No other technology company listens
to customers, collaborates with partners,
adds its own significant layer of innovation
and delivers relevant technology more
efficiently and effectively than Dell.
These words from Michael Dell point out more than anything else how the Dell Company managed to advance to the worldwide number one in the computer industry. From a little company founded by an undergraduate student at the University of Texas, Dell Inc., headquartered in Round Rock, Texas, has developed into a huge corporation with more than 55,200 employees today and an annual turnover of nearly $50 billion.
This paper focus mainly to analyze how the Dell company performs in the competitive environment of the computer industry, which factors are essential for success and how Dell successfully takes advantage of its business structure.
Dell's competitive/business strategy
Dell's business strategy is a successful cost leadership strategy. The company's formula for success has been based upon its unique customization, delivery, and cost proposition. In reaction to faltering performance and the need to pursue new growth opportunities, a dual-strategic approach is required to confront rapidly changing market conditions. First, Dell must integrate its cost leadership skills with differentiated product features and related services to create value for its customers and achieve the benefits of an integrated cost leadership/differentiation strategy. Additionally, becoming a diversified IT company opens up opportunities in related businesses, where similar products, buying processes, target customers, or other operationally related activities can produce synergies. This business-level and corporate-level strategy combination offers Dell a method of dealing with the company's competitive realities. Both strategies are discussed below.
a) Integrated cost leadership/differentiation strategy:
The objective of using this strategy is to efficiently produce products with attributes that boost product quality or performance. Efficient production is the source of maintaining low costs, while differentiation is the source of unique value. Successful use of an integrated cost leadership/differentiation strategy has the added benefit of building skills that can help Dell adapt more quickly to new technologies and rapid changes in the external environment. Simultaneously concentrating on developing two sources of competitive advantage (cost and differentiation) increases the number of primary and support activities in which the company must become competent, which contributes to greater flexibility. Flexible manufacturing systems, information networks, and total quality management systems can also yield a more flexible organization.
b) Corporate-Level strategy:
A corporate-level strategy specifies actions a firm takes to gain a competitive advantage by selecting and managing a group of different businesses competing in different product markets. Corporate-level strategies help companies select new strategic positions to increase the firm’s value. They are also a means to grow revenues and profits. This second strategy is a competitive response to first movers' competitive actions and is typified by imitation. Taking the time to monitor customer reaction to product innovations and avoiding the mistakes and costs of new product introductions are compatible with Dell's successful business model. The approach also provides Dell with time to develop more efficient processes and technologies or create additional value for consumers.
Overall, the outcomes of first mover competitive actions can provide an effective blueprint for Dell's late mover approach, especially as the consumers get comfortable with making investments in new technologies and begin to equate dependable quality and good value with the Dell brand.
What was value chain strategy that Dell pursued?
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