This is the detailed PESTEL Analysis of Dell which covers the external factors analysis; Political, Economical , Social, Technological, Environmental and Legal.
Political Factors
Many political factors in the country in which DELL is considering doing business, or in which it is already doing business, can affect the company’s operations. The main political factors are as follows:
1. The relationship of the country in question with another country in which DELL is doing business will affect DELL’s business. For example, Pakistan is not on good terms of trade with India, due to which it would become difficult to import and export parts or transfer labour from one country to the other.
2. DELL would also have to look at government stability in the country in question. For example, in a country in which the government changes too often, or in a military dictatorship, DELL could not be sure how often business policies would change. This would introduce an element of uncertainty and instability due to which DELL would be hesitant to do business in such a country.
3. Terrorism is another factor that would affect DELL’s operations. DELL would be in a precarious situation in a country which regularly experiences terrorist attacks, or in a country with strong anti-American sentiment. Operating in such a country will not only put DELL’s operations at risk, it would also put its employees at risk too.
Economic Factors
Several factors in the economic environment can affect DELL, such as:
1. After the economic recession, many governments have reduced interest rates in an effort to attract investment. This would make greatly improve the cost of borrowing for DELL, making markets with lower interest rates highly attractive.
2. Lower interest rates would also tilt exchange rates in DELL’s favour, making it more attractive to do business.
3. Rates of inflation can also affect DELL. In a country in which rates of inflation are high or unstable, the demand for laptops would be low.
4. When DELL sets up in a new country, it will have to look at this country’s relationship with China and its other manufacturing hubs. For example, Pakistan is on good terms with China and there are many economic initiatives and trade agreements to facilitate trade between the two countries. On the other hand, such initiatives would not be present in India, and DELL would need to consider whether it would be more feasible to offshore to China or set up production facilities in India instead.
5. DELL would also have to look at export and import barriers and exchange rates between the countries in which it is doing business, and will have to make decisions regarding where to base what facility in order to enjoy maximum profits.
Sociological Factors
The main computer market for DELL would be the United States, Europe, and Asia-Pacific. Out of these, Asia-Pacific, more specifically India and China, represent rapidly growing markets with an increasingly affluent middle class that has more money to spend than before. These markets are also characterized by a younger population that is more tech savvy than older generations. As a result, the sociological factors affecting DELL’s entry into these markets are as follows:
1. Due to increasing purchasing power in many countries, especially in third-world countries, more customers would be willing to purchase and spend more money on computer and hardware-related products not only from Dell but also from competitors such as Apple, HP, Toshiba, Acer, Sony etc.
2. Also due to increasing purchasing power, third-world countries which were formerly not considered an attractive market by computer manufacturers all of a sudden have become more attractive. This means that DELL would have to face a high level of competition if it enters one of these markets.
3. In third-world countries, purchasing a high-end brand of computer, for example DELL, would be considered a symbol of social status and become highly desirable. This would be a great opportunity if DELL is considering entering such a market.
4. The governments of many countries are rolling out initiatives to supply cheap laptops to the less-privileged sections of society. This may either a threat or an opportunity to DELL depending on how they deal with it.
Technological Factors
Technological developments are the major factor affecting the computer industry, and new developments become obsolete at a very rapid rate. DELL’s competitors are heavily investing in innovation and research and development and are continuously rolling out new products. If DELL does not invest in innovation and R&D and does not keep up with the latest technological developments in the field it would be at a severe disadvantage.
Legal Factors
A company such as DELL would be subject to several regulations, the chief of which are as follows:
1. Any company would have to follow the accounting conventions of the country in which it operates. For example, if it is based in the US, it would be subject to GAAP accounting law, and i it is based in the UK, it would have to follow IFRS.
2. Laws regarding ethical business practices such as the Foreign Corrupt Practices Act (FCPA) in the US and the UK Bribery Act (UKBA) would need to be followed.
3. It is very common for the major players of the computer industry to indulge in legal battles. For example, between 2010 and 2014, Apple and Samsung have filed more than 40 patent lawsuits against each other. Depending on the ruling, a lawsuit can severely affect a firm’s profits.
4. In case DELL tries to expand, it may run afoul of anti-trust laws. Companies such as Microsoft have come under the anti-trust radar several times for allegedly predatory marketing tactics and for buying out smaller competitors.
5. In a developing country, there may be laws regarding copyrights and patents, but the implementation of such laws is lax and often government action is not taken against cheap local copies carrying the brand name.
Environmental Factors
The climate of the country in which DELL is operating is a main concern. In a tropical country, there is a very high chance that computers will overheat and DELL will have to deliver computers and processors that can cope with high temperatures.
Another factor is consistent power outages especially in developing countries. This will require DELL to invest in private power generation facilities at their factories in such countries which can mean added fuel costs to power these generators. It will also mean that in order to remain competitive DELL will have to look into producing laptops and other handheld equipment with longer battery life so that they will run for longer periods of time.