This assignment studies the case of Dell Corporation.
INTRODUCTION
The strategic planning in an organisation is the important part in today's modern world of the customer-oriented market. The word strategy is derived from the classical Greek word called as 'strategos'. The word strategos in Greek means a plan to defeat enemy. Strategy is defined by many people and thus has got different meanings. According to 'The New Shorter Oxford English Dictionary,' strategy is described as the art of a commander-in-chief and the art or skills of careful planning; plan for successful action based on the rationality and interdependence of the moves of opposing or competing participants. Furthermore, strategy is perceived as a solo activity, carried out by the select few and passed on to the rest of the organisation after careful planning (Wilson & Gilligan 1997). The strategic planning in an organisation is the important part in today's modern world of the customer-oriented market.
This assignment studies the case of Dell Corporation. It gives a short profile of the company, looks at the adoption and development of business strategies by Dell. It discusses the type of business approach they have undertaken. Strengths and weaknesses of the company are also discussed. Finally, it talks about the challenges the Dell Corporation is facing today followed by a conclusion.
REQUESTED BY: MERVYN SOOKUN
COMPILED BY: YOGENDRA SINGH SUYAL
DATE: 21.11.03
COMPANY PROFILE
Dell, Inc., formerly known as Dell Computer Corporation, was founded in 1984 by Michael Dell. Michael started this company with $1000 and the idea to bypass the middleman in the personal computer industry. This was an unheard of idea that turned Michael Dell into one of the wealthiest men in America. Now it designs, develops, manufactures, markets, services and supports a range of computer systems. This range includes laptops, desktop computers, commercial systems (e.g. servers, storage products, networking products, workstations) enterprise systems (servers, storage and networking products and workstations) and software and peripherals. The Company also help in maximising information technology (IT) by offering a portfolio of services. It constantly deploys systems and educate IT professionals and its consumers. In addition, Dell offers various financing alternatives, asset management services and other customer financial services for its business and customers in the United States through Dell Financial Services L.P., a joint venture between Dell and CIT Group, Inc. The Company is generally managed on a geographic basis: the Americas, Europe and Asia Pacific-Japan http://finance.yahoo.com/q/pr?s=dell [ Accessed 04.11.03]
The mission statement of Dell, Inc. is to "be the most successful computer company in the world at delivering the best customer experience in markets we serve. In doing so Dell Computer Corporation will meet customer expectations of: highest quality, leading technology, competitive pricing, individual and company accountability, best-in-class service and support, flexible customisation capability, superior corporate citizenship, and financial stability" http://www.dell.com [accessed 02.11.03]. A vision like this enables Dell, Inc to track the company's success. Today Dell Computer Corporation is the world's leading direct computer systems company and the best supplier of technology for the infrastructure of internet
Address
Dell Inc.
One Dell Way
Round Rock, TX 78682
Phone: (512) 338-4400
Fax: (512) 728-3653
Email:
[email protected]
Web Site: http://www.dell.com/
http://finance.yahoo.com/q/pr?s=dell [ Accessed 09.11.03]
Financial Position
Index Membership
S&P 500
Nasdaq 100
Sector:
Technology
Industry:
Computer Hardware
Employees (last reported count)
39, 100
http://finance.yahoo.com/q/pr?s=dell [Accessed 09.11.03]
Management and Salary details
Officers
Pay
Michael Dell, 38
Chairman and CEO
$ 3.44 m
Kevin Rollins, 50
Press, COO
$2.79 m
James Schneider, 50
CFO, Sr. VP
N/A
Thomas Green, 48
Sr. VP. Law and Admin. and Sec.
N/A
William Amelio, 45
Sr. VP. Asia Pacific - Japan
N/A
http://finance.yahoo.com/q/pr?s=dell [Accessed 09.11.03]
Profits and Sales Revenue
For the 39 weeks ended 10/31/03, revenues rose 17% to $29.93 billion. Net income rose 25% to $1.90 billion. Results reflect increased sales of enterprise computing systems, especially to Asia-Pacific and European markets, and improved margins.
http://finance.yahoo.com/q/pr?s=dell [Accessed 09.11.03]
BUSINESS STRATEGIES
Cost Leadership
Dell started its business with this strategy and has always been following it since. In order to become the cost leader, the company knew exactly what needed to be done. First thing they did was removing the middle man (retailers) and instead they served their consumers directly. There were less costs involved because they did not have to pay the retailers for selling their products and thus profits were higher. Low costs incurred meant lower prices for consumers - major benefit to consumers in terms of good quality for cheaper and major benefit to Dell as a company in return in terms of more happy and satisfied customers.
Dell followed this strategy of Cost Leadership which was mentioned by Porter. It was a part of Porter's three generic strategies. Other ways by which Dell achieved this strategy was by globalising, economies of scale.
Focus Leadership
Dell focused on offices and personal users of computers solely as its potential customers. Dell was producing products in bulk, so big offices and institutions were the best targets. Dell's segmented its market very clearly to offices and direct customers. This helped Dell create a very strong and specialist reputation.
This strategy was adopted from Focus Leadership ...
This is a preview of the whole essay
Dell followed this strategy of Cost Leadership which was mentioned by Porter. It was a part of Porter's three generic strategies. Other ways by which Dell achieved this strategy was by globalising, economies of scale.
Focus Leadership
Dell focused on offices and personal users of computers solely as its potential customers. Dell was producing products in bulk, so big offices and institutions were the best targets. Dell's segmented its market very clearly to offices and direct customers. This helped Dell create a very strong and specialist reputation.
This strategy was adopted from Focus Leadership element of Porter's three generic strategies. This helped Dell in gaining a better understanding of its market segments.
Differentiation
Dell was the first manufacturer who was supplying computers direct to its customers, without using retailers as middle men. But the main differentiation quality/ strategy they had was to be able to make custom built machines for its customers. Dell was the first company to realise every individual has got different needs, so you cannot sell same machine to all the customers. Every customer needs to be treated as an individual and thus can have completely different requirements to be met from another customer. This gave the customers a feeling of personal customer service. This helped Dell in distancing from others in the market. Competitive advantage was gained over other computer manufacturers. Customers could even order their computer by online. By shipping it direct to its customers from warehouses helped Dell save enormous amount of time in delivering products. Products were readily available. This also differentiated Dell from its competitors.
This strategy was also adopted from differentiation element of Porter's three generic strategies. Benefits to the company included gaining competitive advantage, being able to be flexible to different needs of different customers. The primary reason for his success lies in the fact that he decided to cut out the middleman in the computer industry, therefore better relating and understanding the needs of his customers, gaining Dell Computer Corporation an advantage over the rest of its competition.
Market Penetration
Dell has always adopted the concept of market penetration in its current market segments. Dell offers a huge variety of computer systems, making sure there is at least one for everyone. It uses the market penetration in its current market sector which is computer systems mainly and peripherals.
This strategy relates to Ansoff's matrix of market and product. The objective behind following this strategy is to enlarge the market plus its market share and thus improving the profitability.
Diversification
Dell started its business as being a computer system manufacturer only. But soon after it realised the need of diversification (diversifying itself into new markets) if it was to ensure the survival. So it started selling computer peripherals, collaborations with other big players in the same industry like Intel, Hewlett Packard. Dell also started providing advice, consultations, and office solutions to customers and businesses.
This strategy relates to Ansoff's matrix as well. Diversification helped Dell explore more possibilities which were available in the industry. Diversifying included doing new things such as selling computer peripherals, offering professional advice free of charge to personal users, offices and businesses etc. This concept could be related to Boston Consulting Group matrix. The idea is to make sufficient money from the established products of the company and then use the extra money to support products and services which might need financial aid for advertising, generating customer awareness, research and development etc.
Aggressive Marketing
Dell always uses aggressive marketing to sell its products and services. They believe in being able to sell a product if it is bombarded to customers from every direction. They give so many offers as a part of aggressiveness. You can see a Dell computer advertisement just about anywhere - in the newspapers, periodicals, television, internet etc.
This has been a key factor to their success. Since they offer their products and services at a very reasonably cheap price, marketing becomes easier.
Just in Time
Dell uses the philosophy of just in time. It keeps its inventory levels to minimum. Every computer is only built once the order with personal specifications has been placed. It saves money spent on storage and thus increases productivity. Low inventory costs incurred gets passed on to customers as low priced products.
Total Quality Management
Dell believes in total quality management. Resources are managed in a way so that they are utilised to their maximum. More emphasis is put on lean production rather than mass production. Span of control should not be very wide. Responsibility should be taken for the cause.
OPPORTUNISTIC APPROACH
By looking at Dell Corporation and the way they have carried out their business abck in 1984, it will be true to say that Dell has used an opportunistic approach to business rather than planned approach.
The argument to support the statement is the fact that they have gone beyond the concept of just making computer systems. They also provide software, advice etc. Every time there has been an opportunity, Dell has grabbed it. Once they realised there was a big market for their products in Far East - Asia and Japan, they expanded their market to those places. As it can be seen from the earlier part of the essay, Dell has followed Ansoff's matrix and the matrix is actually designed to survive in the market by being opportunistic.
Michael Dell was the initial founder of the company and when there was an opportunity to go bigger, he was not afraid to go out and seek help from advisors. This is another example of being opportunistic.
STRENGTHS
Following are the main strengths of Dell Inc.:
* No inventory build up
* Industry leading growth ·
* Cost efficiency ·
* Direct to customer business model - latest technology ·
* Customisation ·
* Internet sales leadership - $5M worth of products everyday
http://www.freeessays.cc/db/29/mul71.shtml [ Accessed 15.11.03]
Above listed strengths of Dell Inc. can be related to Performance and Excellence model.
Using Performance and Excellence Model
Dell Corporation has always shown a bias for action. The whole concept, of starting to sell custom built computers directly to customers, itself showed an ability and desire to try new thing. Since then they have always responded appropriately to situations.
Dell Inc. has always shown the closeness to customers. The fact that they have always made custom built computers is a proof of that special close bond with every customer. Award winning customer service is another proof of closeness to the customers.
Michael Dell has always pushed responsibility and authority (anatomy) down the line to product managers and venture teams (Wilson & Gilligan 1997). In addition he has also encouraged its staff to be entrepreneurial.
Dell Inc. always treats its employees as mature people who would respond better. This results in higher productivity through people. This also involves providing incentives and recognition.
The philosophy of hands-on value driven is followed in Dell Inc. Michael Dell himself is the best example himself. Since he is a hard worker and accepts that mistakes have made him learn a lot, it is easier for other employees to follow other core values of the company (Wilson & Gilligan 1997).
Sticking to the knitting (Wilson & Gilligan 1997)is another philosophy which is followed by Dell Inc. Even though Dell has started doing things it did not do to begin with but still kept itself inside the same industry. This way they have benefited themselves lot more than they could have if they were to try something in a complete different industry.
Dell Inc. makes sure that their organisation structure does not become complex and there is not too many staff personnel. Less people at corporate level and more people 'out in the field' getting work done.
WEAKNESSES
* No proprietary technology.
* High dependency on component suppliers.
* Lack of that face to face human touch to the business.
http://www.freeessays.cc/db/29/mul71.shtml [Accessed 15.11.03]
OPPORTUNITIES
* Network-internet, intranet and extranet
* Strong potential market in Europe, China and India
* Low costs and advanced technology
* Growth in business, education and government markets
http://www.freeessays.cc/db/29/mul71.shtml [Accessed 15.11.03]
THREATS
* Competition (price and market share)
* Currency fluctuation in countries outside the US
* Political instability
* Tariff trade barriers
http://www.freeessays.cc/db/29/mul71.shtml [Accessed 15.11.03]
CHALLENGES
Dell Inc. has faced lots of challenges since they started the business back in 1984. When the business begun to expand, there was a challenge of employing more workforce who would represent the company and take business even further. Michael Dell dealt properly with it and he has been recruiting a team of staff who are making business more successful. Another challenge was on how to expand business globally. Michael Dell started training overseas people in U.S. first and then send them overseas to open the business. Dell has to make sure the employees are fully qualified and excellent at job.
The competitiveness of the industry today is a massive challenge in front of Dell Inc. One reason for Dell Inc. to become successful in past was that there was very less competition. Also the fear that if internet bubble burst, it might bring the whole business to an end as it is getting more and more dependable on the internet everyday.
CONCLUSION
Dell Inc. is the best computer manufacturer in the world right now in terms of largest sale revenues. Most credit of their achievement and success goes to its founder Michael Dell. He has used very aggressive marketing by linking with players in the industry such as Microsoft, Intel and Hewlett Packard.
They have also been able to gain competitive advantage and a niche for their products and services by working one their core competencies. Up to now, Dell has handled the change in its external environment perfectly and been making huge profits by following an opportunistic approach.
So, Dell needs to maintain its strengths, competitive advantage and think of new ways too diversify itself even more in the coming future.
REFRENCES
* Wilson, R. & Gilligan, C. (1997). Strategic Marketing Management. The bath press: Bath.
* Dell company profile.
http://finance.yahoo.com/q/pr?s=dell [ Accessed 04.11.03]
* Strengths and weaknesses of Dell
http://www.freeessays.cc/db/29/mul71.shtml [ Accessed 15.11.03]
BIBLIOGRAPHY
* Wilson, R. & Gilligan, C. (1997). Strategic Marketing Management. The bath press: Bath.
* Porter, M.E., 1990, The competitive advantage of nations. The Free Press, New York.
* Hubbard, G. 2000, Strategic management: Thinking, analysis and action. Prentice Hall, Frenchs Forest, NSW.
* Davis, J. & Devinney, T. 1997, The essence of corporate strategy: Theory for modern decision making. Allen & Unwin, St Leonards.
* Dell company profile.
http://finance.yahoo.com/q/pr?s=dell [ Accessed 04.11.03]
* Strengths and weaknesses of Dell
http://www.freeessays.cc/db/29/mul71.shtml [ Accessed 15.11.03]
APPENDIX
Part two of the book, written by Michael Dell, talks about his own business philosophies. He applied them to Dell Corporation in following ways:
* Hiring ahead of the curve - Michael outlines his belief in choosing people with the future in mind as well as a consideration of the challenges they will have to grow into.
* Segmenting the CEO - Michael explains why he split his duties between himself, Mort Topfer, and Kevin Rollins in order to divide and conquer Dell's wide spanning responsibilities through the Office of the CEO.
* Building a company of owners - Michael covers his passion for engendering a sense of personal investment in each employee through responsibility, accountability, and shared success.
* Staying allergic to hierarchy - Michael outlines his distrust of overly rigid business processes as well as his encouragement of communication across all business lines and levels.
* Mobilising people around a single business goal - Michael highlights his use of metrics throughout the company to measure progress, to identify issues, and to tie compensation to the health of the business.
* Developing products from the customer's viewpoint - Michael reviews Dell's approach toward creating products based on customer input and requirements instead of pushing new inventions.
* Targeting a customer of one - Michael explains that you have to structure your business channels to tailor your focus to unique customer needs, fears, sensitivities, and questions.
* Adding value "beyond the box" - Michael describes the importance of looking beyond just the product at the total customer experience and the service opportunities this may present.
* Aligning complementary strengths for success - Michael gives a overview of the benefits of complementary partnering with suppliers for better efficiency, faster feedback, and more tightly aligned products.
* Flipping the demand/supply equation - Michael covers the importance of flowing inventory at a real time speed through the use of real time information rather than using bulk manufacturing processes.
* Playing judo with the competition - Michael reveals Dell's strategy for analyzing the profit pool of an industry and developing a strategy for capturing market share through efficiency and lower prices
http://www.itmweb.com/f070802.htm [Accessed 12.11.03]
Interview of Michael Dell with 'Hosting Tech'
All those PC firms losing market share to Dell Direct might blame Michael Dell's parents for producing a wunderkind with a dream that would become his competitors' nightmare. He grew up in a household where his mother, a stockbroker, discussed the Federal Reserve with the same ease as she served dinner. Discussion of commercial opportunities was a regular dinner table fare - and this kid listened.
The balance was tipped toward the business side of the spectrum in his early years. When he was 12, he learned to cut out the middleman - selling stamps from his collection directly, rather than through an auctioneer. At 16, he sold more newspaper subscriptions to the Houston Post than anyone else by devising a scheme to segment the market - targeting newlyweds and home-buyers, two groups most likely to say yes to his sales pitch. By the time he was through, he was earning more money than his high school teacher.
When Dell was a freshman at the University of Texas at Austin, business outweighed education, as he found himself spending more time building and selling computers than he did on his pre-med studies. The commercial opportunity propelled Dell into the computer industry. He started his own business, completed his freshman year, and left school to build what was to become the largest PC company in the world - selling 50 percent of its wares over the Internet. Now he intends to become the largest provider of servers and storage devices to small to midsize businesses, enterprises, and Internet datacenters.
In his 1999 bestseller, "Direct From Dell: Strategies That Revolutionized an Industry," Dell lays it all out: how he did it, and what he plans to do next. In a Q&A with HostingTech, Dell, the longest-tenured chief executive officer in the computer business, discusses the industry, his company, and how to balance personal and professional success.
HostingTech: What are the strengths and challenges of the I.T. industry?
Michael Dell: I.T.'s greatest strength is its ability to increase productivity, both at home and in business. With the growth of the Internet, including increased government services online, greater e-shopping options, and improved Web applications, the PC will continue to be an integral part of our daily lives. One of our challenges is high-speed Internet access. The United States is behind other countries in building out our Internet infrastructure. As more people access online data and services, we're going to have to address the problem of infrastructure. Our government has the opportunity to help improve Internet access for all consumers. Countries like Denmark and Korea, which have made Internet infrastructure a national issue, have seen steady and dramatic growth in Internet penetration.
HostingTech: What market segment do you expect to see dominating Dell's growth?
Michael Dell: Enterprise - servers, storage, and services. From a geographic standpoint, Germany, France, and China are key growth opportunities.
HostingTech: What operational changes might parallel your anticipated business growth?
Michael Dell: We will continue to modify and adapt our direct model. We have told investors we plan to drive an additional $1 billion out of our business costs this year - in addition to the $1 billion we removed last year.
HostingTech: The Dell direct sales model is widely regarded as an innovation that reshaped the PC industry; what new Dell initiatives might observers look back upon as having been the beginning of other accepted industry practices?
Michael Dell: Our vision is to be the most customer-focused company in the world. We have hundreds of programs and initiatives going on all the time. Examples: First, our goal is to further reduce the amount of inventory we carry. Five years ago, no one thought we could get it down to four days - but we have. Another area is the customer experience. We're putting systems in place to measure the quality. We always want our operations to reflect our customers' expectations. For us, that's what "direct" is all about.
HostingTech: What single area of technology - storage, security, applications - will likely occupy the agenda of CxOs for the next six to 12 months?
Michael Dell: The thing that's on CxOs' minds with regard to technology is making sure I.T. investments are delivering value. In most cases, that means more efficiency and greater network performance, which covers all products. Especially in the enterprise. We're focused on providing servers and storage products that deliver exactly what customers need - no more, no less - but are scalable and based on standards, so our customers can expand their systems easily and cost-effectively.
HostingTech: Bill Gates has relinquished his CEO duties to become Microsoft's chief software architect; do you foresee a similar leadership change of focus?
Michael Dell: I'm having a great time and feel there are still many more exciting challenges ahead. I have grown as much as Dell has over the past 18 years, and I can't imagine another role as fulfilling as the one I have today.
HostingTech: What is your personal philosophy and how do you employ it in business and your personal life?
Michael Dell: I like to win. Competitiveness is part of what drives me and one reason I love our industry. It's challenging and changes quickly; you can never lose your focus or get too comfortable with old habits. You have to be flexible, quick to respond, and always in touch with what customers want. At the same time, balance is important. I love what I do, but I also love spending time with my family. I make sure I have plenty of time for both. I was fortunate to be able to turn my passion for computers into a business. Success is tied to doing something you truly enjoy. If someday people said Michael Dell helped put the customer back at the center of business operations, I'd be very happy with that legacy.
HostingTech: What would be the message of your commencement address to high school graduates?
Michael Dell: Take risks. Experiment. And don't be afraid of mistakes. There's always something to be learned from failure. I've seen first-hand that, often, out of failure come our greatest successes.
http://www.hostingtech.com/nm/02_08_balance_print.html [Accessed 12.11.03]
