Dell Case
Dell is a
major player in the computer industry. Michael Dell pioneered the direct
selling system that catapulted the firm to the top position in the industry. As
the case details, controls systems play an important role in Dell’s success.
For example, the company makes a mere $12 profit on their low end machines that
sell for $299. It is important to control assembly and delivery lest these
wafer thin margins are reduced even further. However, as the case points out,
Dell’s single-minded obsession with control may come at the cost of innovation.
There are a
variety of different essays that can be derived from the reading, our
discussion, your research and the case at the end of the chapter.
However, each essay should begin with a thesis statement couched in the first
paragraph, and should employ your answers to the questions at the end of the
case to support the original thesis in the succeeding paragraphs. The
final paragraph of the essay should incorporate your general argument to
restate the thesis.
It is assumed that at this time all students are now comfortable in their
ability to create an effective thesis statement.
Some of the possible responses to the questions at the end of the case are:
Case Question 1: What advantages
does Dell gain from its tight control system? What disadvantages does the
company experience?
It is
important to note that Dell competes in the PC industry where margins are very
thin. For example, on a $299 desktop model, Dell makes a profit of $12. In such
a situation, it is important to control operations very carefully as else the
margins may narrow even more. On the other hand, a single-minded obsession with
control may come at the cost of other activities, such as innovation, that may
cost the company.
Case Question 2: Which types of
operations controls are mentioned in this article? Give examples of each type.
Testers who
perform quick inspections—screening control
Reducing
downtime— preliminary control
Producing
PCs 40 percent faster—preliminary control
Customer
service—postaction control
Case Question 3: Are Dell’s control
systems effective? In your opinion, what could Dell do to make its control
systems more effective? Explain your responses.
Dell’s
average profit margin is 3.8 percent. To survive in this competitive market,
the company has to have good control systems. Dell reports consistent profits,
thereby indicating the success of its control systems. However, the fact that
sales growth has slowed down – from 16 percent in 2005 to 7 percent in the
first quarter of 2006 – seems to indicate that they are probably focusing too
much on preliminary and screening controls and less on postaction controls.
Management
Update: As of June 2006, Dell was still the market share leader in the PC
industry followed by Hewlett-Packard. Dell had a market capitalization of
$54.70 billion, revenues of $56.74 billion, and a profit margin of 5.99%.
If you would like to learn more about the essay format
please visit the "Guide to Grammar and Writing" on the "Links"
page of this site.
