Page 63 - Electronic Commerce

Chapter 1

By considering all of the issues that it faces in a systematic way, a business unit can
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formulate strategies to take advantage of its opportunities by building on its strengths,
avoiding any threats, and compensating for its weaknesses.
In the mid-1990s, Dell Computer used a SWOT analysis to create a business strategy
that helped it become a strong competitor in its industry value chain. Dell identified its
strengths in selling directly to customers and in designing its computers and other
products to reduce manufacturing costs. It acknowledged the weakness of having no
relationships with local computer dealers. Dell faced threats from competitors such as
Compaq (now a part of Hewlett-Packard) and IBM, both of which had much stronger
brand names and reputations for quality at that time. Dell identified an opportunity by
noting that its customers were becoming more knowledgeable about computers and could
specify exactly what they wanted without having Dell salespeople answer questions or
develop configurations for them. It also saw the Internet as a potential marketing tool. Dell
carefully considered and answered the SWOT analysis questions shown in Figure 1-11.
The results of Dell’s SWOT analysis appear in Figure 1-12.

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FIGURE 1-12 Results of Dell’s SWOT analysis

The strategy that Dell followed after doing the analysis took all four of the SWOT
elements into consideration. Dell decided to offer customized computers built to order
and sold over the phone, and eventually, over the Internet. Dell’s strategy capitalized on
its strengths and avoided relying on a dealer network. The brand and quality threats
posed by Compaq and IBM were lessened by Dell’s ability to deliver higher perceived
quality because each computer was custom made for each buyer. Ten years later, Dell
observed that the environment of personal computer sales had changed and did start
selling computers through dealers.

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