DELLs Strategy for Growth - Assignment Example

DELL’s Strategy for Growth Introduction The strategies which Dell has used since 2000 has allowed for the technology sector to emerge on various levels. Dell has used a combination of restructuring the internal environment for higher levels of innovation to reaching the demands in the external environment. The components which are a part of this are able to provide several initiatives that are allowing the business to have several opportunities for growth in the future. However, an examination of the current weaknesses, trends and potential threats to the company also provides further insight into the expectations of the corporation as well as the initiatives which are currently driving forward the company. When looking at the features of Dell, it can be seen that the driving force in the internal and external environment is innovation. However, other competitors and the limitations with the global structure may lead to changes with the corporation. Dell’s Business Model and IS / IT Strategic Initiatives The basic business model that Dell uses is the build to order manufacturing model known specifically for reducing costs through the buy on demand features, while allowing those in the corporation to have specific tasks oriented toward the model. The response is the customer is able to receive higher quality products while innovation can easily be implemented in the products. This is combined with an integrated supply chain which is specifically associated with the shelf stock that is being added in different stores and which is providing more opportunity for growth within the company. Dell is able to use this basic model, as well as the integrated models which are responding to the growing demand of the company, to change the way in which the computers are developed, while offering a different component with customer service (Dell, 3: 2008). The advantage of this model is based on the ability to respond to the environment which Dell is working in. One of the main issues which are surrounding Dell is based on the concept of being a technology company. Technology requires continuous innovation and growth, specifically because of the emergence of the information age. The integration of new software and hardware systems, upgrades and different updates are continuous with the technological supplies. Engineers and those in the various IT companies are focusing specifically on the use of innovation to grow past competition and to retain customer value. By using more innovation, there is the ability to respond in a manner which is more integrative of the needs in IT and IS while ensuring that the new innovations are a part of the new stock (Melville et al, 283: 2004). This not only helps with the needs within the technological environment, but also creates a high end customer response, specifically because it becomes easier for Dell to match the needs with new items without having the overstock with older technology that is no longer valued. Another advantage of the build to order model is based on how it affects both the internal and external environment. The main concept is to meet the demands of the customer first, which allows Dell to always respond to the trends and expectations in society. This is combined with a clear set of goals which are needed by those working in Dell, specifically because it is a response system. By using a pull strategy, instead of a push strategy, there is the ability to refine target markets, move against competition and to continue to work with customer needs through the internal environment. The pull strategy means that the business responds specifically when a customer pulls in the order, as opposed to pushing the inventory onto the customer (Holweg, Pil17: 2001). While this is an advantage, Dell has to ensure that there is a continuous demand. This means that the marketing strategy as well as the rise above competitors is more advanced. If this falters, then the internal structure as well as the demand for new innovations will also become problematic within the corporation. To ensure that there is a continuous change with Dell, there has been a creation of new target markets. Dell has created strategic initiatives with IT, specifically to continue following the model. The e-commerce support that has been initialized is one of the strategies that was able to use the growing demand in technology while moving into different consumer trends as they were rising in business. The way in which this was done was to respond early to the demands in e-commerce, with the concept of being the pioneer in this specific concept. The network of software as well as the services which were developed responded to a new market segment that was beginning to emerge at the time. Customer satisfaction was known to heighten and new product markets were reached. As a result, Dell not only received more demands from consumers, but also received more responses from stakeholders and was able to create a change with the growth in the internal environment (Kraemer, Dedrick, 2: 2001). The initiatives in 2000 to launch an e-commerce platform and specific products was known to reach to a different target market while responding to demands and needs of different consumers and responding with the same model. From this time, Dell has segmented the business for the home, for small and medium businesses, for the public and for the large enterprise. Each of these arenas carries both products and services that are a response to the needs within the corporation. The several target markets which have been portrayed are followed by the ability to continue adding in new services and products, specifically as a part of the growing demand from the different consumers. The latest goal of Dell is to focus the same strategy on commercial business segments, which now holds 10% of the overall revenue of the company and which is continuing to grow with concepts such as enterprise solutions and storage solutions. In the last quarter of 2010, it was noted that the net income grew by 144% with growth of the company by more than 19% (Dell, 2010). The financial performance, growth in the commercial segment and the new innovations of Dell shows that the initial launch of the e-commerce solution has created a continuous response for businesses that are in need of more technical solutions. Analysis of Dell’s Competitive Environment The competitors of Dell include Compaq, IBM and Hewlett Packard. These are all computer based companies that are interested in the consumer and small business market. Apple, Gateway and eMachines are also a part of the competition, specifically in relation to PCs for homes. Toshiba, IBM and Compaq are the main competitors which are a part of the portable PC business and Sun, Compaq, HP and IBM are based in the Internet infrastructure markets. Exodus and Corio are some of the newer companies that are a part of the competition as well. It is also known that Dell faces competition outside of the United States through NEC, Fujitsu, Toshiba and Olivetti. Each of these competitors are focused on specific PC applications and are competing at a global level (Kraemer, Dedrick, 3: 2001). The advantage of the competition is based first on the internal structure model that is being used by Dell. Most other corporations don’t have the buy on demand process, which raises the operating costs and also creates complexities in building the different pieces of technology. Dell is able to compete with this specifically because of the build on demand process that is used and which saves on operating costs. However, this has also made it difficult for Dell to work into different retail stores because of the demands for stock that are required. This has also made it difficult for Dell to move into the larger enterprises with orders which require different computers that are bought in bulk series. An example of how this has become a detriment to Dell is through the store Best Buy, which decided to use the PCs of HP, specifically because of the stock which was available for the corporation. While this works for small businesses and homes, Dell’s main infrastructure is causing some gaps in working with various retail stores. Those in retail question the quality of how demand to sell manufacturing can work with the continuous need for bulk orders that are required quickly (Gonsalves, 1: 2007). Even though this is a weakness, Dell has found ways to integrate bulk orders, such as seen through the incorporation into Wal – Mart as well as the segment used strictly for large corporations. While the competition of HP is able to create a stronger presence, Dell is finding different avenues for the stock needed. Another concept which is associated with the competition comes through the continuous changes and trends in the innovation. Since invention is one of the driving forces of IT, it makes a difference in how well the competition is able to move with different components. The innovation requires changes with the PCs, specifically with higher technology upgrades which can be used. It also requires meeting the demands of consumers in different target markets, specifically which are interested in the different innovations for better performance at home or in the business. The main weakness which Dell is experiencing with this is noted with the higher innovation and changes in the internal structure of many of the competitors, such as changing selling prices and finding new innovations for home and small business computers. It has been noted that the competition against Dell is able to thrive by providing innovative features and a specific level of quality that isn’t matched by Dell. The gap which has been created since opening the new target segment then provides questions with how much to branch into different ventures as well as how to focus on the quality, reliability and innovation of the current products (Rollins, 1: 2006). Customer Activity Cycle and New Target Markets Another component with Dell that has allowed for both strengths and weaknesses is response to the customer activity cycle and the development of new target markets. This creates a value process which continuously changes the level of value which is associated with the target markets as well as how customers respond to this. For this to work, a company has to first understand the trends and demands that are in society as well as how these vary by location, demographics, space of need and understanding of various products. Each of these are required to be met with an understanding of what value means to the customer and how this directly associates with the continuous loyalty to the market. For loyalty to continue through activity cycles, new features and products have to continuously be available while value and responses through customer service remain a priority. More important, when an activity cycle becomes stale or sustained, then new target markets can begin to grow, specifically because of the relationship marketing that is developed as well as the loyalty that emerges (Payne, Holt, 159: 2001). The customer activity cycle that Dell was able to use is what allows the company to continue to grow. The first way in which this is monitored is through the main model which is used. There is the ability to naturally understand the customer activity cycle and to respond to this as needed. The ability to respond to demand leads a natural sense of growth among consumers and allows Dell to continue to assess the way in which it is growing. This is followed by the strong customer database, which records the main areas in which individuals ask for computers as well as what it will be used for. Dell is then able to combine the innovation and technology with the sustainable markets. As this is done, there is the ability to continue with the growth of the corporation by continuing to provide a sense of loyal customer value. When a cycle begins to disperse, then new demands can automatically be added as a main component of the Dell computers that are sold. Another strength used with the customer activity cycle is the ability to naturally grow into new target markets. The target market which was developed in terms of e-commerce was based on emerging businesses and enterprises that were in need of both services and products. Cycles can be continuous with this, specifically with the use of continuous innovation, upgrades and additions that many can use in enterprises and with e-commerce services. The building of this natural growth has led to Dell’s strategy today, which has the largest focus on commercial enterprises with development coming from various needs through the e-commerce solutions and the large businesses that are in demand with Dell’s concept. The main internal structure is able to respond to this by using innovation as the core component, specifically which is able to respond to the target market while continuing to grow new activity cycles for Dell. The response is then one which works to the advantage of Dell, specifically because of the natural growth with target markets. The disadvantage that is a part of Dell’s response to customer cycles and new target markets is based on the inability to find new demographics and regions. Instead, Dell has to incorporate new levels of innovation based on what is already associated with the main target markets as well as how this is perceived by loyal customers. To find new target markets, Dell would have to monitor competitors, new types of market research and areas which are growing in demand in terms of technology products and demand. A competitor that shows this disadvantage is the growing markets in China, specifically because of the altered pricing structure, high quality and the ability to tap into different target markets with the use of innovative products. The most noticed difference is that Chinese competitors are able to reach foreign countries, smaller towns and a wider population with new innovations and products. This is leaving Dell behind in selling PCs outside of America, with the secondary target markets already becoming loyal to other innovative products. The result is more difficulty in building a presence within the markets while faltering behind the competition on a global level (Lemon, 1: 2005). This is specifically a response to innovation, defining new target markets and the ability to provide a different customer activity cycle that is outside the main marketing initiatives of Dell. Dell’s Core Competencies The core competencies that are a part of Dell come first from the foundation which has been built in terms of creating a structure which responds to the industry of technology and the innovation which is required. This allows the corporation to meet the demands of customers while using innovation as the primary component in expanding the services offered. This creates a different trend in the internal organization, specifically which allows those working for Dell to have more flexibility with the culture while providing on demand results for different innovative needs. More important, the manufacturing process is one which remains up to date and is in line with the different products that Dell offers. The core competencies of the internal organization reflect the ability to overcome several challenges with others that are in competition with Dell. The other types of computer manufacturers don’t provide as many solutions as Dell and are often focused on large or small business, as well as homes. There are also internal structures which differ. It is noted that this changes the cost of the PCs and also alters the ability to lead the corporation with innovation. More important, most of the competition is behind from Dell in terms of creating an internal structure that enhances products in various target markets and with new innovations. Dell is continuing to lead the market by expanding the innovations, specifically which is attracting loyal customers and enterprises, as well as stakeholders that are increasing the shares with the Dell innovations. The competitors in the United States then become limited, specifically because of the infrastructure which is offered by Dell. The third area which is effective with Dell is the natural ability to respond to different trends in the customer activity cycle. The changes that occur in terms of technology lead the different concepts of Dell, specifically with alterations in demands, need for more innovation and expectations to have more provided within the realm of technology. Dell can easily respond to the customer demands because of the structure that is used. Continuous feedback from customers, monitoring the information of those that use the products of Dell and ensuring that there is a sense of quality with custom built products is creating a higher demand for Dell. The e-commerce pioneer statement is one of several examples of how Dell is responding to technology by remaining on the cutting edge of what consumers need and providing innovations and services that are able to drive forward the technology and the expectations with information that is a part of the current information age environment. This is unique to other businesses and is providing sustainability, despite the fluctuations in the economy or from consumer trends. Advice and Recommendations While Dell has provided several core competencies in terms of meeting consumer demand and responding with a strong internal environment, there are still areas of improvement. The first is based on the competition that is working with the same products as Dell. Different types of innovation in technology can lead to alterations and changes in the market that may leave Dell behind. It is also noted that price changes and alterations in quality are some of the weaknesses of Dell. There isn’t the ability to lower the prices of computers as much because most operation costs are not a part of the organizational structure that is in other environments. More important, the quality may sometimes fluctuate because of the demands, while others that are interested in technology are able to create continuous quality from the processes used. These few weaknesses are allowing some of the competition to continue to grow faster than Dell. This is combined with the lack of target markets that Dell is able to build into and which are quickly being taken over by competitors, such as global areas in China. For Dell to change the competition and growth is the need to combine the sustainable efforts with an understanding of quality and expectations for loyal customers. The ability to match competitors when understanding the different concepts of value, as well as innovation, can help for the products to gain more prestige in the community. This can be combined with finding different locations at a global level to expand the market. It is now known that technology and innovative products are in almost every region. Dell can take advantage of some of the markets that haven’t been opened, specifically to provide more alternatives for innovation and technology while expanding the prospects for competition. Once other towns and countries are able to see the Dell products, it will provide sustainable growth and loyalty while allowing Dell to remain ahead of other competitors on a global basis. Another weakness that Dell is required to look into is based on responding to the already developed programs, such as the e-commerce package. The need to expand into new target markets can be combined with different types of innovation that are required for target markets in different regions. Currently, Dell has the services divided according to the U.S and Western markets, which incorporates the home, small business and enterprise products and services. Many in other regions may have different cultural expectations and needs. Dell can begin new customer activity cycles with the same products and software, while adding in specific components that are needed with other demographic groups and which are outside of these main products and services. The expansion that can be taken at this global level will help to open the market while responding to different types of demands that don’t fall into the current categories of Dell. Conclusion The different perspectives that are a part of Dell are providing for more opportunities to be offered within the market. The beginning of this was noted with the e-commerce pioneers that Dell began in 1999. After this time, Dell has continued to grow with several market segments that are interested in technology, innovation and the products of Dell. For Dell to continue doing this there is the need to continue redefining the quality and the price of the products, specifically to respond to the fluctuations that are currently a part of the market and to remain ahead of competitors. More important, Dell is in need of evaluating the global presence and the needs in various nations, specifically which will allow the company to begin to change the prospects and to open new markets while remaining ahead of other competitors that are in the market of technology. If Dell continues to move forward with innovation, there will be the ability to remain a driving force with the technology age. References Dell. (2008). “Dell Supply Chain Management Case Study.” Dell. (2010). “Dell Reports Record Third Quarter Earnings.” Retrieved from: http://content.dell.com/us/en/corp/d/secure/fy11_q3_earnings_release.aspx?c=us&l=en&s=corp. Gonsalves, Antone. (2007). “Best Buy to Up Competition Against Dell.” Information Week (August). Holwell, Matthias, Frits Pil. (2001). “Successful Build to Order Strategies Start with the Customer.” MIT Sloan Management Review (October). Kraemer, Kenneth, Jason Dedrick. (2001). “Dell Computer: Using E-Commerce to Support the Virtual Community.” Center for Research on Information Technology and Organizations Lemon, Sumner. (2005). “Competition Heats Up for Dell in China’s PC Market.” InfoWorld(March). Melville, Nigel, Kenneth Karemer, Vijay Gurbaxani. (2004). “Review: Information Technology and Organizational Performance: An Integrative Model of IT Business Value.” MIS Quarterly 28 (2), 283-322. Payne, Adrian, Sue Holt. (2001). “Diagnosing Customer Value: Integrating the Value Process and Relationship Marketing.” British Journal of Management 12 (2), 159-182. Rollins, Kevin. (2006). ‘Dell Discusses Competition From HP.” Seeking Alpha. Retrieved from: http://seekingalpha.com/article/10971-dell-discusses-competition-from-hp-dell-hpq. Read More