Dell Inc. as Multinational Corporations

Introduction

There is no standard approach that would help a company to achieve global success and brand recognition. Every business searches for unique strategies and methods that best suit its marketing objectives and products delivered to a mass consumer. Dell, an American-based technology company, has developed a set of unique methods and tools used in marketing and management in order to obtain and sustain its brand image and service quality. These methods can be described as the company’s philosophy and outward manifestations of basic and important development in marketing and management. Embracing a systems perspective, the company tends to see marketing operations as complete systems. Dell is a market leader in personal computers, servers, network switches and software. In order to coordinate these divisions and improve marketing management, Dell follows the systems approach essential for effective decision making, for the utilization of models in marketing, and for the application of computer technology1.

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Success Factors

Organization

The main silent factors of success are the unique corporate strategy and coordination activities used by Dell. These strategies are used by every company and business, only an effective selection and analysis of the market help Dell to achieve success on the global scale. “Dell helps drive the course of future industry innovation through a time-tested process that puts customer needs first”2.

In contrast to many other companies in this industry, Dell involves employees in corporate strategic management and decision-making. Employees must understand, accept and internalize corporate strategy if the strategic blueprint is to be transformed into positive strategic results3. Suppliers, strategic partners and customers must have a basic understanding and appreciation of the firm’s strategic direction if these stakeholder relationships are to flourish and be productive. The financial community must be aware of a company’s strategic intentions in order to properly evaluate a firm’s current value and prospects for the future.

Only when the corporate strategy message is communicated in a clear, concise, timely and persuasive manner to key corporate stakeholders does the firm have an opportunity to achieve a competitive advantage. The focus of Dell is on corporate strategic communications designed to create a competitive advantage. Effective strategy communications can result in significant benefits. Payoffs include an improved climate within the financial community, better relationships with suppliers, customers and strategic partners and increased employee morale. Some firms have experienced a boost in their share price and improved shareholder value. Unfortunately, effective strategy communications remain the exception rather than the rule4.

The silent factor of Dell’s success is that Dell invites the global community to be a part of the company and policy creation: “At Dell, we understand that our influence extends well beyond the walls of our offices, factories and other facilities – and that we have a broad impact on the environment, communities and people”5. These tactics can be called strategic credibility which means that key stakeholders view the company’s overall corporate strategy and its strategic planning processes favourably. Using this approach Dell established a very positive strategic reputation and manages to sustain it over long periods of time; other companies find their strategic stature ebbing and flowing over time; some firms never achieve strategic credibility. Dell’s strategic reputation can be determined by four important factors: the perceived strategic capabilities of the firm; past corporate financial performance, CEO credibility and the effectiveness of corporate strategy communications6.

Another success factor is a close link between size, industry, geographic location and corporate strategy communications. The link between corporate strategy communications and shareholder value helps the company to sustain its brand image and create a group of loyal supporters. Dell has a strategic vision for the future and the managerial and organizational resources necessary to translate the vision into tangible results. “Because businesses face many uncertainties in this rapidly changing global market, establishing a genuine dialogue with workers enables both workers and employers to understand each other’s problems better and find ways to resolve them”7. The case of Dell demonstrates that sound global strategy and superior corporate performance may not be enough. In addition to ongoing communications with the investment community, what may be needed is an active and focused communication program to increase investor awareness and appreciation of a company’s strategic capabilities. An intensive and effective effort to communicate its strategy to key stakeholders allows Dell to leverage a sound strategic vision, and, in the process, enhanced its shareholder value8.

Coordination of organizational activities is often neglected by big companies perceived as a traditional and old fashioned tool of management. Thus, Dell uses this strategy in order to improve its internal activities and increase productivity. “Dell’s approach is drawn from a review of global best practices, management systems and acknowledged standards”9. Coordination necessitates communication, formal and informal, vertical and horizontal, to and from the marketplace. In Dell, with multiple levels of management, widely diversified products, and geographically decentralized plants and distribution centres, complex networks of marketing communication have come into being, and the information it gathers affects the efficiency of the organization and largely determines its operational effectiveness. Dell contains several structures.

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A task structure delineates the work people are expected to perform. An authority structure gives some people the responsibility for directing others, although in practice there may be a discrepancy between responsibility and authority. A status structure determines the rights and privileges of people. A prestige structure permits people to expect deferential behaviour from others. A friendship structure stresses interpersonal trust10. These structures have an important effect on organizational relationships and particularly on communication. In establishing organization patterns, Dell management is concerned with the span of control — the number of subordinates reporting to or accountable to a manager. In marketing, however, this span should also include the span of markets and a variety of product lines. As product diversity, geographical spread, and heterogeneity of markets increase, so do the complexities of the marketing organization11.

Marketing

The main silent factors that influence the success of Dell are price and integrated marketing communication (IMC. Dell underlines that since they have both economic and political dimensions, pricing policies are more likely to be governed by tradition than by innovation. They are concerned not only with competition, the elasticity of demand, marginal and average costs, industry structure, substitutability of products, and product and market characteristics but also with numerous governmental constraints. Pricing decisions adopt a systems perspective12. The uniqueness of Dell’s approach is that its executives consider the whole marketing system — manufacturers, wholesalers, retailers, and consumers — and the impact at each stage. These decisions are based on information from market research, sales analysis, distribution cost accounting, standard costs, surveys, experiments, sales forecasts, simulations, and statistical techniques. The information required concerns competitive prices, cost data, demand estimates, product profitability, salesmen and customer reactions, and middlemen needs. Information about future demand schedules, future competitive reactions, and future costs is incomplete at best.13.

In contrast to its direct competitor, Apple, Dell proposes laptops to wide target audiences with different incomes and from different social groups. Dell sets prices from $500 to $3000 while Apple sets prices from $1099 to $3000 and more. The pricing objectives of Dell appeal to wider customer groups and allow them to buy a low priced laptop that satisfies their needs and wants. In contrast, many potential buyers cannot afford laptops from Apple because of a high price14. Thus for both companies, the pricing policy is, therefore, a vital strand of strategy (www.apple.com).

This strategy is valued by Apple which believes that a concentration on a unit that focuses their efforts is better able to serve their needs of a narrow strategic target more effectively than their competition. Businessmen tend to rely more on an average cost approach to pricing than on a marginal approach. Average costs, which are rarely pertinent to an optimal decision, satisfy the desire to “cover our costs and make a profit.” In reality, this reliance on average costs can lead to a decision that can actually reduce sales, increase costs, and reduce profits. However, some executives advocate that sunk costs (costs that cannot be revoked and that are not part of the current pricing decision) should be ignored. They are not affected by current decisions — nothing can be done about them. Yet it is also recognized that over the long run, they must be covered. Primarily, the competition is based on price factors. Dell proposes lower prices for laptops (from $750 to $1000) than its competitor Apple. An average price for Apple is $1099 -$1999. Dell appeals to a market segment where the price is an important consideration to purchase15.

Another silent factor of success is the integrated marketing communication approach. This approach is very popular today applied by different industries and companies. Thus, the uniqueness of Dell is a combination of media and marketing messages aimed to reach a potential consumer. IMC allows Dell to compete on a global scale and reach its target audiences. “Integrated Marketing Communications (IMC) is to marketing communications what digital convergence is to the world of technology — a revolutionary concept with great promise and hype, but one that leaves most executives wondering what is in it for them”16.

Dell passes information to markets through promotion and receives information from them through feedback. Through promotion, Dell unleashes stimuli and supplies the marketplace or components of the marketing network with informative and persuasive messages in order to stimulate, reinforce, or modify behaviour. Conversely, through feedback, the marketplace and marketing network transmit information to a company. Feedback provides useful information for the direction and control of promotion and indicates adjustments that may be made in the media, form, message, and content of the communications, as well as in the other aspects of the marketing mix17. The material that follows develops two main themes advertising in the firm and advertising in society. Marketing communications, which require interaction between two or more people or groups, encompass senders, messages, media, and receivers. The sender of the communication is, of course, the company, advertising agency, or both.

Dell gives special attention to the Internet media and press. In contrast to other companies, it concentrates and invests in these two spheres as the most effective and efficient in marketing18. This strategy allows Dell to get people or markets to progress from a state of unawareness, or even negative reaction, to one of positive action. The stages in this progression are unawareness, awareness, comprehension, conviction, and action. Opposing the marketing communications in this endeavour are such countervailing forces as competitors’ communications, predispositions, noise, brand loyalty, and habit19. This approach can foster interfirm coordination and linkages of manufacturers, wholesalers, and retailers. For the marketing task is not complete with the sale of the product; satisfied customers must be retained. Reaffirmation of consumer choice, a post-sale activity, is important. Continued advertising after purchase gives the customer public acknowledgement of his wise choice and tends to eliminate or reduce cognitive dissonance. The customer is reassured and resold. Repeat business is the avenue to continued success, and postsale advertising is often the course to repeat business20.

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Human Resources

Cultural diversity and cultural training are the main factors that help Dell to compete and create a competitive advantage. Dell underlines that culture, both corporate and national, may constrain open, frank and candid communications. Overcoming embedded cultural values appeared to be a challenge, to varying degrees. Cultural influences also appeared to account for significant differences in the openness and timeliness of global strategy communications, as reported in our international survey of corporate executives and financial analysts. The value of individual training received a more fundamental challenge seen as powerfully influenced by the culture within which it is located21. Cultural factors are also seen to influence organizational outcomes. Organizational dysfunctions will probably require interventions at that level, rather than individual training and development. Organizational characteristics have long been known to affect the likely long-term consequences of training. They have also been seen as open to manipulation such that, for example, organizational performance might be improved by redesigning rules and procedures centralizing decision-making, and so on. “Dell believes that in order to be a successful company and a great place to work, our business must be able to leverage the similarities and differences of all team members”22.

An advantage of Dell strategy is that it invests in the training of all staff including leaders, managers, and professionals. Excellence is achieved through the creation of superordinate goals and a constant developmental emphasis with individuals and groups. Few managers understand the interpersonal dimensions of developmental efforts or approaches to implementation on a daily basis. The relationship seems to be stronger in less developed organizations than in more developed organizations (such as research and development). The nature of professional development in systems where the supervisor can perform all subordinate tasks is one of building technical skills. In systems such as R & D units, where the supervisor can only provide general direction, learning is more managerial in nature23.

Dell introduces leadership training with behavioural models for leader behavioural change and subordinate satisfaction. The authors used three interventions to reveal positive reward behaviour, punitive behavior, and goal-setting behavior. Modelling interventions led to changes in leader behaviour and subsequently to subordinate satisfaction. Dell is interested primarily in performance outcomes. The company questions the value of training which deals with fairly abstract and poorly defined behavioural categories such as “supportive” — trying to change the degree to which individual displays these behaviours.

If it is accepted that it requires a great deal of skill to enact appropriately particular behaviours — even when they are clearly defined and their purpose is understood — it is clear that such an approach is extremely deficient. Such a view obviously challenges most traditional approaches to leadership training. This issue is addressed during the workshop in the context of changing forms of work organization24. Basically, it is an organizational effectiveness workshop that has six phases: 1) intrapersonal knowledge building and interpersonal experiential use of this knowledge, 2) working in autonomous learning groups, 3) team building, 4) working on pre-workshop questionnaire feedback data, 5) designing follow-up programs, and 6) reviewing the effects of the workshop. This intensive, introspective learning is expected to enhance the ability to experience organizational life as an ongoing learning and growing process25.

Financial Performance

The silent factors of success are flexibility and acquisition strategy. Dell maintains the flexibility of unit domains. The company expects a prescribed minimum financial return but imposes no geographical constraints and only broad product definitions. The latter has far more opportunities than the former for choice in the directions in which Dell seeks to lead the subsidiaries. “Dell currently owns 70 per cent of DFS, which provides financing solutions including loans, leases, and revolving credit for consumers, small business and commercial customers”26. Dell invests in information technology and innovations spending 1 billion a year on these improvements. Long-term programs and plans are usually subjected to much greater variation than short-run plans. Short-run plans on which operating programs are based require more detailed data.

For example, short-run plans may detail potentials for particular market segments and territories by brands; establish quotas; and develop financial and manpower needs with considerable accuracy. “Completing the integration furthers Dell’s strategy to extend to customers a full range of financial and leasing services. Through DFS, Dell customers have direct and flexible ways to purchase, lease and responsibly retire Dell technology“27. In contrast to many other companies, Dell gives special attention to short-run forecasts. This strategy allows it to plan production and manage supply chain relations. Information about kinds of possible changes, rates of change, and the interrelationships of various factors is extremely important28.

Conclusion

Analysis of four main areas of performance shows that Dell uses traditional approaches to management and marketing but selects a unique combination of methods and tools which the company to compete and create a strong brand image. The philosophy implies that such activities as pricing, management of the sales force, advertising, personal selling, credit, physical distribution, and other marketing efforts should be integrated, coordinated, and directed at satisfying consumer wants. It also emphasizes that the success of Dell is dependent on profitable sales, which in turn depend on consumer action. Dell gives special attention to marketing resources, with particular emphasis on the organization of marketing activities. As an organizing activity, marketing, through institutions and processes, matches products and services with needs. The core of this activity for Dell is the interaction between organizations and environments, for marketing links separate production centres to maximize the total outputs of a company and society.

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The resulting amalgamation turns both competitive and cooperative systems into organized behaviour systems’ that are affected by such factors as the role of individuals in our society, technological developments and the movement toward specialization, new developments in understanding human behaviour, and the breadth of organizational goals and societal involvement. In this organizational context, marketing may be considered an intervening variable which, to a large extent, links the relationship between the company on the one hand and society on the other. Previously, production was this variable. The systems approach implemented by Dell involves changes in markets, cost-price pressures, the evolution of the product and brand manager concept, the shifting distribution structures, and changes in physical distribution, which have resulted in the need for new views. For whatever reasons, all too often, the corporate strategy remains hidden from view, either misunderstood or unappreciated by key corporate constituencies.

Dell lives and acts in a constantly changing cultural, social, technological, legal, and economic environment. Shaped by the environment, marketing institutions and activities, in turn, have an impact on it. The standards and values that stem from the environment greatly influence consumer behaviour, affecting purchasing and consumption activities, and the business organizations concerned. the success of Dell can be summarized as the interrelation of systems and between different management functions. The intermediate consumer purchases goods for business purposes with the profit motive in mind. Most of the literature focuses primarily on the ultimate consumer, on understanding his (her) role in our marketing and economic system; on consumers as decision-makers; on factors that shape consumer objectives and influence purchases; on the impact of consumer attitudes, opinions, motivations,

Bibliography

Apple Home Page. 2008. Web.

Corporate Strategy. Boston Consulting Group. 2008. Web.

Cage, M. Dell’s Marketing Strategies. Web.

Dell Home Page. 2008. Web.

Dell’s Corporate Strategy. 1997, Web.

Dell To Complete Acquisition Of Dell Financial Services. 2007. Web.

Corporate Management and its Connection to Supply Chain Management. 2008. Web.

Dell Inc. Still a growth Company? 2006, Web.

Financial News. 2008. Web.

Integrated Brand Communications. 2008. Web.

Lee, L. Dell’s marketing Makeover. Business Week. 2007. Web.

Footnotes

  1. Dell Home Page. 2008. Web.
  2. Dell Home Page. 2008. Web.
  3. Corporate Strategy. Boston Consulting Group. 2008. Web.
  4. Dell’s Corporate Strategy. 1997, Web.
  5. Dell Home Page. 2008. Web.
  6. Corporate Strategy. Boston Consulting Group. 2008. Web.
  7. Dell Home Page. 2008. Web.
  8. Dell Inc. Still a Growth Company? 2006, Web.
  9. Dell Home Page. 2008. Web.
  10. Financial News. 2008. Web.
  11. Corporate Strategy. Boston Consulting Group. 2008. Web.
  12. Cage, M. Dell’s Marketing Strategies. Web.
  13. Dell Home Page. 2008. Web.
  14. Apple Home Page. 2008. Web.
  15. Dell Home Page. 2008. Web.
  16. Integrated Brand Communications. 2008. Web.
  17. Lee, L. Dell’s marketing Makeover. Business Week. 2007. Web.
  18. Dell Home Page. 2008. Web.
  19. Corporate Management and its Connection to Supply Chain Management. 2008. Web.
  20. Dell Home Page. 2008. Web.
  21. Ibid..
  22. Dell Home Page. 2008. Web.
  23. Dell Inc. Still a Growth Company? 2006, Web.
  24. Lee, L. Dell’s marketing Makeover. Business Week. 2007. Web.
  25. Dell Home Page. 2008. Web.
  26. Dell To Complete Acquisition Of Dell Financial Services. 2007. Web.
  27. Ibid.
  28. Financial News. 2008. Web.
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