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.