A PESTEL/PESTLE ANALYSIS OF DELL
DELL is a renowned player in the global PC industry. The brand has created a differentiated brand image on the basis of its excellent resources and capabilities and a differentiated business model that serves the customers directly. It has introduced a wide product line consisting of products that cater to various customer groups including professionals and businesses. Dell has generally remained highly competitive in terms of pricing.
However, it has also released a few premium range products for its premium customers. It has released laptops for hardcore gamers and several other products that fulfill the IT needs of its consumers. In the last few years, its market has seen a decline globally. Particularly, in the Asian markets, it could not generate as good sales as Lenovo or HP. The reason is both increased competition and the proliferation of mobile technology. There are several forces in the external environment that affect the business and profitability of Dell. Here is a PESTLE analysis that explains these factors and their effect on Dell’s business.
Political factors have a major impact on businesses operating in the international environment. Global players have to deal with significant political pressures. Policies related to foreign businesses, tax regulations and varying political environment all have a direct impact on these businesses and their revenue. The strain in foreign relationships between China and US can also trouble the American businesses operating there to some extent. Apart from it, political stability is a sign of economic stability and a flourishing market. If the political environment grows unstable it affects the supply chain and distribution networks too.
Political instability is always bad for business. In the recent years, EU has been targeting US businesses in several areas. Political instability in Europe also affects Dell because it is a significant part of its market. If the political environment of a nation is friendly and peaceful, it is easier to do business and grow your brand there. In China, the situation has generally remained peaceful, still diplomatic relationships between US and China are not taking a satisfactory turn. It could affect the US brands like Dell operating in China. Political stability is also essential for continued supply of raw materials and labor especially for brands having an international supply chain.
Economic factors are most important in case of business because they impact both sellers and the customers directly. The world has recently been through a cycle of recession and its effect was felt by most international brands. If the economic conditions are bad, the market is affected and the consumers’ purchasing power is reduced. In such conditions, the sales of the international brands can fall. In the past few years, the global economy has been doing well but the economies of the individual nations may not be in as good shape and in several nations the economic situation is still affected. The Asian economy is growing fast but Dell’s performance there is poor. However, the reasons can be different than economical.
Economic conditions affect several things including operational costs which can grow high in such conditions. A large number of companies were forced globally to reduce their number of employees because of the global recession. Economic slowdown does not just reduce sales and profits but can also create other pressures that will lead to poor performance and higher losses. The problem is that the economic situation is never under the control of brands and economic volatility can always have a bad effect on business. The dollar has grown stronger since the recession and due to that the problem has been aggravated for the US brands. Their profits from international sales have dropped. Dell has also not remained unaffected.
The social factors too can have a deep impact on businesses. Their effect can be both direct and indirect. These factors are an important reason that the brands have to focus upon brand localization. Social trends can impact the sales of particular products. Dell is a manufacturer of laptops and IT solutions. The growing trend of smartphones and tablets has impacted the sales of PCs and laptops in most markets globally. Dell has also seen a drop in its sales of PCs and laptops. Society and culture are not the same globally and unless brands are able to formulate different strategies for different markets, they cannot be successful in the global environment.
Dell is a technological company and therefore will be influenced by technological changes undoubtedly. During the recent years the demand for mobile gadgets has gone up. The proliferation of mobile technology has hurt PC sales globally. More and more customers are looking for smartphones and tablets with larger screen sizes. Technological changes can swiftly alter the market dynamics and affect the sales and revenue of businesses. This decade has also seen the rise of cloud business.
Dell has entered the cloud business and offers a large range of cloud solutions. Technological companies have to be quick to measure the changes happening in the technological environment and respond to them quick to remain competitive. Dell has also released several new versions of laptops and other IT related products that can cater to the customers of the new era whether individuals or businesses. However, competition has also grown heavier with several big brands having entered into cloud business.
Environmental issues have become increasingly important for businesses in the 21st century. It is because while governments have framed laws that are more friendly to the environmentally responsible businesses, customers too love to buy from the environment friendly businesses. Being environment friendly has several benefits. While on the one hand businesses have been able to reduce their carbon footprint and operational costs, they also have a lot to benefit from their improved brand image. Societies and governments world over are concerned for the environment and therefore the brands that are more environment friendly are doing better business. Dell has also invested in recycling, energy efficiency and other areas to reduce its impact on the environment.
Legal compliance is another major issue before the international brands. The laws can be different from nation to nation and brands are required to adhere to them whichever region they are operating in. There are several laws that the businesses are required to adhere to including labor laws and quality and environment laws. Unless these brands comply with the local laws, they would lose significant sums as fines. Dell has also faced several legal issues in the past in China and other nations.