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None Provided18 Asia-Pacific and Japan an increase of 56%. As fiscal year ended the company had $6.9 billion in cash and investment, which were more than double than pervious year, Company also had $3.9 billion in cash flow from operation and the account receivable time was also decreased to 2 days from 34 days in 1999. The company’s sales from its website www.Dell.com exceed $35 million a day in early 2000, which was $20 million more than 1999. “Over the same period, profit was up from $140 million to $1.67 billion – a 64.1% compound average growth rate” (P.P.C-133). By the end of year 2000, the company’s sales from the Internet were $40 million a day, accounted almost 50% of the revenue. By this time, the Company had 2.6 million visitors per week in its more than 80 country specific sites, and had more than 40,000 corporate, government and educational customers. “Dell entered the 21st century as the most successful company in the industry. We are the No.1 computer systems company in the US and No.3 worldwide, rising from No.25 a decade earlier” (Annual report 2000 at www.Dell.com). 6. What is your evaluation of Michael Dell as CEO? How well has he performed the tasks of strategic management discussed in chapter 1? Michael Dell can be given a solid ‘A’ for his performance as a CEO of Dell Corporation. Michael Dell founded the company in 1984 with $1,000 and an unprecedented idea in the computer industry: bypass the middleman who adds little value to the products, and sold custom built computer systems directly to end users. By using this innovative direct marketing approach and by pioneering the industry’s first service and support program, Dell has established it as the number one vendor of computer systems worldwide and is a premier provider of products and services required for customers to build their information technology and Internet infrastructures. In fifteen years the company’s sales have grown from $6 million to $25.3 billion in revenue. Since Dell’s first international subsidiary opened in the United Kingdom in 1987, Dell has open sales offices worldwide and the company’s approximately 32,200 employees serve customers around the globe. The latest global innovation to come from Dell is its leadership on the Web. Dell is acknowledged as the largest online commercial seller of computer systems. The company also is redefining the role of the Web in delivering faster, better and more convenient service to customers. “Michael Dell was widely considered one of the mythic heroes of the PC industry, and was labeled ‘the quintessential American entrepreneur’ and ‘the most innovative guy for marketing computer in this decade” (pg. C-136). Michael Dell was 27 years old in 1992, when he became the youngest CEO ever to head a fortune 500 companies and by the age of 31 he was a billionaire. In 1998, Business Week Magazine named Dell as the “Best Performing Information Technology Company” in the world. Dell was also the top performing stock among the Standard & Poor’s 500 and Nasdaq 100 in 1996 and 1997, and represented the top performing U.S. stock on the Dow Jones World Stock Index. In 1999, The Wall Street Journal named Dell number one in total return to investors over the past ten years. Michael Dell owned 14 percent of Dell computer’s common stock and had a total worth of about $12 billion in early 2000. “Michael Dell was considered a very accessible CEO and a role model for young executives because he had done what many of them were trying to do” (pg. C-141). In order to assess his performance as CEO, it is important to discuss how well he had performed the five strategic management tasks of (1). Vision, (2) Setting objective, (3) crafting strategy, (4). Implementing Strategy and (5) Evaluating performance. Forming a Strategic Vision: Michael Dell is definitely the company’s chief strategic visionary. He came up with the concept for the business and had guided the evolution of Dell computer’s business model. Dell has stayed faithful to their original business models, which combine direct sales and build-to-order production. This model is simple in concept, but is quite complex in execution, and other PC makers rely on resellers, retailers and other agent to carry much of the burden of marketing and sales. Dell has to reach out to customers largely through its own efforts. Dell also had to fill each order to meet customer specifications, a process, which puts heavy demand on shop floor employee, suppliers, and delivery systems. It took Dell 15 years to achieve its present skill in marketing the direct model to work, a concept and philosophy of Michael Dell and other firms had difficulties in trying to imitate his philosophy. “Michael Dell’s near term vision was for the company to reach $50 billion in annual sales by growing aggressively in the consumer and small-business segment in computer service, by increasing its market share in foreign countries and by selling more powerful and more expensive server to corporate customers” (pg. C-173). Setting Objectives: As a chief strategy manager of Dell computer, in 1990, Michael Dell set an objective for the company to become one of the top three PC companies. By 1997, Dell Computer has net sales of $1,759 million and net income of $518 million and had a market share of 5.8%. Dell computer became the third largest PC Company in the world at the end of 1997. Dell’s philosophy and practice includes “respecting the three golden rules at Dell: (a) Disdain inventory (b) Always listen to the customer and (c) Never sell indirect. He also said “Beyond winning and satisfying your customers, the objective must be to delight your customers not just once but again and again” (pg. C-142). Although Dell has gained the acceptance of the companies direct business model in the US, Michael Dell believed the Dell’s biggest challenge was to gain the acceptance outside the US. The company also renovated its design, manufacturing, procurement and logistic process to reduce costs and speed up the entire supply chain. It also expanded its markets internationally and developed successful notebook and server product lines. The result has been an extraordinary run of growth in revenue, profit and market value for the company. Sales reached $18.2 billion in 1998, with profit of 41.46 billion, and Dell’s share of the worldwide PC market grew from 3% in 1995 to 9.2% in the first quarter of 1999. (Annual Report, www.Dell.com.) Dell’s stock price grew by over 40 times from 1994 to 1999, and the company’s market capitalization topped $100 billion. The credit for Dell computer’s solid financial performance goes to Michael Dell. Crafting Strategy: Michael Dell is the chief architect of the company’s strategy, the direct sales approach and the build-to-order approach are both Michael Dell’s contribution. Dell brought in Lee Walker, a venture capitalist as a president as chief operating officer in 1986, to provide the company with financial and managerial experience. Dell learned form him a lot about business and also learned in and out of managing a fast-growing enterprise. Walker helped Dell to turn into a fascinating executive with a character for motivating people and winning their loyalty and respect. Walker also helped Dell to select distinctive and talented people to serve on the board of directors when the company went public. Michael Dell has pushed the company to revamp the traditional industry value chain, shortening it and slashing out cost-producing activities. For example, in 1994 when Dell knew that its margins on PC selling through the distribution channels was less, he withdrew from selling to retailers and other middleman to focus on direct sales. He also push the company in the concept of ‘virtual integration’ and “the company’s strategy was built around a number of core elements: build-to-order manufacturing, partnership with supplies, just-in-time components inventories, direct sell to customers, award-winning customer service and technical support, and pioneering use of the Internet and E-commerce technology. Management believed that a strong first-mover advantage accrued to the company from its lead over rivals in making e-commerce a centerpiece in its strategy” (pg. C-147). Dell chooses few outside vendors as a partner and tries to stay with them long period as long as they maintained their leadership in technology, performance and quality. “A central element of Dell Computer’s strategy, therefore, was to evaluate the various makers of each components, pick the best one or two as supplies and partner with them for as long as they remained leaders in their specialty” (pg. C-148). Implementing Strategy: Dell was active in pushing for better execution of the just-in-time inventory concept and reduction in the number of days of parts inventories. As Michael Dell explained what delivery capabilities expected from its suppliers, “We tell our suppliers exactly what our daily production requirements are. So it’s not, “well, every two weeks deliver 5,000 to this warehouse, and we will put them on the self, and then we will take them off the self”. It’s “Tomorrow morning we need 8,562, and deliver them to door number seven by 7AM” (pg. C-149). Dell computer improved and refined its inventory tracking process, working relationships with partners and suppliers and its method of operating with small inventories. “In fiscal year in 1995, Dell averaged an inventory turn ratio of 32 days. By the end of fiscal year 1997, the average was down to 13 days. The following year, it was 7 days, which compared very favorably with Gateway’s 14 days average, Compaq’s 23 day average, and the estimated industry wide average of over 50 days” (pg. C-150). Dell was running its operation with an average of 6 days of supply in inventories and it had a long-term goal of running in 3 day of average supply. The direct approach allowed Dell to build a relationship, which makes it quick and easy for customers to do business with Dell. IT staffs at Boeing reported that Dell had adapted its IT system, user interfaces and procurement processes to Boeing’s, making it easy and familiar for Boeing employees to buy Dell computers. By selling direct, incorporating the right technology as it becomes available, and timing the change over well, Dell can take advantage of falling prices on components. Michael Dell was involved in making sure the company’s advertisements were communicative and forceful, not soft and fuzzy. “Dell was a strong believer in the power of advertising and frequently espoused its importance in the company’s strategy. His competitive zeal resulted in the company’s being the first to use comparative ads” (pg.. C-159). Michael Dell’s philosophy included not only good planning and good strategy but also the execution of good strategy. The company had established a number of policies and operating practices to encourage successful strategy execution. “The company stressed use of facts and data in daily decision making-“Facts are your friends” was a common phase at Dell and an integral part of the corporate culture. The company had developed detailed profit and loss statement for each part of business, and managers were expected to make fact-based decisions according to their impact on the bottom line; those who resisted were forced out” (pg. C-161). Leading Corrective Adjustments: Michael Dell stayed in close personal touch with customers. Selling direct to customers gave Dell first hand intelligence about customer’s preferences and needs, as well as immediate feedback on design problems and quality. While Dell chose to operate the assembly line in the traditional fashion till 1997, with each worker doing a single operation, Dell shift its operation to “cell manufacturing” method after 1997, where a team of workers assembled an entire PC according to customers specification which reduced Dell’s assembly time by 75 percent and the productivity per square foot of assembly space was doubled. (Annual Report at www.Dell.com) Dell followed the Compaq’s lead by creating a financial services group to help customers with financing their PC networks, which was considered a good effort to add value for its customers. Dell has also responded to change in the PC marketplace by pursuing greater and greater market segmentation. In the second half of 1996, Dell introduced a low-end PC server costing under $25,000 to the market. “There were several drivers behind Dell’s entry into servers. The use of server by corporate customers was growing rapidly. The margin on servers was large. Moreover, purchase price was not as significant factor in selecting which brand of servers to buy because servers required far more in the way of service, support and software” (pg. C-160). Michael Dell has lead the evolving refinements in the company’s strategy. Dell introduced a new line of PC’s revealed in three different models, which had new features and equipped for easy, quick Internet access price ranging from $999 to 2,349. These new Web PC could be plugged in and made internet ready, and they also came with a monitor, printer, technical support options and one-year subscription to Dell’s Internet service, Dell Net. In order to change the PC market with more segment, Michael Dell said, “We had to meet the challenge of extending the Dell brand beyond our strong desktop and notebook franchises. The next logical step was servers. Entering the server business was not only a large opportunity but also clearly a competition necessity. An explosion of networked and internet worked systems was occurring throughout corporations, which means that our present customers- the techno-savvy, second-or third-time buyer who were our core market- would be looking to make big purchase” (pg. C-160). In conclusion, it should be clear that Michael Dell in an effective CEO and has performed the tasks of strategic management quite well. Michael Dell should be given the credit for the success of Dell Computer Corporation. Bibliography:

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