Dell Computer Corporation and Virtual Integration - Case Study Example

INTRODUCTION Make a profit of from 100 persons each than earn $100 from a single person. This ment effectively justifiesthe requirement of a blend in technology and information which overshadows the conventional periphery among consumers and suppliers. The above quoted narration baffled the brains of the founder and CEO of Dell, Inc., Michael Dell. His eloquence has ascended a new genre of business for he detoured the trader avenues which witnessed the enterprise of personal computers. The equation was known as 'direct business model' which, eventually, proved to be expedient to Dell Computer Corporation. The organization is efficaciously utilizing the formula so that it ends the value chain between the manufacturers, suppliers and users. This 'Virtual Integration' has proved to be a miniature to the information era because it effectively allows reconciliation beyond company limitations to generate exceptional results for its dealers. It is not only a strategical approach but an exigency. Day-to-day competition has marked the commencement of extremely convoluted products in the market. This results in cost-pressures and inappropriate linkage between dealers. Virtual integration, on this context is a congenial approach to the business planet. It gives rise to another bureaucratic name- Vertical integration, which is contrary to the virtual one. Vertical integration is inefficient because it focuses on sharing ownership distinctions and no worthy knowledge. Virtual integration holds huge benefits for its marketers. It gives rise to new technologies and fragmentation has innovated the industry likewise. The traditional barriers which once prevailed among industries a few years back could dwindle to a large extent. It resulted in the advent of new small-scale firms to condescend themselves to the segmented parts. MARKETING ISSUE ANALYSIS BY APPLICATION OF ACADEMIC THEORY Undoubtedly, Dell is responsible for the innovation of a new business model for the computer assiduity. They have always focused on three major aspects, the first one being an easy business strategy, secondly, to minimize the business expenses and lastly, focus on improvising their inter-relationship with their customers. Researches claim that during the past years of the commencement of the computer era, the entire sum of gadgets viz. chips and hard-disks, etc. had to be manufactured by a single enterprise. It had to expertise in all aspects of computers which eventually, did not apprise the customer. Time witnessed the augmentation of many new industries and firms which specialized in different elements. It ultimately provided opportunities too many specialized organizations in order to manufacture components. However, Dell excogitated about it in an assorted way. It believed in providing services and solutions to its customers disregarding the need for manufacturing the essential components themselves. This context deciphers the requirement for establishing a strong connection between the supplier and its user. Companies like HP and Compaq accredited the computer constituent assemblage by manufacturing almost everything, which was often considered to be an engineering-medial approach. But they neglected the fact that it, actually, didn't fetch lucrative outcomes, the reason being the least concern about valuation to the customers. For example, even if a company puts chips on motherboards, it actually isn't making a desirable profit out of it. That is because it works on the principle of sales and activating the job to be fulfilled with least consideration to valuate its users. Virtual integration is a trend needed to be followed and brought into consideration for it helps earning higher returns and influence users. Internet has always been a significant aspect of information technology. Today, most of the companies, like Dell Inc. focus on providing the customers with the identical information they earlier used to escort for their databases. This propelled their customers and suppliers, actually, within their business arena. This strategy played a vital role in linking organizations through information. This, further, reduced and limited the traditional hedges between organizations and allowed them to share information and correct themselves in aspects they were inaccurate in. Also, it provided industries with great velocity for product sales and services. It evolved as an ultimate source of distribution strategy delineated by custom-made production. Orders are received through telephonic systems or the internal representatives. This, therefore, resulted in earning good amount of revenues for each unit. Dell, Inc. is tremendously answerable to all its customers for it creates value to its customers, the reason being least indulgence of outsourcing. To their construe, one should be able to reconcile its activities to evaluate its customers. All in all, they refer to a value-chain management which focuses on obtaining input, aggrandizing the required valuation to it and then making it available to its customers. To realize this, they appertain with their suppliers in such a way that they are an integral constituent to the organization. This partner-ship results in a long-lasting obligation which, therefore, is an asset to the company. The suppliers work in comparatively more competent manner beholding the fact of more demand than supply. However, they believe in having the fewest suppliers for their products. It is appreciable in their context because they work on a daily basis rather than providing with products on a weekly or monthly basis. Its like, 'tomorrow morning we need 8,562, and deliver them to door number seven by 7 A.M. (Magretta, 1998) Its not a challenging task to share information and planning's with a supplier, transforming him into an endogenous entity, because as per the credence of Dell, it expedites the value shared between the supplier and the user, thereby, embellishing the economic operations technologically. The key focus lies on the rapidness of stockpile. If you're successful in inflaming users to think about the quick evaluation, you can surely get into the market comparatively quicker. They can effortlessly approach business empires like Microsoft, Oracle and Goldman Sachs because it would take less time for them to reach their users. The purchase is big because they get hold of consumers quickly. Without indulging into physical assets, it is peculiar to know that this empire has earned huge profits in a very less span. It has all become possible because they don't believe in setting new factories and industries if something goes wrong or if any inventory loses hold. It would take a huge amount of energy and time for them to assist. Instead, they would easily be able to fetch good amount of inventory from the other recruiters. The suppliers avail good benefits out of this new business model of virtual integration. This is all happened because the sources prevailing between demand and supply have totally diminished. Variability due to more intervening channels results in comparatively more risk and less demand with eventually, high prices. Also, Dell computers benefit the demand with the help of merging the customers they provide service to. It's quite interesting to know that they don't possess a customer having more than 1% to 2% of assets (Magretta, 1998). They provide products to consumers on a weekly basis. This is more of a strategical approach as they consider those companies which provide them with better revenues or compensations, higher gross margins and maximum profits. It is noticeable that Dell computers provide maximum sales to institutions and then to large-size customer panels. They believe in sectioning profits by purchasing large numbers of products and then standardize them. In 1994, when Dell was just a $3.5 billion company, all it comprised of was the two types of customers-large scale and small scale. By 1996, Dell fragmented into large companies, midsize companies and government as well as education. By 1997, Dell was a $12 billion empire. As time passed by, market was segmented into minute segments. It helps in locating relative opportunities and issues. Fragmentation provides an idea about focusing on different aspects in a deep manner. It identifies the customers' needs and allows relative access to it. Also, it helps in adjudging their needs and when do they require help or assistance. After all, it's a process of keeping the rates low. EVALUATION OF COMPANY'S MARKETING MODELS AGAINST OTHER CONTEMPORARY BUSINESS SECTORS This strategy has resulted in turning Dell Computers' inventory 30 times every year. According to them, it could never be possible unless they had appreciable information and details about their customers and their needs and requirements. Also, they not only keep it limited to sales and services, but they actually know how to manage the flow of information from the customer to the suppliers. Precisely, they are fully aware of how to predetermine demand. For this, they train their managers to have a word with the customer about the technical know-how and their specific needs. By doing this, the managers get to know the aspect which the user is interested in. the customers are followed as per the services they avail. For example, small customers are assisted by telephonic services by which they are governed regarding the available specific contours. Hence, they uphold a perfect balance between demand and supply. This is an effective part of virtual integration with the customers. It can often be regarded as a close customer interrelationship. Regular assistance, routine check-ups, software charging broadens the valuation provided to the customers. According to Dell, Eastman Chemical had a unique blend of their software. Suppose, when they sell a Personal Computer to a client, an assistant would download all the software himself which would usually take an hour costing it around $200-$300 (Magretta, 1998). Dell, on the other hand, believed in creating a substantial network of service with comparatively high speed. They would themselves upload the Eastman Chemical software into their servers. This operation is comparatively less hectic and far handier than seeking assistance from an engineer. It, therefore, saves enough money and time of the customers and valuates product and services. They prove to be the customer's IT professionals than being mere salespersons. This model is being effectively utilized across the world to accentuate the economy sales and to walk hand-in-hand with the market. Internet is the sole responsible factor to commingle these companies into 'virtually integrated ones'. Internet, today, doesn't act as an add-on to the business but is an intact part of the business. It is responsible, to some extent, in reducing the boundary-to-boundary discrimination between companies to achieve virtual integration. ANALYTICAL THINKING The methods of virtual integration are followed by many entrepreneurs and manufacturers. After the huge and incomparable success of Dell computers, they've started believing that it is all about the product and its customer. It is now possible to outsource everything to the suppliers, be it product derivation or innovation in the system. Basically, the replacement of physical treasures with information tools has benefited everyone from suppliers to managers and eventually, to the customers. It has, therefore, resulted in outsourcing relationships instead of non-core activities with inefficient partnerships. They should learn to locate the establishment of long-lasting relationships with the customers so that it diminishes the void between the suppliers, the manufacturer and the customer. Determination of company's valuation and keeping an eye on what one is focusing on can be of great help in establishing a successful empire. Then there comes the selection of the most deserving creed of candidates to ensconce partnership with. It is not at all a denial that they have never adjudged the needs and assistance to their customers. They agree that they have provided door-to-door services, but today they have huge accounts capable enough to keep an eye on their users. Moreover, they have knowledge of their customers to an extent which the users do not know themselves. They keep a track of every purchase and assist them accordingly. All in all, technology has allowed them to harmonize with their customers in a better way, but thereafter, they do not deny the fact that one-to-one assistance is required as well. Their customers can easily access many online tools with the help of the support system Dell has provided to them. They have their websites and all it is required for them is to enter some information regarding their product and they can easily approach help from there. The sites are often referred to as Premier Pages which directly assist them regarding the products they purchase. All the technical information regarding all contours is specified there. Further, Dell Computers has easy access to those customers who look forward to upload their own custom paraphrases. They've maintained efficient relationship with their customers by introducing a number of symposiums so that they are in contact with their users on a regular fundament. They conduct full-fledged regional meetings across the world depending upon the information to be shared and missions to be accomplished. The discussions mainly consist of the future plans over the upcoming years, how to solve problems etc. they deal with the customers in the ratio one-is-to-one which, thereby, creates the same number of customers as the technicians. The association is also linked up to deliberations which help them in assisting customers about the latest technological happenings thereby adjudging their own prognosis. This is what makes these meetings one of their kinds, as agreed by the other companies and its technologists as well. The meetings are marvelous events because they let the customers to converse to the technologists individually. This is easily manageable from the customers' side too, the reason being they are fully aware of the fact that the technicians are there to help and assist them and they are free to speak. Every customer's track is available; hence, it is easy for the technologists to assist them accordingly. Too often, it just so happens that customers and technicians vary in thinking. Dell computers have always believed that it is better if it is quick. But it is not at all mandatory for the customers to think the same way. For example, they, sometimes, disregard the fact of speed just for some amount of stability. Hence, it is very important to be in proper communication with the customers so that they are being benefited in a productive manner. Virtually concatenated corporations are different from organizations trapped in traditional limitations. Dell explains it in a very beautiful and stupendous manner. Virtual integration entirely concentrates on its customers' needs and reaching them in a quick and speedy manner. For models, which believe in change and working whimsically, virtual integration can prove to be an asset. It saves time and resources and meets the customers' needs easily by eradicating every channel between the supplier and user. Dell computers have rated their work at $2 million a day which reached up to $3 million in the next few years. The advent of Christmas season has seen the rate reaching up to $6 million a day (Magretta, 1998). Needs and requirements are transforming as time passes by. Dell has taken proper care of this transformation for he has shrunk all the span and wherewithal. However, in a world of change and transformation, management employees with skills of creating new opportunities in a rapid manner are quite tricky and challenging to seek. Anyways, the mere motive of Dell computers is to be the change they want to see in the world. They are associated with their customers in a homely gesture. Its quite appreciable a fact, that they quote their business not as suppliers or marketers but customers themselves. The value chain prevailing there is all about effectuation of the planning's. CONCLUSION Michael Dell's concept of business, which is selling computers directly to his customers, is appreciable. With such a superb expressway, customers' needs are in easy reach of the marketers. They are able to provide the most productive solutions and a vigorous assistance to their users. Today, customers are offered with the best inter-personal relation-ships as they are being provided with an exclusive sphere of services and sales. The entire vision is the ability to create logical and ratiocinative measures so that the customers are able to avail the maximum benefits of it. Dell's direct model is all about its customers. Users can easily gain advantages because of its superb services, rich scale of quality products, tremendous support systems and easy buying and usage. This has proved to be the most efficacious way to reach the customer for it does not involve any intervening entities and does not affect the cost and pricing of a product. The marketers and business men rather task it as a customer themselves, adjudging the needs and requirements from their view-point. It saves the customers to transform their needs by the intermediaries. Significant improvements, with easy and quick decision-making are resulted to the capabilities of this new model of working. Cheap quality ruins the system; Dell Inc. is always updated regarding all information to fix the problems so it is not repeated ever again. If so happens, they feed their suppliers back so that they diagnose it and work accordingly. They keep it easy and handy for the customers so that they don't get to face the complexities of the technology. They read their customers' minds effectively so that they are able to provide them with best services and advisory along with latest technology. Basically, they work on the principle of low cost and pricings with meritorious value. References Magretta, John (1998). The Power of Virtual Integration: An Interview with Dell Computer's Michael Dell. Harvard Business Review: Harvard College. Read More