How Dell Uses Effective Strategy to Gain Competitive Advantage - Dissertation Example

How Dell Uses Effective Strategy to Gain Competitive Advantage Lecturer Outline Introduction 2. Research question and hypothesis 3. Literature review 4. Methodology 5. Discussion 6. Conclusion 7. Recommendations for future research 8. Bibliography Introduction Dell Computer Corporation is the largest direct-sale computer vendor in the world in terms of selling desktop computers, notebook computers and a variety of computer peripherals and software. The attainment that has been accomplished by Dell has not been easy, but it has to be noted for its effort in the market. The industry started back then in 1984 when Michael Dell started selling personal computers out of his dormitory room as a freshman at Texas University in Austin. The time frame spent in the market is an indication that the firm has gained experience over the years, and, hence, the reason for its presence in the market. Fundamentally, Dell Corporation has attained their positive results in the market due to a great strategy, superb execution and a well-modified leadership approach (Ireland et al., 2011). This document illustrates to the reader how Dell Corporation effective strategy has been put into practice to gain competitive advantage. Significantly, the paper entails on how Dell Corporation has utilized the direct sales strategy to gain their competitive advantage in the market. Research question and hypothesis 1. How does Dell Corporation use an effective strategy to gain competitive advantage in the market? Hypothesis 1. Dell uses the strategy of direct sales to reach out to their clients in a manner that satisfies the needs of clients. 2. Dell has also involved its employees in the daily tasks as a way of making certain that business is done in the right perspective. 3. Dell experience in the market has contributed to their advantage in the market, hence, the direct sales strategy acts as a booster. Literature review First and foremost, it has to be noted that Dell is one of the primary contributors of computers in the global market. Dell being among the primary sellers of computers is what has led to the question of what type of strategy is often utilized. Learning about the type of strategy being initiated by Dell is significant as it enables the reader understand what it takes to be the best in the market. Therefore, the strategy that is being utilized by Dell Corporation is the direct sales approach (Frynas et al., 2015, p. 12-14). Dell Corporation direct sales approach is one of the most successful strategic innovations of the past that has generated positive results for the company. the firm was able to come up with a model that undercuts its competitors on price, forge closer links with its clients and offer shareholders a return several times as compared to the market price. Significantly, Dell’s direct sales model was initially singularly suited with the intention of maximizing the cash conversion cycle. The firm was able to carry little inventory in the process because it bought components on a just-in-time basis. The significance of the approach is customers often paid Dell Corporation more quickly than it paid suppliers, and, as a result, cash flow at Dell was positive. Furthermore, little inventory for Dell led to the reduction in component costs that could easily be passed rapidly to clients (Dell et al., 2010, p. 42-445). The outcome of the process, therefore, led the firm to improve its competitive position in the market. Furthermore, the direct sales model made Dell an industry and shareholder’s sweetheart, a high-tech pioneer with seemingly limitless growth. Component manufacturer components Dell Computer Corp order Final customer Product Distributor The above chart shows how Dell Corporation incorporates the direct sales strategy in order to meet their set objectives in the market. From the drawing, it is seems to be an easy strategy that can be adapted by a firm that desires to prosper in the same way Dell has done over the years. Dell Michael shows that initially they did not have all the necessary pieces that could be put into consideration so as to fit in every value chain. Thus, the above chart entails that they leveraged the investments that others had made by focusing on delivering solutions and systems to the clients. The firm has, therefore, been using the direct sales strategy because they believe that it is the direct approach, in terms of reaching to the clients effectively (Hit et al., 2008, p. 34-37). The model focuses on speed of execution and minimum inventory. Significantly, it can be perceived that the organization bypassed the dealer channel by selling directly to clients over the phone. The outcome of using the strategy is it got rid of resellers’ markup, costs and risks of carrying large finished inventories. Fundamentally, incorporation of the direct sales model enabled Dell to reduce its channel costs and customers got exactly what they asked from the Company (Dell et al., 2010). Latest technology was introduced faster at the firm than through the slow-moving indirect channels that were practiced by other competitors of Dell. Dell has done a good aspect in incorporating the direct sales strategy as it has made business easy for them in terms of directly connecting them to clients (Ignatiuk, 2009, p. 56-59). The outcome of the direct strategy is it has benefited the firm both financially and emotionally from a market point of perception. Methodology So as to effectively enumerate how Dell uses its effective strategy to gain competitive advantage, a study was undertaken at Dell Corporation. A questionnaire was used through a face-to-face interview approach. The study included ten employees located in Texas, where each person was asked questions from the questionnaire. Furthermore, an inclusion of articles and personal observation approach was also put into consideration. The outcome of the study is as follow: Interview questions and responses 1. Do you support the Dell’s direct sales strategy, why or why not? Yes I support the direct sale strategy that is being utilized by Dell Corporation as it is contributing towards the firm’s set objective. The primary reason for supporting the strategy is it includes the cash conversion cycle designed to offer inventory, payables, receivables and cash flow from operations. 2. Has the strategy of direct sale benefited Dell Corporation over the years? The strategy of direct sales has benefited Dell Corporation over the years as it bases exclusively on growth, management and structure of the organization in terms of performance. Furthermore, the benefits of the direct sales strategy are noted in the way Dell places an emphasis on support and service operations. 3. Do you like using the direct sales model as an employee of Dell Corporation? As an employee of Dell Corporation, I like using the direct sales strategy that has been used over the years for several reasons. The first rationale is the strategy is easy to comprehend and because it has enabled Dell to be recognized in the Forbes magazine. Additionally, I like using the strategy because the firm’s ability to nurture its customer-based relationship is the reason for Dell’s success. 4. Would you trade in with another strategy as opposed to what Dell is utilizing? No, I would not trade for another strategy as a way of replacing direct sales strategy. The reason is because I have been using the strategy for several years. The strategy is easy to grasp and it has created positive results for Dell, thus, changing it would not be an option. Furthermore, it can be looked at as one of the best strategies in the market as it connects client and the organization from a personal point of view. 5. What makes the direct sales strategy at Dell significant and is Dell heading towards a positive perspective? The direct sales strategy is significant because it is cost-efficient approach in terms of build-to-order manufacturing and mass customization. Furthermore, the strategy operates under the model of just-in-time management approach, hence, able to deliver positive results for the industry as a whole. Fundamentally, the manner in which Dell is operating its service in the market, it is likely to attain the number one spot in the area of selling computers once again. Discussion From the methodology undertaken, ten of the ten interviewed employees said that they support Dell’s approach of incorporating the direct sale strategy. The implication of the answer entails that the strategy has benefited the firm, and hence, the reason for supporting the strategy. One of the primary reasons that the interviewed gave was that inclusion of the cash conversion cycle that provides inventory, payables, receivables and cash flow from operations was an addition to the strategy. Significantly, the employees at Dell support the direct sale strategy because it has enabled the firm reach where it is today. On the issue of whether the strategy of direct sales has benefited Dell or not, eight out of ten said yes. The fact the eight members were able to support their debate on the basis that the strategy relates to growth, administration and arrangement of the organization in terms of performance. Fundamentally, the direct sales strategy is indeed beneficial as it has contributed to where Dell is today. The other two were supportive of the fact that the strategy had benefited the firm, but did not have facts to prove their points. Thus, it shows that despite the fact that some employees might not understand what the direct sale strategy entails, they belief that it has benefited Dell Corporation. Seven out of ten participants said that they like utilizing the direct sales strategy while working for Dell Corporation. The seven participants belief that it is the direct sales strategy that has enabled Dell to be where it is, and, hence, the reason they like using the model. Furthermore, the seven individuals also gave the rationale that having being place in the Forbes magazine shows that the strategy is significant as it contributed to the success of the Company. The three said that they don’t using the strategy as it often connects them with wrong people. The thought was based on the fact that they sale computers to different types of people, and, times they might link up with conmen as well. When asked on whether the ten would trade in with another strategy, nine of them categorically said no. The Nine participants perceived that the approach of using another strategy in the place of the direct strategy would be like a committing suicide. Additionally, it would be expensive in terms of learning and training employees to adapt to the new strategy. One of the interviewed members said that a new strategy would be appropriate as the direct sale strategy was outdated. From the answer offered by the individual, it seemed like he was not aware of what he was talking about. Lastly, there was the query on whether direct sale strategy was significant and what makes it appropriate in the market. Six of the participants said that the strategy is significant with reasons and the remaining four were against the model. The six individuals said that the strategy of direct sale is beneficial as it is cost-efficient in terms of build-to-order manufacturing and mass customization. Additionally, operating with the just-in-time management approach enables the organization to deliver positive results for the industry. Moreover, the six supporters enumerated that the strategy is leading Dell towards a positive perspective as it offers clients what they desire. The other four were against the strategy and perceived that the best approach would be to include a new strategy. Fundamentally, it is significant for Dell to teach and elaborate to its employees on the benefits the strategy has created so as to be on the same level. Conclusion To sum up the document, it enumerates in detail on how Dell Corporation has taken the liberty to effectively put into consideration a strategy that has benefited their services in the market. The strategy that has been utilized by Dell Corporation is the direct sales concept. It is an essential strategy because it has contributed towards a positive outcome for the firm in the industry. The reason as to why the strategy contributes to the effectiveness of the firm in the market is because it undercuts its competitors on price, forge closer links with its clients and offer shareholders. The approach that has been taken by Dell is an indication that the Company uses an effective strategy to attain its competitive advantage. The importance of the direct sales concept is it bypasses the dealer channel by selling directly to customers over the phone. Furthermore, the strategy is it got rid of resellers’ markup, costs and risks of carrying large finished inventories. Therefore, the manner in which the strategy is being used by Dell is what has contributed to its strategy to be regarded as an effective concept that gains a competitive advantage. The strategy creates paths for the firm, and, as a result, it enables the firm to attain its objectives in the market. Additionally, directly linking the firm and their clients has also contributed towards a positive outcome for the Company. The benefits are seen in the way the strategy brings about understanding and unity between clients and the firm. Dell uses the strategy in a cost-efficient way via a build-to-order manufacturing and mass customization approach. The strategy operates under the model of just-in-time management approach, hence, able to offer positive results for the industry. Significantly, the policy of direct sale is easy to grasp because it requires minimal training. It is true as training is often initiated after every six months, which makes the work of the organization doable. Furthermore, involving each employee to participate in the management of the firm helps as it shows the market that Dell is in the market to bring out change. Thus, the strategy is usually utilized based on a professional point of view and experience earned over the years. Recommendations for future research The paper shows that everything has been put into consideration in terms of ensuring that Dell direct sale strategy is utilized in the right way so as to attain their set objectives. To ensure that the strategy continues to create results that are beneficial for the firm, introduction of the Democratic leadership style would be significant. The Democratic leadership approach would assist the firm to reach out to its set objective because it sensitizes on the importance of working as a team. The Democratic approach is significant as it encourages employees to work as a team, where each party contributes their area of expertise (Verbeke, 2009, p. 67-73). The approach would significantly bring both employees and clients to a closer relationship as sharing information would be considered. It is true as the process would entail driving the direct sales in the right way in order to effectively gain a competitive advantage in the market. Communication is another concept that needs to be emphasized so as to ensure that the direct sale strategy creates beneficial results for Dell Corporation. Communication is important in this case because it would enable both employees and clients to understand each other on what their role entails. Furthermore, communication would generate more unity as the firm would be able to gain a more professionalized approach of managing their direct sale strategy (Spulber, 2007, p. 23-28). Fundamentally, incorporating the proposed approaches will not only benefit the organization in terms of profit share, but it will also help the direct sale strategy to accommodate the services of Dell in the right way. Bibliography Dell, M., & Fredman, C. 2010. Direct From Dell: Strategies that Revolutionized an Industry, HarperCollins. Frynas, J., & Mellahi, K.. 2015. Global Strategic Management, Oxford University Press. Hit, M., Ireland., R., & Hoskisson, R. 2008. Strategic Management: Competitiveness and Globalization, Cases: Edition 8, Cengage Learning. Ignatiuk, A. 2009. Analysis of Dells Business Strategy, GRIN Verlag. Ireland, R., Hoskisson, R., & Hitt, M. 2011. Understanding Business Strategy Concepts Plus: Edition 3, Cengage Learning. Spulber, D. 2007. Global Competitive Strategy, Cambridge University Press. Verbeke, A. 2009. International Business Strategy: Rethinking the Foundations of Global Corporate Success, Cambridge University Press. Read More