Dissertation on how customer values lead to competitive advantage. Case study of Dell
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The personal computing industry is one that is constantly evolving and fiercely competitive. Few players have been able to achieve long-term success and this is reflected in hugely changeable industry market shares. The lucrative exceptions to this rule have emerged to lead and define the market through marketing innovation as much as product innovation. In a market where success or failure has historically been dictated by very practical product considerations rather than brands, market leaders have recently strived to develop very unique and powerful brand identities and marketing models (Temporal 2011). The importance of considerations such as customer engagement and identity means that marketing and distribution strategies have largely become intrinsically linked as a cohesive means to provide customer value. This is exemplified in the case of Apple, where recent popular saturation of the portable hardware market made their products a must have whilst huge distribution and sales efforts met unprecedented levels of demand. Effective links of this kind are found to be hugely beneficial and when coupled with an efficient, useable offering in terms of products huge profits can be garnered (Kuo 2008).
Whilst Apple is likely the contemporary paradigm of these trends in the industry, it is neither the originator nor the most academically telling case. Dell Computer Corporation can be seen to have started this unique form of brand identification, since it’s foundation in 1984 its business model has intentionally differed from the rest as it was one of the first to market directly to its customers circumventing the traditional distribution channel of using retail distributors to supply the end consumer. This allowed the company more control over its reception by the consumer at the point of sale providing tailored value to its customers. In turn this provided Dell with the opportunity to build a drastically different brand identity in an industry where such things were previously considered neither available nor necessary (Magretta 1998). Furthermore, this direct marketing model means that customers can customise their purchases in a way that fully reflects their needs and desires.
An integrated corporate sales strategy such as Dell’s involves a number of elements including marketing, price positioning and logistics; as such equally integrated holistic consideration of objectives, goals and policies is demanded (Andrews 1980). Whereas a soap company, for example, might have a fairly independent sales and distribution strategy, the likes of Dell cannot. Before Dell the computer hardware industry, a small and emerging industry in 1984 approached this fact by simply avoiding or minimizing marketing considerations to concentrate on practical issues. Analysis of Dell’s historical impact on the market and its structure (Fields 2004) shows that integration of marketing and distributions channels was a revolution which saw ideas of branding and corporate identity take off in the sector. In addition to this Dell integrated the Internet into its revolutionary business strategy at a fundamental level, effectively reaping the rewards of two major innovations in one.
At its outset Dell sharply defined it’s offering; directly providing its customers with high performing computing products at cost effective prices. Cutting out many of the middlemen by integrating distribution and sales within the company. This strategy appears to have been successful as it led Business Week to cite the business as one of ‘the world’s 20 most innovative Companies’ (McGregor, 2006). A broadly positive picture emerges, one, which many have analysed to break down the key strategies (Kraemer et al. 2000) and external factors (Barua et al. 2000) of success. There are no shortages of studies exemplifying Dell as an industrial paradigm or a case of incredibly effective differentiation (Grant 2005) however this success story does not continue today.
1.2. Organisational Issues
In 2006, Hewlett Packard displaced Dell as the global personal computing market leader; it has also struggled with gaining market share in India and China (Albaum & Duerr, 2008). New technologies have caused huge challenges to the firm’s effective communication and reputation (Vecchio et al. 2011) resulting in lower levels of customer satisfaction and damaging the brand’s identity. Meanwhile even the core competences of the company have proved difficult to implement on a large scale; Dell’s famously strong supply chain has suffered from the interplay of national contexts, though Reis and Pena (2011) comment on how effectively this challenge has been met in their study of successful supply chains. Their study concludes that in a massively competitive industry, excellence in one area of the supply and value chain is much more important than all-round solidarity. Grinnel and Muise (2010) took a less positive view: Concluding their analysis of the companies production efficiency, competitive advantage, and decline they see a company that is too compromised by bad customer service and brand competition to truly maintain its position of global leadership. This creates interesting causal research potential.
The rise and recession of Dell as a market leader illustrates how every successful company has its respective strengths and weaknesses: In the case of Dell the competitive strengths from its unique approach to sales and supply brought about success, whilst weaknesses in expansion and customer approach may have caused the value gained from this strategy to fall (Albaum & Duerr 2008) which has injured the company on many levels.
It has been pointed out that there has been relatively little attention paid to the particular issues arising in distribution and marketing on the international scale (Clarke 2005). This is clear in the case of Dell: Whilst the causes and effects of Dell’s previous success were academically clarified, only the outcomes of the recent problems are clearly visible, there has been no summary analysis of the failed value strategy which caused these problems.
The arguments above present a solid case for reviewing Dell Computer’s recent challenges and responses to customer demand, illustrating an interesting typology of challenges facing the corporation. The past studies of Dell considered initially compliment the contextual view creating the potential for real, innovative and beneficial results if applied efficiently to specific issues of competition and value provision currently confronting Dell. There is perceivable value in this type of research relating to Dell.
1.3. Research Aims
The background and issues posed above set the precedent for a research project that would enable us to identify consumer values within the PC industry, and amongst Dell consumers; evaluate which one of these values contribute most to competitive advantage, and how these could be utilised for better growth. As a result, the following are the explicit research objectives this project would aim to achieve:
1. Identify the values which customers appreciate in Dell’s products and services
2. Evaluate which of these create the greatest competitive advantage or potential advantage for Dell.
3. Conduct an analysis of how Dell have worked to sustain these across the corporation and where they have failed to maintain their advantage
1.4. Rationale for Research
Undertaking a research of this sort could assist business researchers and managers to understand how a company once seen as a market leader in a particular field could fall from grace, by failing to capitalize on some core values. Dell was a market leader in the PC market, and lost to HP. Other companies (notably Apple) that have capitalized on their weaknesses have now risen as core players within the same market. This research could help similar companies avoid such mistakes, and capitalize on beneficial recommendations.
The potential value of this study goes beyond Dell’s specific context. The strategies have applications in the wider modern computer hardware market. They provide an assessment of the values of the computer hardware customer and can be used as a basis for effective and competitive customer offerings in the quickly changing modern computer hardware market. As such they can be interpreted on a wider scale by hardware manufacturers looking to expand and improve adaptively as well as by those looking to integrate operations abroad.
2. LITERATURE REVIEW
2.1. Organisational Environment
No organisation in the 1990s/2000s, regardless of size and market power, can pursue its goals in disregard of the business environment within which it operates (Fifield, 1998 pg xxxiii). A study of the organisational environment will usually provide information on the nature of competition as a step for organisations aiming to develop sustainable competitive advantage (Porter, 1980).
Porter (2008) asserts that instead of a company focusing on its immediate competitors as its primary source of concern, a more viable strategy would be to shift its attention to the other four forces: customers, suppliers, potential market entrants, and substitute products. This extended rivalry resulting from all five forces (as depicted in figure 1) defines the structure of an industry and shapes the nature of the competitive interaction within the industry.
He further postulates that an understanding of the competitive forces and their underlying causes would reveal the roots of an industry’s current profitability and also provide a framework for anticipating and influencing competition and profitability over time. A number of disagreements to this statement have been raised; a notable argument by Lynch (2009) in his critical reflection on Porter’s five forces theory, disputes the notion of categorizing all the forces as equal. A particular point was his emphasis on the superiority of the bargaining power of buyers against all other forces. He notes that consumers are the most crucial force that determines which organization wins the battle in any industry.
The presence of an insurmountable buyer power in an industry can shift the value creation considerably towards the consumers and away from the industry participants (Collis and Montgomery, 2008). They force down prices, demand better quality of products or services and could generally play industry participants against each other, all at the expense of industry profitability (Porter, 2008). Firms should therefore aim to create value by designing corporate strategies in a way that it attracts and keeps these customers (McKiernan, 2006), thereby ensuring their brand loyalty and establishing a huge switching cost between the firm and its competitors (Porter, 2008).
When new entries are diversifying from other markets, they can leverage existing capabilities and cash flows to shake up competition (Porter, 2008). Firms already existing in such a market which is being faced with such a threat can therefore thrive to strengthen their market base and customer segment, in order to make sure they do not lose their customers to competitors due to inaccurate marketing strategies (Vandermerwe, 1999)
Mason (1949) also noted that the prevailing market situation, the reaction of firms to this situation and product differentiation could also help explain competitive behaviour and the individual performance of these firms.
This competition between firms to serve customers has been in-grown as the very essence of modern capitalist economies and has thus intensified as firms seek to create sustainable competitive advantage in ever more maturing and saturated markets; coupled with increasingly demanding and knowledgeable customers (Hooley et al, 2004). Evans and Richardson (2007), therefore conclude that given the increasingly complex and dynamic environments within which most organisations operate and compete, the firm’s performance and subsequent success of its corporate marketing strategies would depend hugely on its engagement in environmental analysis. Therefore the importance of continuous assessment of the environment should not be underestimated, as the organisation should engage in a continuous process of gathering and evaluating environmental data.
However, a number of theorists (Ansoff, 1984; Piercy, 1997; Lynch, 2009) contest that an analysis of the past and present using these environmental and industrial analytical tools gives no clear indication whatsoever of the future. These arguments help emphasize the need for companies to respond to market change by continuously revising its strategies, thereby adopting a proactive approach to market opportunities and threats while still practising reactive operational approaches to inevitable changes in its macro-environment and industry (Lynch, 2009).
2.2. Customer Driven Business Strategies
Collis and Montgomery (2008) state that a firm seeking to develop a sustainable competitive advantage could do so by investing in new resources, upgrading existing firm resources or leveraging existing resources in order to capture new markets. However, a corporate action of this magnitude is embedded in the core of its main strategic objectives (Lynch, 2009). Strategy can thus be viewed as building defences against the competitive forces or finding a position in the industry where these forces have lesser impact (Porter, 2008).
As more organisations become customer-driven and as customer behaviour continues to evolve constantly (Hooley et al, 1004), there is a constant need to continuously re-evaluate the firm’s strategy, structure and conduct based on customer expectation. As a result, a customer driven strategy would mean that every function of an organisation is directed towards customer satisfaction (Levitt, 2008).
Therefore, for an organisation to be economically effective, there is a need for a strategic fit between an organisation’s strategy, structure (Galbraith and Kazanjian, 1986), conduct (Panagiotou, 2006) and customer expectation (McKiernan, 2006). In increasingly demanding, crowded and competitive markets, there is no substitute for being market oriented; which could be implemented by staying close to customers, understanding their needs and requirements and positioning the firm’s resources, assets and capabilities to deliver superior value (Prahalad and Halem, 1994).
Good corporate strategy then requires continual reassessment of the company’s scope, continuously evaluating how the company’s valuable resources may be upgraded or leveraged across these changing markets (Collis and Montgomery, 2008). An approach that underscores the need for a viable marketing strategy whose objective would be to translate the business strategy into market activity. Thus emphasizing the coherent relationship between business strategy, consumer behaviour and marketing strategy (Fifield, 1998). Overall there are 2 ways in which companies can achieve customer driven business strategies and these are the market driven and resource driven business strategies
2.2.1. Market Driven Business Strategy
The market based view of corporate strategy has certainly been the earliest and most primitive viewpoint in the field of strategic management for organizations to gain competitive advantage and sustainable growth. De wit and Meyer (2004) claims that to achieve sustainable growth and competitive advantage firms should take outside-in approach by taking external environment as its core and starting point in order to formulate and build effective strategy. Panagiotou (2008) goes on to state that firms who adapt market based perspective are objective and rational and are driven by external market with their focus on planning and positioning. In addition to that Day, (1994) states that it can be argued the successful companies are externally oriented and market driven as they focus on exploiting the particular segment of the market by targeting the price sensitive consumers. Jaworski and Kohli, (1993) states that “for successful companies markets are leading and resources are following”. He goes on to say that market driven company’s strategy begins with the `’analysis of the environment to identify attractive market opportunities and target potential customers”. However he argues that it’s also important that “once these customers have been won over and market position has been established, the firm must build on its position by adapting itself to changes in the environment”. On the other hand, Mintzberg, et al., (1998) refers market based approach as the “positioning approach” because this perspective of strategy focuses on market positioning and responds to external developments.
Porter, (1979) “suggests that companies that focus on a particular niche and companies that strongly differentiate their product offering can achieve strong and profitable market share”. Buzzell and Gale, (1987) emphasizes that the position of being a market leader is particularly important, as companies with the high market share benefit from economies of scale. Porter, (1979) argues that there are two important factors that firm must underline in order to choose a competitive strategy.
2.2.2. Resource Driven Business Strategy
The resource-based view of strategic management draws upon the resources and capabilities that reside within the organization in order gain competitive advantage. Ormanidhi and Stringa, (2008) state that firms are considered to differ in competitive advantage and in operational efficiency as a result of their capable and acquired internal resources. According to Johnson and Scholes, (2002) it is the distinctiveness of organizations strategic capabilities that provides them an edge to achieve extraordinary profits compared to others in the market where the strategic capability is the sufficiency and suitability of the resources and competences that organization possesses in order to be successful. Resources can be thought of the inputs that enable organization to carry out its activities and can be categorized as tangible and intangible where tangible are the physical assets that organization posses such as plant & machinery, finance and human resources while as in tangible resources are the resources that are developed by the organization over the period of time such as knowledge, culture and brands. Johnson and Scholes, (2002) state that whilst possession of resources is important, it’s the way the firm uses its resource or in other words it’s the efficient configuration and arrangement of the resources that provides an organization with competencies.
2.3. Organisational Value & Competitive Advantage
2.4. Situation and Theoretical Foundation of Research Question
Kraemer et al (2000) look at Dell’s business strategy as applicable to its product life cycles, analysing how dynamic supply, production, distribution and retail strategies work in union thanks to business integrated computing systems to get the product to the end customer in minimal time. As a result product devaluation and excess stock issues are minimized, both important factors in the modern hardware industry where advancement and obsolescence happen quickly. In conclusion a dynamic, flexible product strategy and approach to customers in a fast moving market is key; the direct customer relationship allowed by sales integration is also a major benefit.
The study of Barua et al (2000) retains the focus on dynamism whilst looking to both external and internal success factors to build a picture of core competences necessary for success in the industry. The extensive research sponsored and contributed to by Dell, reveals eight necessary competences: system integration, internal, customer and supplier orientation of IT backed up by customer and supplier processes and product cycle readiness. The report focuses on analysing the evidential benefits through huge amounts of case study research to support the specified eight-point hypothesis.
These two studies are concise exemplars of a huge school of study focused on analysing Dell’s success story, they both see IT and integration as Dell’s core competences despite having varied perspectives and methodologies. Kraemer and Dedrick have also considered the efficiency of Dell’s globalised production (2002), poignantly only mentioning the less successful global consumer approach side. Others have studied the same success story from the point of views of marketing (Jeremy 2009), PESTLE source categorised strategy analysis (Schmid et al 2005) and stakeholder return of investment (Tesoro 1998) all searching for the reasons for success.
It seems that academic analysis of the reasons for Dell Computer’s success is a road well travelled. Recommendations for further research and follow ups mainly consist of more specific studies or extensions to existing studies and there exist relatively few opportunities for innovative and valuable contribution. One very real opportunity does emerge for expanding on this solid body of work: Kraemer and Dedrick (2002) specifically considered the implications of the increasingly globalised strategies of Dell’s once US centred business model. Looking at how Dell attempt, and sometimes fail, to provide the same integrated value offering to customers overseas as those in the US enjoy. Often their competitive advantages in terms of flexibility and lead time are still present, but less applicable to and appreciated by foreign and modern customer bases.
Whilst all the aforementioned scholars had the academic perceptivity to cover the whole of Dells business as it existed at the time of writing, earlier studies were considering a more US centred business and even more recent research has rarely looked in depth at the specific challenges and opportunities presented by the new market and customer context.
On the other hand a different company in the same industry has received far more attention from this perspective. Whereas Dell emerged from the US national market as a success and used its resources and core competences to ‘go global’, Apple’s success story has peaked more recently in a mature global computer hardware market, as such the success was very much a global one. Similarly to Dell, Apple is an American company on the global stage but its prosperity hit its zenith more recently, for this reason most contemporary analyses of Apple are positive in their predictions, definitively considering the interplay between individual customers and global scale supply and marketing models that confront multi-national hardware distribution corporation. Mention has been made of Kuo’s (2008) research on Apple inc.’s brand equity; it is a good example of such study: It considers the challenges of identifying the Apple brand in China and how effectively Apple has dealt with them. It is an interesting example of a case study of a brand’s customer interaction in a country other than that of the company’s origin revealing the potential benefits of such a methodology.
Yoffee and Kim’s rhetorical and financial-statistical assessment of Apple Inc in 2010, published in 2011 illustrates this story very clearly. Beginning with a rhetorical history of a fairly successful company with modest overseas interest it finishes with a strategic and statistical analysis of the company’s recent boom period post 2005, highlighting how the company’s market cap and share price have rocketed in this period whilst branding strategies and product-customer orientation poignantly took their products from specialist kit to global must have item. For comparison, if we look at Dell’s share price and market cap we see a peak around the turn of the millennium levelling off and gradual decline since 2005 (Source: Nasdaq.com), with low R&D spending and difficulties expanding fully into markets that were once just importers of the brand being blamed for the gradual decline. The link between brand misidentification, competitive advantage replication and decline is reinforced when consideration is made of global investment and expansion policies: The ‘Dell Inc. global development’ service began in 2001 around the companies evident peak of prosperity, a review of the service’s international investment and expansion (Szymanski et al. 2007) shows that as it grew the company fell from grace and prosperity. This study provides solid, valuable information on the company’s place in the market but provides no causal analysis; a look at the specific challenges presented by the demands of the modern customer could as such be very revealing.
To summarize the theoretical and practical situation in which this study will be founded Dell is one of a number of huge American computing success stories. During its glory days the factors and strategies which created its success were analysed from a wide range of angles and an incredibly strong set of core competences were found to be the foundation of its business strategy, creating huge and unique competitive advantages. Around the turn of the century the hugely prosperous company began to focus on holistically replicating its successful business structure abroad allowing for easier distribution and integration in regional contexts. However in the process focus on the core of the company and its competitive advantage was compromised, R&D spending and customer appreciation fell reducing Dell’s incredible success. The outcome was that, since the millennium, the company has not proved as successful as was expected. Not only did peripheral problems reduce the company’s impact (Vecchio et al 2011) but the core competences that had given it strength in its old form failed to succeed both on an international scale (Reis & Pena 2011) and at home (). While this fact has been acknowledged (e.g. Szymanski et al. 2007) little consideration has been made of the causes of Dell’s reduced ability to make its core competences pay off. As such this paper will aim to answer the following question:
Core Research Question: How have Dell worked to sustain a competitive advantage that is valuable to customers and how might this issue be better approached in future?
2.5. Development and Derivation of Research Methodology
Considering the company from the perspective of Porters (1980, 1985) competitive advantage model, Dell was attempting to continue an already successful differentiation based competitive advantage strategy on an increasing scale. Thus it seems likely that change in the context of demand side issues such as customer satisfaction and value provision are likely to blame, rather than core resources and competences. It seems that the best way to confront this new and decisive challenge to Dell’s former supremacy is to review what porter called the value creation side of Dell’s competitive advantage, where the company’s internal superior strength are turned into value that can be perceived and appreciated by the customer.
This part of the competitive advantage strategy was once an area in which Dell were acknowledged to have achieved great success (Grant 2005) but the history of investigation into the company above shows that this is no longer so. In the same chapter where Grant made this assessment of success he also related a particular area of strategic assessment, which is focused on clarifying, analyzing, attaining and retaining it. In his review of this type of assessment he emphasizes how difficult but important it is to quantify, placing it in contrast to the obvious measurability of cost advantages and emphasizing the importance of considering a range of customer views and fundamental market values as part of a value analysis. Whereas narrow, specific customer value analyses of particular product views or particular segment views is very important for some levels of strategizing; broad-based assessment of customer perceptions helps to create innovative differentiation advantages and make space in a crowded market on a large scale (Mathur & Kenyon, 1997). Considering the aspects of a company’s offering on a fundamental level has been shown to be important in highly competitive industries and in the case of the computer industry in particular (Goolsbee, A. 2003). Supply innovation becomes even more important in the context of the financial downturn and finding new value offerings in order to make a broad approach to the market is more important than ever (Reis & Pena 2011) Indeed broad based views provided by analysis techniques such as the value curve can also help Dell to regain valuable market space and broad based competitive differentiation advantages that it pioneered and has since lost.
The value curve, whose major proponents are Kim and Mauborgne (1999, 2005) is a way of graphically reviewing assessments of a company’s offering by either customers or other stakeholders. It can emphasize areas of strength and weakness in the company’s offering, illustrating new ways to translate competitive advantage into customer value and revealing potential new benefits. The customer views of comparative quality, can be used as a basis for generating new strategic options for the company in question, revealing potential that more traditional analyses of specific offerings may not. This method will show factors where competing retailers excel over Dell, reviewing these will form a solid basis for creating a strategy for competing on all fronts, with all areas of the market (Kim & Mauborgne, 1999). As such this approach will aid Dell in restoring and retaining the almost industry wide advantage it once held.
Whilst specific surveys might highlight individual areas where the company’s offering might be improved on the small scale, this method presents a more general picture of the areas of a company’s value offering might need improvement to be truly and effectively competitive. It also goes beyond the superficial views to show the underlying values and preferences which inform and often dictate customer purchase decisions (Grant 2005, p. 208). Such an assessment shows which values could or should be eliminated or reduced for cost efficiency or differentiation and which should be created or maximised for better profits and more appreciable and differentiated value provision (Kim & Mauborgne, 1999, p. 85).
A review of the past literature on Dell presents a company which quickly gained huge success and status in the industry thanks to innovation and differentiation of their offering. However more recently this advantage has been allowed to ebb away, whilst the company still retains its incredible competencies in terms of flexibility these no longer seem so relevant to the customer. This study will look to identify the reason for this apparent falling significance and to propose strategies which might help to resolve this. On a wider scale this case study will provide interesting insight into the real values that customers hold important in the computer hardware industry and will go some way to illustrating how they might be more concisely met.
The introduction and literature review have expanded on Dell’s recent fall from grace, and the reason being that it failed to capitalize effectively on changing market trends and consumer behaviour. This methodology chapter would outline the data collection and analytical steps that would be employed in answering the following research question: “How have Dell worked to sustain a competitive advantage that is valuable to customers and how might this issue be better approached in future?”, and also achieve the following research objectives:
1. Identify the values which customers appreciate in Dell’s products and services
2. Evaluate which of these create the greatest competitive advantage or potential advantage for Dell.
3. Conduct an analysis of how Dell have worked to sustain these across the corporation and where they have failed to maintain their advantage
3.2. Research Philosophy
Understanding research philosophies that are adopted within a particular research is useful as it aids in clarifying how the research would be designed, and helps to showcase on the best approach in conducting the research.
The epistemological approach being utilised in this study is positivism, which focuses on observations and generalisations of social reality (Easterby-Smith et al, 2008). The positivist vie adopts a more objective approach in observing and approaching phenomena in the real world. For instance, due to the positivist approach being adopted, the research would be conducted without the researcher being invididually involved in collecting or interpreting data. They would be external to the researcher, and analysis would be based on methods that are not prone to interviewer bias. Accordign to Easterby-Smith et al (2008), a non-positivist research is not objective, therefore qualitative results gathered could be interpreted falsely based on the reader’s point of view.
3.3. Research Approach
Based on recommendations by Saunders et al (2009), positivist philosophies usually adopt a deductive approach in gathering and analysing data. By adopting a deductive approach, this study would aim to answer the research question and achieve it’s objectives by utilising previously published theories and models, as analytical models. The deductive approach represents the most common view of the nature of the relationship between theory and research and results gotten from this approach are developed through logical reasoning (Bryman and Bell, 2007). As a result of the deductive approach, Dell’s competitive stance could be analysed using already strategic models such as those of Porter and also PESTEL (for environmental analysis), as opposed to an inductive study in which new theories would need to be made up.
3.4. Research Strategy
This study involves the empirical investigation of a particular contemporary phenomenon within its real life context using multiple sources of evidence; therefore, the most befitting strategy, as postulated by Robson (2002) is a case study strategy.
Robson (2002) asserts that the case study strategy would be useful if the aim of the study is to gain a rich understanding of the research perspective and the process being endorsed. Therefore as this study aims to understand the Dell’s competitive advantage and their relative fall from grace, then based on this argument, a case study would be most effective.
The case study approach has been attacked for its lack of generalisability and for the fact that they produce huge amounts of data, which allow researchers to make any interpretation they want (Easterby-Smith et al, 2008). Therefore Oppenheim (2000) argues that the case study lacks the ability to generate objective answers to questions asked. Robson (2002) in response to these criticisms, suggests that case studies should have a clear design, which is be tailored specifically to the research question.
Easterby-Smith et al (2008) further asserts that the case study strategy should be less concerned with issues of validity and generalisability, but more on uncovering rich data that could best explain the life and behavior in organizations and groups. These assumptions illustrate why the case study approach was chosen as a suitable strategy for this research.
Due to the fact that the case study approach is being adopted in this work, the PESTLE framework would be used to gather and more readily analyse the data.
3.5. Conceptual Framework
The most definitive approach to the idea of competitive advantage is the functional one laid out by Michael Porter in his 1980 and 1985 works. This model illustrates how unique capabilities and resources can be gradually turned into advantages which satisfy a company’s customers in ways that no one else can. In the years when Dell was at the forefront of the industry it was often said to exemplify solid competitive advantage and customer value provision in the hardware industry. Grant (2005), among others acknowledged this advantage as a solid and importantly broad-based one spanning different segments of customers. He proceeds to advise that value curve based assessments offered a good way for less successful businesses to achieve or review a broad-based competitive advantage from the point of view of the customer.
Since Grant’s exemplification of the company, Dell has had falling success in the computer hardware industry which has been blamed on the company’s decreasing an ability to turn its competitive advantage into an offering that modern customers value (Reis & Pena, 2011; Vecchio, 2011). This change in fortune means that whilst Dell still has the competitive advantage that Grant, Reis and Pena identified it seems less relevant to customers making the company a good candidate for case study assessment of broad-based competitive advantage and value provision. In conclusion the conceptual framework used in this study is best defined generally as an assessment of the value creation part of Porter’s (1980, 1985) competitive advantage model and more specifically as a value-curve based analysis of broad-based customer value provision as laid out by Kim and Mauborgne (1999) as well as Grant (2005 pp. 279 – 283).
3.6. Data Collection & Analysis
The three objectives above represent the overall aims of the study; they are also consecutive requiring three individual stages in the methodology. Each objective and the approach used to achieve it is outlined below as three separate yet linked stages; collection of data, analysis of data and finally presentation of conclusions in the form of strategic guideline which is both specific to Dells case and more generally applicable.
3.6.1. Data Collection: Identification of Customer Values
Before consideration can be made of the way Dell provides value for its customers it is important to recognise what it is that customers value in Dell’s products and services. Due to time constraints, a survey allowing Dell’s online customers to be questioned on their values could not be completed. Therefore, secondary analysis of information available on the company’s websites and other sources were retrieved, and presented in the form of a PESTLE analysis. This also covered events in the macro-economy, industry and across different regions. However, in order to avoid a “general” data collection activity, the PESTLE analysis were concentrated mainly on Dell’s operations, and not that of the PC industry.
Whilst it was straightforward to compare Dell’s offering with its closest competitors it is often noted that the most revealing and innovative forms of value curve analysis are often those which consider a wide range of substitutes (Grant 2005 pp. 279 – 283, Kim & Mauborgne 1999, 2005) including different ways of gaining the service. Therefore the PESTLE analysis also considers growth in other PC areas, such as in tablet computing and smart phones, as this may be the major areas creating value for customers in today’s market and reducing demand in the PC business.
Judgement and categorisation of each environmental factor is based on three or more data source points from at least two source materials as explained in the methodology. The source material is laid out, listed according to the factor to which it relates, in Appendix 1 categorised according to pestle categories, the original sources are referenced via the numbers in brackets at the end of each source point sentence, these refer to the PESTLE source list in Appendix 1.7. Appendix 2 contains the full, populated PESTLE analysis table structured as described in the methodology. Below the evolution of the analysis according to findings is laid out, followed by a rhetorical overview of each thematic area of the environment as revealed in the analysis.
3.6.2. Identification of Issues and Factors
The PESTLE environmental scanning method splits the areas of environmental influence down thematically. Beyond this basis, previous studies and study guidelines laid out by Costa (1996), Morrisson (2009) and Turner (2002) were used as aides (see methodology) in identifying and defining the issues and factors which were to be considered in this analysis. However these are not entirely conclusive or definitive methodological rules and the context and objectives guided the selection of factors in the study, often necessarily.
The most apparent occurrence of this contextual definition is in the geographical separation of certain factors into South America, Asia Pacific and EMEA; which stands for Europe, Middle East and Africa. Michael Dell identified these three unique global regions of operation definitively and differentially in his 2007 Fiscal Review as CEO. This was a useful distinction for him to make for reviewing Dells operations, it is also useful when considering certain regionally or nationally defined factors such as taxation for example and has notably been taken on by Kraemer and Dedrick in their (2002) analysis of Dell’s production and supply network. It was felt to be equally applicable and useful here in defining certain factors by region to prevent regional differences being overlooked, a good example is regional infrastructure: In the Asia-Pacific region poor international trade institutions as well as variable levels of national transport and communication infrastructure threaten Dell’s operations, whilst in contrast Europe provides an expanding free market and strong national infrastructures, creating opportunities for Dell.
3.6.3. Modification of Data Recording During Compilation
Clarifying the 75 original factors into strengths, weaknesses, opportunities and threats allows for straightforward re-categorisation of the factors into a SWOT analytical model, allowing strategy to be well environmentally situated. However, it quickly became evident through the data input that simply sorting the factors into these four categories did not allow for enough specification of the implications and that categories were needed to encode certain factors as having multiple implications.
For example source analysis of the factor ‘International pressure groups’ found that dell was well viewed by Greenpeace (Greenpeace 2011), and that it worked with other popular corporate pressure groups such as Product-Red ™ (Dell Inc. 2011a). The implications of this are that Dell is strong in this area and that the increasing prevalence of such pressure groups presents significant opportunities for building on this strength despite some threat from hostile pressure groups (Dell inc. 2011b). Because of this factor and others like it, it was felt that inclusion of the ‘strength / opportunity’ (S / O) category in the factor implications column of the table would add significant value to this area of the study by virtue of increasing the level of specification possible.
Similarly a ‘weakness / threat’ category was included to code for the opposite scenario where negative external factors such as hostile media views compound internal image and legal problems. Inclusion of an ‘opportunity / threat’ category was also felt necessary to allow for specific encoding of environmental factors such as the economy in Europe, Middle East and Africa (EMEA) where new and increasing free market opportunities (El-Agraa & Ardy 2011) are offset by the problems of economic recession, corporate constraint and falling revenue (Dell Inc. 2011b). The situation in this area has unpredictable implications for dell and may go either way depending on Dell’s response, meaning that coding simply as an opportunity or threat would have been insufficient.
3.7. Reliability, Validity and Generalizability
There are some issues of bias and error arising from this method of data collection, as the researcher could avoid some potentially important issues by failing to research adequately or analysing the information found. If a survey were used for example, it would be near impossible to ignore collective views of several respondents. The research avoided such potential errors or bias by adopting the approach stated earlier: if a particular information has been found in one or more several sources, then it would be recorded as one of the factors affecting or contributing to the organisation.
Issues of ethics are minimised by the fact that the information collated were from readily available information over the Internet. No respondent was interviewed or surveyed during the course of this research.
A survey allowing Dell’s online customers to compare the service quality and value offerings of Dell with other competing purchase options could have been circulated through customer forums. This could have been used as an instrument for collecting data on customer values with the intent of creating comparative value curve analyses, rather than focusing solely on Internet research and secondary studies.
Also, time constraints limited the extent and depth of the research adopted within this work. If the researcher had more time, an extra emphasis could have been placed on obtaining primary data from hundreds of participants and analysing them using statistical methods to allow for univariate and multivariate basis of recommendations.
The findings have been gathered based on methodology depicted in the previous chapter and outlined as follows. The findings are organised into Political, Economical, Socio-Cultural, Technological, Legal and Environmental factors that have an impact on Dell’s competitive values.
4.1. Overview of Political Findings – See Appendix 1.1
As Dell Inc. expands and consolidates its operations in more and more countries across the world the company encounters an increasing variety of political contexts. New unprecedented political risks and uncertainties come to affect the company meaning that net impact of political factors was generally found to be increasing. This is acknowledged in Dell’s 10K form for 2011, particularly in relation to recent expansion into China and India, where the political context is hugely different from what Dell is used to in the US and EMEA areas (Dell 2011c). A considered yet dynamic and varied reaction strategy is necessary to accommodate these various contexts, maximising the opportunities presented by favourable governments, whilst minimising the threats of hostile ones. Strategic reaction to these issues will become rapidly more complex with expansion.
The threat to the company of being affected by involved political conflict or bad inter-country relations is fairly low in the current, fairly stable political environment, though the company’s exposure to these threats increases with expansion as considered above. The implications of a serious conflict in a focus country would be serious but thanks to a reasonably high level of stability in Dell’s operational centre nations such an issue is unlikely to arise. For this reason Dell, like many companies, actually focus their expansion in politically stable nations (Campbell 2007). Political stability and cooperation creates a new set of factors for consideration, international and global institutions can be beneficial, benefiting global networked corporations like Dell through allowing easy trade and international operations for example in the EU (Kraemer, K. L. & Dedrick, J. 2002). But the likes of the UN can also constrain multinational corporations in ways that a national government can’t
The internal political stability of the Dell Corporation is arguably more threatening to the company and its expansion than the outside situation. The company’s leadership has taken serious hit recently. In July 2010 Michael Dell agreed to pay a $4 million penalty to settle Securities and Exchange Commission charges of disclosure and accounting fraud in relation to undisclosed payments from Intel Corporation. Dell Corporation and two other company executives also paid a total of over $100 million to settle all the charges. (U.S. Securities and Exchange Commission 2010). As well as a massive financial hit this has serious knock on effects on image, employee motivation, company stability and interactions with political institutions which are large clients as well as legislators (Campbell 2007). This issue is a serious, integral weakness in the Dell Corporation with many threatening implications, dealing with it must be a high priority.
4.2. Overview of Economic Findings – See Appendix 1.2
The international economic environment in which Dell operates varies widely from region to region, different markets and different company operations make over-arching global definition and categorisation of factors and their effects inaccurate. For this reason economy and labour market factors have been defined regionally as already explained.
Dell’s primary regional market outside the US has been identified as Europe, the Middle East and Africa (EMEA), although within this region the European market massively and definitively dominates the others (Campbell 2007). Analysis of this market’s economic effects on Dell reveals a mixed, contrasting picture; increasing opportunities presented by the EU’s focus on building free-market infrastructure and new labour opportunities (El-Agraa & Ardy 2011) are offset by threats to Dell caused by the recession, the increasing cost of existing labour and rapidly shrinking profits (Dell Inc. 2011b). The Asia-Pacific region, notably including China, India and Dell’s regional centre of operations; Malaysia, may currently appear to be a low priority relative to EMEA. On the other hand it is a virgin market with much potential in the long term as well as the origin of many of Dell’s outsourced suppliers (Kraemer and Dedrick 2002). As such Dell already benefits from low labour costs, and could well benefit from the rapidly expanding markets so long as sales barriers such as lack of internet access and poor infrastructure are not allowed to compromise Dell’s performance (Wayne 1997).
The relatively small South American sector of Dell has seen significant revenue growth recently in contrast to the wider poor economic outlook (Dell 2011b). The regional chairman sees this as a strong asset pointing out that “Rio Grande do Sul is an excellent base of operations, its economic incentives to attract technology manufacturing companies to the region and its strategic location as an export hub to other South American countries,” (Mahoney 1999). This region is a strength for Dell but there is no avoiding the fact that it has a low impact on the company overall and is a low strategic priority partly because of Dell’s well established operations there already, there is no need for change.
Unfortunately there are a few problematic changes on the horizon for Dell’s operations in South America as well as the Asia – Pacific region: The Malaysian government has given Dell a five year tax holiday which will end very soon and the Brazilian authorities have provided similar tax easing (Wayne 1997), unfortunately Dell pointed out in its 2011 financial reporting (2011b) that these would both come to an end soon at a similar time meaning a cumulative, sudden impact on the company. Together with severe Chinese import and trade taxes a very dangerous outlook in terms of tax is evident in Dell’s international areas of expansion. There is little Dell can do about this other than negotiate and globalize its interests, both of which Dell is already doing.
The power of the company’s global supply and sales networks continue to be a major strength, and the economic outlook in general remains positive with a strong response from Dell.
Unfortunately many of these strengths are beginning to be mitigated and reduced by several emerging economic trends: First adverse global economic conditions have had huge effects on the hardware industry and on consumers, slowing down financial exchanges and reducing profits for Dell (Dell 2011b). In addition many competitors have taken on strategies similar to Dell’s direct online sales one, Consumer focused design used to be a valuable point of difference in the competitive industry, which once allowed dell to offer favourable tailored prices in the price war. But competition is now a major issue in a sector where the company was once alone (Campbell 2007) this takes away a major strength that Dell once held over its competitors and others in the industry, such as Apple, are now outselling Dell online (Kharif 2005). A further emerging problem with Dell’s sales model is that it does not work well in many of the countries into which it is expanding, in South America and India for example many people are purchasing their first computer and as such cannot access Dell’s online sales operations meaning that they are more likely to buy from shops where Dell does not sell (Campbell 2007). Despite all of these problems Dell still refuses to move away from its established and once superior business model, a company general manager saying that “Dell doesn’t have to move away from making boxes. It simply needs to keep focused on quality, price, and delivery” (quoted in Kraemer & Dedrick 2002 pp. 16). This may prove to be damaging in the future as this once superior approach to the industry and to sales is increasingly compromised.
Elsewhere in the company’s supply chain the outlook is more positive, Dell’s networked and outsourced production method remains a real strength with suppliers almost universally continuing to favour Dell, enabling reduced overheads and increased flexibility across the board (Kraemer & Dedrick 2002). Integrated expansion into the Asia Pacific region, where most of Dell’s suppliers operate will provide opportunities to build on this strength in future (Wayne 1997). This will remain a valuable core competence and a basis for frugal business practice expanding in the financially unstable environment which lies ahead.
4.3. Overview of Sociological Findings – See Appendix 1.3
The situation revealed through analysis of Dell’s economic environment is one of a once effective approach to sales becoming less effective in the changing modern context. The sociological situation is much the same; sociological motivations for purchasing Dell’s products were once strong, the importance of performance and job orientation once made Dell’s made-to-order products a social boon. Now though, stylised, branded and commoditised mass produced lifestyle products, such as Apple’s, are much more socially valuable than Dell’s offering (Carr 2005).
Because of falling home-user assessments Dell’s advertising and sales to businesses are now its major strong point: here user-tailored production is appreciated and production plants are major showcases that help sell large corporate customers on Dell as their supplier (Dell 2011c). In general computer hardware consumption is becoming more and more democratised, home consumers want simple effective, user friendly systems that fit with their social context, and business consumers want equally user friendly technology (Johnson et al. 2002). This means that, whilst Dell’s direct to customer sales focus is still useful, it is problematic because it is complex for both parties, it becomes less attractive to customers who demand simplicity whilst it still burdens the company with the requirement huge sales integration of sales in all operating markets (Kraemer & Dedrick 2002) whereas other companies who sell through retailers don’t have these problems. In an industry where consumers shell out large amounts for boutique high-end gaming machines, Dell’s offering may be vulnerable (Carr 2005). Whilst Dell’s organisational style still has notable strengths, consumer and buying access issues like this pose a real threat.
This increased competition and Dell’s loss of control of the direct to customer market causes increases in effective customer demand for the simple reason that customers in markets where there is a lot of choice demand more and more engaging products and marketing which is relevant to them (Chapman 2008).
Falling consumer relevance goes together with very damaging issues of fraud and misrepresentation to cause the media to view Dell as irrelevant at best and immoral at worst, Dell just lacks the Savvy media presence of competitors like Sony and Apple (Kraemer & Dedrick 2002). This damages the company’s image and whilst a strong social responsibility and ethical aspect of the image is beneficial (Rondinelli & Berry 2000, Greenpeace 2011) there is just too much risk from badly perceived and poorly identified products with potential flaws to view the social image as a positive factor overall (Dell 2011b).
There is as much damage to the company’s internal social structure as to its external image and claims of fraud can affect employees’ and potential employees’ company loyalty as well as their attitudes to work. This likely compounds the difficulty and uncertainty of decision making which is innate in a complex, widespread organization to make the internal situation very hostile (Duncan 1972). Fortunately other employment attitude factors affecting Dell’s workforce are much more benign, Dell is heavily involved in preparing young people for success in a globalized, technology-driven society and is well placed to take advantage of a labour force which is both increasingly demanding and increasingly skilled. This advantage has been acknowledged by Dell and independent analysts alike (Dell 2011d, Kraemer & Dedrick 2002) and is a focus which will allow Dell to take full advantage of increasing global talent, acquiring “some of the best storage, systems management, cloud computing and software capabilities in the industry” (Dell 2011d, pp. 3).
Social events outside the company are equally problematic; the economic downturn has caused adverse global economic conditions and instability which harm the business in ways beyond the straightforwardly financial (Dell 2011b). Consumers have changed to buy less and the image of the operations of large multinational corporations has suffered, Dell’s fraudulent activities (US SEC 2010) compound this making consumer hostility a real possibility. Recent major events have had generally negative implications though the problems caused are largely decreasing after the fact.
4.4. Overview of Technological Findings – See Appendix 1.4
The global computer hardware market is understandably an incredibly competitive one, both in terms of horizontal competition and vertical supply chain. Thanks to Dell’s widely spread business this has positive implications as well as negative ones: Cheap component sourcing from overseas has lead to a large number of end user oriented final system assembly companies like Dell, increasing competition and driving down the profit margins of those who do not provide an innovative offering to their customers (Johnson et al 2002). Fortunately this is not a fatal problem as Dell Inc. invests heavily in research and development and as such is generally ahead of the industry curve on the investment, research and innovation front reducing the implications of competition research. Also Diversification of the component technology supply market provides more options for outsourcing, companies with different technologies and competencies compete more and more to provide Dell with the best, most cost effective service (Mabey & Mayon-white 1993). This means that the price rises from competition at Dell’s industry level are mitigated by increasing competition among Dell’s suppliers. There are some competition factors and unmet demands which could act to reduce Dell’s competitive advantage in this area (Campbell 2007), however at the moment it remains strong.
Externally more and more countries are meeting complex computer hardware industry demands in terms of manufacturing. As such competition to attract companies to these ‘ready’ nations is increasing with positive implications for the companies in question including already discussed tax holidays and incentives which a network structured company like Dell can easily benefit from (Mabey & Mayon-White 1993). Innovative companies which have high levels of value added are particularly sought after by developing countries, because such companies can become well embedded economic and technological drivers for the nation in which they reside. As a nations manufacturing capacity and maturity increases offering incentives to high-technology companies and reaping the rewards becomes more and more important to progress (Pietrobelli & Rabellotti 2011).
Dell’s broad network of suppliers, research divisions and solutions providers enable quick, accurate, effective communication and the flexible implementation of new technology. But in order to remain successful good organization and implementation of new technology within the company, a solid yet dynamic corporate infrastructure is required. Dell in particular is heavily reliant on quick, accurate, effective communication and enabling technology (Mabey and Mayon-white 1993) to give it the innovative edge on opponents and to consolidate its supply network (Kharif 2005) so that it can implement new technologies across the board. Dell point out in their 10K form for 2011 that “ The success of product transitions depends on a number of factors that include the availability of sufficient quantities of components at attractive costs” (Dell 2011b) In this way Dell’s industry environment is something of a strong virtuous circle, but one which must be strategically managed and contributed to in order to be sustainable, because outsourcing supply does limit the company’s ability to implement new advances in production and component technology (Johnson et al. 2002).
Dell’s end products once had a huge market advantage; they were once more personalised, customized, varied and efficient than the offerings of most competitors (Kraemer & Dedrick 2002). Yet the market is now broader and naturally offers more options for specified products from high end gaming machines, to stylized lifestyle technology to business solutions (Carr 2005). Meanwhile research into user-friendliness and size-reduction has come to define the home computer hardware market more than increased power and additional functionality (Johnson et al. 2002). Dell, with a focus mainly on the latter, still has a strong presence in this area but their once supreme offering is now just one of many with different advantages. Dell’s end user market is at risk demanding an increasingly complex and considered response: Dell has notably “implemented a growth strategy to deliver the most efficient and flexible IT solutions to meet the changing needs of our millions of customers worldwide” (Dell 2011 c: pp. 4).
An effective, consolidated supply network is important as the computer hardware market demands constant quick improvement to the value chain and the design, construction and delivery of products (Dell 2011d). Having Sales and marketing unified into a dynamic organization, such as Dells simplifies decision-making and enhances customer-focus allowing technology to be taken up effectively in response to consumer demand (Dell 2011e). The transport side of Dell’s network is less of strength, given that Dell’s supply chain is sprawling and complex this is an important problem and has been acknowledged as such by Dell (2011). Whilst Dell’s corporate supply is quite strong and consolidated the complexity of Dell’s organization demands industry leading efficiency which is simply absent (Kraemer and Dedrick 2002). Increasing integration in south-east Asia is a positive approach to improving on this weakness (Wayne 1997).
The responsive sales and marketing strategy has benefited hugely from new interactive and social media, a development which has such strong implications for Dell that it was added to this analysis as an important factor half way through. New media can link in very well with interactive online sales and other interactions, as interactivity is at the centre of Dell’s sales strategy it stands to gain from this increasingly powerful marketing medium (Richter et al. 2011). The social media have been shown to provide opportunities for unparalleled customer engagement and targeted advertising, but must be handled correctly, orienting marketing operations toward the customer on an individual basis (Chapman 2008). This is already a core competence on which Dell has been focusing for a while (2011d), meaning that the company is well invested to see huge benefits from this relatively new communication innovation. It is unsurprising then that a brief review shows Dell’s social media presence to be very strong, linking users efficiently in to the company’s core sales function which has long been a major competence. Large cost and profit margins are available from such a strong direct sales technique along with advantages to user oriented sales, design and services which have long been acknowledged and implemented by the company (Campbell 2007).
After sales care includes an integrated consumer recycling programme, an innovation which sets Dell apart from its competition in high profile business and private computer technology. Dell acknowledges the increasing importance of this factor at the centre of its consumer operations (2011f).
4.5. Overview of Legal Findings – See Appendix 1.5
The legislative environment is very dangerous for large business at the moment, constraints on financing and operations as well as environmental legislations are increasingly coming into force and more are likely in the future. More specifically the legal outlook for Dell Inc. has become less favourable due to Dell’s own serious transgressions. In July 2010 Michael Dell agreed to pay a $4 million penalty to settle Securities and Exchange Commission charges of disclosure and accounting fraud in relation to undisclosed payments from Intel Corporation whilst two other executives had similar penalties. This hugely compromised Dell’s leadership internally as well as bringing more legal attention and hostility to the company’s upper echelons. Yet the fines of the business leaders were far outweighed by the $100 million fine levied on the Dell Corporation for the same reason (US SEC 2010). This had, and still has, negative implications stretching far beyond the immediate financial damages and legal duress, which some believe was not punitive enough (Hansen 2010). For a start Dell consented to a permanent injunction against future violations of certain provisions of the federal securities laws, potential adverse affect on US government trade, constraining the company extensively (Dell 2011b). It does not do to arouse the attentions and suspicions of major regulatory bodies in this way and Dell could well suffer in the future more than they already have.
Pertinently the crime that the company was found guilty of involved use of complex financial transactions to misrepresent the risks of investing in the company to shareholders, making the company seem like more of a safe bet than it actually was (Mirakur 2011). It is easy to see how investors may feel cheated and the value of the shares may be reduced as a result. Beyond this the company’s image as a reliable American and global corporation will be damaged irreparably and government consumers, of which Dell has a lot, may look elsewhere, endangering a potential market segment and directly affecting profits.
So the situation arises that Dell is entering a period of great suspicion of corporate finance and related legislative constraint with a recent history of very poor legal performance. This puts the company in a position which is even more difficult than its corporate competitors. Dell acknowledges this, somewhat ironically, in the risk statement in its SEC 10K filing (Dell 2011b). It stated that regulatory changes and trade protection legislation leave the company at risk whilst implementation of new financial services regulation following the recent credit collapse could unfavourably impact the profitability and cash flows of consumer financing activities. It seems unlikely that the corporate legislature and institutional environment will become more beneficial to Dell in the foreseeable future unless significant reparatory action is taken.
The wider international legislative situation is strongly affected by these serious legal issues as well as by increasing suspicion of corporate finance and debt in general. International business legislation has tightened after the economic downturn, constraining Dells debt and therefore its economic management. The once free and open legal environment in which multinational corporations once prospered without litigation is increasingly constrained by international laws and governmental institutions such as UN and EU commissions as well as economic organisations like the OECD and IMF (Mirakur 2011). The future will likely reveal increasing restraints to credit and financial transactions which were once considered perfectly acceptable (Kraemer & Dedrick 2002), particularly given that as part of its 2010 ruling the SEC has put out a clarion call to international and national legislators highlighting the importance of close consideration of Dell’s financial operations (Dell 2011b, US SEC 2010) .
There are many positive implications of current legislative change, such as the expansion and stabilisation of international trade and market integration, falling corporate taxes and taxes on many forms of private and corporate investment are favourable. These are likely a product of increasing competition among national governments to attract private projects and jobs to their shores (Devreaux et al. 2002). This is quite significant given that in general institutional legislation has become more and more restrictive of many aspects of corporate operation, giving more and more protection to consumers, governments and shareholders at the expense of corporations themselves (Mirakur 2011).
Dell’s quality control is widely recognised as one of its strengths (Campbell 2007) and as such increasing legislation protecting customers has not had as great an effect on the company as it has on some of its competitors as well as some in other industries. For the most part it merely requires that more consideration be made of quality control, as was presumably intended. It is possible that Dell may be able to benefit from the more positive aspects of public law, allowing for easier, lower taxed investment, whilst its strength in quality control prevents it from suffering the worst of the hindrances. It seems that in the area of consumer protection at least everyone benefits. This is just one facet of what has been seen as a new, more negotiated approach to corporate government with governments, who desire corporate investment as well as compliance, seeking to persuade rather than punish (Devreaux et al 2002). With the latter reserved for the most extreme cases such as that of the SEC filings. Current trends indicate that future environmental legislation will be similarly co-operative, meaning that dell has the opportunity to negotiate favourable terms here as well (Rogner & Zhou 2007) It seems that not all trends are bad, although Dell has managed to fall foul of the new negative legislatilature limiting the positive implications of this trend.
4.6. Overview of Environmental Findings – See Appendix 1.6
The general situation on the global level where climate change is concerned is indefinite and, some might say, lethargic. There is evidence and wide agreement that private industrial production’s contribution to climate change is increasing exponentially and as such those involved ought to be more responsible for mitigating it (Rogner & Zhou 2007). Response has come about in the form of institutions, such as the UN backed Intergovernmental Panel on Climate Change (IPCC), whose remit is to develop a scientific and policy consensus on target reduction level. Dell has become involved with these efforts (Dell 2011c) which reflects well on the company and has earned them the praise of Greenpeace (2011) as well as the Newsweek ranking of “Greenest Company in America” in 2010 (Yarett 2010). The pro-activity of public institutions and governments in this area has failed to keep pace with Dell’s own though. In fact the global realisation and regulation of climate change policy is widely regarded as flawed after the 2009 Copenhagen summit on the issue, especially where legislation pertaining to the private sector is concerned.
The Hartwell paper (Prins et al. 2010) considers how the EU’s corporate climate change policy in particular is a failure, with many loopholes and countries opting out and watering the legislation down for their industries. Of all the global approaches to environmental issues, this has proved to be one of the best, flawed though it is it outshines the fragmented, ineffective and often non-existent responses of many countries in the Asia Pacific region and South America as well as in Dell’s home nation of the US itself (Rogner and Zhou 2007). Although not enforced, new UNFCCC commitments such as the Kyoto protocol do implicitly make governments around the world somewhat more responsible for reducing their climate impact, a responsibility which is sometimes but not often passed rightly on to high-polluting private industry such as hardware production businesses.
Against this backdrop Dell’s internal corporate policy looks very benign and progressive; ideas of environmental responsibility are mentioned repeatedly in the company’s 2011 fiscal report as well as its 10K risk acknowledgement (Dell 2011b & 2011c). The public perception of Dells image as a socially responsible “superior corporate citizen” (Campbell 2007 pp.) can only stand to gain from this. In contrast to arguably lackadaisical governments Dell can be considered to be literally pro-active. Among other things the company point out in their 2011 fiscal report that “Free, easy and responsible recycling is the centre-piece of our consumer program. Around the globe, we offer programs that allow for the free return of all Dell-branded equipment.” In the same document the corporation re-affirm their ongoing intention to become a “superior corporate citizen”, something which is likely to fit in very well with popular environmental motivations. This positive forecast is reinforced by Rondinelli and Berry’s (2000) argument that corporations must be seen to hold the same values as their customers and their societies, becoming corporate citizens, meaning that a good corporation must consider the environment as much as its customers themselves. Such social responsibility has benefits revolving around increased sustainability as well as image implications. Though few organisations can be seen to acknowledge these benefits and take the idea of social responsibility to heart, many are seen as happy to be superficially ‘responsible’ (Rondinelli and Berry 2000)
The environmental factors affecting Dell do not all stem from the responsibility for saving it though. Expansion and integration in new markets presents new environmental challenges to Dell, such as up-scaling issues and varied regional and national infrastructures. Dell has long been marketed in Europe and the EMEA region and over the years since its emergence there has begun to consolidate its presence and improve its operations through vertical integration. The region had been, and still is, receptive to such expansion, presenting Dell with an array of new opportunities in the form of emerging post-soviet markets joining the EU as well as newly democratised countries with newly opened markets (Leys 2003). Meanwhile the central infrastructure of the region, in the markets where Dell is already established, is benefiting from strong, increasingly integrated and internationalised, optimised for trade, minimal obstructions to export and maximum transport and communications, (Kraemer & Dedrick 2002) though the recent recession has seriously restrained this progress. Further to this, the EU is particularly receptive to high-technology companies and has an infrastructure as well as a political approach which favours and benefits them (Kharif 2005). The opportunities available to Dell are likely to increase with further consolidation of the national economies and reduction of trade boundaries.
The Asia Pacific region presents the opposite case, it is made up of broadly different national infrastructures, economies and governments which do not work extensively or efficiently together for trade benefits as the European countries do (Wayne 2004). In addition, the majority of countries do not have access to Dell’s main sales medium; the internet, as Dell does not often sell through secondary suppliers such as shops a major face-to-face direct sales operation or a serious change of strategy would be required to benefit from this market (Campbell 2007). This is a severe, high priority problem as the presence in emerging economies and the proximity of suppliers makes this region a solid expansion prospect in economic terms as mentioned previously. The EMEA and Asia Pacific regions might be considered as the extremes of a spectrum which South America lies in the middle of, or rather which it countries lie at different points along. Infrastructure is reasonably good in industry centres such as the Mersocur countries, with strong trade initiatives minimising barriers, whilst other areas lack basic phone and internet service and are hostile business environments in terms of corporate operation and trade (Campbell 2007).