NanYang Institute of Management

University of Ballarat

Student name: Vo Thong TuStudent number: 30120200Course name: Operations ManagementCourse code: BUMGT6935Tutor: Mr. Wong Wai NamDate: 19-08-2013

Assignment topic: Is it possible for a world-class organization to achieve superiority

in all five major competitive priorities-quality, speed, dependability, flexibility and

cost? Explain your reasoning. Provide examples pros and cons of its implemetation

and consequences. Use relevant evaluation criteria to back up your statement.

I. Ability for an international organization in achieve successful in all five

major competitive priorities.

Due to the strengths, the weakness and the limitation of resources, organizations

need to choose which major competitive priorities that they will focus on. It means

organizations will have to trade off which competitive priorities are less excellent in

order to achieve excellence in other competitive priorities.

“There is no such thing as a free lunch”, in fact there maybe a “trade-off” between

performance objectives. It means improving the performance of one performance

objectives could be only achieved by sacrificing the performance of another.

There are two points of view of "trade-offs". The first mention is the sacrifice in

some competitive priorities that can be achieved improvement in other competitive

priorities. The second emphasize that, it can be get over the "trade offs" in operations

to achieve improvement in one or more competitive priorities without any sacrifices.

II. Dell Inc and five major competitive priorities

a. Dell Inc background

Mr. Michael Dell founded the company in 1984 with an initial capital investment of

US$1,000; 25 years later, Dell is recording revenues of US$61, 101M and employs

approximately 78, 900 employees worldwide.

Dell Company is one of the leading companies in information technology market

that designs and produce follow the demand of customer. Dell’s corporate philosophy

is outlined in a set of values referred to as the “Soul of Dell”. Dell performs a

differentiation strategy, which incorporates cost, flexibility, speed and dependability

as the operations performance objectives.

b. Five major competitive priorities

Dell focuses on speed, dependability, flexibility and cost.

With the Dell direct model system, customers can order and configure product

directly from Dell Company.

Assembly line, product design, operation process, supplier relationship are the

key factors incorporate in "make to order" strategy that creates cost competitive

advantage.

Customer’s computers, which ordered, will arrange to be ship and assembled

then delivered to customer in the way that can save time and costs.

Direct selling system of Dell Company described by the high speed, low-cost

distribution channels, direct relationship between Dell and customers, build-to-order,

JIT process, products and services pointed at specific market segments. By this

system, Dell was gave not only the first hand information of customer demand but

also the feedback about quality of products.

Dell has decided to sacrifices the quality objective to trade-off the excellent in

other objectives. From the polar representation 1, it easy to know that quality and

design of Dell PCs is not as better as Apple PCs. However, every coin has two sides,

with the same configurations, Dell PCs price will be lower. This is the key factor in

Dell strategy.

Polar representation 1

The speed objective

Speed reduces inventories:

Most PC manufacturers have used the strategy of IBM sales approach since

1981. The products had been sold and will be delivered to end users through

distributors and reseller channel. It means that their cost structure would be

increased by factors indirectly.

Initially, Dell did not have ability to create their value chain. Sales approach of Dell

is portrayed by selling directly from the Dell factories to the business customer or to

end consumers. Dell sells products directly to customer over the phone, and reduces

the cost and risk of transporting and inventory. Michael Dell said that if they had got

11 days of inventory and their competitor had 80, and Intel introduced new chip, that

would mean Dell were going to get to the market 69 days sooner.

Dell Pc is built on customer’s configuration order. Dell's manufacturing processes

are synchronized in order to avoid delays in production since supplier ships the

components. A finished product it will be brought out of the factory. This operation

process is based on close relationships with suppliers. For example, it only takes 15

minutes to a supplier's delivery to the Dell. With a reliable supplier, dell can focuses

on reducing inventory and increasing operation speed.

Dell’s inventory costs are always kept at a minimum that is one of the competitive

advantages of Dell, which is achieved from speed objective.

Speed reduced risk

The relationship between Dell and suppliers was built on high-speed cooperation

by improving supply chain or quality. If there is a faulty component, it will be fixed or

replaced immediately by informing the suppliers.

The dependability objective

Dell Pcs were made based on customer's need, so customer want to receive what

they had ordered with the best quality and lowest price. Dell and their partner

(suppliers, maintenances, vendors...) deal with customer in the ways that bring to the

customer the feeling of trading with a large corporation. By the direct sales system,

Dell brings to customer the best buying experience.

From dealing with customer and supplier, Dell can verify the right quantity of

components inventory.

The developments of Internet also help to develop Dell service effectively.

Customer can track their shipment with the tool of Dell called web

based order tracking system. This tool is easy so customers can do it

themselves instead of calling to Dell at least three times to check their

shipments status. With this tool can satisfy customer's saving time

demand and it also increase Dell's value chain.

Additionally, Dell's customers can maintain their PCs by themselves

with Dell's technical support online that they can update their PCs with

soft wares, device drivers, or patches easily and directly.

The flexibility objective

Business online has been chosen because of its advantages and opportunity.

Dell's products or services can be delivered through new channels of distribution with

new technology.

Service and support are the strength of Dell. Dell technical support staffs are able

to contact 24 hours a day to help via phone or online, this is one of the best after

sales services strategy that customers can achieve from Dell. Moreover, Dell

outsources maintenance providers to solve customer's problems as soon as possible

although the geography. Despite of warranty expiring, Dell also provides

maintenance services free or with the lowest prices.

The cost objective

The competitive strategies of dell are based on direct distribution channel and low

cost structure. Distribution costs are cut down dramatically by rejecting the traditional

indirect distribution channel.

Not only Dell but also their customers are able to save cost and time by doing

transaction over the internet, such as configuration, ordering, tracking on the internet

via dell web site.

Dell started the direct distribution channel strategy because this strategy can help

Dell in keeping their product's prices are lower than other company with many

indirect stages of distribution channels. In addition, with the combination of

productive process and sales strategy, Dell has ability to achieve the low inventory

costs.

Due to the number of semiconductor and computer parts manufacturers are

increased dramatically, and Dell established the good relationship with them to be

offered the lowest price for input materials so that the low prices output can be

control at minimum. These strategies are aimed at creating customer's benefits

The advantages of low cost strategy lead dell to the leader position in low-prices

market. Although with the lower price products can affect to Dell's profitability, but this

strategy can compensate for profit loss by mass consumption in low-prices market.

III. Conclusion

Low cost strategy, the effects in sales approach and built-to-order customers are

the key factors of achievement of being leader in Computer industry. Dell strategies

are based on incorporate between computer's component suppliers and operation

process strategy in Dell assembly line. Customer also satisfied with the after sales

service and technical support 24 hours a day, which are the important factors help

Dell to increase their value chain.

When a traditional market become saturated, and more competitive, all the PC

companies will focus on the increasing dramatically of emerging markets that based

on low price products and this is the target that Dell has aimed on since the start of

their business.

In summary, Dell has to trade-off quality in order to achieve the excellent

performance in cost, speed, flexibility, and dependability. This strategy leads Dell to

the success in computer industry full of competitive.

Reference

Dell.com Nigel Slack,Stuart Chambers & Robert Johnston. (2010). Operations

performance.Operation Management. Place name: Pitman Pulishing. Michael Dell.(1999). Direct from Dell: Strategies that Revolutionized an

Industr. HarperBusiness. New York Times.(2010). Dell Inc. Retrieved from

http://topics.nytimes.com/topics/news/business/companies/dell_inc/index.html