Analysis of the following situations about the competitive advantage of Dell Company 1 what is the advantages that Dell gained from the production located outside of America? What is the potential disadvantage from that? 2 Why does Dell buy most spare parts from independent suppliers rather than their own production (only small final stage of Dell is the assembly of components into the computer)? 3 what has brought results for cost structure and profitability of Dell when replacing inventory with information?
TRAINING PROGRAM GLOBAL ADVANCED MASTER OF BUSINESS ADMINISTRATIONN INDIVIDUAL ASSIGNMENTS PRODUCTION AND OPERATION MANAGEMENT Class : GaMBA C0211 Leaner: Nguyen Do Class : GaMBA4.C165 HCM City - 2012 Production & operation managerment INTRODUCTION Analysis of the following situations about the competitive advantage of Dell Company 1/ what is the advantages that Dell gained from the production located outside of America? What is the potential disadvantage from that? 2/ Why does Dell buy most spare parts from independent suppliers rather than their own production (only small final stage of Dell is the assembly of components into the computer)? 3/ what has brought results for cost structure and profitability of Dell when replacing inventory with information? 4/ Do you think that Dell's model can be imitated by other manufacturers and other personal computer manufacturers in other industries? 5/ What factors make the other computer companies have difficulty in imitating models of Dell? 6/ what is origin of the competitive advantage of Dell? How stable of this advantage is alike? 7/ what are the potential risks in the strategy of global supply chains of Dell? How to reduce such risks? I An overview of Dell Company: Production & operation managerment Company headquarters of Dell is in Round Rock, Texas, USA Infatuated with his PC, since the age of 15, with determination and intellectual superiority, Michael Dell has come very quickly to the successes in his career and became an entrepreneur when he was sitting in school From the huge profits of many kinds of computers that are brought by Dell brand, to 2007, Michael Dell has put his name on the top of the list of successful business people and the world’s richest with a net value at 18 billion individual assets Dell is a precursor of the small shops founded by Michael Saul while he was still a student at the University of Texas at Austin, USA named PC's Limited To 1988, the name PC's Limited has been replaced by Dell and officially known in the market of information technology in the U.S and after soon, with the computer products of high quality, Dell has become a commercial strong performance in the world of the brand world-renowned computer Currently, along with products ranging from laptops, servers, printers number of employees working at Dell was 78,000 people, the total annual income of the company has soared to 55.908 billion and is feared by many rival manufacturers such as Acer, Compaq, Microsoft, Sony, HP After a period of researching, Michael Dell had to use direct delivery methods No need a middleman, customers simply call or order via the Internet, all in package, product and support equipment was Michael Dell and a number of staff assigned to deliver at home By that method, Michael Dell has created a reputation to customers just can research new market demands Not stopping there, as a new product, not the stable basement and be incurred greater competitive pressures, Michael Dell has applied methods of lowering production costs to attract customers Thus, PC's Limited developments have been pretty solid, and Michael Dell is also experts who rated the most successful application of direct delivery methods The circle product distribution has been set before it became useful Production & operation managerment tools for Michael Dell to capture the market's needs and then put into production of computers, accessories, proactive nature While most other companies focus on computer products is the most common configuration, Michael Dell focused investment in development of computer systems and floppy drives, which are highly configurable, and obviously, Michael Dell has launched an attack on the exact needs of customers and consumed large quantities Created a strong position in the information technology market in the country, Michael Dell was preparing for the program advances to the market in the region and beyond For Michael Saul Dell, the problem has always been top priority for our products are the unique quality and psychological hit to consumers from the increasingly common for computers to laptop elegant and high quality, using licensed Microsoft software In new markets, to reach as quickly as possible, Michael Dell has established a series of product distribution partners Staying faithful to the method of direct delivery to consumers, adding that open customer service network and quality assurance for products distributed Wherever the presence of Dell computer products have their service center and counseling for clients use Even if the client is unable to catch the Dell Computer Corporation's experts will telephone advice to customers By this way, Michael Dell has secured 75% reduction in incidents of the product and created enormous prestige in regard of our customers A series of center customer service was held tightly in place in many countries outside the region and as the customer care center at Alberta, Ottawa, Ontario, Central Texas, Salt Lake City, Utah, Nashville, Tennessee, Chesapeake, Roseburg, Oregon, Twin Falls, Idaho, Oklahoma City, Oklahoma, San Salvador, El Production & operation managerment Salvador, Glace Bay, Nova Scotia, Panama City, Panama, Philippines, Malaysia, China, and India II Situation analysis: What are the advantages that Dell gained from the production located outside of America? What is the potential disadvantage? The advantages that Dell has been produced from locations outside the U.S: Labor costs of manual labor and low cost warehousing and material costs in other countries is also lower than in the U.S , so it lead to higher profits Also Dell prefer to select the U.S market close as Brazil, Malaysia, China have higher labor productivity and reduce transportation costs to customers However, potential disadvantage is likely to lose market simultaneously lost the ability to create its own brand and under the direct competition from its rivals when processing technology as well as all components because they That leads to endangered or about to disappear, replaced a different name today after nearly a decade and delivered to the outsourcing contractor to Dell completely dependent on subcontractors that takes away the ability to create their personal brand Why does Dell buy most spare parts from independent suppliers rather than their own production (only small final stage of Dell is the assembly of components into the computer)? With a view to cutting costs as well as investment in factories optimize inventory costs, while Dell's supply chain strategy globally through the Internet so delivery hand in hand will reduce costs of intermediary reducing the cost and create competitive advantage For example, Dell received orders via the Internet in Vietnam, this time Dell will take steps to update mode components production orders within to Production & operation managerment months Dell is only the final stage of assembly and hand delivered to customers by air, courier in the shortest time Replacing inventory with information what has brought results for cost structure and profitability of Dell? Computer industry is characterized by cost component accounts for 75% of revenue and loss of 1% of every week due to speed quickly obsolete In 2004, Dell store inventory only have days compared with 30, 45 even 90 days of the competition This is a significant advantage to reduce costs and increase revenue When the hard drive faster, larger capacity is introduced every 3-6 months, the value of the old hard drive will take sharply Therefore, if Dell stock took a week and competitors take weeks of inventory, which leads to the advantage of lower component costs by 3% for Dell, and also means an increase of 2% profit Remove inventory from the system also significantly reduced demand for Dell's working capital and increase profitability of the company To be able to compete successfully with low-cost rivals, Dell must have a supply chain able to deliver computers to customers in just a few days time The company has signed cooperation brought out some activities such as component production and delivery, but still retain the assembly in the U.S., Ireland, Malaysia, China and Brazil Do you think that Dell's model can be imitated by other personal computer manufacturers and manufacturers in other industries? In my personal opinion, the Dell’s model can only be reference model for other personal computer manufacturers, it’s difficult to be imitated by the other suppliers or other industries because it depends on the retail supply system and the Dell brand is well known and Dell also had to take a very long process to get to the current destination Production & operation managerment The main customer groups of Dell include: - Individuals use for family and office-Small businesses under 200 employees and medium-large businesses, over 200 employees-government organizations, education, healthcare organizations Both B2B and B2C customer group are done online transactions at dell.com through electronic catalogue system and process order automatically Dell has also launched e-auction system in www.dellauction.com to attract more customers and strengthen business brand at portal website www.dellauction.com Also thanks to the internet, the process of purchasing a personal computer is completely automatic, so although the volume of goods which is sold increased very fast, but Dell does not have to hire more employees This also significantly reduces the cost of sales along with phone costs down But for the initial investment for infrastructure is not easy for other firms What factors make the other computer companies have difficulty in imitating models of Dell? These factors make the other computer companies have difficulty imitating Dell’s model is: With a brand has already been built, Dell regularly apply information technology in activities, especially sales through internet Dell always creating new products with more advanced technology, more gadgets, more appropriate for different groups of customers on over the world Dell always wanted to reach further, higher to the next level, the target of 90 billion USD revenue of Dell is not so far away Supply chain is perfect with the transition inventory burden to suppliers, keeping the reserve at the lowest level far beyond Dell competitors in the industry as well as large corporations in the world Production & operation managerment In addition, internal information systems were measured at all times, Dell is forcing its staff to work with the best performance and many success of Dell in managing the supply chain Just as momentum, Dell will soon leave the competitors behind One thing is clear that firms outside the industry are hard to go the way of Dell because: First, most PCs are assembled from standard components, available from many different sources of supply, so no need to order long-term costs Second, consumers want to have their PC on demand, but the demand is limited: they want the processor faster or slower, more or less memory capacity is not need the color of PC Request restrictions on PC assembly encourage customer preferences without providing a network of more reserve components Moreover, due to the expensive PC quickly become obsolete and lose value over time, the profitability of the PC maker depends on efficiency rather than scale investment According to Dell, if PC makers can reduce the amount of the reserve components through the efficient operation than its rivals, the company will earn more profit This is the core element that investors other computer manufacturers difficult to imitate Dell's strategy What is the origin of the competitive advantage of Dell? How stable of the advantage of this firm? Start with the direct marketing model for personal computers, and then start trading online Then Dell applies Build-to-order model (BTO) with largescale, allowing customers to choose according to demand To meet the large demand, Dell is applying the model of online shopping to improve the efficiency of purchasing raw materials, input devices (SCM), in collaboration with partners and improve operational efficiency within the business (B2B) Production & operation managerment After then Dell apply the model of e-CRM to maintain good customer relations Especially, Dell gained profits by reducing intermediaries and reduce inventory As a result, Dell’s company ranked in the top companies with reliable products and perfect service Method of sale also contributed significantly to its success as well as the product the company sold, Dell has spent quite a lot of effort into the training of staff in order to serve their customers by forcing all employees must undergo a six week training course to answer customer questions, resolve complaints, orders and help customers choose products according to their requirements before making a sale The complaints are always discussed collectively in weekly staff meetings to help employees find the best solutions For example, if Dell found it all a certain component, such as screen 17" from Sony, it can control demand by providing a sample screen 19" with a lower price until Sony distribution more about screen 17" By such steps to balance supply and demand, Dell can meet customer expectations Balancing supply and demand also allows the company to minimize excess inventory and obsolescence Inventory of excess and obsolete Dell is in the range 0.05 to 0.1% of total raw material costs compared to 2-3% of the competitors has help Dell earned a substantial cost advantage The potential risks in the strategy of global supply chains of Dell? How to reduce the risks? The potential risks in the strategy of global supply chains of Dell: The supply unites are easy to capture the information by Dell and seek additional partners for themselves At the same time the "giants" such as HP, IBM have had easily the tendency to better if their orders which are more Production & operation managerment powerful and their capital which pay in advance for its subcontractors will cost less than both Dell Implications long time research and development force Dell will slow evolutionary roots lead to no more alternative designs and other products At the same time by a majority of Dell orders are made directly through the internet so when the incident took place Internet will also be given to influence the operations of Dell not to mention the competition easily hire hacker stole customer information is unavoidable When the components depend more than 80% of independent provider units Dell will easily get stuck when sources become attractive and lead to pressures pushing prices up III CONCLUSION In the production environment of business and the current global competition, it still retains its value We have to identify change, forecast 10 Production & operation managerment change, creating the vision for the future, and design and strategic planning for adaptation and change management, this decides the success or failure for each business With Dell strategic group, we saw the effectiveness of strategies in response to change and meet the tough demands of the market, and it was one of the main factors that make success and development as the company today REFERENCES Lecture of Dr Le Hung Phong Production & operation management book International MBA program – Griggs University 11 Production & operation managerment http://ecommerce.gov.vn/311-779/cung-ung-hang-hoa-trong-thoi-daiinternet-phan-1.vhtml http://tusach.thuvienkhoahoc.com/wiki/Chi%E1%BA%BFn_l %C6%B0%E1%BB%A3c_c%C3%A1ch_m%E1%BA%A1ng_h %C3%B3a_c%C3%B4ng_nghi%E1%BB%87p_%28Tr%E1%BB %B1c_ti%E1%BA%BFp_t%E1%BB%AB_Dell%29/Ph%E1%BA %A7n_2 http://www.doanhtri.vn/article/13-quan-ly-lanh-dao/dell-va-nhung-baitoan-chien-luoc.aspx 12 ... Nashville, Tennessee, Chesapeake, Roseburg, Oregon, Twin Falls, Idaho, Oklahoma City, Oklahoma, San Salvador, El Production & operation managerment Salvador, Glace Bay, Nova Scotia, Panama City,