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Strategy is the direction and scope of an organization over the long term, which achieves advantage in a changing environment through its configuration of resources and competences with the aim of fulfilling stakeholder expectations. The term strategic management underlines the importance of managers with regard to strategy. The strategic management role is different in nature from other aspects of management. It is concerned with complexity arising out of ambiguous and non-routine situations with organization wide rather than operation-specific implications (Thomas .L. Wheelen, 2010).
This study based on the strategic management of Dell Inc. Dell has experienced its tremendous growth by empowering people through innovative products and services. Throughout this period dell has optimized its business model to raise its standards of excellence. Dell's core values, mission, vision has facilitates the company to achieve this glorious goals. The purpose of this report to underpin an outlook for strategic significance and the management of dell computers by evaluating internal and external environments of Dell's position in a comparative landscape. The report further undergoes the analysis; a recommended strategy has been outlined which will guided eventually to Dell's strategic success. The final part of this study stating recommended the strategy and its implementation with a model including conclusion for the overall sustainability of the company.
Dell at a Glance
Dell is an American multinational computer Technology Corporation founded in 1984 by Michael Dell. According to the statistics published under the global PC market share, it was placed to the 3rd position under the worldwide PC shipments. The company employees more than 82,700 people worldwide (www.scribd.com, 2012). Dell grew during the 1980s and 1990s to become a brand, thus Company employee Direct Business Model to expand the core business worldwide. Dell's operational regions include mainly America, Europe Middle East and Asia Pacific regions. The company maintains a consistent focus on offering the best value to the customer. As a trusted technology innovator with diversified, comprehensive IT portfolio, Dell committed to serve its best to the customers and employee. For nearly three decades, Dell has been on an incredible journey, experiencing positive growth on a global scale. Empowering its people - customers, business partners and team members who keep the company moving through the rapidly evolving world of technology.
Dell Key towards Strategic Planning
Vision of the Company
"It's the way we do business. It's the way we interact with the community. It's the way we interpret the world around us-our customers' needs, the future of technology, and the global business climate. Whatever changes the future may bring, our vision-Dell Vision-will be our guiding force"
The vision statement is able to put forward one of the most important principles behind the operations of Dell. The industry that Dell operates in is one of the most dynamic and ever changing one in the international market. Fluctuations of technology and consumer demands mean that change is the only constant. This is why the lack of prediction leads to the vision statement which focuses on the interpretation of strategy through consumer needs, technology trends and international business climate.
Dell's mission is to be the most successful Computer Company in the world by delivering the best customer experience in markets they serve. In doing so, Dell will meet customer expectations in following areas. Highest quality, leading technology, Competitive pricing, individual and company accountability, best-in-class service and support, flexible customization capability and superior corporate citizenship.
Dell Organizational Structure
Dell's governing body consisting with Executive Leadership team and the Board of Directors. The company is leading by the Chairman of the Board and Chief Executive Officer. Currently Michael S. Dell holding the two positions of chairman and the CEO (Dell, 2012). Dell is following two types of organizational structure which include Executive Leadership Team in senior management and Board of directors for oversight and supervision of the overall affairs of the company. They functions under the so call Executive Leadership Team. Supporting the Board of Directors functioning seven committee charters: - Audit Committee CharterÂ , Compensation Committee Charter, Finance Committee,Â Governance and Nominating Committee, Corporate Governance Principles,Â Board of Directors Nomination Process,Â Communicating With the Board of Directors.Â
Dell's Executive Leadership team provides the guidance and focus in terms of seeking to help their customers more efficiently. They decide the company's operations and implements strategy and policy created by the Board of Directors (Dell, 2012).The other officers functions under the supervision of Board of Directors. The hierarchical organization structure is in Appendix:2.
Organizational Characteristics Capabilities and Resources
The heart of the Dell's business strategy is its customer focus direct business model. In order to serve their customers in more efficient ways Dell developed its core competency by making its customers as the centric core value of its business and deployed the resources and capabilities. This has given the significant increment for Dell's strategy to enhance and empowered more competencies such as manufacturing process, human capital management and supply chain management. In order to hit the comparative market in right manner Dell has to improve its products based on modern technologies and consistently Dell has to improve its supply chain and manufacturing process which compliment the efficiencies created by supply chain. Dell had recruit, train and retain compatible workforce which could contribute for company future growth. The healthy environment endorses honesty and accountability as a long term perspective which can logically approach and enhances the core competencies in the complicated infrastructure. By delivering values and servicing them effectively Dell became more efficient in terms of recognizing, acquiring and retaining customers by fulfilling their needs. The core competencies which I discussed above enable Dell to perform efficiently and manage its profitability in a mature industry environment see Appendixâ€¦.Further Dell was able to leverage its core competencies by utilizing its internal resources and capabilities to enhance its key success factors. See appendix â€¦ In addition Dell's infrastructure, global presence along with capabilities and human capital will leads Dell further to achieve potential growth and differentiated strategic dimension. Dell's technological efficiency is capable of supporting expansion to new markets. Such strategies like growing sales and delivering value to the customers in an innovative process will support to the Dell's global manufacturing facilities.
Dell's differentiation stems from processÂ innovation.Â The company is very successful in leveraging and harnessing the valueÂ of its suppliers' and partners'Â technology innovation.Â This allows Dell to minimize R&D spending and improve the cost structure, a strategy that is rarely matched by competitors.Â The company isÂ also gainingÂ knowledge in theÂ retail industryÂ byÂ partnering with majorÂ retailers such asÂ Costco.Â This is vitalÂ for the successÂ of any strategic initiative aiming for a retail presence in globalÂ emerging markets such as China andÂ India. Dell's financials indicate a stellar operational performance evident by above the average inventory, assetsÂ and receivables turnovers.Â The company wasÂ able to achieve aÂ high financialÂ performance at the operational level by utilizing its state of the art IT infrastructure, supply chain and inventoryÂ management systems.Â Further, theÂ company's stockÂ represents anÂ attractive investment due to the company's utilization ofÂ assets and focus on capital return.Â This is evident when comparing Dell's high return on investment, asses and invested capital (ROE, ROA and ROIC) to the industryÂ and market (AppendixÂ F).Â ProfitabilityÂ ratios indicateÂ that DellÂ is experiencing average profit margins.Â This isÂ contributed toÂ hyper competitionÂ in theÂ PC industry; competitors are running on thinner margins in order to gain market share. The capital structure that Dell adopts focuses on financing growth and operations from retained earnings, the company doesn'tÂ pay dividends or acquire debt.Â The company's financialÂ policy in this regard emulates an IT start-up company, even though it's a mature company in a mature industry.Â It's highlyÂ unlikely that DellÂ will continue thisÂ policy in the nearÂ future as investors pressÂ for dividendsÂ and the stock price falls, asÂ is happening already.Â Further, acquiring debt might be necessary to finance growth and establishing retail presence into global emerging markets. This will not have a negative effect on Dell since it possesses the necessary financial leverage.
Business segmentations of Dell
Dell's business segmentation focuses with the customer. It attempt to fulfill customer needs which is at the heart of Dell. During the past year's Dell has signified and recognized its customer-centric business. Dell believes that they operate its global Consumer business by serving customers with faster innovation and greater responsiveness, and enables them to better understand and address their challenges. Dell's global business segments are given in the Appendixâ€¦
Dell Business Strategy
Dell is a customer-centric company which its marketing strategy is quite simple and basic in nature. The main emphasis is on the low-cost-strategy by selling the products at lower prices by following a 'direct business model' which removes the middlemen. Dell is superior to manufacture its products with the time and cost and offer high level of customer service by meeting the customer's expectations. This so call direct business model has five features which is explain in appendix..
Dell Product Development Strategy
The product development strategy of Dell's focus with developing its products based on technologies which include superior features and capabilities at competitive prices. Dell employees its unique approach in terms of design and development its products architecting innovative system designs and integrating new technologies to its products. Therefore by implementing this customer-centric approach, Dell delivers new and relevant products and services to the market quickly and efficiently (Dell, 2012). The company continuing to expands its business through delivering products faster and serving the customers in particular way.
Key strategic issues
Dell is facing multiple strategic issues which may impede on the company's top positioning the computer hardware market. This section addresses the four key strategic issues that Dell should address in order to maintain its prominent market position. First, Dell faces slow growth for its primary product: the personal computer (PC) in saturated U.S. market. The majority of U.S. corporate and education PCs will be replacement units affected by a technological upgrade cycle within the next two years. Therefore, as Dell attempts to maintain its dominant position, the company should focus on product customization and superior relationships with suppliers. This strategy enabled Dell's past success but hadÂ become diluted over the last five years. The company should continue to improve itself in these areas in order to remain the top computer hardware differentiator. Second, the erosion of Dell's brand value continues due to the perception of declining customer service. Although the company prides itself on superior customer service, recent surveys suggest that Dell's results recently declined in this business segment. Dell's executives are aware that quality customer service is a key element of the company's success and are reportedly working towards improvements. Third, Dell's inability to serve all market needs due to the current strategy of limited vendors in its supply chain. Dell brings few products to market and leverages technology createdÂ by other companies effectively and efficiently. Dell also remains committed to chip supplier, Intel. Although this enables Dell to offer PCs at high value to consumers, it also limits the company's ability to supply diverse customers. The company should consider enabling itself to offer more customized products by increasing relationships with more diverse suppliers
Strategic Management Analysis
Strategic Analysis is the process of conducting research on the business environment within an organization which operates and on the organization itself. This provides the foundation for the strategic management by providing an insight into the forces behind the intense competition, by developing a sustaining competitive advantage based on organization core competency (JOSEPH, 2012). The Strategic analysis is a one step in strategic management .The steps involved in strategic management is given in Appendixâ€¦
Strategic analysis used following key analytical methods to underpin strategic management. SWOT analysis, PESTEL analysis, Porter's five forces analysis and Value chain analysis (CIMA, 2007).
Internal Analysis of Dell
Dell enjoys in terms of low cost with superior product performance by its distinctive competencies. They are the core benefits which are practicing by Dell through its direct business model. Dell designs its products according to wishes of the target which allow the company to enjoy superior customer value and brand loyalty, which enhances company ability to coordinate its various functions to produce exciting products. Dell arrive its competitive advantage from three dimensions which is given in Appendixâ€¦.
Value chain analysis of Dell
Before making a strategic decision, it is essential to understand how activities within the organization create value for customers. The main aim of value-chain is to categorize the generically value adding service of an organization. The theoretical study of value chain is given in Appendix..
Dell Value Chain Analysis
Dell relies mostly on its highly reliable supplier, where Dell streamlines its operation and relies on its computer monitor supplier to ship directly to the customer. As long as its supplier retains its leadership position, Dell would collaborate with it to achieve mutual success.
Every Dell system is built to order. Therefore Customers get exactly what they want.Â Dell uses knowledge gained from direct customer contact before and after the sale to provide award-winning reliability and tailored customer service.
Â Outbound Logistics
When Dell introduced its direct business model which sells its products directly to consumers and communicating with them and serving them directly. Dell, on the other hand, sells, especially in two areas, seeing sales trends and learning about unmet customer needs.Â The company also relies on customers' knowledge of what they want to purchase and when they want to complete the transaction to drive the direct business model. Dell leverages this source of customer knowledge by making it as easy as possible for a customer to place a customized order electronically.
Â Marketing and Sales
Dells direct to customer model solve the problem for additional capital for marketing and sales. By selling directly to consumer it eliminated retailers along the way. One advantage of this kind of system is that the firm is continuously in contact with its customers and they are benefiting in two areas concerning sales and marketing, seeing sales trends and learning about unmet costumer demands.
Dell spent dollars training well-educated business segment managers provide state-of-the art advice to customers. The company also initiated a collaborative customer-solution teams that collaborate with customers to fulfill any unmet customer needs. Because of the nature of work of Dell's employees they are continually being inspired to stay abreast of technology threats and opportunities that may alter the competitive landscape in the future.
It is on this activity that Dell is weak because Dell do not enjoy protected by trademark or patent or copyrightÂ technology. The technology being used in the industry is shared by all industry players.
Technology is an important source of competitive advantage and here one strength of Dell for the firm enjoys better access to technology. Dell introduces the latest relevant technology much more quickly than companies with slow-moving indirect distribution channels.
Human Resource Management (HRM)
Dell's mission statement is "to be the most successful computer company in the world at delivering the best customer experience in markets we serve". Dell employees, direct salespeople, help-desk operators, engineers, and the like all have to be knowledgeable and customer focused to ensure Dell's continued competitiveness.
Dell revolutionized the traditional value chain of computer manufacturing industry by introducing the direct to customer model. Dell also employed a global business consultancy, to help it develop a set of metrics to judge business-unit performance. By doing so, daily decision making were more efficient. The chief financial objective that steered managerial evaluation at Dell was return on invested capital (ROIC). Which leads to no inventory build-up, Dell turns over inventory every six days on average, keeping related costs low.
External Analysis of Dell
Dell's environment consists of uncontrollable forces that directly or indirectly influence an organization's ability to achieve a desired result. In the words of Kotler and Armstrong "marketing environment consists of the actors and forces outside marketing that affect marketing management's ability to build and maintain successful relationships with target customers" (Kotler & Armstrong, 2003). These influences create both opportunities and threats for a company in a comparative market segment.
Dell PESTEL Analysis
The political environment of the business has pivotal effects on the performance of the business in the quest of achieving its strategic goals. The political instability started after the 9/11 has affected the market conditions all over the world. Most of the computer manufacturers belong to US and the country government is taking huge efforts to facilitate the business. This offers exciting opportunities across the world to manufacturer like Dell, HP, Acer, Toshiba, and Lenovo etc. In order to capitalize the growing needs of the market the government of US has strengthen its ties with China in order to exploit the comparative advantage of the country in the form of low labor and technological cost
High tariffs on IT products makes Dell difficult to enter other markets apart from USA .since most of the population of the world is young and adaptive to change in technology, dell aimed to manufacture its products which are more user friendly and can be afforded by young professionals, because purchasing power of working population saw an increase over the past few decades. Since the economy saw a change due to the meltdown and recession, dell also had to modify some of its policies to cope up with the changing scenario. The change in the US economy also effected Dell with it bring change in its core policies of inventory and credit
management of receivables and inventory conversion days to decrease its operating cycle and thus reduce cost.
The values across the continents are changing with the passage of time, and now a global culture is arising meaning the presence of universal segment having the same values, likes and dislikes and other norms across the world. This offers exciting opportunities to various organizations including computer manufacturer in the form of standardized product development offers across the world with no adaptation. This translates into various economies, and low fixed costs, meaning change in attitude towards foreign brand.
Technological changes are happening at a very fast rate due to which Dell is able to provide advanced technologyÂ products to theÂ customers. As a result ofÂ technological changes Dell has also increased their product line. It is adapting to the technological changes as he old technology is becoming obsolete. One of the most important effects of technological changes that have led to the increase of the demand of Dell computers is their Direct Business Model. They have excellent ecommerce capabilities, which can be seen with the success of the dell. The recent technological changes can be seen in their recent products like New Power Edge Servers, New Enterprise Computing Portfolio, Innovation Aids Recovery, Ultra-Thin Laptop, Adamo, which will be in the market very soon. Dell could exploit the network-internet, extranet to reach the corners of the world.
Five Forces Analysis
The Porter's five Forces model is a simple and powerful strategy analysis tool that helps managers to know where the control lies in a company situation. It helps in understanding the strengths of the company in the market against the competitors, suppliers, and buyers. According to Porter "the nature of competitiveness in a given industry can be viewed as composite of five forces, rivalry among competitive firms, potential entry of new competitors, potential development of substitute products, bargaining power of suppliers and bargaining power of consumers" (David, 2005). The relationship of Porter's five forces model for Dell have been depicted. In the following the study explore the five elements that constitute Porter's five forces one by one and evaluate their impact on Dell in particular and personal computer industry in general.
Rivalry Amongst Existing Competitors
The personal computer industry from the beginning is inclined toward consolidation, as the market type can rightly be cited as oligopoly. The industry contains players like Lenovo, HP, Toshiba, Sony etc. The competition in the market is based on price and competitive advantage.
Threat of New Entrants
Every player tries its utmost to beat and outperform competitors by producing the latest technology and then price them competitively. This probably the reason that new firms find it very hard to enter the market and the existing competitors trying their level best to either maintain their market.
Bargaining Power of Buyer:
In the personal computer industry the bargaining power of the buyer is very high due to the fact that there is very less amount of brand loyalty in the market because most of the manufacturer produced identical products. In additional to absence of brand loyalty, the switching cost is very low in the industry because most of the systems are based on the Intel processor. Moreover, customer also feels comfortable with backward integration and building their own system through selecting the individual components manufactured by different producers.
Bargaining Power of Suppliers
Traditionally the bargaining power of suppliers is also very high in the computer market. This is due to the fact that there are very few suppliers who supply the major components of the computer. For example the major suppliers of microprocessor are Intel and AMD. They are almost having the monopoly over the market. Moreover the organization will bear significant switching if the decided to change the component part suppliers.
Usually the availability of substitute does affect the sales and profitability of the computer and its various components to huge extent. Traditionally the threat of substitutes is very high for Dell. The computer industry has traditionally experienced similar products produced by the different manufacturer with a very little distinction between a computers produced by one manufacture with that of other. The competition between the rivals can be rightly cited as oligopoly because almost all the major producer manufactures identical products.
The Industry Life Cycle:
The computer industry as a whole has entered the maturity stage of product life cycle (Norman, 2010). Some of the weak competitors have disband their production while others (HP and Compaq) have consolidated their business due to decreasing margins with the passage of time and economic crunch that have started after the insolvency of Lehman Brothers. Most of the competitors are trying their level best to differentiate their offerings from the competitors in order to reduced value for their consumers, while other are trying to produce aesthetic design, ease of use, superior product performance. As depicted in Figure 1 the customer now Requires solution and convenience as compared to technology and performance. In order to stay competitive in the market all the players should continuously innovate their offerings according to the latest trends of the market