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Company wide strategic planning
Company wide strategic planning
The concept and theory of strategic planning
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Dell Computer have recently announced changes to their business strategy and supporting supply chain. They will no longer focus on a made to order direct sales model for their personal computers. Nor will they continue to refine their renowned supply chain model that supported their sales model. Instead, they will be looking to produce personal computers with fixed configurations at lower prices. This essay looks at why Dell have changed their strategy, and then considers the customer value proposition of the new strategy, as well as lessons that other organisations can learn from the Dell experience. According to Michael Cannon, Dell's President of Global Operations, the key differentiators that have made Dell so effective for nearly two decades are its made to order direct sales model and its innovative supply chain (SCN, 2008). Historically, personal computer companies produced most of the components for a computer which they assembled into their final products and distributed to resellers. The manufacturing of these components was vertically integrated into the organisation. Dell, as a small start-up, could not build this infrastructure. Instead, they developed a model where they developed relationships with organisations that could provide these components, allowing Dell to focus on selling and delivering computers. By selling directly to customers, initially through mail orders and later by using the internet, Dell avoided reseller mark-up. Dell also enabled customers to order customised computers, which Dell then assembled after receiving the order (Magretta, 1998, p.73-74). “Customers got exactly the computer they wanted and Dell saved money making the computers only when they were ordered” (Hill & Seggewiss, 2008).... ... middle of paper ... ... , accessed 31 Aug 2008. Kumar S & Craig S, 2007, 'Dell, Inc.'s closed loop supply chain for computer assembly plants', Information Knowledge Systems Management 6, 197-214, IOS Press. Magretta J, 1998, 'The power of virtual integration: An interview with Dell Computer's Michael Dell', Harvard Business Review, vol.76, no.2, pp.73-84 SCN, 2008, 'Complete Transcript of Michael Cannon of Dell Describing Plans for Supply Chain Transformation', Supply Chain News, 14 April, , accessed 16 May 2008. Shah A, 2007, 'HP tops Dell as world's largest PC supplier', Infoworld, October 17, 2007, , accessed 31 Aug 2008.
W.C. Benton, Jr., 3rd Edition, “Purchasing and Supply Chain Management.” (2010). Text. 2.
In the 1960s through the 1970s, companies realized strong engineering, design, and manufacturing functions were strong market strategy keys to create and capture customer loyalty. As the demand for new products rose in the 1980s, these market requirements were to increase their flexibility and responsiveness to adapt existing products and processes or to develop new ones in order to meet customer needs. As manufacturing improved in the 1990s, managers began noticing material and service inputs involving suppliers and their major impact on an organization’s ability to meet customer needs. As a result of these changes, organizations now find that it difficult to manage their own organizations. First, they must be involved in the management of their network of all upstream firms that provide directly or indirectly, as well as the network of downstream firms, which are responsible for delivery and market service of the product to the end customer. In order to succeed, managers have to realize that they cannot do it alone and they must work together on a daily basis with the whole organizations in their supply chains. Because supply chain management involves all functions within an organization, managers need to know what a supply chain is, why it is important, and the impact of supply chain management on the success and profitability of their organization. Today, Wal-Mart topped the list of the America’s biggest companies on the Fortune 500 list, “with sales of almost $345 billion — more than a quarter of a trillion dollars” (Forbs). Wal-Mart’s supply chain management is becoming recognized as a core competitive strategy.
Historically the personal computer (PC) industry has sold its products at reasonably high prices yet garnered only small profit margins. One reason for this is the high competition in the PC industry which led to competitive pricing among producers. Analyzing the competitive environment of the PC industry, it is evident that there is very little barrier to entry in this market. PC's have very low physical uniqueness and are made of standard components that require very little expertise to assemble.
Dell researched the cost of using this type of circulation methods as a fragment of its ABC system and determined direct sales is much more profitable. Today, Dell only uses direct sales. Launched in 1990s, Dell 's e-commerce business became the advertisement of how a company can reap the benefits from online sales. The original business to make a million dollars in online sales in 1997. Having direct contact with their customers is Dell’s competitive advantage. Dell.com gives potential buyers choices and control by allowing to customers to choose computer speed and the size of their hard drives based on how much they are willing to pay. Dell knows exactly what their customers are ordering and are able to get immediate feedback on how they are doing. As I mentioned earlier, Dell’s strategy was to eliminate the middleman by selling PC’s over the Internet, called the Direct Model. Dell became very efficient in build-to-order manufacturing and continued to target specific demographics. Dell enjoyed success until 1992, their troubles, Dell promptly uncovered, came in part from its efforts to sell its products through Staples, Sam 's Clubs and kiosks. While some pundits were questioning Dell 's future, the company acted authoritatively, exiting the retail channel and resolving to re-enter the laptop market only when that product 's quality matched or exceeded the quality of the Dell desktop. By 1997, the Latitude, Dell 's laptop, had won PC Computing Magazine’s Torture Test twice in three years in addition to winning Business Week 's Industrial Design Excellence Award (Rengan &
A business is feasible when it is able to generate profits, standstill despite of risks and achieve the founders’ goals (Hofstrand, 2009). In order to meet all of these achievements, the researcher need to investigate investment, technical market and commercial feasibility (How to conduct a feasibility study, 2015). In terms of Business model Canvas, the ‘customer segments’ component presents the market feasibility. Dell has targeted four main segments which allow the company to design, produce, promote and deliver different products with different features. In comparisons, the ‘value propositions’ contribute to the technical feasibility when the product is formed and advertised, ready to deliver. Dell has used different strategies to maintain and developed the brand including remain the same brand name for different products. This strategy is promised to stimulate customers’ awareness of the company, thus, attract numerous number of clients and increase annual profits. Finally, ‘channels’ characteristic focuses on accessing technical feasibility. Dell disposes different channels in order to reduce the transportation and warehouse costs as well as guarantee customers with aggressive on-time delivery. Consequently, as the cost has been lowered and the reputation has been improved, Dell is expected to maximize their revenues
Dell's strengths were oriented around listening to the customers, responding to the customers, and delivering what the customer wanted. The direct relationship was first through telephone calls, then through face-to-face interactions, and now through the internet. It has enabled them to benefit from real-time input from real customers regarding products and future products they would like to see developed. The company also doesn't use reseller or retail channels because every computer is built-to-order, which allows less inventory. The direct model allows them to take the pulse of whatever market and provide the right technology for the right customers.
Speaking about the business model of Dell, it has ability to remain on the higher end of the scale for a particular time period. Dell has business model, which primarily focuses on direct selling line of attack. It in a straight line supplies the PCs to the regulars. It does not believe in intermediary, retailers for the business practices. Undeniably, this gives them an edge to serve customer well. Nevertheless, it understood the importance of retailers and start offering products on the premises of retailers, such as Wal-Mart, Sam’s Club and so on. Next, Dell administration is certain of the exclusive business of PCs. As time goes on, however, observing the
Dell’s main marketing strategy is customer segmentation that also includes product segmentation in which Dell targets individual market segments and design products according to individual needs of the customers. Looking at this geographically, Dell has set its grounds in US, EMEA and APJ where there are different marketing and pricing strategies. From the demographic view point there is no gender, race, age bias that particularly Dell has, but depends upon on the education, occupation and income of the people buying various products decides further the selling and purchasing behavior. From the behavioral vi...
Dell Inc., with fiscal 2005 net revenue of $49.2 billion, is a premier provider of products and services worldwide that enable customers to build their information-technology and Internet infrastructures. Dell offers a broad range of enterprise systems (servers, storage, workstations, and networking products), client systems (notebook and desktop computer systems), printing and imaging systems, software and peripherals, and global services. During calendar 2004, Dell was the number one supplier of personal computer systems worldwide as well as in the United States. Dell's global market leadership is the result of a persistent focus on delivering the best possible customer experience by selling products and services directly to customers.
Dell Inc. has realized that the most efficient path to the customer is through a direct relationship, with no intermediaries to add confusion and cost. With the power of their direct model and their team of talented people, they are able to provide to their customers high-quality, relevant technology, customized systems, superior service and support and products and services that are easy to buy and use.
Dell made the bold decision in 1994 to eliminate their products from retail stores and focused on mail order customers. In 1996 Dell began selling through their website as well. By eliminating the retail store presence Dell was able to reduce costs, reduce inventory, and maximize profit. Dell utilized a built to order system that allowed customers to specify exactly what they did and did not want on their Dell computer. Dell's just in time inventory system lowered inventory to 6 days and storage costs were saved.
Dell can be one of the most successful companies mostly due to its direct marketing strategy. Unlike other computer companies which sell their product through retailers, Dell provides their computer and service directly to customers. The direct-selling model makes the company understand their customers better and eliminates the retailer cost. What is more, each PC is customized to the customers who can specify what components they want. Dell also holds little or no inventory and assembles products as soon as an order placed. The company can save inventory cost and apply new technology on their product quickly by using the just-in-time approach. In 1996, Dell became the e-commerce leader, for its website is not only some pages describing the details of products but also an online shop specializing computers for consumers. People can buy computer on the website which covering 80 countries, 27 languages/dialects, and 40 currencies without leaving home.
Dell’s initial competitive strategy, when it was founded in 1984 by Michael Dell, was to focus mainly on differentiation. Its strategy was to sell customised personal computer systems directly to customers, which was a rapidly emerging market at that time (1). This was done by targeting second-time customers, those that already understand computers and know what they wanted. Meanwhile other companies at the time was selling “’plain brown wrapper’ computers” (2). By offering customisations, Dell gained a better understanding of customers’ needs and wants. This helped the organisation position itself differently against the more popular brands, such as Compaq and IBM.
Since its launch in the mid '90s, Dell's e-commerce business has been a poster child for the benefits of online sales, says Aberdeen Group analyst Kent Allen. The company's strategy of selling over the Internet -- with no retail outlets and no middleman -- has been as discussed, admired and imitated as any e-commerce model. Dell's online sales channel has proven so successful, says Allen that the computer industry must ask: "Does the consumer need to go to the store to buy a PC anymore?"
In 1913, Henry Ford revolutionized product manufacturing by introducing the first assembly line to the automotive industry. In the 1980’s, Ford picked suppliers based on lowest cost and the overall costs of the supply chain were ignored. Dealing with so many suppliers led to a higher overall costs and a complexity that was difficult to control. In the 1990’s, Ford cut down on the number of suppliers drastically and shifted towards more long term relationships with a set of suppliers that would provide entire vehicle sub systems. Although the number of suppliers were lower, our supply base was different and more complex then the one used by Dell.