Case Study 7.5 Spm

Case Study : Dell Computer Corporation

Case 7-5: Dell Computer Corporation Discussion questions 1. What is Dell’s De ll’s strategy? Dell’s strategy was based on: • Market leadership as a result of a persistent focus on delivering the best possible customer  experience. Direct selling, from manufacturing to consumer, was a key component of its strategy. • Its reputation as one of the world’s most preferred computer systems companies and a  premier provider of products and services that customers worldwide need ed to build their  information-technology and internet infrastructure. What is basis on which Dell builds its competitive advantage? Dell redesigning PC industry value chain as a tool in developing competitive advantage based on: • Cost advantage: This was done in three three areas. Component purchase costs, inventory costs and selling and administrative costs. • Customer knowledge advantage: Dell understood consumer needs and efficiently met those needs by selling computer systems directly to customers. The direct business model eliminated retailers, who added unnecessary time and cost, and shipped directly from its factories to end customers. It took orders for hardware and software over the phone or via the internet. Dell designed an integrated supply chain linking Dell’s suppliers very closely to its assembly factories and order-intake system. Dell outsourced all components but performed assembly. • Technology advantage: dell custom-built its machines after receiving an order instead of  making machines for inventory in anticipation of orders. Dell introduced the latest relevant technology much more quickly than companies with slow moving inventories; turning Dell to  become the number-one retailer of PC, outselling IBM and Hewlett-Packard. • IBM and Hewlett-Packard • Dell moved into IT portfolio; it moved into servers, and storage, mobility products, and also challenged Printer leader HP.

2. How do Dell’s control system help execute the firm’s strategy? •

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Performance Measures: Dell’s scorecard included both financial measures (such as ROIC, component purchasing costs, selling and administration costs) and non-financial measures (component inventory stock outs, finished goods inventory, A/R day and A/P days). Localised decision making system: Dell used its structure as a flat organization as a competitive advantage and localized its decision-making. If an issue did not require a higher up’s attention, then decision would be made without involving him. This would not have been possible in companies bogged down by layers of bureaucracy. Business unit Performance: in 1993, Dell developed a set of metrics to judge businessunit performance. Expedited the assembly process: Dell recognized early the need for speed, or velocity, quickening the pace at pace at every step of business.