Starting with $1,000 in 1984, Dell Computer Corporation has grown from its founder’s dormitory room into a global giant that dominates today’s industry. Nowadays Dell is No. 1 in desktop PCs, No. 1 in the United States in low-end servers, and the country’s No. 1 Internet retailer as well. Since the start of the company almost twenty years ago and its first overseas expansion in 1987 (to the United Kingdom), Dell has grown quite a bit. Now it is a $32 Billion company, operating in over 180 countries with six manufacturing facilities around the globe.
Michael Dell’s famous business model made his company the world’s premier computer maker. The direct business-to-consumer model, which is usually adapted and applied to all of the countries where the company acts, is the distinct feature of the company. (a) The business model (way of working) of Dell Is this model, built by Dell in the 80-ies, willing /able to adopt to country-specific preferences?
Nobody in the world could make computer hardware more efficiently than Dell. Inventing and successfully implementing the “Dell direct” business model brought many advantages with: no more unnecessary costs, i.e. no agenda other than giving the customer what he or she wants1., no middlemen to eat into profits2.., no inventory3. (these are the three guiding principles/golden rules at the company).
1. Direct relationships with the customers allow the management to know and forecast the market better. In time, this customer-focused business model became the key differentiator for Dell. 2. With no middlemen, there is a direct forecast about where the market is going. 3. The power of the model is also in substituting information for inventory. As result of using relationship marketing, the enterprise always have up-to-date information about demand in the market, so it can more accurately tell to its suppliers when and what to manufacture (just-in-time inventory control). This process has enabled Dell to operate with four days of inventory (no more non-working inventory!), whereas its biggest competitors hold over 80 days of inventory.
Besides all of these, the Dell model also aims to minimalize spending on R ; D (Research and Development). Dell engineers have filed almost 1.000 patents, but they tend to be for process improvements, not product innovations. Leaving the costs and the risks of innovating to others enables Dell to offer computers and additional services at irresistible low prices. So when it comes to price, Dell can compete with anyone. “Dell is all about improving the value-chain cycle.”
The company’s physical factories and virtual data warehouses have overcome the traditional supply chain; what he now calls the “value chain”. It still moves computers and parts around the world, however more cheaply and efficiently than anyone else did it before. “We have a pretty simple system,” one of Dell’s managers said. “The most important thing is to satisfy our customers. The second most important is to be profitable. If we don’t do the first one well, the second one won’t happen.” This philosophy determines the whole model and it runs the entire length of the value chain.
Since customer needs and the market itself constantly changes, the model is not static. When entering a foreign market, for example, it always faces a big challenge. In some of the new fields, Dell’s PC success has opened doors, while in others not really. Every step the company made, meant a new challenge for the model. Dell’s survival and success has depended every time on its ability to adapt, integrate, and understand. In Dell’s case, adapting means customization (customization is Dell’s special concept: customizing the products to suit each customer).
Right because of the 1st golden rule (focusing on consumer’s needs and staying steadily in touch with customers), if the market is mature enough to enter it, the entire system might be flexible enough to be able to adapt to local conditions. However, Dell’s customers communicate and buy directly from the firm (www, voice-to-voice or face-to-face) there could be still some country-specific problems with the “Build-to-customer order” model.
In case of China, for example, the following factors hindered the proper running of the model: Chinese were uncomfortable with credit card sales, access to the Internet was expensive as well, software piracy, national PC vendors were promoted by the government etc. Reducing the number of these hindering circumstances, a company should always carry out a deep market research (PEST-analysis could be as well) before going international.
(b) “Global”- and “multinational companies” (MNCs) Is Dell a MNC or a global company? Explain it! According to the definition a global corporation1 “is a company, operating with such consistency across its markets or areas of operation that it appears to treat the world, or major region within the world, as a single market.” A multinational company (MNC)2 whereas is “a company that operates in a number of countries and adjusts its products and practices to each country or group of country.”
Dell’s Direct Business-to-Consumer model is not an American model. It is neither a German, nor a Japanese one. It is a global model. When Dell expands globally the model is tailored to match the unique customs inherent in each country and region to ensure success.
This is Dell’s global model tailored to each market. This is the strategy also applied in Dell’s global e-market operations as well. For example, the enterprise has almost 80 country-specific sub-websites (opening from the main one) tailored for local business: in local languages and in local currency. In some cases prices, product offerings, distribution system, or even marketing promotion are also tailored to the different national markets.
Part of adapting to customer needs is providing a high standard of global quality and operating procedures for global customers. By making consumers satisfied, more than 26.000 employees around the globe work on the good reputation of the firm. The headquarter helps control costs globally by strategically locating their manufacturing facilities. Dell serves Europe, the Middle East and Africa through its manufacturing facilities in Limerick, Ireland. The plant in Xiamen, China serves that enormous market. The plant in Malaysia serves the rest of our Asian markets. Another plant in Brazil serves the markets throughout Latin America.
WHY SHOULD A COMPANY INTERNATIONALIZE & WHICH FACTORS LEAD TO THIS DECISION?
No matter where you are – either in your home country or in a foreign one – setting up a business is always risky. Going abroad, of course, is always more risky, than staying at home. In such case, you have to be aware not only of their own country’s regulations, but also those of the other countries involved in the business transaction. To go or not to go? – it might be the question, but the goal is always the same: make as much profit, as possible.
Before deciding to go international, it is essential to have a clear picture on your would-be market. With the help of the so-called PEST-analysis you can get information on the Political, Economic, Social- and Technical background of a country or a region. After analyzing the macro-environment, the much closer microenvironment should be also explored (SWOT-analysis). If everything is all right with these two multiplied with four factors, only in that case is it advisable to take into consideration going abroad.