Business and Institutional Marketing - Coursework Example

Dell: Business and al Marketing Introduction The last few decades witnessed dramatic growth in information technology and currently it hasbecome one of the most robust industries in the world. Since the IT sector has a high rate of productivity, particularly in the industrially developed world, it plays a great role in driving the overall global economic growth. Economies of scale influence both consumers and enterprises to increase the demand for IT products and services; and this situation in turn contributes to the rampant growth of IT sector. Nowadays, information technology as well as hardware and software associated with IT sector have become an integral part of almost all global industries (Economy Watch 2010). Since information technology is potential enough to reduce the cost of production to a clear extent, every major company tends to acquire IT products and services despite the implementation costs. This paper will examine the Dell, Inc. in the context of its market segment strategies and communication activities. Dell, Inc. and IT industry Dell, Inc. is a Texas based American multinational IT corporation which deals with the development and sales of IT products and services. Currently, Dell is one of the world’s largest technological corporations with a potential of more than 103,300 employees (Dell, 2011). The company has been ranked at 41st in the Fortune 500 list. Development of customer base and mergers and acquisitions are the major expansion strategies of Dell and its major mergers and acquisitions include Alienware (2006) and Perot Systems (2009). As of 2009, the company’s product lines include personal computers, data storage devices, computer peripherals, and software. The Dell is well known in the IT industry for its innovativeness in supply chain management and e-commerce sector. According to Fortune Magazine, the Dell, Inc. is the sixth largest company in Texas on the basis of total revenue (CNN Money, 2011). While analyzing the competitive landscape of Dell, it seems that the company is facing stiff market competition. The firm’s major competitors are Acer, Toshiba, Sony, IBM, Apple, Samsung, HP, Gateway, and Lenovo. Among these competitors, Acer, IBM, and Apple raise potential challenges to the business sustainability of Dell as they have been well established in the industry. The revenues from the IT industry represent a huge portion of the US GDP. According to the United States Department of Labor (2010), IT related “employments increased by 616,000 over the 1994-2004 periods posting a staggering of 8.0 percent annual growth rate”. The US labor department also expects that 1.6 million jobs will be created in IT sector for the period 2004-2014. In addition, it is also predicted that the employment rate of IT managers will grow between 18 to 26 percent by 2014 (ibid). Market segmentation strategies While analyzing the corporate strategies of Dell, it seems that the company is trying to root its business through market segmentation. Dell mainly targets two market segments; corporate firms and other consumers. It is obvious that business houses spend more money on computer products and services than individuals consumers are willing to spend. Corporate firms are frequent and bulk purchasers whereas individual consumers probably buy a single home computer which may be used for several years. The company’s financial data indicate that Dell’s corporate consumers constitute its 85% sales. While analyzing the purchase habit of corporate consumers, it seems that they are too much sensitive to quality rather than price. They are willing to pay more if the computer products and services offer innovative features and ease upgrade options. In addition, the company can ensure huge volume of sales with less promotional expenses when it deals with corporate consumers. Hence, the company focuses more on corporate consumers while framing its marketing tactics. Dell also segments its markets on the basis of national culture since cultural differences greatly affect sales (adpeople, n.d). For instance, an Indian consumer is interested in the technical aspects of a computer product while a Chinese consumer is highly sensitive to product prices. These variances in consumer perception have a significant role to play in preparing advertisements and promotional materials as they need to be designed to impress each segment of the market. To illustrate, the Dell’s advertisements in India depict the technical details of its products. In addition, the company subdivides a country’s market into several regions on the basis of consumers’ ideological peculiarities and cultural influences. The Dell’s market segmentation strategy is well supported by economic theories. The concept of market segmentation reflects that “optimal profits can be achieved if the firm uses consumers’ marginal responses to price, i.e., price elasticities, to define mutually exclusive segments and sets price (or output) so that marginal profits achieved in each segment are equal” (Claycamp and Massy, 1968). It is clear that the Dell defines its operations in each market segment after considering people’s responses to prices and offered features so as to stabilize its business across territories. The following diagram represents the proportion of Dell’s revenues by different markets Which segment(s) the company should target From the above discussion, it is clear that major portion of Dell’s sales revenues are derived from corporate consumers. As discussed earlier, a large base of potential corporate consumers will assist the Dell to trim down its operational expenses associated with promotional activities. Hence, it is advisable for the company to continue the current market segmentation strategy to expand its business territories. It is also recommendable for the organization to focus on large cities and other urbanized areas as it needs to specifically target on corporate consumers. In addition to corporate consumers, the company must also concentrate on other institutions such as schools, clubs, and government authorities, because they also practice bulk purchases of computer products and services regardless of the price factor. However, the company should not ignore its individual consumers because nowadays computer has become a necessity for normal life. Finally, it is advisable for the company to consider university students as a separate market segment as modern governmental regulations have made IT education compulsory in schools and colleges. Communication activities of Dell Corporate communication is a term used to represent a message issued by a corporate firm to its publics. Here, “publics” may include internal people such as employees and shareholders as well as external people including financial institutions, government, and general public. The Dell uses a variety of communication activities in order to transmit coherence and credibility by effectively communicating its corporate messages to concerned parties. Like any other modern corporate giant, Dell also mainly depends on the immense potentiality of internet so as to deal with its corporate communication. The company maintains a series of customized websites effectively by displaying each and every company detail and designing separate forums for technical assistance to meet customer needs. Dell’s R&D team gives great emphasis on customer-driven innovation as the company believes that this concept will bring the customers closer to the firm. “Call-to action” is an essential element of Dell advertising; and the organization uses print and television advertisements to direct consumers towards the company websites for additional information (Financial review, n.d). The company displays its posters in airports and railway stations with intent to communicate its product details directly to people. By adopting such an advertising strategy, Dell is planning to keep its expensive advertisements simple and unchanged and thereby to reduce operational costs. The images shown below illustrate the communication activities of the Dell, Inc. The effective communication activities aid the company to measure the people response rates and pitfalls. Recommendations for communication activities Harold Dwight Lasswell has proposed a communication model to describe different aspects of a communication process. His model reflects that communication has three functions including “surveillance of the environment, correlation of components of society, and cultural transmission between generations” (Lasswell, 2010). Similarly, Schramm’s model of communication also throws light on the interaction between sender and receiver. According to Huang (2004), in contrast to modern theories, classical communication models were speaker centered and they have little significance in today’s consumer centered business world. The Dell’s communication activities well cop up with the Lasswell model of communication as they specifically carry out each of the three functions mentioned in this model. From the view point of Lasswell model, Dell (communicator) tries to communicate its messages (product and service details) to general public through television, internet, and poster advertisements. Although the Dell communication activities have the potential to pass company messages to general public effectively, they are not enough to easily meet the consumer needs. Such a strategy would be inconvenient to consumers who have poor knowledge in internet browsing or who do not have enough time to search for detailed product information. Therefore, it is recommendable for the company to restructure its communication activities in a way consumers obtain detailed product information. Similarly, it is advisable for the company to choose the mode of communication tactics on the basis of cultural background of people the firm targets. To illustrate, some people will not give much attention to television advertisements as they like to collect product information directly from retailers. In contrast, some other people may not be willing to devote much time to shopping and therefore they wish to make purchases through online transactions (The people history, n.d). Hence, the company must design separate communication techniques for different market segments. Market research methods Dell, Inc. as a multinational IT corporation engages in complex business activities in different types of markets. Hence, a comprehensive market research model is essential to point out the potentiality of company operations in different market. I strongly recommend that the company must adopt Porter’s five forces model to evaluate its market segments. As Brandenburger (2002) argues, this method is very effective for industry analysis and business strategy development as it deeply explores different aspects of the industry as a whole. The five forces represent threat of new entrants, threat of substitutes, bargaining power of suppliers, bargaining power of buyers, and the degree of competitive rivalry. From a well structured Porter’s five forces analysis, the Dell can clearly identify its current opportunities and threats and thereby easily arrive at decisions regarding whether or not it is the right time to expand the business. In addition, the PESTLE analysis would also be an effective market research technique for the Dell. PESTLE is an abbreviation for the terms political, economic, social, technological, legal, and environmental factors. This market analysis method will be the most effective one for the company when it thinks of a business expansion. However, this method will not specifically identify different market information that is necessary to launch a business successfully. Finally, the SWOT analysis may also help the company to conduct deep market analysis. This method will specifically discover the strengths and weaknesses, and opportunities and threat to the Dell. Although this strategy may assist the company to effectively eliminate its weaknesses or to defend threats, it is not comprehensive enough to provide all needed information to a multinational corporate giant like Dell, Inc. Conclusion Evidently, the Dell segments its market mainly into two; corporate consumers and individual consumers. As 85% of the company’s sales is derived from corporate consumes, the firm is designing its promotional tactics to attract such market segments. In addition, the organization also divides its market segments on the basis of national cultures as cultural variances have a significant impact on product sales. Similarly, the Dell makes use of internet, television advertisements, and posters to effectively deal with its communication activities. The company may adopt Porter’s five forces model or PESTLE analysis to conduct a detailed market research in order to enhance its business operations. References Adpeople n.d, ‘Case: A business case on Dell and AdPeople- A new perspective on effectiveness, pp.1-20, Viewed 28 November 2011, Brandenburger, A 2002, ‘Porter’s added value: High indeed’, Academy of Management Executive(1993-2002), vol.16, no.2, pp.58-60. CNN Money 2011, ‘Fortune 500: States’, Viewed 28 November 2011, Claycamp, HJ & Massy, WF 1968, ‘A theory of market segmentation’, Journal of Marketing Research, vol.5, no.4, pp.388-394. 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