Outsourcing and Offshoring of Dell Inc - Essay Example

Introduction The policy of Dell Inc. is to listen to s and provide them with innovative technology and service that the s always trusted and valued. Dell Computer Corporation was founded in the year 1984. The founder of the company was Michael Dell who is actually believed to be the longest-tenured executive to lead the company in the computer industry (Dell). Dell follows a direct business model and sells the maximum number of systems globally that any other computer company. The company was ranked at No. 34 on the list of the Fortune 500 companies. As the company follows the direct business model, it eliminates all sorts of retailers etc. which in fact are expensive and time consuming in dealings. The corporate headquarters of Dell Inc. is located at Round Rock, Texas. This is where the company was first started. Dell has regional headquarters in Bracknell, England, for Europe, Middle East and Africa and in Singapore to serve the Pacific Rim, including Japan, India, China, Australia and New Zealand. The company manufactures its computer systems in nine locations: Austin, Texas; Nashville, Tenn.; Winston-Salem, North Carolina; Eldorado do Sul and Hortolandia, Brazil (Americas); Limerick, Ireland (Europe, Middle East and Africa); Penang, Malaysia (Asia Pacific and Japan); Chennai, India (India) and Xiamen, China (China). Dell sells its products and services worldwide. International Activities of the Company The company started its international activities in the year 1987 by opening a subsidiary in United Kingdom (Dell). The reason for any company to open a subsidiary in a different country is the ability of the company to capitalize on low cost labor, easy access to raw materials, low transportation costs, and avoidance of import duties. Usually, firms which aim for a high market share in international markets opt for this kind of strategy (Research). Dell Computer Corporation has got a global supply network which helps the company in its overall product quality along with lowering the costs. Though the company's principle headquarters and design centers are located at Austin, Texas, the company has managed to expand its operations worldwide. Each one of the company's establishments is specialized uniquely. The main headquarters of the company situated in Austin, Texas deals with software development and documentation alongside handling the system development of notebooks, desktops and servers. The company has got two global lines of business namely Dell Imaging and Dell Displays. Singapore center of Dell which was started in the year 2005 is the home for both these global business lines of the company. The entire portfolio of displays along with projectors and Televisions are taken care at the Singapore center. These global lines also include Dell printers and other associated software of the company. The company established a design center in Bangalore, India in the year 2001. The company's design center at Bangalore focuses on software development, server development, international product support, Test engineering and documentation along with enterprise solutions. In the year 200, the company established a design center in the city of Shanghai in China. This center focuses on the system development for desktops along with client system testing and other services related to notebooks and desktops. The company also started a design center in Taiwan in the year 2003 which takes care of data center solutions and notebook and server development. Each of the design centers of the company located at various destinations specialize in different areas. Each center focuses on different activities depending upon the market in which the center is located. The manufacturing units of the company located at various parts of the world manufacture products and the sale of those products is done in those respective regions and they also re-import the products to other places depending on the need and demand. Over the years, Dell has developed the capacity to integrate the principles of lean production in a dispersed network of activities. The company has also developed expertise in building relationships and interfaces that enable rich integration of design, logistics, and data systems with partners worldwide. Offshore strategies are more about shifting relations of power than gaining efficiency. Firms are able to tap new pools of talented workers in countries that afford few employment alternatives, little regulatory protection and weak social safety nets. Moreover, the creation of global labor markets for specific skill groups reduces the bargaining power of all workers in relation to their employers. Off shoring also shifts the balance of market power among firms. It can be clearly stated that Dell gains in market power due to its unique expertise in managing networks along with the control of brand name and key technologies. International locations of the company The company started its international activities in the year 1987 by opening a subsidiary in United Kingdom (Dell). Later, in the year 1990, with and intention to serve the European, Middle Eastern and African markets, the company opened its manufacturing units in Limerick and Ireland. The company's entry into the Asia-Pacific region was in the year 1993 when the company opened its subsidiaries in Australia and Japan. It was in the year 1996; the company started its own manufacturing units in the Asia-Pacific region in Penang, Malaysia. Company expands its manufacturing facilities in the United States of America and Europe, and opens a production and customer center in Xiamen, China. All these developments occurred in the year 1998. A year following these developments, the company opens its second major U.S. location in Nashville, Tenn. During the same year Dell opens manufacturing facility in Eldorado do Sul, Brazil, to serve Latin America. It was in the year 2003; the company changes its name to Dell Inc. officially, reflecting the evolution of the company to a diverse supplier of technology products and services. The second manufacturing unit at Brazil and also manufacturing facilities at India was started in the year 2007. Whenever a company is planning to expand its operations internationally, it should first consider the trade regulations and agreements of the host country with other countries before choosing the mode of entry. When a company is entering an international market for the first time, it should choose an economy where the regulations are less stringent. Where the regulations are more stringent, firms prefer to opt for a low control mode of entry. In case of Dell, in all the locations in which the company has started its design centers and other regional offices, the company has faced negligible problems with the country policies. If it was not so, then the company wouldn't have survived the test of time and remained successful in all its operations till date. Scope of corporate ownership Recently in the year 2006, Dell has acquired a firm called Allienware located in Miami. The company is a manufacturer of high performance desktop, notebook, media center and professional systems. Acquisition means a firm purchasing stock inn an already existing company in an amount sufficient to confer control. Firms prefer this mode when the rules and regulations of the host country do not allow them to start a company from scratch. However, at times firms voluntarily choose this mode to enter a foreign market. According to some researches, the size of the foreign firm, diversity of the product range and its degree of multinationality i.e. the number of countries in which a firm has subsidiaries, positively and significantly influence the decision to acquire. The research shows that the firms that manufacture durable goods prefer to enter international markets through acquisitions. Acquisitions help firms save time. Acquisitions help the acquiring firm to have easy and quick access to the local markets. Firms can adapt to local markets and manage their marketing mix strategy well. Global Sourcing Strategy Global Sourcing Strategy is one which has gained popularity because of factors such as diminishing trade and tariff barriers and converging global markets. The assets, resources and responsibilities of global organizations are centralized. Though, due to economic or political pressures, assembly plants may be located in overseas countries, the operations there are usually limited to sales and service. The subsidiaries implement the plans and policies developed by the parent company. Their freedom to modify products is very limited compared to subsidiaries in multinationals or international organizations. All operation of subsidiaries are tightly monitored and controlled by the centre. Goods, knowledge and technical know-how flow from headquarters to subsidiaries. The complex task of managing widely scattered, varying world markets is simplified through centralized decision making and control. Headquarters is responsible for setting objectives and planning projects, and communicating them to subsidiaries through formal channels. Advanced monitoring systems are sued to monitor plan implementation. Managers may be deputed from headquarters to supervise progress. In global organizations, the whole world is treated as a single, integrated market with more similarities than differences. (Research, Marketing Management) Products and strategies are developed for a unitary world market rather than a stratified market. Organizations do not take note of local environmental differences and try to achieve economies of scale through standardization. A global strategy facilitates effective coordination of the strategies of all subsidiaries and achieves global scale efficiencies. The firm can penetrate foreign markets through aggressive pricing. By marketing a standardized product to world markets and applying learning effects, it can minimize costs. Ensuring that customers are satisfied every time they interact with Dell is a goal owned by every Dell team member. The Dell Executive Leadership Team sets the strategic direction for how the company will continue to keep customers at the forefront of all it does - from designing and delivering services and solutions that meet the unique and evolving needs of its customers to developing innovative new products that deliver a superior customer experience. Another success factor for Dell is the 'direct-business' model that it has adopted. In a direct business model, there would be no mediators between the company and the end-customer. This way Dell deals with its customers directly to ensure high quality service and customer satisfaction. The people at the company spend time with the customers in order to figure out what exactly they want and then customized the orders and produce them accordingly. This way the company always ensures total customer satisfaction. The company continuously strives in implementing innovative strategies on improving customer service, cultivating supplier relationships, making employees the most valued resource for customers, and achieving vertical integration. One simple way that Dell improved customer service was to make the salespeople install their own computers (Fredman). Although unhappy about the directive, the sales force gained hands-on experience with the equipment they'd be selling. It put them in a better position to help customers make informed decisions, Dell said, as well as solve problems with the product. Bibliography 1. Dell. Dell at a Glance. 13 December 2007 . 2. Fredman, Michael Dell & Catherine. Dell: The SEcrets of His Success. U S: INC.com, n.d. 3. Research, ICFAI Center for Management. Business Strategy. Hyderabad: ICFAI Center for Management Research, 2003. 4. -. International Marketing & International Business. Hyderabad: ICFAI Center for Management Research, 2005. 5. -. Marketing Management. Htyderabad: ICFAI Center for Management Research, 2003. Read More