Case Analysis: Dell Case Study
Major facts, in this case, include Dell’s strategies involving direct sales, product customization and stakeholder engagement and the changing competitive environment. These are strategies that have worked for Dell in its quest to provide customers with the highest quality products. A focus on direct sales has ensured that Dell can reach its clients and meet their needs better.
Engaging suppliers as important stakeholders of the organization have enhanced Dell’s manufacturing strategy of mass customization by ensuring that supplies are made just-in-time and with short lead times. Dell utilizes focused mass customization where a limited number of common platforms are manufactured and then customized to meet customer needs. This has created more demand because customers demand unique products. Despite the success in strategy, downward price pressure, competition and a weakening market position challenge the company’s survival.
Dell faces a weakening market position, perpetrated by the intense competition in the marketplace, combined with downward price pressure.
Dell has various options that it can consider in increasing its market share and absorbing downward pressure as follows.
New products: Diversification can be a viable option for Dell and may involve developing more advanced computers and laptops to meet competitors such as Apple. It could also invest in new products such as smartphones whose demand is currently high in the market. This has the advantage of attracting a larger market share but may be expensive to implement (Hans-Ruediger, 2014).
Cost-cutting measures: To increase profitability and counter falling prices, Dell can revise costs in its production system by reducing wastage, streamlining processes and automation. The advantage of this strategy is that it increases returns through reducing the company’s production costs. However, it may impact on process quality when important aspects are eliminated or downsized. Ethical issues may also arise from some steps such as employee layoffs and automation which creates unemployment (Ciravegna, Fitzgerald & Kundu, 2013)
Increased Marketing: Dell could increase its market position through increased advertising of its products. This will ensure that more customers are aware of their products and capabilities, thus improving the market (Kotler & Armstrong, 2015). This has the advantage of increasing product visibility and increasing market share. On the other hand, it may be very costly to implement.
Invest in more advanced research and development: Technology is changing rapidly, and to benefit from the growing market, companies must provide clients with unique products that meet their needs. This calls for investment in research and development to promote the development of advanced products (Ciravegna, Fitzgerald & Kundu, 2013). While new products will increase the company’s market position, research and development are very costly, especially where customer demands keep changing.
Choice and Rationale
New product development is chosen as the best choice of strategy for Dell to pursue. This is because the current customer is increasingly demanding more sophisticated technology and companies that take the opportunity to satisfy this demand will capture a large market share.
Dell should invest in more advanced computers to serve different customer needs. I did not choose cost cutting as the best strategy because Dell has already implemented cost cutting measures before including the laying down of staff. The company may not be ready for more cuts as it would impact its performance. Increased marketing and research and development would come automatically if Dell chooses the new product strategy.
To succeed in new product development, Dell would need to invest in research and development to ensure the production of sophisticated products, which would later be followed by marketing to promote sales (Kotler & Armstrong, 2015).
New product development will be achieved using the following plan.
|New Product Development Implementation Plan|
|Objectives||Develop ten new computer models in the next yearIntroduce a smartphone range with ten new models in the next two years|
|Strategies and procedures||Appoint a marketing research team to explore the market on new technology trends and demandsFund the research and development unit to conduct research on new technologies Train the team on new technologies and aspects of the smartphone marketDevelop new products based on the research and development team’s recommendations|
|Timelines||July 2017 – July 2019|
|Person(s) responsible||Chief Executive OfficerResearch and Development ManagerInformation Technology Manager|
Ciravegna, L, Fitzgerald, R. & Kundu, S. K. (2013). Operating in Emerging Markets. A Guide To Management and Strategy in the New International Economy. Pearson: FT Press.
Hans-Ruediger, K. (2014). Handbook of Research on Managing and Influencing Consumer Behavior. Hershey, PA: IGI Global
Kotler, P. & Armstrong, G. (2015). Principles of Marketing. Harlow, UK: Pearson Education.
Question 1: Fundamental reasons for Dell’s success
Some of the most fundamental reasons for Dell’s success include direct sales, focus on partnerships and product customization. By focusing on selling direct to the customer, Dell had an opportunity to interact with its clients and thus understand their needs better. Building effective relationships with suppliers and linking them to production systems ensured that Dell could implement its production strategy, which included the just-in-time supply of components to save time and warehouse costs. Product customization played a role in increasing demand by providing products that met customer expectations (Hans-Ruediger, 2014). Mass customization was also effective I saving costs.
Question 2: Maintaining competitive advantage and viability of business model
As customers’ needs continue to change amidst increasing competition, Dell should invest in research and development and leverage the social media strategy to maintain its competitive advantage. Research and development will ensure that the company can come up with innovative products to meet the needs of its customers (Ciravegna, Fitzgerald & Kundu, 2013).
Social media is the novel platform that contemporary organization must maximize on to reach existing and potential customers, given the advancement in technology and potential to reach customers across the globe. As part of the organization’s strategy that involves direct customer sales, Dell could reach more customers to increase its sales while engaging them directly to get feedback about its products.
Question 3: Will Dell formula work elsewhere?
The Dell formula is highly successful and can be replicated elsewhere. Customization is a growing trend, informed by customer demand to have products that meet their unique needs. By adopting customization, companies could gain a higher market share. It is notable that creating good relationships with customers and stakeholders can yield great outcomes through better quality products and efficiency.
However, the just-in-time formula and direct sales may not work for all companies. Businesses that thrive on mass production, for example, require regular supplies and warehousing is necessary to meet demand. Direct sales may not work for most consumer products because there need to be middlemen to connect geographical boundaries and enhance availability in locations nearer to the customer. Direct sales would also be costly for the organization (Kotler & Armstrong, 2015).
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