Dell’s Core Competencies
This paper will describe a brief history of the industries development and discuss Dell’s core competencies and marketing strategies, and make recommendations for increasing core competencies, improving vertical integration, possible global expansion scenarios, advertising platform, and marketing strategies. Core Competencies Introduction Dell Inc. was founded in 1984 by Michael Dell. The company sold personal computers directly to customers (Dell, 2011). Since the internet was evolving from confined networks to growing multi-networking capabilities in the 80’s, Michael Dell had the perfect opportunity to enter an emerging computer market.
By 1985, Internet was already well established as a technology supporting a broad community of researchers and developers, and was beginning to be used by other communities for daily computer communications (Leiner et al, 2013). Internet usage exploded in the late 80’s with over 10,000 different networks increasing to over 50,000 in the mid 90’s (Leiner et al, 2013) inevitably driving demand for personal computers and software programing. In 1981 Bill Gate’s Microsoft Co. provided IBM with a software programing, (Windows), the software that manages, or runs, the computer hardware and also serves to bridge the gap between the computer hardware and programs, such as a word processor. It’s the foundation on which computer programs can run. They name their new operating system “MS? DOS. ” (2013), this new Microsoft Disk Operating System (MS-DOS) propelled Microsoft’s development of operating systems. These software programs made vast improvements and by 1994 the software applications included internet capabilities.
The worldwide internet increases dramatically over the next six years from 3 million to 200 million users (Windows, 2013). Consequently, computer manufacturers such as Dell, Hewlett & Packard, IBM, Macintosh, etc. produced millions of desktop computers, along with support products and services. Company Vision and Strategy Michael Dell continues to expand the company’s infrastructure to develop more products and services. Dell’s build-to-order strategy was used to reduce cost and still deliver a product in 5 to 7 days from the order.
Dell’s subsidiaries include “Enterprise Solutions”, “Original Equipment Manufacture” (OEM), and Dell Services, to name a few. Dell’s vision is “the power to do more” which revolves around the ability for customers to interact with the company about improving products or services. Michael Dell stated, “Technology is about enabling human potential” (Dell-Biography, 2013) According to the 2011 Annual report, “Customers may offer suggestions for current and future Dell products, services, and operations on an interactive portion of our Internet website called Dell IdeaStorm” (Dell, 2011).
Dell has expanded its business model to include a broader portfolio of products and services, such as, desktop computers, laptop computers, printers, Dell EqualLogic Solutions data storage, Servers, mobile devices, mobile phones, notepads, and many more. Dell’s strategy considers customer service; enterprise solutions technology; enhance online capabilities; increasing desktop and mobility business; collaboration and acquisitions; innovation; balancing liquidity, profitability, and growth.
According to the 2011 annual report, “Dell’s reputation as a leading technology provider through listening to customers and developing solutions that meet customer needs. We are focused on providing long-term value creation through the delivery of customized solutions that make technology more efficient, more accessible, and easier to use” (p. 6). Dell’s strategy for customer service includes expanding into Brazil, Russia, India, and China (BRIC) with all the products and services.
Dell’s Enterprise Solutions segment, which is the largest subsidiary, provides support for businesses of all sizes; large, medium, and small. Enterprises Solutions provides the clients with solutions for their IT environments, which may include servers, networks, and cloud security and storage capabilities to name a few. Innovation Dell’s subsidiary named Original Equipment Manufacturer (OEM) has performed many services to upgrade existing technology to meet specific needs of the customers and businesses.
For example, Dell is rolling out a preconfigured video surveillance system called SecurePOD, a product from the tech vendor’s OEM Solutions unit, a group that has been around for more than 14 years but only now is making a push to raise its profile in the industry (Burt, 2013, Dell OEM Business, para. 1). The OEM Solutions group works in partnership with customers to create products such as the new video surveillance system SecurePod. A company may have a good idea for a product, but lacks the money or expertise to create the necessary mechanics and infrastructure to manufacture it and testing to support it.
Dell’s OEM Solutions group works with the company to develop and produce the product and get it to market (Burt, 2013, OEM). Again, clients may contact Dell to share an idea with the OEM Solutions group or present ideas on line at Dell’s internet website called Dell IdeaStorm (Dell Annual Report, 2011, p. 11). Customers can call Dell’s 800 number, (1-800-289-3355) which is listed on page 13 of the 2011 annual report. Dell is committed to providing best value, simplification, and more open data center solutions to customers.
Dell is moving forward through investments to grow the business organically as well as inorganically through alliances and strategic acquisitions. Dell’s acquisition strategy will continue to target opportunities that will expand the business by delivering best-value solutions for the enterprise (Dell, 2011, p. 7). Core Competencies Dell has developed strong core competencies from established assets of building and equipment to over 5000 patents, and nearly $60 billion in annual revenue. Dell’s competencies include owner and CEO Michael Dell which has provided strong leadership.
Michael Dell has built Dell Inc. with a small investment of only a $1000 dollars in 1984. Twenty-Nine years later the company now has over 7,000 sales specialist with technical training, and over 103,000 employees (Dell, 2011). Dell’s core competencies provide access to a wide variety of markets including, PC’s, IT solutions, customer service, collaboration with other companies in development, knowledge, etc. According to Guglielmo, “Two out of three business customers’ first experience with Dell is buying a PC, and about 90% of those customers go on to buy other products and services (2013).
Enterprise Solutions supports the new customers with necessary hardware and software to get their computer systems on line. Core competencies contribute significantly to the end product benefits that have a strategic advantage by means of lower prices, or better quality. Also customers are more likely to buy because of specific needs and customer service reputation. For convenience, Dell sells laptops and other products on line or through Best Buy retail stores. Online desktop and laptop orders use a build-to-order strategy with a turnaround time of 5 to 7 days from order receipt to product delivery.
Dell’s value chains require an enormous infrastructure that directs the customer’s orders to each step in the supply-manufacture-assembly-testing-accounting-packaging & shipping process. Moreover, for thousands of different products to anywhere in the world. Dell Competing as a Private Company Dell had been a public traded company until the end of October this year (2013) when Michael Dell used his 16% ownership (worth 3 billion) and 750 million in cash plus 19. 4 billion from Silver Lake (Guglielmo, 2013) to buy out Dell Inc. Michael Dell now controls 75% stake in the company.
According to Guglielmo, industry analysts said such a move would enable the PC maker to accelerate its efforts to transform the company outside of the intense spotlight of Wall Street analysts and investors and free up the decision-making process (2013). Michael Dell can spend more time aligning the value chain with vertical integration to direct operations in other countries, which now include Brazil, Russia, India, China, Mexico, Canada, Australia, Malaysia, Italy, Germany, and France. Michael Dell has just two priorities since going private last month; cash flow and growth (Guglielmo, 2013).
Dell is planning to increase telecommuting to cut back on commuting which will cut cost of travel and increase productivity. According to Burt, “Dell is laying out a plan to get half of its workforce to work remotely at least part of the time by 2020, which officials said will reduce the vendor’s expenses while helping out the environment. The effort around increased telecommuting is one of more than two dozen goals outlined in a recent report by the newly-private Dell—called the “2020 Legacy of Good” plan—that officials are aiming for over the next six-plus years to reduce the company’s impact on the environment” (2013).
Cutting cost will increase cash flow and growth is achieved through balancing liabilities, profitability, acquisitions, and capabilities. Best scenario of growth comes from the company’s core strength of improving current products, such as, designing and building touch screen capability, such as Apple’s iPad. This new technological advantage made Apple’s stock prices increased dramatically when the iPhone and iPad came out. According to Monkey: “The iPhone may have ushered in the age of multi-touch on cell phones, but tablet-based PCs have been slow to adopt the tech needed for the natural-feeling user interface.
Dell’s Latitude XT series became the first to introduce multi-touch on a full 12-inch screen, bringing finger-based operation past games and dialing to working professionals. The XT2 allows users to pan, rotate, scroll and zoom using two fingers, and works with a pressure-sensitive stylus as well. Use it to sketch a prototype on the fly or arrange x-ray photos for a patient – no keyboard needed” (2009). Growth also comes through customer service and customer relationships.
Dell has a strong core competency in customer relations because of the enormous computer systems support through Enterprise Solutions; Dell’s service department; and the OEM group. The OEM group allows companies to come to Dell with ideas and together, design and produce a new product. According to Burt: “Dell OEM Solutions has helped customers in several key vertical markets accelerate time to market with their intellectual property (IP) with customizable Tier-1 OEM technologies developed by our dedicated team of experts.
With our holistic approach to designing, developing and delivering Dell-powered technologies, Dell OEM Solutions offers a full range of global capabilities and branding services to help bring your OEM products to market—from design to lifecycle management and everything in between” (2013). Recommendations Dell made a great decision in 2009 to add several touch-screen laptops to its product line. Currently Dell has another dozen different touch-screen laptops. What’s next? Perhaps a high-end product such as Microsoft’s Surface.
Microsoft Surface is the size of a coffee table and has multi-touch capability, allowing all ten fingers to draw, or touch. Designed for commercial use, but can be used like a touch-screen laptop. Dell is currently using Intel micro-chips and semi-conductors. What are the pros and cons of making a deal with the enormous company? Intel may be too large for any reorganization to be effective. Most acquisitions are achieved through collaboration and analysis of each company to estimate future benefits. Analysis of such a merger would take some time and is beyond the scope of this paper.
Dell may need to move away from the build-to-order model–customers call up and say what they want and Dell builds it, without keeping costly inventory on hand–to a build-to-inventory approach, where the company builds models and sells them off the shelf. It’s a cheaper approach and has made Lenovo the world’s largest PC maker, with increasing margins (Guglielmo, 2013). A better approach could be an, anticipated-build-to-inventory-to-order, where orders are estimated from past sales and are entered into inventory.
This would provide a way to speed up order processing, but may cause issues with cash flow and storage because products may sit in inventory longer than estimated. Dell may need to spend more in marketing and promoting its best laptops and include its commitment to customer service and IT solutions. Funding advertising in competitive markets may not improve market share as much as advertising in new geographical areas, such as Brazil, Russia, India, and China. The complications of language barrier and culture add to the challenges of entering a new market.