DELL computers has utilized the IS/IT market.
Executive Summary:
From the research and report provided here, people would get a clear idea of how well the DELL computers has utilized the IS/IT as a factor for the successful running of their business and popularity in selling desktop PCs. Dell is by far the most renowned name in the computer industry. It is headquartered in the Round Rock, Texas; Dell is a premier provider of products and services required for customers worldwide to build their information-technology and Internet infrastructures. In this report we are going to analysis how IT/IS played a role in DELL company. We also would be identifying the position that DELL has acquired using some of the techniques that we studied. Among them are value chain analysis, Boston box portfolio analysis, and McFarlan's application matrix. Using the techniques above we are going to evaluate and conclude some facts with the information we collect from these techniques. In this report we would also include how the implementation of IS/IT affects the social life as in how does it affect employees, what are the ethical and privacy issues regarding the implementation of IS/IT.
Inputs into Information Systems strategy:
Business Strategy
Dell's strategy is collapsing profit margins throughout the PC market, a dire development for rivals who can't keep up. Dell is pricing its machines not so much like lucrative high-tech products, but more like airline tickets and other low-margin commodities. That puts pressure on Dell to push up sales volume to compensate for the thinner margins.
External Business Environment
There are a lot of factors affecting DELL's business from the external environment. DELL has tight competency with other big computer sellers like Compaq, HP and so on. Social factors also affect the business environment of DELL. Computer companies have to acknowledge that in the Chinese culture, people are still unsure about credit card sales because of the huge expense of computers in China. Companies, such as Dell, then have to invest in door-to-door or face-to-face operations, initially, to gain consumers' faith and consumer's trust in the company and product.
External IS/IT environment
With approximately 39,000 employees around the globe, Dell has a large and diverse corporate organization. The company has lot of computer systems in many locations such as Austin, Texas, Nashville and so on. Dell also maintains sales over 34 offices around the country, and also sells its products and services worldwide.
Internal Business Environment
The internal business environment of the DELL is very good. DELL also has achieved the ISO 14001 Environmental Management System (EMS). With the help of this certification and other program, DELL aims at product design, transportation and so on. As a part of Dell's ISO 14001 EMS, the organization implemented goals where by the goal is to improve internal business environment performance. Continuous improvement processes are used to share successes throughout the company.
Internal IS/IT Environment
The internal IS/IT environment of DELL is very flexible. They have all sorts of application and programs like budgeting system, email system and so on. The internal IS/IT environment of the company does not really have any effects on the external IS/IT environment. There seems to be like less problem and conflicts in the internal IS/IT environment and thus paving way for the success of Dell company.
How IT can affect industry attractiveness
> Can IS/IT create and sustain barriers to entry?
IS/IT can create and sustain barriers to entry. With the help of IS/IT Dell can compete with other new entrants such as IBM which are interested to enter the Chinese market to try to gain market share in the market and to gain control over there. But with the help of IS/IT DELL can use different approaches to catch the eye and gain customers of the Chinese community in China. Dell's Just-In-Time (J-I-T) inventory where by customers can order via online, which helps them to customize the PC of their choice and the PC is manufactured just in time for delivery would help DELL to sustain barriers to entry.
> Can IS/IT change buyer's Bargaining power?
Of course, IS/IT can play an important role in Dell which can change the supplier's Bargaining power. The bargaining power of buyers is an important aspect in the computer industry. It is known that buyers want to buy products at the lowest possible price. And thus with the help of IS/IT price can be down, and also with Dell direct delivery which cuts the middle man, making the prices lower and thus becoming more competent in the computer industry.
> Can IS/IT change supplier's Bargaining power?
The bargaining ...
This is a preview of the whole essay
> Can IS/IT change buyer's Bargaining power?
Of course, IS/IT can play an important role in Dell which can change the supplier's Bargaining power. The bargaining power of buyers is an important aspect in the computer industry. It is known that buyers want to buy products at the lowest possible price. And thus with the help of IS/IT price can be down, and also with Dell direct delivery which cuts the middle man, making the prices lower and thus becoming more competent in the computer industry.
> Can IS/IT change supplier's Bargaining power?
The bargaining power of suppliers is moderate in the computer industry. Dell computers is a vertically integrated company. IS/IT can change the supplier's bargain power to some extent, but it does not provide the suppliers with a lot of bargaining power though.
> Can IS/IT generate new Products or services?
Yes, IS/IT can generate new products or service. In relevancy with Dell computers, IS/IT can generate lot of new services with the help of the WWW and other ways. With IS/IT dell can generate new services, new services can be anything like services on the web, like customer service and other related services.
> Can IS/IT change competition from cost to product differentiation/focus/innovation?
IS/IT cannot change the competition in relevancy with cost. But in relevancy with product differentiation, focus and innovation, IS/IT can change the competition among the rivals in different ways. With the latest innovation by the IS/IT implemented by DELL, the competition can be in a different way. The customers would prefer the a company with the latest IS/IT which can help the customers when they need help from the company. Thus IS/IT plays an important role in changing the competency among the rivals.
VALUE CHAIN ANALYSIS
- External Value Chain
The value chain of Dell is extending in both directions: Customers and partners. The business model creates a close relationship with customers and partners to a level of virtually integrated as if they're inside the company. This is what we called virtual value chain and virtual integration.
Information are captured across various value-adding activities, customer information obtained will be used for analyzing and forecasting customer demand, which help to reduce inventory level, hence reducing cost and increase flexibility, and ultimately achieving the mass customization.
Advantages
. Reduce cost
2. Avoid the risk of carry large quantity of products being obsolete
3. Increased flexibility, rapid respond to the change of customers needs.
4. Focus the money saved from R&D (hardware/software) expenses to customer-centric, value-added activities.
Disadvantages
. Component supply relying on few suppliers.
2. The risk of component shortage and price variation.
Thus to conclude we can say that direct model has been the main factor for the uplifting of dell computer business. Dell expect that the success would be forever and they expect that other companies might implement such models. Dell also said that IT would play a vital role in the success of the business as well as the centerpiece of the business model.
- Internal Value Chain
The internal value chain shows how the various activities and functions in a business unit contribute to the customer's requirements, and how costs are incurred. Understanding what is done, how it is done and how business activities are related leads to a better understanding of information and systems needs and opportunities. The value chain helps to get beyond the detail of current arrangements in order to see the bigger picture in relation to the whole business and the way that customers see it.
PRIMARY ACTIVITIES
* Inbound logistics: obtaining, receiving, storing and provisioning key inputs and resources required by the central operations of the business. This can include recruiting staff, buying materials and services, and dealing with subcontractor.
* Operations: transforming inputs of all types into the products or services to meet customer requirements. This involves bringing together the requisite materials, resources and assets to produce the right quantity and quality of products or services.
* Outbound logistics: distributing the products or services to the place of sale, or to customers directly, using channels of distribution by which the customer can obtain the product or service pay for it.
* Sales and marketing: making customers and consumers aware of the product or service and how they can obtain it; promoting the products in way that persuades the customer that it satisfies a need at an appropriate price.
* Services: adding additional value for the customer at the time of sale or afterwards, for examples: financial services, user training and warranty claims processing.
SECONDARY ACTIVITIES
* Administration & infra-structure: DELL has computerised all the working places. And also DELL has integrated the information system that possible can reduce errors, provide more accurate data and reduce administrative costs.
* Human Resource Management: DELL also conducts training for all employees in order to reduce absenteeism, down time and mostly for human error. High-quality staff is very much required in order to enhance the overall quality performance of the company. In terms of IS/IT, DELL has step a bit further by generating automation environment at its operational working space which assists the staff jobs.
* Technology Management: DELL must be more innovative in finding the technology that is very useful in lower down the production costs.
* Procurement: These are the activities that support the procurement of inputs for all of the activities of the value chain. These range from raw materials and production equipment, through office and factory provision to purchase of office supplies.
Product Life Cycle, Boston Box Portfolio Analysis
Dell's product life cycle is very good and as DELL being the best among and once the top company selling PCs, we can conclude that Dell product life cycle is in maturity level. From the market share that they got in 3rd Quarter of 2001 (Diagram below) we can see that Dell was doing quite well that time. I can say that from their business strategy Dell is going to do well in the years ahead and they are going to dominate the computer world. The company's revenue for the past four quarters totaled $32.6 billion. Dell ranks No. 48 on the Fortune 500, No. 154 on the Fortune Global 500 and No. 10 on the Fortune "most admired" lists of companies. Dell, through its direct business model, designs, manufactures and customizes products and services to customer requirements, and offers an extensive selection of software and peripherals.
Dell would like to make his company the market leader in many of the most attractive IT segments in the world's major developing economies. With this long-term goal in mind, he must evaluate the alternative ways that his company could compete against Legend in China and a number of significant rivals, both domestic and foreign, in countries like India and Indonesia.
Source: Andrew Serwer, Julia Boorstin, Dell Does Domination; It's a terrible time to be selling computers unless you are Michael Dell, who is slashing prices and stealing share from less efficient rivals. Is it "game over" in PCs?, Fortune, Monday, January 21, 2002.
Source: Andrew Serwer, Julia Boorstin, Dell Does Domination; It's a terrible time to be selling computers unless you are Michael Dell, who is slashing prices and stealing share from less efficient rivals. Is it "game over" in PCs?, Fortune, Monday, January 21, 2002.
Dell also appears well positioned to extend its brand name beyond mainstream computer products by leveraging its reputation as an e-commerce leader. In the year 2000, Dell began to redefine itself as the company that "knows how E works". It has shared its online sales expertise with a few large customers as they developed their own e-commerce capabilities.
More recently, Dell has prepared a plan to aggressively enter the computer services business. The first part of this plan is to be implemented by the end of 2002. Other forms of concentric diversification can be expected to emerge as part of Dell's corporate strategy. Although the company is trying to develop a business network that can offer a wide range of software and service capabilities, it will be interesting to see whether it retains its primary concentration on computer hardware.
Sales with respect to continents.
Source: Andrew Serwer, Julia Boorstin, Dell Does Domination; It's a terrible time to be selling computers unless you are Michael Dell, who is slashing prices and stealing share from less efficient rivals. Is it "game over" in PCs?, Fortune, Monday, January 21, 2002.
Dell's stage in Boston box portfolio same as Problem child
Cash Cows - Cash cows are low-growth businesses or products with a relatively high market share. These are mature, successful businesses with relatively little need for investment. They need to be managed for continued profit - so that they continue to generate the strong cash flows that the company needs for its Stars.
DELL falls under cash cows in the Boston box analysis as the reason it has a high market share, they are successful and they can manage to keep selling computers if they control and manage the way they doing business now.
Portfolio of Information Systems according to McFarlan's Matrix
There is a classification scheme originally developed by McFarlan. It compares the role of IS/IT between different organisations and enables an organisation to analyse its mix of existing, planned and potential systems. It takes the form of a matrix and classifies an application as: high potential, strategic, key operational and support, according to its current and future contribution as perceived by business management [Edwards et al., 1995].
Strategic
High Potential
Application which are critical to achieving future business strategy
Application which may be important in achieving future business success
Key Operational
Support
Application upon which the organisation currently depends for success.
Applications which are valuable but not critical to business success.
Strategic:
DELL faces some forces from its competitors in terms of Information Technology.. EDI tool gives very effective opportunities in reducing costs and it can establish the tight linkage between DELL with its suppliers and DELL with its customer.
High Potential:
Dell recently started selling its own brand of handheld computers, called the Axim, at an aggressively low price which can be considered as high potential. And chairman and CEO of Dell, Mr. Michael Dell repeatedly stressed how Dell's success lay in making it as easy as possible for someone to buy a computer.
Key Operational:
There are some applications that are currently being used by DELL and they are critical to the core operations of DELL business, such as: corporate databases, networking system, stock control, Transaction Processing System (TPS), account receivable and payable and the most important of all the, the JIT (just in time) system and the DELL direct which are key operational factors for the success of Dell.
Support:
Some applications that are currently being used by DELL that valuable but not considered as critical success factor are,
* Payroll system: for employee salary calculation and so on.
* Budgeting system: for budget analysis
* Email system: for email and communication purpose
* Word Processing: for documentation purpose.
Suggested Generic Management Strategies and Justification
Some of the key characteristics for a successful IS/IT strategy to Dell are,
* Common systems should possess a global look and feel.
* Applications should require no training, and they should be intuitive to the end user.
* Systems should be able to be individually tailored to suit the end user's unique requirements.
* Databases should be interchangeable.
* The principle future application interface can be in some sort of a web browser
Although the above said characteristics may seem to be very difficult to achieve, its not impossible.
Social, Privacy and Ethical Issues Associated with your Applications Portfolio
Social:
Destroy the employment
It is not always true if the technology can create the employment, but it can actually destroy the employment as well. Most of the people loss their jobs because:
* The technology can replace human jobs
* Human capability limitation
* It gives more accurate, efficient and effective results.
* It required IT-literate staff. Non IT-literate person are very difficult to work with IT environment
Privacy and Ethical issues:
The IS/IT used by DELL are used in a very ethical way and the board of management also is responsible for managing and keeping the Dell's business with standards, ethics and integrity. There is a board which also monitors the direct and senior management and sees whether they act ethically at all times and adhere to the policies of Dell and whether they are using the IS/IT in a proper way. There can be a lot of unethical issues which can be conducted like getting personal information about customers like credit card and so on. By doing such activities they invade the privacy of many customers and do unethical activities too. So the board of Dell monitors that such things are not done.
Security:
Dell protects the IS/IT from being accessed by unauthorized people. They allow certain people with username and password to access the server and also to enter the room where the server are kept.
Conclusion:
Thus to conclude, I would like to say that IS/IT played a very major role in DELL becoming the number one selling of computers. IS/IT has helped Dell to gain competency among its rivals and also helped Dell to expand business all over the world. So IT/IS played a very major role in the success of Dell.
References:
. Dell Business Strategy Secrets (Part 1)
http://www.itmweb.com/f031099.htm
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2. Dell Computer: Profit, market share leader; environmental laggard
http://www.grrn.org/releases/svtc_release_03-02-02.html
[22/10/2003]
3. The Driving Forces Behind Dell's New e-commerce Site
http://www.online-learning.com/papers/dellpublish/section_2.html
[22/10/2003]
4. Dell Takes 'Best-Of-Breed' Approach In ERP Strategy
http://www.informationweek.com/681/81iuerp.htm
[22/10/2003]
5. Business Strategy Analysis
http://pages.stern.nyu.edu/~jsteckel/B011101/dell.htm
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6. About Dell homepage
http://www1.us.dell.com/content/topics/global.aspx/corp/governance/en/principles?c=us&l=en&s=corp
[22/10/2003]
7. Dell and the environment
http://www1.us.dell.com/content/topics/global.aspx/corp/environment/en/mfg_ops?c=us&l=en&s=corp&~section=000
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ITC 383 (Strategic Information Management) Assignment 2
Sadiq Ibrahim - B0001591
