Dell Inc has changed the dynamics of the industry

Published:

Introduction

In this work we have a look at an organisation with its sheer strategy and competitive view of the future created a giant in the industry. It has developed a business model which has a very little requirement of controlling variables, but with few efficient and critical models it has created an industry leader. It shows how Dell Inc has changed the dynamics of the industry and how it has helped in evolved with the industry.

Dell Incorporation

It is an $80 billion company which is created in just in time frame of 23 years. The strategy was to bypass the dealers in the field of personal computers and sell directly to the consumers. What will urge customers to buy online? The answer to these is to make the product build to order and provide them customisation. This business model gave Dell some great cost advantage over it peers. This strategy has given Dell- Information about the customer & dell has leveraged that to create with its partner an infrastructure which is a global giant. The power of customer information has given Dell competitive advantage in the value chain as a result of which much of the competition is now turning to becoming partners across the value chain. Virtual integration has harnessed the needs of two very different models.

Lady using a tablet
Lady using a tablet

Professional

Essay Writers

Lady Using Tablet

Get your grade
or your money back

using our Essay Writing Service!

Essay Writing Service

The IBMs and Compaqs and HP of the world subscribed to the view that "we have to develop everything". This was an engineering centric era, in this era dell was of the view why we should we make everything; we can just buy and collaborate as per our requirement. This view gave them flexibility and coupled with the excellent supply chain that they created- they became what they are. In this model there are fewer things which can go wrong because there are only fewer things which can go wrong. There is no drag effect of 50000 people working with you.

The only critical problem with this business model is to establish partnership model with suppliers so that at customers end everything should seem completely integrated. The key challenge is to make money by reducing the inventory cost to the bare minimum and Dell has done that by using excellent partnership models and also building up an excellent supply chain. They have leveraged the knowledge of value chain in the process. According to Michael dell in his scholarly interview for Harvard Business press, he stated that-"In our industry, if you can get people to think about how fast inventory is moving, and then you can create value. Why? Because if I've got 11 days of inventory and my competitor has 80, and Intel comes out with a new chip, that means I'm going to get to market 69 days sooner"

Partnership with Sony

With Sony the partnership has created excellence for both of them. For Dell there is zero day inventories holding if we look at an excellent partnership model with Sony. Let's examine what Dell said to Sony- oh we are looking to buy two or three million of those monitors, why we don't just pick them up as per our need. If you cannot provide us this convenience we don't keep any of your products.

They go to Sony and say-The distance between demand and supply has totally shrunk, hence we pick as per our need.

The Evolution of a faster Business Model

This differentiated model of dell help it creates a niche in the distribution channel and eliminate all the mid channel members to arrive at cost leadership position in the industry. The basic principle of Resource based view is that the competitive advantage for any particular organisation completely depends upon the resources which are available at any company's disposal. It is a management tool to determine the important resources available for any organisation. It is very important for success of the organisation that these resources are valuable and are not imitable.

The two houses of strategy namely Resource based view & competitive positioning had their fare share of critics. After studying them in detail it can be seen that there are certain inherent weakness in both of them and both of them are not sustainable in long run if isolated. In a long competitive environment a firm needs to invest in either product differentiation or cost leadership and then utilise the competitive positioning which will be sustainable because of our ability to defend it on the base of cost advantage.

Value Chain Analysis

Strategy for profit oriented industry in 21st Century

Lady using a tablet
Lady using a tablet

Comprehensive

Writing Services

Lady Using Tablet

Plagiarism-free
Always on Time

Marked to Standard

Order Now

Both the views of strategy are equally strong and have their sets of critics. A competitive positioning in a competitive market is not sustainable if they don't have adequate resources available to them to maintain the cost advantage. For e.g.: Telecom industry in India is an industry of price wars. Competitive positioning is effective but is only sustainable for bigger players like Bharti Telecom & Vodafone International because they have valuable resources with them which allow them to sustain themselves in price wars.

A profit oriented industry in 21st century should create adequate resources and develop capabilities to use them properly. On the marketing front if the environment is competitive than the firm should develop competitive positioning or till then it should enjoy healthy margins.

Let's take an example of Apple Incorporation. It had the resource of great Inventions & a great leader in there CEO-Steve Jobs. They utilised it with their capability to position themselves in the market. It's a highly profitable firm now.

Conclusion

Dell via its partnership model has completely changed the industry methods. It has integrated the value chain by its access to information. Industry is facing stiff competition and in such a competitive scenario Dell has differentiated at cost and also at offering. The inventory management policy and supply chain excellence has become a part of discussion for all the Ivy League Business Schools. The offering that Dell provided its suppliers has left less room with the suppliers to negotiate. This has led to excellent partnership model which has benefited everyone across the value chain. Dell has created excellence in personal computer industry and it is a pioneer in process management for this industry. The healthy competition and brilliant innovation in this industry has helped in its evolution. Customer is the ultimate one to benefit.

The IBMs and Compaqs and HP of the world subscribed to the view that "we have to develop everything". This was an engineering centric era, in this era dell was of the view why we should we make everything; we can just buy and collaborate as per our requirement. This view gave them flexibility and coupled with the excellent supply chain that they created- they became what they are. In this model there are fewer things which can go wrong because there are only fewer things which can go wrong. There is no drag effect of 50000 people working with you.