Problem Statement
Dell, a leading computer manufacturer has been facing the heat in its operations on different counts for couple of years. The top management is well aware of the issue and has taken quite a few steps as well, while adopting innovative methods of strategic management. The erstwhile images Michael Dell and Rollins were considered to be the reasons behind the slowdown in overall operations, but it seems things have not improved too much even after the frank admission by the top bosses in the presence of all the managers. Under changes market dynamics, the Dell philosophy that ‘every product should be profitable from day one’ doesn’t appear quite in line with the competitive pricing witnessed these days.
Alternatives before the Company
In view of the prevailing practices at Dell, there are a number of issues which might require slight adjustments.
- Dell has certainly taken firm steps towards containing the sense of discontent amongst the workers. But, the high expectations from the workers and managers still appear to be putting lot of pressure on the workers. To expect that everybody would be able to display the qualities of a walking database, will not be an ideal expectation. Therefore, while motivating the workers to deliver their best, the company, would do well to put off some of the pressure. This can be done by relaxing the individual/ team targets and instead focusing more on strengthening the market base.
- The belief that ‘every product should be profitable from day one’ has also come under severe criticism from peers. No doubt, Dell has successfully implemented such a policy in the past, but over the years the level of competition has increased to such an extent that quite often companies take it for granted that the initial period would be more of a penetration exercise in the market. The penetrative pricing policy leaves little room for guaranteed profitability. Therefore, the company might well have to lower the standards of expectations.
- Significant investments in product development and future technologies is another area where Dell needs to focus more, in order to take lead in product differentiation. Taking on the competition becomes much easier if the company is able to place its product with distinguishing features and technologies.
Analysis of the Alternatives
- Lowering the expectations will certainly help the workers to have some more breathing time, and they can focus more on rejuvenating their energies, which in turn will help Dell. But, at the same time, such a step might also lead to a sense of complacency amongst the workers, which can harm the interest of the company in the long run. Therefore, regular monitoring and corrective approach should also be a part of such a step.
- If the company is not able to earn profits from day one, this would certainly reflect on the overall revenue earning of the company, and it might take some time before the accounting books once again come into black. But on the other hand, if the company is able to establish itself in a new market, such a compromise on profits will be more than made up by the company, as it will be able to have loyal customers.
- Product development and future technologies will certainly take away a huge portion of Dell’s revenues. The R&D investment does not appear productive for many years, which in turn will affect the overall profitability of the company. But, once the company is known to have an established R&D facility, it will help in attracting more customers and investors.