Source: Mullins, L (2016), 11 Edition, FT Prentice Hall The growth of the home personal computer (PC) market is one of the most remarkable success

Source:  Mullins, L (2016), 11 Edition, FT Prentice Hall 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. 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; and 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.91 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 magazine in February 2005. Dell has also won accolades for ethical standards of corporate behaviour. The brand image which ed 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 technical 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 technical 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.97 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 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. 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 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. Ro Parra and Joe Marengi, Senior Vice Presidents of America. 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 technical 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. Critically analyse the organisational choices that Dell has made using two of the four main analytical models that are presented in this Module. Which approach do you think is more appropriate and why? What are the main organisational challenges which Dell faces in order to ‘conduct business the Dell Way?’ What are the implications for line managers and supervisors of creating a corporate culture based on the Dell Way? Dell is using technologically sophisticated methods to collect ‘soft’ data about its performance from both customers (Direct2Dell) and staff (Tell Dell). Evaluate these initiatives, and discuss the value of such information in relation to ‘hard’ data (such as sales figures, share price etc.) as a management tool. Critically review the concept of postmodernism as a means of understanding the nature of highly diverse (in terms of geography, technology, organisation, technical specialisation and culture) organisations such as Dell.

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