Introduction
Dell is a Texas based Company that manufactures different types of computer systems. It manufactures products such as personal computers and servers, network switches, personal digital assistants or PDAs, data storage devices, televisions, computer peripherals, software for the computers and other IT related applications and products including support and help desk services. In 2007, the company had revenues of more than 57 billion USD. The company has divisions in a number of countries such as UK, Germany, Australia and many more. The company has about 95,000 employees worldwide. This paper provides a PEST analysis of the company and explains external environment forces such as the Political, Environmental, Social and Technology in which the company operates (Dell UK, 2008).
PEST analysis tool provides an understanding of the external forces that the company faces. The tool helps organizations to develop an understanding of the forces that can affect the company. Based on the analysis, a suitable strategic plan can be implemented to achieve sustained growth. The PEST tool helps on providing the big picture (PEST, 2008).
Political Forces
Kirkpatrick (2006) has commented that governments across the world are encouraging the use of IT solutions and are devoting adequate budgets to allows state and legislature bodies to buy computers and IT hardware. According to Gartner reports (Gartner. 28 November 2006), IT boom still continues as more and more companies upgrade their computers, servers and other hardware. The report also suggests that stricter laws regarding the manufacture and sale of computers. The magazine suggests, “Laws designed to curb the environmental impact of computer parts will disrupt complex global supply chains unless companies themselves are more stringent”.
The RoHS Directive (RoHS, 2008) regulates the dismantling and recycling of waste electrical and electronic equipment by restricting the use of hazardous substances used in their manufacture. The UK implementing laws came into force on 1st July 2006 and since that date, products put on the market in the UK must not contain any of six listed hazardous substances, measured against prescribed concentrations.
The government has enforced stricter legislations to stop cartel from forming and some companies from obtaining a dominating share in the market.
Environmental Forces
The market environment in which the company operates is very competitive. There are many manufacturers such as Hewlett-Packard, Sun Microsystems, Gateway, Apple, Lenovo, Sony, Acer, Toshiba, Asus and many more. The company is among the top five manufacturers in the world (Fortier, 2008).
With increased competition, Dell is forced to cut prices some of its products. Another major environmental force is the Grey market that has a major chunk of the personal computer market. There are reports that these computers are made by important components such as RAMs and circuit board by evading the import duty and some part of the tax that is saved is passed on to the customers and hence there is a steady market for assembled computers. (Fernandes, 2004)
Social Forces
While owning a computer is considered as a business necessity, there is a growing demand for sleek products in attractive designs, combined with advanced features. Devices such as flat monitors that cost more than double a CRT tube monitor are in demand by some customers. There is also an increased demand for sleek laptops, notebooks with red and other colours that are attractive (Oscar, 2008). In many remote villages and developing countries such as India, there is an increased social awareness of using the computer to empower illiterate villagers. This is a positive social force that would help IT hardware and product companies (Kalam, 2005).
An interesting trend that has appeared is that developing countries such as India, that was never a leader in the field of engineering and technology has emerged as a leading IT power. There are many countries such as Infosys, Mastek, Wipro, Patni that are based in India an have development centres across the world and even in UK Many people in UK feel that with development and service support centres moving away from UK to India, Korea and other countries, citizens of UK are losing their jobs. (Kanellos, 2005).
Technology Forces
The IT hardware and service market is extremely volatile and rapid technology changes are the norm. With Intel and Microsoft dominating the chip and the operating system market, there are a number of other players. Dell does not make its chips or create the operating system, but it has to offer products with chips such as Intel and AMD and operating system such as Microsoft Windows, Open Office, Unix, Linux and others (Dell UK, 2008).
Key Note estimates that, in 2004, the total UK computer hardware market was worth £11.82bn at end-user prices, a rise of 5.6% on 2003 (Key Note Report, 2005). According to the report, the technology has moved to configurations with Intel Dual Core and AMD’s Athlon and others. There is a clear market segmentation and the main segments are: home, small and medium business, large business and public sector. These sectors have different technology requirements and the home and individual user markets sees a higher requirement for multimedia enabled and web compliant systems that can operate with high broad band connections. Screen resolution, speed of the processor, audio quality, disk space, wireless connectivity, optical devices support and others assume greater importance. There is also an increase in demand for gaming devices and Dell is not a major manufacturer of such devices. (Key Note Report, 2005).
Conclusion
The paper has discussed the PEST external forces that effect Dell computers. The study has given details of how these forces can impact the company.
References
Fernandes Clyde. 2004. Abacus ‘Schemes’ Gray Market’s Downtrend. Web.
Dell UK, 2008. Solutions overview. Web.
Fortier Paul J. 2008. Computer System Performance Evaluation and Prediction. Elsevier Publications. ISBN 8181476190
Gartner. 2006. PC makers must follow world’s strictest green laws. Web.
Kanellos Michael. 2005. Looking behind India’s tech boom. Web.
Kalam Abdul. 2005. Empowering Rural India: The Financial Express. Web.
Key Note Report, 2005. Computer Hardware – Market Report: Key Note Report, UK.
Kirkpatrick David. 2006. Dell in the penalty box. Fortune: 100 Fastest-Growing Companies 2006. Web.
Oscar Castillo. 2008. Trends in Intelligent Systems and Computer Engineering. Lecture Notes Electrical Engineering. Volume 6. ISBN: 978-0-387-74934-1.
PEST. 2008. PEST Analysis: Understanding “Big Picture” Forces of Change. Web.
RoHS. 2008. RoHS Directive and the UK RoHS regulations. Web.
XPS One, 2008. Dell: XPS One Desktop, Features. Web.