There are various products being managed by the company which aim to fulfil the Information Technology IT related needs of the customers. The management has helped the company to evolve from a computer manufacturer into other technology related areas such as data management and cloud based solutions Dell Inc, Dell has increased its scope of operations through acquisitions and joint ventures with other technology relate firms, enabling it to bring effective IT solutions.
To strive in this competitive environment the firms should have an edge over the competitors. To develop competitive advantage, the firms should produce good quality products at minimum costs etc.
Therefore, it becomes necessary for the firms to have a strategic edge towards its competitors. One such competitive strategy is overall cost leadership, which aims at producing and delivering the product or service at a low cost relative to its competitors at the same time maintaining the quality.
According to Porter, following are the prerequisites of cost leadership Cherunilam, To sustain the cost leadership throughout, the firm must be clear about its accomplishment through different elements of the value chain.
Figure-1 shows a matrix of the three generic competitive strategies and their interrelationship given by Porter.
Three Generic Competitive Strategy This strategy involves the firm winning market share by appealing to cost-conscious or price-sensitive customers. This is achieved by having the lowest prices in the target market segment, or at Bcg matrix for dell the lowest price to value ratio price compared to what customers receive.
To succeed at offering the lowest price while still achieving profitability and a high return on investment, the firm must be able to operate at a lower cost than its rivals.
There are three main ways to achieve this. The first approach is achieving a high asset turnover. In service industries, this may mean for example a restaurant that turns tables around very quickly, or an airline that turns around flights very fast.
In manufacturing, it will involve production of high volumes of output. These approaches mean fixed costs are spread over a larger number of units of the product or service, resulting in a lower unit cost, i.
For industrial firms, mass production becomes both a strategy and an end in itself. Higher levels of output both require and result in high market share, and create an entry barrier to potential competitors, who may be unable to achieve the scale necessary to match the firms low costs and prices.
The second dimension is achieving low direct and indirect operating costs. This is achieved by offering high volumes of standardized products, offering basic no-frills products and limiting customization and personalization of service.
Production costs are kept low by using fewer components, using standard components, and limiting the number of models produced to ensure larger production runs. Overheads are kept low by paying low wages, locating premises in low rent areas, establishing a cost-conscious culture, etc.
Maintaining this strategy requires a continuous search for cost reductions in all aspects of the business. The associated distribution strategy is to obtain the most extensive distribution possible.
Promotional strategy often involves trying to make a virtue out of low cost product features. This could be achieved by bulk buying to enjoy quantity discounts, squeezing suppliers on price, instituting competitive bidding for contracts, working with vendors to keep inventories low using methods such as Just-in-Time purchasing or Vendor-Managed Inventory.
Wal-Mart is famous for squeezing its suppliers to ensure low prices for its goods. Dell Computer initially achieved market share by keeping inventories low and only building computers to order.
Other procurement advantages could come from preferential access to raw materials, or backward integration. Some writers assume that cost leadership strategies are only viable for large firms with the opportunity to enjoy economies of scale and large production volumes.
However, this takes a limited industrial view of strategy. Small businesses can also be cost leaders if they enjoy any advantages conducive to low costs. For example, a local restaurant in a low rent location can attract price-sensitive customers if it offers a limited menu, rapid table turnover and employs staff on minimum wage.
Innovation of products or processes may also enable a startup or small company to offer a cheaper product or service where incumbents' costs and prices have become too high. An example is the success of low-cost budget airlines who despite having fewer planes than the major airlines, were able to achieve market share growth by offering cheap, no-frills services at prices much cheaper than those of the larger incumbents.
A cost leadership strategy may have the disadvantage of lower customer loyalty, as price-sensitive customers will switch once a lower-priced substitute is available. A reputation as a cost leader may also result in a reputation for low quality, which may make it difficult for a firm to rebrand itself or its products if it chooses to shift to a differentiation strategy in future.Strategic management is the process of defining the purpose and pursuits of an organization and the methods for achieving them.
Robert Grant emphasizes that competition provides the rationale for strategy because strategy is about winning. Fred R. David's revision of his popular text gives students of all levels a thorough and interesting introduction to strategic management — one that will show you the value and the excitement of the field.
BCG matrix (or growth-share matrix) is a corporate planning tool, which is used to portray firm’s brand portfolio or SBUs on a quadrant along relative market share axis (horizontal axis) and speed of market growth (vertical axis) axis.
This is the BCG Matrix Analysis of Dell Inc. which has been operating in information technology and providing robust products to their customers. Dell Inc. is a leading name in the technology industry that has recently been changed into a privately owned firm.
No strategic management or marketing text appears to be complete without the inclusion of the Boston Consulting Group (BCG) growth-share matrix. The BCG Growth-Share Matrix is based on two dimensional variables: relative market share and market growth/5(9).
PowerPoint Presentation: 1- 12 Table Demand States and Marketing Tasks 1. Negative demand A major part of the market dislikes the product and may even pay a price to avoid it—vaccinations, dental work, vasectomies, and gallbladder operations, for instance.