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18/08/2018 09:18:19 AM

Analyzing Planning of Michael Dell - Part 1

To perform the planning task, managers identify and select appropriate organizational goals and courses of action; they develop strategies for how to achieve high performance. The three steps involved in planning are (1) deciding which goals the organization will pursue, (2) deciding what strategies to adopt to attain those goals, and (3) deciding how to allocate organizational resources to pursue the strategies that attain those goals. How well managers plan and develop strategies determines how effective and efficient the organization is—its performance level. As an example of planning in action, consider the situation confronting Michael Dell, founder and CEO of Dell Computer, who in 2013 was struggling to increase the PC sales of his company given competition from HP, Apple, and Acer. In 1984 the 19-year-old Dell saw an opportunity to enter the PC market by assembling PCs and selling them directly to customers. Dell began to plan how to put his idea into practice. First, he decided that his goal was to sell an inexpensive PC, to undercut the prices charged by companies like Apple, Compaq, and HP. Second, he had to choose a course of action to achieve this goal. He decided to sell PCs directly to customers by telephone and so bypass expensive computer stores that sold Compaq and Apple PCs. He also had to decide how to obtain low-cost components and how to tell potential customers about his products. Third, he had to decide how to allocate his limited funds (he had only $5,000) to buy labor and other resources. He hired three people and worked with them around a table to assemble his PCs. Thus to achieve his goal of making and selling low-price PCs, Dell had to plan, and as his organization grew, his plans changed and became progressively more complex. After setbacks during the 2000s that saw HP, Apple, and a new Taiwanese company, Acer, achieve competitive advantage over Dell in performance, styling, or pricing, Dell and his managers actively searched for new strategies to better compete against agile rivals and help the company regain its position as the highestperforming PC maker. In 2013 Dell was still locked in a major battle with its competitors, and its performance had not recovered despite attempts to introduce innovative new models of laptops and digital devices. Dell needed a new approach to planning to compete more effectively; and new strategies Dell has followed in the 2010s include more powerful customized lines of new laptops, and a major focus on providing computer hardware, software, and consulting geared to the need of corporate customers. As the battle between Dell, HP, Acer, and Apple suggests, the outcome of planning is a strategy , a cluster of decisions concerning what organizational goals to pursue, what actions to take, and how to use resources to achieve these goals. The decisions that were the outcome of Michael Dell’s original planning formed a low-cost strategy. A low-cost strategy is a way of obtaining customers by making decisions that allow an organization to produce goods or services more cheaply than its competitors so it can charge lower prices than they do. Throughout its history, Dell has continuously refined this strategy and explored new ways to reduce costs. Dell became the most profitable PC maker as a result of its low-cost strategy, but when HP and Acer also lowered their costs, it lost its competitive advantage and its profits fell. By contrast, since its founding Apple’s strategy has been to deliver to customers new, exciting, and unique computer and digital products, such as its iPods, iPhones, and its new iPads—a strategy known as differentiation. 12 Although this strategy almost ruined Apple in the 1990s when customers bought inexpensive Dell PCs rather its premium-priced PCs, today Apple’s sales have boomed as customers turn to its unique PCs and digital products. To fight back, Dell has been forced to offer more exciting, stylish products—hence its decision to introduce powerful customized PCs. Planning strategy is complex and difficult, especially because planning is done under uncertainty when the result is unknown so that either success or failure is a possible outcome of the planning process. Managers take major risks when they commit organizational resources to pursue a particular strategy. Dell enjoyed great success in the past with its low-cost strategy; but presently Apple is performing spectacularly with its differentiation strategy and hurting competitors such as HP, Sony, Nokia, and Blackberry. 

Th.S. Nguyễn Thị My My

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