Term Paper on "Financial Marketing"

Term Paper 10 pages (3093 words) Sources: 1+

[EXCERPT] . . . .

Dell

Overview & brief history of Dell

Dell was founded in 1984 by Michael Dell. According to a profile for the company it is involved in their manufacture, design, marketing, sale and support of services and computer systems throughout the world. This company credits itself on providing services and products that allow businesses and individuals to develop an internet structure. Dell's product line includes laptops, mobile workstations, handhelds, printers, projectors, servers, peripheral products, software and notebook accessories (Dell Profile). The company also has several services that it offers consumers including deployment services, managed lifecycle services and client support services (Dell Profile). The company also provides asset management services and financial services (Dell Profile).

In addition, Dell sells products directly to government, healthcare and corporate entities in addition to small businesses.

The company operates primarily in America, the Middle East, Africa, Europe and Asia. The company's headquarters is in Round Rock Texas (Dell Profile).

Dell is not relay that unique in the services and products that is offers, however the company is unique in the manner in which it conducts business. The company's direct selling methods have transformed the manner in which people purchase personal computers. According to Fields (2004)

Dell Computer has emerged as one of the most innovative firms of the current period on the basis of a process for producing, buying, and selling. This process-oriented route to profit, in turn, rests on three fundamental elements: (1) a different relationship with the customer that involves the practice of selling direct, absent intermediaries; (2) the notion of customization for the specific needs of end users and building customized products in high volume; (3) the use of the Internet by Dell to reorganize not only its system of direct sales but, more significant, the procurement and assembly operations underlying mass customization (Fields 2004).

As it relates to business in general and the computer industry specifically, Dell has had a significant impact on the financial market in the United States. This impact is often referred to as the Dell effect and this effect will be explored further in the next few paragraphs.

Effect on U.S. financial market when Dell came into the Market

According to a report published by Dell Inc., the Dell effect involves several different outcomes. The most pronounced outcome has to do with minimizing the cost associated with the purchase of technology ("The Dell Effect"). The company has been able to accomplish this with a built to order business model that set it a part from the competition.

As it relates more specifically to effect that Dell has had on the financial market in the United States when the company first entered the market, the company could easily outperform the competition because of the business model in adapted ("The Dell Effect"). This business model, in which all products are sold over the internet, eliminated the cost of running brick and mortar stores. In addition Dell was able to make the computers at a reduced cost and these savings were passed on to consumers ("The Dell Effect"). In time this gave Dell a considerable share of the market.

In addition, Dell has deployed affordable computer technology which has created increased productivity ("The Dell Effect"). As such the Dell Effect has created a transformation that is driven by Information technology as it relates to various aspects of the economy. The report asserts that this economic impact can be seen in the empowering of small business.

The company points out that the empowering of small business has occurred since 1998 when Dell began developing and selling affordable servers ("The Dell Effect"). In fact the report asserts that Dell has reduced the cost of servers by more than a one third ("The Dell Effect"). The reduction in the cost of servers is important because servers allow small business to have the computing capacity and the storage that is required to exploit the internet and gain customers throughout the globe ("The Dell Effect").

In addition, the Dell effect had an impact on the quality of the workforce. The report explains that the new found affordability of technology caused by the Dell effect meant that schools and universities are more modernized ("The Dell Effect"). This modernization allowed these institutions of learning to properly train students as it relates to computer technology ("The Dell Effect"). The report asserts that this training will create a highly-skilled workforce that is more productive and led to greater financial and economic success ("The Dell Effect").

Overall Dell's effect on the financial market had to do with the company's capacity to transform the way that computer companies sold products and the decrease in the price of personal computers. Dell in effect made quality computers that are now available to the masses. The company also caused many of its competitors to lower their prices, making computers more of a commodity, in which there is very little difference between the brands.

Problems with Dell now (present) including competition

Over the past year Dell has faced significant problems that have put into question the stability of the once indispensable company. One of the first setbacks came with the recall of the Sony batteries that powered 4.1 million of the company's laptop. This recall occurred because the batteries were a fire hazard and a few had even caught on fire (Rotham, 2006). This recall affected 15% of all Dell laptops that were sold in the last two years and it cost the company millions of dollars to replace the batteries (Rotham, 2006). This is the largest recall in consumer electronics history (Rotham, 2006).

In addition to the recall of the batteries, the company also suffered a reduction in profits and recently the company was placed under investigation by the SEC. Like many other large American corporations the SEC has called into question the accounting methods of Dell (Schneiderman, 2006). According to an article published by Forbes the investigations were called because there was some indication that in prior periods the financial reports were misstated (Schneiderman, 2006). These misstatements are said to include accruals, reserves and other balance sheet items that might influence Dell's financial results that were reported previously (Schneiderman, 2006).

In addition the article points out that the United States Justice Department and Dell's board of directors audit committee are also investigating these issues (Schneiderman, 2006). In fact the Justice Department has subpoenaed documents associated with Dell's financial reporting beginning in 2002 (Schneiderman, 2006). Evidently this announcement caused Dell shares to decrease by more than 4% (Schneiderman, 2006). Dell also released a statement explaining that the company is cooperating with the SEC investigation and doing everything that it can to resolve these issues. Dell also asserts that it will take any corrective action necessary to ensure that these problems are remedied (Schneiderman, 2006).

Additionally, the company has suffered as it relates to the level of its customer service. Dell has received numerous complaints about slow customer service and the company withholding information from consumers. This has also taken a toll on the manner in which the public views the company and its products.

In addition to the aforementioned problems, the company also has problems associated with the competition. A prime example of this is Hewlett Packard. HP has long been a stable force in the computer industry. In recent years HP merged with Compaq and this merger along with HP's competitive prices has caused HP to gain a greater share of the market. HP is now the largest PC manufacturer in the world.

Causes of such problems

There are many reasons why Dell has encountered such problems. As it relates to the battery recall, the company may have overlooked certain safety measures when testing the batteries. In addition Dell is able to keep its prices low because they are able to get computer components at a cheaper price than many of its competitors. The drive to keep these prices low may have driven the company to overlook some very important safety measures.

As it relates to the SEC investigation, the results of the investigation are not yet known. However, many successful companies have been found guilty of engaging in accounting practices that are illegal or at the very least dishonest. If this is the case with Dell, the company may have been attempting to hide the loss of profit as to not alarm shareholders.

As it pertains to customer service, like other American businesses a great deal of the company's customer service is outsourced to foreign countries. It can be frustrating for American consumers to have a customer service representative who speaks with a heavy accent or a representative that does not seem eager to assist them. Overall it seems that in order to keep the company's prices low Dell believed it could reduce costs by going overseas. However, in the long run it may cost the company a great deal because customers will switch to another brand if they feel that they are not receiving the treatment that they deserve.

Finally as it… READ MORE

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