Economic Analysis of Dell Inc. Technologies

This economic analysis explores Dell Inc. Technologies, its market structure, competitive analysis, and revenue performance. It also examines the government's interventions on Dell's operational activities. Learn about Dell's products/services, market analysis, and historical market structure. Discover the optimal market structure for Dell and its societal benefits.

Economic Analysis

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
1. Description of Dell and its products/services..........................................................................1
2. Market analysis of Dell, including its competitive and revenue analysis................................2
3. Market structure of Dell with historical description to analyse whether it is change or not...5
4 a) Critical analysis on different types of market structure to identify the optimal structure for
Dell..............................................................................................................................................7
4b) Key suggestions on interferences of government on operational activities of Dell in terms
of societal benefits.......................................................................................................................8
CONCLUSION................................................................................................................................8
REFERENCES..............................................................................................................................11

INTRODUCTION
Economics is one of the important concept that helps in determining way to utilises the
resources efficiently, by concerning on government interventions, societal benefits and business
environment (Jarmin, 2019). It involves a number of models and theoretical concepts for
studying behaviour and predicting how entities need to respond towards changes in fiscal
policies, market conditions and economic fluctuations, to run business effectively. Under the
present report, to analyse economic environment, an overview is done on Dell Company, which
deals in computer hardware industry and offers products like PC, Servers, Smartphones, TV and
more. This American technology firm is considered as one of the reputational one, which is
known for its innovation in e-commerce and supply chain management. To know more about
this firm, a complete history is evaluated in present assignment, including its market structure,
presence of competitors and key performance indicators. In addition to this, an analysis is also
done to determine which market structure suits best for its business. Furthermore, if government
needs to put interventions on operational activity of Dell is also being examined, through various
secondary sources.
MAIN BODY
1. Description of Dell and its products/services
Today, technology has developed so far, that helps firms to operate their business at large
level easily. In developing and increasing economy of a country, technological company has
contributed a major role. In UK, the digital sector has contributed near about 118.4 billion British
pounds which accounts over 7% of its GVA in 2015 (Technology ICT Sector Report, 2018). This
sector has provided a number of job opportunities to highly skilled people, which also helps
further in reducing unemployment ration. Dell is one of the such computer technology firm, that
established its business in Texas, U.S. in 1984 by Michael Dell. It offers a wide range of
personal computers, peripherals, data storage devices, network switches, smartphones and
television. By making efforts in creating more innovations, has made Dell as number 1 PC
provider within The United States, white at worldwide level it holds second position (Soares,
Soltani and Liao, 2019). This firm also listed as twenty-fifth largest company in Forbes
magazine. Through acquisition business in storage and networking system, Dell has gained
success to operate business at worldwide level. It has given employment to 140k people at
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worldwide level. In order to gain more profitability and generate revenues, this firm used to sell
its innovative products directly to end customers, which includes government agencies,
educational and healthcare institutions, public institutes, companies of all sector (both small and
large) via sales representatives, telephonic way and using its website.
Business success of Dell is mainly based on its simple premise i.e. listening to customers
and respond immediately, delivers technology or services that they value (Sergi, 2019). The main
mission of this company is “to become the most successful and innovative computer firm at
worldwide level by delivering best experience to customers through technological solutions”.
Hereby, means of enhancing and meeting the customer expectations is to offer highest quality
and leading technology, with accountability and support including flexible and optimum
customization capability. Along with this, Dell’s vision is to manufacture such PC which could
easily be fitted with any individual components for building computer system and accommodate
the requirements as well (Jarmin, 2019). Thus, to achieve both mission and vision statements,
Dell has more emphasised towards increasing customization, designing and building products
that must satisfy its customer’s requirements. Thus, all these processes have helped Dell to
become one the best innovative and renowned computer brand in world. It is also considered as
largest PC maker which offers a wide range of Laptops, hardware and software, Monitors and
more (Babajani and et. al., 2019).
2. Market analysis of Dell, including its competitive and revenue analysis
Considering the market performance of a company, it can be measured in terms of metrics
such as units sold, revenue, corporate philanthropy and more (Athey and Luca, 2019). For each
and every product or service which a company offers such Dell Technologies aid to increase
economy of a nation as well. It also involves a number of companies also within business
operations, which ranges from distributors, suppliers and partners for meeting customer’s
requirement. The global footprint of Dell is spanned over 180 nations, with a talented workforce
over 140,000 employees (Audretsch, Link and Scott, 2019). Along with this, it also focuses on
measuring the social impact by fully evaluating overall effect of its each action. The economic
report found that every $1 of revenue generated from operational activities of Dell Technologies
has led to increase its contribution to GDP of U.S. by $1.76 across its supply chain (Economic
Impact Studies, 2020). According to London-based HIS Markit report, it has been evaluated that
for every employment offered by Dell Technologies, leads to increase GDP. Furthermore, to
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enhance women’s position and other minorities in society, this company has directly supported
to near about 16,000 jobs to them. In addition to this, another main contribution of Dell can be
evaluated in terms of supporting government for society benefits, by making investment in child
education, disaster relief and environmental protection (Suma and et. al., 2019).
The performance of Dell Inc. Technologies can be measured by its income statement,
where it revenue has been growing continuously year by year, as shown below –
Income Statement of Dell Inc. Technologies
Breakdown TTM 31/1/2020 31/1/2019 31/1/2018 31/1/2017
Total revenue 9,19,63,000 9,21,54,000 9,06,21,000 7,86,60,000 6,16,42,000
Cost of revenue 6,36,05,000 6,32,21,000 6,55,68,000 5,86,06,000 4,86,83,000
Gross profit 2,83,58,000 2,89,33,000 2,50,53,000 2,00,54,000 1,29,59,000
Operating
expenses
Research
development 49,92,000 49,92,000 46,04,000 43,84,000 26,36,000
Selling general
and
administrative 2,12,53,000 2,13,19,000 2,06,40,000 1,90,03,000 1,35,75,000
Total operating
expenses 2,61,22,000 2,63,11,000 2,52,44,000 2,33,87,000 1,62,11,000
Operating
income or loss 22,36,000 26,22,000 -1,91,000 -33,33,000 -32,52,000
Interest expense 27,03,000 26,75,000 24,88,000 24,06,000 17,51,000
Total other
income/expenses
net 97,000 1,92,000 3,18,000 51,000 -3,53,000
Income before
tax -3,70,000 -4,000 -23,61,000 -56,88,000 -53,56,000
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Income tax
expense -51,96,000 -55,33,000 -1,80,000 -18,33,000 -16,19,000
Income from
continuing
operations 48,26,000 55,29,000 -21,81,000 -38,55,000 -37,37,000
Net income 39,09,000 46,16,000 -23,10,000 -37,28,000 -16,72,000
Net income
available to
common
shareholders 39,09,000 46,16,000 -23,10,000 -37,28,000 -16,72,000
Basic EPS - - -3.22 -5.19 -2.33
Diluted EPS - - -3.22 -5.19 -2.33
Basic average
shares - - 7,19,000 7,18,435 7,18,435
Diluted average
shares - - 7,19,000 7,18,435 7,18,435
EBITDA - 88,14,000 78,73,000 53,52,000 13,33,000
Similarly, considering its competitive analysis, it has been evaluated that Dell Inc.
Technologies deals in monopolistic market structure (Adekoya and Jimoh, 2019). A number of
competitors present in same sector which offers same products but can be differentiated with
each other, by branding, quality or innovation. It includes Lenovo, Apple, Samsung, Compaq
and many more. This would can be shown by below analysis, which shows high performance of
Dell than its major competitors at marketplace –
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3. Market structure of Dell with historical description to analyse whether it is change or not
Market structure of technology industry is considered as monopolistic competition, where
many firms such as Acer, Samsung, Sony, Apple and so on, offers same products, but with
differentiated features (Jarmin, 2019). Therefore, presence of such organizations makes Dell not
a single producer of PCs at marketplace, as well as let it to meet overall expectations of
customers to sustain its business in monopolistic environment. In this sense, Dell values choices
and preferences of customers, that differentiated its PC from Acer and others, in terms of
component, features, style and capacities. In addition to this, respective firm also contends with
rivalries through promoting its products despite of cutting the costs of same (Soares, Soltani and
Liao, 2019). It has also evaluated that aspects which separated or differentiated its items from
others, in innovative work (R&D), by presenting better way, which increase willingness of
potential customers to choose its brand. Therefore, in terms of considering its brand image and
high performance key indicator, by operating business in monopolistic competition, earning
power of Dell in upcoming year can be estimated in following way –
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Estimated performance of Dell Inc. Technology
Earnings
estimate
Current qtr.
(Apr 2020)
Next qtr. (Jul
2020)
Current year
(2021)
Next year
(2022)
No. of
analysts 14 14 16 17
Avg. Estimate 1.01 1.3 5.21 6.68
Low estimate 0.19 0.31 2.71 5.25
High estimate 1.41 1.69 6.41 8.76
Year ago EPS 1.45 2.15 7.35 5.21
Revenue
estimate
Current qtr.
(Apr 2020)
Next qtr. (Jul
2020)
Current
year (2021)
Next year
(2022)
No. of analysts 10 10 13 13
Avg. Estimate 20.83B 22.17B 87.66B 91.79B
Low estimate 16.48B 17.64B 75.01B 76.56B
High estimate 22.39B 24.28B 93.79B 96.82B
Year ago sales 22.24B N/A 92.5B 87.66B
Sales growth
(year/est) -6.30% N/A -5.20% 4.70%
Earnings
history 29/4/2019 30/7/2019 30/10/2019 30/1/2020
Est. EPS 1.21 1.47 1.62 2.02
Actual EPS 1.45 2.15 1.75 2
Difference 0.24 0.68 0.13 -0.02
Surprise % 19.80% 46.30% 8.00% -1.00%
However, it has been seen that at initial level, Dell Inc. has operated its business in oligopoly
market, because only few industries have dominated technology industry (Sergi, 2019). It has
helped Dell to make collaboration with various firms, Perot Systems, SonicWall, EqualLogic and
more, for enhancing its business at global level. Along with this, it was too difficult for new
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entrance to enter into this industry, due to high demand of finance and other resources (DELL
Technologies Inc., 2020). But with emerging concept of globalisation, competition is increasing
continuously in technology industry, which has transformed market structure of associated firms
from oligopoly to monopolistic competitions (Jarmin, 2019). This would have given advantages
to many small or large organisations to operate their businesses easily, within technology
industry. But to enhance sales and retain loyal customers, they have to concern on developing
more innovation in business.
4 a) Critical analysis on different types of market structure to identify the optimal structure for
Dell
Market structure describes the key characteristics of specific area in which a firm operates
its business. It shows number of organisations that offers identical products and services in a
market, where structure of them describe on the basis of prevailing competition (Babajani and et.
al., 2019). Therefore, considering this point, market structure can be categorised into four main
sections, which includes Monopoly, Oligopoly, Perfect competition and Monopolistic
competition. In this sense, perfect competition defines condition of area where number of small
firms operate business in same industry and compete with each other, especially in terms of
quality and pricing policies. But no single business possesses market power to retain its position.
While monopolistic structure describes same situation of presence of various firms in a certain
area, but in order to gain market power, they all seek more to increase diversification in their
business, by differentiating own products from others (Athey and Luca, 2019). In context with
oligopoly market, there is a high barrier for entrance and exit for any business, due to limited
competition and each firm is allowed to set prices of goods in own manner. Other than this,
monopoly is completely different from above three structures, where only single firm has power
to control entire industry, therefore, people do not get options or alternatives of goods which led
them to buy on high prices too.
Therefore, considering all above options of market structure, it has analysed that oligopoly
would be optimal one for Dell, because it possesses entire characteristics which led this firm to
earn high profitability. It includes higher opportunities to maximise revenue and market share, by
acquiring the significant amount of market power (Audretsch, Link and Scott, 2019). For this
purpose, it needs to concern more on developing features of PC that differentiate its business,
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from other dominant firms especially from Apple Inc. and Sony. This factor also gives
opportunity to collaborate with other technological companies, to harness more advantages.
4b) Key suggestions on interferences of government on operational activities of Dell in terms of
societal benefits
Since innovation in technologies help each and every sector of business, therefore, it has
analysed that companies that deals in this industry, has contributed a large proportion in
enhancing economy. But on its flip side, it also increases threat of cyber security, malfunctions,
loss of big data and more (Adekoya and Jimoh, 2019). Along with this, manufacturing computers
and related products like PCs, software, hardware components and more, a number of chemicals,
plastic and toxic materials are used, that impacts directly on environment negatively. Therefore,
considering both positive and negative impact of technology on society, it is essential for
government to put interventions on operational activities of such companies. It includes
regulations which not only force technology companies like Dell to adopt green-production, but
also support them for development of new goods and services without harnessing the nature. For
this purpose, direct interventions like R&D programs, working together with policymakers and
more, aid such companies to make more innovation in business. Along with this, government can
also support entrepreneurs of small firms who have skills to make innovative products, for
improving their performance, so that contribution of them can be gained for mitigating risk of
cyber security and other (Suma and et. al., 2019). Strong government interventions on computer
technology firms, also lead to increase capacity of business for improving R&D function, to
produce more innovative services and products.
CONCLUSION
It has been summarised from entire report that economic analysis helps organisations in not
only measuring its own branding image, but also factors which support in enhancing more
competitive advantages. By analysing different market structure, companies can make decision
to shifts its operation activity for sustaining business through longer period of time. Along with
this, determining key performance indicators, organisations can also estimate its revenue and
progress of business in future as well, so that in case of urgency, they can make modifications
accordingly. Furthermore, in context with technology industry, as business of this sector is
continuously growing, therefore, company whether operate in oligopoly market or monopolistic,
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they just required to add more innovative features in goods or services. This would help in
earning and retaining loyalty of customers more easily.
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REFERENCES
Books and Journals
Adekoya, O. D. and Jimoh, I., 2019. Scholars Journal of Economics, Business and Management
Athey, S. and Luca, M., 2019. Economists (and economics) in tech companies. Journal of
Economic Perspectives. 33(1). pp.209-30.
Audretsch, D. B., Link, A. N. and Scott, J. T., 2019. Public/private technology partnerships:
evaluating SBIR-supported research. In The Social Value of New Technology. Edward Elgar
Publishing.
Babajani, R. and et. al., 2019. Integrated safety and economic factors in a sand mine industry: a
multivariate algorithm. International Journal of Computer Applications in
Technology. 60(4). pp.351-359.
Jarmin, R. S., 2019. Evolving measurement for an evolving economy: thoughts on 21st century
US economic statistics. Journal of Economic Perspectives. 33(1). pp.165-84.
Jarmin, R. S., 2019. Evolving measurement for an evolving economy: thoughts on 21st century
US economic statistics. Journal of Economic Perspectives. 33(1). pp.165-84.
Rep, A., 2019. Accounting Treatment of Intangible Assets-Analysis of Computer Programming
Companies. International Journal of E-Services and Mobile Applications (IJESMA). 11(3).
pp.61-77.
Sergi, B. S. ed., 2019. Modeling Economic Growth in Contemporary Belarus. Emerald Group
Publishing.
Soares, A., Soltani, E. and Liao, Y., 2019. The influence of inter-firm relationships on Supply
Chain Quality Management: A Survey of UK firms. International Journal of Global
Management Studies Professional (IJGMSP). 4(2).
Suma, P. and et. al., 2019. Assessing the Technical Effectiveness and Economic Feasibility of
Pest Management Through Structural Heat Treatment: An Entomological and Economic
Analysis in Four Mills in Sicily (Italy). Journal of economic entomology. 112(2). pp.957-
962.
Online
Economic Impact Studies. 2020. [Online] Available Through:<
https://corporate.delltechnologies.com/en-gb/social-impact/cultivating-inclusion/
community-empowerment/economic-impact-studies.htm >.
DELL Technologies Inc. 2020. [Online] Available Through:
<https://in.finance.yahoo.com/quote/DELL/analysis?p=DELL>.
Technology ICT Sector Report. 2018. [Online] Available Through: <
https://www.parliament.uk/documents/commons-committees/Exiting-the-European-Union/
17-19/Sectoral%20Analyses/36-Technology-ICT-Report%20FINAL.pdf>.
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