Developing Core Competences and Changing the Market Position

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Dell's strategy is formulated on the basis of a balance between organisational learning and the resources it has, which creates a sustainable competitive advantage.

In case of Dell, the company has always focused on improving the resources through continuous learning to enable core competencies, eventually leading to achieve competitive edge. Dell's supply chains, inventory management system and direct selling model are a few examples of core competencies and resources created over a period of time through continuous learning. Currently, Dell's strategy is to change the market positioning due to changing environmental factors, globalisation and competitor activities. Promoting the highest standard of corporate governance and ethical conducts is the core of the current corporate strategy.

SWOT Analysis

Strengths

No inventory build-up.

Industry leading growth.

Cost efficiency through direct business model.

Latest technology driven products and processes.

Customisation for better value for money.

Internet sales leadership.

Sales through retail stores as well.

Existing new line of products.

Dell's dynamic organizational structure allows it to achieve diversified targets.

Strong supply chain management.

Weakness:

High dependency on component suppliers.

Continuous improvements and process updates required by suppliers.

Computer market not computer manufacture, making Dell unable to switch supply.

Opportunities:

High growth in emerging markets. Like: China, India.

Strong potential of the European markets.

Growth in business education and government markets.

Continuous innovation and improvements by software and hardware vendors like Microsoft, Intel.

Threats:

Political instability.

Economic instability (Credit crunch).

Currency fluctuations in countries outside US.

Competitive rivalry that exists in the PC market globally.

3.2 Strategy Implementation

Shifting from a direct business model to a more contemporary approach of selling computers through retailing, along with product innovation is the new strategy. Adapting retailing as a distribution channel can be seen as an emergent strategy, whereas, product innovation can be seen as a deliberate strategy to achieve sustainable competitive advantage.

Against a backdrop of intense competitive pressure, particularly in the lower-priced desktops and notebooks, Dell evolved its direct sales business model and has entered into a number of retail partnerships worldwide to complement and extend its existing direct business.

Company also introduced a number of new products to appeal to consumers, recognizing the increasing importance of product personalisation, from product appearance to the ability to see and buy products wherever customers want. Embracing the new distribution channel helped the company to penetrate into new markets effectively and to increase market share in the current markets.

Increasing sales in different countries and different product categories reduces business risk, because no single product or geographic region is responsible for a majority of the company's revenues.

Markets

Product

Existing

Existing

Market Penetration

Adaption of another distribution channel to complement the existing business model and overcome the challenges.

New

Market Development

Entering into high growth markets, like Latin America, China, India.

Ansoff's Matrix

An Ansoff's growth share matrix (figure 4) is used to understand the moves of the company in an ever changing market environment. The strategy is a result of increasing competition, differentiated consumer behavior in new markets, changing consumer behavior in current markets, technological advancements and threat of new entrants with better products.

This makes the company respond to all the factors affecting the company's growth, and embrace the new growth strategy quickly and effectively.

3.3 Implementation Barriers

Dells core competence was assembling cost effective solutions and selling through its direct sales model. Conventional retail channels and pre-configured computer models will not allow the company to customize their products.

Moreover, Dell's stock configurations will not command their accustomed price premium while sitting on retail shelves because they are insufficiently differentiated from competitors' offerings. Worse, Dell will experience a sizable increase in its capital costs, as it has to maintain finished goods inventory for the channel, whereas before it needed no finished goods inventory.

However, there is a bright side to it as well as company's reputation will help it to gain retailer confidence and form strategic relationships with them. Additionally, being a technology company, it is not difficult for the company to invest in and to maintain a high standard product innovation team to meet its deliberate strategy.

3.4 Organisational Learning: Dynamic capabilities

Knowledge management and the concept of learning organisation are the latest theories. Like every other theory it seems to be the desirable for each company that is using it. These theories will be applied in the next years by many organisations. The main reason of development for these theories was the enormous flow of information and the effect of internet in the everyday life and the evolution of technology makes necessary for each organisation to find out new ways to apply those information. The demands are increasingly changing and so the needs for new ideas and innovations.

In a learning organisation, employees are continually gathering and sharing knowledge and are willing to apply that knowledge in order to take some decisions. A learning organisation has no specific organisation design, but it describes an organisational culture.

Dell has applied the theory of organisational learning since a long time, where in knowledge management has a strong influence on the learning process of the organisation as a whole. The ease of adapting the new changes, working towards improvement of the organisation and to meet the demands of the consumer rather than to achieve the targets of the company, becomes a dynamic capability for Dell Incorporated.

3.5 Corporate Social Responsibility and Corporate Governance

Michael Dell describes his strategic initiatives and priorities across the environment and supply chain and in corporate governance (dell.com). Porter's Competitive advantage model (Figure 5) can be used to describe the efforts of the company in every aspect of the value chain to increase shareholder value and to create and sustain superior performance to increase customer value

The model analyses with relevant examples, the value being added by Dell as a company by engaging itself into strong Corporate Social Responsibility act, which creates value for every stakeholder in this organisation.

Environment is a matter of utmost importance for any ethically responsible individual or firm, and the sustainability of Dell's CSR practice will be successful till it stops trying to create a sustainable environment.

Figure 5: Porter's Competitive Advantage

Source: Mapping Social Opportunities, Harvard Business Review, December 2006

-Relationship with universities worldwide

-Product Safety, precautionary materials and chemicals used.

-First and only company to provide no charge on recycling.

-Improved packaging methods.

-Efficient and transparent financial reporting.

-Lobbying with various agencies at all levels, to address emerging issues.

-US headquarter powered by 100% green energy.

-Open an honest communication.

-24 hours ethics helpline available for employee to raise issue confidentially.

-Raising employee awareness.

-Recruiting diverse talent.

-Training through Dell's talent management programs.

Performance planning, learning and development

-Injury free work place

-Suppliers education

Workshops

-Implemented Business process improvement at all suppliers' location.

-Work with minority owned business, women and small business with the help of small business administration, National minority, and supplier development council.

-Achieved supplier diversity awards.

-Suppliers can talk directly to Dell reps via direct talk scheme.

Support Activities

Firm Infrastructure

Human Resource Management

Technology Development

Procurement

Primary Activities

Inbound

Logistics

Operations

Outbound

Logistics

Marketing

&Sales

Sales Service (After)

-Streamlined transportation network to reduce transit times and to minimize air freight.

-Works with freight movers who commit to reduce their GHG impact.

-All aspects of operations incorporate principles of pollution prevention, waste minimization and resource reduction.

-Paper reduction initiatives.

-Reduce waste &transportation impact by minimizing packaging material.

-Products build closer to the customers.

-Partnered with environmental protection agency.

-Marketing strategy customer oriented.

-Anti-competitive pricing practices,

-Information sharing marketing.

-Customer awareness programs,

-Effective recycling practices.

-Numerous efforts on preventing consumer identity theft &maintaining customer privacy.

3.6 Customer Empowerment: Customer Empowerment is more successful in increasing customer satisfaction than just customer service (aid) as it can help solve the issue by not only having a more long term solution but in a more direct and successful manner. Customer service leads to dependency and short sightedness, whereas empowerment is a more strategic choice Dell has embedded in its customer service mechanism.

Dell has evolved the way its customer service operation works, by enabling the customers to give a feedback or suggestion and to rise concerns. Company has generated various blogs over the internet and a dedicated team which deals with issues outside the scope of the front line service representatives. This enables the customer to get a more satisfactory solution than a restricted decision of the front line employees. This helps the company to understand its customers more closely. It is yet another move to explore the knowledge available from the customers and to achieve a cost effective way in improving the process or operations for their benefits.

The sustainability of customer empowerment approach, can be evaluated by understanding that the company has put customers at the forefront and giving responsibility of their own satisfaction, through which their dignity and value is enhanced.

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