Dell Porter’s Five Forces Analysis

Porter’s Five Forces analytical framework developed by Michael Porter (1979)[1] represents five individual forces that shape the overall extent of competition in the industry. These forces are represented  below:

Threat of new entrants to consumer electronics industry is not significant due to cost and financial, knowledge and technological barriers. However, it is important to note that new businesses may overcome these barriers if they are able to introduce new products to the market based on innovative concepts. Large players such as Dell, Apple, HP, Samsung and Acer derive extensive benefits from the economies of scale and this fact represents an additional entry barrier to the consumer electronics industry.

Bargaining power of buyers is immense due to the abundancy of offer and little differentiation amongst products. Moreover, there are usually no additional costs for Dell customers to switch to the competition and the majority of customers are well educated about products and services offered by Dell, another important factor that fuels buyer bargaining power. High level of price sensitivity for the type of products and services offered by Dell also increases the bargaining power of buyers. However, inability of backward integration, i.e. producing products offered by Dell by customers, can be specified as an important factor that diminishes buyer bargaining power.

Bargaining power of suppliers is significant. Dell is extensively dependent on suppliers because it does not manufacture, but simply assembles its products from parts delivered by external vendors. Although there is a large number of companies that can potentially supply parts for Dell, there are only few reputable suppliers located close to Dell’s assembling units and this fact increases supplier bargaining power. Presence of supplier switching costs also contributes to their bargaining power. For Dell, the cost of supplies relative to selling price of products is high and it increases supplier bargaining power. However, a paramount importance of volume for suppliers diminishes their bargaining power….

Dell Inc. Report contains more comprehensive application of the framework of Porter’s Five Forces. Moreover, the report illustrates the application of SWOT, PESTEL and Value-Chain analytical frameworks and discusses Dell’s marketing strategy and company’s approach towards Corporate Social Responsibility (CSR).

[1] Porter, M. (1979) “How Competitive Forces Shape Strategy” Harvard Business Review