DELL Business Excellence - Assignment Example

Business Excellence: Case Study on DELL Student’s Name Subject Professor University/Institution Location Date Table of Contents Business Excellence: Case Study on DELL 1 Table of Contents 2 Terms of reference 3 Business Excellence: Case Study on DELL 4 Introduction to DELL 4 Background 4 Drivers for strategic change 4 Areas for improved business performance 5 Overview of business improvement methodologies 5 Investors in People 5 Pros 5 Cons 6 Business Process Re-engineering 6 Pros 6 Cons 7 Six Sigma 7 Pros 8 Cons 8 Theoretical overview 8 Leadership of change 8 Human dimensions of change 9 Business Improvement Method to be applied to DELL 10 Justification for choice 10 Changes to be implemented 11 Challenges to be overcome 12 Conclusion 12 List of references 14 Terms of reference Dell has been a market leader in the personal computer market for a very long time but it started having issues at the beginning of 2006. This was followed by a loss of its market position and share to its competitors such as HP and IBM. Mounting competition, changing consumer demands and technology development are the key drivers of strategic change for Dell. This report will highlight Dell’s areas of enhanced performance. It will also give an overview of three business improvement methodologies namely Investors in People, Business Process Re-engineering and Six Sigma, including the pros and cons of each method. In addition, it will present a theoretical overview of leadership of change as well as the human dimensions of change. Lastly, it will recommend the best business improvement methodology that needs to be applied to Dell. Business Excellence: Case Study on DELL Introduction to DELL Background Despite Dell being a market leader in the personal computer sector, it started facing problems in 2006, with its rivals such as IBM, Sun Microsystems and HP taking up its share in the market in the established servers which operated business data networks and websites. In the initial three months of 2006, the company’s profit decreased by 18 per cent. This forced Dell to go for AMD’S Opteron fragments in the established servers segment in order to get back its market share. However, towards the end of 2006, Dell lost its market leadership position to HP. In the last 3 months of 2006, it reported revenue of $14.4 billion which was 5.1 percent lower than that of the previous year. In addition, Dell was performing poorly in its printer section and experienced a 2.6 percent decrease in its market share. Analysts argued that, the company’s direct retailing business method needed to be changed since consumers were shifting to preconfigured methods in stores. In response, Dell considered to shorten new product lifecycle, focus on the needs of consumers and foray into the growing Chinese market with personal computers customized for Chinese consumers (Ray, Paul & Krishna 2009, p.1). Drivers for strategic change There are several drivers pushing for strategic change in Dell. To start with, Dell is facing increasing competition from its key competitors in the personal computer industry such as IBM and HP. It is because of this competition that, Dell lost its market share in 2006. A lower market share means that, there are few customers to buy the company’s products or services which in turn lead to a decline in sales volume and eventually low profits. Competition in the personal computer sector keeps on mounting with more and more participants coming in. Increasing competition can be said to be the key driver for change for Dell (Ray, Paul& Krishna 2009, p.1). In addition, rising consumer demands is leading to the call for change. Ray, Paul & Krishna (2009, p.3) says that, Dell has functioned under its old business model of direct selling since its invention. Consumers are no longer interested in such a method. There is thus a need for Dell to adopt a new selling method. Advancing technology is also another driver for change. Dell’s products and delivery of services should be up to date with the current technology. Areas for improved business performance Dell needs to focus on numerous areas in order to enhance its business performance. First, online selling has contributed to a high sales volume in the past. However, Ray, Paul & Krishna (2009, p.5) claims that there are customers especially those from Asia Pacific who are not willing to pay for products before they see them. Therefore, Dell should devise a way through which the customers can view the products before purchase. Additionally, internet shopping is not common in countries like Russia and Hungary and thus the company should create more awareness of e-commerce in those areas. Moreover, Dell should include more intermediaries in their distribution chain so as to reach more customers. The firm also needs to focus on its inventory management system (Ray, Paul & Krishna 2009, p.3). Overview of business improvement methodologies Investors in People According to Bell, Taylor & Thorpe (2002, p. 161), this is a tool for business improvement that is designed to enhance the performance of an organization through its workers. It assists organizations to improve their performance and to achieve their goals through managing and developing their staff. It is based on three principles namely plan, do and review. Plan involves formulating strategies to enhance the performance of a firm. Do means taking certain measures to boost the performance of a company. Review entails assessing the impact of a firm’s investment in individuals on its performance. An external appraiser will search for proof that the three standards have been followed by a firm. It reflects business planning process making it apparent for a firm to follow and execute in their individual planning process. Pros Alvesson & Willmott (2003, p. 34) asserts that Investors in People presents a firm with a way for enhancing the management of its employees, employee motivation, satisfaction as well as availability of training and development resources. In addition, it is externally approved and widely acknowledged and thus it functions as an autonomous stamp of authorization for both potential employees and customers. Investors in People acts as a benchmark for a firm’s staff management to outside bodies along with making an in-house commitment to the staff to continually enhance their standards in the long run. Moreover, the method is inclusive, engaging all people working for a firm in all capacities such as part-time, full-time, volunteers and consultants, particularly important to the varied employment structures prevalent in most socially and voluntary enterprising organisations. Furthermore, the standard is given indefinitely through regular reviews that have a timeframe of less than three years. Within this period, a firm can decide on how often it wishes to be assessed and updated on its progress. Cons Though carrying out this method may result in enhanced relationships between a firm and its service users, customers and other stakeholders, it primarily focuses on internal quality. The method does not aim at directly addressing a firm’s broader social, environmental and economic impacts. Additionally, it needs devotion from all workers including top management and it cannot be executed without their participation. Moreover, just like other business tools, this method has a likelihood of being expensive for a number of third sector firms, especially if considerable changes require to be done after assessment. Besides, the standard concentrates only on employee development and quality (Alvesson & Willmott 2003, p.35). Business Process Re-engineering According to Oakland (2004, p. 87), this refers to the basic rethinking and drastic redesigning of all the business processes in an organization so as to attain significant improvements in vital performance measures such as service, quality, cost and speed. For a firm that does BPR, it becomes process-oriented and all its processes are classified and given certain names. In such a case, every person within the organization knows the specific process which relates to him or her and comprehensive process evaluation like control and monitoring is done. In order to restructure work procedure and achieve considerable extents of improvement in time management, cost and quality, several principles have been suggested. First, the management should integrate information generation work into the actual work that generates the information. Additionally, it should treat geographically distributed resources like they are centralized. It should also organize around results not tasks. Pros Oakland maintains that business process re-engineering is associated with several benefits. In the first place, it enhances employee satisfaction because they get a bigger sense of closure, completion and accomplishment from their duties. A worker undertakes a complete process, sub-process or job, which by definition gives an outcome that he or she expects. In addition, it increases effectiveness. All workers have a high sense of responsibility since they are acquainted with the processes that relates to their job positions. Every process is totally examined under a strict control by the management. As a result, employees present high quality commodities and services to the customers. Moreover, it improves organizational approach by increasing flexibility and compliance to change which in turn creates a better atmosphere for individuals to work. BPR helps identify waste and promote ideas by pinpointing outdated steps, products or employees in a certain process. It encourages the input and involvement of employees and thus workers who are familiar with the process being studied can spot defects and contribute ideas for correcting the defects (Oakland 2004, p.89). Cons BPR has some limitations. First, it normally needs heavy investment especially in technology. Obsolete methods like discharging a duty manually, face substitution by computer programs. Such programs enhance efficiency and lessen errors but a firm ought to spend on the software as well as training, which is an expensive alternative especially for firms that are after cutting their expenses instantly. Moreover, not every business type gains from BPR. For instance, a manufacturing firm may not be able to redesign its processes without giving up product quality or safety. It also lowers the morale of some employees. A worker become insignificant and demoralized if their main function is gotten rid of during the process overhaul (Anthony & Preece 2002, p.112). Six Sigma According to Fahy, Roche & Weiner (2004, p. 57), this is a quality measurement process which assists an organization to improve the quality of its products and services through elimination of defects or obstacles that prevent the organization from reaching perfection. A defect refers to anything which is beyond the customer specifications. To attain Six Sigma, a single process should not generate over 3.4 defects in a million chances. The main objective of this method is putting into practice a measurement-oriented strategy which revolves around process improvement as well as reduction of deviations by applying the Six Sigma improvement policies. The process is sub-divided into DMADV and DMAIC. DMADV stands for define, measure, analyze, design and verify. This is an improvement structure used to build up new products or processes at the quality levels of Six Sigma. DMAIC stands for define, measure, analyze, improve and control and it is an enhancement system for the present processes which fall below requirement and needs incremental improvement. Pros Drawing from Fahy, Roche & Weiner (2004, p. 59), one of the advantages of Six Sigma is that, it is customer centred and hence it aims at achieving maximum consumer satisfaction and reducing the defects in a product or a service. It targets new innovative tactics and customer delight so as to go beyond the expectations of a customer. In addition, the method targets deviation in the business processes and concentrates on improving them rather than the end result. The adoption of Six Sigma results to a rise in a firm’s profitability as well as reduction of operation costs and thus the improvements that are attained are directly linked to financial outcome. Cons Fahy, Roche & Weiner (2004, p. 60) further says that, the main limitation of Six Sigma is that, quality standards ought to be set according to given tasks and that, computing 3.4 defects in a million as a standard results in spending a lot of time in areas that are less beneficial to the company. The method is also considered to be gimmicky and merely a rebranding of other improvement tools and methods as done by Toyota. It thus encourages outsourcing of improvement plans without accountability. Moreover, the implementation of Six Sigma constantly need skilled workforce. Hence, control and dedication of employees are difficult to achieve if the implementation is not done on a regular basis. Theoretical overview Leadership of change According to Porter & Tanner (2004, p.166), leaders should actively interact with business partners. Creating partnerships, understanding and acting in response to their wants and taking part in cooperative improvement operations are highly encouraged behaviours in leaders. They support a setting of excellence within the organization through communication, convenience and responding to the needs of people. In addition, leaders need to give suitable resources and help, including assisting to set precedence for improvement undertakings and liberating the employees to take part in those undertakings. Acknowledging both group and individual contributions in a well-timed and appropriate way is of paramount significance too. Moreover, leaders recognize and support organizational change by being able to understand change forces and playing a central role in directing change. Activities comprise securing the organization’s investments and resources, communicating change plans, managing stakeholders as well as assessing the success of change. Besides, leaders should ensure that a firm’s strategy and policy are founded on the current and future desires and expectations of all stakeholders. Comprehending the marketplace and the likely changes forms a part of the strategy and policy formulation process. It is also the responsibility of leaders to ensure that, policies and strategies are rooted in information that is derived from performance measurement, learning, and research and outside related activities. Current levels of performance, top performance as well as partners’ core capabilities should all be put into consideration. In addition, external data like economic and demographic data should be considered (Porter & Tanner 2004, p.166). Porter & Tanner (2004, p.167) maintains that, after all the necessary information is gathered, leaders should develop, review and update the strategy and policy of the organization. Balancing the needs of stakeholders, ascertaining competitive advantages and spotting core competencies are considered important activities. Alliance between leaders and partners is crucial because it is a way of managing risk. Leaders should also communicate and deploy the policies and strategies that have been developed through a structure of main processes within the organization. This is a kind of natural follow-on after the development stage. Normally, performance measurement structures or balanced scorecards along with business plans are utilized to enable this and to follow up progress. Communication must be to every stakeholder and it is necessary for leaders to make sure that, understanding of the strategies and policies is evaluated. Human dimensions of change According to Porter & Tanner (2004, p.168), a successful organization manage, grow and liberate the whole potential of its employees at a personal, group-based and at an organizational level. In order to ensure that change is successful, five human dimensions should be considered. First, human resources should be planned, controlled and enhanced. It is crucial that, human resources’ policy and plans are totally aligned with top level strategies. There should also be a clear procedure for people resource planning. Moreover, it is important to ensure an association among human resource policy, the structure of the organization and the outline of major processes in the organization. Recruitment, development of careers and planning of succession under an equal opportunities structure should also be taken into account. Second, the knowledge and skills of people should be identified, built up and maintained. Since the business environment keeps on changing, there is a possibility that, the knowledge and expertise of the employees of an organization largely vary with its requirements. The first step in filling the gap is by having pertinent processes for identifying the requirements of the firm and assessing the current skills and competencies of the employees. The setting up and implementation of training programs may be a main enabler. People are also usually developed through work experience or teamwork. Setting personal objectives, assessment and mentoring form part of this step (Porter & Tanner 2004, p.168). Drawing from Hayes (2007, p.121) people should be involved in the change process and empowered. An organization can utilize devices like team-working, in-house conferences and ceremonies. It is as well crucial to understand the way employees are empowered in order to take the correct action, and how to review the value of the action. One of the commonly used models is the idea of developing guidelines to direct empowerment. The other dimension is a dialogue between the organization and employees. This is an overview of communication processes and aims at assessing how the requirements of the business are evaluated, the way bottom-up and top-down communication is attained as well as how to review and improve the effectiveness of communication. Hayes (2007, p.122) highlights the last dimension as rewarding, recognition and caring for employees. Reward involves features such as redundancy, remuneration and other employment terms which ought to be in alignment with the organization’s strategy and policy. Besides, recognition is crucial with the aim of encouraging and maintaining empowerment and involvement. Promotion of employee welfare, including safety and health are characteristics of excellence in an organization. In addition, appreciation and diversity of employees’ varied cultural backgrounds is very important. Business Improvement Method to be applied to DELL Justification for choice The business improvement method to be used in Dell is business process re-engineering. Dell needs to change most of its processes if it has to get back its market leadership position and maintain it. In the current competitive business world, firms encounter considerable change forces. There are specific reasons why BPR is the best method for Dell. The company’s consumer satisfaction is declining and its profits are not at the expected levels. Re-engineering is more of achieving remarkable improvements than making minor improvements or alteration. If Dell needs to survive, it ought to respond to business environmental changes. Thus, it must have an effectual program to assist in redesigning its operation processes for it to operate properly in the changing environment (Ray, Paul & Krishna 2009, p.5). According to Ray, Paul & Krishna 92009, p.3), the three significant changes that are impacting Dell’s operations are competition, technology development and customer demand. Competition in the PC market is becoming stiff. Companies are no more limited to the domestic levels because of globalisation. Dell needs to effectively synchronize numerous suppliers, retailers and subsidiaries situated in various countries and BPR is the only solution to that. Advancement of technology is changing business operations and thus Dell needs to build up more processes where technology and the firm’s value-adding processes are incorporated in order to generate a new competitive advantage. Moreover, currently a customer has the power to inform a company what he needs, when and how he wants it (Hayes 2007, p.125). Dell needs to change its processes to accommodate the changing demands of its customers. Changes to be implemented Several changes need to be made to Dell’s processes. To start with, online selling process requires some changes. Since its customers are not willing to buy personal computers and laptops without seeing them, Dell should arrange for products’ viewing for those consumers who insist on physically examining the product before purchasing it. Dell conducts online selling at different areas around the globe and China is one of its major customers for online selling. Thus it should open up several outlets especially in the main cities so that; interested consumers may have a look at the company’s products at those outlets. Additionally, Dell should refrain from direct selling and redesign its supply chain to accommodate as many intermediaries as possible in order to enable the company to reach many consumers. This may be enhanced by entering into partnership with established retailers like supermarkets, electronic stores and exhibition centres. Moreover, Dell is venturing into more markets in different regions and the demand for its products is increasing. Therefore, it should change its inventory management systems and start manufacturing more products without waiting for consumers to place orders. In addition, Dell laid off employees in 2008 to cut down its operation cost (Ray, Paul, & Krishna 2009, p.5). However, it has opened new outlets since then and thus there is need for more staff. Dell’s should employ new highly experienced staff to adequately serve in its various branches. Challenges to be overcome In implementing the business process reengineering method, Dell is likely to face certain challenges that it needs to overcome in order for the implementation process to be successful. Complacency is the main challenge that Dell may face. From the company’s perspective, Dell is a market leader and it may believe that, it has superior know-how and a big market share and thus BPR is irrelevant to the company. It may end up ignoring the reality that, any form of business may become obsolete because of environmental changes. Moreover, most established firms like Dell fail to effectively reorganize their process because they are satisfied with their status quo (Oakland 2004, p.87). Dell should therefore recognize the issue of complacence for its BPR to succeed. Another challenge is resistance. Managers may resist change because it threatens their powers. Employees may also pose some resistance. Their worry about dismissal may lead to lack of commitment to their jobs and may undermine the planned processes. Dell should strive for buy-in from each department before the process is initiated. Lastly, there is fear of failure and the unknown. Successful implementation of BPR is not guaranteed. According to Anthony & Preece (2002, p.112), most firms are not conversant with the reengineering methodology and are afraid that dramatic reorganization of the processes may result in a collapse. Dell should thus communicate the reengineering process effectively to the entire organization and ensure overall understanding of the new processes. Conclusion Dell started experiencing problems in its operation in 2006 which resulted into a decline in its profits and loss of market leadership to HP and IBM which are its main competitors. Dell’s drivers to strategic change are, increasing competition, changing consumer demands and advancing technology. The areas for improved performance are online selling, distribution chain and stock management system. Investors in People method enhances employee management and is independent of the organization. However, it basically deals with internal quality and is dependent on employment commitment. Business process reengineering enhances employee satisfaction and increases effectiveness but it requires heavy investment in technology and only work for some business types. Six Sigma maximizes customer satisfaction and increase the profitability of a company but it consumes a lot of business time and needs highly skilled manpower. Leaders create partnerships, avail resources for change, communicate, develop and review business strategies. Employees needs to be involved and empowered in the change process. The best business improvement methodology for Dell is business process reengineering. List of references Alvesson, M & Willmott, H 2003, Studying Management Critically, Thousand Oaks, Sage Publications. Anthony, J & Preece, D 2002, Understanding, Managing and Implementing Quality, Thousand Oaks, Sage Publications. Bell, E, Taylor, S & Thorpe, R 2002, A Step in the Right Direction? Investors in People and the Learning Organization, British Journal of Management , 13 (2), 161–171. Fahy, M, Roche, J & Weiner, A 2004, Beyond Governance, Hoboken, John Wiley& Sons. Hayes, J 2007, The Theory and Practice of Change Management, Hampshire, Palgrave Macmillan. Oakland, JS 2004, Oakland on Quality Management, New York, Routledge. Porter, LJ & Tanner, SJ 2004, Assessing Business Excellence:A Guide to Business Excellence and Self-Assessment, New York, Routledge. Ray, K, Paul, S & Krishna, P 2009, Dell: Reinventing itself in 2007, London, IBS Research Center. Read More