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The Dell Company was founded in the year 1983 by Michael S. Dell. The initial focus of the company was on selling desktop computers. In the course of twenty years that followed, this company grew to a level of becoming the number one supplier of computer systems in the world. Dell was well-known for its low-cost structure and the direct model it had which enabled it to win a competitive advantage over its competitors. In the year 2003, the company changed its original, Dell Computer Corporation, to Dell Inc. The Dell Company extended its operations in Europe, North America and Asia. Beginning from the year 2006, the company started underperforming and lost its market share to the competitors and this resulted in poor financial performance. This underperformance resulted from the imitations the competitors carried out of its innovations. Following the poor financial performance, the CEO at that time, Rollins, stepped down to pave way for the former CEO, Michael to come back to run the company.
Dell has been a successful company in the market for a considerable length of time since its inception. This success has been attributed to the direct model it has, having direct customer relationships, having important information on matters related to customers, the best manufacturing practices alongside other excellent services in management.
Over time, Dell has been able to maintain a low cost structure. This has been realized through building systems only after they are ordered. More so, this has also been realized through keeping the inventory at the minimum level possible, allowing the company to pass on to its clients any reductions in component costs. In the course of time, the customers have kept on ranking the company as being number one in offering services and in customer satisfaction.
When it has come to hiring people to work in the company, the company has been keen at selecting only the most competent staff and would avoid any chances of recruiting employees who would most likely retard the company's progress. Those employees who are just coming in are informed that they have to be comfortable with a high level of uncertainty. The executives who have served in the company for a long time have been pushed to draw an organization chart to make the company livelier. Departments have been divided whenever they have been growing big.
However, from the start of 2006, the company began losing its market share in the United States to other competitors like Apple and Hp. This loss was attributed to the company's own internal issues, growth of units sold through retail schemes and competitive pressure from HP and Apple companies. Another factor that led to the underperformance of the company is the improvement in technology and decreasing cost which reduced the need for customization. Moreover, the company was losing its market dominance for the reason that the rival companies were imitating the company's supply chain innovations alongside lowering their prices.
In the course of 2007, Dell ceased being a leader in the manufacturing of personal computers in the world market and it was overtaken by HP. Its share in this market had reduced to 15.2% from 18.2% in 2006. In the same time period, the share of HP had risen from 16.5% to 19.1%. The consumer market seemingly had changed at a significant level in the 3 years that had past. Dell was at this time trying to catch up.
The Dell Company has to consider several strategies in order to regain market leadership. The company should consider its cost structure and seek ways and means of reducing the costs in comparison to the competitors. This should be implemented in such a way that the company remains competitive in the market yet spending to the minimum in the process of production. The company should also consider better methods of reaching the potential customers. For instance, the use of online marketing should be intensified. It should also consider expanding as well as customizing its product and product portfolios. The company ought to focus on consumer market growth by introducing competitive products and which are also unique and appeal to the taste of consumers.
Recommendations, implementation plans and justification
In order to ensure that the Dell Company gains market leadership, it is recommended that the company seeks to maintain its low cost structure. However, this should be carried out in a manner that ensures that the cost structure is not non-competitive. There should be consideration of the moves that are being taken by the competitors concerning this strategy.
The low cost structure may be realized through taking cost-saving initiatives such as reducing the cost of goods sold and decreasing operating expenses. The reduction of the cost of goods sold would be realized through optimizing the company's global manufacturing network, redesigning of the company's supply chain, complexity reduction, cutting down development time, and designing aimed at meeting the tastes and preferences of customers. A reduction in the operating expenses would be realized through lowered benefit and compensation costs, reducing headcount, carrying out improvement in productivity and ensuring tightening of the discretionary spends. If this plan will be implemented, the company will be in a position to remain competitive in the market and also be able to gain market leadership ahead of its great competitors like HP.