|Dell Incorporated |
|Three-year Strategic Plan |
|Ethical Approach |

|Janell K. Alston |
|10/25/2010 |

Dell Inc: Three-Year Strategic Plan
Janell Alston
Gwynedd-Mercy College
Bus 512: Strategic Planning
Instructor: Kirk S. Keseric
Due Date: October 25, 2010

Company Profile: Dell Inc
Description: What is Dell Inc? I. History/Background

II. Core Elements & Code of Conduct

III. Business Ethics/Strategy

IV. Products & Services

V. Competition

VI. Ethical Umbrella

a. Corporate Social Responsibility

b. Corporate Accountability

c. Corporate Governance

d. Environmental Responsibility

VII. Financial Highlights

a. Comparing 2010 to 2009

b. Comparing 2009 to 2008

VIII. S.W.O.T. Analysis

IX. Conclusion

X. References

Dell Inc. is one of the largest computer manufactures in the world and they have grown tremendously over the years. They were founded in 1984 in Austin, Texas, by Michael S. Dell. This company was originated with an unprecedented idea - by selling computer systems directly to customers, we could best understand their needs and efficiently provide the most effective computing solutions to meet those needs. Their evolving business strategy combines their revolutionary direct customer model with new distribution channels to reach commercial customers and individual consumers around the world. Michael S. Dell is one of the longest-tenured executives to lead a company in the computer industry. This company builds every one of their systems to order and offer customers a powerful, richly-configured system at a competitive price. Dell’s Direct Model business approach is largely responsible for the success of the company, it provides a fast cost-efficient and customer friendly means of production and distribution (Dell, 2009).

Since this market is ever changing, competitors are challenging Dell with new and unique products in effort to overcome the superiority of the Direct Model. The growth and development of the laptop computers is a primary area in which Dell Inc. can work for continued success, despite the threat posed by its competitors. Dell initiates the latest and appropriate technology much more promptly and efficiently than any other computer company (Dell, 2010). Also, Dell’s refined strategy to building an adequate infrastructure establishes market creditability against its better-known rivals. Their approach to the computer industry had two advantages: First they wanted to bypass distributors and retail dealers which will eliminate markups of resellers, and second building to order greatly reduced to the cost and risks associated with carrying large stocks of parts, components and finished goods (Dell, 2009).

Mission/Vision/Diversity Statements

Dell’s Mission Statement: Is to be the most successful computer company in the world delivering the best customer experience in markets we serve. By doing so, Dell will meet customer expectations of: • Highest quality • Leading technology • Competitive pricing • Individual and company accountability • Best-in-class service and support • Flexible customization capability • Superior corporate citizenship • Financial stability Dell’s Vision Statement: It’s the way we do business. It’s the way we interact with the community. It’s the way we interpret the world around us-our customers’ needs, the future of technology and the global business climate. Whatever changes the future may bring our vision – Dell Vision – Will be our guiding force. Dell’s Diversity Statement: Believes that in order to be a successful company and a great place to work, our business must be able to leverage the similarities and differences of all team members. To achieve that, our CEO, Michael S. Dell, and Dell’s Global Diversity Council drive initiatives throughout our company. Dell’s diversity initiatives focus on three business imperatives: • To provide a great customer experience, which requires a workforce reflective of our customers • To access the best and brightest talent the marketplace has to offer • To focus on global expansion with employees who understand the various cultures, giving us a competitive advantage

Core Elements (Values) and Code of Conduct

Limitless people are familiar with Dell’s customer-focused direct business model, and the company’s success in creating leading value for customers and investors. The success of Dell Inc. is built on a foundation of personal and professional integrity. The “Soul of Dell” defines what kind of company they are and aspires to become. This serves as a guide for the actions of the company around the world. Every company has some core values and Dell Inc. has five core elements that make them who they are today. Dell’s code of conduct adheres to the values and beliefs of the Soul of Dell. The five core elements/values of the Soul of Dell are: Customers, The Dell Team, Direct Relationships, Global Citizenship and Winning. Customers: Dell believes in creating loyal customers by providing a superior experience at a great value. The Dell Team: believes in continued success lies in teamwork and the opportunity each team member has to learn develop, and grow. Direct Relationships: Dell believes in being direct in all they do. They are committed to behaving ethically; responding to customer needs in a timely and reasonable manner; fostering open communications and building effective relationships with their customers. Global Citizenship: Dell believes in participating responsibly in the global marketplace. They are indeed committed to understanding and respecting the laws, values and cultures wherever they do business; profitability growing in all markets; promoting a healthy business climates globally; and contributing positively in every community they call it home, both personally and organizationally. Winning: Dell has a passion for winning in everything they do. Each one of these elements has one thing in common and that is believing”. The “Soul of Dell” believes that they are the best at what they do and the team also, believes that with their continued success only lies teamwork. The Dell team works extremely hard to meet the needs of each and every customer with carefully personalized standard-based computing solutions. Dell’s Code of Conduct provides general guidance to all members on how to behave legally and ethically, and in compliance with the letter and spirit of applicable legal requirements, Dell policies and our ethical principles. It serves as a manual for living their value of winning with integrity. Dell’s ethical principles are: We are honest: What we say is true and forthcoming – not just technically correct. We are open and transparent in our communications with each other and about our business performance. We are trustworthy: Our word is good. We keep our commitments to each other and to our stakeholders. We do the right thing without compromise. We avoid even the appearance of impropriety. We treat others with respect: We value their contributions and listen to their point of view. We maintain fairness in all relationships. We are courageous: We speak up for what is right. We report wrongdoing when we see it. We use good judgment: We think before we act. We use our purpose, values and ethical principles as decision filters to guide our behavior. We are responsible: We accept consequences of our actions. We admit our mistakes and quickly correct them. We don’t retaliate against those who try to do the right thing by asking questions or raising concerns.

Business Ethics/Strategy

Business ethics is a personal moral manner where people try to decipher right and wrong within their daily and organizational lives. With the terms “business” and “ethics” put together can create a more powerful influential understanding of cultural beliefs of what is important to you on the judgments that are made of good or bad behavior. Dell Inc’s business ethics consist of its Global Ethics and Compliance Team (Dell, 2010). This team initiates education and awareness to all of Dell’s employees on highlighted issues such as privacy and data protection, workplace conduct, and gifts and entertainment. This team also delivers consistent training to prepare all the employees for effectively, legally and safely performing their jobs on a daily bases. Dell has two mandatory training courses for all employees: Winning with Integrity which is the Code of Conduct overview of the company and Information Security Polices and Standards. Employees are also encouraged to complete three additional global ethics courses: Dell Corporate Governance, Records Management, and the newly developed Privacy and Data Protection Awareness. Ethically Dell is indeed committed to understanding and respecting the laws, values and cultures wherever they do business. Profitability growing in all markets while promoting a healthy business climate globally contributes positively in every community that they call home both personally and organizationally. Dell’s business strategy combines its direct customer model with a highly efficient manufacturing and supply chain management organization and an emphasis on standards-based technologies. This strategy enables Dell to provide customers with superior service and support; and products and services that are easy to buy and use. The key creed of Dell’s business strategy are: A direct relationship is the most efficient path to the customer, customers can purchase custom-built products and custom-tailored services, Dell is the low-cost leader, Dell provides a single point of accountability for its customers and non-proprietary standards-based technologies deliver the best value to customers. Dell built its reputation as a leading technology provider through listening to customers and developing solutions that meet their customers’ needs. They are focused on providing long-term value creation through the delivery of customized solutions that make technology more efficient, more accessible, and easier to use. They are focused on improving their core business, shifting their portfolio to higher-margin and recurring revenue streams over time, and maintaining a balance of liquidity, profitability, and growth. Dell consistently focuses on generating strong cash flow returns, allowing them to expand their capabilities and acquire new ones. They seek to grow revenue over the long term while improving operating income and cash flow growth.

Products and Services

Dell aspires to provide customers with integrated business solutions. They design, develop, manufacture, market, sell and support a wide range of products and services that can be customized to individual customer requirements. Their products and services are organized between enterprise solutions and client categories. The enterprise solutions include servers, storage, and related services, software and peripherals. Client includes mobility, desktop products, and also related services, software and peripherals. Dell’s services include a broad range of configurable IT and business services, including infrastructure technology, consulting and applications, and business process services. Dell also offers a range various customer financial services for their business and consumer customers in the United States.

Competition

Dell operates in an industry in which there are rapid technological advances in hardware, software, and service offerings and face on-going product and price competition in all areas of our business from branded and generic competitors. They compete based on our ability to offer profitable and competitive solutions to our customers that provide the most current and desired product features, as well as on customer service, quality, and reliability. Demand is driven largely by the construction needs and governments and the desire of industrial customers to improve the efficiency of operations. Profitability depends on the ability to accurately predict costs for project. Small firms, which can effectively compete with larger ones by having expertise in a particular field, are often hired as consultants on larger projects if they have special expertise. Large firms are advantaged in designing and managing large projects. Dell has several competitors; however, their biggest competitor is Acer. Acer has more than one PC brand up its sleeve. The company is the leading manufacturer of notebook, desktop, and netbook computer. Supplementary Acer products include servers, storage systems, smartphones, projectors, LCD televisions, digital cameras, and computer displays. The company also provides IT support services, and its Acer eDC facility is the largest stand-alone data center in Asia. Acer, who outsources its manufacturing, sells through resellers and distributors worldwide. Dell’s other competitors are Gateway, IBM, Apple, Hewlett-Packard, Cisco System, and Xerox Corp.

Ethical Umbrella

Corporate Social Responsibility

Corporate Social Responsibility also known as CSR is the actions of an organization that are targeted toward achieving a social benefit over and above maximizing profits for its shareholders and meeting all its legal obligations (Ghillyer, 2010, p.78). It can also be referred to operating a business in a manner that accounts for social and environmental impact created by the business. Corporate Social Responsibility at Dell Inc. is about demonstrating through action their values of corporate citizenship. In the itinerary of the integration of economic, social and environmental responsibility into everything they do and ensuring diversity remains a Dell cornerstone. Dell has a full-time commitment to being a responsible corporate citizen. It’s a commitment driven by the types of goals, strategies and accountabilities that characterize every part our business. And it’s one that persists through all business cycles (Dell, 2010). Dell focuses on the ideals of environmental responsibility, corporate responsibility and the social responsibility to further strengthen the beliefs of addressing issues will support the realization of financial goals and can be critical to their long-term corporate achievement. Dell must continue to grow responsibly protecting their natural resources and practicing sustainability in all its forms and improve the communities where they live and work through their financial and volunteer efforts. Their commitment to social responsibility is about making a meaningful difference and seeking innovative ways to help others through their technology resources and employees by partnering with non-governmental organizations to address some of the key issues facing our world today.

Corporate Accountability

Integrity to inspire trust is Dell’s corporate accountability. They succeed when they earn the utmost trust and respect from their customers through the actions and innovations of the company. Ethics and integrity is built into their key corporate growth, which encourages people to accept the responsibility and enables then to take actions. The undisclosed key to Dell’s corporate accountability is the pride that the employees take in the company. Within that it is more than just simple meeting all the compliance requirements and following the rules it is about creating a culture that people can simply act with integrity.

Corporate Governance

The Board of Directors and management team have jointly responsibility, ethics and integrity at Dell Inc. In that regard, the Board expects each director, as well as each member of the senior management, to lead by example in a culture that emphasizes trust, integrity, honesty, judgment, respect managerial courage and responsibility. Moreover, the Board also expects each director and each member of senior management to ac ethically at all times and adheres to polices as well as the spirit, expressed in Dell’s Code of Conduct. The Board will not permit any waiver of any ethics for any director of executive officer. Corporate governance is also the commitment to the achievement of business success and the enhancement of long-term stockholder value with the highest standards of integrity and ethics. Primarily the success is an approach to corporate governance that will extend beyond simple compliance with the authorized necessities.

Environmental Responsibility

Dell Inc. aspires to be the greenest technology company on the planet. They dare to motivate by engaging with others and sharing what they have learned. They strive to innovate by improving the efficiency and design of their products. Dell’s greatest innovation is their leadership. They realized that a top-notch management strategy would not fulfill Michael Dell’s goal. In addition, it would propel Dell’s vision into everyday workings of their business.

Financial Highlights

Comparing 2010 to 2009

During Fiscal 2010, operating income decreased 32% to $2.2 billion. The decrease in operating income was primarily attributable to a revenue decline of 13% and a decline in gross margin dollars of 15%. A 9% reduction in operating expenses during Fiscal 2010 favorably impacted operating income, while operating expenses as a percentage of revenue increased slightly during the same periods. Net income decreased during Fiscal 2010 by 42% to $1.4 billion. Net income was impacted by significant declines in operating income and higher interest and other, net in Fiscal 2010 compared to Fiscal 2009, net income was negatively impacted by an increase in their effective tax rate to 29.2% from 25.4%. Generally, Dell’s average selling price during 2010 decreased 8% mostly due to competitive pricing pressures and a change in product mix towards lower-priced offerings, particularly in the consumer segment. The average selling price in consumer decline is 21% during 2010; this was mostly due to Dell’s expansion into retail and a continuing shift in mix to lower-priced products. In the consumer business, Dell’s market strategy is to expand their product offerings and customer coverage, by focusing on optimized products and services that have the features that customer’s value. They continue to see competitive pressure, particularly for lower priced desktops and notebooks. Dell expects this competitive pricing environment will continue for the foreseeable future. The average selling prices for their commercial segments remained relatively flat from 2009.

Comparing 2009 to 2008

Operating income decreased 7% to $3.2 billion in Fiscal 2009. The decrease was partially driven by a shift in product mix that resulted in lower average selling prices. Additionally, operating income was impacted by higher cost of sales, which lowered their gross margin percentage, partially offset by reduced operating expenses. For Fiscal 2009, net income decreased 16% to $2.5 billion. Net income was impacted by a 7% decline in operating income, a 65% decline in interest and other, net and an increase in their effective tax rate from 23.0% to 25.4%.
For fiscal year 2011, first quarter (ended April 30, 2010) • Revenue - $14.9 billion • Operating income - $824 million • Net income - $584 million • Earnings per share - $0.30 • Cash flow - $238 million

S.W.O.T. Analysis

One of Dell’s greatest strengths in targeting the business executive category is that roughly 75% of all sales revenue comes from large businesses and government organizations. Dell has already established relationships with large companies, and this provides most of their business. These companies pass the relationship on through their employees, providing them with Dell products. Dell has a considerable weakness in targeting the college student segment of the market. This is due to the fact that only 5% of Dell’s total sales revenue currently comes from educational institutions such as colleges. Unlike Dell’s business customers, Dell lacks a large amount of relationships with educational institutions. Many students purchase their PC’s through their schools, Dell is clearly not in a position to take advantage of the college at this time. Their greatest weakness is that buyers can not physically touch or see the product that they want to purchase. The Direct Model provides many great opportunities, however the disadvantage is that customer cannot go to retailers and try a few different products and go home with a computer all in one visit. The thing that differentiates Dell from its competitors is customization. Many computer buyers are suspicious of a product that they can’t personally examine before purchasing. Moreover, an anxious buyer would have to wait a number of days before their computer was delivered. Personal computers are being purchases and used more than ever before. The market for laptops, in particular, is growing much faster than that of the desktop computers. This general trend lends itself as a great opportunity for Dell’s laptop business to grow in all segments. Another opportunity for all the targeted segments relates to the first trend that was mentioned. Customers are becoming more educated about personal computers, as an increasing number of them are second-time buyers. Consumers who have purchased computers in the past know what they want, and Dell can cater to them. The Direct Model can provide the framework for customers to make truly personalized computers in a qualified hassle-free environment. Increased communication and technological integration also create great opportunities for Dell. Customers can now go on the Internet to personalize their computer, place an order, or just simply get information. This is more efficient and effective for both Dell and the customer, and its benefits are many. In such a volatile market as personal computers, threats are great and many. Because of the ever changing nature of the computer industry, companies are constantly being challenged to produce higher quality, lower priced products, and do it faster and more efficiently than the competition. One to Dell primary external threats is that the prices between brands are getting smaller all the time. Dell’s Direct Model benefits the consumer in many ways, one of which is cost savings. Now that other companies are finding ways to combat the low costs of Dell, they can to pass along savings to their customers. As a result, price differential is becoming less of an issue, if not nonexistent, for buyers. Many of Dell’s competitors are therefore becoming closer substitutes. Another serious threat is simply that the growth rate of the computer industry is slowing. At this current time, Dell owns a greater market share than any of its competitors throughout the world. However, as the market slows down, competition for market shares will intensify. Companies will have to work harder than ever before to distinguish their brand from substitutes. If a company has trouble differentiating its brand from its competitors, they will find it hard to hold a significant market share. Finally, the fast pace of technological advancement, while being a tremendous opportunity, is also a great threat. The newest, fastest, most efficient technology and most durable, user-friendly products are going to sell. If the company fails to keep up-to-date with innovations in technology, they will quickly see decline in performance.

Conclusion

With the competitive advantage that Dell Inc. has they have a product that every consumer and organization wants. Besides the fact that Dell is the preferred desktop and laptop of enterprises in the United States and Europe and winning more than 400 product awards in 2007, Dell is a company that believes in what they are doing and will stop at nothing to become the best in the computer industry. The current market trends in the personal computer industry, for laptops in particular, are being driven by ever changing consumer needs, wants, and demands. As a result, companies like Dell Computer Corporation are forced into constant state of adaption in order to satisfy their customers. By taking full advantage of their strengths, paying close attention to their weaknesses, and identifying both opportunities and threats from the macro-environment, this company can position themselves as significant shareholders in an intensely competitive market.

References

About Dell. (n.d.). Retrieved September 29, 2010, from http://content.dell.com/us/en/corp/about-dell.aspx?c=us&l=en&s=corp Corporate Responsibility. (n.d.). Retrieved September 29, 2010, from http://content.dell.com/us/en/corp/cr.aspx Ghillyer, A. W., (2010) Business Ethics: A Real World Approach. New York, NY: The McGraw-Hill Companies. Sliver, R., (2002) the 21st Century Executive: Innovative practices for building leadership at the top, San Francisco, Jossey Bass. Thompson, A. A., Jr., Strickland, A. J, III, & Gamble J. E. (2008). Crafting and Executing Strategy: The Quest for Competitive Advantage: Concepts and Cases (16th ed.). New York: McGraw-Hill/Irwin