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Dell computers was established by Michael Dell in 1984 while he was still a student in University of Texas in Austin with starting capital of $1000 as ''PCs Limited'', operating from campus dormitory room as his office, his aim is to sell IBM - PC compactable built from stock components. In 1985, the company developed the first computer own design that is the '' Turbo Pc'' sold for US $795, contained an 8088 processor (Intel compatible) with speeds 8MHz.
Dell computer ship system of about 140,000 per day (averagely), means, more than one every second. According to dell website, ''every fortune 100 company does business with dell'' (dell.com). The company stated it operation selling a customised computer to customer, as there main focus is on customer service. Dell introduce second day on - site product service in 1987 as the first computer company to do so, and after which investor are interested in the company, which give rise to the public offering of company stock in 1988. The company name was change to Dell Computer Corporation in the same year, Dell computer make a turn around in 1989 as the company get into mobile computing with the first laptop design.
In 1990s, the company expand rapidly by opening a centre for manufacturing in Limerick, Ireland, to serve European, African market and Middle Eastern. They provide there customer with service like 24hours hotline for complaints and 24 - to 48 hours guarantee of shipment of replacement parts, introduce a direct toll - free technical support line. In 1990, dell change there course and started selling through retail outlets such as, Comp USA, circuit, and price club. In 1993, dell was on of the top 5 computer manufactures and on this same day they started there expansion to Asia - Pacific markets with Australia and Japan Assistant, in this same year, they have increase in there revenue but they have problem in managing what had become a billion dollar company and this is the first quarterly loss of dell in 1993 (dell, 1999).
1996, there is an intensified in Asian - pacific expansion, and in the same year they launched there web site www.dell.com for there business. However, the company begins to be in network - server market in 1996, and in the follow year they introduce its first workstations system.
Dell success means a lot in manufacturing facilities in the world. In 1998, they expand there manufacturing facilities in American and Europe, in which they open customer and production centre in Xiamen, china same year they introduce power vault storage products. They expand there manufacturing facility into Eldorado do Sul, Brazil to serve the Latin American in 1999.
The top global position in the shipment in 2001 highlights the company business success, and in this same year they introduce power connect network switches. The company have successful expand the business model into computer related equipment such as consumer electronic and with the introduction of printer for consumers and business. (broadband-guide.net/l)
Dell International is known to manufactures, develops, sells and assists personal computers, and other products related computer. (dell.com)
The distinct performance of Dell Computer in past years clarify a fundamental competitive component advance response in the personal computer industry with the value of time.(Kraemer, Kenneth L.; Dedrick, Jason; Yamashiro, Sandra: Information society Jan - Mar 2000, Vol. 16 Issue 1, P5, 17p).
The life cycles of the Product in the personal computer (PC) industry have reduced in 1988 from about 22 months to 6 months in 1997 (Mendelson & Pillai,1998), and the performance price of key factors has continued to increases every 18 months or decrease. As a result, excess inventory depreciates rapidly. In addition, getting new, quality products to market on time is basically to maintain competitiveness in an industry where customers are willing to pay a premium for the latest technologies and reward quality by repeat purchases.
Dell's strategies using direct sales and build-to-order production have shown to be successful in reducing inventory, and introducing new products to the market quickly, and by doing this enable it to increase market share and the investment return is high in the competitive industry.(www.indiana.edu/).
The impact on the industry of Dell's success is seen in the efforts of other leading PC makers and distributors to develop their own direct sales and/or build-to-order capabilities (Stafford 1999).
The report illustrates how Dell business model make use of information technology (IT) has a vital for executing both elements of its business mode, "direct sales and build-to-order", and also gives clear view into how IT can be applied to attained flexibility and speed in the industry where time is vital. (www.indiana.edu/)
The importance of IT in time dependent industries has been confirmed by Mendelson and Pillai (1999), who surveyed 67 business units and found a strong correlation between an industry's "clock speed" and the use of IT to enhance internal and external communications and distribution
DELL INTERNATIONAL BUSINESS STRATEGY
Johnson and Scholes
(Exploring Corporate Strategy)define strategy as:
"The scope and direction of an organisation over the long term, which gives the organisation advantage to achieve through it configuration of resources within a challenging environment to meet the desires of markets and fulfil the expectations of the stakeholders"
The statement above can be further explained by looking at the key factors that define the Dell international business strategy under the following:
- Long-term goal (direction)
- Scope (which market to compete in, and how)
- Advantage (the strength of the organisation)
- Resources (skills, assets, finance, technical competency, etc.)
- Stake holders expectations' (profit and return on investments)
Dell like any other organisations operate within an industry and this is referred to as the "external environment" as the decision made by Dell is sometime been influence by the following factors: political, economy, social, technology, and all this have an impact on its performance.
However, for most strategy decisions the core external factor that dictates dell business approaches is it's "Industry" that it operates which define its relationship with customers, competitors and suppliers.
India is one of the biggest emerging markets, and this made it a very important strategic location (in business sense) for dell to get into as the populations is 1,166,079,217 (2009 est.)-(www.india.gov.in) and the country have one of the largest number of educated people globally and with the cost of operation and wages below what is been paid across developed countries, it's very attractive to various organisations and also Dell.
Also this will act as a distribution hub for dell, so as to cater for all south East Asian countries and beyond.
Dell successful strategic entry into the Indian market have open up a big business opportunity and all decision making before this move occurred by taking time to analyse the environment and the competitors.
All decisions were made at corporate level (strategy), business unit level (strategy) and operational level (strategy).
Over the years, Dell have build a good brand and have a quick turnaround time for delivery of customer orders, and using the SWOT (strength, weakness, opportunity and threats) analysis, it will in understanding how the strategic decision were made.
The swot analysis below shows Dell capability before entry into the Indian market.
- Known brand name
- Direct to customer business model
- Having substantial access to cash flow
- Technological advancement
- Own manufacturing factory in Singapore
- Lack of strategic partnership in India
- Cultural difference from other country they already doing business in.
- Legislation issue around work related laws (labour)
- Financial gain as India is a country with a large population
- Access to labour force with less operational cost
- Strategic location to access other sub-continent like Sri-Lanka and the rest
- Indigenous companies
- Cultural issues around women
- Political influences.
Prior to going to India, Dell don't have presence in any high street stores all business is done via telephone and internet (USA), but due to the cultural difference in the approach to shopping in the India, customer like to see what they buy, touch and have a feel for it, this lead Dell to change their business strategy to suite the India market by opening stores, selling to high streets and most especially providing the customer the Dell core business strategy of "customization(depending on individual needs) at a low cost price.
By utilizing their strength to address their weakness, Dell succeed in entry the Indian market and go further by building factories and in the last fiscal year annual reports, the India region contribute towards the profit of the company in the tune of over 45% of the total returns.
Johnson and Scholes define strategic management as strategic decisions that harmonise the three layer of strategic management process shown below:
DELL'S ENTRY IN INDIA
Dell International Incorporated Ltd (a US company) is the registered owner of the trademark "DELL" in many countries and registration application for the same is pending in India. Dell products entered Indian market in 1993 and were widely marketed and advertised. But 1996, the Company a liaison office was set up in Bangalore to oversee the marketing and distribution network of Dell products and services in India. They later open the second contact center in Hyderabad, Dell operate their service from the centers based at Bangalore, Chandigarh, Hyderabad an Gurgoan. In 2000, Dell International incorporated founded an Indian subsidiary which known as Dell Computers Corp.
In 2001 Dell Computers later realize that there is an existence of another company named Dell Technologies, knowing that, it now dawn on them that the name "DELL" which was there trademark as part of there corporate name. Consequent to the notice, the both parties had to negotiate between them. However, in the process of this the opposite party asking for certain sums of money for dropping the "Dell' from its name.
During the conflict, it transpired that, they have registered a domain name to be "dell-technologies.com" through Ebiz technologies for the reason of deceiving the consumers and purposes of promoting its business. Dell computers forward a to Ebiz technologies asking for the removal of the domain name as the same was breaching its exclusive rights over word "DELL" measures failed, Dell computers brought out an action for passing off against the impinge and Ebiz technologies.(channelregister.co.uk)
In March 2007, Dell have approximately half a billion dollar enterprises in India and has believe to there revenue will be up to $1 billion within next year.3 years of launching dell product in India market, Dell meet the $1 billion sale mark in India. Dell in India have number one provider of notebooks and provide to larger corporation, corporation with more than 1000 employee. In 2008, in India market Dell was ranked third with 7.6% market share compared to two year ago with market share about 4% (Dell has a share of 16% in Notebook section and share of6% in desktop section in 2008, compare to 8% and 4.5% share respectively in 2007).(Case study of dell strategy in India 2010)
In time of service, Dell have expand there capability with $6billion service business and this developing faster than expected mostly in product business, in the area of infrastructure service, assisting customers to move from old system to new modern environment, consolidating and optimizing data centres, implementing virtualization, moving onto the latest technology. Dell have show India customer that they are truly a global enterprise, and there computer is all over the world. (CII Forum Delhi, India)
In the last 10 years, the computer hardware and software markets have developed tremendously. The computer Information technology sector is a very substantial section of the global economy. The sector is one of United State economy leading export. Moreover, information technology and personal computers are reaching into every aspect of the consumer.
The following is the indirect distribution channel in the information technology/PC
Dell competitor include: Hewlett - Packard (HP), Apple, Samsung, Sun Microsystems, Gateway, Lenovo, Sony, Acer, IBM, Asus, and Toshiba. But they are differ in different section, however, the main and largest competitors of all are Hewlett - Packard (HP), Lenovo group (LNVGY), and International Business Machines (IBM), Hewlett - Packard recently acquire electronic data system (EDS) will be a great challenges for Dell, initially Dell agree to sell its PCs, and hardware through EDS. Then HP will not be willing to sell dells produce through its supplement, and this buyout will make dell to loss a lot of sales. Dell and Alienware are competing in the market versus AVADirect, Falcon Northwest, a subsidiary of HP (VoodooPC), and with other manufactures. Second quarter in 2006, Dell share is between 18% and 19% share compared to HP 15%, late 2006 Dell lost its leadership in the PC business to HP,IC and Garter estimated third quarter in 2006 to be 36% growth compare to 15% growth of HP, but the problem was in fourth quarters when Dell PC decreased to 8.9% compare to HP's 23.9% growth[update], as a result of this at the end of 2006 Dell PC market shae stand at 13.9% compare to HP's 17.4%.(www.reuters.com)
- Improving Dell core business began by simplifying their internal organization to make it easier for them to listen to customers and answer to there needs. These actions help them improve profitability, in part, by lowering operating expenses while adding focus to solving customers' most persistent IT and product challenges.
- The Use of the direct model has been an inherent part of Dell's success and will continue to be the secret of their business going forward. Since the end of fiscal 2007, they started building on that success, combining the new direct customer model combine with new distribution channels.
- The development in the business model allows them to achieve additional consumers and small businesses through retail partners and value-added resellers like, Gome in China, Wal-Mart and Staples in the Americas, in UK, warehouse, Car phone, and Japan's Bic Camera.
- Attending to customers on time is also important to them, they have reexamined the entire design process to improve speed-to-market so that customers can have there desire products in their hands even as quick as they can do presently.
- This procedure has led to important changes in the manner in which they run the business. They have develop an operations globally in Singapore center to run their supply chain, product design, and manufacturing
- Their most vital test with customers, however, knows good ways to attend to there needs and help them. Support teams and Customer service are the fundamental way to resolve customer issues. Thousand new support team member$ have been added in all regions, and give them training to fix a wider range of complicated issues, and Dell Connect is launched, so far a remote diagnostic tool has delivered almost 8 million sessions with satisfaction rate of 93 percent. (www.dell.com)
CONCLUSION AND RECOMMENDATION
- Dell has grown rapidly to become one of the top three vendors in the PC industry, and has seen an extraordinary increase in share price and market valuation. While many other PC companies have been unable to handle the demands of time-based competition, Dell has continued to thrive in such an environment.
- Dell's use of IT plays a vital role in the implementation of its business model. The company has used IT to coordinate its build-to-order processes from order taking through procurement, logistics, production, service, and support. Doing so has enabled it to reduce inventory, speedup logistics and product cycles, under stand user markets, and offer additional services to customers.
The key to Dell's success has been its direct sales and build-to-order business model. This model is simple in concept but highly complex in its execution, especially under conditions of rapid growth and change. Dell has continually refined and extended its business model while striking a balance between control and flexibility.
Dell Inc: Financial Statement 2010, by Interactive Data Real-Time Services Thomson Reuters. http://moneycentral.msn.com/investor/invsub/results/statemnt.aspx?Symbol=dell www.india.gov.in
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Industry Week (March 2005). Dell Strategy Includes US Presence.
Dell Annual Report. 1997, 1998, 1999.
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Exploring Corporate Strategy (Text and Cases), 7th Edition: by Gerry Johnson, Kevan Scholes, and Richard Whittington.