Dell Inc. previously PC’s Limited (1984-88) and Dell Computer Corporation (1988-2003) is a global corporation that blueprints, advances, and manufactures personal computers (PCs) and several computer-related products. The company was founded as PCs Limited by an American student Michael Dell in 1984. A student at the University of Texas in Austin, Dell was able to provide consumers with high-quality PCs at quite competitive prices, because they bypassed the costs associated with the traditional markets. Dell invested in customer support, where they issued technicians who would service PCs for their customers, including risk-free return policy. In the first half of the 2000s, Dell’s competitive advantage was unmatched. Its competitive advantage stemmed from its popular build to order and direct selling approach. However, other companies were able to copy Dell’s method of standardized. Competitors invested in manufacturing in countries even lower costs than Dell. Dell widened its activities in the area of ‘Enterprise Solution and Services’ through several acquisitions. In 2011, Dell was purchasing six companies and was acquiring two more companies, which were Compellent and SecureWorks, at the beginning of 2012. To remain profitable in a rapidly changing environment, Dell will have to employ several growth strategies for a sustainable future as a technology company; these include simplification and innovation.

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Strategic Management and Leadership

Introduction

Brief Profile of Dell

Dell Inc. previously PCs Limited (1984-88) and Dell Computer Corporation (1988-2003) is a global corporation that blueprints, advances, and manufactures personal computers (PCs) and several computer-related products. The company is among the leading suppliers of PCs in the world. The company is headquartered in Round Rock, Texas.

The company was founded as PCs Limited by an American student Michael Dell in 1984, a student of the University of Texas in Austin. The company was established on the principle of building and selling customized PCs directly to the customers; the company began by selling their products through mail catalogs and advertisements (Hill, 2011). Dell was able to provide consumers with high-quality PCs at quite competitive prices because they bypassed the costs associated with the traditional markets. PC limited was renamed Dell Computer Corporation, and it went public in 1988. In 1996, the company began using the online platform for customer support and sales. In 1999, Dell surpassed Compaq Company Corporation as the most prominent PC sellers in the United States. In the 21^st century, Dell extended its product line to include digital cameras, televisions, and several products related to computers. The company was renamed Dell Inc., signifying the general transition into the electronics industry.

Changes in the PC Industry

According to Gartner (2019), PC shipments in the world grew by one point one percent within the third quarter of 2019. The major cause for growth can be attributed to Windows 10 refresh cycle. The impact of this growth was determined by the level of the refresh cycle or the state of local markets. The third quarter of 2019 saw Dell continued growth of its PC shipments with a five-point five percent growth. The market in Japan was specifically a strong market for Dell with a triple-digit desktop growth compared to the same time in 2018.

Artificial intelligence (AI) and machine learning are no longer in the research phase but have effectively being used within the industry throughout 2018 and are set to grow in the coming years. They are extensively being used in mobile and web applications. The cybersecurity industry has also been growing due to the need for protection of computer systems and data from unwarranted access. The transformation of Dell Computer Corporation to Dell Inc. earmarked Dell’s venture into such a computer service industry, such as cybersecurity.

Purpose of the Report

This report aims to conduct an examination of Dell Inc. in terms of the company’s competitive advantage, investment strategies, and innovations and recommend strategies that would add value for the company in the years to come.

Question 1

VRIO Analysis of Dell

The VRIO framework is a tool used to strategically design measures that might enable an organization to discover and protect the resources and capabilities that guarantees them an along-term competitive advantage. The VRIO represents an acronym with a four-question model framework – value, rare, inimitable, and organised.

Value. In the first half of the 2000s, Dell’s competitive advantage was unmatched. Its competitive advantage stemmed from its popular build to order and direct selling approach. The just in time strategy (JIT) allowed the company to operate under minimum inventory levels within the industry. The reduction in inventory cost allowed Dell a tremendous cost advantage compared to its competitors.

Rare. Dell’s framework of direct selling has further enabled the company to avoid costs brought about by retailers and wholesalers, making their products even more affordable (Knott, 2015). Dell has been able to balance supply and demand within the market because of their close relationship with their suppliers who have updated information on the trends in the market

Inimitable. Other companies were able to copy Dell’s method of standardisation. Competitors invested in manufacturing in countries even lower costs than Dell. While Dell heavily focused its attention in the United States, accounting for 8% of its sales, it had relatively weak sales in the Asian market. For instance, their products were forced out of the Chinese market because of relatively cheaper similar products.

Organisation. Due to the challenges posed by the existing strategy, Dell has shifted focus to the area of related business to the PC industry. Computer services and software industry has enabled Dell to realize profits in the sector such that by the fourth quarter of 2019, its revenue stood at $23 800 000 000, which was an increase of 8%. Thus, Dell Inc. has a structure for a sustained competitive advantage (Gartner, 2019)

Dells Competitive Advantage

Dell’s competitive advantage stems from three essential strengths. The first strength emanates from the development of high-quality products compatible with the standards of the industry. Many of Dell’s products have been ranked higher than IBM and HP publications such as PC World and PC Magazines. The second strength emanates from their ability to maintain efficient and flexible manufacturing operations leading to a smooth asset base. In Dell, manufacturing parts come into the company to particular orders from their customers (Bartlett and Beamish, 2011). The attention placed on details makes their process efficient and leads to high-quality products. Dell’s third strengths come from its concept of direct relationship marketing, which allows the company to tailor its products according to its customer needs and also eliminates almost half of dealer mark up prices enabling the company to put forward very aggressive prices.

Dell’s Capabilities and Enterprise Solution and Services

In October 2015, Dell introduced new products from services and software under the Enterprise Solutions and Services that would enable businesses to have all their IT needs under a single seller. According to CEO, Michael Dell, the intention was to become an end to end enterprise solution provider. The focus is competitively differentiated and establishes a value for their customers based on several domain solutions such as intelligent management of data and next-generation solution computing. With an existing one billion eight hundred million PC install base worldwide, where there are four hundred million PCs, which are already four years or older, present a massive market for Dell’s market growth.

Question 2

Dell’s Key Acquisitions

The acquisition involves purchasing the most shares in a target company. On the other hand, mergers involve the combination of two companies that were previously separate into one company. Dell widened its activities in the area of ‘Enterprise Solution and Services’ through several acquisitions. In 2011, Dell was purchasing six companies and was acquiring two more companies, which were Compellent and SecureWorks at the beginning of 2012. In March 2012, Dell purchased SonicWall, a company that provided data and network security services for several companies for a deal worth one billion two hundred and fifty million dollars. In June 2012, Quest Software was acquired for two billion four hundred million dollars. Quest Software was involved in systems management, cloud software and computing, and computer storage (Sick et al., 2015). Clients of Quest Software were large companies, who required backup and recovery software and a solution for a single sign-on that allowed multiple accesses to password-protected accounts with a single log-in.

Challenges of any Acquisition

Culture can be argued to be a company’s greatest strategic asset. While unique organisation marketing strategies can be successfully copied, it is difficult to match up to another company’s culture. Cultures are what make organizations succeed. Mergers that arise out of acquisition are not usually a ride in the park, because it is a marriage with two different expectations that need to exist in the same space. Ironically, mergers between businesses, which are in the same line, have the most difficulty of integration (Lev-Ram, 2016). Only one in seven mergers is usually successful; this is due to culture clash. Corporate culture includes collective patterns of behaviours, values, and unwritten organisational rules. It is the regulatory frame of reference. The formal organisational cultures include charts, job descriptions, annual performance appraisals, pay and compensations, and procedures and policies. Informal cultures include informal leaders, unwritten rules, cultural norms, political systems, and informal leaders.

Symbiosis Integration

According to Haspeslagh and Jemison (1991), two criteria determine the approaches to integration, including the extent of strategic interdependence and the need for autonomy in the organisation. Integration approaches include preservation, absorption, intensive care, and symbiosis. Symbiosis integration provides for a robust strategic interdependence but requiring a high need for independence (Haspeslagh and Jemison, 1991). Dell, as the acquiring firm and the acquired organisations, can learn and adopt the best qualities from each other. Symbiotic integration can be attributed by the preservation of operational autonomy of the entities concerned. And through the development of strong links ensures that the realisation of joint programmes. This is a model of inter-company cooperation.Advantages and Disadvantages of Symbiotic Integration

The symbiotic integration strategy has several advantages to both the acquiring and the acquired firm. The acquired firm preserves a high autonomy allowing the benefits and qualities of the acquired firm to be retained. There is a general knowledge transfer between the mangers of both the acquired firm and the acquiring firm. The symbiotic integration strategy is effective for cross border mergers and acquisitions, because it allows local market adaptation, where the acquired company is already knowledgeable in.

However, the symbiotic approach has the disadvantage of not fully guaranteeing the acquired firms full autonomy. It requires financial sharing even in situations where the acquiring company is experiencing the financial downtown opposite of the acquired firm.

Question 3

Importance of Innovation to the PC industry

The innovation of fundamental concern to every organisation and its role in market coordination and development is absolute. Today, the personal computing industry is not only composed of the traditional PC servers, laptop PCs and desktops but also include smart hand-held devices, such as smartphones, ultra-mobile PCs and PDAs. The PC industry is supported by a wide variety of service specialists, retailers, distributors, logistics providers, manufacturing services, and component suppliers. These industries also include the electronic industry and contribute innovation and production networks. Apart from supporting innovation, these industries provide the essential infrastructure for innovations in new categories of products, such as smartphones and MP3 players, for example, iPods and ultra-mobile PCs.

Global revenues for the essential PC industry sum up to two hundred and thirty-five billion dollars in 2005, where one hundred and ninety-one billion dollars in portable PCs and desktops, sixteen billion in smart handheld devices and twenty-eight billion in PC servers (Dell Inc., 2016).

As much as innovation has been beneficial to the industry, with equal importance is the considerable decline in prices in recent years, enabling PCs to have an even broader market reaches in the world. Emerging markets such as India and China have been growing faster than most developed economies, and this has forced most PC developers to consider the needs of such markets at lower prices. Globalisation production has enabled products to be ten to thirty per cent cheaper than they would have been (PSA Group, 2019). The availability of more affordable, smaller and more powerful products has enabled the expansion of the market stimulating innovation in the software, hardware, and services.

Strategies Undertaken by Dell since 2005

In 2005, Lenovo acquired ThinkPad name and Manufacturing rights from IBM. At this time, Lenovo was the Chinese PC market leader. By 2010, Lenovo had grown to become the fourth largest manufacturer of PCs competing actively with Dell for its businesses. Lenovo had become the market leader by 2013. Lenovo was manufactured in China, low labour cost producing country and was, therefore, able to compete with Dell’s low costs. It is in this period that Apple moved its manufacturing of successful items, such as MacBooks and iPads to China, where the manufacturing costs were reasonably small.

Dell realised that its primary model of business made to order low-cost computers were under massive attacks from even lower costs manufacturers. The PC market had been commoditised, and the selling of PCs was no different than selling coffee or sugar. Pricing was the basis of market competitions. Sustainable competitive advantages measures such as knowledge, key competencies and branding had disintegrated in the market.

As a result of the challenges from their existing strategy, Dell took in a new approach related to business area to PC – computer software and services. This was no different from the move made by world-leading computer cooperation, IBM, which had built the same move years earlier (Lovekar, 2018). This is where Dell widened its activities in the area of Enterprise Solutions and Services by acquiring several companies in this area; this was done from 2011 to early 2012. The new strategy had some benefits as the new acquisitions experienced profits better than other parts of Dell’s PC businesses. From their Dell’s sales record, ‘public sector businesses’ and large companies had become Dell’s major clients while consumer sales remained very low.

Dell chose not to abandon the existing notebook and desktop business as it was accounting for half of its total number of sales in 2011. Additionally, twenty per cent of their sales arose from the sales of personal PCs. Public sector institutions and even larger companies were looking forward to using smartphones, media tablets, and such related products. Dell could not only rely on its new business strategy Enterprise Solutions and Services.

Question 4

The BCG Matrix of Dell’s Products and Services

Dell has widened its scope of operations through mergers and acquisitions of various related technology companies, enabling it to be more effective in providing IT solutions to its customers. The management of the company has facilitated the transformation of the company from just a computer manufacturer into areas related to technology, such as could base solutions and data management (Dell Inc., 2016). There is an analysis of Dell’s products and services, such as Notebooks, Desktop PCs, Peripherals, Software and Enterprise Solutions, and Services through the BCG matrix. The evaluation is based on the growth prospects of different products, market share, which assisted in categorising their products in terms of question marks, cash cows, dogs, and stars.

Desktop PCs and Notebooks. Some of Dell’s products can be categorized as a cash cow which involves products with high market share by looking at the revenue of the particular products. In this case, Dell’s Desktop PCs and Notebooks fall under this category as they have been able to provide cooperation with sustained profits. Though a decline has been experienced in the PC market, Dell has been able to acquire its share of profits from PC sales (Lev-Ram, 2016). The Desktop PC positioning can assist Dell maintained a strong market position and use the profit revenue to strengthen the other products they offer.

Peripherals and Software. Question marks relate to products that seem to have an uncertain future. These products can prove their worth by becoming highly successful or perform poorly that they would need divestments. In this case, Dell’s cloud computing, as it only recently began dealing with platforms of cloud computing. Cloud competing can become profitable for Dell, where there is a rising trend for cloud computing, though the development of this product is still uncertain.

Enterprise Solutions and Services. Dogs indicate unprofitable business units or poor performing items. Most of these products have a meager market share, making it hard even to produce these products. In this case, Dell’s cell phone brand would fall under this category. Smartphones have not been able to experience profitability for the corporation. The company failed to meet its expectations when it ventured into the smartphone market as it was unable to compete against market leaders such as Apple Inc. The failure of Dell’s smartphones can be attributed to the inability of the meeting of customer needs and preferences (Reisinger, 2011).

Strategic options (Example; Invest, Harvest, Divest) suitable for each product/service and according to theory

Desktop PCs and Notebooks. These are quite profitable for Dell as they still maintain a high share in the market (Dell, 2019). They bring forth good margins of profits and do away with excess cash with no need for significant investment. Thus, Dell should allocate minimum investment to its Desktop PCs and Notebooks but still maintain to attain relevant returns.

Peripherals and Software. Dell’s peripherals and software have become stars, after growing their products in the market. Therefore have the potential of continually raking in more profits for Dell. Thus, to maintain market leadership, it is essential that Dell invests in its stars, ensuring future profits as the market expands.

Enterprise Solutions and Services. Dell’s smartphone has only had a minimal market share. This product has not been that profitable; thus, divestment will be the best strategy for business strategy. However, if it starts gaining profits, only little investment should be directed towards it.

Question 5

Dell’s Future Strategies

A Review of the PC markets in 2018-2019. Over the third quarter of 2019, the PC market grew by three percent to seventy million four hundred thousand units, according to IDC. Gartner, on the other hand, said the market grew by slightly over one percent by sixty-eight million one hundred thousand units. The difference between these two tallies is that Gartner does not include Chromebooks, OS devices, and tablets like iPads, but IDC does.

In the cloud infrastructure as service has proven to be dominated by three market leaders; Amazon Web Services, Microsoft Azure, and Google Cloud. AWS’s maintenance at the helm is no surprise as the parent company Amazon is already a disrupter in industries such as grocery and retail. Microsoft is an alternative because of its vital partnership with companies such as Oracle. IBM and Alibaba Cloud trailed as the niche in the market. According to Garner, AWS had a market share of over forty-seven percent, which was three times that of Microsoft, which was just over fifteen percent. While the three AWS, Microsoft, and Google Cloud remain the market leaders in the United States, Alibaba is akin to Amazon in China with a market share capacity of forty-two percent in cloud services provision.

Recommendation of Strategies that would add value to Dell

Diversification. Dell should continue with the diversification program of its products. This might prove to be of interest to both of its existing and potential customers. For over 30 years, Dell has focused on perfecting front-line support and supply chain logistics in PC manufacturing. In the post PC world, diversification is necessary to remain relevant within the industry. Dell can continue its acquisition strategies if it needs to be.

Market Penetration. Market penetration involves increasing one share of the market. It involves developing the existing business strategies for a business. It will also increase the company’s supplier and buyer abilities. Dell first needs to ensure that a market exists for its products. For a particular group to qualify as a potential market, they must demonstrate the want and need for the product. A specific target market should also be able to purchase the products comfortably. Through its experience, it can ensure there are no product quality issues, as they venture into new emerging markets, such as China and India.

Conclusion

Dell’s acquisitions of new companies may have proved challenging, as it was difficult to integrate the processes of the acquired company with Dell’s. The new acquisitions saw the transition of Dell from only dealing with PCs and into Enterprise Services and Solution, which meant that they ventured in areas such as cloud back up and security. The acquisition has proven successful for Dell, as services provided from the new acquisitions account for half of its revenue. To remain profitable in a rapidly changing environment, Dell will have to employ several growth strategies for a sustainable future as a technology company; these include diversification and market penetration.

References

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Haspeslagh, C.P. and Jemison, J., 1991. Managing Acquisitions-Creating Value Through Corporate Renewal. New York: The Free Press.

Hill C.W.L., Cronk, T. and Wickramasekera, R., 2011. Global Business Today: Asia-Pacific Edition, ‘Restoring Dell’s Competitive Advantage. McGraw-Hill, Sydney.

Knott, P.J., 2015. Does VRIO help managers evaluate a firm’s resources?. Management Decision, 53(8), pp.1806-1822.

Lev-Ram, M. (2016, December 27). The Gamblers behind Tech’s Biggest Deal Ever. Fortune. [Online] Available at: http://fortune.com/dell-emc-merger-tech-biggest-deal/ [Accessed 16 Dec. 2019].

Lovekar, V., 2018. Neutrally Weighing the Advantages and Disadvantages of Globalization. [Online] Available from: https://opinionfront.com/advantages-disadvantages-of-globalization [Accessed 16 Dec. 2019].

Machková, H. and Collin, P.M., 2015. Market Entry Strategies of Passenger Carmakers-The

Case Study of the Czech Republic. [Online] Available from: https://cebr.vse.cz/pdfs/cbr/2015/03/04.pdf [Accessed 16 Dec. 2019].

PSA Group, 2019. Groupe PSA to launch the Peugeot brand into the U.S. and Canada. [Online] Available from: https://www.prnewswire.com/news-releases/groupe-psa-to-launch-peugeot-brand-into-usand-canada-300801587.html [Accessed 16 Dec 2019]

Reisinger, D., 2011. 10 Things Dell Doesn’t Get About the Mobile Market. Chanel Insider. [Online] Available at: http://www.channelinsider.com/c/a/Dell/What-Dell-Doesnt-Get-About-the-Mobile-Market-10-Things-245012 [Accessed 16 Dec. 2019].

Sick, N., Golembiewski, B., Preschitschek, N. and Leker, J., 2015. Market convergence in a dynamic mobility-An empirical analysis of cross-industry collaborations. In the ISPIM Innovation Symposium. [Online] Available from: https://pdfs.semanticscholar.org/f1c7/18cf665bae89419a5e23fd18c3d3fe112fa1.pdf [Accessed 16 Dec. 2019].

STRATEGIC MANAGEMENT AND LEADERSHIP

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