Management Challenges of Dell - Case Study Example

Management Case Study: Dell Introduction Dell registered twelve years of profit making since 1993. From the year 2005, the corporation faced several challenges that led to great decline in its sales as well as profits. The decline in sales was attributed to many factors that the corporation has long since tried to cope up with. The solutions derived aimed at revitalizing its image and improve on sales. Factors that led to decline in sales are internal and external issues. Internal issues in the corporation affect its management, quality of products, and services of the corporation and brands of dell available. External issues deal with stiff competition from PC manufacturers. These challenges have drawn attention to Dell’s management team to deliver viable solutions so that it remains in the market of PC manufacture. The management has developed several solutions to tackle its challenges. Challenges Internal issues faced by the corporation are as follows: I. Management: Resignation by Dell’s CEO, Michael Dell in July 2004 and taking over of the corporation by Kevin Rollins created a negative impact. Slowed growth was recorded. The company was characterized by poor customer services. Poor planning resulted from lack of estimates by analysts. A recall of four million laptops that had complications with Sony-made batteries among other cases made most customers lost confidence in the company’s products. II. Bad leadership: Accounting practices of the company failed to meet the targets of the firm. Financial analysts added more woes by cutting prices for products which were of poor quality. Public critics forced the company to relocate to India in 2001 although it returned to US in 2004. III. Consumer Behavior Consumer behavior has continuously changed. Despite the change, Dell stuck to its old practices of selling PCs. The Direct Model created a limited supply chain. Orders are taken from end-users online. However, consumer behavior has changed because they demand to see the products before purchasing, as well as being provided with recommendations from retailers in stores. Dell entered retail channels in 1990 but sales were slow and contributed to Dell’s financial losses in 1993. When Michael Dell returned as CEO, he decided that the company would sell the products directly to the end-customers. Dell did not widely supply their machines through retailers until the year 2007 when they introduced two laptop models in more than 3,000 Wal-Mart stores across the US (Ogg). External Issues As for external issues, the main one is the rise of viable competitors in the PC market. The emergence of viable competitors is one of the main external challenges faced by Dell. IBM sold its PC division to Lenovo, a China-based company. Later, Hewlett Packard merged with Compaq, which is known for their IBM clones. Acer, a rising Taiwan company bought the declining Gateway to enter the US market share. All of this was happening at the same time as Apple’s resurgence in the consumer PC market. These companies offered more advanced products and with more to offer consumers in the field of personal computers compared to Dell. In addition, a maturing PC market industry led the PC industry to reach its saturation point in the US, as well as in several parts of Europe and Japan in the early to mid 2000s. This left the company with little room to grow and caused stagnation to set in, especially in terms of introducing new models of PCs or other hardware to the market. The purpose of this paper is to identify and analyze the possible steps to revitalize the company. Possible solutions towards the challenges discussed aim at restoring Dell’s face in the market of PCs. Solutions 1. Strengthening the corporate governance within Dell Inc. Dell is known for its core values statement “The Soul of Dell” in which the employees share the company’s value. The CEO, Michael Dell made the company’s top management accessible to the lower-level employees in nurturing innovation ideas within the company and to maintain good leadership. The accessibility of management, from Dell on down has made junior employees believe their ideas are welcome and heard (Fisher). With this, the stakeholders would view Dell as a strong and potential company in good or bad times economically. 2. Even though Dell does not produce 100 percent of its products itself, it should monitor the quality of other parts being purchased from other suppliers to ensure the quality of its products. On top of that, the call center personnel should be well trained especially on the technical issues as well as promoting the products in order to maintain good customer relationship. By putting some allocations in research and development (R&D) within Dell, more ideas can be put into new lines of innovative products to be marketed. This would be an approach by Dell in its market segmentation. Furthermore, Dell has a competitive price for the same technology offered compared to its competitors. 3. Brand positioning Dell’s supply chain is not mentioned as a problem anymore since they have entered retail channels through Wal-Mart. Even though Wal-Mart sells other computer brands as well, Dell is believed to be able to gain their market share by having brand recognition. With this, it can penetrate the consumer market, which trusts a strong brand name and is sensitive to price. Dell is not the first to have a strategic alliance with the well-known Wal-Mart, and this trend continues with other computer brand names as well. 4. Company Strengths To sustain their market share in the industry, Dell could rely on its competitive advantages, which are: competitive prices, good relationship with the suppliers, product customization, well-structured costing and good customer service. Business Theories Every organization has their business theory. Theories relevant to the case study are related-business theories in inventory management and communication management such as the following: 1. Direct Model This model is a selling approach set in Dell since its foundation. In this model, sales are from the manufacturer directly to end-customers to eliminate the middleman and reduce stockpiling inventory at any point of time. It is also known as “build-to-order” model. 2. Just-in-time This inventory model is an inventory strategy employed to increase efficiency and reduce waste by receiving goods only as they are needed in the production process, thereby reducing inventory cost (Investopedia). Dell created a software application system, Symphony whereby Dell and suppliers monitor supplies need according to the orders placed to manage just-in-time inventory. 3. High-speed Management Communication theory This is a new organization communication theory being used to obtain competitive advantage (King and Cushman 15) whereby organizations like Dell and its competitors immediately respond to the environmental change by adapting to the changes and/or revising its strategy to be profitable. The theory focuses on the use of computers, telecommunications, and extremely well crafted messages to provide a rapid-response system adapted to customer needs and competitor products (King and Cushman 15). Methods of Research Methods of research used for this paper are; (i) Identifying the existing problems in Dell through the case study; (ii) Analyzing the problems identified by using SWOT analysis; this involves identifying the strengths, weaknesses, opportunities and threats in this particular case and through other readings (iii) Assessing the alternatives available and (iv) Suggest recommendations to solve the problem. In this analysis, the constants identified are: the channel of supply, type of products offered by Dell and its competitors and their performances; whereas the variables identified are prices, brand and quality support service. Other intangible variables are products’ reliability and customer satisfaction. From the case study, the Direct Model and Just-in-time model have been successful for Dell throughout the years and can offer customers the same technology at lower prices compared to other industry players. The high-speed management communication theory shows that Dell should respond immediately to the changes in market to sustain its brand name. In summary, Dell is still a strong name in the computer industry despite its losses and can sustain its competitiveness through its periods of ups and downs. A further study should be held to evaluate its potential growth in the market share. Works Cited Cushman, Donald P. and Sarah Sanderson King. "Best Practices at the Dell Computer Corporation: Benchmarking a High-Speed Management Communication System." Cushman, Donald P., et al. Communication Best Practices at Dell, General Electric, Microsoft, and Monsanto. State University of New York Press, 2003. 15. King, Sarah Sanderson and Donald P. Cushman. "The High-Speed Management and Organizational Communication: Cushman, King, and Associates." Watershed Research Traditions in Human Communication Theory. Ed. Cushman Donald P. and Branislav Kovacic. State University of New York Press, 1995. 177. Investopedia. Just-in-time . 12 March 2012 . Ogg, Erica. "What Wal-Mart Means to Dell." 24 May 2007. CNET News. 12 March 2012 . Fisher, Lawrence M. "Strategy+Business: How Dell Got Soul." Strategy+Business. 12 March 2012 . Read More