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We are living in the era of information. The 21st century has come with more than ever powerful working tools: the computer, the Internet, and Information technology. The computer has been playing an increasingly important role in the daily lives of people, families, organizations and businesses. With their huge computing and processing power, computers have boosted up productivity, increased accuracy, saved time, and become essential equipments for almost every business today. Together with the widely application of the Internet and Information technology, the computer has become even more powerful tool which improves every aspect of people lives. Owning to its power and functionalities, the demand for computer has increased continuously over years, pushing the PC (personal computer) industry become one of the most competitive and dynamic. Within 6 years from 2006 to 2010, the worldwide PC sales almost doubled and stay at more than 300 million units in 2010. Large computer companies today spend billions of dollars annually on innovating new technology, developing new products in order to gain the top position on the market. Besides, due to the fast pace of changing, as a feature of the industry, computer firms have to adjust their overall strategies continuously to stay strong. Dell Inc. is one typical example of successful computer enterprise by using appropriate strategies toward technology innovation and operation. With innovation based on standardization, direct sales model, and the support of modern and fast information technology system, Dell keeps in hand key comparative advantages to win the first position in the market for many years. Until now, Dell still remains as the toughest competitor for any PC maker. Being attracted by the eventful computer industry and efficient operation of Dell Inc., the writer decides to choose the PC industry as the theme and Dell Computer is in the centre for this working paper. Within the limited volume of this thesis, the writer will go through three parts:

The first part introduces briefly about the computer industry, technology development, strategies of enterprises regarding technology innovation and development as well as some short stories of leading companies. The second part talks about Dell Inc., including its history of development, its strategies of technology innovation and operation, and its global expansion. This part will analyze how the combination of creative technology development policies and business model help this firm becomes one of the leading computer makers in the world. The third part will be about technology development in Vietnam in globalization scenario, Vietnamese technology enterprises and some lessons withdrawn from Dell Computers success and failure for them. Due to the limited time and knowledge of the writer, this paper inevitably contains some limitations and shortcomings. Therefore, the writer would like to receive every feedback or comment from teachers and people who interested in this topic to improve the quality of the thesis.

Chapter 1: OVERVIEW OF TECHNOLOGY AND DEVELOPMENT STRATEGY OF COMPUTER ENTERPRISES IN GLOBALIZATION 1.1. Overview of technology development in computer industry in the world: The personal computer (PC) industry is one of the strangest and most dynamic in the world. Probably there is no other kind of product that is so technologically sophisticated, changed so rapidly, sells for so much money, and is sold by so many companies for not much profit. The fierce competition in this industry is the reason why so many problems are encountered by those who deal with PC vendors. Since PC could be assembled from standardized components without much expertise required and the barriers to entry are not as tough as in the past, new computer business is established on a frequent basis. As a result, there are thousands of companies making PCs that perform similar functions pushing the market to be extremely price-competitive. Since the market is so competitive, vendors often sell at very low margins. Computers are not the same as many other products, where the company selling the device is making upwards of 50% of the price of the product as gross profit. For PCs it is often around 10%. Additionally, there is probably no other industry that has prices change as dramatically and frequently as the PC industry. Usually, prices are decreasing. This is good for the consumer but very bad for vendors, because it means that their already low margins get squeezed if prices drop between the time that they buy a product and the time they sell it. Drop in the price of PC comes from both severe competition and rapid changes in technology. As a consequence, PC makers often prefer to keep low inventories. Whenever prices fall, the vendors potentially lose money on every component in inventory at the time. Due to the rapid frequency of changes in technology, functionalities and capacity of computers are improved continuously, broadening PCs definition over time. In the dawn of PC industry, a computer was a bulky device, furnished with some simple functions and small volume, but extremely costly. Today, people could

possess small handheld devices which are integrated with processing power and functions tens times better than huge mainframes decades ago. The PC industry has a strong connection with the software industry and the application of the Internet. These two peripheral industries have accelerated the speed of technology innovation even faster. In years recent, a computer device has evolved into a centre for all the digital peripheral such as music players, digital cameras, video recorders, internet TV, etc. With the technology evolution, computers have become the ever powerful tools that are essential for any success business and modern families; and the PC industry become one of the most strategic industries in the world in the 21st century. 1.1.1. Velocity of development and innovation: The personal computer industry has grown from a hobbyist industry in the 1970s to a highly profitable industry worth hundreds of billions of dollars worldwide. Driven by consumer demand to access the Internet and the advancements of microprocessor technologies, the demand for PCs for personal and business use has climbed continuously in the early 21st century The PC industry is one among the fastest growing industries in the world. According to a research carried out by Etforcasts, the annual worldwide PC sales has a trend to double every six years. By 2000, the PC sales was 132 million; and almost doubled in 2006. The velocity of increase in this industry is at a staggering rate of around 9% annually compounded. (Table 1) Table 1: Worldwide PC Sales Unit: 1 million PCs Year Worldwide PC Sales 1990 24 1995 58 2000 132 2005 207 2010 325

(Source: etforecasts) Another noticeable index is the number of PC in use. In 2000, there were more than 500 million units in-use and the figure in 2010 is over 1400 million units almost three times higher. (Table 2)

Table 2: Worldwide PC in use Unit: 1 million PCs Year Worldwide PC in use 1990 100 1995 225 2000 529 2005 2010 910 1,425 (Source: Etforecasts)

The figure above shows that the computer industry has a huge growth potential. These growth potentials are fostered by the upgrading of obsolete machines, newly established business around the world, new generation or innovation of computer devices integrated with digital functions. Yearly PC sales for the U.S. and the main regions of the world are summarized in the next figure. North America will remain the largest region through 2007. All figures are in millions of units. Figure 1: Annual PC Sales of the main regions of the world

(Source Etforecasts) In 2003, the number of PCs sold in the US was roughly about 30% of the total worldwide sales. This data indicates that the remaining 70% of the PC sales happened outside the US. This shows that there are many opportunities yet to be discovered by firms around the world. According to etForcast , Asia will be the region with the fastest growth in computing devices. This trend is confirmed by the rapid urbanization and modernization of China in recent years, and expected to

continue to grow in the next decade. Therefore, it is logical to move the PC manufacturers in the US into the global arena. PC revenue was growing slower than unit growth due to considerable price declines and saw a pause the last two years due to lower unit sales growth than price declines. The worldwide PC revenues were $251B in 2000, which increased to over $333B in 2007. Worldwide PC revenue declined to $320B in 2010. According to experts of Etforecasts, worldwide PC revenue has a trend to grow again in the next five years to around $400B in 2015, which is due to the unit growth boost from the iPad and competing products. To get a clearer picture of the potential of IT industry, have a look at the following figure about computer and peripherals industry in the period from 1999 to 2004. This computer and peripherals industry include products which are computerbased and inter-connected to computers. These products are indicators of how well the entire industry is doing in terms of new innovations and future development. Figure 2: Computer and Peripherals Industry 1999 2004 Unit: billion Dollars

This figure is a good indicator of the huge potentials in the IT industry. Although the industry had a minor setback in 2001, the net profit and sales remains

high for 2004. As mentioned above, IT industry has become a center for computer and peripheral devices. There will be a greater demand in networking because computers are more connected to each other. Wireless technology will continue to grow in range and speed for more and more information need to transmit between computers and across networks. 1.1.2. Overall impact to the development of economies in the world The 21st century comes with more than ever powerful tools which based on the widely use of computers and the Internet. The popularity of PCs is phenomenal because it has revolutionized the way people communicate, how information is stored, and peoples ability to access knowledge at their fingertips. Besides, PCs have become necessities in the corporate world simply because business processes involve heavy use of computers and Internet. In fact, the percentage of population with computer connected to the worldwide network has become one of the key indicators for the level of modernization and human power of economies in the world. Following is the figure for some typical countries: Table 3: Internet users per 100 people Country US Japan Germany Australia China Singapore Vietnam 2007 2008 2009 2010 75.2 74.1 78.2 79.3 73.6 74.7 77.4 79.4 75.4 78.3 79.7 82.5 69.6 71.7 74.1 75.8 16.0 22.7 29.0 34.4 67.9 68.0 68.4 70.1 20.9 24.2 26.8 27.8 (Source: World Bank estimates - World Development Indicators)

There are two things that can be easily seen from the above table. First, the advanced economies often have high percentage of population with computer connected to the Internet. Developed countries such as US or Germany have a very high rate, almost four-fifth of the population; meanwhile, developing countries like China or Vietnam stay at much more humble levels. This means that internet connection is one of the indicators for the power and modernization of the

economies. Second, the percentage in general has the trend to increase continuously over time which denotes the increased demand for computers and Internet using. Peoples job will more and more related to the application of computer and Internets functions. Information technology has shifted the paradigm of economies. In a macroeconomic sense, information technology affects the patterns of production, investment and employment. Production structure: as the information technology evolves, the world is now in paradigm shift from the industrial age to the information age. As a result, there is a growing demand in the service fields that require expert knowledge and information. Thanks to information technology, existing service industries such as banking and distribution are enhancing efficiency and expanding their business areas. New industries on the basis of information technology such as software industry and information processing service are rapidly growing. The following table is about information and communication technology goods exports include telecommunications, audio and video, computer and related equipment; electronic components; and other information and communication technology goods of some countries. The number is taken as percentage over the total goods exports.

Table 4: ICT goods exports (% of total goods exports) Country\Year US 2007 14.2 2008 12.8 2009 13.0

Japan Germany Australia China Singapore Malaysia




7.9 6.9 6.8 1.8 1.5 1.4 29.1 27.5 29.5 36.2 35.9 35.4 41.6 26.2 38.1 (Source: United Nations Statistics Division's Commodity Trade)

The table shows clearly that ICT products is an important part in the production structure of countries, especially Asian developing countries since the percentage is very high (times higher than developed economies). This can be explained as the trend of outsourcing in big technology firms of developed countries to take advantage of cheap labor force and market potential in Asia-Pacific area. Investment structure: as information technology changes the aspects of competition, investment is made more in the area of information and communications that promotes productivity and efficiency of knowledge-based products. As the demand for high technology goods has increased continuously, the IT industry becomes a highly profitable but competitive industry. Severe competition in home countries forces computer firms to expand globally, finding new market for their growth. In addition, the pressure of price-competition requires them to find ways to cut cost. As a result, large multi-national technology tend to invest in potential markets such as countries in the Asia-Pacific area or India, changing dramatically the investment structure of both home countries and investment receiving countries. According to OECD Factbook 2010 regarding to investment structure of the world, ICT shares in total non-residential investment doubled, and in some cases, even quadrupled between 1980 and 2000. In 2008, ICT shares were particularly high (at 24% or more of the total) in countries like the United States, Sweden and Denmark, etc. Software has been the fastest growing component of ICT investment. In many countries, its share in non-residential investment multiplied several times between 1980 and 2008. In 2008, software's share in total investment was highest in Sweden, the United States, Denmark, Finland and the United Kingdom. In the recent years, software accounted for 50% or more of total ICT investment in France, Finland,


Sweden, Japan, Korea, Denmark, the United Kingdom, the United States, Canada, Switzerland and Netherlands. Communication equipment was the major component of ICT investment in Portugal and Greece. IT equipment was the major component in Belgium and Ireland. Changes in employment structure: In advanced economies, the number of workers in manufacturing sector is drastically reduced by shrinking share of its production. But employment in information and knowledge-intensive service sector is increasing with automation and investment in information technology. In the occupational categories, there are more demands for experts with creativity and information technology. Meanwhile, for developing countries, a large number of people move from the agriculture sector into manufacturing due to the trend of outsourcing of big technology firms in the world. Investment in infrastructure of high technology firm in developing countries to take advantage of the cheap manufacturing factors has created jobs for millions of employment in the local areas. In a microeconomic sense, information technology changes business activities. It is important today that how much information a company have and how much of them could be converted into useful knowledge. The global modern economy has proved that knowledge itself, not a physical good, is a valuable product. In other words, owning to advanced information technology, knowledgebased workers, who create and utilize information, play a key role in economic activities and knowledge creating organizations like research institutes and universities will find their increased roles as a place for economic activities. Changes take place in every part of the business from the communication system to development of goods and technology, procurement, production, sales, distribution, and after sales services. Enterprises depend heavily on rapid development of diverse goods and technology in order to satisfy customers. Time to market is also getting an important position in today economic environment. Modern communication methods such as email or fax have been widely used in companies since they accelerate the whole business process and save a lot of time.


Meanwhile, enterprises have a trend to change production system from mass production under economy of scale into production on demand thanks to the application of E-commerce and advanced communication tools. Keeping a smooth flow of information both internally and externally has become one of the key comparative advantages of companies in technology field. It helps companies save time and keep them updated constantly with information about the real demand of the market. That is the basis for their customization to truly meet the need of theirs customers. In short, the informatics era come with the technology evolution has restructured and speed up peoples lives, business operation, and the whole economic scenario of every countries in the world. The technology power of countries in the 21st century comes with the economic and politic power. Information, communication and computer-related industry have become the strategic focus of development in almost a large number of countries and regions around the world. National policies to promote technology development and innovation: When talking about the countries growing fast and increasing their power with technological means today, people often mention the role of information technology, the widespread use of computers and the Internet. Information technology sector has proven itself to be the most strategic power in the development of national economies due to its productivity, speed, and versatility. As a consequence, countries in the world have set up and changed their own policies and strategies to develop their technology power on a continuous basis. On of the main indicator regarding to the policies for technology development and innovation of countries is how much they spend on research and development activities (R&D). The following table shows a brief comparison of this expense in some typical countries in the world. For even a clearer look, the second column takes this expense as percentage over the GDP of those countries.


Table 5: Domestic expenditures on R&D by country 2009-2010 (most recent year available) Country US 2009 Japan 2009 Germany 2010 France 2010 South Korea 2010 United Kingdom 2010 Canada 2010 Italy 2010 China 2009 Singapore 2009 South Africa 2008 R&D expense (million R&D expense/GDP

current ppp) (%) 401 576.00 2.90 137 314.21 3.36 86 209.64 2.82 49 990.76 2.26 53 184.86 3.74 39 137.82 1.77 23 970.09 1.80 24 269.15 1.26 154 147.36 1.70 5 733.23 2.27 4 708.22 0.93 (Source: OECD, Main Science and Technology Indicators)

In general view from the above table, developed countries often have a higher rate of R&D expense over their GDP, more or less of 3%. This is relevant with the result of strong technology power and potential in these countries. Meanwhile, developing countries such as China has also spent a substantial amount to develop its technology power to catch up with developed economies in the world. In deed, the location of R&D investment has a trend to move toward new emerging economies such as India or China. This is considered as the direct consequence of outsourcing activities of many large technology firms in the world in the process of global expanding and cost cutting. According to an estimation of European Commission, between 13 years from 1995 to 2008 the worlds gross domestic expenditure on R&D (GERD) almost doubled in real terms. Over this period real GERD increased by about 50 % in the EU, 60 % in the United States, 75 % in developed Asian economies, 855 % in China, 145 % in BRIS countries (Brazil, Russia, India, South-Africa) and almost 100 % in the rest of the world. As a result, less than 24 % of R&D expenditure in the world was located in the EU in 2008, compared to almost 29 % in 1995. The share of the United States and Japan also decreased substantially from almost 38 % to 33 % in the United States and from 16 % to 13 % in Japan. Moreover, this global


trend has been accelerating since 2004, which marked the beginning of a steeper increase in R&D expenditure in China and developed Asian economies. Figure 3: Changes of World GERD in real terms

(Source: DG Research and Innovation Data: Eurostat, OECD, UNESCO Notes: BRIS: Brazil+Russian+India+Singapore) This evolution is expected since rapid economic growth in China and a number of other countries in the world allows for rapid increases in R&D expenditures in these countries. Also, high growth rates are more easily reached when the initial level is relatively low. In that context, the share of the EU and other advanced economies is bound to shrink and the figure below quantifies this shrinkage. This re-balancing in knowledge production has important consequences for the EU in terms of international scientific and technological cooperation and knowledge flows in the world.


In the 2002 Lisbon Strategy, the EU set the objective of devoting 3 % of its GDP to R&D activities by 2010. In 2005, with the re-launch of the Lisbon Strategy, Member States set their own national R&D intensity targets to be met in 2010. In the Europe 2020 Strategy adopted in 2010, the EU maintained the 3 % objective for 2020 and in the following months, Member States adopted their 2020 national R&D intensity targets. Despite a 25 % real-terms increase in research expenditure over the period 20002008, R&D intensity in the EU has stagnated at around 1.85 % of GDP between 2000 and 2007 with a slight increase in 2008 and 2009 to 2.01 % of GDP (Figure I.1.2). This late increase in R&D intensity is, however, due to a more rapid decrease in GDP than in R&D expenditure. In the United States, after a continuous decline during the first half of the decade, R&D intensity started to increase from 2005 to 2.77 % of GDP in 2008, slightly above its 2000 value (2.69 % of GDP). This quasi-stagnation of R&D intensity in the EU and the United States contrasts with the strong increases observed in Japan, South Korea and China during this period, up to 3.44 %, 3.37 % and 1.54 % of GDP respectively. Part of the very high R&D intensity growth observed in China is due to its low initial position. It is to be noted that this increase slowed down in 20072008 in Japan. Of the largest contributors to R&D expenditure in the EU, France and the United Kingdom have followed a similar path to the EU average, while Germany is closer to the US level. 1.2. Development strategy of technology enterprises: Although the market for computer is huge and profitable, the competition is truly fierce between leading providers including Dell, Hewlett-Packard, IBM, Sony, Toshiba, Acer and Apple. As the demands for computer and computer-related products are getting higher day by day, there is also a pressure for PC vendors to drive the price down to compete with others. It is often down to the level where profits are questionable; as mention in the previous sector, around 10% of price margin. Meanwhile, PC vendors also have to cope with rapid product cycle because high technology is changing so quickly. As the result, IT enterprises have to keep their costs down and try to maximize their market share. The use of information


systems to gain competitive advantage becomes very attractive to the companies in this industry. Each firm follows their own strategy of technology innovation and doing business. Dell: The innovative Direct-Sales Business Model eliminates the need for a retail chain. The ability to customize PC on an individual customer basis is one of the main comparative advantages of this vendor. Dells PCs are built and upgraded based on standardized components of collaborative partners. Hewlett-Packard: It merged with Compaq Computer to compete against Dell. This computer giant still relies on the more traditional retailer channel business model. HP also offers variety of computer products such as printers, scanners, and digital cameras. IBM: Traditionally IBM is in the mainframe and large scale computing market. It holds the most patents in the world as an attempt to stay ahead in the competition. The PCs from IBM are gear towards corporate and business use. Lenovo: Lenovo is the world's second largest PC maker after its 2005 acquisition of IBM's personal computer business. . Lenovo markets its products directly to consumers, small to medium size businesses, and large enterprises, as well as through online sales, company-owned stores, chain retailers, and major technology distributors and vendors. Sony: a Japanese consumer electronic giant becomes a computer maker. Their computers gear toward the consumer market and offer tools for video editing. It is aiming towards the overall design and appearance of the computer. The main Laptop line of Sony is Vaio which tend to concentrate on the high end market. Toshiba: a Japanese diversified manufacturer and marketer of electrical products, information & communications equipment and systems, Internet-based solutions and services. In PC venture, Toshiba focuses on portable computers. Their computers offer a balanced between price and performance.


Acer: Taiwan PC maker which has been staying in top 5 PC vendors regarding the market share in recent years after its acquisition of US-based competitor Gateway. In the early 2000s, Acer changed it business strategy a manufacturer to a designer, marketer and distributor of products, while performing production processes via contract manufacturers. Acers products are competitive both in the quality and the price. Apple: Last major PC maker that is not using Microsofts Windows operating system. Apple has moved from competing directly with the Wintel market to a more leisure computer market. Their computers focus on design and userfriendliness. The customers for Apple are personal users, educational institutions, and graphics design firms. The following table is about global market share of leading vendors in recent years: Table 6: Global PC Market Share 2008 - 2011 Rank 1 2 3 4 5 Others 2008 HP Dell Acer Lenovo Toshiba 2009 18.4 HP 14.3 Acer 11.1 Dell 7.2 Lenovo 4.5 Toshiba 44.5 2010 2011 19.3 HP 17.9 HP 17.2 13.0 Dell 12.9 Lenovo 13.0 12.2 Acer 12.0 Dell 12.1 8.1 Lenovo 9.7 Acer 11.2 5.1 Toshiba 5.4 ASUS 5.9 42.3 42.1 40.6 (Source: Gartner and IDC estimation)

The position of leading competitors in the PC market has changed a lot in recent years due to the acquisition and merger of companies. Dell stayed for years at the first place in the early years of 2000s; however, after the acquisition of Compaq, HP has gained the biggest market share, much bigger than Dell and stayed at No. 1 position. The acquisitions of IBM by Lenovo and Gateway by Acer have also changed the position of these two companies. In 2009 and 2011, Acer and Lenovo respectively overcome Dell to gain the second position on the global market. 1.2.1. Technology innovation


Leading PC makers mainly follow 2 ways of technology innovation: to become a leading innovator or to follow standards-based innovation. Leading innovator: By this way, PC makers follow independent innovation to create a brand new technology. They focus on R&D activities in order to achieve technical breakthroughs which enable enterprises to form a strong technical barrier by applying for a patent and exclusive right of the new technology or product. Product innovation in this way occurs through two broad processes: R&D and new product development. R&D is an ongoing activity that generates new knowledge that can be applied to new products. New product development is a multi-stage process of design, development and production that creates physical products for target markets. These two processes are both very costly because this is when the computer makers try to develop something totally new to the market. This is the case when an entirely new product is being created such as the wireless notebook that requires integration of communication technologies, or in the case of a new product category such as the Apple iPod. If the new technology is widely accepted by the market, the leading innovation companies will receive a huge benefit from the exclusive right of using the new technology. If the consumers want to use the new product, they have no other way but buy them from the exclusive providers since they are the only sources. However, following this way means that independent innovation enterprises should input adequate human and material resources in the research and development and market development. They bear the huge cost of R&D and also the risk that the product may not be well recognized on the market. Moreover, because technology in the computer industry changes very fast, the new technology, after a short period of time, will be standardized. At this point, the leading company of the technology will face with the tough competition from other parties who can produce the same technology with much cheaper price. The leading company will continue the cycle of R&D and product development for a new product.


Standards-based innovation: This way mean the computer maker will based on standardized technology and market demand to build their own product by improving product design, capacity, productivity, etc. Standards based innovation offers advantages and safeguards which independent innovation cannot match. Standardization means a technology has the support of its industry. In other words, since the technology is already accepted by the market, it is ensured about the inter-operating ability and future proofing, and thereby contributes greatly to customer confidence. Additionally, as it draws on research from multiple sources, standardization means technologies are continually improving in their performance, and expanding into new areas and applications. As a consequence, standard technology allows for larger and homogenous markets. While many leading innovator try to differentiate their products by spending huge amount of capital on R&D activities to create brand new technologies which distinguish them from any thing available on the market, the others with more humble budget for R&D could follow this strategy of innovation which is based on the standardization of technology. When a new technology appears on the market, if it is accepted by consumers, the leading innovator will often possess an exclusive right with the usage and application of that technology and this would bring them substantial benefit for a period of time. At this stage, the consumers have to accept the price even if it not reasonable for that exclusive technology because that is the only way they could use it. But this is just the beginning of the whole story. With the higher demand of the market for that technology, it will become more and more popular to the point that other parties could gain the knowledge of manufacturing that technology and beginning to produce it. The technology is gradually standardized and could be sold with much cheaper price than the exclusive one. This is the point when companies with standards-based innovation strategy start playing their games. Based on the standardized technology, they spend some money on R&D to build their own products, upgrade its capacity, and improve the efficiency to serve their customers in the way they want. This strategy of innovation benefits them in many ways: first, they could spend a smaller amount on R&D


activities with the same technology. Second, because the technology is standardized, it is widely accepted by the customers on the market which means small risk of their products being rejected. Third, they spend money on developing their own products and they are often better than the original products of leading innovators regarding the computing capacity, speed, volume, and often with more competitive price. The second strategy of technology innovation has proven itself to be a wiser way to build a product. Among leading PC providers, Dell is the best example of using this way of innovation to accelerate its business. Other competitors like HP or Lenovo also have had the movements toward this way of managing their technology. Application of Information Technology to the Industry By looking at the size of the PC Industry, analysts will conclude that it is impossible to run business efficiently without the use of Information Technology. The entire business will be supported by three major aspects of IT use in the Industry; they are the use of IT in the manufacturing, the use of IT in customer support and service, and the role of IT in strategies that enable the firm to gain competitive advantage.

Figure 4: PC industry Value Chain Suppliers Manufacturing Retail Services Customers Information Technology Support The PC industry Value Chain shows the logical components that support the day-to-day business operations. Information Technology support is throughout the value chain.


In the manufacturing stage, a firm has to be able to track the inventory of all the components that goes into a computer, and they need to do it in with millions of computers on a daily basis. It is close to impossible for any PC manufacturer to do this without the use of IT to support the manufacturing process. IT helps to automate a lot of the mundane daily task and leaves the resources free for other tasks. PCs are highly customizable in features and processing power. Therefore, it is important for the manufacturers to customize any PC to fit the needs of any customer. To accomplish it efficiently IT will support the ordering processes and customer service processes. All the information will store into a database, and the manufacturer can look up the any information on any PC that they have ever built for its customer. IT is often used in the forming the strategy for the PC manufacturers. For example, IT enables a manufacturer to manage their global sales and customer services. The ability to manage an effective IT system lies among the main competitive advantages of a PC company. An effective IT system ensures the flow of information run smoothly both externally and internally within enterprises. And in this era, information means profit. Large companies like Dell or HP have proved that their success in managing the IT system helps them understand about the real market demand, form the basis for their product customization. Furthermore, with the support of the e-Commerce website, PC manufacturers open up unlimited business opportunity that can span the entire world. 1.2.2. Business strategy: As mention in the previous part, the competition in the computer Industry is fierce and global. These conditions force the manufacturers in the industry to stay competitive using well thought out business strategies and tactics. And it does not simply stop there. The firms in PC industry have to continuously adjust its strategies to response to pressures from customers, competitors in the market, and IT vendors.


The strength of the company lies with the capability to deal with all the changes and the rapid adaptation of its strategies. The following figure will present a Business Strategy Model for the computer industry. The model is divided into categories of focus, and each focus will provide several options that a firm can choose to implement in its strategy. Different firms will have different strategies and combinations. Such differences will enable them to compete in the same industry while vary in focus and capabilities. Figure 5: Business Strategy Options in PC industry Products Desktops Laptops Customers Individuals Corporate Markets US Europe Asia Manufacturing strategy Customized Sales and distribution Direct Sales Companys structure Alliances Independent Any enterprise in the computer industry has to choose at least one primary and perhaps some combinations of the supplementary strategies. The two primary strategies are low cost and product differentiation, and the supplementary strategies include innovation, grow, and alliance. In order to implement the low cost strategy as the primary strategy, the firms have to notice a few important points. In the least-cost competition there is only one winner, and this is to say there is only one company that can achieve the least cost in the production. Low cost strategy emphasizes on ways to cut cost as low as Retain Chains Latin America Education Government Tablets Servers

Fixed features


possible. For example, the most popular way is based on economies of scale which means the firms have to sell a lot of the same products to sustain the extremely low profit margin on each item. Other ways include the policies to keep low inventory, direct sales to cut the cost of middleman. Generally, the firms need to use information systems to exploit cost reductions and form strong business alliances with suppliers and other logistics providers. Dell Inc. is the best example of companies successful in applying this strategy. The direct sales model and the ability to maintain almost-zero inventories have contributed greatly in the forming of extremely competitive price of its products. On the other hand, the differentiation strategy focuses on separating the product from the industry standard. This is a strategy that focuses on unique products that exceed the industry average in terms of performance and design. The product must be highly customizable so it caters to individuals rather than having a generic form. Firms using differentiation as a strategy need to constantly make adjustments to the product because of the competitors imitation. As an illustration, Apples primary strategy is in product differentiation. It tries very hard to differentiate itself from the rest of the PC manufacturers through better design and performance. Through Apples own brand image, it tries to convince the customers that its computers are superior to other competitors. The PC industry offers a wide range of products. Desktops and laptops are computers that target at home customers. For business, government, and educational customers, they will find the tablets and servers both very attractive to fit their needs. In the 21st century, the PC industry is truly global. Computers can be shipped to different places around the world with the minimal modifications. The computer itself is the same for all countries; however, the documents and manuals that come with the computer will have to be localized to the specific countries. Besides a clear primary strategy, a good combination of the supporting strategies is also important. Innovative use of information systems in Supply Chain Management will enable the firm to cut costs to support the primary strategy. Total Quality Management allows a company to provide and sustain a good customer


service time after time. Strong Alliances are formed to foster a closer relationship with the suppliers and logistics providers. Alliances can also drive the costs down and increase the profit margin on each product. The options for strategy are limitless. The goal for all firms is to make a wellbalanced choice a choice that will ensure the competitive edge of the firm in the industry. Failure in doing so will result in loss of market share and perhaps the end of the business opportunity for the firm. 1.3. Development strategies of some MNCs in the world and achievements: 1.3.1. Globalization of the Personal Computer industry: Table 7: Share of global PC production by region 1985 1990 1995 2000 Americas 53% 32% 32% 34% EMEA 24% 27% 20% 19% Asia-Pacific 23% 41% 48% 47% (Source: Reed Electronics Research, Yearbook of World Electronics Data Note: EMEA: Europe Middle East - Africa) The computer industry has long been one of the most global of industries. The Asia-Pacific production network was concentrated in Southeast Asia, particularly Singapore and Taiwan. In Singapore, many U.S. and other MNCs set up production of computer hardware, especially disk drives. In Taiwan, entrepreneurial local companies found opportunities supplying the major PC makers, beginning with simple parts and moving up to more sophisticated components, and assembly of PCs and peripherals. Over time, labor-intensive activities were relocated to low-wage locations such as Thailand, Malaysia and China, with Singapore and Taiwan coordinating production in these sites and handling more sophisticated manufacturing processes at home. Japan and Korea were less successful as global PC producers, but were the major suppliers of high volume components such as memory chips and flat-panel displays.


As early as 1988, the Asia-Pacific region had surpassed the Americas as the largest producer of computer hardware, even though the largest market was in the Americas and most leading PC vendors were U.S. companies. Asia-Pacific gained production at the expense of both the Americas and Europe/Middle East/Africa (EMEA) until 1990; since then it has grown relative to EMEA while the Americas share of production has remained stable. In absolute terms, production has continued to grow in all regions. In Europe, production was concentrated in Germany, the UK, France and Italy during the 1980s. Each of these countries had a national champion computer vendor that had been nurtured through government procurement and other policy measures. However, none of the national champions made a successful transition from mainframes to personal computers. As a result, production stagnated in the mid 1990s in all of the countries except the UK, which attracted IBM and Compaq to locate PC production in emerging industry clusters in Scotland and Wales. In the Asia-Pacific region, production was dominated in the 1980s by Japan, which nearly tripled production between 1985 and 1990 to surpass the U.S. as the world leader. During this time, Singapore and Taiwan also saw rapid growth, followed by Korea. In the early 1990s, Japan continued to see solid growth in production, while Singapore and Taiwan each tripled their production to become the third and fourth largest producers in the world. In the late 1990s, however, Japans production declined precipitously, and Singapore and Taiwan saw much lower growth rates. The fastest growth was now occurring in the less developed ASEAN countries of Malaysia and Thailand, and most dramatically in China, which has leaped to number four in world production. This shift to developing countries was driven by investments by U.S, Japanese and Taiwanese firms looking for lower cost production sites and, in the case of China, looking for market access as well. 1.3.2. Strategies of some leading PC makers in the world and achievements: Hewlett-Packard (HP):


HP is a PC vendor that operates in more than 170 countries all over the world. HP was founded in 1939. Corporate headquarters are in Palo Alto, California. In recent years, HP has remained as the largest IT company in the world, with revenue totaling $127.2 billion for fiscal year 2011. In 2011HP stayed at number 11 in Fortune 500 ranking. In 2002, HP and Compaq have merged together to gain the market competing with the main competitor Dell. These steps in the strategy of HP has boosted the market share of this PC enterprise become much larger than Dell and help the company stay at the first place in the world for years. Probably no other company offers as complete a technology product portfolio as HP. The company provides infrastructure and business offerings that span from handheld devices to some of the world's most powerful supercomputer installations. HP offers to consumers a wide range of products and services from digital entertainment and from computing to home printing. This PC vendor divides its products into three groups to meet the need of each market segmentation, including: The Personal Systems Group: business and consumer PCs, mobile computing devices and workstations. The Imaging and Printing Group: inkjet, laser-jet and commercial printing, printing supplies Enterprise Business: business products including storage and servers, enterprise services, software and networking

In order to innovating its technology constantly, at the moment HP scientists are focused on 24 large-scale projects that fall under eight high-impact research areas: printing and content delivery; mobile and immersive experiences; cloud and security; information analytics; intelligent infrastructure; networking; services; and sustainability. However, in recent years, HP has shifted from creating entirely new technology to using standardized components in producing PCs. The clear figure is


that this company has reduced it R&D budget continuously. In 2009, HP spent $2.82 billion on R&D, down from $3.54 billion a year earlier. In 2007, HPs R&D spending was $3.6 billion. This movement in its strategy has supported greatly to lower cost. HP keeps a balance in its products, good quality PCs integrated with updated technology but at a competitive price level. Apple Apple Inc., formerly Apple Computer, Inc., is a multinational corporation that creates consumer electronics, computer software, and commercial servers. Apple's core product lines are the iPad, iPhone, iPod music player, and Macintosh computer line-up. Founders Steve Jobs and Steve Wozniak effectively created Apple Computer on April 1, 1976, with the release of the Apple I, and incorporated the company on January 3, 1977, in Cupertino, California. For more than two decades, Apple Computer was predominantly a manufacturer of personal computers, including the Apple II, Macintosh, and Power Mac lines, but it faced rocky sales and low market share during the 1990s. With the introduction of the successful iPod music player in 2001, Apple established itself as a leader in the consumer electronics industry, dropping "Computer" from its name. The latest era of phenomenal success for the company has been in the iOS range of products that began with the iPhone, iPod Touch and now iPad. As of 2011, Apple is the largest technology firm in the world, with annual revenues of more than $60 billion. The main lesson from Apples success, however, is the central importance of focusing on strong products that are well-designed for the market. For years in this century, Apple has become the best leading innovator with continuously updated generation of its products and brand new ones. Steve Job, the companys leader, is a genius at minimalist designs that integrate technology breakthroughs to fill a newly emerging need with unusual style. The result can be seen in the way he describes the attraction of the iPad Its like holding the Internet in your hands. Its so much more intimate than a laptop and more capable than an iPhone. Its truly magical.


The following figure presents the budget Apple has spent on R&D as percentage of revenue. In general, spending on R&D of this company is high, keep this vendor among the top 50 R&D spenders in the world. However, companys revenue increases faster than this expense (as illustrated as decrease trend of the figure), especially since 2010 with the introduction of the ever successful tablet Ipad. Figure 6: Apples R&D % of sales

(Source: Larry Dignan ZDNet news) Behind such great products, Apple thrives because it has been described as a welloiled machine. The company has outsourced its manufacturing operations, while 317 Apple stores are wildly popular and profitable. The Apple music store iTunes has expanded into a powerful vehicle for trading videos, movies, and possibly other information products. Lenovo: Lenovo is the world's second largest PC maker in 2011. This Chinese company is established on November 1, 1984. In 1985, the company launched the first Chinese-made motherboard with Lenovo technology. The brand name, Lenovo, was born from this. Lenovo operates factories in Chengdu and Hefei in China, Japan, and as of December 2011 has plans to start production in Argentina. Lenovo focuses on vertical integration in order to avoid excessive reliance on original equipment manufacturers and keep costs down.


This PC maker offers to the market the ThinkPad, IdeaPad line of notebook PCs and ThinkCentre line of desktops. These brands became part of Lenovo's offerings after its 2005 acquisition of IBM's personal computer business. As its strategy, Lenovo markets its products directly to consumers, small to medium size businesses, and large enterprises, as well as through online sales, company-owned stores, chain retailers, and major technology distributors and vendors. This direct sales model helps the company to reduce cost of middle man and retailers, and form the basis to get instant feedback from its customers. This all reduces the cost of producing and selling products and keeps this enterprise stay competitive on the market. Besides, Lenovo owns the greatest track record for innovation in the PC industry and remains committed to innovation in its products and technology. As stated in the companys statement, Lenovos innovation strategy is based on a twotiered approach to solving real-world customer problems: Focus the majority of development on ideas that can be brought to market within 24 months; and, Invest longer term in research targeting game changing big plays At the moment, Lenovo operates seven research and development centers and more than 46 world-class laboratories, including major research centers in Yokohama, Japan; Beijing, Shanghai and Shenzhen, China; and Raleigh, New York City. The company employs more than 1,700 engineers, researchers and scientists and has received more than 100 major design awards. Lenovos R&D centers have produced some of the world's most important advances in PC technology, ranging from the original Bento Box PC notebook design in 1992 to the 2008 launch of the innovative ThinkPad X300, considered as one of the world's lightest, thinnest and most innovative full-featured notebook PCs ever. Lenovo's commitment to innovation introduces more industry breakthroughs and technology that sets the technical standards for business users as well as consumers.


Chapter 2: DELL COMPUTERS TECHNOLOGY INNOVATION AND DEVELOPMENT STRATEGY 2.1. Overview of Dell computers development: This section of the paper deals with Dell Computer in the PC industry in terms of how they fit in the global PC industry, their technology innovation, their


competitive strategy, the significance and the roles of the information systems, and the strengths and weaknesses of Dell Computer in the industry. In 2011, Dell reported $61,494 billions in sales, 16% increased in comparison with the previous year, and employed 100,300 people worldwide in production, development, and customer support of the operation. Dell is truly a global business with products range from desktops, laptop, workstations, servers, networking devices, and computer peripherals such as printers, cameras, LCD TV, mp3 music players, and recently tablet. Each Dells product can be further customized to meet the needs of the customers. Dells direct sales business model has been refined and modified to support the changing product line and customer service. However, the main idea behind the direct-sale business model remains unchanged. From a statement on Dells website, Dell is doing business directly with customers, one at a time, and believe we can do it better than any one else in the industry. The successful direct-sales business model puts much emphasis on the customers. From the beginning to the end of the transaction, Dell understands completely what the needs of its customers are. This results in a satisfied customer with the potential to do business again and again in the future. After two decades of growth, Dell has become the world leading direct-sale computer vendor in the PC industry. As a relatively young company, Dell finds themselves constantly competiting with old, more established companies like Hewlett-Packard and IBM. In many years in the early of this century, Dell reclaimed the title of the number one PCs supplier in the industry. The success of Dell Computer is not possible without the vision of Michael Dell and his innovative strategies of technology development and operation. The following is a brief history of Dell Computer and its development. 2.1.1. Introduction to the company: Dell, Inc. is an American multinational computer technology corporation headquartered in 1 Dell Way, Round Rock, Texas, United States. The company is founded on November 4th, 1984 by Michael Dell who at that time was still a


student in University of Texas. In 1983, Michael Dell started his computer hardware retail business by selling hard drives and RAMs for IBM PCs. Dell bought his products from IBM dealers at cost, and later resold it through newspaper and magazines to individuals and businesses at lower cost than the retailers. By April 1984, his dorm room computer business was already making about $80,000 a month, and the success was strong enough to persuade him to drop out of college. As a result, Dell founded Dell Computer with $1,000. In the next few years, he was making IBM clones computers under the name PC-Limited and sold it to customer directly without retailers. This approach allowed PC-Limited to sell computers to its customers at 40% of the price of the IBM computers. The directsales business model propelled Dell Computer to the leading PC supplier in the industry. Table 8: Dell market share and rank from 2001 to 2010 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Market share Rank 13.3 1 15.2 2 15.0 1 16.4 1 16.8 1 15.9 1 14.3 2 14.3 12.2 12.9

2 3 2 (Data: Gartner Inc.)

For many continuous years, Dell was the number one PC maker in the industry. However the situation has changed dramatically since the merger of HP and the direct competitor Compaq in 2002, together they own the market share bigger than Dell. Besides, bigger size allows HP to foster it low cost strategy due to economy of scale. Some years later come the rise of Lenovo and Acer with the acquisition of IMB and Gateway respectively. As a result, Dell keeps the third position in the market in 2011. The direct-sales business model is just one tool for Dell to do business. If the success of Dell is based solely on this model, Dell would have lost its competitiveness a long time ago. The competitors of Dell can duplicate the model and do business the same way as Dell. There are other factors staying at the core of


Dell strength. Following is a summary of Dell comparative advantages based on several analyses about this firm: Leading technologies: Dell always keen to embed latest technology in its products. Following standards-based innovation, Dell PCs are built with standardized components which are well-recognized by the market. Dell has spent much effort and money to push its product to the limit of capacity in order to serve customers with the best computing solution. In addition, due to its direct relationship with customer, Dell is able to introduce the latest relevant technology compared to companies using the indirect distribution channels. Moreover, Dell launches newer technology far more before the other companies that hold inventories. The focus of Dell on technology personnel has helped this firm to catch up with every change in high technology. Customer Direct: one of Dells core strength is its firm belief in upholding the direct business strategy. Going direct has benefited this firm in many ways. Since it cut off all the role of wholesalers as well as retailers, it reduces greatly the cost of manufacturing and selling computers, resulting in products with very competitive price level. In addition, direct relationship is the basis for its ability of customization. The information and feedback from customers could be collected easily and quickly. And this information will be of help in choosing the most appropriate computing solution to serve the customers. This process results in higher satisfaction and trust of customers on Dells products and services. This form of innovation has been of great importance in pushing it from the bottom all the way to the number one supplier of Desktops, notebooks, and server in the world. Information Systems: no one can deny the importance of Dells Information Systems as a competitive advantage. Information Technology has been around for some time now and is available to everyone at fairly low costs, so it only makes sense for a company to have one. But by just having Information Systems they do not inherit a competitive advantage. The advantage comes from strategies built around solid business models. And Dells overall implementation of the customer direct business model which uses Information Systems is one of its most powerful


competing forces. The efficient Information System at Dell has kept the flow of information run smoothly in the operation of this company. It turns Dell Inc. into an extremely flexible machine which is always up-to-date. Leadership: Michael Dell, the founder of the enterprise is the one who has contributed greatly to Dells top position. His innovative vision about the PC industry and market trend has driven Dell to where it is today. Besides Michael Dell, Dell takes on some of the top executives in the world including its own employees such as Kevin Rollins who manages its day to day operations and helped develop strategies around the direct selling of computer systems and services. As Dell Computer is moving towards a multi-products, multi-national, and multiservices business, it becomes impossible for one entrepreneur to have all the right skills in managing the company. The collaboration of leaders combines the talents of people in a company that is growing at a tremendous rate. Dell most certainly has more strengths than weaknesses as a company, but that just means it needs to keep a closer watch on its weaknesses. Rivalries as weakness: Industry rivalries are perhaps the greatest weakness of Dell. As one of the top PC manufacturer, Dell has everybody as a competitor. HP and Compaq have merged to counter the strength of Dell. The new merger can lower their costs significantly so they can continue to use the retail approach to compete with Dell. In addition, when Dell expands globally, it also faces with strong competition from local region. From previous section, Asia is the area with the highest demand of PC at the moment. Therefore, some Asian computer firms have been emerging strongly; become the direct competitors of Dell. For instance, Japanese and Korean consumer electronics makers are switching to manufacture PC in recent years. Their advantage is the abundant of cheap and skilled workers. They focus on product designs as a differentiation strategy. Especially in recent year, Lenovo has become one of the top PC makers after the acquisition of IBM. In 2011, this firm even overcomes Dell and gains the second position of global market share. That is a clear illustration for the competition from Asia. Another potential problem for Dell is from the suppliers. Dell relies on the suppliers to provide them


with the necessary components to build a PC. If the suppliers cannot deliver the components to Dell, Dell will face with a delay in production. It will create a ripple effect to the rest of the business processes. Limited Technological Selection: even the strategy regarding technology innovation has brought Dell a lot of successes; it also causes a minor weakness that Dell is faced with is its choice of technology. Dell has the opportunity to employ technology as soon as it comes out, but this enterprise usually waits to verify how a technology will perform in the market before implementing it. Dells cautious nature of adoption could possibly lead to a loss of market share to other companies willing to take a risk. And sometimes it is not necessarily a risk that it would be taking. One of the illustration could be pointed here is the success of Apple with the famous tablet Ipad in 2010. This enterprise spent 3.1% of its revenue in 2009 on R&D and come up with the first tablet Ipad in the market. This product become a big success and helps this company gain the main market share for tablets after that. Meanwhile, Dell has waited for a period of technology standardization to release its first tablet Latitude ST. Strategy Mimicking: Dells strategies of standards-based innovation and customer direct are well known and its business processes can be duplicated by any company. This is not seen as a direct weakness of Dell but an indirect weakness of Dells in relation to the market. In fact, many competitors of Dell have changed some parts of their technology focus when perceived the fact that Dell has born a much lower R&D cost while still gained the biggest bite of the cake. For instance, in recent years, HP has shifted its technology innovation strategy into using some standardized components in stead of building their own technology. On another side, the emerging Taiwan firm Lenovo is also keeping a direct relationship with its customers, lowing down the cost and price of products. Strategies which help Dell stay competitive for years at the same time, could help its competitors, especially with newly emerging firms which do not stuck with any old and complex system need to change.


In general, Dells innovative strategies regarding technology innovation and direct business model enable it to become and stay competitive in the changing global market. With strong global sales and growth, Dell will continue to own a large market share in the PC industry. 2.1.2. History of development since establishment: Timeline of development: 1980: Michael Dell purchases his first computer-an Apple II-and promptly takes it apart to understand how it was designed and made. 1983: Declaring he ultimately wanted to beat IBM, the young Dell conducts a lucrative business out of his dormitory room at the University of Texas, selling upgraded PCs and add-on components. 1984: With $1,000 in startup capital, Michael registers his business as Dell Computer Corporation, doing business as PC's limited, and leaves school in May of that year. The company becomes the first in the industry to sell custom-built computers directly to end users, bypassing the dominant system of using computer resellers to sell mass-produced computers. 1986: Dell unveils the industry's fastest-performing computer, a 12 MHz, 286-based system, at the Spring Comdex national computer tradeshow. The system quickly attracts a large number of reviews from the technology press. The company also pioneers the industry's first thirty-day money back guarantee, which becomes the cornerstone of Dell's commitment to expand its service offerings and offer superior customer satisfaction, and offers the industry's first onsite service program. 1987: In a bold move for the risky operation, Dell establishes its first international subsidiary in the United Kingdom. Eleven more international operations would open over the course of the next four years.


1989: The fast-growing company experiences its first major stumbles: It accumulates excess inventory of memory components, which results in writedowns, and cancels an ambitious product development program code-named "Olympic." 1990: Dell becomes the first computer company to jump into the burgeoning market for computers sold through consumer retail stores such as CompUSA and Best Buy. The company later becomes the first company to exit this segment as well, after determining the retail-store model did not meet its financial objectives. 1992: Dell achieves slightly more than $2 billion in sales for the fiscal year ended January 1993, which represents a remarkable 127 percent increase. 1993: Suffering from the pains of extremely rapid growth, Dell cancels a secondary offering and posts its only quarterly loss resulting from a temporary withdrawal from the notebook market, its exit from retail stores, and a restructuring of European operations. 1996: Dell challenges the traditional market for premium-priced servers based on proprietary technology with its introduction of its Power Edge server line. In less than two years, PowerEdge vaults Dell from the tenth position in market share to the third largest server vendor in the world. The company's quiet bid to sell custom-built computers over the Internet quickly becomes a public revolution when the company announces that sales over www.dell.com have exceeded $1 million per day. During the same year, Dell introduces its first custom-made web links for customers. Called "Premier Pages," the links allow customers to tap directly into the company's own service and support databases. 1998: Dell solidifies its Internet leadership when it tops $12 million per day over the Internet, expands its Premier Page program to more than nine thousand customers and establishes web-based connections with its suppliers to speed the flow of inventory and quality information. Dell opens an integrated sales, manufacturing, and support center in China.


1999: Dell becomes the number one PC company in the United States, the largest worldwide market for personal computers. To accommodate its growth, Dell opens new manufacturing facilities in Nashville, Tennessee and Eldorado do Sul, Brazil. Sales over www.dell.com top $35 million per day. 2001: It's a year of firsts as Dell becomes the No. 1 computer systems provider worldwide, and reaches No. 1 in U.S. Intel-based server shipments. The PowerConnect line of network switches launches Dell into the networking equipment market. Dell signs an agreement with storage leader EMC to enable more affordable enterprise-class storage area network solutions for customers of all sizes. 2003: The Company expands its product portfolio with Dell-branded printers and officially enters the consumer electronics market to serve as a single source for its customers. 2005: Dell tops the list of "Americas Most Admired Companies" in Fortune Magazine. Furthering its commitment to the environment, Dell OptiPlex desktop line of products features a lead-free motherboard, power supply and chassis. 2006: Dell is the first in the industry to offer free product recycling for consumers worldwide. This enterprise revolutionizes the way businesses connect with customers with the launch of Direct2Dell a blog to enable fast, direct, two-way conversations with its customers. Also in this year, Dell acquires computer gaming leader Alienware to complement its high-performance systems designed for gaming enthusiasts and media content customers. 2007: The Vostro series becomes Dells flagship line of solutions tailored to small businesses. Dell ramps up our social media efforts to connect with customers by joining Twitter, launching the first investor relations blog, and debuting IdeaStorm.com, a destination where customers can post and share ideas. Dell makes great strides toward its sustainability goals by launching carbon-neutral programs for consumers and corporate customers, and by joining the Carbon Disclosure Project Supply Chain Leadership.


2008: Dell acquires storage leader EqualLogic, growing their original customer base of 1,000 to 25,000 worldwide in the first two years. Dell launches its first Modular Data Center a mobile, self-contained data center optimized for cloudcomputing applications. Dell Studio, a new consumer product line designed for selfexpression and creative living, is introduced. 2009: Dell acquires Perot Systems and launch a new business called Dell Services that gives customers end-to-end IT services to help lower their total cost of IT ownership. Dell enters the smart phone market with the Mini 3i from China Mobile. Customers rank Dell x86 servers, corporate laptops and desktops No. 1 in enterprise customer satisfaction. Dell introduces Adamo and Latitude Z laptops both the worlds thinnest laptops for consumer and business users who demand design, innovation and functionality. 2010: Dell is the No. 1 healthcare information technology services provider in the world according to Gartner, Inc. and wins more than 300 industry awards in 2010. Dell accelerates its enterprise customers move to the cloud with Dell Virtual Integrated Systems solutions, based on open architecture solutions that focus on interoperability and extending the legacy investments of its customers. Dell enters the tablet arena with the Streak, a 5-inch device designed to provide the best on-thego entertainment, social connection and navigation experience. Newsweek names Dell the greenest company in America. 2011: Dell celebrates a record-breaking fourth quarter with double-digit growth in the strategic enterprise solutions and services space, and the largest single-year revenue increase in company history. Dell acquires SecureWorks, RNA Networks and Force10 Networks, leaders in enterprise solutions and services. Further proof of its commitment to providing end-to-end IT solutions for our customers, Dell commits $1 billion to develop Dell data and solution centers around the world and open R&D centers in Israel and the U.S. 2.2. Dell computers technology innovation and development strategy: 2.2.1. Technology innovation:


Standards-based innovation: As its main strategy of technology innovation and development, Dell celebrates standards-based technology. As Richard Gardner, a securities analyst and managing director at the San Francisco office of Smith Barney explains that Dell likes to wait until the components that go into a product are standardized and available from a number of suppliers at competitive prices, then it enters the field with the same kind of manufacturing and fulfillment expertise that it brought to PCs. What is the reason for the beginning of this policy? That is easy to guess. When Dell was newly established, it did not have any big laboratory like what of IBM or Intel for the mere reason of shoe string budget. It means that Dell could not afford to purchase exclusive chip of big companies likes IBM or Intel; they do not want to retail it to a new comer. As a result, Dell only could stood outside and see other companies to gain huge benefit at the early stage. There was no way to break into the technological barrier until when that new technology become more popular and the third parties started to join the game and the product was standardized enough to use chips of the third parties. This is the moment when Dell jumped into where it used to stay outside and play its role. The early example of Dell dated back in 1986 when Dell produced the industry's fastest-performing computer, a 12 MHz, based on 286 system which has the competitive price of USD 1995. The current IBM computer based on 286 system has the speed of 6 MHz, and was first offered as the price of USD 3995. At the Spring Comdex national computer tradeshow November 1986, the system quickly attracted a large number of orders and reviews from the technology press. In the long run, this way serves Dell even better than the pioneers who have to bear the huge cost of R&D. On the contrary, Dell could buy standardized version with price much cheaper than the one with exclusive right. The price even cheaper when there is competition between different providers. At this point, Dell starts its technology innovation strategy. Based on this standardized technology, Dell collects


information and find out about what its customers want. Through Dells direct sales model, direct relationships with customers keep the flow of information run smoothly and accurately than any other competitors in the market. This is a huge comparative advantage that Dell possesses. From this pool of information, Dell improves the standard design by pushing it to the limitation of capacity, makes it become faster, more durable, higher volume, and also cheaper. In other words, this can be called as demand-driven technology innovation. The innovation based on standardized components helps Dell remain a low level of spending on R&D in comparison with other computer makers such as HP or Apple. Dells total research, development, and engineering expenses were $624 million for fiscal year 2010, $665 million for fiscal year 2009, and $693 million for fiscal year 2008. Microsoft spent 13 percent of revenue for fiscal 2011, down from 14 percent in fiscal 2010. For fiscal year 2011, while Dell spent 1 percent of revenue on R&D for fiscal 2011, Google spent 14 percent of revenue on R&D; IBM spent 6 percent of revenue on R&D; the number of HP is 2.5 percent of revenue on R&D; and Apple is 2.2 percent. Therefore, it way of technology development has saved a huge cost for Dell annually. Meanwhile, they companys products are still updated with the best technology. To serve customers with the best computing solution, Dell divides its products into specific lines which fit the exact demand of target customers. Traditionally, Dell offers the Optiplex desktop line for corporate customers and Dimension desktops for small businesses and consumers. In notebooks, it targets the Latitude line to corporate customers and the Inspiron line to consumers and small businesses. Its enterprise systems include the Precision line of workstations and PowerEdge servers, both based on the Intel architecture. More recently, Dell began to offer the PowerApp line of server appliances. In 2006, Dell acquired computer gaming leader Alienware. Since then, Dell Alienware line join in the list of PC lines of this company. This line of product is integrated with very strong system features to meet the need of high-end users and media content customers. Recently, Dell offered to the market the XPS Ultrabook line, a series of product with cutting edge technology


feature and design. The super thin and elegant design of this series is of the high interest for fashionable customer, mostly the young. Dell customers can order PCs with a variety of configurations for items such as processor speed, memory, storage, sound and video, networking, and monitors. For the most part, however, Dell keeps its configurations fairly limited, with only a few options for each item. But even so, there are thousands of possible alternatives for each product, and several products in each line. One estimate is that Dell offers a total of 1.6 million different possible product configurations for all its product lines. Dell works with partners such as Microsoft and Intel on product development, and with contract manufacturers such as Quanta for product engineering. By leveraging the innovations of the PC industry value chain, Dell minimizes its R&D costs. Its own R&D budget is only about 1.6% of revenues, compared to 4-7% for IBM, HP, Compaq and Apple, who are supporting their own technology platforms. Dell also offers a wide range of third party software and accessories for sale through its DellWare (for relationship and public sector customers) and Gigabuys channels. Software also can be installed at the factory standard applications such as Microsoft Office for all customers, and non-standard or custom applications for relationship customers. In general, then, Dells product development strategy is aimed at enabling it to capture both new customers trust and old customers loyalty. In return, Dell gives customers the convenience of buying a full range of products and services from one source, using the best technology with reasonable money paid. Significance of Information Systems at Dell Computer As mentioned in the previous sections in this paper, the PC industry relies heavily on information systems to gain competitive advantage, and Dell is no exception. However, information systems play a more important role at Dell. Dells direct-sales business model eliminates the need for a middle-man(retailers); it becomes a bridge between the suppliers and the customers. Therefore, there is a need for Dell to maintain a relationship with the supplies and another relationship


with the customers. This is done through the use of an information system. On the supplier side, Dell collects information from their suppliers. This information will feed into a database for storage. At any time if Dell needs to analyze a component from specific suppliers, Dell will have a complete profile of the product, such as the reliability, price, and performance. On the customer side, Dell wants to know what their customers want. All that information will be further analyzed and used for future products, customer service, and better marketing strategy. Information Systems become significant when Dell relies heavily on eCommerce and e-Business to operate on a daily basis. On the e-Commerce aspect when a customer places an order from Dell online, it initiates the manufacturing of a new PC. The information systems will contact the warehouse to start the assembly process, billing department to process the transaction, and the shipping department for outbound logistic support. These are all done without interferences. Information Systems also play an important role in e-Business. Information and data can now travel through the company with greater speed and efficiency. This is important for a company that has offices in more than thirty countries and operations that span continents. Through information systems, the business strategies of product differentiation, growth, and innovation are supported. Even before the customer orders the computer, Dells supply-side information systems are at work by correctly estimate the demand of computer components. These links to the suppliers are vital because the prices of the computer components can change rapidly. Moreover, technology is also constantly evolving and hard to keep up. Therefore, lowering the inventory in stock at Dell can help them to have a high return on invested capital (ROIC). As mentioned in the company section, Dell has a higher ROIC compared to the rest of the PC manufacturers. Supply-side management is important because it allows Dell to stay competitive by offering the highest customization for its customers, and have the parts ready only when they need it to put in the PC. This translates into product differentiation in business strategy by offering efficiency.


Dell.com e-Commerce website is the virtual storefront for Dell. In a physical store, there are limits on how many customers they can serve at a given time due to the number of staffs and equipments. Dells direct sales model eliminates all these limitations by using an e-Commerce website. Customers can customize their PCs directly from the website without need of an assistant. The entire ordering process is automated and it is easily scalable as the demand increases. For a regular store, the increase of productivity means putting more employees in the store. This poses challenges because it takes time and training for new employees to work efficiently in a new environment. However, Dell can just increase the number of servers to handle to extra transactions. Furthermore, Dell can provide the same service to its customers every time. The information systems support is a crucial element in the direct sales business model. It propels growth in the business strategy by offering quality customer service. The value of Dells e-Commerce website doesnt stop after the customers have received their PCs. PC support and service are also built-in components of Dells e-Commerce website. Customers can order services and talk to Dells repair technicians directly through the website. This is a huge advantage for Dell because traditionally PC manufacturers require its customers to send in their computers or bring it into an authorized service center for repairs. Dell eliminates all the hassles, and the customer will receive replacement components in the mail. This rapid service allows Dell to service the minor problem quickly and reserve the capabilities to service more complex issues. The innovative way of support and service at Dell earned an award from Computer Shopper Magazine. The technical support and service at Dell cannot function properly without information systems support. It is the link between the Dells employees and the customers. In 2003, Dell.com website generated more than half of the total revenue for the company. This is a staggering 18 billions worth of computers and peripherals business through an e-Commerce website. The benefit of the Internet is only part of the equation. The real challenge lies with Dells ability to integrate the Internet into its business strategies and specific areas in the direct sales model. In other words,


telecommunications are important tools that allow Dell to sustain competitive advantage through better linkage to its customers, and act as a medium for Dell to do business with them. Even before the Internet, telecommunications have played a vital role at Dell. Phone and catalog orders are the primary sources of linkage between Dell and its customers. Direct sales model of Dell eliminates the middleman in the business so it is important for the manufacturer to understand the needs of the customers. Telecommunications serve as a direct link between them. The popularity of the Internet fills Dell with extra capabilities on top of the regular phone and catalog sales. Through the Internet, the link is more interactive. Dell can provide information on their products and service almost instantly to the potential customers. Customers feedbacks are transmitted to Dell in nanoseconds so Dell can make changes accordingly. The Internet also allows Dell to do business regardless of time zone differences because it provides a 24/7 access for people around the world to browse the store. As a result, Dell is always doing business when their customers need it. Apart from these added capabilities, the most important is perhaps the scalability issue. Before the Internet, the number of phone sales representatives and catalogs limited Dells sales capabilities. With the help of the Internet, Dell can now do business without these physical limits. Internally, telecommunications also play a vital role to link business processes together. The best example from Dell is its own Dell-On-Dell service suite. The five components all require telecommunications support and linkage because they cannot exist solely. They are systems on top on another systems, and there are enormous data that need to exchange between all of them. For instance, Dell.com e-Commerce website have a direct link to its DSi2 supply and manufacturing systems, so at any time it will know which parts to order from the suppliers and when to deliver the components to the manufacturing staffs. Furthermore, Dell is global company that is doing business in many different countries. Information needs travel across continents rapidly. As a result, the Internet becomes a medium for email to exchange between Dells employees. These are just few internal


processes that require extensive use of telecommunications to function. Telecommunications provide the network for information to pass through internally within Dell and externally with other business entities. The significance of information systems can never be under estimated. Dell uses telecommunications as a tool to bridge external and internal business processes that drive the direct sales model. Telecommunications and technologies complement each other and together they fuel business competition in terms of enhanced capability and coverage. Better products and services will be delivered to the customers, and this is the top line of what business competition is all about. 2.2.2. Development strategies: Throughout the overall operation and philosophy of doing business, there are the three golden rules at Dell: Disdain inventory: Dell was founded on the premise of "under-promise and overdeliver" -to customers, employees, and suppliers. It had also built its reputation, in part, on how well it managed our inventory, which led to faster service and greater savings for its customers. So it probably seems somewhat peculiar that the first meaningful setback Dell experienced in 1989 had to do with having too much inventory. Because Dell were used to chasing after every incremental dollar of growth, it sales were rising very, very quickly. Naturally, Dell saw this as a positive sign. And to fill this demand, it of course had to buy parts-among them, memory chips. But instead of buying the right number of memory chips-which it would today-Dell bought as many of those improper as it could get its hands on. Dell bought more chips than we needed, at the peak of a cyclical market. And then prices plunged. To make matters worse, Dell also got caught "crossing the street" technologically, as memory chip capacity went from 256K to 1 megabyte almost overnight.


As a result, Dell was suddenly stuck with too many chips that nobody wanted - not to mention the fact that they had cost it a ton of money. There it was the company that had been built on dealing direct, trapped in the very same inventory quandary that had been plaguing its indirect competitors. Inventory is the worst thing to own in an industry in which the value of materials or information declines quickly, which today means any industry-from computers, to airlines, to fashion. In the electronics industry, for example, the rapid pace of technological change can sink the value of inventory a company holds over the course of days. In the information industry, the value of information can decline in hours or minutes, or even seconds, as it does as in the financial markets. And when a company is not yet an industry leader, managing inventory becomes even harder. Back in 1989, Dell did not have the vendor relationships as it is today, which could have helped it negotiate a situation like that more gracefully. Besides, Dell did not have the forecasting skills it have today, and it did not have the disdain for inventory that it does now-which was born, in part, of that experience. Dell had to sell off that inventory, which depressed its earnings to the point where the company earned only a penny per share in one quarter. To compensate, Dell had to raise the price of our products, slowing our growth. And it had to postpone plans to launch operations in new countries. For the first time in the company's history, Dell did not deliver. To the companys stunned disbelief, Dell had quickly become known as the company with the inventory problem. The inventory problem was definitely a valuable lesson to Dell, forcing it to pace itself better and rediscover one of the building blocks of its success: the value and importance of managing inventory. Out of this experience, Dell learned that improving the speed of its inventory flow is not only a winning strategy but a necessity: It combats the rapid decline in the value of materials and requires less cash and has less risk. Dell also made a greater commitment to understanding and utilizing forecasting.


Table 9: Dells Inventory Turnover Year Inventory turnover Weeks Inventory 1993


















(Source: themanufacturer.com) Key point to notice here is that Dell was carrying over 10 weeks worth of inventory in 1993. By 2001, Dell was carrying less than 1 week's worth of inventory. This essentially means that inventory used to sit around for 11 weeks and now it sits around for less than 1 week. Remember, computers lose almost 1 percent of their value per week. This is not like the canned food industry where managers can let their supplies sit around for months before anyone buy them. Computers are not canned goods, and as Kevin Rollins of Dell mentioned about this problem, computers rot. The longer a computer sits around, the less it is worth. That said, due to depreciation alone, in 1993 Dell was losing roughly 10% per computer just by allowing computers to sit around before they were sold. In 2001, Dell was losing less than a percent. Based on holding costs alone, Dell reduced costs by nearly 9%. As the above illustration clearly analyze, keeping low inventory in computer industry is an important competitive advantage to any firms. And the successful story of Dell has become one of the most vivid evidence for this policy. Always listen to the customer Based on its Direct Sales model, Dell has a perfect position to listen to customers. Other providers have to depend on retailers, cannot compare to direct sales and loose the direct relationships to customers. Dell could collect a great deal of information thanks to those direct relationships while almost all competitors


could not. Direct Sales model not only cuts cost from the middleman but also dismisses their prevention in the flow of information. This way enables Dell to keep low inventory and track customers transaction better than any other competitors. This is, in fact, a simple concept that once it sell computers directly to customers, Dell could see clearly their demand and try to provide them with the most appropriate computing and processing solutions that fit their need. In other words, selling directly helps Dell understand what customers want. While others sell PC based one expected number, Dell sell PC based on what customers order. This understanding has become a key factor in the effort of disdaining inventory, which helps it save billions of dollars. Dell meets big business customers regularly, bringing accountant groups to work with them. It use different mechanisms, such as Dells Platinum Council, to keep close relationships with them and update their need. With small business and individual customers, Dell contacts them frequently through Sales or supporting division both on telephone or the Internet. For this market section, it carries out online and telephone survey. If a customer has a problem with their PC and contact to Dell, they will received a call to confirm whether or not the problem is solved satisfactorily. Over time, Dells Sales and technology supporting force could keep track of what customers buy and what problems occur. This pool of information is highly regarded by Board of Director of the Company; they often hold meetings to define what customers require. The fact that each of Dells PC is made based on the order is an excellent condition for the feedback of what customers in each segment want. Since Dell cares a lot about feedback and has a deep insight about its market, it can avoid keeping huge inventory. On the contrary, competitors in the past manufactured for slow demand, as orders from retailers reflected. Without the direct contact with customers and true demand of the market, their profit was narrowed remarkably.


Dell is excellent in this way by concentrating in collecting and processing customers information. After more than 2 decades of following information on the market, Dell has a clear concept of what each market segment want. For example, big companies want the stability; they do not want to be affected by the latest and the most fashionable models as individuals. In stead, they want networking PC which can be administered from afar and updated with different softwares and service packages. That the reason why Dell divide its PCs into OptiPlex line (for companies) and Dimension line (small companies and individuals) to satisfy those different demands. Collecting information from customers is just the first part of the whole process; after that is how to use that information. At Dell, customers play the main role in innovating and developing products, and they are aware of it. In deed, Dell won the first survey JD Power of PC industry about customers satisfaction since its customers said they had contributed to the process. Dell knows when to take part in a new field and what field is meaningful to its business (such as Liquid Crystal TV). Once it joins a field, Dell follows its customers need passionately. What customers want? At what speed? How about the capacity? That is all Dell sticks to, every minute, through Sales Division. For example, when the whole PC industry was excited to move to chip MIPS CPU (chip in Central Processing Unit which can carry out millions of command per second). Compaq, AST, Microsoft, and others follow the trend. Dell, at that moment, react in its expected way: ask the customers. Through a series of forums with small customers and meetings with other big ones, Dell learned about what customers expect about this new chip. It understood that there was almost no clear meaningful added value to be seen by customers. As a result, Dell decided not to invest in manufacturing this kind of chip and reject the project. And this movement is right when the expense to manufacture this new chip cannot be compensated by the little care of customers.


Dells customers not only can order their PCs as they want but also can follow them even before they leave the factory. After a customer places an order, they will receive an order number, and they can follow the status of their order in Dells factory once it is done. When their PC is in delivery, they can take the delivery code from Dell website. All they need to do is to click the mouse button to know where their PC is, when it reaches their house, and what to do if it not. If there is any delay in delivery, Dell will send to that customer a notice. After delivery, customers are still kept in touch. Each Dell PC, desktop, or server are provided with a service card which contains a service code (this code is also seen when customer open Dell Support window). They bring in this code online or through service line and Dell Technology Support people will receive their cases. After the problems are solved, customers will receive a call 2 days later to confirm whether the problems are fixed satisfactorily. If a customer wants to check a solution on the Internet, they could access Dell Solution Network at http://support.dell.com. This is another way to keep customers inside a close circle of information. The Internet is an important tool to keep in touch with customers. They always could order and follow their orders via telephone, but they seem to prefer using the Internet. The data could also be provided to the Internet from Dells data base. As other Dells activities, the concept of keeping customers inside the circle of information is a simple one; however, Dell is excellent in implementing it. With other providers, this concept means to provide them with one telephone number and a code to follow. With Dell, this means to keep customers posted from the beginning by letting them check the price on the Internet, and following their PCs when they stay in the factory until they reach their houses. Never sell indirect In early days of PC market, almost PCs were sold through retailers such as ComputerLand and others. Dells wise idea was going directly and rejecting any middleman. Dell started to receive orders via telephone, going directly to


customers. Michael Dell said that Dell is the first PC maker going directly this way. Going directly has become a main feature of Dell Computer Corporation, Dell Inc. today, and contributed significantly to the success of the company. This is a creative step in early days and helped Dell to sell computes with lower prices. While IBM or Compaq spent 500 USD to manufacture one PC and sell it, it costed Dell only 450 USD. This simple step changed everything in years after. 50 USD became a key advantage since other competitors could not over come. If Dell only doing well at one thing, it must be keeping low cost: 50USD lower for the same product with other competitors. Meanwhile, other competitors at the moment could not go directly, because it means that they would have to reject all the retailers who are selling their product; this will breach all the contracts of distribution they have signed. In fact, Michael Dell estimated that going direct has saved 25% to 45% profit on each PC; and this is a significant advantage, a key factor helped Dell, then, stay extremely competitive on the PC market. The direct-sales business approach has given Dell a very strong lead over its competitors. While others are still focusing on inventory control, Dell is already running the business with low inventory or no inventory in warehouse. Components are gathered only when the consumer places the order. Because the PCs are not prebuilt in the factory, Dell can offer full customization on their PCs. Customers can choose a specific processor, the amount of RAM, different graphics card and other add-on peripherals. The result is a extremely efficient production with the customers know exactly what they are getting from Dell. The greatest benefit of having a direct-sales model is the lower cost because it completely eliminates the need for a retailer. Therefore, the savings will pass on to the customers through lower purchase price.In the past, computer manufacturers assembled computers based upon what they had in their inventory. This necessitated maintaining a stock room with three to four months of computer inventory in the distribution channel. On the contrary, Dell produces a computer only when the customer requests and pays for the item. In essence, customers funds are used to


finance the transaction and this saves Dell millions of dollars in financing costs. The direct sell method is advantageous for Dell because the company maintains two days worth of inventory and this helps to save several million dollars in inventory holding costs. Computer component costs are steadily decreasing so it is not beneficial for a computer manufacturer to keep volumes of inventory in stock over a long period of time. For example, if you buy a Compaq computer from a store, it may have been assembled with components that were in stock for three or more months. More than likely the Compaq computer will cost more than a Dell computer because its components were bought at their market price three months ago, whereas a Dell computer will cost less because its components will be bought at their current market price. Computer technology has been undergoing significant technological changes. Since many computer manufacturers maintain three to four months of inventory, they have to wait three to four months to bring new models to market. Manufacturers are also forced to mark down prices to sell older computer models. Dell on the other hand, can introduce a new model within a day or two and will not face losses like other computer manufacturers due to obsolescence. Dells business model has significantly been enhanced by the Internet making it easy for customers to contact Dell directly. Other computer manufacturers, including Gateway and Compaq, have copied Dells business model and other businesses are evaluating it.GM has been testing a model similar to that of Dell to sell cars in Taiwan; McDonalds has already revamped their stores to produce food according to customers orders; Ford and Toyota are organizing their operations to customize cars according to customer specifications; and furniture, auto, appliance and other manufacturers are likely to copy Dells business model in coming years. Tailoring their computers to their customers specifications and selling the item directly to their customers is what makes Dells business model superior. Customers are more than willing to support a company that offers them flexibility


and convenience. No longer is the customer locked into strictly buying their computer from a retailer who can only offer them the one size fits all item. Going online makes it possible for the customer to get what he or she desires and needs. Indeed, Dells business model has ignited a spark that is not likely to be extinguished in the near future. As primary strategy, Dell is using product differentiation in the PC hardware. Through the direct-sales business model, Dell is able to offer high degree of customization to its customers on their PCs. Other PC suppliers have a hard time to offer such customization because they are depending on the retail chain to sell their products. Traditionally, it is the PC manufacturers decision of what specifications to put on their PCs. With Dells direct-sales model, the specifications are decided by the customers. Dell can offer the customers more flexibility in terms of computer components and price. In recent years, the PC industry is driving the price of the computers down. As a result, Dell shifts some of its strategies towards low cost to compete with other manufacturers. For the supporting strategies, Dell uses all three in innovation, growth, and alliance. To maximize profit, Dell has to find innovative ways to implement information systems to cut operating costs. The growth of Dell can be visualized by the diversification of Dells product line. As for alliance, Dell maintains a good relationship with all of its hardware suppliers. A good relation will enable them to get computer components at a very competitive price. The combination of these strategies enables Dell to stay extremely competitive in the PC industry and constantly provide the best values for its customers. The strength of the direct-sales doesnt stop here; because Dell is the only one leading PC manufacturers that can successful implement and harness the power of the direct-sales model. Ones might argue that Dells success is because they have been doing direct sales from day one of their business, and the entire company is at stake. The direct-sales model requires absolute precison on production, inventory control, and customer service. Any mistake will lead to a potential delay on the PC production. Dell is able to achieve all these through the use of information systems.


One of the early focuses of Dell about the Direct Sales model is selling directly to business customers with a lot of care for them. The main reason is that share of revenue from this area is a big part of Dells cake. Currently, Dell provides a different product line to business and government customers OptiPlex which is more secure, more stable, easier to administer and maintain in networking condition. For home and individual customers, Dimension product line is available providing higher processing and computing power. 2.3. Dell computers operation in the world: Dell is a global company operating in 34 countries in three world regions, with about 96,000 employees and $52.902 billion USD as of 2010. Dell is organized along geographic lines into the Americas, Asia-Pacific and Japan, and Europe/Middle East/Africa (EMEA). Corporate headquarters is in Round Rock, Texas, which is also the regional headquarters for Dell Americas. Each of the regions has its own regional headquarters and its own assembly plants and supply network. Regional headquarters include Bracknell, U.K. for EMEA, Hong Kong for Asia-Pacific and Kawasaki for Japan. The following figure is about percentage of Dell revenue from different parts of the world.

Figure 7: Dell Revenue Mix 2007


(Source: IDC Worldwide Quarterly PC Tracker, Sept. 2006 and Company Estimates) From the above figure, it can be seen that US remains the biggest market of Dell products, the follow comes EMEA area as a whole, Asia-Pacific and Japan comes third, and Latin America stay at the last position. Asia-Pacific at the moment is considered as an emerging potential market for IT products. It can be expected that the future numbers will change remarkably. Dell has invested in high growth countries such as Brazil, Russia, India, and China, or BRIC, and be expected to continue its global expansion in the years ahead. Dells continued expansion outside of the U.S. creates additional complexity in coordinating the design, development, procurement, manufacturing, distribution, and support of its increasingly complex product and service offerings. Dell intends to continue to expand its global capabilities as its international business continues to grow. Dells business activities are organized in each region around different customer segments. These vary somewhat, but generally include: (1) relationship


(large corporate) customers; (2) home and small business (sometimes called transaction customers); and (3) public sector (government and educational) customers. Product development is largely centralized in the U.S., and the same base products are sold worldwide. These products are customized for different regional and country markets with appropriate power supplies, keyboards, software and documentation. Other functions such as IT and e-commerce applications usually originate in the U.S., and then are adopted with necessary modifications in the other regions. Manufacturing processes are always being upgraded, and the newest plant is usually the most advanced wherever it is located. Improvements developed for new plants are implemented in existing plants as much as possible. The demands of Dells model have led it to adopt a new organizational structure referred to as a virtual company or value web. It is marked by a focus on a few key strategic activities, and extensive outsourcing of non-strategic activities. Dell works closely with external partners to produce its PC products and to offer its customers an array of additional products and services that add value and allow Dell to capture a larger share of the customers IT spending. To manufacture its products, Dell coordinates a global production network that spans the Americas, Europe and Asia, combining in-house final assembly with heavy reliance on outside suppliers and contract manufacturers. Manufacturing of printed circuit board assemblies, subassemblies, and some final products (mainly notebook PCs) is handled by contract manufacturers or original design manufacturers such as SCI, Solectron, Celestica, Hon Hai, Quanta and Arima. Like other PC makers, Dell relies on outside suppliers for components and peripherals such as disk drives, CD-ROM drives, semiconductors, add-on cards, monitors, keyboards, mice and speakers. Its PCs can be bundled with standard software such as Microsoft Office or with specialized software requested by corporate customers. Dell relies on outside partners for services such as system integration, installation, on-site repairs and consulting. Partners include Wang, Unisys, IBM and BancTec. It also works with resellers who support Dell hardware and receive referral fees for recommending Dell to customers.


As Dell has moved beyond its home market in the U.S., it has had to adapt its business activities and organizational structure to the different markets in which it operates. In effect, Dell has had to create similar but distinct value webs in each of the major regions, and to further customize its marketing and service functions for individual countries. The process of globalization has shaped Dells own structure, but Dells success has conversely helped to reshape the global structure of the PC industry. Since the beginning of its operation, Dell has shown a major interest in expanding their global exposure. Dell has signed a deal with WalMart Stores (WMT) to sell Dell desktops and notebooks in Brazil and Mexico. Dell has also signed a deal with Gome Group, which is the largest electronics retailer in China. Currently Dell has 24,000 retail stores around the world, with a much bigger reach thanks to its partnerships and collaborations. Dell continues to pursue international sales through a variety of means. In addition to distribution agreements with large retailers, Dell has developed a number of products specifically targeted at emerging markets. The best example of this is the Dell 500 notebook, a low cost laptop designed to be affordable for a large phase of the population of developing countries. Such initiatives have proven successful for Dell; unit sales for emerging markets have grown signifcantly. Despite this stellar performance there is still much room for growth, since only 5.1% of Indians and 9% of Chinese have computers, compared to 75% of Americans. Furthermore, 85% of the world's population lives in developing markets. Within Dells portfolio of offerings, non-PC products and services are showing larger growth potential than the companys PC segment, which currently accounts for 60% of sales. Dell is responding to this increased demand in the nonPC segment, expanding its line of servers, peripherals and accessories, and customer support services. These account for a smaller percentage of Dells revenue, leaving room for continued growth. In addition, margins on these goods and services are generally higher, especially for technical support services. The


higher profitability and increased demand in the non-PC segment could bolster Dells earnings significantly if the company continues to improve its offerings in the segment. The PC market has become intensely competitive, especially in the United States. Dell must keep its prices competitive or risk losing business to competitors, putting pressure on Dell to cut production costs wherever possible. Following industry trends, Dell has begun outsourcing more components to third parties in order to lower its costs of production. Unlike other leading PC manufacturers, such as Hewlett-Packard Company or Apple, Dell still assembles its own final products. In order to try and close the resultant gap in production costs, especially for highly demanded notebooks, Dell sells its factories worldwide to various contract producers. The purpose of this outsourcing is to minimize production costs, increasing profit margins and allowing the company to reduce prices. On the other hand, Dells increasing reliance on its technology partners can decrease its control over the supply chain as a whole. As more components are outsourced to third parties, Dell loses some of its control over both prices and the overall production process. In an effort to counter the fall of personal computers and server sales, Dell will make a strategic acquisition that will allow it to obtain a piece of the U.S. governments stimulus. As part of the U.S. stimulus, the government is spending $19 billion over the next five years into technology that will digitize medical records. To get a piece of this, Dell will purchase Perot Systems, a provider of technology services with specialty in electronic health records, for $3.9 billion; Perot services 1,000 hospitals and automates patient records for 200,000 doctors. This will secure revenue for Dell which has had difficulty during the downturn. While Dell does not manufacture its own components or subassemblies, it does handle final assembly for nearly all of its desktop PCs and servers. Notebook PCs are manufactured by Taiwanese manufacturers Quanta and Compal. In some cases the notebook PCs are shipped complete to the final customer. However, Dell


is increasingly ordering base units from its suppliers and doing final configuration of notebooks in order to offer more configuration options to customers. In brief, Dell organizes manufacturing by region, operating one or more assembly plants to serve its major markets. Plants in the Austin, Texas and Nashville, Tennessee areas serve North America; Eldorado do Sul, Brazil serves Brazil and South America; Penang, Malaysia serves the Asia-Pacific region; Xiamen, China serves China and Japan; and Limerick, Ireland serves Europe, the Middle East and Africa .

Chapter 3: Lessons for technology enterprises in Vietnam in globalization


3.1. Overview of technology enterprises in Vietnam in global integration scenario: 3.1.1. Overview of technology development in Vietnam: For the last 10 years, Viet Nam information technology sector has been developing rapidly, playing an increasingly important role in national economy, contributing to the national security and defense, emerging as a spearhead economic sector as well as an infrastructure and a driving force for the socio-economic development of the country. Continuing with the achievements in 2000-2005 period, in period of 2006-2010 Viet Nams IT industry maintains the high growth rates, and achieved significant results, become a key economic-technology sector, and also is one of the important driving force for the development, reducing poverty and improving peoples living standards, and help to bring Viet Nam gradually catch up with developed countries in region and over the world. The development of Viet Nams IT industry is diversely in such fields as software industry, hardware industry, digital content industry, IT services, etc. In particular, the digital content industry and IT services are expected to booming in coming years. Among IT industry, the field software development and services in period 2006-2010 have achieved significant growth in both revenue and market; become a most promising economic sector of the country. The revenue of this area growths at the average rate over 30% a year, reached over 1 billion USD in 2010, four times increasing compare with that in the year 2005, with the export revenue account for about 35%, increasing 5 times as in 2005. The main export markets of Viet Nams software enterprises are Japan and North America. Viet Nam is often on the top 10 of the most attractive destinations for global outsourcing exports which ranked by international consulting organizations such as KPMG, Gartner, AT Kearney (In the report Offshoring Opportunities Amid Economic Turbulence by AT Kearney announced in 2011, Vietnam is ranked at level 8 among the most attractive destinations for outsourcing).


IT services like IT outsourcing , business process outsourcing , data center infrastructure, hosting services, cloud computing, mobile applications, e-banking, ecommerce, etc are popularly growing in the domestic market, as well as attracting outsourcing contracts with foreign partners. Especially, IT solution consultant and systems integrated service have strongly grown in the last 5 years, with the scale of revenue in this area increased annually on average by 35% per year. Viet Nams Hardware and Electronic industry has developed rapidly in scale, with the strong contribution of multi-national corporations direct investing in this sector. In 2010, the revenue of hardware, electronic industry reached 5.6 billion USD, increasing 5 times as that in 2005. This industry is in the top 5 industries which have highest export revenue of Viet Nam, with export turnover in 2010 about 3.5 billion USD. The mainly exported products are computer related products, electronics and components, which are exported to 35 countries in the region and the world. Up to end of 2010, there are about 127,500 labors work in hardware and electronic enterprises in Viet Nam. There is around 10% labor force involved in manufacturing of telecom equipment, 25% involved in manufacturing of office equipments and computers, the rest are in manufacturing electronic products and electrical appliances. About 90% of workers have qualification and expertise experience in electronics, telecom and IT. The rate of turnover on employees in the hardware and electronic area in Viet Nam reached 44,100USD/employee/year. Digital content industry is the new immerging sector but rapidly growing with over 40% yearly. The key fields of this areas are content on mobile networks, content on the internet, online games, online entertainment, E-commerce, Elibraries, digital television, electronic newspapers. In 2010 the revenue of the digital content industry of Viet Nam reached 934 million USD, increasing 9 times compare with that in 2005. Recently the Viet Nams digital content enterprises are expanding their market and providing services to other countries such as Laos, Cambodia, Indonesia, South Korea, etc.


IT development policies of the government and achievements: The Vietnamese Government always pays a special attention and provides favorable conditions and incentives to promote the development of the sector. On October 17, 2000, the Politburo of the Communist Party of Viet Nam issued Directive No. 58-CT/TW on Promoting application and development of information technology for industrialization and modernization (Directive 58). In this Directive, the Politburo has clarify that information technology is one of the most important power of the development, together with some other hi-tech industries which transform dramatically the economy, culture, society of modern world. This is the first time in Vietnam; information technology industry has an official general Directive, including all key factors: information technology industry, application of IT, IT work force, infrastructure and legal framework for developing and applying IT. The 58 Directive in an important turning point for the development of IT in Vietnam since it has formed the basis to overcome a lot of difficulties and restrictions. Under the leadership of the Party and the Government in the last 10 years, the Viet Nam ICT sector has gained many important achievements and met the objectives. As stated in Vietnam ICT White Book 2011: The IT industry has become an important economic sector, with annual growth rate higher than any other areas. The contribution to GDP growth increases year to year. The whole IT industry average revenue growth in the period 2001-2009 represented 20-25% per year. By the end of 2010, the revenue of the software industry and digital content industry reached 2 billion USD, the hardware industry revenue reached 5.6 billion USD, revenue of telecommunications services reached over 9.4 billion USD, bringing the total revenue of telecom and IT industry in 2010 to 17 billion USD, 19 times higher than that in 2000. On September 22, 2010, the Prime Minister signed Decision No. 1755/QDTTg to approve the National Strategy on Transforming Viet Nam into an


Advanced ICT country (referred to as The Strategy from now on). This reflects the political determination of the Party of Viet Nam and the Government in developing ICT industry to keep pace with countries in the region and the world. The Strategy sets out objectives as: to develop ICT human resources to international standards; to build ICT industry, especially software industry, digital content industry and IT services, to become a leading economic sector, so as to contribute significantly to GDP growth and exports; to set up a broadband information infrastructure in the whole country; to apply IT effectively in all socioeconomic aspects and national security, defense. The annual growth rate of the ICT industry income is to reach at least 2-3 times the growth rate of GDP. By 2020, the contribution of ICT industry to GDP should be from 8% to 10%. Table 10: Number of employees in IT sector

(Source: General Directorate of Customs) Steering views of The Strategy are: accelerating the development of Viet Nams ICT on the basis of ensuring continuity with creative measures, targeting higher objectives with higher speed; reasonably developing on the basis of optimizing internal resources and taking advantage of international knowledge and resources; efficiently utilizing the state budget, attracting more investment from local and foreign enterprises; applying the highest priorities and preferences in accordance with the law on the development of high technology, research and


training for IT parks, research and training institutions, and all enterprises/individual who provide IT products and services. Figure 8: Number of universities offering ICT training

(Source: Guidebook on universities and colleges recruitment - Ministry of Education and Training) Based on these views and objectives, The Strategy identifies six groups of tasks focusing on issues such as: developing ICT human resource; developing ICT Industry; continuing to develop and improve the telecommunications and IT infrastructure; building and deploying suitable supporting solutions for providing digital information to households; applying IT effectively in government agencies, enterprises and the society; strengthening research capacity in the ICT sector; mastering gradually and developing technologies for creating new products. The Strategy also stated six solutions: enhancing information dissemination regarding the Strategy; promoting the socialization of investment in ICT, especially in the development of broadband telecommunications infrastructure; providing investment incentives for priority areas; building and improving institutional frameworks; establishing a specific mechanism and renewing policies; promoting international cooperation.


According to Dr. Le Doan Hop, Minister of MIC: This is intelligence, strength and determination of those who work in the ICT areas, of the Viet Nam young generation, of the political system and people of Viet Nam. Implementing The Strategy is one of the central tasks of Viet Nam from now until 2020. The Strategy also represents the aspirations of the Viet Nam youth to change Viet Nams position in the international arena in various fields, including information technology. 3.1.2. Leading companies and services providers in IT industry Number of enterprises in software, IT services also increased rapidly, which reached over 1,000 firms in 2010, increased 2.5 times as in 2005, which mainly located in big cities, with over 70,000 labors. Average labor productivity on the software and IT services reached 14,800USD/employee/year, but with high ranking businesses, this number may reach over the 20,000USD/employee/year, especially for the firms who provide the integrated services, the number reached over 30,000USD/employee/year. Up to now, Viet Nam has many software firms which have more than 1,000 employees such as FPT Information Systems, TMA, PSV, ..., especially FPT Software has more than 3,500 employees. There are two software firms have achieved the CMMi level 5, and dozens of companies certified CMMi level 4, CMMi level 3 or ISO-9001. Currently there are seven IT parks operation in the country, which some quite successful and well known such as Quang Trung Software Park, Da Nang software park, IT Park of the National University in Ho Chi Minh City, etc... Many multinational corporations on ICT are planning to expand their investment and operation in Viet Nam, such as Intel, Samsung Electronics, HP, Nokia, etc. The local hardware companies also invested modern production lines, and improve the quality management system with international standard, and asserted their positions in the domestic market, such as FPT Elead, CMS, VTB, etc... Some Vietnamese mobile brands have dominating a significant share in the


domestic market such as Q-Mobile, AVIO-Mobile, Bluefone, etc... The areas of chip and electronic board design also achieved significant results. Viet Nam now able to design and produce microprocessor 8bit, 16bit, 32bit, typically the 32-bit micro-processor named VN1632 make by The Research and Education Center (ICDREC) of National University in Ho Chi Minh City. By 2010, there were over 500 content providers operation in Viet Nam; typically are VTC, VNG, FPT, VASC, VDC, etc.... This industry employed about 50,900 labors, which 70% direct related to content production and services. Most of the labor in the digital content industry are well educated, which about 10% have master degree, 70% have bachelor degree, and 20% have diploma or professional certificate. The rate of turnover on employees in the digital content industry in Viet Nam reached 18,300USD/employee/year. Figure 9: Market share of Internet providers 2011

(Source: The White book 2011) As can be seen from the above chart, there are three main Internet service providers play on the market: VNPT, FTP Telecom and Viettel. Among them, VNPT is the biggest, almost dominant one in this area.


3.1.3. Application of the internet in life and economic activities Table 11: the application of the Internet in Vietnam 2009-2010

(Source: White Book 2011) The above figure shows a trend of increase in every aspect of Application of the Internet between 2 years 2009 and 2010. This is a clear sign for technology development in Vietnam and the increase in IT-awareness of Vietnamese. The IT application in society, community and businesses had positive changes because of the effective implementation of Directive 58. All classes in the society over the country have facilities for ICT application, and Vietnam has become one of the countries which have the highest number of Internet users. In Jun 2010, the percentage of households with laptops and computers increased 14.76%, about 6 times higher than in 2002, the percentage of households with Internet access at home reached 12.84%.


Table 12: Number of PC through 2008 - 2010

(Source: General Statistics Office) In the absolute term, the number of PC in-use in Vietnam has increased continuously over years. This means the demand for computer of individuals, households, and organizations has an increased trend. Besides, the competition and technology changing have reduced the price of computer and computer-based products, giving more chances for Vietnamese people to access to these devices. Figure 10: Household with computer per 100 household

(Source: General Statistics Office)


As stated by IDC on 9th March, 2011, the consumption rate of Vietnam PC market has grow over estimation with more than 2.1 million units. This high level is mainly the result of consumption of laptop group in the 4th quarter with 639.000 units, increased 16%, make the total of computer consumed in the year over 2.11 million units, increased 9,8% in comparison with the previous year. The laptop group in the 4th quarter, 2011 increased nearly 32% in comparison with the previous quarter and 42.5% increased with the same period the year before. On the contrary, the number of desktop decreased 5% and 15% in comparison with the previous quarter and the same period the year before respectively, mainly due to the decrease in demand and decrease in mobile devices that affected the desktop sector. Among 5 leading PC providers in Vietnam as of the 4th quarter, 2011, Dell continues to increase and keep the first position with 21% market share. Two Taiwan companies are Acer and Asus keep 13% and 10% respectively. HP stays at number 4 with 9% but is the number one in desktop sector; Lenovo stays at number 5 position with 6% market share. The application of IT in management activities and business transaction has become more and more popular. Enterprises have been awared of the importance of IT in administration, management, and market researching and expanding activites. Thus, the infrastructure of IT in enterprises has been enhanced significantly. Most enterprises have Internet access to serve their business activities (about 90%), 67.7% of enterprises have LANs and the application of software in management has become a focus in enterprises business. Public services (distant education, remote diagnosis, electronic libraries) have gained remarkable achievements by using ICT. High-tech applications have been popular in the operation of many industries such as construction, mechanics, pressing, textiles, petroleum, hydro-meteorology, etc. The level of application of IT has changed remarkably through years. In 2002, Vietnam had only 525 thousands computer used in economic units. In 2007, the


whole country had almost 2.02 millions of computers, 3.28 times higher and increased equally both in manufacturing and administrative areas. The number of computers with LAN connection for internal transactions has increased 6.5 times and computers with Internet connection increased with a very high rate of 16.13 times. The rate of computer using in business units is fairly high, equals 74%. 3.2. Lessons from Dell for Vietnamese technology enterprises: From the Dells story, there is plenty of knowledge that can benefit Vietnamese technology enterprises. Despite the differences in the situation and basis of the companies itself, many lessons withdrawn could be useful and applicable in the day-to-day operation of those companies. 3.2.1. Technology focus: First, continual innovation based on standardized products is what truly works at Dell. Innovation is incremental and continual it never stops. It is daily. Most innovation occurs step by step. It is rarely about the big idea. Spending on R&D activities is important, but they could learn the Dells way to not only save this huge cost, but also still have updated products with the best working efficiency by the means of standards-based innovation. By using the standardized components and improve them, push them to the limitation of capacity, make them become even better than the original product of leading innovators. In the globalization scenario, Vietnamese technology firms find a lot of difficulties in competing with strong international ones. One difficulty is the huge amount of capital invests in R&D laboratories. While Vietnamese firm do not have a huge investment in comparison with already strong firms in the world, they could find the standard-based innovation as a solution. Follow that way could help them keep a lower expense for innovation but still have updated technology. This strategy has served Dell well for years, they achieve both: better products with leading technology than others and lower R&D expense; these advantages form the basis for it extremely competitive prices, helping Dell to stay among the top PC provider in the world.


Second, the technology innovation process should be collaborative. Collaboration leads to the best ideas. If enterprises could build a way to collect customers opinion about what is important or what is of the market demand, they could adapt their products to serve the market most effectively. Dell has done this well in many years. Remember one of 3 tenets of Dell is always listen to customers. Direct relationship with customers reflects to it quickly about the current need or new trend in customers demand. Dell then innovates it technology to that way and serve customers with the best and most appropriate computing solutions. It has sold what the market wants instead of based on its own expectation. This why people call this way is demand-driven innovation. IT personnel and IT system should be an important focus in technology innovation process. In order to sustain the direct business model the core business processes would have to be set atop information systems in order to be efficient, effective, and a gain competitive advantage. Every aspect of Dells operations uses one type of information system or another, from human resources to the customer tracking an order. Not only does Dell rely on its information systems 100%, but it would not be a company without them. It would be borderline impossible to manually manage the amounts of information handled by its current systems. Information systems are the backbone of its business strategy and future. The role of information systems played a significant factor in the relative success of Dell. It was achieved through the incorporation of information systems at every level within the organization which created more efficient and effective business processes. The success of Dell should be almost completely attributed to the use of information systems. 3.2.2. Creative strategies: The direct sales model is one of the key factors for the long-term success of Dell. It gains a lot thanks to this: not only one of the way to cut off cost of providing products (which means more competitive price than other competitors) but also the best way to keep direct relation with its customers which set up the basis for the low inventory. Tailoring their computers to their customers specifications and selling


the item directly to their customers is what makes Dells business model superior. Customers are more than willing to support a company that offers them flexibility and convenience. No longer is the customer locked into strictly buying their computer from a retailer who can only offer them the one size fits all item. Going online makes it possible for the customer to get what he or she desires and needs. Indeed, Dells business model has ignited a spark that is not likely to be extinguished in the near future. Vietnamese firms should consider this strategy carefully and apply it in a proper way in running their companies due to the differences in the concept of relationships and middleman in Western and Vietnamese culture. If this model could be used appropriately in their operation, it will be a big comparative advantage regarding both the lower price but the practicalness of their products. Keeping just-in-time inventory is another strategy that Dell has done really well since the very beginning of its operation. This is another strategy that helps it cut a huge amount of expense for storing and maintaining inventory. Especially with the hi-tech industry, the value of inventory will decrease substantially from day to day due to quick changes in new technology. Computer component costs are steadily decreasing so it is not beneficial for a computer manufacturer to keep volumes of inventory in stock over a long period of time. For example, if you buy a Compaq computer from a store, it may have been assembled with components that were in stock for three or more months. More than likely the Compaq computer will cost more than a Dell computer because its components were bought at their market price three months ago, whereas a Dell computer will cost less because its components will be bought at their current market price. Computer technology has been undergoing significant technological changes. Since many computer manufacturers maintain three to four months of inventory, they have to wait three to four months to bring new models to market. Manufacturers are also forced to mark down prices to sell older computer models. Dell on the other hand, can introduce a new model within a day or two and will not face losses like other computer manufacturers due to obsolescence. Disdaining


inventory strategy, hence, saves Dell from the risk of losing value due to technology obsolete and, of course, cut cost also. Nevertheless, for Vietnamese enterprises, this strategy is both an effective and challenging to apply. It is not easy to using this strategy. The fact is that even some big firms in the world has tried to imitate this strategy of Dell but failed. Keep almost zero inventory means that the operation is always on the move and one problem with one sector could affect badly the whole system. Another thing is that Dell could do it because it has significant power in bargaining with suppliers who bear the risk of keeping the entire inventory and supply it just-in-time.


People will become more and more related to the use of the computer and the Internet when jobs in this century more than ever rely on knowledge and information. The direct consequence will be the continuous increase in the demand of computer and computer-based products. Thus, the PC industry will be expected to be more and more competitive and dynamic in many years to come. To be successful in a PC business, a company needs to consider many factors, both internally and externally. Among those, a wise choice of what strategy to follow is of essential. In decades, the success or failure in choosing an appropriate set of strategies has brought companies to the top of the market or to the end. Because the computer industry moves much faster than other industries, enterprises need to keep renewing themselves if they do not want to fall behind. Outstanding firms are often the ones who have the flexibility and adaptability in their technology focus, product development, and overall business operation. For many years, Dell computer has proven itself to be a very competitive computer vendor. What should be taken into consideration of Dell success include its wise technology innovation policy, efficient application of the IT system, direct sales model, and inventory management. Following technology innovation based on standardization, Dell has always tried to push its products to the limit of capacity and better than that of competitors. Besides, the company could reduce cost in every aspect of production as well as selling product with the support of the modern IT system, direct relationship with customers and suppliers, just-in-time inventory. These features shape the products of Dell to be competitive both in the quality and in the price. For many years around the beginning of this century, Dell stayed the first position regarding the market share in the PC industry, only lose this position after the merger of two other leading companies HP and Compaq. Being aware of the importance of Information Technology to the development of the economy and society in this era, Vietnams government has set up a pack of


official policies and plans to speed up the development of this power. Years of implement has observed significant changes in technology power of our country such as the number of computers used in household and business has increased very fast. IT labor force has also been taken care of when an increasing number of universities in Vietnam take into their program IT training. In the globalization scenario, technology enterprises in Vietnam possess great opportunities to learn from success and failure experience of international firms. Moreover, they also could access with the latest technology in the world. On the other hand, they are also exposed to the risk of being lag behind if they could not keep pace of the fast changing in technology as well as market demand. The competition is also tougher on the market once international firms invest in Vietnam. The development of Dell Inc. is one source of valuable lessons for Vietnamese technology enterprises to think of. Considering every differences about Dell and themselves, they could still learn from the standards-based technology innovation, managing a smooth IT system, direct sales model, cost-cutting


Books and papers
1. Charles W. L. Hill International business: competing in the global marketplace 6th edition, McGraw-Hill, 2007. 2. Jason Dedrick and Kenneth L. Kraemer Globalization of the Personal Computer Industry: Trends and Implications Center for Research on Information Technology and Organizations, University of California, 2002 3. Steven Holzner HOW DELL DOES IT: Using speed and Innovation to Achieve Extraodinary Results, McGraw-Hill, 2006. 4. Michael Dell, Catherine Fredman Direct from Dell: Strategies that revolutionized an Industry, Collins Business Essentials, 2006 5. Kenneth Kraemer and Jason Dedrick Dell Computer: Using E-commerce To Support the Virtual Company Center for Reserch on Information Technology and Organizations, University of California, Irvine, 2001 6. William F.Achtmeyer Dell computer corporation, Tuck school of business at Dartmouth, 2002 7. Joan Magretta The power of Virtual Integration: An Interview with Dell Computers Michael Dell Havard Business Review, 1998 8. Dell Inc., Dell annual report 2011 9. Information and communications publishing house white book 2011 10. OECD, OECD Information Technology outlook 2004 11. European Commission, Innovation Union Competitiveness report 2011


Websites: 1. Dell Inc. link: http://www.dell.com/ 2. OECD statistics library, link: http://stats.oecd.org/Index.aspx 3. UN Statistics Division, link: http://unstats.un.org/unsd 4. Vietnams ministry of Information and Communications, link: http://news.mic.gov.vn 5. Gartner Inc., link: http://www.gartner.com 6. Etforecasts, link: http://www.etforecasts.com