- June 23, 2020
Ithighlights the main policies that sky-rocketed the sales for the DellComputer Corporations.
Themain policy under discussion is the utilization of direct retailsales to reach to as many customers as possible.
Appreciatesthe growth efforts from the policies.
Showswhy the policy failed, amongst other factors such as development ofthe Dell Notebook computers.
Mentionsthe concentration on growth overshadowed liquidity and profitabilityhence, introducing a new to effect a new policy
Possibilityto change the detrimental policy
Indicatesthe involved parties to enact the new policy
Mentionsthe importance of the policy to the employees and vice versa
Thenew policy to run Dell is cash conversion policy
Highlightsthe compatibility of the new policy with the existing Delloperations.
Reasonsto Change Policy and Risk If the Changes Are Not Enacted
Detailsthe benefits of the new policy
sthe negative effects that will follow if the firm fails to adopt thepolicy.
Thenegative effects of failure of adoption include stunted growth andconflict within the shareholders’ returns.
Requirementsof the new policy
Thereare various steps needed to bring to full effect the success of thenew policy.
Theyinclude setting out regional offices across various regions that willserve as stand-alone braches.
Thebranches will approach the markets as they see fit, each applying thecash conversion technique.
Longterm needs include hiring managers to run the branches
Establishinga central resource center for all the branches is also a long termrequirement
Formany years, Dell Company has been on the forefront of providingtechnological provisions for the various computer end-users. Thecompany reverted from a public company to private ownership back in2013, a move expected to raise its performance. However, the policychanges seem to have stagnated the performance of the company. Thelatest release from Dell indicates the mention to acquire EMC Corptotaling up to $67 billion (US, 2016). The aim of the new deal is tocreate a corporate-computing giant by combining Dell’s PC andserver sales, specifically to customers and the small to medium-sizedbusinesses, with the storage facilities provided to EMC. EMC majorlyfocuses on servicing large corporations. The decline in revenue fromDell by 6% annually ended in the year 2013, but the percentageincrease in the revenue amounts ended lately in January 2015 (US,2016). The market structure at the time as seen by competitors suchas IBM and HP is that the huge firms split into individualcorporate-computing and PC-Printer institutions. Dell maintained itspolicies not to split, a doubtful move since the competitors startedgaining profits from the splits. Additionally, Dell payed $4.5billion to clear debts, a move that left the firm with less cash thancompared to when it traded publicly (US, 2016). Yet, the move toprivatize the firm has not boosted the profits. Hence, the deal toacquire EMC presents itself as a highly leveraged transaction. Amidall the futile developments to raise profits by the firm, there needsto be a change in the policies of the firm, as explained below.
Challengesof the Policy
Thepolicy at hand presents limitations based on the growth of the firm,together with the structure and management of the enterprise.Although Dell may not have been the largest computer selling company,it was sure the fastest growing firm in the field. The huge marketpolicy to produce the future ready machinery started to work againstthe firm. With the new technological breaks and constant innovationin the world of computers, Dell decided to initiate the manufactureand assembly of ready to use laptops (Policies for MacrofinancialStability). More destructively, the firm still maintained theconventional ways of boosting sales through direct retail sales. Themanufacture of the ill-conceived and unreliable notebook computerswas now followed by pushing the gadgets through retail channels(Policies for Macro financial Stability). The leading retailsuperstores in the nation specializing in computer sales took on Dellnotebook computers. Stores such as CompUSA, retail stores such asBest Buy and Staples and Wal-Mart spearheaded the selling efforts ofthe Dell notebooks. The sales from the policy of retail selling werehigh, and so were the losses. The computer firm overshadowed theliquidity and profitability of the enterprise with the want to grow.In so doing, the profits were low, lowering the returns for theshareholders. More so, top leaders of the firm ignored that a companydoes not attain success from growth only, other puzzles must fit toattain success in all aspects of a giant company like Dell.
Possibilityto Change the Detrimental Policy
Thecompany needs to take up a new strategy that takes into considerationall the factors needed to run a business successively. Mostimportantly, the new mechanism and policy in store need to have aspecial focus and allocate resources towards the satisfaction of theshareholders. The new policy requires participation from the toplevel management of the firm, down to the low-level employees of thefirm. Importantly, there is urgent need for the top managers of thecompany to grasp the functionality of the new policy. If they fail tounderstand how the policy will work, the company will stillexperience stunted growth results. Besides, the success of the newpolicy depends on the managers’ abilities to pass down the newpolicy to the employees.
Thenew system expected to change the results of the company is the cashconversion cycle. The policy operates by filing all the inventory,the receivables of operations, the cash flow and the payables of thefirm. All the top managers of the enterprise have to generate reportsthat indicate the amount of the invested capital and assets andcounter their reports with growth figures. The policy is new to theorganization hence, training will be a pivotal exercise to achieveoptimum results (Purce & John, p 67). The training process isopen for the existing employees, all new entrants of the firm and itwill occur through various ways. Accountants will get prior knowledgeof the operation the other employees will sit through video sessionsand learn how the new policy works and internal memos will be ineffect to ensure the policy works (Purce & John, p 76). Purceadds the aim of the training is to help all employees understandtheir contribution to the new policy and also learn how the policyaffects their daily operations within the organization structure(88).
Thecash conversion cycle is specifically suited for Dell from the directretail method previously used. The policy of selling directly to thecustomer means that Dell has close to zero finished goods inventory(Edge, 100). Also, there is fewer parts inventory since the firm buysits components on an on-time basis. The cash flow of the firm isencouraging since Dell receives payments at a higher rate fromconsumers than it pays its suppliers (Edge, 67). Besides, the lessinventory above means that the reductions in all costs of thecomponents are to the customers, which improves on the competitiveadvantage of Dell.
Furthermore,the firm has to lose the direct sales mechanism as the success of thecash conversion cycle depends heavily on the cash flow to thecompany. This will help the management of the firm to improve theability to achieve massive sales by selling the various products tolarge organizations.
Reasonsto Change Policy and Risk If the Changes Are Not Enacted
Ifthe firm does not change to the cash conversion cycle, there is ahuge possibility that the direct retail procedure will reach ceilingpoint. The level point will close Dell forever in the retail scene,and the profitability of the firm will be under siege. More so,sticking to the old policy will continually reduce the returns of theshareholders. The direct retail sales mechanism exposes Dell to afailure to grow, as most of its sales would be to the first-timebuyers only (Holsapple, et al. pp 130-141). The results slow thegrowth of Dell, opposing the objectives of the organization.Additionally, the adoption of the new policy breaks the company fromthe monotony of small-scale sales through the retails and will exposethe firm to massive cash flows from selling its products to the hugeinternational organization (Holsapple, et al. pp 130-141). The newpolicy exposes the firm to a new definition of functions where thedivision of labor is global, spreading sales to various parts of theglobe (Holsapple, et al. pp 130-141). Furthermore, the firm willcentrally focus on product development, and each regional branch willoperate as a stand-alone center. The break to stand-alone empowersmore people the firm hence, the growth of the growth will be aguarantee. The cash conversion cycle will individualize thegeographical layout of the business, which will then translate tosegmenting the customer base. Dell will now access more customers inthe increased geographical zones (Gitman, 210). It is also a benefitfor each geographic zone to run as independently as possible tomarket their products, choose the best components for the regions anddo their planning (Gitman, 229).
Requirementsof the New Policy
Tofully effect the new policy, Dell needs to set out geographical mapsand select the potential zones where they would attract as manycustomers as possible. Setting the geographic zones will lead tospecialization where each zone conducts its processes to perfection.More so, the division into the various geographic process willdedicate individual cash conversion cycle, and each region will showits inventory, easing the process of tracking the performance of thecompany. The mindset of the geographical separation and launching tointernational markets will also introduce the management to theoverhaul concept of overtaking the regional competitions (Turner,89). Applying the cash conversion cycle will be imperative as soon asthe local offices are set. By doing so, the regional offices willhave adequate to learn of the specific customer needs and the Dellwill customize its products to suits the individual needs. The plansabove entail the short-time requirements necessary to override theinventory and secure a growth pattern for Dell. Establishing theregional operations will be pivotal as Dell will acquire customer’sinformation firsthand, without relying on any third parties to makemarket estimates. Dell will eliminate using unreliable data toforecast sales that facilitate the planning process. Besides, thedata obtained will be current, and the organization will makedecisions using the latest data hence, minimizing the risks obtainedby using outdated consumer information (Turner, 104).
Thelong term requirements begin with hiring competent managers to headthe regional offices. Most importantly, the managers need torecognize the real mission of the regional offices that it is notonly to develop but also to overtake the regional competition. Bydoing so, each selected region will ensure Dell is the primaryprovider of computers and their components to the consumers in theregion, scaling Dell to becoming the overall leader of providingcomputers and parts. Long term success of the new policies will alsoentail the establishment of a similar resource for all the regionaland international establishments. The similar resource provides thebranches with manufacturing services, procurement operations, supportand follow-up, training modules, and overall support. In conclusion,the increase in volume market will lead Dell in diversifying in thepresent computers and their components, to growth exponentially andwith no limits.
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Edge,Charles S, and William Smith. EnterpriseMac Administrator`s Guide., 2015. Internet resource.Purce& John, p 67
Gitman,Lawrence J., Roger Juchau, and Jack Flanagan. Principlesof Managerial Finance.Pearson Higher Education AU, 2015.
Policiesfor Macrofinancial Stability: How to Deal with Credit Booms., n.d.. Print.
Holsapple,Clyde, Anita Lee-Post, and Ram Pakath. "A unified foundation forbusiness analytics." DecisionSupport Systems 64(2014): 130-141.
Turner,Jamie, and Reshma Shah. Howto Make Money with Social Media: An Insider`s Guide to Using New andEmerging Media to Grow Your Business., 2014. Print.
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