Dell’s strategy involved making use of the simple rules of functional business. The first of these was to make the customer’s needs not only get met, but satisfied beyond other businesses capabilities. According to Birger (1995), the customer will always choose the goods that satisfy his needs more. They achieved this by making the products especially personalized. They also were able to cut the cost of purchase by eliminating middle men in their chain of supply. By so doing they established direct contact with the customers, from manufacture straight to the customer. This may also explain why they were able to sense the needs of the various customers and thereby respond to market changes faster than any of its competitors. Thus by understanding the customer, the company was in a better position to react to their needs (Foxall, 2005). They were also able to create a personalized experience for each customer by tailoring the product to specifications of the customers. This was easier for customers who were ordering in large quantities. This was all done in direct communication with the company, no middle-men.
The other strategy involved the product handling. By making high quality products tailored to the current needs of the customer, Dell was able to build market dominance over its rivals. They also outsourced the making of the products and their plants were reduced to assembly points. Outsourcing helps reduce costs, thus making products cheaper and profit margins higher. As a result, the company was able to eliminate the need for manufacture assets reducing its function to assembly and distribution. They also reduced the number of times staff directly handled the products, reducing the chances of quality compromise.
Dell also worked on its staff and management policies. The involvement of all stakeholders by displaying and honestly interpreting statistics for the company energized the staff. They also engaged a consultancy company to come up with useful parameters and statistics of judging performance. The result was that the company became more target oriented. This data was given in real time allowing for rapid adjustment of procedure so that they could efficiently operate. With information concerning their financial performance and especially customer needs coming, they were much better placed. Schiffman (1993) advocated for the knowledge of the customer so as to provide target specific goods, a policy that Dell followed well. This made the company united and goal oriented in step with the real situation on the ground.
So how did their strategies affect the company’s statistics? The result of competitive customer relations resulted in increased sales and rate of stock turnover. These relations include the customization, relevance of product and pricing. The fact that there were no middle men also contributes to reduced cost of sales. This happens because the middle men would add their mark up and pass on this cost to the next level of distribution, causing the end product to be expensive. The end result is the customer would find the products competitively affordable and therefore buy, increasing stock turnover and finally a higher return on equity.
Dell’s innovation and direct customer handling produced an increased stock turnover. This was also aided by the fact that they responded quickly and efficiently to technology changes thus their products did not have a long shelf life. This is a great saving on the cost of storage and handling, a cost that other company’s incurred. Therefore, by keeping stock constantly flying off directly from its assembly, the company cut off the need for developing elaborate storage assets and warehouses leaving cash open for other purposes.
The other strategy employed was the outsourcing and reduced handling by employees. This would cause a decrease in the cost of production and increase the return on investment. This is because comparatively little assets and finances were committed to turning over a large amount of stock. There was also reduced need for assets such as plants and equipment such that capital could be committed elsewhere. As a result, the company engaged only in assembly. This would be advantageous to Dell helping it to be able to use relatively little capital to give a larger output thus boosting its return on capital statistics.
The motivation and cohesion of workers and stakeholders towards a common goal of increasing efficiency helped improve the competitive nature of the company. This is important as it helps reduce the management and handling costs of employees. Also, the employees contribute a lot more than if they are not motivated. The statistical impact is that there is good return per employee and a lower administrative cost outlay. This would enable the company to be competitive as the employees feel the responsibility to make the company better.
The cost of hiring a consultant was a worthy investment. It was a strategy of obtaining expertise and a critical outside opinion for the benefit of the company. This investment paid off as it was through this that the company was able to gain the use of statistics in their daily operation. The statistics, given in real time, helped make relevant decisions that would allow the company to react to changing market situations as they occur. The result is that they would be able to remain competitive, taking advantage of unique situations way before their competition and thus gain more sales.
References
Birger, W., (1995), Using Market Data to Infer Utilities, Consumer Research Britain. Dell Computer Corporation article, n.d.
Foxall, G. (2005.) Understanding Consumer Choice. Baingstoke. Palgrave Macmillian.
Schiffman, L.G. (1993), Consumer Behavior, Prentice Hall International, London.