GLOBALIZATION AND INTERNATIONAL BUSINESS:

A CASE STUDY OF DELL

Table of Contents
1.0 Introduction............................................................................................2

2.0 Overview of the company..........................................................................2

3.0 The concept of globalization.......................................................................2

4.0 Influence of globalization and Dell’s international business strategy................4

4.1 Comparative Environmental framework.......................................................4

4.2 Trade and Investment..............................................................................5

4.3 World Financial Environment......................................................................6

4.4 Importance of ethics in International Business.............................................6

4.5 International Business Strategy.................................................................7

4.6 Planning process......................................................................................7

4.7 Management of International Business Operations........................................7

5.0 Critical reflection on Dell’s International Business strategy.............................7

References...................................................................................................9

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1.0 Introduction:

The present piece of work has been developed in the light of globalization and
international business strategy taking into consideration the business case of Dell
Inc. Contemporary business framework has been significantly influenced by the
emergence of globalization. Business organizations nowadays are considering new
and more innovative international business strategy in order to promote businesses
in a global platform. Dell has been chosen for the current study since the company
has been successful in effective promotion of business globally. Accordingly,
attempts have been made in the study to evaluate position of the company globally
and the impact of several global factors such as competitive environment, trading
policies, financial environment, business strategies and management.

2.0 Overview of the company:

Since the foundation of the company in the year 1984 by Michael Dell, Dell Inc. has
been a household name in IT Hardware and networking devices components. The
domain of Dell services includes manufacturing computer related hardware
components and networking peripherals along with real time support mechanism
for troubleshooting of such peripherals. Besides, the strategy of developing user
defined customized products has introduced a core competency within the business
framework of the organization. Such uniqueness involving the business policy has
helped Dell to become one of the leading computer hardware brands along with the
likes of HP and Acer. Based on the Fortune 500 list published Dell has got the rank
of 25 among the world’s largest company in terms of revenue [Available at:
http://www.dell.com/downloads/global/corporate/conferences/20061016_ibs.pdf,
15 Aug 2013].

3.0 The concept of globalization:

Over the years, the term ‘globalization’ has been used differently by different
authors. Some of the common terms associated with the concept are
internationalization, liberalization, universalization, modernization,
deterritorialization and globality. Ethier (2009) mentioned that the
internationalization process promotes the concept of cross-border relationships

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between national regions including freedom of international exchange. Davis and
David (2002) termed the process of globalization as liberalization that highlights
the flow of trade and monetary instruments between cross national regions.
Another term that is used to describe a global business process is
universalization. The process highlights the phenomena of cross cultural human
interactions involving in a common business process. The concept of
modernization emphasizes the application of rationalism, industrialism, capitalism
and bureaucratism that are considered to be necessary elements in successfully
transforming a traditional business process towards a more contemporary
framework (Guesnerie, 2001). Deterritorialization process involves the strategy
of evaluating the geography of business expansion and the approaches of business
organizations in mapping the target geography. Finally, globality determinant
involving the globalization process deals with the external business environment.

The process of globalization is often termed as the conduction of regional

framework into a global platform. From a business perspective, globalization is
considered as the process of promoting an organizational business is an
international platform engaging cross cultural demography. According to Neary and
Albert (2006) globalization is a continuous process of integrating economic, social
and cultural values in the global networking system. On the other hand, Bernard et
al. (2003) suggested that globalization from a business perspective is the concept
of integrating a national economy into a global economy. Although the term
‘globalization’ is used as a buzzword in academic domain, the concept is widely
used in a business concept by organizations in conducting an international business
policy.

The emergence of the term ‘globalization’ had been first found in the early 1990s in
some of the academic contents. Authors and scholars mainly regarded such concept
in knowledge promotion mechanism in a wider area. There have been several
debatable topics regarding the effectiveness of the globalization process, although
facts and statistics have found to be pointing towards positive results. Jones (2004)
suggested that the globalization process is theoretically proven but practical
implementation of such mechanism is a myth. However, according to Kemp and

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Henry (2006), such process is a step forward toward next generation business
policies and certainly an effective one in in avoiding business sustainability.

4.0 Influence of globalization and Dell’s international business strategy:

Globalization has influenced the international business policy of Dell in many

possible ways over the last two decades. The overall influence of globalization has
resulted in some positive influences as some negative influences although the
positive impact has been slightly greater than the negative counterpart. The overall
international market of Dell is mostly condensed in the US region with Asia being
the second largest international business region of the organization.

4.1 Comparative Environmental framework:

Cultural:

Dell has focused on the cultural aspect in the international business strategies as a
result of which the company has managed to increase the sales volume in the
targeted geographic region. For example, Dell officials have identified the cultural
value of ethnic customers specially belonging from Asia Pacific regions and
accordingly made Inspiron R series laptops with perceived cultural designs which
have been a hit among the customers.

Political:

Political influences in different geographic regions have been affecting the

international business policies of Dell Inc. The situational context of several regions
specially China, India and other Asia Pacific regions can be considered in this
context. Continuous political imbalance in these regions has been in contrary to the
advanced technology approach of the organization.

Legal:

Legal infrastructure of various cross national regions has several indirect impact on
the business of Dell. Legal implications in different countries regarding import-
export mechanism, service standards and maintaining business ethics often
influence in overall business productivity of Dell.

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Economic:

Since the major global recession in the year 2008, Dell has not been fully recovered
and has failed to generate revenue to the desired extent. However, based on the
findings of Jones (2004) the company has been successfully maintaining demand
and supply ratio. Moreover, global IT industry has been expecting a growth of 10%
over the next five years giving rise to the buying potential of the customers. Hence,
the future is looking bright for Dell in the coming years [Available at:
http://www.dell.com/downloads/global/corporate/conferences/20061016_ibs.pdf,
15 Aug 2013].

Social:

Social factors such as the taste and demand of the customers often influence the
business of Dell in an international platform. Based on the demand of the
customers, Dell has developed products targeting specific demography. For
example, to target students and young working professional, Dell has developed
multimedia notebooks since such demography prefer all-in-one multimedia solution.
On the other hand, the company provides professional notebooks to target older
demography.

4.2 Trade and Investment:

Trade and investment policies involving international business expansion

incorporates with various legal implications such as the import-export tariffs, FDI
(Foreign Domestic Investment), corporate tax and free trade. Import-export tariffs
are proportionate with the type of economies with more developed economies are
implied with greater tariffs (Kemp and Henry, 2006). As a consequence, Dell is
currently considering conducting more business in the less developed economies in
order to enhance the return on investment. Corporate tax is another institution in
the international business procedure. US and UK along with several other EU
nations have a higher corporate tax policy compared to the countries in the Asia
region. Therefore, Dell has been focusing more on these regions in order to boost
the overall revenue generation process (Deardorff, 2006). FDI policy is another
major implication that dictates the nature of investment in the target international

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region. In this context, the company has been benefited from western countries like
US UK and other European regions that have open business policies whereas in
some of the Asian countries such as the likes of India, the implications of FDI
policies affect the business.

4.3 World Financial Environment:

Dell belongs to the computer hardware component and peripherals industry.

Currently the industry is worth estimated overall revenue of $609 billion. More than
27,745 business organizations operate in the industry employing more than
3,009,000 employees worldwide [Available at:
http://www.ibisworld.com/industry/global/global-computer-hardware-
manufacturing.html, 15 Aug 2013]. Despite a rapid expansion rate since the early
1990s, the industry has been suffering from decreased annual growth mainly
because of the delayed effects of some major economic massacres. The industry
has been experiencing an annual growth of -0.7%, although experts believe that
the industry is recovering from the recession of the year 2008 and as estimated
10% growth is expected over the next 10 years [Available at:
http://www.sec.gov/Archives/edgar/data/826083/000082608313000005/dellfy131
0k.htm, 15 Aug 2013].

4.4 Importance of ethics in International Business:

According to Feenstra (2003), the success of international business strategies is

much dependent on the ethics maintained by the organizations in the due course
since the environment in the target destination is bound to be different to that of
the host destination. In this context, environmental analysis is an effective tool in
determining the external environment regarding the target market so that
perception of ethical conditions involving the organizational business can be
developed. Ethics could be regarding the cultural, environmental and legal
implications involving the target region that are needed to be maintained in the
international business policy in order to make the process successful.

4.5 International Business Strategy:

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Two of the major assessments involving the international business strategy are
target market selection and strategies of market penetration (Deardorff, 2006). Dell
is recently targeting middle-east countries along with countries in the Asia Pacific
regions since these countries are experiencing an emerging economy. The
organization has been creating subsidiary businesses in these target regions as the
market penetration strategies. Since Dell is a well established brand, the market
penetration strategy is of less significant to the international business policy of the
company.

4.6 Planning process:

From a broader perspective, the international business strategy of Dell is found to

be consisted of four steps involving planning, organization, implementation and
control (Dixit and Victor, 2007). The first step is strategic planning process in which
the external business environment involving the business is analysed in order to
develop knowledge regarding nature of the target market. Based on the findings of
the research, organization values are determined so that the business policy can be
suited in the target geography. Once the business framework is ready for the go
line, implementation process is done followed by continuous control mechanism in
order to ensure the efficiency of the process.

4.7 Management of International Business Operations:

Dell has dedicated R&D team to continuously tract the nature of the global IT
industry. The purpose of such team is to find possible ways to minimize the gap
between demand and supply (Ethier, 2009). Besides, the role of the management
team in Dell is crucial in conducting an ethical management practices and perceived
business operations in specific market regions.

5.0 Critical reflection on Dell’s International Business strategy:

The international business strategy of Dell is found to be quite effective and that
has helped the company expanding the business in markets with good prospects.
The company has recently been focusing more on the emerging economies rather
than developed economies. Such policy has helped the company to achieve a

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greater ROI generating desired amount of revenue. However, the issues regarding
cross-national diversities often affect the international business policies of Dell
which are needed to be focused in order to create a sustainable international
business policy.

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References:

Bernard, A. B., Jonathan E., Bradford J. J. and Kortum, S. (2003) “Plants and
Productivity in International Trade”, American Economic Review, 93, pp. 1268-90.

Davis, D. R. and David E. W. (2002) “An Account of Global Factor Trade”, American
Economic Review, 91, pp. 1423-53.

Deardorff, A. V. (2006) “The General Validity of the Law of Comparative

Advantage”, Journal of Political Economy, 88, pp. 941-57

Dixit, A. K. and Victor, D. N. (2007) “Gains from trade without lump-sum

compensation, Journal of International Economics, 21, pp. 111-122.

Ethier, W. J. (2009) “National and International Returns to Scale in the Modern

Theory of International Trade”, American Economic Review, 73, pp. 389-405.

Feenstra, R. C. (2003) Advanced International Trade: Theory and Evidence, 3rd ed.
Princeton: Princeton University Press.

Guesnerie, R. (2001) “Second Best Redistributive Policies: The Case of International

Trade”. Journal of Public Economic Theory, 3, pp. 15-25.

Jones, R. W. (2004) Heckscher-Ohlin Trade Theory, The New Palgrave Dictionary of

Economics, 2nd Ed. Cambridge: MIT Press

Kemp, M. C. and Henry, Y. W. (2006) “Gains from trade with and without lump-sum
compensation”, Journal of International Economics, 21, pp. 99-110

Neary, J. P. and Albert, S. (2006) “Factor Content Functions and the Theory of
International Trade”, Review of Economic Studies, 53, pp. 421-32.

www.dell.com. 2013. Dell International Business Strategy Conference Call. [online]

Available at:
http://www.dell.com/downloads/global/corporate/conferences/20061016_ibs.pdf
[Accessed: 15 Aug 2013].

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www.ibisworld.com. 2013. Global Computer Hardware Manufacturing: Market
Research Report. [online] Available at:
http://www.ibisworld.com/industry/global/global-computer-hardware-
manufacturing.html [Accessed: 15 Aug 2013].

www.sec.gov. 2013. ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934. [online] Available at:
http://www.sec.gov/Archives/edgar/data/826083/000082608313000005/dellfy131
0k.htm [Accessed: 15 Aug 2013].

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