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Dell’s organizational fortitude requires a vigilant, agile, and fluid approach to change. Historically, management teams throughout this successful organization have accurately identified those change initiatives that ultimately brought about competitive advantage. Identifying goals, goal specifications, metrics for accomplishing the goal, and metrics specifications propels organizations towards their strategic objectives. The critical challenges Dell’s leadership faces today require innovative thinking and integration to create an agile infrastructure. Such a process can also help organizations more proactively sense and react to the volatile changes in their competitive environments.
To manage effectively across the computer industry, acute awareness regarding the interdependency of departments, partnerships, culture, and subcultures is critical. Amplified global competition, rapidly developing advancements in technology, and the fluctuations of customer demand have produced shorter product life cycles, thus creating the need for faster product development. “One can easily relate to the rapid obsolescence of products in many industries, notably the computer and electronics industries.” (Kessler, E., 1996). Dell, Inc., as a result of escalating technological advancements, has increased the number of potentially lucrative product niches while creating more diverse product lines.
Competition and substitute availability are significant factors in the race to capture and maintain competitive advantage. “Moderate competitive pressures simultaneously provide sufficient motivation, ample resources, and the opportunity for a firm’s fast innovation to undercut the market positions of competitors.” (Kessler, 1996)
“Today global markets and global sources are more accessible for many reasons: better technology (such as Internet communications), cheaper transportation, and reduction of legal-entry barriers to most international markets.” (Anderson, 2000) Dell’s strategic development of its direct marketing agenda has resulted in phenomenal growth. Based on many defining financial ratios like, gross profit, net revenue, ROI, ROE, etc. it is apparent that Dell is financially superior and a leader within its industry. As competition has expanded and the computer industry overall has struggled to survive, this company has remained profitable. The trends are clearly indicative of a strong economic system, which are supported further by a comparison of industry averages. Additionally, Dell not only stands on a firm financial foundation, they continue to support superior customer service and a pre-eminence with their internal employees. Dell’s implementation of leadership training throughout all managerial levels will assist in the support of the staggering financial growth and help eliminate the potential erosion of the infrastructure in the future.
Dell has set the standard concerning diversity. Michael Dell’s leadership in the company’s commitment to diversity proves that it is both the right thing to do and a key business performance strategy. Dell recently stated that, “To compete, the company must attract and retain talented men and woman who represent a range of background. Further, Dell realizes that its diverse workforce fosters innovation, creativity, and new solutions that help the bottom line.” (Fry, 2003) Dell goes well beyond a diversified employee-base, it is also “committed to a diverse supplier base that includes small businesses and minority-women – and veteran – owned businesses.
High performing organizations, such as Dell are alert to the acceleration in the continuing global rate of change, developing trends, and economies. Dell instinctively 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. “In today’s fast-changing business environment, responsiveness – quickness, agility, the ability to adapt to changing demands – is more vital than ever to a firm’s survival.” (Bateman-Snell, 2003) Enhancing Dell’s competitive advantage and strategy is a result of strategic management, technological innovation and express decision-making.
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 survival depends on remaining alert to developing trends and economies. Dell’s rapid innovation and resourcefulness has helped maintain its ranking amongst the top PC producers. Dell’s strategic focus on the business and educational markets has resulted in a significant market share in each of those segments. The organization was the leading supplier of computer systems business for two years running. Dell’s strategic development of its direct marketing agenda has resulted in phenomenal growth.
Dell consistently delivers swift strategic response to match customer needs to products and service. In addition to a full line of desktop and notebook PCs designed for consumers, Dell offers network servers, workstations, storage systems, and Ethernet switches for business customers. “Electronic commerce is now allowing global customers in some industries to connect directly and reveal their preferences, such as Dell Computer’s strategy of assembling computers in-house to customer specifications.” (Anderson, 2000) Such tactical maneuvers have allowed Dell to remain the world’s premier direct-sale computer vendor.
Dell’s strategic alliance with the voices of the customer and stakeholders to accurately project and exploit trends and make prompt decisions by reassessing strategies, continually adds competitive advantage by leveraging and enabling the latest process concepts. Dell’s strategy to incorporate customer and stakeholder feedback in process innovation and product design ensures customer loyalty. This integration serves to prevent misinterpretation between perceived and actual customer needs. Dell purposely “forms linkages, upstream and downstream, lateral and horizontal” (Kessler, 1996) through all phases of research and development. 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. Research has shown “that direct contact with customers triggers quicker action and helps employees to pay attention to new ideas, solutions, and opportunities.” (Kessler, 1996) Rapid product development increases the learning capacity of employees while strengthening their technical, conceptual, and interpersonal competencies.
In Dell, Inc.’s 2004 annual report, Founder, Chairman of the Board, and Chief Executive Officer Michael dell stated, “Dell product shipments grew 26%, nearly three times the average of other companies. Our revenue increased 17 percent, to $41.4 billion; total sales by the rest of the declined. Operating expenses or just 9.7 percent of revenue, the lowest full-year in our history.” (mergentonline.com, and product category. Dell’s full-year product shipments, revenue, operating profit, and earnings per share broke all previous records. Dell was the leading supplier of computer systems business for two years running. The business was profitable in every geographical market, customer segment, and product category. Dell, Inc. is a company on the leading-edge.
Although financial data confirms Dell’s success, it does not fully disclose their achievement. Dell is world renown for its customer service. Last year Dell earned more than 100 awards for product and service quality and reliability. Dell turns their inventory, on average, 107 times per year. Quality is another hallmark of Dell, Inc. “Dell’s PowerEdge servers are being selected more and more for critical applications within the data centers if businesses and other organizations.” (www.dell.com) The Dell website is one of the world’s highest-volume Internet commerce sites.
“International Business Machines Corp. (IBM) is dropping out of the personal computer (PC) business. Oracle Corp. is acquiring PeopleSoft Inc. Outsourcing, offshore and otherwise is looming large as an option in the computer industry.” (Hayes, 2004) Dell’s persistent innovation and greatest strength seems to be in the uncompromising philosophy of do what the customer asks for and do it right.
Dell is the world’s premier direct-sale computer vendor. In addition to a full line of desktop and notebook PCs designed for consumers, Dell offers network servers, workstations, storage systems, and Ethernet switches for enterprise customers. Dell faces fierce competition from Hewlett-Packard, whose market share improved significantly following its acquisition of perpetual PC leader Compaq.
In Dell’s annual report, Michael Dell asserts, “We again demonstrated the fundamental competitive advantages of our high-quality, low-cost business model and the great discipline with which it’s applied worldwide by an outstanding Dell team. For us, that discipline takes the form of identifying a small number of priorities, directing resources to them, then measuring and holding ourselves accountable for significant progress toward them. ” (www.dell.com )
There are several government-imposed regulations that affect most industries at some level. There is regulation and deregulation that is specific to particular industries. Organizations are guided by city, county, and state regulations, consumer, employee relations, environmental issues, financial and globalization regulations. Regulations regarding employee relations and globalization significantly impact the computer industry.
“The promises and perils of globalization take many forms. The most commonly experienced manifestations are in the realms of economics and culture, but much of what shapes the causes and consequences of globalization today, in any form, is its less glamorous regulatory underpinnings. Whether and how certain interests prevail during trade negotiations depends not only on the quality of the product, service, or idea being promulgated, but the strategic leverage their advocates enjoy (or the coalitions their different types of advocates are able to assemble) in the international forums established to manage the global economy.” (Woolcock, 2001)
There are several potential challenges inherent to Dell’s strategy. Collaborative efforts can be inadvertently sabotaged because of differing divisional or departmental goals. Maintaining project focus through corporate lenses will reduce departmental myopia. The reverse is also a possible challenge, becoming overwhelmed by the length and the breadth of the new process or product. Dell could compromise itself by engaging in too many technological fields and innovations. Having too many irons in the fire could result in spreading its resources too thin.
Dell, Inc. is understandably one of the leaders of the information technology industry. The company has found their product niche and raised to the challenges faced in the computer industry, in a word, Innovation. Upon review of the company financial’s, annual report, and extensive research, it appears that there are few problems that are currently plaguing Dell. However, based on the annual report ‘Dell servers are being clustered together into virtual supercomputers that can be expanded over time, as customer needs require and resources permit, at a cost as much as 90 percent lower than for proprietary mainframe computers.’ The potential problem is the ability to internally support these supercomputers. Additionally, the ‘Dell Effect’, where prices drop and value increases, potentially undervalues the system through competition. In an effort to remain ahead of competitors Dell is adding value and reducing costs. This could eventually introduce long-term dilemmas, which would become catastrophic to correct.
There are potential ethical conflicts associated with Dell’s competitive methods. “If formal techniques, such as quality function deployment, are not used to explicitly focus innovation efforts on consumer demand, quality can become lost in the firm’s narrow pursuit of speed as an end in itself, rather than an instrumental end to the success of the project.” (Kessler, 1996) “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 in order to avoid cultural faux pas that could lead to misinterpretation of the customers true needs.
Kevin Rollins president and chief operating officer at Dell stated that the organizational goals are to increase market share position 10 to 20 percent while pricing 20 to 30 percent below the competition. He asserted, “You’ve got companies with 60 percent gross margins, so if we drop the margins to 30 percent, they aren’t geared to compete.” (Briody, 2001) Dell proves that it is not the big that eat the small, rather the fast that eat the slow.
Dell’s recent business “Latitude” notebook, desktops and mobile workstations were developed with enhancements based on direct customer feedback. These enhancements have increased performance, reliability, usability and environmental friendliness. These innovations reflect Dell’s ability to incorporate direct customer feedback into every product. National brand manager, Dell Canada Mobile Products, Peter McNeil exclaimed, “They enhanced the performance, usability and reliability that our customers demand.” (Hoovers, 2005) Dell’s fourfold strategic initiatives to drive global growth, attain product leadership, provide superior customer service, and embrace Dell’s corporate culture are permeated in everything it does.
Organizational objectives and goals must be in strategic alignment with the Dell’s mission, vision, and values statements. The right indicators will aid in monitoring performance, identifying potential obstacles to optimal performance while increasing the organizations ability to anticipate and spot trends, and make express decisions by reassessing strategies. Identifying goals, goal specifications, metrics for accomplishing the goal, and metrics specifications will propel Dell towards its strategic objectives. 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.
Similar to performance measurement are milestones. Milestones target time-based objectives, instill a sense of urgency, and maintain focus. Milestones “structure the process by separating an otherwise formidable task into manageable parts. This segmentation further aids in translating overarching project goals into concrete, achievable ends that can increase workers’ task motivation during product development.” (Kessler, 1996)
Dell needs to be mindful of what it does best. Deviating from its own best practices has had expensive consequences. “The $340 million purchase of ConvergeNet proved that acquiring companies is not Dell’s strength. The acquisition has been roundly criticized by analysts for not producing results sooner. U.S. Bancorp Piper Jaffray’s Ashok Kumar characterized the debacle as “an expensive lesson.” Company executives even admitted that they had not done enough due diligence, and major delays in product rollouts occurred. Richard Watts, the former CEO of ConvergeNet and now the head of privately held Scale Eight, even sued Dell, claiming wrongful termination when he was pink-slipped weeks after the acquisition.” (Briody, 2001)
Dell, first and foremost needs to emphasize innovation into its manufacturing and marketing process, not just its products. “Innovation is where the money is in 2005. That’s why Dell will still be in the PC business in 2005 and IBM will not.” (Hayes, 2004)
Organizational survival is reliant on its capacity to project and maximize trends, make express decisions by reassessing strategies, continually adding competitive advantage by leveraging and enabling the latest process concepts. Organizations must be responsive, agile, and capable of adapting to change quickly, as change is inevitable. Historically, management teams throughout highly successful organizations, such as Dell, have correctly identified those change initiatives that ultimately brought about competitive advantage and how they might evolve. The critical challenges managers of the twenty-first century face today require innovative thinking and integration to create an agile infrastructure.
References
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Bateman, T. & Snell, S. (2003) Management: The New Competitive Landscape, Sixth Edition. The McGraw-Hill Companies. New York, New York.
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Source by Victoria Krayna
