DELL COMPUTER CORPORATION

the day before yesterday, i uploaded three video chips on Youtube, but yesterday and today morning, i received 2 emails from Youtube, it stated that two of the video should not be uploaded, I do not know the exact reason. anyway, let it go. and my youtube account will be normal on 7th August.
the weather is fine today, but I do not have beautiful mode, because of the emails. anyway, I should spend more time on my study. that is the most important thing for me.

another old assignment from Advanced management accouting. there were 8 case studies, I guess. this one is about dell computer corporation

Background

Nowadays, Dell Computer Corporation has become the number one retailer of personal computers in all over the world. However, two decades ago, it was just a very small business which was established by Michael Dell with about $1000 in 1984. Why the Dell can achieve so huge success in these 2 decades? I think one key point is that its special direct selling strategy. Then, I will analysis by SWOT and around other points.



1. SWOT analysis:

Strength

1. The strategy: direct sale mode ----establish the world’s largest direct-selling computer company.

2. Dell owns the world’s most preferred computer systems.

3. Because of the strategy, it can reduce the cost and time, and reduce the price of products,

4. Good customer services and a premier provide the services to meet the customer’s needs.

5. Introduced the latest relevant technology faster than other competitors.

6. Because of Dell’s special value chain, ROE is very high.



Weaknesses:

1. Because it’s different from the traditional value chain, it will be some negative effects, such as hard to access location and less opportunity to sell.

2. Because outsourced all components, it is very difficult to manage the quality.

3. It will be very difficult to expend the selling channels because there are no other retailers in markets.

4. No market reflects from retailers and difficult to assess the market records.



Opportunity:

1. New information technologies introduce.

2. Expand the number of new consumers and achieve more profits.

3. Develop the new channels of selling to improve the sales.

4. Some competitors will retreat from markets.



Threats:

1. Threats from competitors.

2. Rapidly changing in business environment.

3. Some local burdens, such as legal, tax and local protect.

4. The fight of prices.

5. The special value chain whether is suitable for future markets.



2. Dell’s strategy:

For corporate: the core strategy of Dell is direct selling mode. It means the product is sold from manufacturer to consumer directly, no other retailers and reduce the time and cost due to this.

For business: another strategy is that dell is different from the traditional value chain, it outsourced the components but performed assembly to design an integrated supply chain,



3. The basis of Dell’s competitive advantages:

The direct selling mode is basis on the “best understand consumer needs and efficiently provide the most effective solutions to meet to needs”. Because of this rule, the corporate can communicate with consumer face to face, and identify the major problems to solute. Because of this, it can help to ensure the market position and design the market trend for the development.



4. There are 2 different value chains:

One is the traditional value chain, which is that design the manufacturers first by the analysis of market forecast, and “build to stock”. Next products store in warehouses and distribute to retailers, then sell to customers. By the contrast, there are some advantages: it can control the amount of produces. In addition, it owns many retailers and can accessed the location very easily. Moreover, the customer can test before purchasing due to this, and the salesperson are very knowledgeable. Sometimes, the retailers also can reflect the market solution to company. However, the traditional value chain is not flexible and need high cost and spend much time on turnover,

On the other hand, Dell’s value chain---the direct model is much flexible than traditional value chain. Because of no retailer, it reduces cost & time and need the customer’s meets very quickly. In addition, due to outsource all components, it reduces the cost of plant, equipment and R&D, and the price of products will be low. Thus, ROE of Dell is much higher than other competitors. But it also effect to expand on the markets, thus the sales of dell is less than IBM and HP.



5. The purpose of value chains:

The purpose of value chains analyzing is that seeks to determine where in the company’s operations from design to distribution----customer value can be enhanced or cost lowered. An organization’s value chain is a collection of the key activities performed to design, produce, and market, deliver and support its products or services. This provides the opportunity to understand the behavior of costs and the sources of differentiation.



6. Lean manufacturing:

Lean Manufacturing: "Lean" means the conduct of manufacturing operations with minimum waste - i.e. with a minimum of the seven wastes of over production; waiting time; transportation; processing time itself; movement; the production of non-conforming product; and the maintenance of stock. In truth, the elimination of waste and the pursuit of lean manufacturing operation are identical to the aims and practice of Just-in-Time. Lean Manufacturing is an approach to designing and managing production processes that emphasizes minimal inventory and just-in-time delivery, among other things, to improve the efficiency of a manufacturing process.



7. Key “lean manufacturing” principles:

Dell Computers is lean. The company took orders from customers and fulfilled them by buying and assembling the needed components. Customers got exactly the configuration they desired, and Dell reduced its need for plants, equipment, and R&D.



8. ROIC: is defined as a measure of how effectively a company uses the money to invest in its operation. Dell’s scorecard included both financial measures and non-financial measures. The scorecard was generated on a real-time basis, and relevant performance measures were broken down by customer segment, product category, and country.



9. Dell Computer's strategy was built around a number of core elements: build-to-order manufacturing, mass customization, partnerships with suppliers, just-in-time components inventories, direct sales, market segmentation, customer service, and extensive data and information sharing with both supply partners and customers. Through this strategy, the company hoped to achieve what Michael Dell called "virtual integration" stitching together of Dell's business with its supply partners and customers in real time such that all three appeared to be part of the same organizational team

another one which is also about the same case:
SWOT Analysis of DELLCOMPUTER

STRENGTHS


• Sells computer systems directly to customers (direct business model)

• Uses latest technology

• Became the no. 1 retailer of personal computers (outselling IBM and Hewlett-Packard

• Dell’s brand is one of the best known in the world

• It uses IT and has excellent customer relationship management to capture data on its loyal consumers. This allows it to produce the pc based on the customer’s own specification.

• Dell is not the manufacturer. Components are made by suppliers. Dell performs assembly

WEAKNESSES




• Much of Dell’s strategies have to rely on the capacity and capability of these manufacturing components. Continuous updates and process improvement is required so that they can keep with Dell’s pace of development

OPPORTUNITIES




• Having established an integrative and virtual network, Dell has been able to achieve the high level of corporate outcome that challenged most of the industry leaders.

THREATS




• Price competition at the suppliers level (third party Hardware and Software Suppliers) and product categorizations which could eventually affect Dell’s position in the market.

2. What is Dell’s strategy?


Answer:

Dell’s strategies are build-to-order manufacturing, mass customization, partnerships with suppliers, just-in-time components inventories, direct sales, market segmentation, customer service, and extensive data and information sharing with both supply partners and customers

Built-to-order - Dell has no in-house stock of finished goods inventories and that, unlike competitors using the traditional value chain model, it did not have to wait for resellers to clear out their own inventories before it could push new models into the marketplace. Equally important was the fact that customers who bought from Dell got the satisfaction of having their computers customized to their particular liking and pocketbook.

Partnerships with suppliers - Michael Dell believed it made much better sense for Dell Computer to partner with reputable suppliers of PC parts and components rather than to integrate backward and get into parts and components manufacturing on its own.

Just-in-time components inventories - Dell's just-in-time inventory emphasis yielded major cost advantages and shortened the time it took for Dell to get new generations of its computer models into the marketplace. New advances were coming so fast in certain computer parts and components (particularly microprocessors, disk drives, and modems) that any given item in inventory was obsolete in a matter of months, sometimes quicker

Direct Selling - Selling direct to customers gave Dell firsthand intelligence about customer preferences and needs, as well as immediate feedback on design problems and quality glitches.

Market segmentation - from large customers, both corporate and governmental buyers, to small customers, both small businesses and individuals.

Customer service - Dell contracted with local service providers to handle customer requests for repairs; on-site service was provided on a next-day basis. Dell also provided its customers with technical support via a toll-free number, fax, and e-mail.

On-line communications technology made it easy for Dell to communicate inventory levels and replenishment needs to vendors daily or even hourly.

Virtual Integration and Information-Sharing - 16 On-line communications technology made it easy for Dell to communicate inventory levels and replenishment needs to vendors daily or even hourly.

3. What is the basis on which Dell builds its competitive advantage?
Answer:

The basis on which Dell builds its competitive advantage is Low Cost. Cost leadership can be achieved through such approaches as economies of scale in production, experience curve effects, tight cost control, and sale cost minimization (in such areas as research and development, service sales force, or advertising). Dell followed this strategy selling its products directly to its customers. The company took orders from customers and fulfilled them by buying and assembling the needed components. Customers got exactly the configuration they desired, and Dell reduced its need for plants, equipment and R&D.


5. In general, what is the purpose of value chains? Why are they an effective tool in company management strategies?

Answer:

Value Chain Analysis identifies opportunities to gain cost advantages and increase differentiation.

• Cost advantage - Firms gain cost advantage by controlling key cost drivers, finding ways to reconfigure the value chain and optimising the linkages between activities. Understanding the linkages between value chains for different industries, market segments and geographic regions allows companies to optimise their business scope through acquisitions, divestitures and alliances

• Differentiation - Firms increase differentiation by understanding and selectively integrating their linkages with their customers value chains, thereby creating competitive advantage for their customers

Value Chain Analysis is used to identify potential sources of a company’s economic advantage in its industry. The analysis separates a firm into its major activities in order to understand the behaviour of costs, the associated value added, and the existing and potential sources of differentiation. It depends on an understanding of how the firms own value chain relates to, and interacts with, the value chains of suppliers, customers and competitors. Companies gain competitive advantage by performing some or all of these activities at lower cost or with greater differentiation than competitors.

6. Have you heard of the term ‘lean manufacturing’? Find out and discuss how it complements value chain analysis ?

Answer:

Lean manufacturing is an operational strategy oriented toward achieving the shortest possible cycle time by eliminating waste and reducing incidental work. The technique often decreases the time between a customer order and shipment, and it is designed to radically improve profitability, customer satisfaction, throughput time and employee morale. The benefits generally are lower costs, higher quality, and shorter lead times. The term represents half the human effort in the company, half the manufacturing space, half the investment in tools, and half the engineering hours to develop a new product in half the time.

7. Is Dell Computers ‘lean’? Discuss.?

Answer:

Dell Computers is a lean enterprise. A lean producer is typically the low-cost producer in its industry. This allows Dell to set the market price. Lean manufacturing often requires half the space and less direct labour. Lean manufacturing turns out high quality products (no return of the products) Lean producers make what a customer wants and when he wants it, so users get what they want, and they get it fast. Lean manufacturing leads to speed of delivery of product that’s configured as customers want it, speed with new product introductions, speed in management decision-making because the organization is flat and bureaucracy almost nonexistent. It can take full advantage of changes in the marketplace as they occur.

8. The primary financial objective that guided managerial evaluation at Dell was return on invested capital (ROIC). Thomas J. Meredith, former Dell CFO, even put ROIC on his number plate.’ Pg 317. Explain and discuss ROIC and why it was so important to Dell?

Answer:

Return on Invested Capital (ROIC) is a useful tool of comparing companies in terms of efficiency of management and viability of product lines. It is expressed as a percentage and calculated by dividing a company's total capital into its earnings before interest, taxes and dividends.

9. Check out Dell’s website. Any other information that is relevant to strategy?
Answer: google it :)

I just find it, this unit called: BAO3312 Advanced Management Accounting
good luck when people study this unit