Dell's_Strategy_for_Success

Dell, Inc. Sharon Welch Ashford University BUS630: Managerial Accounting Instructor: Isabel Wan 10/31/2011 A. What is Dell’s strategy for success in the market place' Does the company rely primarily on customer intimacy, operational excellence, or product leadership customer value proposition' What evidence supports your conclusion' Dell’s strategy combines its direct business model with a highly efficient manufacturing and supply chain management organization and an emphasis on standards-based technologies. Dell relies on customer intimacy and assures marketplace will be successful, and have the key tenets of forefront for their business strategy. Dell’s objective is to maximize stockholder value while maintaining a balance of three key financial metrics: liquidity, profitability, and growth. B. What business risks does Dell face that may threaten its ability to satisfy stockholder expectations' What are some examples of control activities that the company could use to reduce these risks' (Hint: Focus on pages 7-10 of the 10-K). General economics, business, or industry conditions may result in a decrease in net revenue. Dell’s revenue could deteriorate as a result of macroeconomic trends in both the U.S. and abroad. If the economic climate deteriorates, customers or potential customers could reduce or delay their technology investments. As a result, Dell’s net revenue and profitability could be negatively affected. If Dell is unable to maintain its competitive advantage, a loss of market share, revenue, profitability may result. A substantial portion of Dell’s revenue is dependent upon international sales, which are subject to risks and uncertainties. Local economic and labor conditions, political instability, unexpected changes in the regulatory environment, trade protection measures, tax laws (including U.S. taxes on foreign operations), and foreign currency exchange rates, any of which could potentially adversely affect Dell’s operations. C. How has Sarbanes-Oxley Act of 2002 explicitly affected the disclosures contained in Dell’s 10-K report' (Hint: Focus on pages 34-35, 59, and 76-78). The Sarbanes-Oxley Act of 2002 affected the disclosures because it states that the annual report must contain an internal control report and that independent accountants have to certify the company’s internal control over its financial reporting. D. Is Dell a merchandiser or manufacturer' Dell is both a manufacture and merchandiser, because they manufactures computer and sell other items such as monitors, printers, TVs, etc. Dell 10-K provides research and production in which they sale their products along with other merchants. E. What are some examples of direct and indirect inventoriable costs for Dell' Why has Dell’s gross margin (in dollars) steadily increased from 2003 to 2005, yet the gross margin as a percentage of net revenue only increased slightly' Dell’s direct inventoriable costs are the cost of monitors, laptops, printers, and the items that makes their sales. Dell’s indirect inventoriable costs are salaries and depreciating cost of equipment. Dell’s gross margin steadily increase because the balancing between direct and indirect costs. The indirect cost increased while the direct costs decrease in which disturbed the bottom line. F. What is the inventory balance on Dell’s January 28, 2005 balance sheet' Why the inventory balance so small compared to the other current asset balances' What competitive advantage does Dell derive from its low inventory levels' Page 27 of Dell’s 10-K reports a figure called the crash conversion cycle. The cash conversion cycle for Dell has consistently been negative. Is this a good sign for Dell or a bad sign' Why' The inventory balance as of January 28, 2005 is $459. The inventory is so small, because it is based on the demand for that period. Dell’s competitive advantage is that, they able to custom build products for their customers, in which the customer can detail exactly what they want. I think having a negative cash conversion cycle is good, because it measures how fast a company can convert cash into even more cash. The lower the number is the better for the company. G. Describe some of the various types of operating expense incurred by Dell. Why are these expenses treated as period costs' Some of Dell’s various types of operating expenses are: operating cost selling, administrative, general, research, development, and engineering. These expenses are treated as period costs because they are related to the perspective period on the income statement, and they are incurred with period labeled as period costs. H. List four different cost objects for Dell. For each cost object, mention one example of a direct cost and an indirect cost. .1. Warranties are direct costs; because Dell offers a standard warranty and Dell will be abide by the warranty agreement for the cost each of quarter. 2. Shipping cost; an indirect cost because of the geographic area that produces and ship product. 3. Research, development, and engineering cost are direct costs dealing with payroll, administrative expenses, and contribution fees. 4. Website development cost is indirect costs because the maintenance features the function of websites. References United States Securities Exchange Commission. (2005). Form 10-K for the fiscal year ended January 28, 2005. Retrieved http://www.sec.gov