Assignment 5: Capstone
Abstract
Dell Inc. deals with manufacturing and selling of personal computers and other computer accessories. Turbo PC was the first product produced by Dell Company, which has experienced gradual growth since its foundation. Various strategies and policies have led to the success of the multinational company over the years. Therefore, the paper covers the effect that the mission, vision, and primary stakeholders of Dell has on its success. It highlights the effect of the six segments of the environment on both the firm and the industry. It also focuses on the SWOT analysis and five (5) forces of competition to determine how they affect Dell. Various levels and types of strategies, the relationship between the strategy and organizational structure are also addressed. Additionally, it describes the internal environment, corporate governance mechanisms, ethical implications related to strategic decisions.
Introduction
Dell Inc. is among the largest multinational technology enterprises that deal with manufacturing and selling of personal computers and other computer accessories. The firm’s head offices are in the U.S. It was founded as personal computers limited by Dell Michael in 1984 (Fields, 2006). The main competitors of Dell include Apple, Lenovo group, Samsung, Sony, Hewlett-Packard Company among others. It is ranked as the third largest distributor of personal computers globally after HP and Lenovo (Moorhead, 2013). The company has come up with strategies that have enabled it to yield more success as analyzed by the SWOT and five forces model. The mission, vision, and mission statements have major impacts and significance for the company (UK essay, 2015). It uses various levels and types of strategies and has a close relationship between the strategies and organizational structure. The internal environment, corporate governance mechanisms, and ethical implications are related to strategic decisions (Fields, 2006).
Impact of the company’s mission, vision, and primary stakeholders
The mission statement talks about the company’s objective and plans to serve its stakeholders. On the other hand, a vision gives the future goals and aspirations of a company. They give a clear purpose of the organization (Moorhead, 2013). It gives a firm a guideline on the strategies it should follow to develop measurable and realistic goals. For Dell Corporation, the mission statement helps it to go for strategies that focus on integrity and responsibility. It believes in winning but through the right channels, not through fraud and other vices (Tinnacher, 2010). The vision statement helps the company to plan for positive impacts of differences in leadership and management in general. The primary stakeholders of Dell are the employees, investors, financial institutions, silver lake and channel partners (Tinnacher, 2010). The stakeholders play a significant role in the firm by providing labor, marketing and participating in decision-making (Moorhead, 2013). Stakeholders lead to positive developments in the company due to their active involvement where they share ideas and provide the support needed (Moorhead, 2013).
Impacts of the six segments of the general environment
The six sections are described as external factors that are beyond the company’s control though a PESTEL analysis. The six segments could be social, political, environmental, economic, technological or legal (Harford et al., 2013).
PESTEL analysis for Dell. Inc.
Political factors include government regulations and taxation policies in various countries that the company distributes its products to (Harford et al., 2013). In some countries like China where the government promotes local personal computer companies, the government’s regulations affect the company negatively. The state also supports foreign vendors, but there are complicated processes and formalities of securing government contracts by Dell in China. Additionally, the Chinese government controls the internet usage thereby limiting the growth of the market through the internet (UK essay, 2015).
The economic environment is described by inflation and current economic situations among other factors. The economic factors affecting Dell include the software piracy, shortage of skilled labor and preference of cheaper systems that are not standard in some countries (Fields, 2006). The poor economy has led to reduced market, reduced buying capacity of individuals and fluctuation of currency exchange that results in reduced profit margins for Dell (Harford et al., 2013)
Based on the social factors, culture deals with the values and attitudes of a particular community (Tinnacher, 2010). In the U.S., the demand for computers has shifted from businesspeople to students and young children for educational purposes. The automation of all sectors of life has led to the increased use and demand for computers and notebooks. However, some people do not believe and trust the company. Therefore, they have to engage in face-to-face operations to convince such customers (Tinnacher, 2010).
The technological sector involves integrating new knowledge into materials, processes, and products (UK essay, 2015). The company makes use of new technology to attain a low-cost leadership strategy as well as product differentiation. Dell has to keep up with the advancement in technology to gain a competitive advantage over their competitors. It uses sophisticated technology to provide 24 hours online technical support, downloading of software and order status information (Fields, 2006).
Based on the environmental factors, Dell uses the direct strategy to ensure that all its operations contribute to environmental friendliness. It works closely with the non-governmental firms, shareholders activists, and socially responsible groups that aim at achieving environmental sustainability (UK essay, 2015).
Legal activities and affairs in various countries have affected the operations of Dell. For instance, the company was fined due to some misleading advertisement about PCs in New York (Barker et al., 2013).In Orleans, two competitor companies filed a false accusation stating that Dell was selling surveillance cameras and partnering with city officials. Such instances probe financial challenges to the company. Besides, the image of the company is destroyed (Wheelen & Hunger, 2011).
The SWOT analysis assists in the realization of strengths, weaknesses, opportunities and threats associated with a particular company (Jurevicius, 2013).
Strengths
Dell company benefits from its strong brand name and image valued at $7.5 billion (UK essay, 2015). It allows its customers to conduct product customization that makes it unique among its competitors. Dell is also involved in several green initiatives and has been considered as an eco-friendly business thereby, placing it in the best position to work with the government and public agencies. It is recognized as a competent Merger and Acquisition Company since it has spent $13 billion to obtain mergers that resulted in new capabilities, assets, patents, and skills (Jurevicius, 2013). It utilizes the direct selling business model to distribute its products to the consumers without involving big box retail outlets.
Weaknesses
Dell relies fully on revenues collected from the sale of laptops and hardware, which have a small profit margin (Ireland et al., 2008). Poor customer services have resulted from outsourcing its call centers offshore. It has a small budget of investment on the R&D that has led to the lack of opportunities to develop smartphones, tablets, and learning of new skills and capabilities compared to their competitors (Jurevicius, 2013). Due to low investment in R&D, it has a weak portfolio of patents that makes it difficult to compete in the tablet and smartphone markets. The company focuses on online selling (Jurevicius, 2013). Therefore, it has few retail locations that inhibit buyers from buying since they do not have the physical connection and touch with the products. Lastly, Dell offers products that have little differentiation from competitor products and are disadvantaged if the competitors offer the same products at lower prices (Ireland et al., 2008).
Opportunities
Dell provides services such as security, infrastructure, cloud computing as well as enterprise solutions such as networking, servers, and storage that bring in a lot of profit for the company (Jurevicius, 2013). Therefore, the company should focus on expanding such divisions to gain more profits and overall growth. Dell should invest in the R&D to obtain more patents through acquisitions. The rapid economic growth provides a real market for Dell products Therefore, it should focus on expanding its market share. The tablet market growth is likely to increase in future thereby, providing a chance for Dell to provide new tablet models that will help it to benefit from the market growth (Jurevicius, 2013).
Threats
Currently, there is a high demand for smartphones and tablets due to their improved capabilities and lower prices. Weak demand for laptops is a significant threat to Dell that greatly relies on laptops to obtain its revenues (Jurevicius, 2013). Reduced profit margins resulting from an increase in the prices of raw materials imply that the cost of production for Dell will rise. There is slow growth rate in the computer market, which leads to the probability of saturations in the market. It will make it difficult for Dell to regain its lost market share and compete with other competitors (Ireland et al., 2008). Dell faces stiff competition from other giant personal computer manufacturers such as Apple, Toshiba, Lenovo, Acer, and HP among others.
A strategy that Dell can use to capitalize on its strengths and opportunities
Dell can take advantage of the direct sale approach to developing a profitable network that will help in offering their customers with customizable deals online (Lee & Kotler, 2013). It can form mergers with other companies such as gaming industries that will contribute to diversifying their offerings. It should also exploit the opportunities presented in the new market by producing new products that will satisfy the global population. It can make products that suit the needs of the local and worldwide customers. The company can use defensive mechanisms such as lobbying for changes and assistance to achieve this vision (Lee & Kotler, 2013).
Dell porter’s five forces analysis
In 1979, Michael Porter formulated the five forces models (Dell & Fredman, 2006). The five Special Forces influence the competition intensity in the marketplace. They include the buyers’ bargaining powers, suppliers’ bargaining powers, threats of substitute products and rivalry in the market (Dell & Fredman, 2006).
Threat of new entrants
Large corporations such as Dell use the strategy of economies of scale to add barriers of entry to the new competitors. New business ventures can overcome the obstacles and introduce new products to the market based on innovation (Barker et al., 2013).
Bargaining power of buyers
Dell has an increased the bargaining power of buyers due to their extended offers and a good brand name (Grinnell & Muise, 2010). Additionally, Dell offers quality products at reduced prices that are considered sensitive to the customers thereby, increasing their bargaining power. However, the inability to achieve backward integration reduces the buyers’ bargaining power (Grinnell & Muise, 2010).
Bargaining power of suppliers
Dell relies greatly on suppliers since it does not manufacture but assembles its products from various parts that are bought from external vendors. Dell’s suppliers are located near their assemblage facilities to increase convenience. The cost of supplies is high thus, increasing the bargaining power of suppliers (Burton et al., 2003).
Rivalry
Dell corporations face stiff competition from other personal computer companies such as Apple and Hp (Wheelen & Hunger, 2011). Therefore, Dell should come up with strategies that will reduce pressure from competitors. Dell also faces rivalry regarding the high concentration of computers in the market, little product differentiation, reduced profits and price wars (Burton et al., 2003).
Threat of substitute products
The existence of substitute products from other companies such as Toshiba affects the sales and business for Dell. However, the threat of substitute is considered petty because Dell produces good quality PCs and the significant alternative is Apple Company in the U.S. (Harford, Mansi & Maxwell, 2012). Additionally, the high prices and lack of software for Apple PC prevents customers from switching to Apple thereby keeping the threat of substitute low (Harford, Mansi & Maxwell, 2012).
Ethical implications related to strategic decisions
Dell has adopted the culture of integrating ethics and compliance in its day-to-day decision-making. It believes in performing tasks in the proper way and winning in the right way as well. They conduct their decision-making ethically to ensure that the interests of their customers, suppliers, and strategic partners are considered, and a good business prevails. Dell has a council that deals with the compliance and ethics associated with decision-making; Dell Global Risk and Compliance Council (GRCC) (UK essay, 2015).
Relationship between strategy and organizational structure
There is a close relationship between Dell’s strategies and the organizational structure. The two work hand in hand in that any changes in the policy lead to the adjustment of organizational structure to ensure proper functionality. In other words, the organization chart must be modified to adapt to the new policies and strategies introduced in the firm (Lee & Kotler, 2013).
Dell Corporation analysis of the external environment
Every business venture is affected by both internal and external factors during its operations. The external environment impacts can be termed as how the company copes with the external trends and mitigates them before they occur (Barker et al., 2013). Such external trends are divided into two; those that provide opportunities and those that pose threats to a firm. The major external trends for Dell are the emergence of tablets and smartphones and environmental sustainability. The rise of smartphones and tablets present both risks and opportunities for Dell Company. The opportunity is that it creates a new market for the industry (UK essay, 2015). Therefore, Dell can manufacture tablets and smartphones and sell them in the new markets. Environmental sustainability opportunities include the increased profits due to the low cost of production and energy. Renewable sources of energy are less costly compared to other sources of energy. Therefore, it increases profits and protects the environment. However, it is a threat because Dell could face stiff competition from other companies in the new markets. It will have to compete with well-managed businesses that manufacture smartphones and tablets in the new markets. The reduction of cost using renewable sources is not much reliable based on their speed and capabilities among other criticisms (Barker et al., 2013).
Dell Corporation analysis of the internal environment
Resources, core competencies, and capacities characterize the internal factor analysis. The board carries out the internal controls and risk management of Dell Company (Lee & Kotler, 2013). It uses high-level strategies that contribute to the increased profits as well as satisfaction to the customers. Dell distinguishes itself from its competitors through the introduction of direct sale strategy, lean production, JIT inventory management and the internet. Dell also gains its competitive advantage through making its transfer processes fast through online selling (Wheelen & Hunger, 2011). The SCM systems have enabled the company to promote good communication, reduce the production and distribution cost thereby adding value and customers’ satisfaction (UK essay, 2015). However, the company has to carry out promotions and advertisement to inform their customers of their new products such as tablets to enter a new market. It will need to employ the penetration strategy to enter the new market for its products. Dell has developed a good brand name through dominating the online markets through the website selling. As a result of small investment in R&D, it has a weak portfolio of patents that makes it difficult to compete with tablet and smartphone markets (Ireland et al., 2008). The company focuses on online selling. Therefore, it has few retail locations that inhibit buyers from buying since they do not have the physical connection and touch with the products. Therefore, to compete in the ever competitive market of technology, Dell will need to invest more in R&D as well as establishing more retail shops globally (Ireland et al., 2008).
Levels and types of strategies for a firm
The primary levels of policies that exist in any business include the business level, corporate and functional levels (Harford, Mansi & Maxwell, 2012). Corporate level strategies refer to how the company conducts its business and the section of the environment where the firm can develop and compete with others. The major corporate level strategies include growth strategies, retrenchment and stability strategies (Dell & Fredman, 2006).
Business level strategies focus primarily on the competitive advantage of the firm through the products and services produced. The major business level strategies include the differentiation strategy, low-cost leadership, and concentration on a particular market gap (Wheelen & Hunger, 2011).
Functional level strategies deal mainly with operational segments and departments with much emphasis on the value chains and processes of the business. The functional level strategies are applied mostly in marketing, finance, human resource, R&D and operations among others (Moorhead, 2013).
Business level strategies for Dell
Dell uses the cost leadership and differentiation strategies to ensure that it stays ahead of the competitors (UK essay, 2015). The company is aware that customers need good quality products at low prices; hence, it has introduced the strategies that will add on to its competitive advantage. Based on the cost leadership strategy, Dell has applied technology and innovation in its operations thereby allowing it to achieve cost differentiation. The cost leadership strategy has also been utilized through the introduction of JIT systems and customer conjoint (UK essay, 2015). The process involves allowing a client to specify their requirements and preferences to ensure that the product fits their needs that are offered through the Dell websites. Based on differentiation, Dell uses technology and innovation to make sure that it offers unique products that are of high quality to add on to its competitive advantage. Differentiation is also achieved by offering better ordering services, upgrades and good relationship with enterprises through open standards (Tinnacher, 2010).
Corporate level strategies for Dell
Dell utilizes the growth strategies at the corporate level to ensure that it can expand its business. The growth strategies focus on four main areas, which are product simplification, an increase of customer base, end-use computing solutions and scale for alternative computing solutions. Dell’s smart selection programs where it produces PCs and offers 24 hours sales boost the simplification of goods (Moorhead, 2013). It aims at increasing its customer base by venturing into the tablet and smartphone markets. It can provide alternatives such as cloud computing, internet of things, networking, and storage among others (Moorhead, 2013).
Communication plan
Corporate governance
Corporate governance is described as the affiliation that is used to regulate and manage the strategic guidelines and routine of business among stakeholders (Harford et al., 2012). It helps in the establishment of a connection between the firm’s top-level managers and owners. The board, which represents all the stakeholders and the management, carries out the corporate governance of Dell. The board and administration teams work under a combined effort to run and manage the operations of Dell’s business. Such management is based on high standards of responsibilities, integrity, and ethics. Therefore, the board expects every stakeholder of Dell to embrace transparency and adhere to the requirements of the code of ethics (Fields, 2006).
Impacts of corporate governance in the strategic decisions of Dell
The implications of corporate governance are described by the roles that the management and board play in decision-making (Fields, 2006). The board ensures that an oversight of how business is conducted is carried out through selection, evaluation, and compensation of the top management. They are involved in operational planning to ensure that the need of the stakeholders is addressed in daily operations of the firm (Harford et al., 2012). It ensures that financial reporting is often done to facilitate accuracy, integrity, and clarity of funds used. Financial reporting ensures that funds are accounted for well and are not misappropriated to avoid losses due to errors and mishandling. The board is involved in strategic decisions to give views on the best strategies to use to mitigate any risk that may occur in the firm (Tinnacher, 2010). Therefore, corporate governance of Dell impacts the company positively through participating in decision making, representing the views and needs of the stakeholders. It also ensures that frequent financial reporting and other management reports are delivered to promote integrity, ethics, clarity and accountability among the members.
Effective leadership in Dell
Dell has experienced good leadership based on transformation leadership style. Transformational leadership has allowed the firm’s leaders to strive towards fulfilling the vision and mission statement of the company (Grinnell & Muise, 2010). The transformational leadership of Dell has led to success, credibility and keeping their promise to their customers.
Recommendation
Dell has dealt mainly with the transformational leadership to attain its success. In addition to the style, it should also incorporate others styles of leadership such as autocratic and democratic style to gain more success.
Efforts by Dell to become ethically responsible
Dell believes in doing things the right way as well as achieving success using the right channels (Grinnell & Muise, 2010). It has established programs that ensure that ethics and compliance are followed at all cost. The programs work in conjunction with the Dell Global Risk and Compliance Council (GRCC) that is made up of leadership and functional teams such as ethics, audit, and accounting. Dell has emerged successfully in the efforts of becoming ethical in that it has won awards for being the most ethical corporation globally. For instance, it received an award in 2014 from the Ethisphere Institute for being the world’s most ethical company (Dell & Fredman, 2006).
References
Fields, G. (2006). Innovation, time, and territory: space and the business organization of Dell Computer. Economic Geography, 82(2), 119-146.
Harford, J., Mansi, S. A., & Maxwell, W. F. (2012). Corporate governance and firm cash holdings in the US. In Corporate Governance (pp. 107-138). Springer Berlin Heidelberg.
Moorhead, P. (2013). Dell's PC Growth Strategy -- In It To Win It. http://www.forbes.com/sites/patrickmoorhead/2013/06/21/dells-pc-growth-strategy-in-it-to-win-it/#4e7bf22f4cc1
Jurevicius, O. (2013). SWOT analysis of Dell. Strategic management insight
https://www.strategicmanagementinsight.com/swot-analyses/dell-swot-analysis.html
UK essay. (2015). Environmental factors faced by Dell and its competitors business essay. https://www.ukessays.com/essays/business/environmental-factors-faced-by-dell-and-its-competitors-business-essay.php
Grinnell, J., & Muise, C. (2010). Dell computers: competing toward decline?. Journal of Business Case Studies, 6(3), 13.
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Dell, M., & Fredman, C. (2006). Direct from Dell: Strategies that revolutionized an industry. http://www.worldcat.org/oclc/861517962
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Burton, T. T., Boeder, S. M., & APICS--The Educational Society for Resource Management. (2003). The lean extended enterprise: Moving beyond the four walls to value stream excellence. Boca Raton, Flo: J. Ross Publishing.
