Organizational Technology Plan for Dell,

Organizational Technology Plan for Dell, Inc.

In an increasingly globalized marketplace, identifying and seizing opportunities to capture additional market share becomes vital to a company's success. One company that has managed to accomplish this and more is Dell, Inc., one of the leading personal computer vendors in the world today. This paper describes the organizational technology plan for Dell, Inc. And the company's organizational technology plan. The study explores and defines the company's plans for the organization (including managers and individuals), and its intentions concerning how best to apply this new and emerging technology. A summary of the research and salient findings are provided in the conclusion.

Overview.

Today, Dell, Inc. And its subsidiaries (hereinafter "Dell" or "the company") competes in the international marketplace for personal computers through innovative design, development, manufacture, marketing, sale, and support of various systems and services to customers around the world (Dell, 2007). The company has achieved its current level of success by providing its customers with a wide range of products and services that allow consumers to build customized information-technology and Internet infrastructures (Dell, 2007). The company's broad range of products includes enterprise systems (i.e., servers, storage, workstations, and networking products); client systems (such as notebook and desktop computer systems); printing and imaging systems; and software and peripherals (including titles, monitors, plasma and LCD televisions, MP3 players, handhelds, and notebook accessories) (Dell, 2007). Further, the company also provides its customers with a variety of services, including information technology management services; professional services in technology consulting, application development, solutions integration, and infrastructure design; deployment services; support services; and training and certification services (Dell, 2007).

Beyond these core business components, Dell has also expanded its operations to include financing alternatives, asset management services, and other customer financial services for its business and customers in the U.S. (Dell, 2007). Today, Dell's customers include large corporate, government, healthcare, and education accounts, as well as small-to-medium businesses and individual customers; however, the manner in which the company markets and sells its products and services bypasses all middlemen and work with and ship directly to their customers (Dell, 2007). The company's Market Guide profile indicates that Dell was founded by Michael S. Dell in 1984 under the name "Dell Computer Corporation"; in 2003, though, the company changed its name to Dell, Inc. with headquarters in Round Rock, Texas (Dell, 2007). The company's stock performance for the past 5 years to date compared to the NASDAQ averages on which it is listed, is shown in Figure 1 below.

Figure 1. Dell Stock Performance - Past 5 Years to Date.

Dell's gross margin as a percentage of revenue increased to 18.6% during the first quarter of its fiscal year 2006 (when compared to 18.0% for the same period last fiscal year); furthermore, the company's year-over-year improvement in gross margin was attributed to favorable pricing on certain commodity components, higher revenue to leverage fixed production costs and a favorable shift in product mix (Form 10-Q, 2006, p. 6). According to the company's corporate literature, "Dell Inc. listens to customers and delivers innovative technology and services they trust and value. Uniquely enabled by its direct business model, Dell sells more systems globally than any computer company, placing it No. 25 on the Fortune 500" (Dell at a glance, 2007, p. 3).

Current Technology Assessment.

The latest Securities and Exchanges filing for the company shows Dell reported that during the preceding quarter, in spite a slight decrease in research, development and engineering expenses from the prior year, the company succeeded in efficiently managing its research and development (R&D) function spending by carefully targeting those innovations and products that were considered most valuable to its customers, and by relying upon the capabilities of the company's strategic partners (Dell Form 10-Q, 2006, p. 3). According to the company's filed Form 10-Q (June 3, 2005), to date, Dell has obtained 1,160 U.S. patents and have applied for 767 additional U.S. patents as of April 29, 2005.

Value Chain Analysis.

Given the vast array of choices consumers now have in the personal computer industry, competition is indeed fierce and Dell has been able to maintain its lead by using the information available to it and identifying opportunities to add value to its products and services through innovative customer service. In this regard, according to Fields (2004), "Dell is the contemporary developer of custom-built personal computers (PCs). This firm ranks among the most innovative organizations of its time period, ascending to this status by responding to different communications revolutions. The company used technologies of communications revolutions to create enormously innovative production-and-distribution organizations that redefined competitive practices for business activity in their own time" (p. 2). As discussed further below, while it does not succeed every time, the company's goal to provide its consumers with the product they want when they want it is straightforward enough. In his book, Capitalist Development, and the Innovative Enterprises of G.F. Swift and Dell Computer, Fields notes that, "Although it manufactures computers, Dell accumulates profit as a logistics firm. It is an organization of knowledge and routines extracting surplus not from production, but by managing the movement of product and information flows along a globally dispersed network of companies engaged in the various operations of producing and marketing finished PCs" (p. 166). The company's vice president for manufacturing emphasizes to this end: "We are not experts in the technology we buy. We are experts in the technology of supply chain integration. We have created this expertise with the Internet at its core" (vice president, interview, July 18, 2001, cited in Fields, 2004 at p. 166).

In its capacity as a logistics company, Dell's most notable achievement consists of the extent to which it is has been able to balance supply and demand of product flows among the firms in this global commodity chain. In this regard, "Supply and demand balancing," insists this same Dell vice president, "is one of the most important capabilities at Dell" (vice president, interview, May 24, 2001 cited in Fields, 2004 at p. 166). The key to this core competency is attributed to the company's expertise in material balancing; however, Dell's ability to quickly process Internet information flows is also cited by Fields as being one of the company's primary attributes that Dell uses to manage the external capabilities of other firms. According to Fields (2004), "This mastery over material balance flows and Internet information flows has enabled Dell to create an organization differentiated from its competitors by the degree to which it has succeeded in accomplishing a singular aim: accelerating speed and compressing time in the movement of materials as they pass through the adjacent steps of customer order, procurement, production, and final product delivery" (p. 166). A complete listing of the company's products and services designed to enhance the computing experience for its growing number of consumers is provided at Appendix a.

Social Contract.

According to the company's literature, Dell's corporate philosophy is based on a simple concept:

By selling computer systems directly to customers, Dell could best understand their needs and efficiently provide the most effective computing solutions to meet those needs. This direct business model eliminates retailers that add unnecessary time and cost, or can diminish Dell's understanding of customer expectations. The direct model allows the company to build every system to order and offer customers powerful, richly-configured systems at competitive prices. Dell also introduces the latest relevant technology much more quickly than companies with slow-moving, indirect distribution channels, turning over inventory in just five days on average. (Dell at a glance, 2007, p. 2)

The company has managed to deliver on the vast majority of its promises to its increasingly loyal followers; however, it is clear that Dell's approach to manufacturing-on-demand carries with it some important considerations for its marketing executives as well. Indeed, based on two personal experiences in ordering products from Dell, the company's customer service function has not kept pace with its otherwise stellar success. For instance, in their study, "The False Promise of Mass Customization," Agrawal, Kumaresh, and Mercer (2001) report that, "Dell's story is by now a familiar one. Over the phone or via the World Wide Web, customers select what they want from hundreds of different components to configure the computer of their choice, which Dell doesn't begin to build until it has the money for it in hand" (p. 62). This approach sounds fine in concept, but actually putting it into practice time and time again for the company's millions of consumers has clearly been a challenge for Dell. These issues have assumed even larger proportions as the company has sought to expand its market on a global basis, and these issues are discussed further below.

Global Issues.

According to its corporate literature, Dell has revolutionized the computer industry over the last 20 years by making computing accessible to customers around the globe, including businesses, institutional organizations and individual consumers: "Because of Dell's direct model -- and the industry's response to it -- information technology is more powerful, easier to use and more affordable, giving customers the opportunity to take advantage of powerful new tools to improve their businesses and personal lives" (Dell at a glance, 2007, p. 2). The company has demonstrated this effect time and again as it enters new, standardized product categories, such as network servers, workstations, mobility products, printers and other electronic accessories; in fact, almost 20% of every standards-based computer system sold in the world today is a Dell: "This global reach indicates our direct approach is relevant across product lines, regions and customer segments" (Dell at a glance, 2007, p. 3).

Today, Dell competes on a global basis, and it manages its business through three key geographic segments as shown in Table 1 below:

Table 1.

Dell Geographic Business Segments.

Geographic Segment

Description

The Americas

This business unit accounted for about 64% of the $56 billion the company earned in revenues in 2005 (Allison, 2006). This market region includes the U.S., Canada, and Latin America (Dell Annual Report, 2006); one Dell executive, Lawrence Pentland, was recently assigned control of the operations in Latin America. Within the Americas, the company reports that it is further segmented into Business and U.S. Consumer; the Americas Business segment includes sales to corporate, government, healthcare, education, and small and medium business customers within the Americas region, while the U.S. Consumer segment includes sales primarily to individual consumers within the U.S.; the company maintains regional offices in Argentina, Brazil, Canada, Chile, Colombia, El Salvador, Mexico, Panama and Puerto Rico (Dell at a glance, 2006);

EMEA

This region covers Europe, the Middle East, and Africa with regional offices located Austria, Bahrain, Belgium, Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Ireland, Israel, Italy, Morocco, Netherlands, Norway, Poland, Romania, Russia, Portugal, Saudi Arabia, Scotland, Slovakia, South Africa, Spain, Sweden, Switzerland, Turkey and United Arab Emirates (Dell at a glance, 2006)

APJ

This region includes Asia and the Pacific Rim, as well as Australia and New Zealand (Annual Report, 2006) with regional offices located in Australia, China, India, Indonesia, Japan, South Korea, Malaysia, Philippines, Singapore, Taiwan and Thailand (Dell at a Glance, 2006); however, declining average selling prices for desktops and laptops together with the increase of low-cost competition from Asia, has begun to diminish Dell's traditional cost advantage, compelling the company to identify new ways to distinguish itself from the competition (Allison, 2006).

Sources: As indicated.

While it continues to approach its path to success in innovative ways, Dell has kept a close watch on how best to manage its affairs in an environmentally responsible way. For instance, the company's emphasis on introducing more energy-efficient hardware has proven highly successful. Indeed, Dell's sales of liquid crystal display (LCD) monitors now surpass the company's cathode ray tube (CRT) computer sales, a trend that has introduced an era of flat monitors that use one-third the power of CRTs: "Ultimately, the flat panel is less expensive," as a result, according to a Dell manager (Halal, 2004, p. 27). Furthermore, the company has recognized the environmental impact of its used hardware systems and has taken steps to address the problem. To this end, Dell has made plans for the appropriate disposal of its customers' obsolete systems, and has even provided incentives for them to use Dell for this purpose. For instance, Ella, Meyer and Young (2004) report that like most major computer manufacturers, Dell has sponsored a trade-in program for its customer; the company's DellExchange program facilitates Dell customers donating, trading, or selling used Dell computers.

In addition, during its first quarter of fiscal 2006, the company employed component cost declines to achieve profitable growth as the cost environment improved; the Form 10-Q states: "We expect the component cost environment to continue to be favorable during the second quarter of fiscal 2006 and will continue to adjust our pricing as necessary in response to future competitive and economic conditions. The strength of our direct-to-customer business model, as well as our strong liquidity position, position us to pursue share gains in any business climate" (emphasis added) (Form 10-Q, 2006, p. 7). By keeping abreast of what real people want, the skilled executives at Dell have attempted to remained focused on the most profitable mix of products and services; for instance, the company's Form 10-Q from June 2005 indicates that Dell: