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Dell’s Innovative Pattern
Dell’s innovative pattern takes its roots in the same historical origin – revolutionary changes in communications. Changes that took place in the last years of the nineteenth century and 100 years later, laid the historical and structural ground for new inventions in production networks that the two firms had. Thanks to the railroad and telegraph, it was possible to conduct trade between regions. That allowed changing the system of production of beef and its distribution. Similarly, the Internet gave the push to the creation of the commerce infrastructure, and that gave Dell the possibility to reorganize the production, distribution, and selling of personal computers.
These revolutionary changes in communication laid the foundation for inventions in strategy, routes of operation, and structure of the organization of these two companies. The similarities in their work led to the fact that Dell has developed new production and distribution networks. However, that was not just a pioneer work in the economic area. In terms of geography, both companies’ networks established new spaces for business activity (Many, 2008; Jones, 2003).
Geographically, this pioneering work manifested itself in the way of routing materials and information through space, and how both companies managed key points of their work so that it was easier to move lots of material in the limited periods. These reorganized territories are a representation of innovation geography. These companies are connected across time with the same path that led from the revolution in communications to the new inventions in production networks and the reorganizations of territory to gain profit (Jones, 2003).
Dell Computer is such a company that works based on such a mode of competition, called ‘information-intensive mode’. IBM, Hewlett-Packard, and many other companies that manufacture PC are envious of Dell’s make-to-order model of manufacturing. Such a model has a key benefit – it is a model of negative working capital. That means that customers send orders and payments to Dell in advance, then the company buys the components to make this product and sends it to the customer (Many 2008).
The concept of the marketing mix is based on the idea that combines different variables’ sets related to the products or services and their blending that can be used in the decision-making process. There are many different theories on how this process should be performed; however, the most often used are 4 Ps, 7Ps, 3Ps, and 4Cs. The role of the marketing manager in this process is to find the right ‘ingredients’ for the mix that will facilitate the process of development of the appropriate strategy to increase sales of the products or services (Borden, 1984; Thomas, 2006; Zeithaml, Parasuraman, & Berry, 1985). One of the marketing mix models is the extended marketing mix, also known as Three Ps. These are the variables that were added to the basic 4 Ps mix: people, process, and physical evidence.
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Most manufacturing companies work in a reverse way: they foresee the demand for their products; then they use their working capital to buy the inventory; after that, they are manufacturing and sending the product to their distributors or wholesalers and, then, retailers sell their products to the customers (Dell, 2012). This channel of distribution pays for the products to the manufacturing company. However, in Dell’s business model, information took the place of inventory. First, Dell takes information from the market and revenue from customers, and only then the company buys parts and components from the suppliers (Jones, 2003).
Dell manufactures its products with incredible speed. Once the customer has placed the order and the company has received it, it takes six hours only for the final product to be sent to the customer (Jones, 2003). In 1993, Dell made large investments into reworking its informational systems in production and logistics, as well as making the manufacturing automated. This innovation resulted in lower costs and an increase in overall production. All of this was made to support the model of direct sales and make the negative working capital model financially efficient (Many, 2008).
The Information about the Marketing Segments
The information about the marketing segments gathered for the decision-making process before and after deciding the place of the particular market’s segment in the company’s marketing strategy can be and should be used for the market segment analysis. The analysis allows marketers to evaluate the situation inside a segment to develop a focused product or service (Fifield, 2007).
The segmentation analysis can vary from segment to segment due to their peculiarities; however, the main principles are similar: determination of the main variables, inherent to the segments, identification of the secondary variables that can affect the segments in general, exposure of the segments’ peculiarities and their further evaluation. The Three Ps marketing mix proposes to use the following variables: People, Process, and Physical Evidence. It is already known that the People variable focuses on customer satisfaction, which is extremely important with regards to the desire of the service-providing company to establish long-term relationships with a customer. This variable also should include a clear understanding of the situation with the interpersonal communicational skills level of the personnel. These skills should be developed well to provide customers with services of high quality (Bruhn, & Georgi, 2006).
Process, as the second variable, is much more valuable for the company that sells services. Unlike the product purchase process, which is usually quick and impersonal, the process of providing services includes communication with personnel, feedbacks, support, etc. (Breshears, 2010). It is utterly important to organize this process at the highest possible level because it forms the customers’ satisfaction, helps to retain customers, and creates a positive image of the company. All these factors form the competitive advantage (Boshoff, & Du Plessis, 2009).
Finally, physical evidence should be considered to provide potential customers with the best environment, created by the tangible and intangible elements. Thus, it is necessary to give the potential customers proofs that a company provides quality services, and that its reputation is good (Breshears, 2010). To do so, the marketers should consider promotional events for improving the reputation of the company and take a closer look at the material environments (offices, showrooms, etc.), in which the service presentation and selling process go.
The vast majority of the segmentation analyses have various types of ‘cluster analysis’ in their basis. Cluster analysis is a set of statistical procedures, which are well defined and allow using a group of people in accordance to their ratings’ proximity. Despite the prevailing number of advantages, the cluster analysis has several issues (Fifield, 2007). These issues are connected with inherent limitations and inaccuracy of the results. The main problem of cluster analysis routines lies in the ignorance of the pattern of respondent ratings. The results rely mostly upon the proximity of respondent ratings. Such a state of things may lead to the meaningless results of the segmentation analysis. Another serious limitation of clustering approaches lies in the fact that all statements are considered equal, which is wrong because some statements could be far more important than others. These limitations do not allow relying on clustering analysis in explaining consumer behavior or possible need in a particular product or service (Fifield, 2007).
Dell’s make-to-order model of manufacturing has made this company the leader in the industry. No company can be compared to Dell as the company works with the incredible speed getting order information from the customer, processing it and turning it into purchase information for the suppliers; then, sending this information to the assembly line to make computers of different configurations and then shipping the products to the end customers (Dell, 2012).
The sustainable position and successful development of any company on the market are defined by two major factors. Internal processes, their organization, improvements, and other related activities are the first factor that has the main influence on the company’s development. External processes, like competitors’ activities on the market, political, economic, social situations, and other related issues are the second factor that affects the company’s position. The influence of internal factors can be controlled directly by the company’s management so the internal influences can be called Strengths and Weaknesses, according to Strengths, Weaknesses, Opportunities, Threats (SWOT) analysis (MyStrategicPlan, 2010).
The way Dell operates is based on skills in managing information, as well as on asset management skills. The category of personal computers is well established, and Dell Computer invented a new business model in this category. It became an example of strategic innovation at the level of a business model (Jones, 2003). Michael Dell chose not to make a line of computers for selling them in retail stores; instead, he decided to use the Internet for offering computers with a custom design. He changed his business model to make the available supply of parts as minimal as possible. He minimized the turnaround time necessary for the delivery of products, and he made the need for customer service as little as possible. As a result, he built a highly efficient business model that has brought lavish profits over many years (Dell, 2012).
According to Breshears (2010), “services’ marketing mix refers to the combination of marketing activities, an organization engages in to promote and sell intangible services as opposed to tangible products. In addition to the four Ps of traditional product marketing--product, price, place, and promotion - the services marketing mix include the three Ps of service marketing - people, process, and physical evidence. The Services Marketing Mix is also referred to as the Extended Marketing Mix”. As one can see, this is the case when the Three Ps classification must be used (Villamejor, 2009; Macchi, & Lah, 2010).
The success of Dell Computer lies not in its excellent and powerful computers but in its new business model (customized computers are sold not in the retail stores but via the Internet, and solid supply chain management is present). That means that even companies that are not able to have state-of-the-art research departments can still be competitive in the market if they concentrate their work on making a better business model (Jones, 2003). External influences can be explained rather simply as they were described before. Every company operates in the business interconnected medium. Logically, the situation on the market, successes or failures of the competitors, and a vast variety of other reasons influence any company somehow. The influence of the external factors cannot be controlled directly, so they can be called Opportunities and Threats as SWOT analysis defines them (MyStrategicPlan, 2010). Both internal and external influences of the organizational environment play an important part in the marketing strategy model, based on the marketing segmentation strategy (Fifield, 2007).
Strengths and Weaknesses. During the process of segmentation and evaluation of the market segments, the company’s managers should assess the organization’s assets and activities to determine the advantageous factors that will allow the company to successfully compete in this segment with other companies. On the other hand, managers should evaluate the weak spots of the company to avoid undue risk of intervention into the wrong segment of the market. It is vitally important to evaluate the company realistically, its abilities, and resources. Mistakes in the evaluation can be extremely costly for any company, despite its size and the overall position on the targeted market (MyStrategicPlan, 2010; Ferrell, & Hartline, 2008).
Opportunities and Threats of Marketing
There are no ways to influence the competitors directly to gain an advantageous position in the targeted market segment. The only possible opportunity to do is to evaluate the current competitors’ positions and assess their strong and weak sides. Thus, the company with good analysts on board will get an opportunity to use such weaknesses of competitors as the problems with the product quality or lack of appropriate service, as an advantage to gain a bigger share of the market (MyStrategicPlan, 2010). However, it is important to recognize potential threats and be ready to deal with them. Threats can vary from newly improved or revolutionary products from competitors to the falling demand on the own products due to the economic situation in the country, for example. Only timely and adequate reaction to the threats and weaknesses, and prospective vision of opportunities and strengths can make success possible for any company, in any targeted segment of the market (Ferrell, & Hartline, 2008).
The overall commercialization affected all spheres of human life. Marketing is not an exception. The maximization of profit became the main goal for every company present in the current markets. Ethics and other traditional values, like respect from the customers, high quality of products and services, and many others, became not that important for the contemporary market of any kind (Choudhury, 2003). However, not all companies have followed this way of development. Their managers came to the right conclusion that positive, adequate integration of marketing ethics can significantly improve the main function of marketing, which is to sell products successfully. The other side of this aspect, the ignorance of ethical principles and rules, can have the opposite effect from the customers’ side, and sales might seriously drop (Griffith, & Mayo, 1997).
Any sustainable marketing strategy should be built about the high ethical principles and values that adhere to the regulations, laws, customer’s needs, and public norms. However, in strategies, based on narrow market focus, there is always a risk that should be considered by marketing decision-makers. The main problem is usually the incorrect segmentation of the market and, thus, futile efforts of the company to promote unnecessary, abusing, or even harmful products to the particular group of customers (Griffith, & Mayo, 1997; Choudhury, 2003).
Hence, the whole idea of the targeted marketing that is supposed to maximize the effectiveness of marketing activities is distorted. Market segmentation strategy allows companies to develop products and promote services within a narrow scope. This approach has major advantages, as well as disadvantages, in the ethical dimension. The properly chosen and evaluated segment can get those products and services that customers need the most. The positive effect is on hand (Choudhury, 2003). However, the slightest mistake in the marketing strategy, concerning some sensitive ethical issues, can destroy the whole campaign and make people think negatively about the company, despite all benefits and pluses that a product or service can give. International companies’ marketers should be highly precautions since they work on the international market, where so many cultures and ethical peculiarities are involved (Choudhury, 2003).
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Ethics in marketing have become of substantial value over the past few years. The simple intrusion of goods and services is not that effective as it was before. More and more people begin to think clearly about what they purchase; they are not ruled by emotions anymore. The importance of a highly ethical, sophisticated, respective approach to the customers’ expectations and possible experiences can be far more beneficial in perspective than a primitive and aggressive promotion of the products and services. The marketers should understand that positive thoughts about the company they promote are too valuable to destroy it with one single unethical, sloppy move (Choudhury, 2003; Griffith, & Mayo, 1997).
The advantages of the strategy are conditioned by the qualitative approach in market segmentation. The emphasis in the strategy is made on the high importance of an ethical approach to the further promotion of products and services due to the current market situation. However, the development of the ideal strategy is only halfway to success without its proper implementation. To complete the second, implementation stage, the following recommendations were developed to ease the process (Miles, & Snow, 2003).
The first thing to do is the assessment of the available resources for the implementation. During this stage, the availability of material and managerial resources should be evaluated; a timeline for the implementation should be created and coordinated with all participants of the process. This is an important stage of the whole implementation because this is the exact moment when the future of the company is defined. The next, second step to be taken is the determination of process cost. It is essential because even the most beneficial plan with unreal implementation price is not worth the efforts applied (Miles, & Snow, 2003). The third step of the implementation stage is the assignment of the executive, or a group of executives, who will control the whole process and coordinate the procedure, according to the marketing strategy model. These three steps are to be carefully considered and performed if a company wants to implement the development plan without delays and other problems. The most critical issues during the process are the responsibility and direct interest of the executors. Otherwise, the efforts would be worthless or inefficient in the long run.
The company can be competitive in the market if it has a strategically significant business model. Therefore, it makes sense that attempts to make the current business model better can be beneficial for the company. In case that is correct, the companies should implement innovations in their current business model just as they invent something new for their products. Strategy innovation is such a process when changes and improvements are made in the business model of the company as a whole, not only in its products.
The modern business world demands the executive officers to have such qualities as a quick and timely reaction to the changes, adequate steps, according to the current situation, and a certain flexibility in approaches to the different challenges. However, the professional, talented executive officer should have the vision of the company’s development for the different strategic periods in the future. Only the appropriate and correct strategy of development can give any company a chance to gain new positions on the market or, at least, keep the existing pace of development.