Entrepreneurship With Dell As An Example Commerce Essay


In the history of the world, there have been tens of millions of entrepreneurs. In fact, there are probably many millions of them existing today. Various authors report the greatest entrepreneurs of all time. One list includes: King Croesus who minted the first coinage in the world; Pope Sixtus IV who created indulgences for the dead because the church needed more money, Benjamin Franklin who is considered America's first real entrepreneur; P.T. Barnum; Thomas Edison; Henry Ford; 'Bugsy' Siegel; Ray Kroc; H. Ross Perot; Steve Jobs and Steve Wozniak (Harper, 2006). We can all think of dozens of others in our own lifetimes that are not on this list, like Tom Watson, who established IBM, Sam Walton, Bill Gates, Martha Stewart, Oprah Winfrey, Richard Powers, Larry Page and Sergey Brin (founders of Google) and so on. The list could go on for pages.

The 'modern' entrepreneur selected for this paper is Michael Dell because he changed the way people buy computers. He also changed the way computers are marketed. He started with very little and two decades later, Dell is the #1 computer in the United States. Sales in 2006 totaled (mil.) $55,908.0, a 13.6 percent increase over 2005 (Lower, 2006). Net income was (mil.) $3,572.0, an increase of 17.4 percent (Lower, 2006). The number of employees increased by 18 percent (Lower, 2006).

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Michael Dell founded the company in 1984 and continued in his role as chief executive officer and chairman until 2004; he is still the chairman of the board (Dell, 2006; Lower, 2006). He had $1,000 and an idea - if you sell directly to the customer, you will have a far better idea of what the customer wants and expects (Dell, 2006). Every system ordered is built to the needs of each customer (Dell, 2006). This approach also allows the company to offer customers the latest technology nearly as soon as it is developed (Dell, 2006).

The company expanded internationally quickly. In 1987, they opened a subsidiary in the United Kingdom and in 1990, they opened in Ireland (Dell, 2006). In between, in 1988, they took the company public with an initial price of $8.50 per share (Dell, 2006). Global expansion continued in 1993 with subsidiaries in Australia and Japan and in 1996, they expanded to Malaysia (Dell, 2006). At this time, sales were primarily by telephone but in 1996, products were offered through Internet transactions (Dell, 2006). It was also in 1996 that Dell reached the one-million computer systems benchmark (Dell, 2006).

Between 1998 and 1999, more subsidiaries were opened in the Americas, Europe, China, and Brazil (Dell, 2006). Each was strategically located to serve the largest possible consumer base in the region (Dell, 2006). The option to purchase Dell's products from their Web site, of course, meant they could receive orders from anyplace in the world. As can be seen from the selected fiscal data reported, Dell continues to increase sales each year. In fact, in Q4 2006, Dell shipped more than 10 million computer systems in just that quarter (Dell, 2006).

Throughout those years, Dell opened more manufacturing and service plants across the United States (Dell, 2006). They also dramatically increased the number of products they sell (Dell, 2006).

Entrepreneurship was not new to Michael Dell; he established a "mail-order stamp trading business" (Hoover's, 2006) when he was just 13 years old (Hoover's, 2006). His gross receipts exceeded $2,000 per month within just a few months (Hoover's, 2006). When he was 16, he began selling newspaper subscriptions (Hoover's, 2006). A year later, he bought a BMW (Hoover's, 2006). He was a successful entrepreneur before he even considered computers.

His initial plan was to become a doctor and he enrolled in pre-med studies when he entered college (Hoover's, 2006). He began another business from his dorm room "selling random-access memory (RAM) chips and disk drives for IBM PCs" (Hoover's, 2006). At that time, IBM was requiring any retailer who wanted to stock IBM products, to purchase large quantities of PCs (Hoover's, 2006). They were willing to sell the products at their cost to Dell just to get rid of the inventory (Hoover's, 2006). Dell advertised in magazines and newspapers at 10-15 percent below the going retail price (Hoover's, 2006). Between the fall of 1983 when Dell enrolled in college and spring of 1984, Dell's sales exceeded $80,000 per month (Hoover's, 2006).

That kind of money convinced Dell to leave college and focus on business, which is exactly what he did (Hoover's, 2006). He then started building IBM clones and selling them under the name of PCs Limited (Hoover's, 2006). He continued to sell his products directly to the end-customer (Hoover's, 2006). The approach allowed Dell to sell his machines for less than half the cost of an IBM (Hoover's, 2006). Dell renamed his company Dell Computer and that's how this company was established (Hoover's, 2006).

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Although there were attempts to sell the products through retail outlets: Soft Warehouse, which is now CompUSA in 1990, Staples Office products in 1991, and Xerox who sold the products in Latin America, Dell returned to exclusive direct sales by 1994 (Hoover's, 2006). This also reflected Dell's original idea that direct-selling to the consumer lowers the price for the customer and allows the company to make changes faster than other companies in the industry.

Entrepreneurship has certainly become more difficult and more complex over the last few centuries. Early entrepreneurs, for example, the grocery market or the apothecary, had little if any competition. They settled in a town and were the first to open a store. The greatest entrepreneurs in the early days of this country were also inventors who knew how to commercialize a product or who had a product that needed very little commercialization, think of the telephone and electricity. This is true for the early days of advanced information technology. The beginners like Gates and Jobs created something or they teamed up with the creators or they bought certain creations. What they had was foresight and brilliance in their fields and in marketing the products or services. Obviously, the time for an entrepreneur is at the beginning of an era, like the information technology era. They face very little competition as long as they are willing to work 24 hours a day, seven days a week.

The obstacles entrepreneurs face today have to do with the advanced nature of the society. As suggested in the previous paragraph, early entrepreneurs had carte blanche, there was little competition. This is true in any historical period. The later a budding entrepreneur enters the field, the more obstacles there are, especially in terms of competition. Law and regulations represent another obstacle for today's entrepreneur. There are far more regulations, especially in some industries, than there were even 50 years ago. As an example, Miller (2004) reported that in that year, more regulations were passed and more regulations proposed regarding the technology industry than ever before. The issue of taxing the internet was an issue as was if the Internet should be regulated (Miller, 2004). Legislation regarding privacy was proposed and some passed along with recommendations for security (Miller, 2004).

The U.S. Small Business Administration (SBA) reports that half of all new businesses fail in the first year and 95 percent fail by year five (SBA, 2006). Reasons for failure, which can also be viewed as obstacles to success, include: not enough experience, not enough start-up money, poor inventory management, spending too much on fixed assets, using business revenue for personal use and even having the company grow faster than expected (SBA, 2006). In some cases, the business is not located in the right place (SBA, 2006). Other reasons include poor management skills and ineffective marketing programs. Sometimes, entrepreneurs have no idea how much time and energy is required to build a successful business.

Williamson (2005) suggested five qualities or characteristics are needed to establish a successful business. These are: a strong desire to succeed, maintaining a positive attitude in the face of the challenges and obstacles, making a total commitment to success, being patient and not expecting the business to pay off in a year, and persistence to keep going (Williamson, 2005). If we compare the reasons businesses often fail to the qualities and characteristics, we can see a correlation.

Consider the characteristics of Michael Dell. He was a successful entrepreneur at age 13 and by the time he was just 19, he was grossing over $80,000 each month. All he did was buy parts at wholesale and sell them at a price that was less than retail. Then, when he started building IBM clones, he sold them at about 40 percent of the average price. All he did was advertise in newspapers and industry magazines. He had an idea at the right time in history and courageously pursued his theory that selling direct to the consumer was the only way to sell computers.

The importance of entrepreneurship, i.e., small businesses, cannot be overstated. Less than 1 percent of businesses are classified as large, 99.7 percent of employers are small businesses (Longley, 2006). They employ about half of all workers in the country and they "create 75 percent of the net new jobs in our economy" (Longley, 2006). They represent 97 percent of all American exporters and account for almost 30 percent of the value of exports from this country (Longley, 2006). The fact is that the economy would seriously stall except for small businesses, i.e., entrepreneurs. As already stated, it is more challenging to become a successful entrepreneur today than it was in the 1700s and 1800s but it is still possible. There were fewer regulations 200 years ago and there was less competition.

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Emigh (2004) that in October of that year, Dell, IBM and Hewlett-Packard released a collaborative policy for social responsibility. They called it the Electronics Industry Code of Conduct and it "applies to all suppliers in the global supply chain" (Emigh, 2004). The code addressed numerous issues, such as child labor, discrimination, ethics, labor and employment, and protecting the environment (Emigh, 2004). It does not matter where the company is located, the standards apply to them if they deal in any way with these companies (Emigh, 2004). For example, suppliers to their suppliers are accountable.

Inc.com (2000) reported that companies who have strong ethics programs realize numerous benefits. They can avoid the possibility of fines, for one ting (Inc.com, 2000). Research finds that employees have a stronger commitment to these companies and customers are more loyal (Inc.com, 2000). Brand image is enhanced among consumers (Inc.com, 2000). If anything is reason enough for companies to be ethical and to demonstrate social responsibility, the bottom line is typically higher in companies with strong codes that they enforce.

Dell is very involved in corporate social responsibility programs. In fact, it jumped to number 9 in the 2006 list of Business Ethics magazine list of the "100 Best Corporate Citizens" (SRB, 2006). It was at number 71 in 2005 (SRB, 2006). Some of the reasons for that placement is their equal opportunity policies, which exceed any laws and regulations (SRB, 2006). The diversity of the workforce along with having a strong code of conduct for all employees were mentioned as was their support and sponsorship for the Energy Star program, which is involved in reducing greenhouse gases (SRB, 2006). They also have a free recycling program for customers - the company will pay to pick up old Dell computers from the customers' homes (SRB, 2006).

Corporate social responsibility is essential for all companies, large and small. It is a way companies give back to the communicates that support them and keep them in business. The most compelling consequences of companies in today's society acting irresponsibly are: fines for violating regulations and a loss of customers. Consumers are smarter today and they want to spend money with companies that demonstrate responsibility, integrity and strong ethical codes.

During which historical time period entrepreneurship was most important is debatable. It is always important. It was easier for people with good ideas and the drive to work for them to succeed decades ago but it is still possible today. We witness this every day. Sometimes, it is the small store that opened a couple years ago in our neighborhood and sometimes it is someone like Gates, Jobs, Steward or Dell. Clearly, the economy would not survive without entrepreneurs and their subsequent small businesses.

Michael Dell is a good example of a modern entrepreneur. He exhibited the qualities of success at a very young age and those characteristics never left him. Although Dell Inc. did have some challenges in the early 1990s, the company rebounded and has become even stronger.