Theoretically-underpinned Case Study Analysis of Dell Corporation Essay
Marketing facets increase with the rise in competition and diversified market segmentation bases (Goodale, 2002). In order to gain recognition, build a brand name and retain customer loyalty, many firms seek strategies that will enable them to stand out from the competitor. In studying marketing behaviours, several academicians and practitioners apply theories, concepts and models that explain a marketer’s tendency towards particular marketing strategies.
As mush as some marketers align products depending with consumer tastes and preferences, others opt to create products and pull customers into accepting their products. This essay applies the theoretical modules in the critical evaluation of the marketing strategies of Dell Computer Corporation and highlights how the themes align or misfit with Dell’s marketing strategies. Some of the conceptual themes evaluated include marketing and consumer orientation, consumer relationship management, value, market intelligence and marketing metrics and learning organization.
2.1. Dell on Market Orientation, Consumer Orientation and Customer Relationship Management
Academics and practitioners recognize market-oriented corporate strategy as the pillar of exceptional organizational performance (Kara, Spillan, & Deshields, 2005, p. 105). Market orientation research widely applies the concepts of Kohli and Jaworski, and Naver and Slater (Gotteland, Haon & Gauthier, 2007, p. 46). Kaur and Gupta (2010, p.88)
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Furthermore, Kaur and Gupta (2010, p.88)
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Generally scope of market orientation is synthesized upon the methodological challenges, for instance the universal acceptability of the development of scales; the nomological network, which are the antecedents and effects of market orientation, and market orientation implementation, which focuses on the managerial action towards market orientation (Kaur and Gupta, 2010, p.88). Kohli, Jaworski and Kumar (1993: p. 467) define market orientation as all the partaking in the entire organization that apply market intelligence involving the current and future requirements of customers; vertical and horizontal dissemination of intelligence in the organization, and the organization response or action to intelligence. Learn about Dell Marketing Strategy
These have been referred to as the three activities of market oriented firms according to Kohli and Jaworski, which emphasize on organizational behaviour as opposed to the state of mind. Market oriented firms implement these marketing concept. On the other hand, Narver and Slater (1994a, p.3) view market orientation as the culture that best creates those behaviours that greatly value the customers and consequently the business experiences continuous performance.
Slater and Narver (1994b, p.7) insist that these kinds of behaviours create the competitive advantage for the firm. Narver and Slater’s market orientation theme distinct five major components and these are customer orientation, competitor orientation, inter-functional coordination, focus on the long term and a profit focus. Ward, Girardi and Lewandowska (2006, p. 164) argue that the Narver and Slater 5 component model could be widely applied but there is no evidence measure that shows a correlation between business performance and customer orientation.
Dell uses the direct business model as a marketing strategy where the dealer or agent category of the supply chain is skipped. Magretta (1998, p. 73) points out from an interview with Michael Dell-Dell’s founder-that the initial intention when the direct business model was adopted was to give dell a substantial advantage on cost by reducing and eliminating costs and risks of transiting finished goods, but the model turned to have a better advantage, and this is having direct contact with customers. Dell has since established a consumer orientation strategy to marketing, a component agreed upon on both the managerial and cultural aspects of market orientation. Studying Dell’s marketing strategy; most of the components of Slater and Narver apply.
“The heart of a market is its customer focus,” (Slater & Narver, 1994b, p.9). Dell showcases the consumer orientation which the firm values, through constant interaction with its customers, a factor that has given the firm a better competitive advantage. The competitive advantage is manifested where Michael Dell as reported by Magretta (1998, p. 74) states that the company integrates both coordination and focus whereby innovation takes place at the same pace as customer relations. This is as opposed to other computer firms who first innovate and then market the idea to the customers. According to Narver, Slater and MacLachlan (2004, p 335) market orientation perspectives, Dell can be classifies as a firm with a responsive market orientation based on customer-driven attributes that involve first, learning about the preferences of the customers, and gathers product ideas before developing and testing and improvement.
Michael Dell as cited in Magretta (1998, p. 81) gives an example of a time when the Dell engineers thought that they should provide their customers with faster and better performing products, although they sort to listen to the customers fast before adopting any changes on the products. The meeting wit the clients revealed that stability of the product is preferred as opposed to improved changes. On the other hand, there is a group of firms that showcase proactive market orientation and therefore described as customer driving firms where they lead the customers to the kind of products that they have rather than asking the customers what they prefer.
Microsoft and Intel for instance use such marketing strategies and this can be argued from a resource based theory perspective where the firm wants to utilize its inward resources to create a market quest for their products (Magretta (1998, p. 82). Critically, one may wonder if Dell’s market share may drop if the customers tend to like and adopt the latest technologies from customer-driving companies like Intel and Microsoft. However, Dell, as cited in Magretta (1998, p. 83) explains that they are so committed to their customers that they take upon themselves to educate the clients on new technologies and how to use them efficiently. So, Dell will invest in hiring more employees to provide customer services as opposed to investing in innovation trials as compared to its competitors, and this gives Dell its competitive advantage.
Most computer firms use technology on a proactive market orientation aspect, and they achieve organizational performance through managerial directed innovations, mostly determined by their resource. Therefore competition between Microsoft and Intel will basically depend on who has the latest technology and what kind of segmentation bases are they targeting with the latest invention. Dell, although a computer firm, has established its brand through client related services and will sort the customers’ perspective before creating a new invention. However, Narver, Slater and MacLachlan (2004, p. 340) findings show that a proactive marketing orientation creates and sustains the success of a new product.
The business is very vulnerable in economic terms because it relies on the customer’s best guesses for novel products that may turn to be either of long term economic benefit or become a fad as well. Moreover, competitors may respond by providing the parallels to the new products and create competition base on pricing (Diehl et al. 2003). However, the advantage is that proactive marketing orientation is recognized for new insights and value adding advantages which in turn creates customer loyalty and dependence. On the other hand, responsive marketing orientation barely adds new insights for value adding chances because they have to wait for the customers to express the needs. In turn, customer dependency and loyalty is lessened. However, for Dell’s case, it can be argued that the emphasis is on consumer orientation overcomes its weakness as a responsive marketing orientation firm.
As a customer-driven firm, Dell ensures that all employees in all the levels of the organization get to meet and know there customers through meetings organized (Magretta, 1998, p. 80). This is with an effort to improve the customer relationship marketing even though most of CR management id done through virtual integration. The direct business model has also been studied by Hulten (2007) when analyzing the customer’s perception of the organization depending on the kind of interaction.
According to Hulten (2007, p 266), there exists weak and strong client relationships basing on trust and commitment. Active customers tend to have a committed relationship that is built on trust, with the organization and seem to become loyal and persistent customers that may not be easily swayed to competitor brands. On the other hand, passive customers tend to have weak relations with the organization and may easily opt for other brands whenever issues like pricing, product quality, services and stocking act against their expectations. Dell is therefore likely to gain a legacy of loyal customers if the claimed customer relationship is realistic. Customer relationship marketing (CRM) is also an important aspect of organizational performance.
However, many doubts traverse as far as the eligibility of the relationship is concerned. Creating a good relationship with the clients who but the firm’s products is a great thing to do, and some marketers are known to interact with their clients at very close proximities, even at personal level. The client’s perception of the organizational culture is therefore based on psychological likeness, which is very beneficial for the company because it creates brand loyalty. However, there exists an argumentative perspective of whether customer relationship management (CRM) is genuinely focused on the relationship or transaction.
For instance, will Dell completely leave Microsoft and Intel to lead on innovations just because Dell’s customers said they prefer stable products? Whether there is a comprehendible CRM or none, it is a clear fact that businesses are in existence because they not only want to sell their products but also to make profits. Another way of looking at the concept is would Dell continue to offer free consultancy services to a client who switched from Dell’s products to Microsoft products but would want some information regarding the new invention they just bought? In marketing orientation, the audience is led to believe that a true CRM exist but again the impact of technology on the relationship cannot be ignored. For instance, Dell interaction with its clients is through virtual integration (Magretta, 1998, p.83).
The employees and management learn everything possible on the technologies and provide a channel where the customer’s can learn through Dell’s website. On an argumentative basis, there is no mutual interaction between Dell employees and their clients. As a matter of fact, the interaction is through the technology that incorporates Dell’s organizational transactions. Realism in CRM has therefore been hindered by technology, and the fundamental reason behind CRM is more geared towards the transaction than the relationship itself. Dell as interviewed by Magretta (1998, p.83) defends the technological CRM through virtual integration by stating that the technology enables the customer to be reached faster and effectively and therefore, the customer need is met as expected.
This statement further harnesses the consumer orientation perspective of Dell. Coley, Mentzer and Cooper (2010, p 142) argue that consumer orientation in businesses is important because consumers contribute largely to the performance of the organization. However, the authors argue that consumer orientation just don’t align with market orientation strategies as speculated by Slater and Narver, (1994b, p4), and as much as market orientation should remain customer-centric, the consumer orientation should be treated as a separate component.
Mavondo (2000) reports on a study that measures the differences between the business marketers and consumer marketers while applying Narver and Slater (1990) and the Kholi, Jaworski and Kumar (1993) models. Findings reveal that as much as both models are important in explaining marketing orientation, the model of Narver and Slater is comprehended better across many organizations.
2.2. Dell on Marketing Intelligence, Marketing Metrics and Learning
Interaction with the customer is very important but can only benefit the organization if an organization can generate intelligence on predicting the latent needs of customers and finds ways to satisfy those needs thereby upholding the customer value further (Slater & Narver, 2000, p. 121). Marketing intelligence involves knowledge of both the competitors and customers but the firm’s performance depends on how this knowledge is integrated, disseminated and the response to its execution (Kohli and Jaworski, 1993, p 468), Marketing intelligence is therefore a significant requirement of marketing orientation, because without market orientation, there will be no systems, infrastructure and the departmental inter-functionality that is required to sort, analyze and execute marketing intelligence (Kohli and Jaworski, 1993, p 470).
On the other hand, marketing orientation is also a requirement of market intelligence knowledge a company may lose touch with consumer requirements, or worse still, the firm will be incapable of placing itself on a competitive advantage in the market. Through marketing orientation, the organization determines the priority given to marketing intelligence, and its significance on strategic dynamics. Market intelligence and market orientation coexist together and one is void without the other. Dell’s market intelligence has enabled the company to establish a unique marketing orientation in the computer industry and this is marketing through virtual integration.
Dell sought a different strategy of carrying out the computer business. For instance after realizing that company’s classic computer companies involved themselves in the whole supply to consumer proactive inventions and sometimes missing out o n value addition, Dell decided to improve components of the already existing inventions through consumer-response orientations (Magretta, 1998, p. 74). Instead of involving all the steps in the supply-consumer chain, Dell skips the transit and warehouse storage steps and only delivers the products on customer demands. By partnering with Sony, Dell ensures that the quantity and quality of products is available on request.
Dell’s market intelligence of filling in the gaps of consumer needs places it on a competitive advantage against its competitors. Marketing intelligence at Dell would be void without marketing orientation. Dell’s marketing orientation involves having an organization that can disseminate the needs of its customers through the available resources and means of interaction between the suppliers, consumers and stakeholders, thereby being able to execute the information analyzed from the marketing intelligence.
Dell’s marketing intelligence therefore articulates with the 3 activities of market orientation by Kohli, Jaworski and Kumar, (1993, p 468). As much as Dell does not satisfy Narver, Slater and MacLachlan (2004) requirements of a proactive marketing orientation, it can be argued that Dell is an organization that values knowledge through learning, although the learning effects from responsive market orientation.
Marketing metrics are the strategies put to justify the marketing value within the organization. Any expenditure in executing the marketing strategies is seen as a cost rather than an investment, and thus the top management would require evidence of its value. . Early works measured marketing metrics on financial terms basing on sales, cash flow, profit and tangible assets among others. With evolution of marketing metrics non financial measures such as customer satisfaction; market share; brand equity and customer loyalty are considered. Other revolved measures include the input and output basing on market audits, multivariate analysis and efficiency.
Organizations have unique marketing metrics that suit the organizational culture and structure. Dell incorporates customer satisfaction, perceived quality, brand valuation and customer loyalty and retention as means to marketing metrics. According to Ferrel et al. (2010, p. 94), most businesses in the current era are strengthening the relationship with stakeholders, just as it happens with customers and suppliers. The agency theory can well explain how Dell seeks its marketing metrics. The agency theory explains principal-agent relationships that exist for the purpose of executing the marketing strategies. Dell invests less on tangible assets but instead builds on relationships with customers, suppliers and stakeholders (Magretta, 1998, p. 75).
2.3. Societal Marketing and Dell
Conventional marketing is continuously being criticized because marketers are perceived as getting smarter in their convincing tactics and sometimes mislead customers. Eisend, (2007, p. 616) points on two sided advertisements where one part of the advertisement carries a positive message about a product, while another carries a disclaimer. Marketing has also been cited as a behaviour changer in the society because people’s activities will definitely lean towards the marketing pressure. Dell, for instance, on encouraging virtual integration as a marketing strategy reduces human to human interactions.
As far as Michael Dell argues that it is for quick and effective administration of consumer needs, it should be noted that if Dell did not introduce the strategy, then this need would not have been created. Market liberalism enables marketers to come up with activities; some good some bad- but the underlying factor is clients are convinced to spend on the products. Market Capitalism encourages creation of wealth eve through means that divide the society. The current market strategies push consumer spending regardless of the economic situation (Witteloostuijin, 1998). This is an indication that marketers could be placing there needs for business performance first without ethical considerations of poor consumers.
Dell’s marketing strategy which is direct business model through virtual integration has enabled it to become one of the fastest growing global computer corporations as the internet continually forms new avenues for business ventures. Dell’s marketing strategy comply with Kohli and Jaworski’s 3 activities of market orientation while at the same time complies with Narver and Slater’s customer-orientation, competitor orientation and interdepartmental functioning further implications should be considered on how to use the strategy for long term focus and profit sustainability. Dell reduces human to human interaction by incorporating technology on customer relationship management. The marketing theories are based on contradictions and similarities in some cases but it is up to the firms to internalize concepts that will place them on a better competitive advantage.