The paper 'Strategy Evaluation is a Waste of Organizational Resources' is a wonderful example of a Management Essay. The evaluation of a business strategy involves analyzing the company’ s performance with respect to its internal resources and external environment. It is not just an analysis of the company’ s performance but a broader evaluation of whether the company’ s business objectives and plans are appropriate with respect to its competitive positioning, whether its current performance is in line with its initial strategy objectives and planning and also whether the strategies are flexible enough to adapt to the changing circumstances.
It is possible to evaluate the financial performance of the company with respect to the competition in quantitative terms but much of the external environment and internal resources of the company may not be quantifiable hence difficult to evaluate. Besides, in the context of the changing business environment, structured strategy evaluation may be considered to be redundant as each company has its unique strengths and weaknesses hence a standardized strategy evaluation may not be appropriate. However, it may also be opined that strategy evaluation is necessary, particularly in the dynamic situation with changing the business environment, to analyze whether the organization structure and culture are aligned with the strategic objectives and plans.
As Thompson, Stickler, and Gambler (2007) said, a winning strategy needs collaboration of the entire organization so that there are enthusiasm and commitment towards organizational success. A company decides on its business strategy only after the evaluation of alternatives available. For example, Dell Computers, in 1984, decided to adopt the build-to-order and direct selling strategies of production and selling, while the major competitors at the time, HP, IBM, and Gateway were operating on the strategies of build-to-stock and retailer-driven selling.
Dell’ s strategy was essentially driven by the external environment that had already become highly competitive. The company needed to develop a competitive strategy rather than a generic strategy, the latter being related to a product that had its social value higher than the cost while the earlier strategy required the generation of some social value for garnering profits (Anderson School). Dell realized that in the face of stiff competition, the only competitive advantage that it could develop was in terms of prices.
Towards this end, it developed the novel business strategy in which it did away with the retailer intermediaries, setting up direct contact with customers through the telephone, and more in the 1990s, through the Internet (Achtemeyer, 2002). The direct selling model, by which customers were offered choices of computer configurations, was supported by the build-to-order manufacturing process by which the supply chain was activated only after the customer put in the order and made the payment, either through credit card or cheque, thereafter the marketing executive putting in an order with the vendor.
On the other hand, the company paid the suppliers of components only after the final assembly, which was done at the company’ s factories, and the product supplied to the customer. As a result, the company did not need to maintain any inventory of final products. The competitors, on the contrary, stocked computers with retailers and received payment only after delivery. Dell could earn higher margins than its competitors, passing on some of the benefits to customers through lower prices, as a result of its low inventory and dealer costs.
Within a very short period of time, Dell captured a major market share and became the leader in the computer hardware industry. The strategy worked for the desktop computer business till the 1990s. Most of the business that was generated through e-commerce was from corporate clientele. The strategy, however, reached a saturation point thereafter. By the mid-2000s, the desktop computer industry became commoditized with little scope of product differentiation. Gradually, the main customer base for both desktop and laptop computers became individual buyers rather than corporate buyers.
Individual buyers preferred to buy after a touch-and-feel evaluation of the product, which was readily available for retailer-driven competitors’ products. Dell began to lose out to competition from this segment. This has been particularly the case for laptop computers, the fastest-growing segment in computer manufacturing. Besides, newer players began to emerge in the market, which had the additional advantage of being closer to the locations of the component production bases in Asia. The commoditization of the product meant that the early-mover advantage of the existing players began to diminish.
Ways to reduce costs through strategic tie-ups with component manufacturers, availability of high-speed and flexible chips, and so on, replaced the cost-cutting advantage of the direct selling model. On the other hand, Dell’ s direct selling cum build-to-order model required an elaborate and extremely efficient supply chain that turned out to be more costly in the new circumstances. Hence, the company, in about two decades, found, on the evaluation of its business strategy, that the external environment was no longer in alignment with its internal resources.
As the company had so long focused on perfecting its supply chain, it had invested little in its research and development and product design capabilities. While, the existing competitors, HP the most important among them, and newer players like Lenovo and Acer, captured market share, particularly in the laptop market, by offering customer-centric products. Hence, Dell has now altered its strategy and has begun to make its physical presence felt through kiosks at retail outlets and discount stores without completely abandoning the direct selling model. However, this inadequate strategic evaluation has cost it with lost market share as Acer has overtaken it by becoming the second-largest seller of laptop computers, after HP (Gilmore, 2008).
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