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Dell is the worlds leading computer systems company. They design, build and customize products and services to satisfy a range of customer requirements. From the server, storage and Premier Services needs of the largest global corporations, to those of consumers at home. They do business directly with customers, one at a time, and believe. They do it better than anyone on the planet.
We attribute Dell's success within the computer industry to its unique, low-cost business model, direct sales approach and collaborative research and development. By focusing on leveraging its core competency in supply-chain management and low-cost manufacturing within mature technology segments, such as PCs, Dell has a proven strategy to disrupt traditional technology business models that rely on proprietary technology or multistage sales and distribution. A key part of Dell's success stems from leveraging widely available industry technology within a low-cost manufacturing framework as a way of displacing the competition.
All this was made possible because of the Vision of one man, Michael Dell. Michael Saul Dell (born February 23, 1965) is an American business magnate and the founder and chief executive officer of Dell Inc. He is one of the richest people in the world, ranked 44 with a net worth of US$14.6 billion in 2011.
Michael Dell is considered a very accessible CEO and a role model for young executives because he had done what many of them were trying to do. he delegated authority to subordinates, believeing that the results came from "tuning loose talented people who can be relied upon to do what they are supposed to do." He was a visionary leader!!
Visionary leadership goes beyond charisma. Visionary leadership is the ability to create and articulate a realistic, credible, attractive vision of the future for an organization or organizational unit that grows out of and improves upon the present. This vision is so energizing that it "in effect jump-starts the future by calling forth the skills, talents, and resources to make it happen."
A vision differs from other forms of direction setting in several ways:
A vision has clear and compelling imagery that offers an innovative way to improve
Vision taps people's emotions and energy.
Michael Dell had them both. The key properties of a vision seem to be inspirational possibilities that are value-centered, realizable, with superior imagery and articulation. A vision is likely to fail if it doesn't offer a view of the future that is clearly and demonstrably better for the organization and its members.
Desirable visions fit the times and circumstances and reflect the uniqueness of the organization. People in the organization must also believe that the vision is attainable. Michael Dell has created a vision of a business that allows Dell Computer to sell and deliver a finished PC directly to a customer in fewer than eight days.
The uniqueness of Michael Dell's management style lies in its combination of reaching for the heights of perfection while burrowing down into every last data point. No rival has been able to imitate it.
He believes that the status quo is never good enough and that once a problem is discovered, it must be dealt with quickly. He refuses to dwell on success, and instead focuses upon how improvements can be made. Excuses are not accepted. Being a hero at Dell means saving money and every employee is expected to focus on cost control.
Michael Dell appears to embrace the following Fayol principles:
Authority and Responsibility: Michael Dell exhibited his right to give orders and his power to exhort subordinates for obedience when he fired his top European managers because they didn't cut costs deeply enough.
Unity of Direction: There is a singleness of purpose (continuous improvement and cost control) that makes possible a single plan of action to guide managers and workers in their use of organizational resources.
Initiative: Initiative is required by employees, who are expected to identify ways to continuously improve upon the company's past accomplishments.
Discipline: only highly disciplines employees are capable of overcoming the temptation to make excuses and consistently strive towards the achievement of corporate goals.
Dell announced an aggressive global target of $62B in revenue by 2006, which meant the firm would need to make talent acquisition and development a global priority. At the same time,
Dell wanted to continue to focus on cost effectiveness and operational efficiency.
The company's cornerstone values and philosophy are expressed as five elements, which together comprise "The Soul of Dell":
â€¢ The Dell Team
â€¢ Direct Relationships
â€¢ Global Citizenship
The company was at a point where it was asking its managers and leaders to lead differently than they ever have before. While reaching the aggressive numbers was essential, it was not enough. Instead, leaders were being called on to get to the numbers while engaging their people by offering inspiration and extraordinary leadership, integrating the Soul of Dell into their leadership styles.
Below is the diagrammatic view of strategic decision making and leadership skill development at Dell.
â€¢ Prepared for greater leadership roles
â€¢ Expanded support network
â€¢ Greater insight into self and others
â€¢ Development Plan
For any organization to be successful, leadership and management style should get altered with the life cycle of the organization. The style should match the organization's phase. Figure below shows different leadership and delegation of authority styles with organization's life cycle.
Dell's strategies were also very well matched with organizations internal and external environments.
Five Forces Analysis
Michael Porter's Five Forces Model is a framework which helps managers analyzed the competitive forces within an industry which can then be used to identify opportunities and threats to an organization within that industry. The Five Forces are risk of entry by potential competitors, rivalry among established firms, the bargaining power of buyers, the bargaining power of suppliers, and substitute products. There is also another force, which is sometimes referred to as the sixth force, which is complementors. The following will discuss three of the primary forces affecting the personal computer industry, and Dell in particular, proving that the personal computer industry in which Dell exists is actually a very unfavorable industry to be in.
One of the most dominant forces within the personal computer industry is the intensity of rivalry among incumbents. Within Dell's strategic group, the industry can be examined as a consolidated industry, due to the oligopoly that has been established by large manufacturers including Dell, Gateway, and Hewlett Packard. Within this consolidated industry, the intensity of rivalry is extremely high due to a particular company's competitive actions or moves directly affecting their competitors. For instance, when HP first started offering sub-$500 home computers, Dell and other manufacturers were forced to quickly offer similar low-end systems, which undercut their profits by causing customers to flock to these new low-end systems, rather than the traditional mid-range $1,000 computers which were being sold prior to that time. Additionally, industry demand, particularly within the business segment, has been declining, as customers are satisfied with their current systems and have no real urge to upgrade their hardware or software. This has caused the intensity of rivalry to rise as companies fight to maintain their market share and customers. Due to these factors, as well as the fact that, for large manufacturers, the exit barriers are quite high, the intensity of rivalry within the personal computer industry is very high.
The bargaining power of buyers is also quite high within this industry. While the everyday buyer may not have large bargaining power with computer manufacturers, larger buyers, such as large businesses, educational institutions, and governments have significant power because they purchase in large quantities, giving them the ability to leverage their power to gain price reductions. Switching costs are also quite low, with both individual and large customers having little difficultly to move from one manufacturer to another since most systems are based upon standard "Wintel" design specifications. Finally, it is relatively easy for customers to backwards integrate and build their own systems by purchasing the necessary components directly from the industry's suppliers or through retail outlets, threatening the industry as a whole.
Finally, the power of the suppliers of the industry, that is the computer component industries, is quite high. One reason for this is due to the fact that there are few substitutes to many of the components, particularly microprocessors and operating systems, and are therefore vital to the personal computer industry. Furthermore, companies within the industry would incur significant switching costs if they were to move to a product from a different supplier due to hardware and software incompatibilities. For instance, were a company to move from Intel to AMD processors, they would have to go to another supplier for their motherboards, which could ultimately cause other incompatibilities, forcing them to find yet other suppliers for other components. Another example is if a company decided to move from Windows to a variant of Linux. While the operating system itself is less expensive, it is much more difficult to find applications for Linux, there are many hardware components which do not have the drivers necessary to run upon Linux, and the learning curve is quite steep for customers, which would force a manufacturer to invest in a larger customer support staff.
This analysis provided a great deal of insightful and intriguing information into Dell's success, both within the personal computer industry, as well as their other ventures into the consumer electronics and computer peripheral industries.
Although extremely successful in its own right, this analysis proves that without their competition, Dell would most likely not have been so successful. Much of their success came from the fact that their rivals, namely HP/Compaq and Gateway pushed Dell to improve their customer service to differentiate themselves from the competition. Furthermore, due to significant price wars within the industry, Dell had to improve their manufacturing process, quickly adopting a just-in-type system, in order to keep their manufacturing costs low, allowing them to pursue a low-cost leadership strategy alongside their differentiation strategy.