CASE STUDY. DELL COMPUTERS IN 2003: DRIVING FOR INDUSTRY LEADERSHIP
Dell’s IT strategy
This paper intends discuss the concept of information technology. The
paper intends to give a background of Dell. The paper also intends to discuss
on the applicable theories or related literature. Moreover the paper wants to
discuss an in-depth appraisal of some of the theories in action within Dell.
Through all the information that will be gathered a conclusion shall also be
presented.
Introduction
Over thirty-five years have passed since academics began speculating
on the impact that information technology (IT) would have on organizational
structure. The debate is still on-going, and both researchers and managers
continue to explore the relationship between IT and organizational structure.
This relationship is becoming increasingly complicated by both the rapidly
changing nature of IT and the increasing environmental turbulence faced by
many organizations.
As organizations need to process more information under these
uncertain conditions, IT is one possible way for organizations to increase their
information processing capability. However, other, more organizational tools
are also at their disposal for processing more information. These include task
forces, lateral relationships, self-contained work groups, and slack resources.
Thus, the relationship between IT and organizational structures is not a simple
one (1998).
IT has a dramatic effect on both people's personal and professional
lives. IT is also changing the nature of organizations by providing
opportunities to make fundamental changes in the way they do business.
Many of the opportunities are recognized and understood. Yet a tremendous
number of issues and consequences are only vaguely perceived while other
questions are just now being raised (1996). The technology is changing
rapidly, with computing speeds and the number of transistor equivalents
available in a given area of a microprocessor chip both doubling
approximately every 18 months. Organizations are acquiring more and more
technology systems to assist in everything from manufacturing to the
management of information to the provision and improvement of customer
service. Harnessing and coordinating this computing power is the challenge.
New tools and innovative perspectives with which to examine, interpret, and
comprehend these rapidly evolving environments are always needed and
sought (1996).
IT is transforming the way that business is conducted. Computers
prepare invoices, issue checks, keep track of the movement of stock, and
store personnel and payroll records. Word processing and personal
computers are changing the patterns of office work, and the spread of
information technology is affecting the efficiency and competitiveness of
business, the structure of the work force, and the overall growth of economic
output. This transformation in the way in which information is managed in the
economy constitutes a revolution that may have economic consequences as
large as those brought about by the industrial revolution (1994). Many people
believe that the primary driving force behind this information revolution is
progress in microelectronic technology, particularly in the development of
integrated circuits or chips. Thus, the reason that computing power that used
to fill a room and cost $1 million now stands on a desk and costs $5000 or
that pocket calculators that used to cost $1000 now cost $10 is that society
happens to have benefited from a series of spectacularly successful
inventions in the field of electronics. But fewer people understand why the
introduction of information technology occurred when it did or took the path
that it did, why data processing came before word processing or why
computers transformed the office environment before they transformed the
factory environment. Because this technology oriented view of the causes of
the information revolution offers little guidance to the direction that
technological developments have taken thus far, it offers little insight into the
direction that they will take in the future (1994).
Dell Computer Corporation Company Background
Dell Computer Corporation is a major manufacturer of personal
computers, computer peripherals, and software. Among the leading producers
of computers in the world, Dell sells its products directly to customers through
the Internet and mail-order catalogs rather than through retail outlets. The
company is based in Round Rock, Texas. At Dell Computers, customers are
brought into the product planning and manufacturing processes, with all
employees encouraged to have contact with customers. Through effective
collaboration across boundaries, ideas can be shared about product designs
and value propositions. The result is faster and more customer-focused
product and service innovation. To produce the capacity for this, considerable
attention must be placed on organizational structures, processes, skills and
culture. Such elements that may need a radical overhaul in established
companies (2002). Dell was founded in 1984 by . In 1983, during his
freshman year at the University of Texas, he bought excess inventory of RAM
chips and disk drives for IBM personal computers from local dealers. He
resold the components through newspaper advertisements at prices far below
retail cost. By 1984 his sales totaled about $80,000 a month. In April 1984
Dell dropped out of school to launch his company (2003).
The new company soon began manufacturing its own IBM-compatible
computers under the name PCs Limited. Because Dell sold computers directly
to users through advertisements in magazines and catalogs, the company
could price its machines lower than those sold through retail stores. Sales
reached nearly $6 million during the company’s first year, climbing to $34
million the following year. By 1987 Dell was the leading mail-order computer
company in the United States. That year it created a sales force to target
large corporations and began adding international offices to capture the
direct-mail market outside the United States (2003). While the company
continued to grow rapidly; Dell experienced a series of setbacks that hurt
profits. In 1990 the company began selling computers through retail stores, an
effort it abandoned in 1994. In 1991 Dell launched a line of notebook
computers, but quality problems and inadequate production planning forced
the company to stop selling them for a year. In 1994 Dell launched a new line
of notebook computers and expanded efforts to increase overseas sales. Dell
also began focusing on the market for servers, which are computers used to
run local area networks. By the late 1990s, Dell was firmly in place as the
world’s number one direct seller of computers. More than 50 percent of the
company’s computer sales transactions took place via its website, which
generated worldwide sales in excess of $40 million a day (2003).
Literature surrounding strategy
Management of a firm needs strategy, to make sure that everything
goes well in the company, through the use of strategic management
everything done in the company is well organized and no detail is being left
out. The company needs strategic management to make sure that the
company is doing well internally. The term strategic management originates
from the Greek language, where the word means the art of a general. The
person who makes strategies is the strategist who is the leader of an army
(1991).Strategic management decisions have multifunctional and multi-
business consequences, this kind of decision require broad consideration of
the firm's external and internal environments, and it may affect the firm’s
chance of prosperity. It is important to know what strategy is about, what can
it do help the company prosper, what will happen if not used properly, what
are the advantages and disadvantages of having a strategy. Strategy is a plan
that assimilates the company’s major target; policies and rules; decisions and
sequences of action into organized whole. It can apply at all levels of
organization and pertain to any of the functional areas of management (2000).
Strategy is plagued by a stigma of unsystematic reasoning (1988). It is
incomplete searches for strategic alternatives, and bounded rationality (1960)
influenced this perception. Strategy is a combination of the company’s
objectives, policies and decisions to be done in unison or contingent upon
each other. In recent years research has made significant contributions to the
strategic management field. These efforts, however, have not provided
complete answers to many of the core strategic dilemmas faced by top
executives (, 2001).
The level of strategy includes corporate, business, and functional
strategy. Each level has its own focus and range. Its level is unique in its own
way. Corporate Level Strategy is focused on the selection of businesses in
which the company should compete in. Corporate Level Strategy is also
focused on defining the issues that are corporate responsibilities; defining
where in the corporation competition is to be localized; develop collaboration
by sharing and coordinating staffs other resources across business units,
investing financial resources across the business units, decide how the
business units are to be governed. The Business Unit Level Strategy focuses
on the plans that will be used to fight competition, in the markets the company
is competing in. This level of strategy focuses on developing and maintaining
a competitive advantage for the goods and services produced. At this level
the company focuses on positioning the business against rivals, anticipating
changes in demand and technologies and adjusting the strategy to
accommodate them, and influencing the nature of competition through
strategic actions such as vertical integrations and through political actions
such as lobbying. Functional Level Strategy focuses on the operational and
value adding activities that a corporation chooses for the improvement of the
business. It is also the level of operating divisions and departments.
Functional level strategies in marketing, finance, productions, human
resources, and research and development involve the development and
coordination of resources through which business unit level strategies can be
executed efficiently and effectively.
The concept of IT strategy is relatively new. IT strategy can be
conceptualized as having different dimensions. The first dimension is an
information technology scope, referring to the types and range of IT systems
and capabilities potentially available to the organization; the second
dimension is systemic competencies, focusing on those distinctive attributes
of IT competencies such as higher system reliability, interconnectivity, and
flexibility that help create new business strategies or better support existing
business strategies; and the third dimension is IT governance, choosing
structural mechanisms such as joint ventures, long-term contracts, equity
partnerships, and joint R&D to obtain the required IT capabilities, such as the
deployment of proprietary versus common networks, as well as strategic
choices pertaining to the development of partnerships to exploit IT capabilities
and services (1994).
Theories in action within the company
As an IT strategy Dell increased the knowledge of its employees with
regards to websites and information technology. In an article by (2004), Dell
Computer Corporation aggressively pursued Web-based training as a solution
to its employee education needs. The company patterned its training after its
business model, which emphasizes a direct-to-customer approach, with on-
line training available 24 hours a day, 7 days a week. They anticipate that
more than 60 courses will be offered via WBT, representing three-quarters of
its industry-related training and an additional 300,000 hours of employee-
development training. Through this strategy of dell the company can be
assured that the employees they have are the best and the employees are the
best in their field.
The employees of Dell as mentioned are given supplemental
knowledge regarding information technology since most of them may have no
prior encounter with IT. The web-based training given to the employees can
not only benefit the company but it can benefit the employees as well.
Through increasing the knowledge of the employees on IT by Dell the
company can produce not only competitive employees but employees that
can produce good IT strategies that can be used against competitors.
Another IT strategy used by dell is its website being up to date,
attractive, and visually informative. The website is up to date and being
constantly upgraded so that the clients will not be left behind regarding news,
products, and other information that can help them improve their relationship
with the company. The website is attractive and it can make people who use
the internet to take a glance at the said site at the same time be encouraged
to buy products from the company.
The website is visually informative. The website serves as a media to
inform the company about its products and what each product does. Adding
pictures or visuals to the products can help informing the clients about the
product and in can entice the consumer to buy the products. This can also
give the added idea on the product and additional assistance on what product
to buy. This IT strategy of the company regarding the website can help the
company achieve its goals. This IT strategy of the company regarding
websites gives the company advantage against its competitors. It competitors
don’t have such feature of their website, the rivals website are more
complicated and less visually informative. Moreover the IT strategy of the
company regarding websites helps the company be internationally
competitive; Being internationally competitive means it is able to deal with
companies far from it. Dell uses the website to be able to compete with other
companies from other countries. In a way the chances of the company can
increase and its scope of customer can widen at the same time the number of
clients the company has can increase, double or triple.
Another IT strategy of Dell is not only helpful to the company but
helpful to different countries affected by terrorism. This IT strategy is the
company including in its online order form questions about using the product
to use it in making a weapon of mass destruction (WMD). Before client’s
orders can be finalized they are asked certain things regarding what they will
do with the product, how the product will be used, who will use the product,
and a little background on the character of the clients. As mentioned one thing
asked of the clients is if they will use the said product to cause harm to the
country. Through this strategy the company can be assured that the product
will not be used to cause harm to the people and the country. Through the
said strategy not only the company will achieve benefits but the government
as well. The government is assured that there will be restrictions and lesser
instances wherein computer products are used to create WMD. Threats that
may prevent the operations of the company and the government can be
thwarted. Terroristic acts can be prevented by the government and the
company. It lessens doubts on the use of the company’s products and it
lessens doubts on the importance of the product to the society. Although
some may not agree with the company asking the question since it makes the
client’s chance of keeping their privacy the said strategy brings more benefits
not only to the company but the government as well.
Moreover an IT strategy used by the company is the selling its products
with lower prices, giving discounts to clients, and making online sale. As an IT
strategy the company sells its products with lower prices. Lower prices of
products entice clients to buy from the company. It also lessens the clients the
competitor has. As an IT strategy the company gives discounts to clients, this
discount helps the clients save some money and the saved money can be
used to buy other things. An IT strategy of the company is the online sales
wherein prices of products are lower than they used to be. The products of
the company are already lower than its competitors it can still become lower
when a certain time arrives. These IT strategy makes the company be
competitive on the price wars it faces most of the time. Through these IT
strategy the goals, and objectives of the company will be realized and the
company will acquire added profits.
Lastly an IT strategy used by the company is using other internet sites
to promote the company’s website. Some people may not know the company,
the product it offers, and the website has. This can be due to the company
being not much popular to some people and the website is not that known.
Websites by other companies such as Yahoo and others can be used to
promote the company, the product it offers, and the website. Many people surf
Yahoo and other related sites for different purposes like finding the things they
need or things they want to do. People who surf the internet maybe finding
computer products that they need and through these sites they can find the
company they are looking for. The more popular sites can be used to promote
smaller companies and less popular companies. Through the popular website
more people will come to know the company and more people will be
encouraged to take a look at the products the company has. The more clients
the company has means more profits and added competitive advantage. This
IT strategies mentioned brings benefits to the company as long as these IT
strategy are used well added with proper coordination and effort among the
employees and management within the company.
Conclusion
IT is also changing the nature of organizations by providing
opportunities to make fundamental changes in the way they do business.
Many of the opportunities are recognized and understood. Yet a tremendous
number of issues and consequences are only vaguely perceived while other
questions are just now being raised. IT is transforming the way that business
is conducted. Computers prepare invoices, issue checks, keep track of the
movement of stock, and store personnel and payroll records. Word
processing and personal computers are changing the patterns of office work,
and the spread of information technology is affecting the efficiency and
competitiveness of business, the structure of the work force, and the overall
growth of economic output. Dell Computer Corporation is a major
manufacturer of personal computers, computer peripherals, and software.
Among the leading producers of computers in the world, Dell sells its products
directly to customers through the Internet and mail-order catalogs rather than
through retail outlets. The company is based in Round Rock, Texas.
Management of a firm needs strategy, to make sure that everything goes well
in the company, through the use of strategic management everything done in
the company is well organized and no detail is being left out. The company
needs strategic management to make sure that the company is doing well
internally. The concept of IT strategy is relatively new. IT strategy can be
conceptualized as having different dimensions.
IT strategy is like a bullet the company can use against its rivals in the
competitive war. The IT strategy used by the company makes it competitive
not only within rivals within its scope but rivals in other countries. The IT
strategy makes the company be recognized not only in one country in most
parts of the world. Although some IT strategy tends to be questionable for
some and inappropriate for others it use and benefit for a company cannot be
denied. The IT strategy gives the company increased clients, more profits,
additional competitive advantage and achievement of goal. Not only has it
benefited the company but gave benefits to the clients, the government and
other sectors of society. The clients can be given a better kind of service, and
the clients can have satisfaction they desire. The government can benefit by
receiving assistance in preventing certain instances and problem. The IT
strategy can make the company need more employees thus the government
will have lessened problem of high unemployment rate. Through the IT
strategy the sectors of society will have easier way of living and more time
can be used to do certain things. As long as the company uses the IT strategy
and the IT strategy is aligned with the goal and the objectives of the company
nothing could go wrong.
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