Strategic Planning For Information Systems
770.627.71
Allan Fisher
Kareem Sumner
Dell Computer Corporation:
Strategy and Challenges for the 21st Century
March 2, 2016
1. Michael Dell is an intelligent, new school CEO. He made himself accessible as a
CEO and gave his subordinates the authority to do what they were supposed to do,
to achieve the best results. As a leader, Dell was aggressive, competitive and a
risk-taker – all of the qualities a good leader should have. He was humble enough
to understand that in order for the company and himself to be successful; he had
to surround himself with the best talent available and persons that can fill the
knowledge ‘gaps’ he could not fill. He also hired Lee Walker as president and
chief operating officer to mentor him in the managerial and financial aspects of
the company. Not to be limited to just the abilities of his staff, Dell knew that
success was also defined by the company’s strategy, ideas and the sharing of
power among top management.
Michael Dell has performed the tasks of strategic management very well. He
defined a solid business model and created a sustainable competitive advantage
over other PC makers by selling build-to-order PC’s directly to consumers. This
eliminated markups by bypassing distributors and retailers and reduced the costs
and risks of having a large inventory of items.
2. Dell’s core strategy was built around a core set of elements: build-to-order
manufacturing, partnerships with suppliers, just-in-time components inventory,
direct sales to customers, excellent customer service and technical support, and
leading the use of the Internet and e-commerce technology.
All of the elements of his strategy fit together like a puzzle. He implemented the
build-to-order and sell-direct strategy so that there would be no inventory of
finished goods and customers can purchase customized PC’s. Instead of
manufacturing parts, Dell partnered with top suppliers for components and they
provided Dell with parts on an as-need basis. This fit well into Dell’s just-in-time
inventory practices by cutting costs and decreasing the time to push new systems.
Customer service and technical support went hand-in-hand as Dell looked to the
Internet to provide both services to their customers.
The strategy is evolving and is including elements such as demand forecasting,
entering the server market because of the rapid growth of corporate customers
purchasing servers. Dell also introduced the WebPC to broaden the market with
its products.
3. The SWOT analysis reveals that there are not too many weaknesses to Dell’s
strategy. The competition tried to imitate Dell’s strategy of build-to-order and
sell-direct, but were unable to reproduce the same results. The analysis revealed
that Dell’s strengths lie in the elements of their strategy. Their weakness is
recruiting enough talent to handle foreign opportunities and getting foreign
countries to accept its business model - a position that Compaq and IBM have
Strategic Planning For Information Systems
770.627.71
Allan Fisher
dominated. Dell took the opportunity and entered the server market because its
corporate customers demanded servers.
4. It appears that from a competitive strength assessment, Dell’s PC strategy is
difficult to duplicate. Many of its competitors have shifted their business model to
build-to-order manufacturing, but found it difficult to develop the just-in-time
delivery schedules with their suppliers. Of the five major computer manufacturers,
IBM maintained the strongest competitive position. Overall, IBM operated in
more areas than any of its competitors did. Its strengths are rooted in customer
service, technical support and systems integration of any organization in the world.
Its core business has become a service rather than just products.
5. Dell’s strategy did result in a substantial competitive advantage over its rivals.
Dell was able to have a cost advantage using the build-to-order and sell-direct
strategy. The customization of its PC’s along with its customer service and
technical support gave Dell a focus advantage that met specific needs of its
customers. They also had maneuverability advantage because of its just-in-time
inventory turn ratio of 6 days. It allowed Dell to push new systems sooner than
any of its competitors.
6. Looking at Dell’s financial performance summary from 1995-2000, it is apparent,
in the increasing revenues, that their strategy is sound. Their total assets have also
increased each year proving how aggressive Dell has been in acquiring companies.
7. Dell is in a real good position to become the global market leader in PCs. Compaq,
the current title holder, has suffered some setbacks and are now scurrying to
remain on top. Michael Dell believes in remaining aggressive and executing good
strategy. No matter what the company accomplished, Dell always believed they
could do better. There was no room for complacency. Dell has also expanded its
product line to include WebPC’s and storage devices. Compaq, and other
competitors, had a cost disadvantage compared to Dell because they used resellers
and distributors. Dell was able to push new PCs much quicker and at lower costs
than Compaq. With the aggressive and competitive nature of Michael Dell, and a
sound strategy that has been proven over time, Dell is poised to take the lead in
the global market of PCs.
8. I would buy stock in Dell because over a period of seven years the company went
from being a $1 billion business to $25 billion. Michael envisioned the company
growing to $50 billion in the near-term by increasing its market share in foreign
countries.