The Competitive Advantage of Dell Company - Case Study Example

Case study: Dell Company. Through the case study it is clear that Dell Company has established itself all through its existence. Despite some of the challenges it has faced, it has also been able to achieve a competitive advantage at some point, through its uniqueness in terms of its operations, for instance, in shortening its supply chain, thus escaping the retailer’s margin. Nevertheless, the resource based view describes an organization as a bundle of resources that are combined hence making the organization different from the others, in terms of its product and services. According to Ismail W (2010, pp 397), the current firms are concentrating on the gaining more resources that yield to a competitive advantage. Competitive advantage can only be achieved when a firm has unique products or services that are different from its rival companies and cost leadership which entails producing the best products and services at affordable costs for the consumers, hence becoming a low cost producer in a market (Porter, 1998, pp 12). One of the unique practice of the dell company is the just in time assembly that involve assembling of the computer only when a customer orders for one, this is essential as it responds to the customer’s demand. The author further explains that the differentiation concept should always involve quality, for instance, dell has always made sure that its components are up to standard and also they offer their customers a choice of computer configuration, thus putting the customer’s interest first. In addition, dell was the first to develop a direct sales strategy which involved the use of telephone and internet, thus shortening its supply chain and its costs too. It is obvious that dell has in the past achieved a competitive advantage through the above strategies. However, a resource can only be strategically important if it is of value, the resource should also be rare so as not to be easily imitable by other rival firms. The resources should be unique so as to stand out, thus making it hard for other firms to possess them; these factors lead to a competitive advantage (EDSM, pp 2). Resource based view emphasizes on the capability of a company in achieving a competitive advantage, which is through its resources; in which these resources respond to opportunities and threats in the market, (Zhu, 2009 pp 52). Dell has also been able to utilize the internet and its benefit at a first rate as compared to its rival competitors, which is an advantage to the company as it is able to attract more customers through the internet and also market its products. The establishment of customer care services is also a wise strategy as their clients are subjected to after sale service in terms of assistance in running of the computers. Customers always prefer an organization that caters for their needs even after they have purchased products from them, and this attracts the clients more to an organization as they believe that they are offered with sufficient assistance and that the company is not only interested in money making, but also with the customer’ welfare. In addition, dell has also been able to apply the cost differentiation strategy by offering it customers with a variety of products at a favorable cost. Dell utilized its resources to outwit its competitors hence portraying the Michael porter’s five forces which clearly illustrates the nature of competition; threat of rival, threat of new entrants, threat of substitute products, the bargaining power of customers and that of suppliers, (Hill, 2009 pp42). 1 Threat of new competitors, emerges when these competitors result in the decrease of returns of the other existing firm, in this case dell was subjected over-witted by small emerging firms like Acer, which provided low costs of their products, thus affecting dell’s market share and returns. 2 the threat of substitute product or service, as a result of the many faults that took place in the dell’s product under the new management, customers were forced to opt for the similar rival products from Acer, who provided quality products at low prices. 3 Bargaining power of customers that force a company to lower costs or produce unique product or services. In this case, dell emerged as a profitable company as it took the customers needs seriously, for instance before 2004, it provided quality and unique product for its customers and provided the just in time strategy that enabled its clients to order their preferred product before it assembled it. 4 Bargaining power of suppliers occurs when the suppliers charge high prices for their resources if they are unique, however in the case of dell company, they benefited as a result of their stable relationship with their suppliers who agreed upon being paid only when after their components had been assembled to products and were sold to the customers. 5 the intensity of competitive rivalry is evident in the way dell made sure that it established strategies such as just- in-time, use of internet, producing quality products, offering low cots for quality products and offering customer care services for assistance purposes to its clients, (Hill, 2009 pp42). However, where there are roses there must be thorns, this is evident in the period when dell revenues started decreasing in 2005 and a lot of dissatisfaction from consumers generated as a result of faulty motherboards and the ineffective customer care services the company provided. Nevertheless there are certain factors that seem to point at the new management, as the reason behind the deteriorating situation in dell. However an organization’s aim is normally to attain certain goals and objectives, therefore organizational structure arises from the decisions made in order to guide employees in their respective duties and that’s when bureaucracy falls in. According to Max Weber’s theory of bureaucracy, fixed division of labor, hierarchy of offices, rules governing performance are some of the elements he named as solutions to the arising problems in administration. Nevertheless it is evident that under dell’s management, the company was stable unlike it turned out under Kevin Rollin management. Nevertheless a bureaucratic organization entails official conducting of business continuously, and with each official being assigned their own duties, (Lannello, pp12). Thus in dell’s incapability to deliver quality customer support, opposed bureaucracy, as the support staff should have complied with their responsibilities. Managers are supposed to be accountable for the use of resources; hence they are supposed to utilize these resources so as to make returns. When dell was the CEO, of Dell Company, he made sure that strategies were set so as to achieve a competitive advantage, by ensuring that their resources were of quality and met the consumer’s needs. However during Kevin’s management the company hit turmoil, showing that, his management focused more on money making other than quality which opposes the rule of bureaucracy. It is evident that Kevin’s management did not utilize the company’s resources wisely, thus leading to severe repercussions, of losses and even loss of a market share of the one booming company. This proves that the management aimed at maximizing their benefits and returns at the cost of their customers, who in return were not pleased with the results and hence opted for the rival products, leaving the company at the edge. Nevertheless, before the fall of dell, it faced a bureaucratic order in the ay it [performed its duties, mainly in its operation procedures, for instance the fact that it could only assemble a computer only after a customer had ordered for one, hence saving on inventory. Its systematic approach to standardization of components, hereby it gave the freedom to customers to make a choice of their own configuration. The concentration on company’s assist’s other that Michael dell’s personal assets, contributed greatly to the success of the company as personal goals were set aside and the management concentrate on the goals and objectives of the company. When an organization can not face the competition in the market, it results to strategies such as the lowering it costs, and however as evident in dell’s case, this strategy can compromise the quality of a company’s products hence leading to lack of faith in the products from customers. One of the major strategies that Acer used was to exploit the weakness of dell to emerge as been the main competitor. The Acer Company emerged with low costs and quality goods at the time dell was faced with the quality crisis, hence emerging an option for frustrated customers. This was a smooth move by Acer as it worked out as an advantage while dell was still struggling to gain back their client’s trust. However the worst mistake that dell did was to compromise quality for returns, regardless of how sour things got, dell should have maintained its high standard of product thus being able to secure their clients from their competing rivals. Nevertheless due to poor management dell, was not able to fully survive the crisis as it market share was compromised, despite stiff competition and other external factors, the management present at the time could be blamed for the results as a manager in this case is responsible for the company’s resources and have to work hard to maximize on returns as much as ensuring quality is not compromised. Reference List Encyclopaedic Dictionary of Strategic Management. (EDSM). 2007. Retrieved from: http://tamanpowell.com/Writing/assets/Resource%20Based%20View.pdf Hill, C. Jones, G. 2009. Strategic Management Theory: An Integrated Edition 9. Cengage Learning Publisher. Retrieved from: http://books.google.co.uk/books?id=CzIK9ELsyYwC&pg=PA42&dq=porter%27s+five+forces&hl=en&ei=UuIJTp2VLtPG8QOS0fGSAQ&sa=X&oi=book_result&ct=result&resnum=1&ved=0CDIQ6AEwAA#v=onepage&q=porter%27s%20five%20forces&f=false Ismail, W. Omar, R. 2010. The Relation of Strategic Human Resource; Practices with Firm Performance: Considering the Mediating Role of Resource Based View. The journal of Asia pacific. Studies. Retrieved from: http://web.ebscohost.com/ehost/pdfviewer/pdfviewer?vid=4&hid=14&sid=a78af28b-0960-4ea3-9425-f138c11b7a2e%40sessionmgr14 Lannello, K. 1992. Decisions without hierarchy: feminist interventions in organization theory and practice. Routledge Publisher. Retrieved from: http://books.google.co.uk/books?id=BEEpDHTpyfkC&pg=PA12&dq=Hierarchy+%26+Bureaucracy+theory+in+an+organisation&hl=en&ei=Q_EJTvT9HIKi8QPMz9mOAg&sa=X&oi=book_result&ct=result&resnum=1&ved=0CDAQ6AEwAA#v=onepage&q&f=false Porter, M. 1998. Competitive advantage: creating and sustaining superior performance: with a new introduction. Simon and Schuster Publisher. Retrieved from: http://books.google.com/books?id=H9ReAijCK8cC&printsec=frontcover&source=gbs_atb#v=onepage&q=product%20differentiation&f=false Weber, M. 2009. Max Weber’s theory of bureaucracy. Retrieved from: http://www.businessmate.org/Article.php?ArtikelId=30 Zhu, Y. 2009. Exploratory Study on Value of Information Systems to Electrical Construction Companies: Resource-Based View; journal of management in engineering. http://web.ebscohost.com/ehost/pdfviewer/pdfviewer?vid=4&hid=107&sid=a78af28b-0960-4ea3-9425-f138c11b7a2e%40sessionmgr14 Read More