Michael Dell, in 1984 with the age of 19 while he still as a pre-med freshman at the University of Texas at Austin and he founded PC's Limited with 1000USD.DELL, 2012 He have the new idea and perspective on the computer market for how the computer technology should be designed, manufactured and sold. They have introduce a new vision and concept which is that by selling computer systems directly to customers that's meet their needs .The following year, Dell came out with their very first computer called the Turbo, featuring an IntelÂ® 8088 processor running at 8MHz, a 10MB hard drive and a 5.25" floppy drive. (DELL, 2012) The major goal was to produce personal computer systems that were IBM compatible and were produced or entirely stock parts. What set the company apart was not just its consumer-oriented focus but also its allowance for people to customize their computers during the ordering process. In 1989, Dell have joins the mobile computing revolution with its first laptop computer, the 316LT. (DELL, 2012) The progress of the business was rapid and in 1997, Dell had shipped its ten millionth system. In 1996, Dell began selling their products through their website and three years later they took over Compaq and jumping forward a bit. In 2001, the company gains the leading share of the global PC market and now it was the third largest PC vendor in the world after HP and Lenovo. However, Dell has a long track record with customer satisfaction, at the very least in regards to their computer products. Althought, when the global PC industry fell into its worst slump ever during 2000, but with the change in management and innovation Dell still managed to record net income of $1.78 billion on revenues of $31.17 billion for 2002.
What Is Change and Organizational Change
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Change is the act, process, or result of altering, modifying or transforming. Organizational change is defined as any alteration of an organization's structure, technology, or people.
Any business in today's rapid change of environment that is looking for the pace of change to slow is likely to be disappointed. Businesses should embrace change. Change is significant for any organization because, without change, businesses would likely lose their competitive edge and fail to satisfy the needs of the loyal customers. Change has become part of manager's job and because change can't be eliminated, managers must learn how to deal with it successfully.
Categories of Organizational Change
When managers decide that change is needed, one of the first issues they face is: What to change? The specific areas of change a company might undertake-its technology, structure, and people. Any change will almost certainly involve at least one of these areas of focus, and the larger the change the more likely several areas will be involved.
The structure can be defined in term of tasks and responsibilities, work roles and relationships, and channels of communication. Structure makes possible the application of the process of management and creates a framework of order and command through which the activities of the organization can be planned, organized, directed and controlled.
Changing in structure includes any alteration in authority relationships, coordination mechanisms, degree of centralization, job design, or similar variables. For example, restructuring can result in decentralization, wider spans of control, reduced work specialization, and work teams. (Robbins, 2010) These structural components give employees the authority and means to implement process improvement. For example, Dell is a very flat organization with little bureaucracy to slow it down. An open office environment encourages free-flowing information and a friendly atmosphere. Most employees would describe it as a fun place to work. Employees are empowered to pull together a cross-functional team with the individuals he or she feels would be best to work on a specific project or problem. (Hanson, 1999)
Changing in technology includes alteration to the way work is completed or to the methods and equipment used. One organizational area where managers deal with changing technology is continuous improvement initiatives, which focus on developing flexible processes to support better-quality operations. Employees wanted to improve are constantly looking for things to fix, so work processes must be adaptable to continual change. This adaptability requires an extensive commitment to educating and training workers in problem solving, decision making, negotiation, statistical analysis, and team-building. (Robbins, 2010)
Always on Time
Marked to Standard
For instance, Dell use cutting edge technologies such as on-line training, CD ROM delivery options, and web-based educational tools, the system is designed for self-paced learning that allows employees to learn as they work. Michael Dell wrote in the Dell University's annual report: "Our goal is 'stealth learning'-education that is so seamlessly incorporated into our work that we don't even realize we are learning." An extensive course catalogue is available on line, providing training on topics such as operations, finance, management, customer service, technology, ethics, sales skills, and project management. (Hanson,1999)
Changing in people refer to changes in people's attitudes, perceptions, behaviors or expectations. For example, providing people with new information or a new way to look at problems, issues, or events can potentially create significant changes their behavior. (Hitt, 2011)
Moreover, people are changing which can involves directly enhancing their knowledge, skills, and abilities - typically through education, training and personal development activities. This can improve the performance of individuals, groups, and even larger units, regardless of any other changes a manager might initiate..
Dell had issued a stock grants under the Dell Amended and Restated 2002 Long-Term Incentive Plan ("the 2002 Incentive Plan") which was Employee Stock Plans.Â The 2002 Incentive Plan was to provide the granting of stock-based incentive awards to Dell's employees, non-employee directors, and certain consultants and advisors to Dell (Dell, 2012).
Ninety percent of employees participate in a plan that allows them to purchase company stock at 15% discount for personal investment and investment in 401K retirement plans. This gives each Dell employee a very personal stake in the company's success. On-the-spot awards for recognition of outstanding performance are used to further reinforce performance. Finally, compensation for the management team and key contractors has been designed to assure accountability for achieving the corporation's objectives (Hanson, 1999).
What Causes Organizations To Change?
The causes of organizational change originate from either external or internal forces. A manager must be alert to all of them in order to achieve organizational goals and keep the company in leading position globally. Dell changes mainly because of external forces.
External forces are arise almost totally from factors outside the organization or external environment such as economic or business conditions, technological developments, marketplace, or the others.
The marketplace reflects intense competition in recent years. Regardless of the state of the economy, most businesses and many other organizations are likely to be extremely sensitive to moves made by their direct competitors, especially those in response to changes in the market or customers' preferences. The actions of other significant players in the immediate environment often can trigger changes inside a given organization.
For example, Dell faces huge encroachments from Apple's phones and tablets, which are cutting into Dell's consumer PC and notebook business. Other than that, it also faces threats from Quanta and other wholesale manufacturers as efforts such as Facebook's Open ComputeÂ threaten to reduce its importance in the server-making business for large web scale buyers and even cloud companies ( Higginbotham, 2011).
Changes in technology developed outside an organization frequently require it to respond, whether it wants to or not. Technological advances offer both opportunities and threats to organizations. If managers are slow to respond to technological changes, the consequences can be dire. Technology also creates the need for organizational change. The Internet has changed how we get information, how products are sold, and how we get our work done. Technological advancements have created significant economies of scale for many organizations. (Robbins, 2010)
While the use of IT in Dell greatly increases efficiency in production processes, it also is increasingly important in linking Dell to its broader network of suppliers, business partners, and customers, thereby enabling Dell to achieve "virtual integration" throughout the entire value chain (Magretta, 1998). Fully utilize the modern information technology and implemented in the company's entire organization levels is the key to Dell's success.
Obvious forces for change affecting business organizations are developments in the economic environment. If the economic weakens, companies may reduce their workforce or at least limit hiring; prune low-profit product lines; and make other cost-cutting decisions.
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For example, in 2009, economic conditions hurt sales enough that Dell moved a major production facility from Ireland to less costly Poland, leaving 1,900 Irish workers unemployed. (Hitt, 2011)
Conversely, if the economy is vibrant and expanding, companies may consider adding new services of products, creating new units or division, increasing their geographic areas of operations, and undertaking similar growth changes. (Hitt, 2011)
Evidence of Dell's solutions transition over the past 12 months includes acquiring eight companies providing strategic intellectual property for Dell's growth as a solutions provider, creating a software organization, and openingÂ 11 customer solution centre globally. The company also has doubled the number of its engineers developing enterprise solutions and more than tripled the number of its specialists selling solutions over the past five years. (Dell's Enterprise Solutions Strategy Delivering on Financial Commitments; Company Adopts Quarterly Dividend Beginning in Third Quarter, 2012)
a) What seem to be the most important things leading to the success of this company?
First and foremost, the first component is "Inspiration". As we know that inspiration is the period when all our effort and endeavour are successfully come together in the creative process. Michael Dell who is the founder and CEO of Dell Computer Corporation decided to implement and apply the concept of direct selling technique in his own business way. In fact, direct selling technique is which a company sells its goods directly to customers, while all intermediates such as distributors and retailers are eliminated. In his book, "Direct from Dell", he says that "I've Always Been Fascinated with Eliminating Unnecessary Steps".("Direct from Dell"-1999) At the same moment, Apple incorporation was selling consumer electronics, computers software and personal computer through indirect channels. Therefore, Michael Dell would like to have more unique and distinct business plan-direct selling!!He wants to keep the process of buying to be more easily and simply(Gwendolyn Cuizon, 2009), so the customers could evade from all sorts of problems from distributors or suppliers. Moreover, Dell will also able to rise up the customer satisfaction, contentment and even be more allegiance of the customers towards any DELL products.
The following crucial key factors which lead to the success of DELL are "Innovation". In the Dell's pathway to success, Michael Dell arrange out a designated, innovative strategies on enhancing and improving customer service. For an instance, Dell said that in order to develop a "customer -focused philosophy", you should always think about the bottom line especially your customer's bottom line. (Michael Dell) Can you save them money while enhancing your partnership with them? (Smart Money 2010) Michael Dell has his own unique business concept which is he will think strategically about customers' businesses, and find effective solution to assist them cut cost and heightening the profit, all the while improving how they can serve their customers. Dell improved the customer service by letting their own salesperson installing their own computer.
The next vital key component to be success was the "Employee attitudes". Michael Dell realized about the important roles of the employees. In his own perception, he found out that the greatest threat to Dell does not come from the competitor; it would come from our own employees! (ND. Dell Inc-2001) The above statement implies that if the employees lose the entrepreneurial team spirit, the company will definitely collapse. Michael Dell gives the scope of power to the employees to drive the business in a particular direction and provides them with sufficient tools and resources as they could able to fulfil their targets and goals. The main reason why he will do that is because he treats his employees as a co-owner. (MarivicButod, 2008) Besides that, Dell also emphasis on team-work, no matter among employees or among manager and staff, even the position of the CEO is also been shared. Team- building is generally an activity that assists work organizations set up goals develops positive interpersonal bonding and defecate the roles and responsibilities of each team member. Dell believes the notion of "two heads are better than one". ("Direct from Dell"-1999)
b) What do you see as the major challenges facing by this company over the next five years?
The existence of competitors is the primitive challenges facing by Dell over the next 5 years. In reality, rivalry among competitors is extremely high for Dell. Its major business opponents are Apple, Compaq, IBM, Gateway and Asus. A common phenomenon nowadays is price war always exists among competitors. In spite of Dell has a low threat of substitutes since there is always a demand for technology products in society. In our opinion, the only threat for Dell in the next 5 years is Apple computer, although the products are of high costs and insufficient of software support .The major reason is because it is very reliable! (Apple Inc -Wikipedia). Besides that, since Dell are facing extraordinary challenges as the personal computer market continues to weaken, in large part because many consumers are preferring for high-powered mobile devices, such as tablets, instead of desktops, for instances, Apple-iPad, Samsung Galaxy Tab and so on.
On the other hand, Dell critically required an influx of channel expertise. Another challenge is to search enough talented people to assist the company capitalise on the opportunities available in overseas markets. Dell was aggressive in recruiting foreign nationals graduating from U.S. business schools. (BARRON'S 4 may 2010) .Michael Dell believed that he needed the expertise of foreigners who not only knew his company from the inside but also able to understand different cultures and could respond in a sensitive manner to local behaviours and custom. Dell needs internal and external champions!(Direct Dell-1999) Moreover, there needs to be someone who possessing a strong relationship with Michael Dell and tell him the truth about what is going on with the politics behind this effort and not fear for his or her job. That may not be easy for Dell. There are many difficult meetings to hold, people and policy decisions to be made, and leadership challenges to be faced that will lead this company into uncharted territory.
In addition, the next challenge is the possession of Dell for future's advance technology and the advancements in the technology as there is a lot of scope for improvement and advancements in the technology. The future technology can make it possible to produce even much smaller computers with better features, and better performance, as compared to nowadys. So, the continuous changes in the technology keep the computer manufacturers on their toes, to make swift decisions and utilize effective and innovative strategies to produce high quality computers as there are numerous competitors of Dell which are well known companies around the world. The competitors of Dell include, Apple Inc, Microsoft, IBM, Acer, HP, Sony, LG, Samsung, etc. ( Natalie Schmid, ND. The Dell Company) Hence, Dell needs to be more innovative and be initiative in their technology.
Dell main advantage to compete in the market was Direct Model. The Direct Model allows Dell to directly get into the consumer, understand their need and allows consumers to fully customize their laptops. The market is becoming more educated and now more and more individuals want a product that can fulfill their specific needs. In the case of laptops, this means that customers want more options in terms of both performance and portability. By cutting out the retailer as a distributor, Dell has made it possible for each buyer to order directly from the factory and thus let Dell know the changes in the need of the customer and in others save a lot of cost too.
Efficiency in Delivery
Besides, the Direct Model also have a relatively fast delivery. This allows customers to place their order, and receive their customized computer often within days. And this have gain the confident and have a relatively highly positive image in term of quality and services toward the Dell compare to others company.
Low producing Cost
Dell has also an advantage in their inventory turnaround time and in their well-controlled relationships with suppliers. Which means that the business features create large cost savings and save a lots of time which Dell can pass on to its customers. The final result is personal customized, low-priced computer can be sold to the consumer.
Good relation with large businesses and government organizations
Roughly 75% of all sales revenue of Dell comes from large businesses and government organizations. This have proven that Dell has already created relationships with large companies and this provides most of their business. The good relationship have created an advantage for them as Dell can spent less resource on promoting and marketing their computer. Because the good relationship with these companies and organization in turn will pass the relationship on through their employees, providing them with Dell products.
Basically, Dell companies do not hindered by many weaknesses. One of the Dell's weaknesses is that they have a poor customer services. According to two recent reports, customer service at leading PC seller Dell has slipped in recent months. The declines indicate a stable trend of falling satisfaction with Dell's support although they are only statistically small in number (Spooner, 2004). The perception of declining customer service also results in corrosion of Dell's brand value and their business segments.
Dell has a human resource planning system which is known as OHRP (organization and human resource planning) that is to ensure enough labor with the right skills doing the right job at the right time to achieve their goals. However, each employee has a different personality and will not perceive or receive the planning system the same way. Hence, the objectives may not be worked at all times as this has to depend on the employee whether want to perceive or not.
As the Dell companies continued to grow this will cause the alteration of Dell's structure, control systems, and culture in order to keep the firm on track to achieve their strategic goals. At first, they formed a functional structure that with a taller hierarchy. Nevertheless, as Dell continued to grow again, its functional structure could not support higher levels of coordination and specialization anymore. So, Dell moved to a customer structure that focused on the special needs of each customer segment and developed even more specialized team for different division which in turn caused the firm to decentralize and become flatter. However, the decentralization can cause the organization to be fragmented. This occurs when all the units that once worked well together in centralized structure may lose their sense of team spirit and cooperation. The lower-level employees may experience lack of motivation and initiative.