Management Theory & Practice

Case Study

Breaking the mould (Dell Computers: the world at your fingertips)

Company Background
Introduction: According to Dell.com (online), Dell Incorporated describes itself as the world's
leading computer systems company. Dell is the largest and fastest growing among all major
computer systems companies worldwide, with more than 46,000 employees. Dell designs, builds
and customizes products and services to satisfy a range of customer requirements. Its global
strategy is to be the premiere provider of products and services, including those that customers
require to build their information technology and Internet infrastructures. Dell has manufacturing
facilities and sales offices throughout the Americas, as well as Europe and Asia to remain close
to Dell's customers wherever they are located (Dell USA: About Dell, 2004).

Dell regularly communicates to the public in a variety of ways. For example, according to the
U.S. Securities and Exchange Commission (online) pursuant to the requirements of the United
States Securities and Exchange Commission, Dell Incorporated regularly reports its financial
performance to investors, creditors, bond holders, insurers, banks, employees and other
interested parties in the form of quarterly and annual filings with the SEC.

Another important SEC filing is form 8-K. An 8-K report is required to be filed with the SEC in
a timely manner whenever events that are deemed to be of interest to investors or potential
investors occur at a publicly traded company such as Dell. The provisions of the Sarbanes-Oxley
Act passed following the accounting fraud related scandals involving such well known U.S.
corporations as Enron and WorldCOM require even more prompt notice to the SEC of significant
events (The Laws That Govern the Securities Industry, 2004).

The Details
The growth of the home personal computer (PC) market is one of the most remarkable success
stories of the last quarter century. If you own a home PC or an electronic notebook and you live
in the United States, then there is a one in three possibility that it arrived on your doorstep
packed in boxes labelled ‘Dell’. Whilst Dell has a smaller proportion of the PC market outside
the USA (it is locked in close competition with its nearest rival, Hewlett-Packard, which
overtook Dell to become the biggest seller of PCs in late 2008) there remains a strong possibility
that your new PC was assembled in Limerick, Penang or Xiamen.

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Any of these is a very long way from the bedroom of a campus dormitory at the University of
Texas at Austin, which is where Michael Dell began to build and sell computers directly to
customers in 1984 before dropping out of college to run his business full-time.
In 1984, building a PC from components was still a specialised activity, and while some people
were able to assemble their own equipment in order to save money and get precisely what they
wanted, the majority of domestic customers bought ready-made products from retailers. The
distribution channel for the industry usually contained five components: supplier (of
components, chips, software etc.), manufacturer, distributor, retailer and customer.

Michael Dell’s idea was to sell direct, and at the same time allow customers to have a PC partly
tailored to their personal requirements by choosing options from a list of components and
specifications which he would then assemble to order. This move eliminated two of the five
elements of the distribution channel (the distributors and the retailers) leaving only three players:
the suppliers, Dell and the customer. The opportunity to develop this new approach into a
successful business was made possible by the coalescence of three trends: increased levels of
consumer confidence and knowledge about the product itself; better and faster software which
enabled first the phone-based and then the internet-based ordering system to run effectively.

Finally technological and manufacturing advances which enabled Dell to lower the price of a PC
to a level where it clearly became good value for money. Whilst Dell supplied both business and
individual customers, it was in the home PC market that the approach had particular success.
Each computer was assembled to order, with components purchased from suppliers as they were
required, so Dell was able to identify and respond to customer preferences and industry trends
very quickly, and without a significant amount of capital being tied up in inventory or stock (the
value of which would be declining rapidly as new and better products emerged).

The system had the added advantage that pre-paid for the goods, thus placing Dell on a firm
financial footing from the outset. While this approach to the manufacture of consumer goods is
by no means unique (the ‘lean manufacturing’ approach is widely used in the car industry for
example) and other players in the IT market adopted it, Dell was able to make it work more
successfully than its competitors. The basic business model transferred readily to the internet,
where the process of ‘mass customisation’ can be managed even more effectively on-line. Dell’s
growth at the turn of the century took it worldwide, and it was placed first in a ranking of the
‘Most Admired Companies’ by Fortune magazine in February 2005. Dell has also won accolades
for ethical standards of corporate behaviour.

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Not all plain sailing
The brand image which helped put Dell at the top of Fortune’s list in 2005 depended very
heavily on its ability to pull together both its own efforts and those of other organisations (i.e.
component manufacturers, transport and logistics organisations, delivery companies etc.), often
in far-flung regions of the world, to put together a package which offered both reliability and
value for money for its customers. As we have seen, its original strength was in its ability to cut
out the ‘middle man’ and deliver that package quickly and cheaply.

But the IT business is both highly competitive and a dizzyingly fast-moving environment; and in
the early years of the 21st century Dell had to rebalance the content of its package.
The area where the Dell operation proved most vulnerable was that of customer service and
support. In the more traditional world of retail outlets, customers were able to discuss purchases
and return faulty equipment or seek support at a store. Such a network of customer support was
absent from the Dell model. Initially Dell outsourced customer support (along with delivery), but
as expectations about after-sales service rose, its call centre support lagged behind these
expectations resulting in some very public criticism, not least of which was in the form of a long-
running critical blog by dissatisfied customer and journalist Jeff Jarvis.

Dell brought its support centres back in-house; two were based in Canada, but mostly they were
‘offshored’ (but not ‘outsourced’) to the Philippines, Malaysia and India, where Dell opened new
Business Centres in 2007. It also launched its own blog as a means of capturing and responding
to customer complaints. In July 2006, Dell’s share price dropped substantially after a profit
warning was issued following the decision to make a major investment in customer support
systems. The task then facing Dell’s management was to persuade investors that the proposed
plan would result in a long-term improvement of the company’s ability to stay ahead of the game
and ultimately deliver a good return on investment.

Why was this move necessary? To a large extent, the very success of Dell at the cheaper end of
the market meant that similar low-cost operators ceased to be a major competitive threat by the
end of the 1990s. However, as home computers became big business for more up-market
companies and those which had previously focused on business customers, Dell found itself
competing directly with the very companies it had side-stepped in the 1990s: Hewlett- Packard,
Lenovo (the Chinese company which bought the IBM computer manufacturing arm in 2005) and
even Sony.

These organisations were not only able to provide high-quality, reliable products, but also had
much stronger customer service support. This revealed a strategic weakness in Dell’s operation

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and forced it to raise its game not only in terms of the computing power it delivers, but also in
terms of its after-sales service.

The soul of Dell

Dell is keen to balance business performance with responsible operations; the overall general
philosophy is described by the company as ‘ The Soul of Dell’98 and the Code of Conduct
reflects its ambitions to conduct business the Dell Way – the right way, which is ‘Winning with
Integrity’. Simply put, we want all members of our team, along with our shareholders,
customers, suppliers and other stakeholders, to understand that they can believe what we say and
trust what we do.

Feedback from the workforce as well as customers is clearly critical to the success of Dell, and
the workforce is encouraged to get involved in the process through its ‘Tell Dell’ system. There
is change happening all across Dell, creating a revolution in how we interact and drive for
business results. Processes are changing, attitudes are shifting, objectives are being aligned,
careers are being enhanced and people are listening. Closely. At the core of it is Tell Dell. The
Tell Dell survey program has been continually refined over the past several years from being a
good informational instrument to its current use as a critical analytic and diagnostic tool for
making Dell a better place to work and a stronger company.

Part of the Winning Culture philosophy is to engage directly with our employees, the way we do
with our customers. As managers at Dell, it is critical that we support our Winning Culture by
working to deliver an unbeatable employee experience each and every day. Ro Parra and Joe
Marengi, Senior Vice Presidents of America.

Talking to Hyderabad
This case study is being written on a Dell computer. It was ordered from the front room of a
terraced house in the south of England at about 10pm one March evening. Within minutes, I had
an email from Sunita at the Hyderabad Customer Experience Centre to say she would be tracking
my order to completion and giving me updates on its progress. I could look at the progress it was
making by following events on the website, which told me that the components were on their
way to Limerick, then that the PC had been assembled, then that it had been dispatched to the
distribution hub where it was joined by the chosen accessories.

I could see when it crossed from Ireland to the UK and when it had reached the local distribution
centre, and finally Sunita phoned me to announce the delivery day and time about one week after
the order was placed. She rang again to ensure that it had arrived and was operating to my
satisfaction. When I mentioned that the cooling fan seemed rather noisy, she logged a call to the

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support team (also in India) and I found myself, phone in one hand, screwdriver in the other,
involved in what can only be described as the postmodern experience of running a diagnostic test
on my PC, with Sunita’s colleague talking me through the process of opening the operating unit,
dismantling the fan and checking the nature of the fault. As a result, a local engineer was
dispatched with a replacement component. Within ten days the whole operation was complete to
both my and Sunita’s satisfaction, and we said our farewells.

Conclusion
A laptop is a small computer which is also known as a notebook. It is a small computer that is
portable and convenient to use when traveling. Osborne Computers invented the first portable
laptop in the year 1984 that saw a sale of approximately 1000 units in one month time. As the
technology industry is improving, laptops are on the merge too. There is a wide range of laptops
an individual can decide to choose from depending on the needs and wants of the individual.
Among the best-known manufacturers of laptops is the Dell Inc. Originally, Dell was a private
organization owned by the Americans. Michael Dell, a student at the University of Texas,
founded the company.

In the year 1985, Dell produced the first machine of the company known as the Turbo computer.
In its first year of operation, the company had a gross income of about $73 million. In the year
1986, Michael Dell partnered with Lee Walker who became the president and the chief operating
officer of the company. Lee also acted as a mentor of Michael in making sure that the company
was in a high rise.

Dell then incorporated transportation and logistics management of its international

manufacturing to include all forms of transportation for efficiency, creating an integrated
physical distribution concept. The customers, when making an order, choose the final physical
distribution based upon how quickly they want delivery of their computer. Empowering the
buyer with the decisions of the computer components, delivery, and service increased customer
satisfaction.

Dell's decision to utilize "Green" technologies to become a carbon neutral company increased
customer satisfaction with companies and individuals concerned with the environment. In 2009
nine of its European and American facilities were powered by renewable energy, including 100
percent of its 2.1 million square-foot global headquarters at Round Rock, Texas.

Source: Mullins, L (2016), Management and Organisational Behaviour, 11th Edition, FT Prentice
Hall

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Question:
1. Discuss the focus of the Dell case and who are the stakeholders in the case and the role/s
each of them played.

2. Two things characterize the business environment today; identify these two (2) elements and
discuss their impact in relation to Dell’s environment.

3. The positive outcome of effective leadership in a fast- changing, team- oriented environment,
requires managers to possess certain competences. Identify these in the Dell’s situation
presented.

4. Do a SWOT on Dell and state how the strengths and weaknesses have been undertaken by
the company. What does a SWOT analysis reveal about the attractiveness of Dell Computer’s
situation?

5. What are the main organisational challenges which Dell faces to ‘conduct business the Dell
Way?’

6. What are the implications for line managers and supervisors of creating a corporate culture
based on the Dell Way?

7. What factor has allowed Dell to cut costs and still remain competitive in the rapidly changing
technology industry?

8. While the world seems to be moving away from bricks and mortar retailing, why has Dell
adopted this approach? b) How did they have to adapt their manufacturing to accommodate
this channel?

9. What advantages does a traditional retailer provide to a customer? What approach does Dell's
approach use for their computer manufacturing and distribution explain its benefits or
shortcomings?

10. What are the advantages to Dell of having manufacturing sites located where they are? What
are the potential disadvantages?

11. Why does Dell purchase most of the components that go into its PC from independent
suppliers, as opposed to making more itself?

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12. Do you think that Dell’s model can be imitated by other PC manufacturers and manufacturers
in other industries? Discuss.

13. Do you think the following processes are evident in the case:
a) total quality management, b) downsizing c) right-sizing; and d) re-engineering? If so,
show the evidence.

14. What is the source of Dell’s competitive advantage? How secure is this advantage in the
sustainability of Dell’s competitive edge?

15. Identify Dell’s global supply chain strategy. What are the potential risks associated with
Dell’s global supply chain strategy? How can these risks be mitigated?

16. How did Dell put the customer in control of the buying process? What role does the Internet
help in this feature of Dell’s business?

17. How did Dell regain prominence with its core B2B market, and how did it move into the
consumer market successfully?

18. Selling product to customers they do not know might not really add any value to Dell’s
business unless they are aware of Dell’s product. What can Dell do to develop it product’s
presence?

19. Is Dell’s strategy potent enough to beat out other PC companies? What are Dell’s chances for
becoming the dominant leader in the global PC market?

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