ECO561 Phoenix Dell Inc Challenges of Expansion to China Assignment

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Economics

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ECO561

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University of Phoenix

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Purpose of Assignment

This week students will review and revise their Week 3 Research Analysis for Business Signature Assignment based on economic analysis and the feedback provided by their facilitator. Students will also expand their Week 3 analyses to evaluate the challenges of expanding their chosen company's production to a foreign market.

ASSIGNMENT MUST BE BASED ON DELL INC. FROM MY WEEK 3 ANALYSES

About Your Signature Assignment

This signature assignment is designed to align with specific program student learning outcome(s) in your program. Program Student Learning Outcomes are broad statements that describe what students should know and be able to do upon completion of their degree. The signature assignments might be graded with an automated rubric that allows the University to collect data that can be aggregated across a location or college/school and used for program improvements.

Assignment Steps

Resources: Tutorial help on Excel^® and Word functions can be found on the Microsoft^® Office website. There are also additional tutorials via the web offering support for Office products.

Revise your Week 3 assignment, Research Analysis for Business, using the feedback provided by your facilitator. This Week 6 report should only include one conclusion, so you will need to rewrite the conclusion you included in your Week 3 assignment, Research Analysis for Business.

Select a foreign market in which to expand your chosen product (Dell Inc.). If you wish, you may use one of the countries your team analyzed in their Week 5 Comparative and Absolute Advantage Assignment.

Prepare a minimum1,750-word report addressing the points listed below about Dell Inc. The use of tables and/or charts to display economic data over the time period discussed is highly encouraged, you may submit any economic data in Microsoft^® Excel^®format in a separate file. You may use the U.S. Department of Labor's Bureau of Labor Statistics (BLS), U.S. Dept. of Commerce's Bureau of Economic Analysis (BEA), the Federal Reserve of St. Louis's FRED data, the CIA World Fact Book, World Bank data, and World Trade Organization, or other appropriate sources you might find on the Internet or in the University Library. The new sections of your report should:

Evaluate current global economic conditions and their effects on macroeconomic indicators in your selected country. Provide forecasts for population growth, gross domestic product (GDP) growth, GDP per capita growth, export growth, and sales growth.
Evaluate any competitors' existing production in the chosen country.
Assess sales forecasts in the selected country by using the Federal Reserve of St. Louis's FRED data, the CIA World Fact Book, World Bank data, World Trade Organization, or other appropriate sources you might find on the Internet or in the University Library.
Categorize the type of economy that exists in your selected country as closed, mixed, or market. What is the difference between these types of economies and how might this affect your expansion?
Assess how your chosen country's current credit market conditions, especially interest rates and the availability of financing, affect demand for your product or service and your planning or operating decision for your production in that country.
Analyze the role of the selected country's central bank on that country's economy.
Compare the availability, education, and job skills of the work force in the selected country. Discuss any additional challenges of international production, such as political stability, availability of government financing or other incentives, threat of capital controls, and exchange rate risks.
Explain any additional supply chain challenges you anticipate if attempting to make your product in your chosen country and selling the product in other countries.
Based on the data gathered and analysis performed for this report write a conclusion in which you:
- Create business strategies, including price and non-price strategies, based on your market structure to ensure the market share and potential market expansions and explore global opportunities for your business in a dynamic business environment and provide recommendations.
- Develop a recommendation for how the firm can manage its future production by synthesizing the macroeconomic and microeconomic data presented.
- Propose how the firm's position within the market and among its competitors will allow it to take your recommended action.
- Recommend strategies for the firm to sustain its success going forward by evaluating the findings from demand trends, price elasticity, current stage of the business cycle, and government.
- Recommend any comparative advantages your company will have over competitors currently operating in that country, and defend your position, either for or against, expanding your company's production into your chosen country based on your research.

Integrate with the Week 3 Individual Assignment, and incorporate corrections and suggestions from the instructor's feedback. The final report should be a minimum of 2,800 words.

Cite a minimum of three peer reviewed sources not including the textbook.

Include all peer-reviewed references and government economic data sources/references from Week 3.

Format your assignment consistent with APA guidelines.

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Dell Inc. Jeremiah Maranelli ECO/561 June 26th, 2017 Dr. Mark Erenburg 2 Dell Inc. Dell Inc. is quite easily one of the most recognizably public traded firms in the US. The firm is most well known for their technology in personal computers and software, but also deal in servers, data storage devices as well as other advanced technological equipment. Dell Inc. was founded around 1984 and has over 100000 employees (Forbes, 2015). The company operates in a incredibly competitive market structure. Many competitors, to include Hewlett Packard (HP), Acer, Toshiba, Lenovo, IBM, Samsung, and Apple, are capable of providing similar products which saturate the market providing customers a multitude of options of products. The fact that Dell Inc. has continued to grow as a successful organization amidst fierce ever growing competition, speaks volumes of Dell Inc. This paper will provide an analysis of economic data and business data to explain how the core economic principles impact the sustainability of the firm and what actions the firm can take to ensure success. Over time, the company’s market share has continued to change. As early as 1999, the market share of Dell Inc. was approximately 16% with higher returns their rivals. As the company expanded its product line and acquired other firms, their profits and market share also grew and increased. However, Dell Inc. no longer dominates the market share as they once did nor gain returns as they used to. Increase competition as mentioned before have made it increasingly difficult for Dell to thrive. Furthermore, other barriers such as the high capital needed to start and operate a technology company have hindered Dell Inc. Another barrier that Dell Inc. faces is the rate of which technology advances. This challenge is shared amongst the competition as equipment and software rarely remain current for long periods of time. It takes money and resources in order to stay current in this field as it quickly can become very 3 expensive. If Dell Inc. were to fall behind significantly in the advancement in technology, they would quickly become irrelevant in their market and the company would surely fail. Taking all of these barriers of entry into consideration, Dell Inc. would be better served to remain in the industry, but must provide continuous product variation and diversification or will otherwise be eliminated from competition. There are always indicators that influence companies and their success or ultimate failure. Indicators of Key Macroeconomics that could potentially influence the success of Dell Inc. include unemployment, interest rates, consumer price index, personal income, industrial production, and inflation. As an example, unemployment could be an indicator because the employment rate has remained stagnant since roughly 2009 and while growing, is doing so at a very slow speed, which reduces the demand and overall purchasing power of the consumers; ultimately resulting in a loss of revenue and cuts in wages and salaries within the company. There are so many effects, as in the ripple effect, with this one indicator. For instance, to take it even further, the loss of revenue and cuts of wages is detrimental to Dell’s reputation to the general public which can most certainly affect its future success. While the government can potentially undertake fiscal policies to increase employment, the company may still need to strain its resources and monies on wages and salaries in recruiting more employees. It’s important to note that industrial production has increased steadily since 2009 implying that more firms are encouraged to enter the industry which pressures Dell to reduce its product’s prices. If the growth does eventually decline and the price of elasticity is analyzed carefully, the prices of Dell’s products could be increased just enough to increase profits by capitalizing on higher levels of consumer demand. Furthermore, Real Income has also increased which further represents that consumers purchase power is ever growing. As consumers increase 4 their household or individual income, the demand for Dell products will also increase, which will lead to more sales for the company. Dell must capitalize when this occurs and beat their competition to the point of new quality and innovative products and technology in order to gain the edge over their rivals. Dell must also expand their operations, but in order to do so smartly, then must be able to make sound financial loans, such as alternative lending practices or financing such as venture capitalist or equity financing, despite an increasing federal government interest rate. Today, prices in the US are no longer determined by only the forces of supply and demand, but rather through quality products and customer service. Consumer price index has been unstable over the past few as it fluctuates as the strength of the US dollar changes which creates an unpredictability in the demand for Dell products. The business is operating at the expansion phase, therefore modifying their products to extend to its products life cycle in order to achieve a constant competitive edge. Most recently, there is a decline in the market for personal computers and desktops by 5.7 %, according to market research firm international data corporation in 2015. Lenovo reported a reduction in personal computers from 57 million in 2015 to 55.5 million computers and has a market share of 21.3 % of the market share. HP Inc. had about 54.2 million personal computers in 2016, an increase of about 1.3 %, with a market share of 21%. (US B.E.A, 2006). Dell finished at a modest 3rd with about 40.7 million personal computers which were a 4.3 % increase (IDC, 2015). Dell expects a change in customer expectations and looks forward to service based areas of growth such as security software, mobile and cloud computing. As a recent example, the firm recently launched ProSuppport Plus which detects possible issues before a problem is caused. The GDP of the United States by the year 2015 was 17.95 trillion dollars and has been increasing since the year 2010. The growth in GDP has a positive impact to Dell as it will 5 motivate the company to produce more since economic systems are improved, and income levels increase. Today, Dell Inc. has computers that range in price from $1000 to $2500, but minor changes in price could be examined in order to determine the Price Elasticity of Demand for the computers. This can be done by taking the change in the quantity of computers bought and dividing it by the resultant change in price. If the price elasticity of demand is low, then Dell can vary its prices to make more sales, but if highly elastic, consumers may shift to rival firms. Substitutes to personal computers include the tablets, Mac books and other gadgets that are produced by some the rival firms (O'connor, 1999). In conclusion, Dell Inc. could and should place itself in great position within its market by offering top quality products that are innovative and creative, competitive products and prices, and product expansion to remain relevant and current with the competitors whose market share is steadily declining. Also, the firm should comply with the federal policies especially on loans by developing alternative financing as I mentioned in this paper. 6 References Accounts, I. E. (2006). US Bureau of Economic Analysis. Washington, DC. Branson, A., Espinal, C., Mogaji, L., Campbell, M., Quintela, S., & Gallegos, S. I. Organization Introduction-Company History and Current Status. Estrella, A., & Mishkin, F. S. (1998). Predicting US recessions: Financial variables as leading indicators. Review of Economics and Statistics, 80(1), 45-61. O'connor, C. H. (1999). U.S. Patent No. 5,894,571. Washington, DC: U.S. Patent and Trademark Office. People, W. K. Dell Explained "2015 annual results". Forbes
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Running Head: CHALLENGES OF EXPANSION TO CHINA

Dell Inc.: Challenges of Expansion to China
Name
Institution
Date

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CHALLENGES OF EXPANSION TO CHINA
Introduction
Dell can strategically position itself within the global sphere through innovation and
creation of quality products, production of competitive goods and prices, and international
expansion of its product. China is one of the foreign markets in which to expand the products of
the company. The country is a significant source of business for technology companies because it
is experiencing the fast development of its information industry (Pomeranz, 2009). As an
innovative and efficient technology company, the aim is to maintain its relevance among
competitors who have a steadily declining market share for personal computers and desktops
(B.E.A, 2016). Moreover, the firm should comply with relevant federal policies particularly on
loans through the development of alternative financing. The move will in turn support
technological innovation, economic prosperity, and industrial transformation in China.
Current Global Economic Conditions
Currently, the global economic conditions of the country include a slow growth rate of the
Gross Domestic Product (GDP) due to a major decline in the output of the manufacturing and
construction sectors, which are significant drivers for growth in China (China Economic Outlook,
2017). The nation has been experiencing a stable growth rate since its initiation of economic
reforms in 1978, but the rate of increase has been steadily declining since 2010 (China Economic
Outlook, 2017). As a result, inflation has been occurring in the country through capacity reductions
and higher commodity prices. The solution was to impose stringent monetary policy measure to
reduce inflation in the country and decrease the uncertainty it creates for the financial markets
(China Economic Outlook, 2017). Nonetheless, the effect may be a declining rate of employment
growth and industrial production during the recovery phase.

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CHALLENGES OF EXPANSION TO CHINA
Population growth forecasts indicate a stagnation of population increase at 0.004 percent
in 2017 and 2018, which is similar to the growth rate in 2016. GDP growth may reduce to 6.2 and
5.8 percent by the end of 2017 and 2018, respectively, from a 6.9 percent growth rate in 2016.
Likewise, GDP per capita growth has been steadily reducing since 2010, and the figures may reach
a low of 0.058 and 0.055 percent in 2017 and 2018, respectively. Further, the steady decline in
exports may see the growth rates fall to -10 and -15 percent in 2017 and 2018, respectively.
Moreover, the reducing trend in sales growth may see the figures reach, respectively, a minimum
of 6.5 and 6.3 percent in 2017 and 2018 (CEIC, 2016).
Existing Production of Competitors
Nonetheless, China has also experienced the rapid development of science and technology
through an emphasis on funding, reform and societal status (Pomeranz, 2009). Rapid
advancements are evident in various fields such as infrastructure, high-tech manufacturing, and
commercial applications. The areas of progress have been attractive to many other technology
companies such as Huawei, ZTE, and Lenovo. For instance, Huawei started out business in the
country in 1987 as a manufacturer of phone switches and gradually diversified to build telecom
networks, offer consulting services, and make mobile devices (Niu, 2010). Likewise, ZTE works
on networks and mobile devices, and it is one of the largest handset manufacturers in China (Niu,
2010). On the other hand, Lenovo is renowned for its line of laptops and tablets, and it also includes
desktops, workstations, information technology management software, servers, and storage
devices in its range of production (Niu, 2010).

Sales Forecasts

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CHALLENGES OF EXPANSION TO CHINA
Historical and predicted data of the total retail trade sales for China suggest that China has
been experiencing both an increase and decrease of its year-over-year sales growth since 1993.
The longest negative streak occurred between 1995 and 1999, while the longest positive one took
place between 2000 and 2004 (FRED, 2017). Since the forecasted sales contain an exponential
line, the sales forecast involves the use of the GROWTH function in Excel. The results indicate
that the year-to-year growth rate of retail sales for China may still be positive in the future.
Nonetheless, the sales growth rate may decrease by 1.32 percent in 2018, and possibly maintain
an inclining growth rate in the following years. The sales forecasts highlight a positive trend in
sales for the country’s economy.
Economic System
China consists of a mixed economy, where both the private and state-owned enterprises
coexist (Pomeranz, 2009). Thus, the businesses share the means of production and trade with
outside regions. Such an economy is unlike a closed one, which does not engage in importation
and exportation of products (Zimbalist and Sherman, 2014). Also, the mixed economy is dissimilar
to a market economy, where the individual citizens and businesses of a region aggregately interact
to guide economic decisions and the pricing of goods and services (Zimbalist and Sherman, 2014).
Further, such an economy experiences little government intervention or centralized planning. The
differences in these types of economies highlight the practices of the Chinese government in
distancing the state from the operations of firms and seeking to improve the overall efficiency of
the economy. Consequently, enterprises such as Dell can achieve foreign investment and real
prosperity in the country and can absorb laid-off workers of declining state-owned businesses. The
result will be economic growth and social stability.
Credit Market Conditions

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CHALLENGES OF EXPANSION TO CHINA
Thus, the mixed economy will be favorable for the company to achieve economic
expansion into China. Correspondingly, the current market conditions for the country include a
slowed rate of credit growth in 2017, indicating that its policymakers are balancing the need for
growth stimulus while addressing the risk from rising debt (Wildau, 2017). Thus, rising debt for
the nation is a significant factor for the slower rate of economic growth in over 20 years, and it
threatens the financial stability of the country and its medium-term growth prospects. The issue
may lead to a fall in demand for the products of the company. Nonetheless, China is the second
largest portfolio country in International Finance Corporation (IFC), which has invested more than
US$10 billion to support multiple projects across the Chinese provinces (China Economic
Outlook, 2017). The organization addresses various global issues, including renewable energy,
energy efficiency, clean technology, mobilization of capital, and syndication loans.
Role of the Central Bank
The central bank for the country is the People’s Bank of China (PBOC). Since 1948, the
PBOC has been controlling and supervising the domestic financial sector and the country’s
banking system (China Economic Outlook, 2017). Further, the bank represents the nation in
official international financial organizations (China Economic Outlook, 2017). The organizations
include the International Monetary Fund, the World Bank, and the Asian Development Bank.
Moreover, the 1978 economic reforms have seen the PBOC engage in formulating and directing
monetary policy to enhance financial stability and stimulate economic growth (China Economic
Outlook, 2017). Conjointly, the PBOC formulates the credit plan, sets interest rates, regulates the
financial market and the interbank lending and bond market, issues and administers the circulation
of Renminbi, and manages the official foreign exchange (China Economic Outlook, 2017). The

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CHALLENGES OF EXPANSION TO CHINA
operations aim to promote financial stability, guide sound banking transactions, maintain the
stability of the domestic and foreign value of the currency, and foster economic development.
Challenges for Production
Migration from rural areas has been a significant aspect of the large labor force in the
country (Pomeranz, 2009). Thus, construction and labor-intensive...