It will be no small task to reinvigorate the company. The market for PCs is shrinking--global demand dropped 11 percent in the last quarter alone --and Dell's market share has been on the decline for nearly a decade. According to the company's last earnings report, its PC profits took a nose dive-- falling about 79 percent. The founder's master plan rests on the conviction that he can turn the PC-based business into what he likes to call an "enterprise solutions and services" business.
Essentially, that means that, similar to IBM, Dell is looking to corner the market on software that appeals to small- and mid-sized businesses.
That won't be easy, and Michael Dell knows that. What he also knows is that the PC businessis is dead--and the company must move on. I'm just level-setting what Dell is today, because I think a lot of people look at Dell and they go, "Oh, Dell is a consumer PC company. In , the company started betting heavily on the tablet market, specifically business tablets.
But the tablets have, for the most part, failed. A tablet traffic report compiled by Chitika shows that Dell tablets--which run on Windows barely even register on the charts compared to the Apple iPad, Samsung Galaxy, and Amazon Kindle.
So, what's Dell to do? He needs to get his entrepreneurial groove back. Dell didn't respond to my requests for comment. But after looking at a range of company documents, filings, and analysts' opinions, I think there are five key ways to do it. Feel free to disagree or suggest your own initiatives in the comments below.
Dell chose to locate its manufacturing plants close to such regional markets for better market access, lower shipping costs, and improved responsiveness in delivery. In the past, customers in India would have to wait for up to a month for their computers, which were manufactured in Malaysia. However, this choice of location is not without its disadvantages. Locating manufacturing operations beyond the United States comes with certain disadvantages.
Generally, the greater the distance from the home market, the more difficult it will be to conduct operations. The geographical distance makes control over the manufacturing operations even more difficult.
However, due to similar culture, beliefs and proximity of manufacturing operations, the recovery effort was incredibly fast with the aid of local firms. Recovery would also be difficult due to the distance and liability of foreignness. One of the main reasons for outsourcing the manufacture of PC components is the ability to choose good components and suppliers rather than having to produce them oneself.
Outsourcing would allow Dell to focus on its own competencies, such as managing its efficient supply chain, customer service, research and development of new products, etc. Since the incorporation of Dell, it has been outsourcing the manufacturing of components manufacture but not the final assembly itself.
Dell does not want to outsource its manufacturing operations entirely so as to prevent the unintended creation of competitors. Outsourcing is often described as easy to replicate and the competitive advantage that it provides is not sustainable. Outsourcing is only feasible if it is separated from other supply chain activities, which is what Dell is trying to achieve. Consumers prefer to purchase laptops in retail outlets, so they can look at and feel the design.
Moreover, competitors began restructuring efforts and significantly improved their business models. The decline of the desktop PC was one of the main reasons that Dell lost its ranking as the leading global PC maker. Knowledge as a source of competitive advantage has allowed these MNEs to surpass Dell in market share.
They were able to do so as they outsourced their manufacturing operations entirely. However, Dell was still restricted by its decision to outsource only components and desire to have total control over the final assembly.
Lenovo became the world's third-largest personal computing company overnight, gaining access to foreign markets beyond China. Strategies and measures that Dell undertook to address its loss of market share were many. For example, it reduced reliance on direct sales by selling through retail channels and launched laptops and netbooks.
Bartlett and Beamish describe three types of strategic approaches that an MNE can use to respond to challenges, defend worldwide dominance, challenge the global leader, and protect domestic niches. However, doing so eroded its core competencies. Instead, Dell should defend and reinforce their existing capabilities rather than developing new ones. Dell can do so by taking extra steps to improve its customer service.
For example, it introduced a concierge service for customers in April that provided personalized and remote services for customers. In the third step the strengths, weaknesses, opportunities and threats SWOT analyses will be performed. Finally in the last step it will be discussed how Dell can improve its strengths and what is a suitable approach to beat out the competition. For this analyse the development of the company which is closely associated to the development of Michael Dell as a leader is studied base for the study: Thomson, Arthur A.
The young Michael Dell had an instinct for successful business creation and he proved this when he started in with a simple idea to sell PC components out of his collage dormitory, which he bought from IBM dealers, who had often excess supplies on hand, because they were required to order monthly quotas from International Business Machines IBM. He sold these components for 15 percent below the regular retail price. Dell decided to drop out of college and formed PCs Ltd.
His simple strategy was to sell the PCs direct to end users to eliminate the retail markup. This low price strategy worked out very well and generated enormous revenue growth. In the company was already assembling its own PC designs. The young Michael Dell was back at this time a enthusiastic hard working individual full of ideas. During that time he had to refine the strategy several times even after it was implemented, but because of missing business, financial knowledge and leadership qualities shy person and terrible public speaker he was unable to develop his business further.
The young company was therefore struggling with growing pains. Michael Dell was aware of this problem and brought in Lee Walker, a 51 year old venture capitalist, to provide the needed managerial and financial experience to develop the company. In the company was renamed into Dell Computer and first international offices were opened. In Walker had to leave the company because of health reasons. The hiring of Walker and Meyerson shows that the young Michael Dell understood very well the important role of corporate governance.
Michael Dell developed a new style of management based on both technical knowledge and marketing know-how. He was considered as a very accessible CEO with very good leadership qualities.
He delegated authority to subordinates and Michael Dell believed that best results came from turning loose to encourage corporate intrapreneurs. The finer the segmentation, the better able Dell is to forecast what its customers are going to need and when.
Dell then coordinates the flow of that strategic information all the way back to its suppliers, effectively substituting information for inventory. Each segment has its own issues. You need a totally different approach. Segmentation gets us closer to them. It allows us to understand their needs in a really deep way. And good forecasts are the key to keeping our costs down. We turn our inventory over 30 times per year. We see forecasting as a critical sales skill. We teach our sales-account managers to lead customers through a discussion of their future PC needs.
We can do this with our large accounts, which make up the bulk of our business. And we can also steer them in real time, on the phone, toward configurations that are available, so this is another way we can fine-tune the balance between supply and demand.
There are so many information links between us and our customers. For example, we can help large global customers manage their total purchase of PCs by selling them a standard product.
Close customer relationships have allowed us to dramatically extend the value we deliver to our customers. Our solution was to create a massive network in our factory with high-speed, megabit Ethernet. What happens to the money our customer is saving?
They get to keep most of it. We become intimately involved in planning their PC needs and the configuration of their network. But the people working on PCs together, both from Dell and Boeing, understand the needs in a very intimate way. See you later. Remember, a lot of companies have far more complex problems to deal with than PC purchasing and servicing. The idea is to use technology to free people up to solve more complicated problems. For example, a customer like MCI can access our internal support tools on-line in the same way our own technical-support teams do, saving time and money on both sides.
They simply go to dell. These tools are used by internal help-desk groups at large companies as well as by individuals. One of our customers, for example, allows its 50, employees to view and select products on-line. They use the Premier Page as an interactive catalog of all the configurations the company authorizes; employees can then price and order the PC they want. They are happy to have some choice, and Dell and the customer are both happy to eliminate the paperwork and sales time normally associated with corporate purchasing.
That frees our salespeople to play a more consultative role. We also have developed tools to help customers set up their own customized versions of dell. There are about 7, of these to date. In a direct business like ours, you have, by definition, a relationship with customers. But beyond the mechanisms we have for sales and support, we have set up a number of forums to ensure the free flow of information with the customer on a constant basis.
In these meetings, our senior technologists share their views on where the technology is heading and lay out road maps of product plans over the next two years. There are also breakout sessions and working groups in which our engineering teams focus on specific product areas and talk about how to solve problems that may not necessarily have anything to do with the commercial relationship with Dell. For example, Is leasing better than buying? People in businesses as dissimilar as Unilever and ICI can learn from each other because, amazingly, they have very similar problems when it comes to PCs.
The ratio is about one Dell person to one customer. At our last session, we had about customers. All our senior executives participate in these meetings with our largest customers. And that helps us, as well, with our own demand forecasting. We hire a lot of people from other companies in the industry, and they tell us that these meetings are unique. I spend three days at each of them.
In the normal course of our business, I have lots of opportunity to talk to customers one on one, but there is something much more powerful about this kind of forum.
At every Platinum Council, we review what they told us last time and what we did about it. We keep an ongoing record of the issues. Let me give you a concrete example: A few years ago, the engineers responsible for our desktops were operating on the theory that customers really wanted performance from these products—the faster the better.
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