Dell Inc. is one of world' largest multinational technology corporation that manufactures sells and supports personal computer and other computer related.
Dell was founded as PC's Limited in 1984 by Michael Dell, with a start-up money totaling $1,000, when he was attending the University of Texas. Michael Dell started his business with a simple concept that selling computer systems directly to customer would be the best way to understand their needs and give them the most computing solutions. The first product of the company is a self-designed computer called Turbo PC which had lower prices than major brands. PC's Limited was not a first company to do this but was the first to succeed, grossing $73 million in its first year trading.
The company changed its name to Dell Computer Corporation in 1988. They tried to sell computer through stores in1990 but was unsuccessful and they returned to sell directly to customers.
Dell was included in Fortune Magazine as one of the world's 500 largest companies in 1992. Four years later, Dell began to sell computer through its website. In 1999, Dell beat Compaq and became the biggest seller PCs in the US with $25 billion in revenue.
In 2003, the company's name was changed to Dell Inc.
In 2004, Dell tried to expand its sales include televisions, printers and digital audio players. At the same year, Michael Dell resigned and retaining as chairman of the board. Kevin Rollins became new CEO.
In 2005, Dell appeared at the first place in the Most Admired Companies of Fortune Magazine.
In 2006, Dell bought Alienware - a computer hardware manufacturer.
In 2007, Kevin Rollins resigned and Michael Dell resumed as CEO. This same year, Dell had partnership with Wall-mart, Staples and Gome that helped it to reach new customers and extend its distribution.
Industry overview
As we know, computer industry is a highly competitive industry. And this industry is very flexible, technology is changing day by day, companies and organizations have to change to catch up with the speed of technology. If the companies cannot catch up with it, they will be eliminated by their competitors. Here are few names of outstanding companies in the industry:
HP started in 1939.
IBM joined in computer industry since 1980 but this company had a strong foundation from 1880s.
Acer started in 1976.
Apple was founded in 1976.
Dell was founded in 1984.
These are few strong names in the computer industry, all of these names appeared very early but except Dell, Dell only has more than 20 years experience. This mean Dell will have to compete with giant corporations that exist and understand the industry, the market longer and better.
Technology also plays an important role in computer industry. As technology continues to evolve, so does the establishment of technology as a driving force in the business world today. In times past, businesses were guided by people and processes. These two factors are what drove a business' performance and determined whether or not an organization would be successful in reaching its mission critical goals.
This industry differs somewhat from other manufacturing industries in that production workers make up a relatively small proportion of the workforce. Technological innovation characterizes this industry more than most others and, in fact, drives much of the industry's production. This unusually rapid pace of innovation and technological advancement requires a high proportion of engineers, engineering technicians, and other technical workers who carry out extensive research and development. Likewise, the importance of promoting and selling the products manufactured by the various segments of the industry requires knowledgeable marketing and sales workers. American companies in this industry manufacture and assemble many products abroad to take advantage of lower production costs and favorable regulatory environments.
Electronic products contain many intermediate components that are purchased from other manufacturers. Companies producing intermediate components and finished goods regularly choose to locate near each other, because doing so allows companies to receive new products more quickly and lower their inventory costs. It also facilitates joint research and development projects which benefit both companies. As a result of having the skilled workforce that fosters product improvement, several regions of the country have become centers of the electronics industry.
Globalization has become a major factor in the electronics manufacturing industry, often making it difficult to distinguish between American and foreign companies. Many American companies are opening plants and development centers overseas and overseas companies are doing the same in the U.S. Many products are being designed in one country, manufactured in another, and assembled in a third.
Economic conditions
We are now facing serious global economic crisis, worried much about it and really thought it becoming big disease which affecting communities and industries across the planet. Furthermore, people now afraid of losing their job, companies really facing much trouble how to get through and survive in the financial crisis especially in IT industry where contains highly competitive market and DELL Inc. is a part of that industry.
As we wrote above, Michael Dell established Dell Computer Corporation in 1984 in Austin, TX with the capital of $1,000 during the time he was attending University of Texas. By his vision, he could do great things by upgrading PCs and sell them. Furthermore, he was right to find ways to sell to the end users directly and now his company not only in term of the sales also building great customer relationship.
Here are some brief information of the company's record in the changing global economy:
In 1986 Dell expand its service offering, giving superior customer satisfaction and offers the industry's first onsite service program.
In 1987 Dell establishes its first international subsidiary in the UK
In 1990 Dell started to sell computers through consumer retail stores such as CompUSA and Best Buy however later exit this segment because it's not meet Dell financial objective.
In 1994 Dell launches its Dell Asia/Pacific and Japan operational
In 1996 Dell launches www.Dell.com started to selling custom-built computer online.
In 1998 Dell opens an integrated sales, manufacturing and support center in China.
In 1999 sales over www.dell.com tops 35$ million per day.
In 2003 Dell ship out 6 million units over HP with 5 million units.
In 2004 -40,000 regular employees, 27,000 in U.S, and approximately 13,000 in other countries.
After the full prosperity economic periods, the condition take trend to going down until now it became economic crisis in the world which directly affect to every industries and Dell follows that situation going down as many corporation in the world. They are facing with many problems which waiting to be solve such as financial, sale, profit or forcedly layoff their employees to avoid the bankruptcy.
Organizational structure
Geographic/ Market Hybrid
Figure : Dell's Geographic Structure
Advantages:
Maintaining a geographic scope
P&D is consistent
Customers are more focused
Easy to implement
Disadvantages:
Duplication of efforts
Communication between Dell' top managers and its customers
Accountabilities
Dell's functional Structure
Figure : Dell's Functional Structure
Advantages:
Co-ordination
Communication
Skills improvement
Motivation
Controlling
Disadvantages:
Limited the growth of under structure
Limits the quantity of products and services
Difficult to co-ordinate in a larger size
Problem statement and Analysis
Analysis of changes in the external environment
The Computer Industry is one of the biggest in the world with HP, IBM, and Apple… and Dell is a part of that main players. Furthermore, computer industry consists of all the potential buyers in personal computers such as printers, servers, notebooks and other computer peripherals. Dell deeply understands it and spends much work in analysis of changes in the environment and it provides environmental scan for the Computer industry:
Dell's marketing strategy has to improve and trends in the environment which containing threats and opportunities.
The key to be succeeded in these changes depends on how Dell adapts to the environment by modifies it marketing fix and strategies.
The strategy of Dell will be changed depends on the economic environment where containing consumer buying power, inflation levels, number of employee levels, credit conditions to the customer.
As the environment changes, Dell has to think about consumers who has to purchase power to back up their desire for the product, it's really important in Computer Industry. Furthermore, things such as brand name and its prestige will be a significant basis key for Dell's competitive advantages for computer products. Besides, changes in retail prices absolutely not a better effect on the market share, the unpredictable changing too risky for Dell in the economic crisis now. To talk more about the impact of these days global regression, we have to admit that this challenging economic conditions are beginning to affect IT sales even as DELL continues its strong showing globally. However, the company is keeping a watchful eye on inflation and other economic pressures which creating threat to the company. According to Dell's report, profits in its fourth quarter decreased by 39 million year over year, a loss the company attributes to lower sales worldwide, as a result of the economic crisis. However, Dell believes and confident in Dell's reorganization plan which offer the globalized companies opportunities to standardize products and services. Moreover, these projects will make Dell's can enable a company to balance the income different geographies, open chances to make up that loss in another area. Moreover, due to the affects of economic crisis so that Dell has exceeded earnings expectations by cutting prices and reducing employee. According to Dell's CFO Brian Gladden said during the company's most recent earning announcement that Dell intends to increase its saving by an additional $1 billion by 2011 which he did not deny would include additional layoffs. Dell also asking their employees to take some unpaid time off in the economic crisis time as a means of reducing costs, possibly avoiding the increasing of their loss and better position Dell for long-term competitiveness.
In economic environment, Dell should focus on the value of the home currency which all branded products like Dell are imported and their prices vary with changes in the relative exchange rates. Even in the crisis period, the customers are likely to purchase higher quality products rather than to simply buy more depend on their income.
The technological improvement and inventions always creates new products and market opportunities where Dell should be proven has high competitive with their rivals. Moreover, not only reducing the size of the product but also increased efficiency and improve product's quality of Dell to show the advantages in the computer Industry.
The change of political environment also contains varying of government's laws in every country which's too complicated to Dell or the others to adapt immediately to the new laws. It includes the field of advertising, safety, pollution, and investing required by different governments.
The culture environment contains a large impact on the industry with large sphere of influence. Especially in Dell's case, if it's too intense that creating a threat and barrier of customers, they might replace or switch to unknown local branded products available where they be able to purchase with cheaper price.
Dell's responses to the Changes
The world is unpredictable and crisis events will occur. The ability to continue to communicate is critical to managing through unexpected situations. Dell Emergency Notification and the optional Incident Collaboration Center ( ICC) allows you to interactively contact large numbers of employees and customers during a crisis to provide direction, ascertain status and tools to manage through the hard time.
Changes in the industry and environment are the factors that affect directly to the growth of a company. Dell also concerns about that and tries to change itself as fast as possible to the environment.
Competition and substitute availability are significant factors in the race to capture and maintain competitive advantage. The critical challenges Dell's leadership faces today require innovative thinking and integration to create an agile infrastructure.
As competition has expanded and the computer industry overall has struggled to survive, Dell has remained profitable. Dell not only stands on a firm financial foundation, they continue to support superior customer service and a pre-eminence with their internal employees.
High performing organizations, such as Dell are alert to the acceleration in the continuing global rate of change, developing trends, and economies. Dell recognizes the changes and acts on it to achieve competitive advantage. Dell is expeditious in its decision-making and execution of goal-directed change that is in alignment with its organizational goals and objectives
Dell's strategy is: survival, sustainability, revenue generation, and profitability through innovation and speed.
Dell's efforts remain focused on four strategic initiatives:
Driving global growth
Attaining product leadership
Superior customer service
Embracing Dell's corporate culture
Dell's rapid innovation and resourcefulness has helped maintain its ranking amongst the top PC producers. Dell's strategy to incorporate customer and stakeholder feedback in process innovation and product design ensures customer loyalty. These alliances reduce time and cost as they minimize or remove steps in the research and development process. It also provides motivation for its employees. Rapid product development increases the learning capacity of employees while strengthening their technical, conceptual, and interpersonal competencies
Dell, Inc. is understandably one of the leaders of the information technology industry. The company has found their product niche market and raised to the challenges faced in the computer industry, in a word, Innovation. However, there are few problems that Dell has to face currently as customer needs require and resources permit, at a cost as much as 90% lower than for proprietary mainframe computers. The potential problem is the ability to internally support these supercomputers. In an effort to remain ahead of competitors Dell is adding value and reducing costs.
There are potential ethical conflicts associated with Dell's competitive methods. "Friendly fire" or healthy competition amongst colleagues for idea generation or innovative solutions could result in faulty thinking, resistance, dangerous shortcuts, or liability issues. At a global level this strategy must be well thought out and carefully implemented.
Evaluation of organizational performance measurement systems is qualitative in nature. Such a process can also help Dell more proactively sense and react to changes in their competitive environment.
Analysis of Dell's solutions
Delivering the Best Possible Customer Experience
Dell's climb to market leadership is the result of a persistent focus on delivering the best possible customer experience by directly selling computing products and services online and through catalogs.
"We put a great deal of emphasis on understanding what drove customer satisfaction, whether it was response times on the telephone, quality of products, valuable features, or the ease of experience in using the product. Engaging the entire company - from manufacturing to engineering to sales to support staff - in the process of understanding customer requirements became a constant focus of management, energy, training, and employee education," writes Michael Dell. We can see clearly the Dell's management is always focus on customer centric, Dell wants each moment customers spend with Dell is valuable.
Focus On the Best Solution, not the Best Technology
As Fortune wrote: "A Dell mantra is that today's technology is tomorrow's commodity. Dell waits until the cost of that technology falls low enough for it to be stuffed into computers at state-of-the-art factories and then sold direct at a cheap price, which allows the company to drive for share." Technology may play an important role but sometimes some problems need human to solve it and we can based on technology to make the best solution to solve the problems, and use technology as a tool to help Dell solve the problem and the problem here is decrease the cost and price. Dell did a good job in solving this problem.
Teaching Innovative Thinking
"It is really dangerous if everyone in a company starts thinking the same way", writes Michael Dell, Chairman and CEO of the Dell Computer Corporation. "The danger comes when you fall into the trap of approaching problems too similarly. You can encourage your people to think about your business, your industry, your customers innovatively. Ask a different question - or word the same question in a different way. By approaching a problem, a response or an opportunity from a different perspective, you create an opportunity for new understanding and new learning. By questioning all the aspects of our business, we continuously inject improvement and innovation into our culture. How can we teach people to be more innovative? Ask them to approach a problem in a holistic sense." This part of Dell very similar to HP and HP is good example for other company to learn, HP Way used to work smoothly but people in the organization didn't want to change and when a new CEO came in. She had a good view about the company as a outsider and not be influenced by HP Way. Del learned this lesson and they tried to be run in a different track from the beginning. Dell encourage people to think innovatively, people also can raise the problem or solution to solve it.
Getting Feedback from Customers and Suppliers
Dell start their innovation process with asking their customers, "What would you really want this thing to do? Is there a different way to accomplish that?" Then they meet with their suppliers and ask, "Can we do this in a different way?" Then they try to come up with a totally different approach that exceeds the original objectives.
To continually bring information from the outside world into Dell, with an eye toward staying as competitive as they can, Michael Dell uses a variety of innovative approaches. He says, "I also enjoy roaming around outside the company to see what people think of us. On the Web, nobody knows I'm a CEO. I'll hang out in chatrooms where actual users commonly chat about Dell and our competitors. I listen to their conversations as they discuss their purchases and their likes and dislikes. It's a tremendous learning opportunity."
Not only listening from customers, Dell also listen to suppliers and Dell wants to have a whole view about each problem they encounter. So, this type of feedback is always run very well because Dell looks into the problem as a whole and satisfy both customers and suppliers. So, the most flexible and good for both sides will come out. Standing in the between Dell won the satisfaction of customers and suppliers.
Individual responses to outside changes
As in the global crisis, none companies nor any corporations that don't have their own difficulties, especially changes that occur in the environment and the industry. On other hand, these changes are factors that affect directly to the growth of a company.
Dell has realized about that and tried to change itself as fast as possible to adapt the environment. In January, 2007, after returning to the role of chief executive of Dell, Mr. Dell said that he would revive the company through a combination of investments and strategy changes - including the introduction of sales through retail stores - and move to cost cuts.
To being direct, Mr. Dell hired some fresh outside blood. Two of the major additions were Mike Cannon, the global operations chief and Mark Jarvis, the chief marketing officer. The former was charged with improving the efficiency of Dell manufacturing plants and wringing costs out of them. A major component of that initiative was to close some US based assembling facilities and outsource that work to cheaper Asian countries.
Figure : Michael S. Dell, comic picture
The latter was given the task of blurring the line between Dell and Apple in the minds of consumers or as Mr. Dell puts it - 'building brand lust'. Dell has made progress on both those fronts.
Since then, Dell has unveiled a series of more stylish products and laid off about 8,500 workers. The company sold 53% more consumer PCs in its fiscal quarter ended Aug. 1 than it did a year earlier, sending its world-wide consumer market share to 9.1%, up from 7.5% at the same time last year. Not only profit margins have risen but also the company has had some success in the high-end consumer market. However, it's not to the extent that Michael Dell was hoping for. Hence, he made the decision to let both of them go.
Dell also announced on Dec 31st that it is eschewing the geographical-based organization of its commercial business in favor of an integrated worldwide business that will be clustered around type of customer .This is intended to make the company more responsive to global trends. These changes raise a number of red flags. Firstly, Mr. Dell is admitting that some of the people he hand-picked to turn the company around are not getting the job done. Secondly, it creates some confusion over just how committed Dell will remain to the strategy of outsourcing manufacturing operations to lower-cost locales, something Mr. Cannon was heavily involved with. And third, these reorganizations are seldom positive indicators. Anyway, according to these changes, one question has been occurred "Is Mr. Michael Dell eventually going to make this work?" and there is a strong case that has been made to against it.
The first point which is pointed out is Dell was still the chairman while Kevin Rollins was running the company. It's not like he handed over this money-making machine, went into seclusion for three years and came back to find a mess. So a lot of Dell's current struggles germinated during his watch too. But more importantly, Dell seems to have trapped itself in the role of trying to be everything to everybody. Consequently, there is brand confusion around Dell. Mr. Dell has contributed to that by trying to pursue a strategy of high-end innovation along with bargain basement pricing. Those two objectives run counter to each other as the low margins cannot finance expensive R&D.
Conclusion
Main factors of Dell's success
To become a success, Dell says, "You just need a framework and a dream".
Dell isn't the computer industry's biggest innovator, but nor does it try to be. Dell knows what it is good at and what made it a success, and it has stuck to that formula. By cutting operating costs, eliminating the middleman, scrapping inventory and spending a minimal amount on research and development, Dell is the first to admit that its sole goal is to offer computers at the lowest possible price and leave the cost and risks of innovating to others.
Dell has made a point of studying its customers as opposed to its competitors, believing this would give it a greater competitive advantage. By focusing on product customization, customer needs and customer service, Dell has become a company as one of the most customer-centric in operation today. As a result the company could reduce its inventory costs and deliver customers products and services they require. - Dell further recognized the importance of a premium customer service as a key element for success.
Otherwise, Dell also knew that the success of a company would depend on its employees. By giving its staffs a high degree of responsibility and authority, Dell was ensuring employees had an equal amount of interest in seeing the company succeeded.
Dell is always aware of changing trends and being flexible to adapt to them, Dell was able to use those very changes to compete to its competitors.
Current situation of the company
Dell was first found in 1984, 25 years passed by, but Dell still maintains its reputation as one of the world's largest PC maker and its well-know brand. Recently, Dell has been trying to sell its factories in order to cut costs.
According to the plan, a company that purchases a Dell factory would likely be contracted to continue making computers there for Dell. As implementing this plan, Dell would continue to expand its use of original design manufacturing partnerships and manufacturing outsourcing relationships. On other hand, thanks to this plan, Dell could cut out the retailer; have cheap labor due to the manufacturing outsourcing relationships, and still Dell can maintain the customer's own specification. However, due to selling factories, Dell has created a huge range of products and components from many suppliers from various countries. Besides, companies or computer makers are not computer manufacturers make Dell unable to switch supply. Moreover, as having and introducing many new products to its huge range, Dell has created itself diversification strategies. However, in order to maintain the position that Dell is now having in PC industry, it has to be aware of competitive rivalry that exists in the PC market globally, as well as new entrants to the market that may pose potential threats. Lastly, Dell should also expose to fluctuation in the World currency markets in exchange rate. In conclusion, Dell should give commitments to customer value, operate with responsibly, and continue to differentiate itself from other competitors.
Figure : Revenue of Dell Inc. from FY 2004 to FY 2008
Suggestions and Recommendations
Dell is a multinational computer company which managed to stay in the first place of computer system sales for over a decade. Its strong and revolutionized strategy of direct selling computers to the customers increased its success in the computer companies' field providing it with a competitive advantage.
From the analysis of changes in the external environment we've mentioned above, Dell needs to understand the differences between each segmentation of customer that it' s dealing with, therefore Dell may have appropriate tactics.
On the other hand, with gaining customers trust in product and services, Dell should also have alliances with major partner in the IT industry like Intel to compete better with its potential rivals. Successful in its promotion by taking "be direct attitude" like a key factor to Dell has changed the way customer views and it might be a right time to seed their plans and campaigns to attract consumers. Dell should continue to strengthen their competitive position as the leader of online computer systems. If Dell wants to optimize their return on investment, they should continue to form strong customer relationship as well as vendor relationships and participation, also. This way may surely help Dell to maintain its stable reputation and profit.
Diversification appearance (colors, pattern, for examples) of products and care more about young, fashionable customers is a good chance for Dell to increase its sales.
Figure : Some of Dell's Collection
On another dimension of doing business, Dell should also keep concern in the manufacturing process in order to reduce costs and maintain high quality products. Sensitive in selecting and adapting new technology and new global trends are important since Dell's competitors are more and more each day, in both number and competitive competency.
In conclusion, Dell is on a mission and that is to provide the best online customer experience to all, who decide to buy Dell products. This task will be accomplished by demonstrating the key features, product benefits and other value added to the customers (good supporting service, for example).
Forecast the future look of Dell
Based on Dell's current position in the Computer Industry, on the developing history of this 25-years-company, on the inspirational way of doing business of Dell's founder and CEO, on the flexible and customer-centric culture of the company, we have reasons to believe in a bright sight of Dell Inc.
Quickly in adapting both new technology and new trends, Dell is struggling for gaining market share and take away its competitors' customers.
Started with a passionate dream, Mr. Michael Dell has been trying more than his best to use a simple but meaningful concept to drive the whole corporation.
As people more and more get used to the e-commerce, Dell has great opportunities to enlarge its market share without investing giant amount of dollars in setting up new branches wherever there's a need for Dell's products. People may discuss that, the traditional way of selling is better because there're people who can only purchase if they can directly look and touch at the product. But, Dell's always opening its doors to retailers, whom they provide different policies from policy for end-users. By this way, if you are an active retailer and you "sense" that selling Dell may surely profit you, you would contact with Dell and create a "partnership" easily with a cheap cost (through website, not like traditional way).
Moreover, high quality, durable, nice staff who always want to listen to customers' needs and wants, and now, fashionable are features to launch Dell to a higher level of success.
Therefore, we personally think that Dell can even improve it market share and company value regardless to the global regression, which Dell has come out with many solutions to survive through.
Article "Layoffs to hit another Dell plant" at http://news.cnet.com/8301-1001_3-10193926-92.html
Article "Dell askes workers to take unpaid vacation" at http://www.reuters.com/article/technologyNews/idUSTRE4A37BQ20081104
Dell related pages on www.wikipedia.org
Article "Dell computer Corporation: A model for innovation" at http://www.team-doctor.com/Assets/HansonDellComputer.pdf
Article "Dell strategic management" at http://ivythesis.typepad.com/term_paper_topics/2008/02/dell-strategic.html
Article "Dell computer: Organization of a Global production network" at http://www.crito.uci.edu/git/publications/pdf/dell.pdf
Article "The irrepressible Dell" at http://ebwriters.com/irrepressible_dell_18831.htm
Article "Is Dell chasing ghosts or is a turnaround realistic?" at http://www.investorguide.com/stock-archives.cgi?date=010209
Article "Dell plans to sell factories in effort to cut costs" at http://online.wsj.com/article/SB122058183649202581.html
