Dell Went Private

In late October 2013 the CEO and founder of Dell. Inc, Michael Dell, and his investment partner Silver Lake bought out the low cost, high volume manufacturer of home and business technology products for $24.9 billion. Michael Dell now owns 75% of Dell. Inc and has said that going private was important to help the organisation move more quickly in a dynamic industry. However, becoming a private company will also remove the pressure of answering to shareholders and give senior management more autonomy in strategic decision making. Critically, Dell have been afforded the freedom to make long-term investment decisions that won’t have to pay off by the end of a financial quarter – this change in the structure of business ownership could have a  profound impact on the Dell’s strategic management, but, what does their strategic management involve?
Strategic management is a process and performance centered initiative with the ability to create and sustain competitive advantage. The breadth of knowledge and oversight held by senior management at Dell is of utmost importance to their organisation-wide and strategic level of management. However, establishing what constitutes business performance and the strategies for obtaining competitive advantage first requires the clarification of Dell’s organisational purpose. This starts with a business vision and this is where the process of strategic management started for Michael Dell and Dell’s senior business managers:

“Our vision is not just to provide the best customer experience in our industry, but to be counted among the best in any business. We have a constructive passion for winning in everything we do. Continuous improvement is a basic element of our culture, and manifests itself in how we build a work force with diverse backgrounds and skills worldwide, maintain the highest standards of integrity, develop leaders, and encourage personal accountability by all of our people.”

Organisational purpose is the reason for a business’ existence and this reason should lie in society; adding value for stakeholders, particularly considering the special privileges society provides businesses with, such as limited liability. This social purpose is evident in Dell’s vision statement but their new ownership structure makes it even more possible for the organisation to balance the needs of stakeholders without becoming subject to the power and influence of shareholders.

Along with a vision, a business’ mission is also part of an organisations purpose, defining an organisation’s core business area and overriding direction, which is facilitated by the organisation’s business model. Simplistically, a business model defines how an organisation generates revenue, for example the organisation may have a merchant/retailer or an intermediary business model. For Dell, the business model involves having the most efficient procurement, manufacturing and distribution capabilities in the industry. Dell going private has a potential to further facilitate the organisation in making strategic cost-cutting and efficiency decisions in a timely fashion; reinforcing the strength of their direct business model and ultimately contributing to the organisations competitive advantage.

Dell Business Model

This diagram illustrates the direct business model that characterises Dell’s channel structure; from an analysis of executive management at Dell it has become evident that this business model is the focal point of their strategic management.

Posted by: Bradley Cronk

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5 Comments Add yours

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