Strategic Situation Analysis for Developing Critical Thinking Skills - Matching Dell - Essay Example

 Case Study: Matching Dell Strategic situation analysis is a new and innovative approach towards developing critical thinking skills and an analytical approach towards problem solving and assessment. It requires a person to cultivate the ability to ask critical questions while dealing with any case study in order to obtain the required answers and ideas. These ideas and answers are then utilized to obtain personal findings and reach conclusions so that future strategies could be formulated and recommendations made. This approach towards analyzing a situation is based on productive and critical mind-set, and involves several steps in its execution. One of the most important steps in SSAS is to investigate the underlying strategy of a situation and find out how that strategy influences the outcomes, productivity and results of the study at hand. This constitutes the third step in the SSAS approach. The pertinent case study is dealing with the functioning of the Dell computer company, and its comparison with its rival companies. This involves examining the management and strategies of the Dell corporation, and matching it with its rival corporations. Towards the mid ‘90s, the advent of personalized computers had taken over the market, and more and more customers were finding new reasons to obtain their own computers. This meant that computers were no longer limited to big corporations and businesses, but were becoming a household commodity. This gave companies like IBM and Apple, which were previously manufacturing mainframe machines, to produce PCs and tap the huge profits in this sector. Initially, IBM, the leading company in computer hardware, took over the market by manufacturing PCs and loading them with software developed mainly by Microsoft. Their contract with Microsoft proved fruitful and they were soon the leaders in the market. Other companies like Compaq, HP (Hewlett-Packard) and Gateway followed suit. They all focused on developing the hardware and contracting with software companies like Microsoft or Apple to provide them with the operational programs, and their main customers were big and medium sized corporate organizations. Dell was another such company dealing with the manufacturing of PCs. However, their method of working was radically different from the other companies, and it was so successful that it gave them a huge edge of advantage that soon earned them the leading position in the market. To understand how and why they were able to compete so successfully with the already existent companies, and why the other companies soon started imitating Dell in their business strategies, we have to study both the strategies separately and identify the issues and pros and cons related to them. IBM, Compaq and HP, all of them being already players in the market, had almost a similar line of action to each other, and it was well in accordance with the normal trends prevalent in the market at that time. This set formula involved not only the manufacturing company and the suppliers for that company, but also third parties such as the retailers, the resellers and the distributors. Not only that, but also delivery agencies like UPS and Airborne Express who delivered the product to the customers when the customers made an order directly to the manufacturing company. The involvement of all these parties meant that there were more people to please, more people to pay and more red tapes to go through. Also, the time interval between the date of order and the date of delivery was very large, often spanning over a few months. Along with the time factor, the problem of inventory was a real menace, as these usually relied on their forecasting instead of the forecasting of the outer reps that dealt with the market. This meant that huge stocks would often pile up and hence, had to be stripped down so that they could be reassembled into newer models and updated specifications. This process was costly and introduced many problems in the hardware. Also, as the customers were mostly first-time buyers and as yet unaccustomed to operating those machines, the companies often had to spend huge amounts in recruiting personnel to take care of customer problem on-site. The dell company, on the other hand, introduced a revolutionizing system of operations that very quickly gave them an edge over the others. Their system was known as the “Direct Model”. Instead of manufacturing computers on a bulk scale, they introduced the concept of custom-designed machines whose orders and specifications were taken directly from the customers and that were delivered directly to the customers. This effaced the need for third-parties like retailers, resellers and distributors. Dell maintained a contract with USP and Airborne Express to carry out the job of delivery right on the door steps of the customers. This solved many of the problems that were faced by the other companies. As PCs were only manufactured after an order was received, there was no need for inventory, and hence, no loss of money on its disposable. The time factor was reduced to a day or two from the date the order was received to the date of its delivery. There was a marked decrease in their prices due to no third-party involvement, and an increase in their sales. Custom-designed PCs became extremely famous, and to help customers get acquainted with their machines, Dell had 50,000 pages on their website that dealt with customer problems. Buyers could place an order directly on the website, and could contact the representatives through a 24/7 hotline. Dell tried its hand at retailing, but did not find it economical. They also had to introduce efficient management that resulted in much improved sales. Other companies tried to copy the Dell working system, but were not as successful, due to many reasons. Most important one was that their customers could not place an order directly on the website but had to contact the resellers for that. Also, they introduced the custom-designed PCs, but still could not get rid of the inventory due to the retailers that had invested in the assembly operations and wanted their own profits. Dell was able to succeed because it introduced a new system of operation and changed the business environment, something that the other companies, with the formula system of working that had gone obsolete by then, could not. Dell’s triumph lied in a less cumbersome business strategy that aimed at cutting down on the losses and investment, and increasing the profits by incorporating innovative ideas and new technology. Reverences (June 6 1999). Matching Dell. Harvard Business School. Retrieved October 29 2007. from Business and Industry Database. Read More