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Contents

Dell’s Strategic Management. 2

The outstanding performance of dell 5

Other Crucial Elements of Dell’s current Business strategy. 7

Dell’s SWOT analysis. 7

An evaluation of Dell’s cost competencies. 10

References. 12

Dell’s Strategic Management

Dell Inc is a leading PC manufacturer and supplier to government and corporate customers. Today, the company is one of the first companies to start offering customers Pentium processors with industry-standard power at a time when many vendors are still trying with limited success to widen their scope using the existing technologies. According to Treacy& and Wiersema(2009, p. 134)Dell has a unique market strategy that is based on low cost leadership that puts the company in a good position to manage technology transitions that are based on a build-to-order manufacturing system. According to Anderson(2004, p.154), this is the main reason why Dell may overtake Hewlett-Packard as the world leader in manufacture and sale of personal computers.

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Strickla (2004, p. 54)says that the build-to-order approach enables Dell to be consistent in maintaining low inventory levels while at the same time integrating emerging technologies into existing systems. Today, consumers are reducing supply bases. This provides PC makers such as Dell to get an opportunity to seize the right market share gains. Dell faces the challenge of redefining its strategy in order to face these challenges while at the same time maintaining its position as a low cost leader on the global platform.

As early as 1994, Dell was struggling to establish its position as a second-tier PC maker. During this time, the company was ordering its components in advance while at the same manufacturing to structure. This strategy seemed to be working in those days since technological innovations were not taking in a fast a pace as they do today. Today, says Morris (2009, p. 728) technological changes have necessitated frequent strategic planning changes in order to bring the core activities in tune with the company’s business model of maintaining a favorable customer relations strategy.

After 1994, Dell’s new business model was characterized by elimination of inventories through the creation of a just-in-time system. Its products were sold directly to consumers. In this process, new supply chain capabilities were put in place. The supply chain that Dell put in place was more than merely a means of pursuing efficiency and productivity; it was also a way of making difficult strategic tradeoffs in order to bring all its functional activities in line with the newly established business model.

Eisenhardt &Brown (2009, p. 788) note that in the process of creating the new business model, Dell had to leverage its resources strength by carefully targeting its corporate relationship with customers. The customer had predictable needs that they had already budgeted for and therefore, they wanted product models with pre-determined specifications. For this reason, they company was entering into a commitment with high-end, repeat purchasers who already had preferences based on early technology adoption.  

Dell Inc. CEO Michael Dell has done a great job of managing both the manufacturing and supply lines of the company at an international level at a time when the greatest technological changes have taken place in the history of computing. While pursuing this goal, the CEO was faced with the twin task of operating two-account system involving buy-component-to-plan and build-product-to-order strategies. Ensuring that both accounts were working as expected was a big challenge. It required a unique way of maintaining customer relationships as well as understanding their needs.

            The strategy execution process, to be effective, had to begin at the grassroots level. This way, the company was able to reach a wider customer market share as the internet continued to become more and more powerful and pervasive element of business models in many companies. The main line of effectiveness arose from the ability by companies to differentiate tasks in a more efficient and more feasible manner.

            Dell (2009, p. 3) says that a strong corporate leadership strategy has been responsible for positive responses to the changing PC market in terms of cost and availability of resources and competition. One of the best resources that Dell utilized is customer-specific intranet networks that were hosted in the form of websites. These intranet networks were highly effective as they were tailor-made to fit in with the individual situation of every customer. This is how Dell managed to put in place particular configurations that were guaranteed to work best in the network of each customer. At the same time, the company was able to get real-time insights from both individual and corporate customers about latent needs for purposes of identifying new generations of PC-specific products.

            Michael Dell, the founder of Dell Inc. started the company in 1984 on a very simple concept of selling personal computers directly to end customers. As the company’s leader, Dell has managed to develop a completely new style of management that is based on both marketing know-how and technical knowledge. He was able to maintain familiarity with all aspects of the business, to overcome his shyness and control his ego.

            Michael Dell was clever in the way he used a social strategy that involved motivating people by winning their respect and loyalty. He was also successful in the way he was able to delegate some of his authority to his subordinates. By being a risk-taker, the CEO was able to meet with customer from all corners of the world, a factor that was a very integral element of giving the company a competitive edge in the PCs industry.

The outstanding performance of dell

            The most outstanding performance standard for Dell Inc. is that all of its workstations, personal computers and servers were manufactured to order. None of them were manufactured for inventory.             All Dell customers could easily order custom-made workstations and servers according to their specific needs, preferences and applications. For this reason, Dell came to be considered a world-class innovator in PC manufacturing and a pioneer in mass production of customized products.

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            The build-to-order strategy was advantageous in that the company lacked an in-house stock of manufactured products, meaning that it never had to wait for resellers to clear their own inventories before pursuing the goal of making new models and introducing them into the marketplace. The largest inventory that resellers could stock lasted between 30 and 60 days. All customers who bought products from Dell had their personal computers customized to their liking.

            Quality control and run testing process could easily be carried out in all assembly plants. Once all parts, components and subassemblies had been obtained from the suppliers, it was easy to assemble the Dell products.

            One of Dell’s greatest intangible resources is partnerships with suppliers. These partnerships took the form of backward integration with the best suppliers of every part and component. The company has been able to maintain business relationships with the best suppliers as long as they remain in leadership positions in areas of performance, technology, quality and cost.

            The cost leadership strategy that Dell adopted was compatible with its built-to-order strategy because unlike other PC manufacturers, the company was able to respond to price-change shocks caused by innovational changes in the world of computing. New advances in innovations were taking place so fast that in a matter of months, the existing technology would become obsolete.

            The low cost leadership strategy would not have borne fruits if the direct sales strategy was not pursued hand-in-hand with aggressive marketing campaigns. Aggressive marketing campaigns were characterized by ability to detect shifts in trends of sales, problems with design and glitches in quality. The management believed in Dell’s ability to respond very quickly to these shocks in order to gain a significant competitive advantage over other PC makers who operated on the basis of mass production of products that had been variously equipped and configured PCs that were sold through inventory-based retail channels. For this reason, Dell’s strategy can best be described as customer-driven.

Expansion into a new range of products

            Recently, Dell has expanded its operations into switches, data storage hardware, handheld PCs, printer cartridges and printers. This expansion is a way of diversifying the product base of the company using its existing competitive abilities in servers and PCs in order to pursue opportunities for more revenue growth.

            Michael Dell’s approach seems to be one driven by a perpetual search for the next big opportunity. The problem with this approach is that it is difficult to take every opportunity at once, since it leads to a kind of overload in the system. In the CEO’s rationale, the company is still going through the standardization and commoditization in order to exploit the $800 billion technology market. The company is still in the process of developing strategies of getting into the core of the technology market, at which time it will have overtaken Hewlett-Packard as the biggest PC Company in the world.

Other Crucial Elements of Dell’s current Business strategy

            The company’s drive for leadership in the industry is assisted by three additional elements: e-commerce and intranet technologies, advertising, and the PC industry’s white-box segment. The company is a pioneer in use of e-commerce and intranet technology in order to increase efficiency derived from its activities in different supply chains. The technology made it possible for all activities relating to order-to-delivery to be streamlined as well as to encourage more and more consumers to make use of the company’s website in order to gather information.

Dell’s SWOT analysis

            A SWOT analysis is an important strategic planning tool aimed as assessing the Strengths, Weaknesses, Threats and Opportunities that are inherent in any business venture. Strengths are attributes of a company that are very helpful in the process of achieving an objective. Dell has several strengths. The main one is a direct business model. Through just-in-time manufacturing as well as build-to-customer order, the company is able to maintain competitive pricing, thereby achieving the goal of price leadership.

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            Other Dell’s strengths include highest quality and technology, cost/differentiation strategy, best in-class support and service, superior corporate citizenship, flexible customization capability, effective leverage of skills, real-time perpetual adaptation to environmental changes, availability of new technologies in the process of competing with rivals, and overall cost and operating efficiency.

            Weaknesses are attributes of an organization that are harmful to the goal of achieving the set objectives. Dell also has its share of weaknesses too. The main weakness is overdependence on component suppliers. The company also depends too much on manufacturers of subassemblies as well as other devices such as printers, drivers, scanners, memory cards, modems and data storage utilities.

            Opportunities are external conditions that are helpful in the achievement of an objective. The main opportunity for Dell is in the form of mass customization. The company has potential growth in many overseas markets. It also has an opportunity of perpetually expanding its PC’s industry market.

            Today, personal computers are increasingly become a necessity both in the workplace and at home. Second-time buyers would prefer to buy custom-built computers owing to their increasing knowledge about computers. Therefore, the company will always boast of curious loyal customers who are always on the lookout for new computers with additional features.

Threats are external conditions that are harmful to the task of achieving objectives. Dell faces the threat of fierce competition in the form of both market shares and prices, emergence of new competitive forces, trade barriers such as taxes and tariffs, currency fluctuation, and political instability in certain overseas markets.

            The personal computers market is very volatile and for this very reason, many threats abound. Technological changes occur in hardware, software and computer accessories. The company has to be on the look-out for these changes on a daily basis in order to find new concepts to be added into the existing computer systems. The threat of a company becoming outmoded remains a pulsating reality for all players in the computer business. That is not all; companies are always under competitive pressure to produce high-quality but cheap products.

            Among the greatest of Dell’s external threats is the narrowing gap between prices of different brands. Dell’s Direct Model is attractive to customers since it saves cost. Since competing companies can afford to offer computers cheaply, this poses a threat to Dell’s growing customer base that is anchored on the company’s price-conscious market leadership. 

            The analysis of Dell’s SWOT indicates that the company is in a very competitive position. The main highlight of the analysis is the “Direct Business Model” concept. Other contributors to the competitiveness include a close relationship with supply partners and customers and an accurate understanding of the company’s business environment

  Indeed, the business model pioneered by Dell proved to be an attractive one when major competitors began copying it, but with little success. Dell (2006, p. 2) says that what these competitors did not understand is that it is all a matter of a whole different approach in a company’s mode of operation.

            Additionally, Dell Inc. ought to profit from the various growth and expansion opportunities at its disposal, which can make the business increase profitability while at the same time trying to minimize the effects of weaknesses as much as possible.

An evaluation of Dell’s cost competencies

            Dell’s core aim is being a consistent cost leader. The company produces PCs of high quality and it sells them directly to consumers. Although threats and many technological changes are expected, the company is financially well positioned to adapt well to changing trends in global economy. The company’s financial ratios are an accurate indication that it is not match for its competitors. No wonder it is well positioned to overtake Hewlett-Packard as a world leader in PC business. The greatest indicator of the reality of such a likelihood is the brand-name loyalty that they company has established the world over through an effective cost-differentiation strategy.

            Dell(2008, p. 12) says that the direct market strategy seems to have succeeded if the growth in the company’s revenue from only $12 billion to $61 billion is anything to go by. The strategy works mainly because of the ease with which new opportunities can be pursued while at the same time enabling the company to overcome threats and weaknesses. Through a comprehensive review of the company’s costs across all supply and assembly processes, profitability has continued to increase.

            The company, it seems has been re-organizing its strategy without falling of the line as far as the direct market strategy is concerned. For instance, in the beginning of 2008, focus was on five main growth priorities: enterprise, consumer, small to medium enterprises, Notebooks and Emerging Countries. All these elements of strategic focus are indications of the reality that exists as far as exploitation of the company’s opportunities is concerned.

References

Dell, M, 2008, Fiscal Year 2008 in Review

http://content.dell.com/us/en/corp/d/corp-comm/ir-FY08-in-Review.aspx?c=us&l=en&s=corp&redirect=1 viewed April15, 2010.

Dell, M, 2006, DellIncorporation: Can Rivals Beat its Strategy, Routledge, New York.

Strickla, A, 2004, Strategy: Winning in the Marketplace: Core Concepts, Analytical Tools, Cases, Macmillan, New York.

Treacy, M, & and Wiersema, F, 2009, Discipline of Market Leaders: Target Your Customers, Narrow Your Focus, and Dominate Your Market, Sage Books, London.

Dell, M, 2009, Direct from Dell, John Wiley, Boston.

Morris, M, 2009, ‘The Entrepreneur’s Business Model: Toward a Unified Perspective’

Journal of Business Research, Vol. 58, No. 6, pp. 726-735.

Anderson, D, 2004, Build-To-Order & Mass Customization: The Ultimate Supply Chain Management and Lean Manufacturing Strategy for Low-Cost On-Demand Production Without Forecasts Or Inventory. CIM Press, Cambria, CA.