and ease of navigation while a customer searches for the right product. The graphic content is very rich and catches the glance. The site is well balanced with advanced Search Engine Optimization techniques incorporated, for e.g. the footer contains “about us”, “careers”, “community” and certain other links which could distract a visitor if they were introduced in the navigational header. The dell.com chat support is very comprehensive and the opportunity to chat with a product expert 24x7 gives any visitor the confidence to shop with Dell. 

3.3 FINANCIAL IMPLICATIONS OF E-COMMERCE

The financial implication of having an integrated e-commerce platform presence is the hidden costs associated with the transactions. From customers’ viewpoint, he needs access to internet to carry out the purchase process, he needs to have a suitable payment option available such as debit or credit card or netbanking. In any financial transaction online, an additional payment gateway charge of 2% is levied on the transaction. The company or the customer may pay for it, but this is a hidden cost. Also fraudulent financial transactions result into higher loss of financial assets and neither the company nor the customer might be ready to accept the liability of the same. In case of a transit between different countries, the shipment may be charged transit duty which is also an added cost.

3.4 A NEW E-COMMERCE SOLUTION FOR DELL

Dell’s direct model depends on the online sales platform through its website. This is already equipped with all the major functionalities that a customer may desire. One can choose to compare between multiple products or services, filter options as per his criteria and make an informed choice about the purchase. Dell, through its distribution network, will deliver the goods to the customer. The present website fulfills all the necessary criteria for Dell to have a good e-commerce platform (Dell, 2016).Although certain incremental changes can be incorporated to facilitate the visitor –

  • A better search engine that will allow a graphical 3D view of the product (augmented reality) along with expected delivery date, offers or discounts available, and essential accessories and similar other brands with additional or less number of features that come on top of the popularity list. 

  • Video testimonials of eminent Dell users and professionals would help generating a sense of faith within the minds of visitors, especially those who are new to online shopping. 

  • The expert chat option needs to be available 24x7. It is important as customers often get confused about the choice of technology suited for their need and require expert assistance.

3.5 SUITABILITY OF THE NEW SOLUTION

The new solution can further improve the aesthetics as well as the functionality of the site and gain the trust of a first-time visitor. It is of utmost importance that the Click-to-Convert rate for all the dell.com ads becomes high and bounce rate decreases. Dell should look to combine cost-effective social media marketing strategies along with “retargeting” ads to reach out more to the global customers. The incremental improvements to the site and the SEO, coupled with an effective social media marketing strategy can improve the declining sales figures of Dell. 

REFERENCES

  • 1.    ATKearny, 2015. Global Retail E-Commerce Keeps On Clicking. [Online] 

  • Available at: https://www.atkearney.com/consumer-products-retail/e-commerce-index/full-report/-/asset_publisher/87xbENNHPZ3D/content/global-retail-e-commerce-keeps-on-clicking/10192

  • [Accessed 22 April 2016].

  • 2.    Dell, 2016. About Dell. [Online] 

  • Available at: http://www.dell.com/learn/us/en/uscorp1/corp-comm

  • [Accessed 21 April 2016].

  • 3.    Dell, 2016. Improving our core business. [Online] 

  • Available at: http://www.dell.com/content/topics/global.aspx/corp/en/about_dell?c=us&l=en#core

  • [Accessed 21 April 2016].

  • 4.    Dell, 2016. Official site of Dell. [Online] 

  • Available at: http://www.dell.com/

  • [Accessed 22 April 2016].

  • 5.    Forbes, 2016. America's Best Employers. [Online] 

  • Available at: http://www.forbes.com/companies/dell/

  • [Accessed 22 April 2016].

  • 6.    Gartner, 2014. Gartner Says 2013 Worldwide Server Market Grew 2.1 Percent in Shipments, While Revenue Decreased 4.5 Percent for the Year, s.l.: Gartner.

  • 7.    IMRG, 2012. International developments in e-commerce. [Online] 

  • Available at: http://go.channeladvisor.com/rs/channeladvisor/images/uk-ebook-IMRG-CBT.pdf

  • [Accessed 22 April 2016].

  • 8.    Marino, J., 2015. Dell is now the biggest company to accept Bitcoin internationally. businessinsider.in, 19 February. 

  • 9.    Rogers, A., 2015. Huge Growth Potential in the Global e-Commerce Market. [Online] 

  • Available at: http://marketrealist.com/2015/11/huge-growth-potential-global-e-commerce-market/

  • [Accessed 22 April 2016].

  • 10.    World Intellectual Property Organization, 2016. What is Intellectual Property?. [Online] 

  • Available at: http://www.wipo.int/about-ip/en/

  • [Accessed 21 April 2016].

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