How Dell Dose It
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Chapter Nine
Know how to grow
“One of the three computers sold in the US. is a Dell. Hopefully soon, that will be one out of two”. (Michael Dell.2004)
Since its beginning, Dell Inc. has been in an almost permanent hyper growth. Because of that its been crucial for Dell to understand how to handle fast growth, and its developed strong developed strong strategies to do that. Because growth is such an issue at Dell, watching Dell offers clearer lessons on handling growth than youll find elsewhere.
Going direct was Dells original inspiration, but one idea wasnt enough to sustain growth for such a big firm, so Dell tried to find more ideas to speed up its growth which lead them to a wide range of product, and different area of distribution of products.
Dells Growth
The genius of Dell Inc. is evident in how its been able to grow. Heres the global market share for PCs in the first quarter of 2005, according to USA Today:
Dell, 19 percent
Hewlett-Packard, 15 percent
IBM/Lenovo,7 percent
Fujitsu/Fujitsu Siemens, 5 percent
Acer, 4 percent
Toshiba, 4 percent
NEC, 3 percent
Apple, 2 percent
Gateway, 2 percent
Dell expects 16 percent growth of sales and earnings for its first fiscal quarter. Thats look interesting comparing to the expected sales and earnings increase of just 6 percent for top rival Hewlett-Packard. For IBM, the forecast is 6 percent sales growth and 12 percent earning growth. Improving sales of servers, storage systems, printers and consumer goods is key to Dells goal of being an $80 billion firm by 2008 or 2009.
Grow or Die
Growth in the field of high tech business is not an optional decision but its the only alternative which the corporations can have. Either you bring yourself up and maintain your position in the market or just fade away.
Michael Dell is known for the idea of that” in the high tech business you either grow or die “(Fast Company).
All public companies have the obligation to grow but for Dell the idea of growth is not just a common strategy among many but the most important one and vital the decision which have brought up Dell to current position, which is very well stable.
Although rapid changes in high tech could bring growth the corporations but this is not the case for Dell. Dells growth is due to the power of the company to show its competency in the market to the potential customers which desire to buy PCs in great number and attract there attention to buy from Dell, because the larger companies want to buy only from a few reliable, PC vendors.
According to the CEO Kevin Rollins note the “Soul of Dell is not just about how much bigger we can get and how much more money we can make, but about how we can make it sustainable.
In order to sustain Dell has had to learn how to grow, as Michael Dell also has said:” If we stayed a small PC company, we would have been killed”.
Strategies which dell has focused on them to romaine sustain are, Going Direct to customers, invading market when its ripe, segmenting, ROIC, relaying on partners, Delegation and staying flexible.
Go Direct
Dells idea of Go Direct was the initial inspiration, and an excellent one which worked as a platform for dells take off and beginning of growth. Due to this strategy Dell was able to undercut its competitors by marketing PCs with a far margin than its rivals, and providing low price PCs to customers.
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. Direct model eliminates retailers which add unnecessary time and cost, or can diminish Dells understanding of customer expectations.
Invade Market When Its Ripe
Every day a new technology comes up and a bring many new product to the market, but new technology by itself could not make success for a corporation but it depend on the time and place of its application, thats the strategy which Dell knows well about it, to invade the market when its ripe.
It means that when a new technology introduced, Dell waits until the market accept the technology and then evaluate the profitability of it, after that decides to invade the ripe market by undercutting its competitors with standardized components.
Segment to Mirror the Market
“When youve got a huge market opportunity facing you, the only way to handle it is to divide and conquer. Thats the basis behind our concept of segmentation” Michael Dell has said and a great part of his insight has to do with how to scale his company as it grew. Segmentation allows Dell to scale his business rapidly because every time they determine that there is sufficient momentum to segment a unique customer group, theyll break it off, give it its own organization team, and let it act as a small company. The purpose here is to let Dell operate like a small company or a set of small companies.
Segmenting at Dell was originally done to bring a better service to customers. When a unit becomes too large and unresponsive, Dell segments it into smaller unit. In this way, its internal segmentation mirrors the market.
Chase Return on Invested Capital (ROIC)
Controlling growth in huge corporations requires a metric to focus on it in order to measure performance of the business and make future decisions upon it. In case of Dell Corporation they tried to chase return on invested capital and focus on areas which have more profits for the