Dell Computer Discussion Questions
1. According to the PERCEPTOR model, what are the positions of Dell and its competitors in the product space defined by the two most important attributes? How do your positions, and competitive positions, relate to the ideal brand positions of the segments? Which of the brands are well positioned in this market, in your opinion? What are the projected market shares for Dell and its competitors based on this model?
2. What marketing mix (advertising and distribution) will you recommend? Use ASSESSOR to allocate the marketing budget and develop a market share estimate. Use the initial proposed budgets for yearly advertising and distribution, and assess how much market share is affected if these budgets are changed (keeping the total amount expended the same as Dell considers this to be an absolute ceiling on marketing expense). How do the market share estimates obtained by PERCEPTOR and ASSESSOR compare? To answer this question, use the information provided in the case, together with the following additional information obtained from the consultants:
FOR THE ADVERTISING RESPONSE FUNCTION
Reference Budget: $200,000,000
Minimum Share: 5.0%
Maximum Share: 90.0%
Exponent: 1.3
FOR THE DISTRIBUTION RESPONSE FUNCTION
Reference Budget: $200,000,000
Minimum Share: 0.0%
Maximum Share: 90.0%
Exponent: 0.8
3. Using the FINANCIAL worksheet, do a five-year projection for Dell's Executive PC using market shares obtained from PERCEPTOR or ASSESSOR. Assume the market share projected for Year 1 by PERCEPTOR or ASSESSOR is maintained through Year 5. Hint: When using the FINANCIAL worksheet, make your entries of unit sales in thousands of units, and dollar figures in thousands of dollars. That is, to enter 30 million units, type "30000," or to enter indirect costs of $100,000,000, enter "100000." This minimizes the number of zeroes in the spreadsheet and facilitates interpretation. Caution: Add back the zeroes when obtaining results. So if your NPV shows "$2,000,000," it really means $2 billion!
4. Suppose Compaq repositions positively on the performance attribute at the end of year 2. Go back and recalculate market shares for the four brands, and use this market share estimate for years 2 through 5 to recalculate your five-year projection using the FINANCIAL worksheet. How much is Dell affected by this repositioning by Compaq? What steps could Dell take now to protect its position? Explain.
5. Considering all of the above information, should Dell launch the new Executive PC? Explain why or why not.