Chuzz -
You have stated my point more eloquently than I did... I look at where DELL has headroom, where they have strength as a business, and where they are placing their focus, and I just do not see the kind of business direction which would fulfill the claims for growth which DELL management has been proposing.
Geoff says "Dell management has shown great savvy IMO in its reluctance to push the company into areas where Dell enjoys little competitive advantage (actually, comparative advantage). It is not uncommon to see good firms ruin themselves by expanding into fields where they don't belong. "
This has indeed been one of DELL's strengths, and one which works well when they can effectively "skim the cream" - take aim on the high margin segments, target products which hit those markets, and generate a better return than companies which cover the whole range. But for that strategy to be effective, DELL has to be a relatively small fish in a big pond, since by definition they are going after the best 20%... so that worked great when DELL had 3% of the market, but it will never take them to 50% share - in fact, we have seen this year that it won't even support their current growth goals (thus the push into consumer products which have none of those attributes). DELL is also forced to expand their laptop line beyond the "sweet spot", likewise their enterprise offerings.
With the right investments, DELL could create presence and pull in smaller internet access devices, "convergence" products, or, at the other end of the spectrum, SANs and enterprise infrastructure. Yet they seem reluctant to abandon the "fast follower" model and make the business changes and investments to succeed with a breakout strategy, perhaps for the reasons Geoff suggests.
If they maintain this strategy, they will inevitably be constrained by the overall growth in their core market. That will make DELL a very different company than it is today, and a vastly different one than it was 2 years ago. |
