1

PREFACE
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, organi ations and businesses. With their huge computing and processing power, computers have boosted up productivity, increased accuracy, saved time, and become essential e!uipments 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. #wning to its power and functionalities, the demand for computer has increased continuously over years, pushing the $% &personal computer' industry become one of the most competitive and dynamic. Within ( years from 2))( to 2)1), the worldwide $% sales almost doubled and stay at more than *)) million units in 2)1). +arge 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. ,esides, due to the fast pace of changing, as a feature of the industry, computer firms have to ad-ust their overall strategies continuously to stay strong. .ell Inc. is one typical e/ample of successful computer enterprise by using appropriate strategies toward technology innovation and operation. With innovation based on standardi ation, direct sales model, and the support of modern and fast information technology system, .ell keeps in hand key comparative advantages to win the first position in the market for many years. 0ntil now, .ell still remains as the toughest competitor for any $% maker. ,eing attracted by the eventful computer industry and efficient operation of .ell Inc., the writer decides to choose the $% industry as the theme and .ell %omputer 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 .ell Inc., including its history of development, its strategies of technology innovation and operation, and its global e/pansion. This part will analy e 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 1ietnam in globali ation scenario, 1ietnamese technology enterprises and some lessons withdrawn from .ell %omputer"s success and failure for them. .ue 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 !uality of the thesis.

Chapter 1: OVERVIEW OF TECHNOLOGY AND DEVELOPMENT STRATEGY OF COMPUTER ENTERPRISES IN GLOBALIZATION 1 1 O!er!"e# $% te&h'$($)* +e!e($p,e't "' &$,p-ter "'+-.tr* "' the #$r(+: The personal computer &$%' industry is one of the strangest and most dynamic in the world. $robably 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 $% vendors. 2ince $% could be assembled from standardi ed components without much e/pertise re!uired and the barriers to entry are not as tough as in the past, new computer business is established on a fre!uent basis. 3s a result, there are thousands of companies making $%s that perform similar functions pushing the market to be e/tremely price4competitive. 2ince the market is so competitive, vendors often sell at very low margins. %omputers are not the same as many other products, where the company selling the device is making upwards of 5)6 of the price of the product as gross profit. 7or $%s it is often around 1)6. 3dditionally, there is probably no other industry that has prices change as dramatically and fre!uently as the $% industry. 0sually, prices are decreasing. This is good for the consumer but very bad for vendors, because it means that their already low margins get s!uee ed if prices drop between the time that they buy a product and the time they sell it. .rop in the price of $% comes from both severe competition and rapid changes in technology. 3s a conse!uence, $% makers often prefer to keep low inventories. Whenever prices fall, the vendors potentially lose money on every component in inventory at the time. .ue to the rapid fre!uency of changes in technology, functionalities and capacity of computers are improved continuously, broadening $%"s definition over time. In the dawn of $% industry, a computer was a bulky device, furnished with some simple functions and small volume, but e/tremely 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 $% 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 T1, etc. With the technology evolution, computers have become the ever powerful tools that are essential for any success business and modern families9 and the $% industry become one of the most strategic industries in the world in the 21st century. 1 1 1 Ve($&"t* $% +e!e($p,e't a'+ "''$!at"$': The personal computer industry has grown from a hobbyist industry in the 1:;)s to a highly profitable industry worth hundreds of billions of dollars worldwide. .riven by consumer demand to access the Internet and the advancements of microprocessor technologies, the demand for $%s for personal and business use has climbed continuously in the early 21st century The $% industry is one among the fastest growing industries in the world. 3ccording to a research carried out by <tforcasts, the annual worldwide $% sales has a trend to double every si/ years. ,y 2))), the $% sales was 1*2 million9 and almost doubled in 2))(. The velocity of increase in this industry is at a staggering rate of around :6 annually compounded. &Table 1' Ta/(e 1: W$r(+#"+e PC Sa(e. Unit: 1 million PCs =ear Worldwide $% 2ales 1::) 28 1::5 5> 2))) 1*2 2))5 2); 2)1) *25

(Source: etforecasts) 3nother noticeable inde/ is the number of $% in use. In 2))), there were more than 5)) million units in4use and the figure in 2)1) is over 18)) million units almost three times higher. &Table 2'

Ta/(e 0: W$r(+#"+e PC "' -.e Unit: 1 million PCs =ear Worldwide $% in use 1::) 1)) 1::5 225 2))) 52: 2))5 2)1) :1) 1,825 (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. =early $% sales for the 0.2. and the main regions of the world are summari ed in the ne/t figure. ?orth 3merica will remain the largest region through 2));. 3ll figures are in millions of units. F")-re 1: A''-a( PC Sa(e. $% the ,a"' re)"$'. $% the #$r(+

(Source Etforecasts) In 2))*, the number of $%s sold in the 02 was roughly about *)6 of the total worldwide sales. This data indicates that the remaining ;)6 of the $% sales happened outside the 02. This shows that there are many opportunities yet to be discovered by firms around the world. 3ccording to et7orcast , 3sia will be the region with the fastest growth in computing devices. This trend is confirmed by the rapid urbani ation and moderni ation of %hina in recent years, and e/pected to

continue to grow in the ne/t decade. Therefore, it is logical to move the $% manufacturers in the 02 into the global arena. $% 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 $% revenues were @251, in 2))), which increased to over @***, in 2));. Worldwide $% revenue declined to @*2), in 2)1). 3ccording to e/perts of <tforecasts, worldwide $% revenue has a trend to grow again in the ne/t five years to around @8)), in 2)15, which is due to the unit growth boost from the i$ad 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 1::: to 2))8. This computer and peripherals industry include products which are computer4 based and inter4connected to computers. These products are indicators of how well the entire industry is doing in terms of new innovations and future development. F")-re 0: C$,p-ter a'+ Per"phera(. I'+-.tr* 1111 2 0334 Unit: billion Dollars

This figure is a good indicator of the huge potentials in the IT industry. 3lthough the industry had a minor setback in 2))1, the net profit and sales remains

high for 2))8. 3s 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 0 O!era(( ",pa&t t$ the +e!e($p,e't $% e&$'$,"e. "' the #$r(+ The 21st century comes with more than ever powerful tools which based on the widely use of computers and the Internet. The popularity of $%s is phenomenal because it has revolutioni ed the way people communicate, how information is stored, and people"s ability to access knowledge at their fingertips. ,esides, $%s have become necessities in the corporate world simply because business processes involve heavy use of computers and Internet. In fact, the percentage of population with computer connected to the worldwide network has become one of the key indicators for the level of moderni ation and human power of economies in the world. 7ollowing is the figure for some typical countries: Ta/(e 5: I'ter'et -.er. per 133 pe$p(e %ountry 02 Aapan Bermany 3ustralia %hina 2ingapore 1ietnam 2)); 2))> 2)): 2)1) ;5.2 ;8.1 ;>.2 ;:.* ;*.( ;8.; ;;.8 ;:.8 ;5.8 ;>.* ;:.; >2.5 (:.( ;1.; ;8.1 ;5.> 1(.) 22.; 2:.) *8.8 (;.: (>.) (>.8 ;).1 2).: 28.2 2(.> 2;.> (Source: World Bank estimates - World Develo ment !ndicators)

There are two things that can be easily seen from the above table. 7irst, the advanced economies often have high percentage of population with computer connected to the Internet. .eveloped countries such as 02 or Bermany have a very high rate, almost four4fifth of the population9 meanwhile, developing countries like %hina or 1ietnam stay at much more humble levels. This means that internet connection is one of the indicators for the power and moderni ation of the

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economies. 2econd, the percentage in general has the trend to increase continuously over time which denotes the increased demand for computers and Internet using. $eople"s -ob will more and more related to the application of computer and Internet"s functions. Information technology has shifted the paradigm of economies. In a macroeconomic sense, information technology affects the patterns of production, investment and employment. Pr$+-&t"$' .tr-&t-re: as the information technology evolves, the world is now in paradigm shift from the industrial age to the information age. 3s a result, there is a growing demand in the service fields that re!uire e/pert knowledge and information. Thanks to information technology, e/isting service industries such as banking and distribution are enhancing efficiency and e/panding their business areas. ?ew 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 e/ports include telecommunications, audio and video, computer and related e!uipment9 electronic components9 and other information and communication technology goods of some countries. The number is taken as percentage over the total goods e/ports.

Ta/(e 4: ICT )$$+. e6p$rt. 78 $% t$ta( )$$+. e6p$rt.9 %ountryC=ear 02 2)); 18.2 2))> 12.> 2)): 1*.)

Aapan Bermany 3ustralia %hina 2ingapore Dalaysia

15.;

18.*

18.;

;.: (.: (.> 1.> 1.5 1.8 2:.1 2;.5 2:.5 *(.2 *5.: *5.8 81.( 2(.2 *>.1 (Source: United "ations Statistics Division#s Commodit$ %rade)

The table shows clearly that I%T products is an important part in the production structure of countries, especially 3sian developing countries since the percentage is very high &times higher than developed economies'. This can be e/plained as the trend of outsourcing in big technology firms of developed countries to take advantage of cheap labor force and market potential in 3sia4$acific area. I'!e.t,e't .tr-&t-re: as information technology changes the aspects of competition, investment is made more in the area of information and communications that promotes productivity and efficiency of knowledge4based products. 3s the demand for high technology goods has increased continuously, the IT industry becomes a highly profitable but competitive industry. 2evere competition in home countries forces computer firms to e/pand globally, finding new market for their growth. In addition, the pressure of price4competition re!uires them to find ways to cut cost. 3s a result, large multi4national technology tend to invest in potential markets such as countries in the 3sia4$acific area or India, changing dramatically the investment structure of both home countries and investment receiving countries. 3ccording to #<%. 7actbook 2)1) regarding to investment structure of the world, I%T shares in total non4residential investment doubled, and in some cases, even !uadrupled between 1:>) and 2))). In 2))>, I%T shares were particularly high &at 286 or more of the total' in countries like the 0nited 2tates, 2weden and .enmark, etc. 2oftware has been the fastest growing component of I%T investment. In many countries, its share in non4residential investment multiplied several times between 1:>) and 2))>. In 2))>, softwareEs share in total investment was highest in 2weden, the 0nited 2tates, .enmark, 7inland and the 0nited Fingdom. In the recent years, software accounted for 5)6 or more of total I%T investment in 7rance, 7inland,

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2weden, Aapan, Forea, .enmark, the 0nited Fingdom, the 0nited 2tates, %anada, 2wit erland and ?etherlands. %ommunication e!uipment was the ma-or component of I%T investment in $ortugal and Breece. IT e!uipment was the ma-or component in ,elgium and Ireland. Cha')e. "' e,p($*,e't .tr-&t-re: In advanced economies: the number of workers in manufacturing sector is drastically reduced by shrinking share of its production. ,ut employment in information and knowledge4intensive service sector is increasing with automation and investment in information technology. In the occupational categories, there are more demands for e/perts with creativity and information technology. Deanwhile, 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 -obs 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, knowledge4 based workers, who create and utili e information, play a key role in economic activities and knowledge creating organi ations like research institutes and universities will find their increased roles as a place for economic activities. %hanges 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. <nterprises 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. Dodern communication methods such as email or fa/ have been widely used in companies since they accelerate the whole business process and save a lot of time.

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Deanwhile, enterprises have a trend to change production system from mass production under economy of scale into production on demand thanks to the application of <4commerce and advanced communication tools. Feeping a smooth flow of information both internally and e/ternally 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 customi ation to truly meet the need of theirs customers. In short, the informatics era come with the technology evolution has restructured and speed up people"s 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 computer4related industry have become the strategic focus of development in almost a large number of countries and regions around the world. Nat"$'a( p$("&"e. t$ pr$,$te te&h'$($)* +e!e($p,e't a'+ "''$!at"$': When talking about the countries growing fast and increasing their power with technological means today, people often mention the role of information technology, the widespread use of computers and the Internet. Information technology sector has proven itself to be the most strategic power in the development of national economies due to its productivity, speed, and versatility. 3s a conse!uence, countries in the world have set up and changed their own policies and strategies to develop their technology power on a continuous basis. #n of the main indicator regarding to the policies for technology development and innovation of countries is how much they spend on research and development activities &GH.'. The following table shows a brief comparison of this e/pense in some typical countries in the world. 7or even a clearer look, the second column takes this e/pense as percentage over the B.$ of those countries.

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Ta/(e ;: D$,e.t"& e6pe'+"t-re. $' R<D /* &$-'tr* 0331=0313 7,$.t re&e't *ear a!a"(a/(e9 %ountry 02 2)): Aapan 2)): Bermany 2)1) 7rance 2)1) 2outh Forea 2)1) 0nited Fingdom 2)1) %anada 2)1) Italy 2)1) %hina 2)): 2ingapore 2)): 2outh 3frica 2))> GH. e/pense &million GH. e/penseIB.$

current ppp' &6' 8)1 5;(.)) 2.:) 1*; *18.21 *.*( >( 2):.(8 2.>2 8: ::).;( 2.2( 5* 1>8.>( *.;8 *: 1*;.>2 1.;; 2* :;).): 1.>) 28 2(:.15 1.2( 158 18;.*( 1.;) 5 ;**.2* 2.2; 8 ;)>.22 ).:* (Source: &ECD' (ain Science and %ec)nolo*$ !ndicators)

In general view from the above table, developed countries often have a higher rate of GH. e/pense over their B.$, more or less of *6. This is relevant with the result of strong technology power and potential in these countries. Deanwhile, developing countries such as %hina 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 GH. investment has a trend to move toward new emerging economies such as India or %hina. This is considered as the direct conse!uence of outsourcing activities of many large technology firms in the world in the process of global e/panding and cost cutting. 3ccording to an estimation of <uropean %ommission, between 1* years from 1::5 to 2))> the world"s gross domestic e/penditure on GH. &B<G.' almost doubled in real terms. #ver this period real B<G. increased by about 5) 6 in the <0, () 6 in the 0nited 2tates, ;5 6 in developed 3sian economies, >55 6 in %hina, 185 6 in ,GI2 countries &,ra il, Gussia, India, 2outh43frica' and almost 1)) 6 in the rest of the world. 3s a result, less than 28 6 of GH. e/penditure in the world was located in the <0 in 2))>, compared to almost 2: 6 in 1::5. The share of the 0nited 2tates and Aapan also decreased substantially from almost *> 6 to ** 6 in the 0nited 2tates and from 1( 6 to 1* 6 in Aapan. Doreover, this global

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trend has been accelerating since 2))8, which marked the beginning of a steeper increase in GH. e/penditure in %hina and developed 3sian economies. F")-re 5: Cha')e. $% W$r(+ GERD "' rea( ter,.

(Source: D+ ,esearc) and !nnovation Data: Eurostat' &ECD' U"ESC& "otes: B,!S: Bra-il.,ussian.!ndia.Sin*a ore) This evolution is e/pected since rapid economic growth in %hina and a number of other countries in the world allows for rapid increases in GH. e/penditures in these countries. 3lso, high growth rates are more easily reached when the initial level is relatively low. In that conte/t, the share of the <0 and other advanced economies is bound to shrink and the figure below !uantifies this shrinkage. This re4balancing in knowledge production has important conse!uences for the <0 in terms of international scientific and technological cooperation and knowledge flows in the world.

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In the 2))2 +isbon 2trategy, the <0 set the ob-ective of devoting * 6 of its B.$ to GH. activities by 2)1). In 2))5, with the re4launch of the +isbon 2trategy, Dember 2tates set their own national GH. intensity targets to be met in 2)1). In the <urope 2)2) 2trategy adopted in 2)1), the <0 maintained the * 6 ob-ective for 2)2) and in the following months, Dember 2tates adopted their 2)2) national GH. intensity targets. .espite a 25 6 real4terms increase in research e/penditure over the period 2)))J2))>, GH. intensity in the <0 has stagnated at around 1.>5 6 of B.$ between 2))) and 2)); with a slight increase in 2))> and 2)): to 2.)1 6 of B.$ &7igure I.1.2'. This late increase in GH. intensity is, however, due to a more rapid decrease in B.$ than in GH. e/penditure. In the 0nited 2tates, after a continuous decline during the first half of the decade, GH. intensity started to increase from 2))5 to 2.;; 6 of B.$ in 2))>, slightly above its 2))) value &2.(: 6 of B.$'. This !uasi4stagnation of GH. intensity in the <0 and the 0nited 2tates contrasts with the strong increases observed in Aapan, 2outh Forea and %hina during this period, up to *.88 6, *.*; 6 and 1.58 6 of B.$ respectively. $art of the very high GH. intensity growth observed in %hina is due to its low initial position. It is to be noted that this increase slowed down in 2));J2))> in Aapan. #f the largest contributors to GH. e/penditure in the <0, 7rance and the 0nited Fingdom have followed a similar path to the <0 average, while Bermany is closer to the 02 level. 1 0 De!e($p,e't .trate)* $% te&h'$($)* e'terpr".e.: 3lthough the market for computer is huge and profitable, the competition is truly fierce between leading providers including .ell, Kewlett4$ackard, I,D, 2ony, Toshiba, 3cer and 3pple. 3s the demands for computer and computer4related products are getting higher day by day, there is also a pressure for $% vendors to drive the price down to compete with others. It is often down to the level where profits are !uestionable9 as mention in the previous sector, around 1)6 of price margin. Deanwhile, $% vendors also have to cope with rapid product cycle because high technology is changing so !uickly. 3s the result, IT enterprises have to keep their costs down and try to ma/imi e their market share. The use of information

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systems to gain competitive advantage becomes very attractive to the companies in this industry. <ach firm follows their own strategy of technology innovation and doing business. .ell: The innovative .irect42ales ,usiness Dodel eliminates the need for a retail chain. The ability to customi e $% on an individual customer basis is one of the main comparative advantages of this vendor. .ell"s $%s are built and upgraded based on standardi ed components of collaborative partners. Kewlett4$ackard: It merged with %ompa! %omputer to compete against .ell. This computer giant still relies on the more traditional retailer channel business model. K$ also offers variety of computer products such as printers, scanners, and digital cameras. I,D: Traditionally I,D 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 $%s from I,D are gear towards corporate and business use. +enovo: +enovo is the worldEs second largest $% maker after its 2))5 ac!uisition of I,DEs personal computer business. . +enovo markets its products directly to consumers, small to medium si e businesses, and large enterprises, as well as through online sales, company4owned stores, chain retailers, and ma-or technology distributors and vendors. 2ony: a Aapanese 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 +aptop line of 2ony is 1aio which tend to concentrate on the high end market. Toshiba: a Aapanese diversified manufacturer and marketer of electrical products, information H communications e!uipment and systems, Internet4based solutions and services. In $% venture, Toshiba focuses on portable computers. Their computers offer a balanced between price and performance.

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3cer: Taiwan $% maker which has been staying in top 5 $% vendors regarding the market share in recent years after its ac!uisition of 024based competitor Bateway. In the early 2)))s, 3cer changed it business strategy a manufacturer to a designer, marketer and distributor of products, while performing production processes via contract manufacturers. 3cer"s products are competitive both in the !uality and the price. 3pple: +ast ma-or $% maker that is not using Dicrosoft"s Windows operating system. 3pple has moved from competing directly with the Wintel market to a more leisure computer market. Their computers focus on design and user4 friendliness. The customers for 3pple are personal users, educational institutions, and graphics design firms. The following table is about global market share of leading vendors in recent years: Ta/(e >: G($/a( PC Mar?et Share 033@ = 0311 Gank 1 2 * 8 5 #thers 2))> K$ .ell 3cer +enovo Toshiba 2)): 1>.8 K$ 18.* 3cer 11.1 .ell ;.2 +enovo 8.5 Toshiba 88.5 2)1) 2)11 1:.* K$ 1;.: K$ 1;.2 1*.) .ell 12.: +enovo 1*.) 12.2 3cer 12.) .ell 12.1 >.1 +enovo :.; 3cer 11.2 5.1 Toshiba 5.8 3202 5.: 82.* 82.1 8).( (Source: +artner and !DC estimation)

The position of leading competitors in the $% market has changed a lot in recent years due to the ac!uisition and merger of companies. .ell stayed for years at the first place in the early years of 2)))s9 however, after the ac!uisition of %ompa!, K$ has gained the biggest market share, much bigger than .ell and stayed at ?o. 1 position. The ac!uisitions of I,D by +enovo and Bateway by 3cer have also changed the position of these two companies. In 2)): and 2)11, 3cer and +enovo respectively overcome .ell to gain the second position on the global market. 1 0 1 Te&h'$($)* "''$!at"$'

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+eading $% makers mainly follow 2 ways of technology innovation: to become a leading innovator or to follow standards4based innovation. Lea+"') "''$!at$r: ,y this way, $% makers follow independent innovation to create a brand new technology. They focus on GH. activities in order to achieve technical breakthroughs which enable enterprises to form a strong technical barrier by applying for a patent and e/clusive right of the new technology or product. $roduct innovation in this way occurs through two broad processes: GH. and new product development. GH. is an ongoing activity that generates new knowledge that can be applied to new products. ?ew product development is a multi4stage process of design, development and production that creates physical products for target markets. These two processes are both very costly because this is when the computer makers try to develop something totally new to the market. This is the case when an entirely new product is being created such as the wireless notebook that re!uires integration of communication technologies, or in the case of a new product category such as the 3pple i$od. If the new technology is widely accepted by the market, the leading innovation companies will receive a huge benefit from the e/clusive 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 e/clusive providers since they are the only sources. Kowever, following this way means that independent innovation enterprises should input ade!uate human and material resources in the research and development and market development. They bear the huge cost of GH. and also the risk that the product may not be well recogni ed on the market. Doreover, because technology in the computer industry changes very fast, the new technology, after a short period of time, will be standardi ed. 3t 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 GH. and product development for a new product.

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Sta'+ar+.=/a.e+ "''$!at"$': This way mean the computer maker will based on standardi ed technology and market demand to build their own product by improving product design, capacity, productivity, etc. 2tandards based innovation offers advantages and safeguards which independent innovation cannot match. 2tandardi ation 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 inter4operating ability and future proofing, and thereby contributes greatly to customer confidence. 3dditionally, as it draws on research from multiple sources, standardi ation means technologies are continually improving in their performance, and e/panding into new areas and applications. 3s a conse!uence, standard technology allows for larger and homogenous markets. While many leading innovator try to differentiate their products by spending huge amount of capital on GH. activities to create brand new technologies which distinguish them from any thing available on the market, the others with more humble budget for GH. could follow this strategy of innovation which is based on the standardi ation of technology. When a new technology appears on the market, if it is accepted by consumers, the leading innovator will often possess an e/clusive right with the usage and application of that technology and this would bring them substantial benefit for a period of time. 3t this stage, the consumers have to accept the price even if it not reasonable for that e/clusive technology because that is the only way they could use it. ,ut this is -ust 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 standardi ed and could be sold with much cheaper price than the e/clusive one. This is the point when companies with standards4based innovation strategy start playing their games. ,ased on the standardi ed technology, they spend some money on GH. 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 GH.

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activities with the same technology. 2econd, because the technology is standardi ed, it is widely accepted by the customers on the market which means small risk of their products being re-ected. 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. 3mong leading $% providers, .ell is the best e/ample of using this way of innovation to accelerate its business. #ther competitors like K$ or +enovo also have had the movements toward this way of managing their technology. App("&at"$' $% I'%$r,at"$' Te&h'$($)* t$ the I'+-.tr* ,y looking at the si e of the $% 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 ma-or aspects of IT use in the Industry9 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.

F")-re 4: PC "'+-.tr* Va(-e Cha"' 2uppliers Danufacturing Getail 2ervices %ustomers Information Technology 2upport The $% industry 1alue %hain shows the logical components that support the day4to4day business operations. Information Technology support is throughout the value chain.

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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 $% 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. $%s are highly customi able in features and processing power. Therefore, it is important for the manufacturers to customi e any $% to fit the needs of any customer. To accomplish it efficiently IT will support the ordering processes and customer service processes. 3ll the information will store into a database, and the manufacturer can look up the any information on any $% that they have ever built for its customer. IT is often used in the forming the strategy for the $% manufacturers. 7or e/ample, 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 $% company. 3n effective IT system ensures the flow of information run smoothly both e/ternally and internally within enterprises. 3nd in this era, information means profit. +arge companies like .ell or K$ have proved that their success in managing the IT system helps them understand about the real market demand, form the basis for their product customi ation. 7urthermore, with the support of the e4%ommerce website, $% manufacturers open up unlimited business opportunity that can span the entire world. 1 0 0 B-."'e.. .trate)*: 3s 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. 3nd it does not simply stop there. The firms in $% industry have to continuously ad-ust its strategies to response to pressures from customers, competitors in the market, and IT vendors.

21

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 ,usiness 2trategy Dodel 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. .ifferent firms will have different strategies and combinations. 2uch differences will enable them to compete in the same industry while vary in focus and capabilities. F")-re ;: B-."'e.. Strate)* Opt"$'. "' PC "'+-.tr* $roducts .esktops +aptops %ustomers Individuals %orporate Darkets 02 <urope 3sia Danufacturing strategy %ustomi ed 2ales and distribution .irect 2ales %ompany"s structure 3lliances Independent 3ny 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 least4cost 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. +ow cost strategy emphasi es on ways to cut cost as low as Getain %hains +atin 3merica <ducation Bovernment Tablets 2ervers

7i/ed features

22

possible. 7or e/ample, 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 e/tremely low profit margin on each item. #ther ways include the policies to keep low inventory, direct sales to cut the cost of middleman. Benerally, the firms need to use information systems to e/ploit cost reductions and form strong business alliances with suppliers and other logistics providers. .ell Inc. is the best e/ample of companies successful in applying this strategy. The direct sales model and the ability to maintain almost4 ero inventories have contributed greatly in the forming of e/tremely competitive price of its products. #n the other hand, the differentiation strategy focuses on separating the product from the industry standard. This is a strategy that focuses on uni!ue products that e/ceed the industry average in terms of performance and design. The product must be highly customi able so it caters to individuals rather than having a generic form. 7irms using differentiation as a strategy need to constantly make ad-ustments to the product because of the competitor"s imitation. 3s an illustration, 3pple"s primary strategy is in product differentiation. It tries very hard to differentiate itself from the rest of the $% manufacturers through better design and performance. Through 3pple"s own brand image, it tries to convince the customers that its computers are superior to other competitors. The $% industry offers a wide range of products. .esktops and laptops are computers that target at home customers. 7or business, government, and educational customers, they will find the tablets and servers both very attractive to fit their needs. In the 21st century, the $% industry is truly global. %omputers can be shipped to different places around the world with the minimal modifications. The computer itself is the same for all countries9 however, the documents and manuals that come with the computer will have to be locali ed to the specific countries. ,esides a clear primary strategy, a good combination of the supporting strategies is also important. Innovative use of information systems in 2upply %hain Danagement will enable the firm to cut costs to support the primary strategy. Total Luality Danagement allows a company to provide and sustain a good customer

2*

service time after time. 2trong 3lliances are formed to foster a closer relationship with the suppliers and logistics providers. 3lliances 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 well4 balanced choice J a choice that will ensure the competitive edge of the firm in the industry. 7ailure in doing so will result in loss of market share and perhaps the end of the business opportunity for the firm. 1 5 De!e($p,e't .trate)"e. $% .$,e MNC. "' the #$r(+ a'+ a&h"e!e,e't.: 1 5 1 G($/a("Aat"$' $% the Per.$'a( C$,p-ter "'+-.tr*: Ta/(e B: Share $% )($/a( PC pr$+-&t"$' /* re)"$' 1:>5 1::) 1::5 2))) 3mericas 5*6 *26 *26 *86 <D<3 286 2;6 2)6 1:6 3sia4$acific 2*6 816 8>6 8;6 (Source: ,eed Electronics ,esearc)' /earbook of World Electronics Data "ote: E(E0: Euro e 1 (iddle East - 0frica) The computer industry has long been one of the most global of industries. The 3sia4$acific production network was concentrated in 2outheast 3sia, particularly 2ingapore and Taiwan. In 2ingapore, many 0.2. and other D?%s set up production of computer hardware, especially disk drives. In Taiwan, entrepreneurial local companies found opportunities supplying the ma-or $% makers, beginning with simple parts and moving up to more sophisticated components, and assembly of $%s and peripherals. #ver time, labor4intensive activities were relocated to low4wage locations such as Thailand, Dalaysia and %hina, with 2ingapore and Taiwan coordinating production in these sites and handling more sophisticated manufacturing processes at home. Aapan and Forea were less successful as global $% producers, but were the ma-or suppliers of high volume components such as memory chips and flat4panel displays.

28

3s early as 1:>>, the 3sia4$acific region had surpassed the 3mericas as the largest producer of computer hardware, even though the largest market was in the 3mericas and most leading $% vendors were 0.2. companies. 3sia4$acific gained production at the e/pense of both the 3mericas and <uropeIDiddle <astI3frica &<D<3' until 1::)9 since then it has grown relative to <D<3 while the 3mericas" share of production has remained stable. In absolute terms, production has continued to grow in all regions. In <urope, production was concentrated in Bermany, the 0F, 7rance and Italy during the 1:>)s. <ach of these countries had a Mnational championN computer vendor that had been nurtured through government procurement and other policy measures. Kowever, none of the national champions made a successful transition from mainframes to personal computers. 3s a result, production stagnated in the mid 1::)s in all of the countries e/cept the 0F, which attracted I,D and %ompa! to locate $% production in emerging industry clusters in 2cotland and Wales. In the 3sia4$acific region, production was dominated in the 1:>)s by Aapan, which nearly tripled production between 1:>5 and 1::) to surpass the 0.2. as the world leader. .uring this time, 2ingapore and Taiwan also saw rapid growth, followed by Forea. In the early 1::)s, Aapan continued to see solid growth in production, while 2ingapore and Taiwan each tripled their production to become the third and fourth largest producers in the world. In the late 1::)s, however, Aapan"s production declined precipitously, and 2ingapore and Taiwan saw much lower growth rates. The fastest growth was now occurring in the less developed 32<3? countries of Dalaysia and Thailand, and most dramatically in %hina, which has leaped to number four in world production. This shift to developing countries was driven by investments by 0.2, Aapanese and Taiwanese firms looking for lower cost production sites and, in the case of %hina, looking for market access as well. 1 5 0 Strate)"e. $% .$,e (ea+"') PC ,a?er. "' the #$r(+ a'+ a&h"e!e,e't.: He#(ett=Pa&?ar+ 7HP9:

25

K$ is a $% vendor that operates in more than 1;) countries all over the world. K$ was founded in 1:*:. %orporate head!uarters are in $alo 3lto, %alifornia. In recent years, K$ has remained as the largest IT company in the world, with revenue totaling @12;.2 billion for fiscal year 2)11. In 2)11K$ stayed at number 11 in 7ortune 5)) ranking. In 2))2, K$ and %ompa! have merged together to gain the market competing with the main competitor .ell. These steps in the strategy of K$ has boosted the market share of this $% enterprise become much larger than .ell and help the company stay at the first place in the world for years. $robably no other company offers as complete a technology product portfolio as K$. The company provides infrastructure and business offerings that span from handheld devices to some of the worldEs most powerful supercomputer installations. K$ offers to consumers a wide range of products and services from digital entertainment and from computing to home printing. This $% vendor divides its products into three groups to meet the need of each market segmentation, including: The $ersonal 2ystems Broup: business and consumer $%s, mobile computing devices and workstations. The Imaging and $rinting Broup: ink-et, laser4-et and commercial printing, printing supplies <nterprise ,usiness: business products including storage and servers, enterprise services, software and networking

In order to innovating its technology constantly, at the moment K$ scientists are focused on 28 large4scale pro-ects that fall under eight high4impact research areas: printing and content delivery9 mobile and immersive e/periences9 cloud and security9 information analytics9 intelligent infrastructure9 networking9 services9 and sustainability. Kowever, in recent years, K$ has shifted from creating entirely new technology to using standardi ed components in producing $%s. The clear figure is

2(

that this company has reduced it GH. budget continuously. In 2)):, K$ spent @2.>2 billion on GH., down from @*.58 billion a year earlier. In 2));, K$"s GH. spending was @*.( billion. This movement in its strategy has supported greatly to lower cost. K$ keeps a balance in its products, good !uality $%s integrated with updated technology but at a competitive price level. App(e 3pple Inc., formerly 3pple %omputer, Inc., is a multinational corporation that creates consumer electronics, computer software, and commercial servers. 3ppleEs core product lines are the i$ad, i$hone, i$od music player, and Dacintosh computer line4up. 7ounders 2teve Aobs and 2teve Wo niak effectively created 3pple %omputer on 3pril 1, 1:;(, with the release of the 3pple I, and incorporated the company on Aanuary *, 1:;;, in %upertino, %alifornia. 7or more than two decades, 3pple %omputer was predominantly a manufacturer of personal computers, including the 3pple II, Dacintosh, and $ower Dac lines, but it faced rocky sales and low market share during the 1::)s. With the introduction of the successful i$od music player in 2))1, 3pple established itself as a leader in the consumer electronics industry, dropping O%omputerO from its name. The latest era of phenomenal success for the company has been in the i#2 range of products that began with the i$hone, i$od Touch and now i$ad. 3s of 2)11, 3pple is the largest technology firm in the world, with annual revenues of more than @() billion. The main lesson from 3pple"s success, however, is the central importance of focusing on strong products that are well4designed for the market. 7or years in this century, 3pple has become the best leading innovator with continuously updated generation of its products and brand new ones. 2teve Aob, the company"s leader, is a genius at minimalist designs that integrate technology breakthroughs to fill a newly emerging need with unusual style. The result can be seen in the way he describes the attraction of the i$ad MIt"s like holding the Internet in your hands. It"s so much more intimate than a laptop and more capable than an i$hone. It"s truly magical.N

2;

The following figure presents the budget 3pple has spent on GH. as percentage of revenue. In general, spending on GH. of this company is high, keep this vendor among the top 5) GH. spenders in the world. Kowever, company"s revenue increases faster than this e/pense &as illustrated as decrease trend of the figure', especially since 2)1) with the introduction of the ever successful tablet J Ipad. F")-re >: App(eC. R<D 8 $% .a(e.

(Source: 2arr$ Di*nan 1 3D"et ne4s) ,ehind such great products, 3pple thrives because it has been described as a well4 oiled machine. The company has outsourced its manufacturing operations, while *1; 3pple stores are wildly popular and profitable. The 3pple music store J iTunes J has e/panded into a powerful vehicle for trading videos, movies, and possibly other information products. Le'$!$: +enovo is the worldEs second largest $% maker in 2)11. This %hinese company is established on ?ovember 1, 1:>8. In 1:>5, the company launched the first %hinese4made motherboard with +enovo technology. The brand name, +enovo, was born from this. +enovo operates factories in %hengdu and Kefei in %hina, Aapan, and as of .ecember 2)11 has plans to start production in 3rgentina. +enovo focuses on vertical integration in order to avoid e/cessive reliance on original e!uipment manufacturers and keep costs down.

2>

This $% maker offers to the market the Think$ad, Idea$ad line of notebook $%s and Think%entre line of desktops. These brands became part of +enovoEs offerings after its 2))5 ac!uisition of I,DEs personal computer business. 3s its strategy, +enovo markets its products directly to consumers, small to medium si e businesses, and large enterprises, as well as through online sales, company4owned stores, chain retailers, and ma-or 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. ,esides, +enovo owns the greatest track record for innovation in the $% industry and remains committed to innovation in its products and technology. 3s stated in the company"s statement, +enovo"s innovation strategy is based on a two4 tiered approach to solving real4world customer problems: M7ocus the ma-ority of development on ideas that can be brought to market within 28 months9 and, Invest longer term in research targeting Mgame changingN big playsN 3t the moment, +enovo operates seven research and development centers and more than 8( world4class laboratories, including ma-or research centers in =okohama, Aapan9 ,ei-ing, 2hanghai and 2hen hen, %hina9 and Galeigh, ?ew =ork %ity. The company employs more than 1,;)) engineers, researchers and scientists and has received more than 1)) ma-or design awards. +enovo"s GH. centers have produced some of the worldEs most important advances in $% technology, ranging from the original ,ento ,o/ $% notebook design in 1::2 to the 2))> launch of the innovative Think$ad P*)), considered as one of the worldEs lightest, thinnest and most innovative full4featured notebook $%s ever. +enovoEs commitment to innovation introduces more industry breakthroughs and technology that sets the technical standards for business users as well as consumers.

2:

Chapter 0: DELL COMPUTERCS TECHNOLOGY INNOVATION AND DEVELOPMENT STRATEGY 0 1 O!er!"e# $% De(( &$,p-terC. +e!e($p,e't: This section of the paper deals with .ell %omputer in the $% industry in terms of how they fit in the global $% industry, their technology innovation, their

*)

competitive strategy, the significance and the roles of the information systems, and the strengths and weaknesses of .ell %omputer in the industry. In 2)11, .ell reported @(1,8:8 billions in sales, 1(6 increased in comparison with the previous year, and employed 1)),*)) people worldwide in production, development, and customer support of the operation. .ell is truly a global business with products range from desktops, laptop, workstations, servers, networking devices, and computer peripherals such as printers, cameras, +%. T1, mp* music players, and recently tablet. <ach .ell"s product can be further customi ed to meet the needs of the customers. .ell"s direct sales business model has been refined and modified to support the changing product line and customer service. Kowever, the main idea behind the direct4sale business model remains unchanged. 7rom a statement on .ell"s website, M.ell is doing business directly with customers, one at a time, and believe we can do it better than any one else in the industry.N The successful direct4sales business model puts much emphasis on the customers. 7rom the beginning to the end of the transaction, .ell 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. 3fter two decades of growth, .ell has become the world leading direct4sale computer vendor in the $% industry. 3s a relatively young company, .ell finds themselves constantly competiting with old, more established companies like Kewlett4$ackard and I,D. In many years in the early of this century, .ell reclaimed the title of the number one $%s supplier in the industry. The success of .ell %omputer is not possible without the vision of Dichael .ell and his innovative strategies of technology development and operation. The following is a brief history of .ell %omputer and its development. 0 1 1 I'tr$+-&t"$' t$ the &$,pa'*: .ell, Inc. is an 3merican multinational computer technology corporation head!uartered in 1 .ell Way, Gound Gock, Te/as, 0nited 2tates. The company is founded on ?ovember 8th, 1:>8 by Dichael .ell who at that time was still a

*1

student in 0niversity of Te/as. In 1:>*, Dichael .ell started his computer hardware retail business by selling hard drives and G3Ds for I,D $%s. .ell bought his products from I,D dealers at cost, and later resold it through newspaper and maga ines to individuals and businesses at lower cost than the retailers. ,y 3pril 1:>8, his dorm room computer business was already making about @>),))) a month, and the success was strong enough to persuade him to drop out of college. 3s a result, .ell founded .ell %omputer with @1,))). In the ne/t few years, he was making I,D clones computers under the name $%4+imited and sold it to customer directly without retailers. This approach allowed $%4+imited to sell computers to its customers at 8)6 of the price of the I,D computers. The direct4 sales business model propelled .ell %omputer to the leading $% supplier in the industry. Ta/(e @: De(( ,ar?et .hare a'+ ra'? %r$, 0331 t$ 0313 2))1 2))2 2))* 2))8 2))5 2))( 2)); 2))> 2)): 2)1) Darket share Gank 1*.* 1 15.2 2 15.) 1 1(.8 1 1(.> 1 15.: 1 18.* 2 18.* 12.2 12.:

2 * 2 (Data: +artner !nc5)

7or many continuous years, .ell was the number one $% maker in the industry. Kowever the situation has changed dramatically since the merger of K$ and the direct competitor %ompa! in 2))2, together they own the market share bigger than .ell. ,esides, bigger si e allows K$ to foster it low cost strategy due to economy of scale. 2ome years later come the rise of +enovo and 3cer with the ac!uisition of ID, and Bateway respectively. 3s a result, .ell keeps the third position in the market in 2)11. The direct4sales business model is -ust one tool for .ell to do business. If the success of .ell is based solely on this model, .ell would have lost its competitiveness a long time ago. The competitors of .ell can duplicate the model and do business the same way as .ell. There are other factors staying at the core of

*2

.ell strength. 7ollowing is a summary of .ell comparative advantages based on several analyses about this firm: Lea+"') te&h'$($)"e.: .ell always keen to embed latest technology in its products. 7ollowing standards4based innovation, .ell $%s are built with standardi ed components which are well4recogni ed by the market. .ell has spent much effort and money to push its product to the limit of capacity in order to serve customers with the best computing solution. In addition, due to its direct relationship with customer, .ell is able to introduce the latest relevant technology compared to companies using the indirect distribution channels. Doreover, .ell launches newer technology far more before the other companies that hold inventories. The focus of .ell on technology personnel has helped this firm to catch up with every change in high technology. C-.t$,er D"re&t: one of .ell"s core strength is its firm belief in upholding the direct business strategy. Boing direct has benefited this firm in many ways. 2ince 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 customi ation. The information and feedback from customers could be collected easily and !uickly. 3nd 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 .ell"s 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 .esktops, notebooks, and server in the world. I'%$r,at"$' S*.te,.: no one can deny the importance of .ell"s Information 2ystems 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. ,ut by -ust having Information 2ystems they do not inherit a competitive advantage. The advantage comes from strategies built around solid business models. 3nd .ell"s overall implementation of the customer direct business model which uses Information 2ystems is one of its most powerful

**

competing forces. The efficient Information 2ystem at .ell has kept the flow of information run smoothly in the operation of this company. It turns .ell Inc. into an e/tremely fle/ible machine which is always up4to4date. Lea+er.h"p: Dichael .ell, the founder of the enterprise is the one who has contributed greatly to .ell"s top position. Kis innovative vision about the $% industry and market trend has driven .ell to where it is today. ,esides Dichael .ell, .ell takes on some of the top e/ecutives in the world including its own employees such as Fevin Gollins who manages its day to day operations and helped develop strategies around the direct selling of computer systems and services. 3s .ell %omputer is moving towards a multi4products, multi4national, and multi4 services 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. .ell most certainly has more strengths than weaknesses as a company, but that -ust means it needs to keep a closer watch on its weaknesses. R"!a(r"e. a. #ea?'e..: Industry rivalries are perhaps the greatest weakness of .ell. 3s one of the top $% manufacturer, .ell has everybody as a competitor. K$ and %ompa! have merged to counter the strength of .ell. The new merger can lower their costs significantly so they can continue to use the retail approach to compete with .ell. In addition, when .ell e/pands globally, it also faces with strong competition from local region. 7rom previous section, 3sia is the area with the highest demand of $% at the moment. Therefore, some 3sian computer firms have been emerging strongly9 become the direct competitors of .ell. 7or instance, Aapanese and Forean consumer electronics makers are switching to manufacture $% in recent years. Their advantage is the abundant of cheap and skilled workers. They focus on product designs as a differentiation strategy. <specially in recent year, +enovo has become one of the top $% makers after the ac!uisition of I,D. In 2)11, this firm even overcomes .ell and gains the second position of global market share. That is a clear illustration for the competition from 3sia. 3nother potential problem for .ell is from the suppliers. .ell relies on the suppliers to provide them

*8

with the necessary components to build a $%. If the suppliers cannot deliver the components to .ell, .ell will face with a delay in production. It will create a ripple effect to the rest of the business processes. L","te+ Te&h'$($)"&a( Se(e&t"$': even the strategy regarding technology innovation has brought .ell a lot of successes9 it also causes a minor weakness that .ell is faced with is its choice of technology. .ell 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. .ell"s cautious nature of adoption could possibly lead to a loss of market share to other companies willing to take a risk. 3nd sometimes it is not necessarily a risk that it would be taking. #ne of the illustration could be pointed here is the success of 3pple with the famous tablet Ipad in 2)1). This enterprise spent *.16 of its revenue in 2)): on GH. 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. Deanwhile, .ell has waited for a period of technology standardi ation to release its first tablet +atitude 2T. Strate)* M","&?"'): .ell"s strategies of standards4based 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 .ell but an indirect weakness of .ell"s in relation to the market. In fact, many competitors of .ell have changed some parts of their technology focus when perceived the fact that .ell has born a much lower GH. cost while still gained the biggest bite of the cake. 7or instance, in recent years, K$ has shifted its technology innovation strategy into using some standardi ed components in stead of building their own technology. #n another side, the emerging Taiwan firm +enovo is also keeping a direct relationship with its customers, lowing down the cost and price of products. 2trategies which help .ell 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 comple/ system need to change.

*5

In general, .ell"s 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, .ell will continue to own a large market share in the $% industry. 0 1 0 H".t$r* $% +e!e($p,e't ."'&e e.ta/(".h,e't: Timeline of development: 11@3: Dichael .ell purchases his first computer4an 3pple II4and promptly takes it apart to understand how it was designed and made. 11@5: .eclaring he ultimately wanted to beat I,D, the young .ell conducts a lucrative business out of his dormitory room at the 0niversity of Te/as, selling upgraded $%s and add4on components. 11@4: With @1,))) in startup capital, Dichael registers his business as .ell %omputer %orporation, doing business as $%Es limited, and leaves school in Day of that year. The company becomes the first in the industry to sell custom4built computers directly to end users, bypassing the dominant system of using computer resellers to sell mass4produced computers. 11@>: .ell unveils the industryEs fastest4performing computer, a 12 DK , 2>(4based system, at the 2pring %omde/ national computer tradeshow. The system !uickly attracts a large number of reviews from the technology press. The company also pioneers the industryEs first thirty4day money back guarantee, which becomes the cornerstone of .ellEs commitment to e/pand its service offerings and offer superior customer satisfaction, and offers the industryEs first onsite service program. 11@B: In a bold move for the risky operation, .ell establishes its first international subsidiary in the 0nited Fingdom. <leven more international operations would open over the course of the ne/t four years.

*(

11@1: The fast4growing company e/periences its first ma-or stumbles: It accumulates e/cess inventory of memory components, which results in write4 downs, and cancels an ambitious product development program code4named O#lympic.O 1113: .ell becomes the first computer company to -ump into the burgeoning market for computers sold through consumer retail stores such as %omp023 and ,est ,uy. The company later becomes the first company to e/it this segment as well, after determining the retail4store model did not meet its financial ob-ectives. 1110: .ell achieves slightly more than @2 billion in sales for the fiscal year ended Aanuary 1::*, which represents a remarkable 12; percent increase. 1115: 2uffering from the pains of e/tremely rapid growth, .ell cancels a secondary offering and posts its only !uarterly loss resulting from a temporary withdrawal from the notebook market, its e/it from retail stores, and a restructuring of <uropean operations. 111>: .ell challenges the traditional market for premium4priced servers based on proprietary technology with its introduction of its $ower <dge server line. In less than two years, $ower<dge vaults .ell from the tenth position in market share to the third largest server vendor in the world. The companyEs !uiet bid to sell custom4built computers over the Internet !uickly becomes a public revolution when the company announces that sales over www.dell.com have e/ceeded @1 million per day. .uring the same year, .ell introduces its first custom4made web links for customers. %alled O$remier $ages,O the links allow customers to tap directly into the companyEs own service and support databases. 111@: .ell solidifies its Internet leadership when it tops @12 million per day over the Internet, e/pands its $remier $age program to more than nine thousand customers and establishes web4based connections with its suppliers to speed the flow of inventory and !uality information. .ell opens an integrated sales, manufacturing, and support center in %hina.

*;

1111: .ell becomes the number one $% company in the 0nited 2tates, the largest worldwide market for personal computers. To accommodate its growth, .ell opens new manufacturing facilities in ?ashville, Tennessee and <ldorado do 2ul, ,ra il. 2ales over www.dell.com top @*5 million per day. 0331: ItEs a year of firsts as .ell becomes the ?o. 1 computer systems provider worldwide, and reaches ?o. 1 in 0.2. Intel4based server shipments. The $ower%onnect line of network switches launches .ell into the networking e!uipment market. .ell signs an agreement with storage leader <D% to enable more affordable enterprise4class storage area network solutions for customers of all si es. 0335: The %ompany e/pands its product portfolio with .ell4branded printers and officially enters the consumer electronics market to serve as a single source for its customers. 033;: .ell tops the list of O3merica"s Dost 3dmired %ompaniesO in 7ortune Daga ine. 7urthering its commitment to the environment, .ell #pti$le/ desktop line of products features a lead4free motherboard, power supply and chassis. 033>: .ell is the first in the industry to offer free product recycling for consumers worldwide. This enterprise revolutioni es the way businesses connect with customers with the launch of .irect2.ell J a blog to enable fast, direct, two4way conversations with its customers. 3lso in this year, .ell ac!uires computer gaming leader 3lienware to complement its high4performance systems designed for gaming enthusiasts and media content customers. 033B: The 1ostro series becomes .ell"s flagship line of solutions tailored to small businesses. .ell ramps up our social media efforts to connect with customers by -oining Twitter, launching the first investor relations blog, and debuting Idea2torm.com, a destination where customers can post and share ideas. .ell makes great strides toward its sustainability goals by launching carbon4neutral programs for consumers and corporate customers, and by -oining the %arbon .isclosure $ro-ect 2upply %hain +eadership.

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033@: .ell ac!uires storage leader <!ual+ogic, growing their original customer base of 1,))) to 25,))) worldwide in the first two years. .ell launches its first Dodular .ata %enter Q a mobile, self4contained data center optimi ed for cloud4 computing applications. .ell 2tudio, a new consumer product line designed for self4 e/pression and creative living, is introduced. 0331: .ell ac!uires $erot 2ystems and launch a new business called .ell 2ervices that gives customers end4to4end IT services to help lower their total cost of IT ownership. .ell enters the smart phone market with the Dini *i from %hina Dobile. %ustomers rank .ell />( servers, corporate laptops and desktops ?o. 1 in enterprise customer satisfaction. .ell introduces 3damo and +atitudeR S laptops J both the world"s thinnest laptops J for consumer and business users who demand design, innovation and functionality. 0313: .ell is the ?o. 1 healthcare information technology services provider in the world according to Bartner, Inc. and wins more than *)) industry awards in 2)1). .ell accelerates its enterprise customers" move to the cloud with .ell 1irtual Integrated 2ystems solutions, based on open architecture solutions that focus on interoperability and e/tending the legacy investments of its customers. .ell enters the tablet arena with the 2treak, a 54inch device designed to provide the best on4the4 go entertainment, social connection and navigation e/perience. ?ewsweek names .ell the greenest company in 3merica. 0311: .ell celebrates a record4breaking fourth !uarter with double4digit growth in the strategic enterprise solutions and services space, and the largest single4year revenue increase in company history. .ell ac!uires 2ecureWorks, G?3 ?etworks and 7orce1) ?etworks, leaders in enterprise solutions and services. 7urther proof of its commitment to providing end4to4end IT solutions for our customers, .ell commits @1 billion to develop .ell data and solution centers around the world and open GH. centers in Israel and the 0.2. 0 0 De(( &$,p-terC. te&h'$($)* "''$!at"$' a'+ +e!e($p,e't .trate)*: 0 0 1 Te&h'$($)* "''$!at"$':

*:

Standards-based innovation: 3s its main strategy of technology innovation and development, .ell celebrates standards4based technology. 3s Gichard Bardner, a securities analyst and managing director at the 2an 7rancisco office of 2mith ,arney e/plains that M.ell likes to wait until the components that go into a product are standardi ed and available from a number of suppliers at competitive prices, then it enters the field with the same kind of manufacturing and fulfillment e/pertise that it brought to $%s.N What is the reason for the beginning of this policyT That is easy to guess. When .ell was newly established, it did not have any big laboratory like what of I,D or Intel for the mere reason of shoe string budget. It means that .ell could not afford to purchase e/clusive chip of big companies likes I,D or Intel9 they do not want to retail it to a new comer. 3s a result, .ell 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 -oin the game and the product was standardi ed enough to use chips of the third parties. This is the moment when .ell -umped into where it used to stay outside and play its role. The early e/ample of .ell dated back in 1:>( when .ell produced the industryEs fastest4performing computer, a 12 DK , based on 2>( system which has the competitive price of 02. 1::5. The current I,D computer based on 2>( system has the speed of ( DK , and was first offered as the price of 02. *::5. 3t the 2pring %omde/ national computer tradeshow ?ovember 1:>(, the system !uickly attracted a large number of orders and reviews from the technology press. In the long run, this way serves .ell even better than the pioneers who have to bear the huge cost of GH.. #n the contrary, .ell could buy standardi ed version with price much cheaper than the one with e/clusive right. The price even cheaper when there is competition between different providers. 3t this point, .ell starts its technology innovation strategy. ,ased on this standardi ed technology, .ell collects

8)

information and find out about what its customers want. Through .ell"s 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 .ell possesses. 7rom this pool of information, .ell 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 demand4driven technology innovation. The innovation based on standardi ed components helps .ell remain a low level of spending on GH. in comparison with other computer makers such as K$ or 3pple. .ell"s total research, development, and engineering e/penses were @(28 million for fiscal year 2)1), @((5 million for fiscal year 2)):, and @(:* million for fiscal year 2))>. Dicrosoft spent 1* percent of revenue for fiscal 2)11, down from 18 percent in fiscal 2)1). 7or fiscal year 2)11, while .ell spent 1 percent of revenue on GH. for fiscal 2)11, Boogle spent 18 percent of revenue on GH.9 I,D spent ( percent of revenue on GH.9 the number of K$ is 2.5 percent of revenue on GH.9 and 3pple is 2.2 percent. Therefore, it way of technology development has saved a huge cost for .ell annually. Deanwhile, they company"s products are still updated with the best technology. To serve customers with the best computing solution, .ell divides its products into specific lines which fit the e/act demand of target customers. Traditionally, .ell offers the #ptiple/ desktop line for corporate customers and .imension desktops for small businesses and consumers. In notebooks, it targets the +atitude line to corporate customers and the Inspiron line to consumers and small businesses. Its enterprise systems include the $recision line of workstations and $ower<dge servers, both based on the Intel architecture. Dore recently, .ell began to offer the $ower3pp line of server appliances. In 2))(, .ell ac!uired computer gaming leader 3lienware. 2ince then, .ell 3lienware line -oin in the list of $% lines of this company. This line of product is integrated with very strong system features to meet the need of high4end users and media content customers. Gecently, .ell offered to the market the P$2 0ltrabook line, a series of product with cutting edge technology

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feature and design. The super thin and elegant design of this series is of the high interest for fashionable customer, mostly the young. .ell customers can order $%s with a variety of configurations for items such as processor speed, memory, storage, sound and video, networking, and monitors. 7or the most part, however, .ell keeps its configurations fairly limited, with only a few options for each item. ,ut even so, there are thousands of possible alternatives for each product, and several products in each line. #ne estimate is that .ell offers a total of 1.( million different possible product configurations for all its product lines. .ell works with partners such as Dicrosoft and Intel on product development, and with contract manufacturers such as Luanta for product engineering. ,y leveraging the innovations of the $% industry value chain, .ell minimi es its GH. costs. Its own GH. budget is only about 1.(6 of revenues, compared to 84;6 for I,D, K$, %ompa! and 3pple, who are supporting their own technology platforms. .ell also offers a wide range of third party software and accessories for sale through its .ellWare &for relationship and public sector customers' and Bigabuys channels. 2oftware also can be installed at the factory J standard applications such as Dicrosoft #ffice for all customers, and non4standard or custom applications for relationship customers. In general, then, .ell"s product development strategy is aimed at enabling it to capture both new customers trust and old customer"s loyalty. In return, .ell 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 3s mentioned in the previous sections in this paper, the $% industry relies heavily on information systems to gain competitive advantage, and .ell is no e/ception. Kowever, information systems play a more important role at .ell. .ell"s direct4sales business model eliminates the need for a middle4man&retailers'9 it becomes a bridge between the suppliers and the customers. Therefore, there is a need for .ell to maintain a relationship with the supplies and another relationship

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with the customers. This is done through the use of an information system. #n the supplier side, .ell collects information from their suppliers. This information will feed into a database for storage. 3t any time if .ell needs to analy e a component from specific suppliers, .ell will have a complete profile of the product, such as the reliability, price, and performance. #n the customer side, .ell wants to know what their customers want. 3ll that information will be further analy ed and used for future products, customer service, and better marketing strategy. Information 2ystems become significant when .ell relies heavily on e4 %ommerce and e4,usiness to operate on a daily basis. #n the e4%ommerce aspect when a customer places an order from .ell online, it initiates the manufacturing of a new $%. 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 2ystems also play an important role in e4,usiness. 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. <ven before the customer orders the computer, .ell"s supply4side 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. Doreover, technology is also constantly evolving and hard to keep up. Therefore, lowering the inventory in stock at .ell can help them to have a high return on invested capital &G#I%'. 3s mentioned in the company section, .ell has a higher G#I% compared to the rest of the $% manufacturers. 2upply4side management is important because it allows .ell to stay competitive by offering the highest customi ation for its customers, and have the parts ready only when they need it to put in the $%. This translates into product differentiation in business strategy by offering efficiency.

8*

.ell.com e4%ommerce website is the virtual storefront for .ell. 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 e!uipments. .ell"s direct sales model eliminates all these limitations by using an e4%ommerce website. %ustomers can customi e their $%s directly from the website without need of an assistant. The entire ordering process is automated and it is easily scalable as the demand increases. 7or 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. Kowever, .ell can -ust increase the number of servers to handle to e/tra transactions. 7urthermore, .ell 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 !uality customer service. The value of .ell"s e4%ommerce website doesn"t stop after the customers have received their $%s. $% support and service are also built4in components of .ell"s e4%ommerce website. %ustomers can order services and talk to .ell"s repair technicians directly through the website. This is a huge advantage for .ell because traditionally $% manufacturers re!uire its customers to send in their computers or bring it into an authori ed service center for repairs. .ell eliminates all the hassles, and the customer will receive replacement components in the mail. This rapid service allows .ell to service the minor problem !uickly and reserve the capabilities to service more comple/ issues. The innovative way of support and service at .ell earned an award from %omputer 2hopper Daga ine. The technical support and service at .ell cannot function properly without information systems support. It is the link between the .ell"s employees and the customers. In 2))*, .ell.com website generated more than half of the total revenue for the company. This is a staggering 1> billions worth of computers and peripherals business through an e4%ommerce website. The benefit of the Internet is only part of the e!uation. The real challenge lies with .ell"s ability to integrate the Internet into its business strategies and specific areas in the direct sales model. In other words,

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telecommunications are important tools that allow .ell to sustain competitive advantage through better linkage to its customers, and act as a medium for .ell to do business with them. <ven before the Internet, telecommunications have played a vital role at .ell. $hone and catalog orders are the primary sources of linkage between .ell and its customers. .irect sales model of .ell 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 .ell with e/tra capabilities on top of the regular phone and catalog sales. Through the Internet, the link is more interactive. .ell can provide information on their products and service almost instantly to the potential customers. %ustomers" feedbacks are transmitted to .ell in nanoseconds so .ell can make changes accordingly. The Internet also allows .ell to do business regardless of time one differences because it provides a 28I; access for people around the world to browse the store. 3s a result, .ell is always doing business when their customers need it. 3part from these added capabilities, the most important is perhaps the scalability issue. ,efore the Internet, the number of phone sales representatives and catalogs limited .ell"s sales capabilities. With the help of the Internet, .ell can now do business without these physical limits. Internally, telecommunications also play a vital role to link business processes together. The best e/ample from .ell is its own .ell4#n4.ell service suite. The five components all re!uire telecommunications support and linkage because they cannot e/ist solely. They are systems on top on another systems, and there are enormous data that need to e/change between all of them. 7or instance, .ell.com e4%ommerce website have a direct link to its .2i2 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. 7urthermore, .ell is global company that is doing business in many different countries. Information needs travel across continents rapidly. 3s a result, the Internet becomes a medium for email to e/change between .ell"s employees. These are -ust few internal

85

processes that re!uire e/tensive use of telecommunications to function. Telecommunications provide the network for information to pass through internally within .ell and e/ternally with other business entities. The significance of information systems can never be under estimated. .ell uses telecommunications as a tool to bridge e/ternal 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. ,etter products and services will be delivered to the customers, and this is the top line of what business competition is all about. 0 0 0 De!e($p,e't .trate)"e.: Throughout the overall operation and philosophy of doing business, there are the three golden rules at .ell: D".+a"' "'!e't$r*: .ell was founded on the premise of Ounder4promise and overdeliverO 4to 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. 2o it probably seems somewhat peculiar that the first meaningful setback .ell e/perienced in 1:>: had to do with having too much inventory. ,ecause .ell were used to chasing after every incremental dollar of growth, it sales were rising very, very !uickly. ?aturally, .ell saw this as a positive sign. 3nd to fill this demand, it of course had to buy parts4among them, memory chips. ,ut instead of buying the right number of memory chips4which it would today4.ell bought as many of those improper as it could get its hands on. .ell bought more chips than we needed, at the peak of a cyclical market. 3nd then prices plunged. To make matters worse, .ell also got caught Ocrossing the streetO technologically, as memory chip capacity went from 25(F to 1 megabyte almost overnight.

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3s a result, .ell was suddenly stuck with too many chips that nobody wanted 4 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 !uandary 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 !uickly, which today means any industry4from computers, to airlines, to fashion. In the electronics industry, for e/ample, 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. 3nd when a company is not yet an industry leader, managing inventory becomes even harder. ,ack in 1:>:, .ell did not have the vendor relationships as it is today, which could have helped it negotiate a situation like that more gracefully. ,esides, .ell did not have the forecasting skills it have today, and it did not have the disdain for inventory that it does now4which was born, in part, of that e/perience. .ell had to sell off that inventory, which depressed its earnings to the point where the company earned only a penny per share in one !uarter. To compensate, .ell had to raise the price of our products, slowing our growth. 3nd it had to postpone plans to launch operations in new countries. 7or the first time in the companyEs history, .ell did not deliver. To the company"s stunned disbelief, .ell had !uickly become known as the company with the inventory problem. The inventory problem was definitely a valuable lesson to .ell, forcing it to pace itself better and rediscover one of the building blocks of its success: the value and importance of managing inventory. #ut of this e/perience, .ell 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 re!uires less cash and has less risk. .ell also made a greater commitment to understanding and utili ing forecasting.

8;

Ta/(e 1: De((C. I'!e't$r* T-r'$!er =ear Inventory turnover Week"s Inventory 1::*
5.1(

1::8
:.8

1::5
:.>

1::(
28.2

1::;
81.;

1::>
52.8)

1:::
52.8)

2)))
51.8

2))1
(*.5)

1).);>

5.5*2

5.*)(

2.18:

1.28;

).::2

).::2

1.)12

).>1:

(Source: t)emanufacturer5com) Fey point to notice here is that .ell was carrying over 1) weeks worth of inventory in 1::*. ,y 2))1, .ell was carrying less than 1 weekEs 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. Gemember, 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. %omputers are not canned goods, and as Fevin Gollins of .ell mentioned about this problem, computers MrotN. The longer a computer sits around, the less it is worth. That said, due to depreciation alone, in 1::* .ell was losing roughly 1)6 per computer -ust by allowing computers to sit around before they were sold. In 2))1, .ell was losing less than a percent. ,ased on holding costs alone, .ell reduced costs by nearly :6. 3s the above illustration clearly analy e, keeping low inventory in computer industry is an important competitive advantage to any firms. 3nd the successful story of .ell has become one of the most vivid evidence for this policy. A(#a*. (".te' t$ the &-.t$,er ,ased on its .irect 2ales model, .ell has a perfect position to listen to customers. #ther providers have to depend on retailers, cannot compare to direct sales and loose the direct relationships to customers. .ell could collect a great deal of information thanks to those direct relationships while almost all competitors

8>

could not. .irect 2ales model not only cuts cost from the middleman but also dismisses their prevention in the flow of information. This way enables .ell 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, .ell 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 .ell understand what customers want. While others sell $% based one e/pected number, .ell sell $% 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. .ell meets big business customers regularly, bringing accountant groups to work with them. It use different mechanisms, such as .ell"s $latinum %ouncil, to keep close relationships with them and update their need. With small business and individual customers, .ell contacts them fre!uently through 2ales or supporting division both on telephone or the Internet. 7or this market section, it carries out online and telephone survey. If a customer has a problem with their $% and contact to .ell, they will received a call to confirm whether or not the problem is solved satisfactorily. #ver time, .ell"s 2ales and technology supporting force could keep track of what customers buy and what problems occur. This pool of information is highly regarded by ,oard of .irector of the %ompany9 they often hold meetings to define what customers re!uire. The fact that each of .ell"s $% is made based on the order is an e/cellent condition for the feedback of what customers in each segment want. 2ince .ell cares a lot about feedback and has a deep insight about its market, it can avoid keeping huge inventory. #n 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.

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.ell is e/cellent in this way by concentrating in collecting and processing customers" information. 3fter more than 2 decades of following information on the market, .ell has a clear concept of what each market segment want. 7or e/ample, big companies want the stability9 they do not want to be affected by the latest and the most fashionable models as individuals. In stead, they want networking $% which can be administered from afar and updated with different softwares and service packages. That the reason why .ell divide its $%s into #pti$le/ line &for companies' and .imension line &small companies and individuals' to satisfy those different demands. %ollecting information from customers is -ust the first part of the whole process9 after that is how to use that information. 3t .ell, customers play the main role in innovating and developing products, and they are aware of it. In deed, .ell won the first survey A. $ower of $% industry about customers" satisfaction since its customers said they had contributed to the process. .ell knows when to take part in a new field and what field is meaningful to its business &such as +i!uid %rystal T1'. #nce it -oins a field, .ell follows its customers" need passionately. What customers wantT 3t what speedT Kow about the capacityT That is all .ell sticks to, every minute, through 2ales .ivision. 7or e/ample, when the whole $% industry was e/cited to move to chip DI$2 %$0 &chip in %entral $rocessing 0nit which can carry out millions of command per second'. %ompa!, 32T, Dicrosoft, and others follow the trend. .ell, at that moment, react in its e/pected way: ask the customers. Through a series of forums with small customers and meetings with other big ones, .ell learned about what customers e/pect about this new chip. It understood that there was almost no clear meaningful added value to be seen by customers. 3s a result, .ell decided not to invest in manufacturing this kind of chip and re-ect the pro-ect. 3nd this movement is right when the e/pense to manufacture this new chip cannot be compensated by the little care of customers.

5)

.ell"s customers not only can order their $%s as they want but also can follow them even before they leave the factory. 3fter a customer places an order, they will receive an order number, and they can follow the status of their order in .ell"s factory once it is done. When their $% is in delivery, they can take the delivery code from .ell website. 3ll they need to do is to click the mouse button to know where their $% is, when it reaches their house, and what to do if it not. If there is any delay in delivery, .ell will send to that customer a notice. 3fter delivery, customers are still kept in touch. <ach .ell $%, desktop, or server are provided with a service card which contains a service code &this code is also seen when customer open .ell 2upport window'. They bring in this code online or through service line and .ell Technology 2upport people will receive their cases. 3fter the problems are solved, customers will receive a call 2 days later to confirm whether the problems are fi/ed satisfactorily. If a customer wants to check a solution on the Internet, they could access .ell 2olution ?etwork at http:IIsupport.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 .ell"s data base. 3s other .ell"s activities, the concept of keeping customers inside the circle of information is a simple one9 however, .ell is e/cellent in implementing it. With other providers, this concept means to provide them with one telephone number and a code to follow. With .ell, this means to keep customers posted from the beginning by letting them check the price on the Internet, and following their $%s when they stay in the factory until they reach their houses. Ne!er .e(( "'+"re&t In early days of $% market, almost $%s were sold through retailers such as %omputer+and and others. .ell"s wise idea was going directly and re-ecting any middleman. .ell started to receive orders via telephone, going directly to

51

customers. Dichael .ell said that .ell is the first $% maker going directly this way. Boing directly has become a main feature of .ell %omputer %orporation, .ell Inc. today, and contributed significantly to the success of the company. This is a creative step in early days and helped .ell to sell computes with lower prices. While I,D or %ompa! spent 5)) 02. to manufacture one $% and sell it, it costed .ell only 85) 02.. This simple step changed everything in years after. 5) 02. became a key advantage since other competitors could not over come. If .ell only doing well at one thing, it must be keeping low cost: 5)02. lower for the same product with other competitors. Deanwhile, other competitors at the moment could not go directly, because it means that they would have to re-ect all the retailers who are selling their product9 this will breach all the contracts of distribution they have signed. In fact, Dichael .ell estimated that going direct has saved 256 to 856 profit on each $%9 and this is a significant advantage, a key factor helped .ell, then, stay e/tremely competitive on the $% market. The direct4sales business approach has given .ell a very strong lead over its competitors. While others are still focusing on inventory control, .ell is already running the business with low inventory or no inventory in warehouse. %omponents are gathered only when the consumer places the order. ,ecause the $%s are not prebuilt in the factory, .ell can offer full customi ation on their $%s. %ustomers can choose a specific processor, the amount of G3D, different graphics card and other add4on peripherals. The result is a e/tremely efficient production with the customers know e/actly what they are getting from .ell. The greatest benefit of having a direct4sales 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. #n the contrary, .ell produces a computer only when the customer re!uests and pays for the item. In essence, customers" funds are used to

52

finance the transaction and this saves .ell millions of dollars in financing costs. The direct sell method is advantageous for .ell because the company maintains two days worth of inventory and this helps to save several million dollars in inventory holding costs. %omputer 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. 7or e/ample, if you buy a %ompa! computer from a store, it may have been assembled with components that were in stock for three or more months. Dore than likely the %ompa! computer will cost more than a .ell computer because its components were bought at their market price three months ago, whereas a .ell computer will cost less because its components will be bought at their current market price. %omputer technology has been undergoing significant technological changes. 2ince many computer manufacturers maintain three to four months of inventory, they have to wait three to four months to bring new models to market. Danufacturers are also forced to mark down prices to sell older computer models. .ell 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. .ell"s business model has significantly been enhanced by the Internet making it easy for customers to contact .ell directly. #ther computer manufacturers, including Bateway and %ompa!, have copied .ell"s business model and other businesses are evaluating it.BD has been testing a model similar to that of .ell to sell cars in Taiwan9 Dc.onald"s has already revamped their stores to produce food according to customers" orders9 7ord and Toyota are organi ing their operations to customi e cars according to customer specifications9 and furniture, auto, appliance and other manufacturers are likely to copy .ell"s business model in coming years. Tailoring their computers to their customers" specifications and selling the item directly to their customers is what makes .ell"s business model superior. %ustomers are more than willing to support a company that offers them fle/ibility

5*

and convenience. ?o longer is the customer locked into strictly buying their computer from a retailer who can only offer them the Mone si e fits allN item. Boing online makes it possible for the customer to get what he or she desires and needs. Indeed, .ell"s business model has ignited a spark that is not likely to be e/tinguished in the near future. 3s primary strategy, .ell is using product differentiation in the $% hardware. Through the direct4sales business model, .ell is able to offer high degree of customi ation to its customers on their $%s. #ther $% suppliers have a hard time to offer such customi ation because they are depending on the retail chain to sell their products. Traditionally, it is the $% manufacturers" decision of what specifications to put on their $%s. With .ell"s direct4sales model, the specifications are decided by the customers. .ell can offer the customers more fle/ibility in terms of computer components and price. In recent years, the $% industry is driving the price of the computers down. 3s a result, .ell shifts some of its strategies towards low cost to compete with other manufacturers. 7or the supporting strategies, .ell uses all three in innovation, growth, and alliance. To ma/imi e profit, .ell has to find innovative ways to implement information systems to cut operating costs. The growth of .ell can be visuali ed by the diversification of .ell"s product line. 3s for alliance, .ell maintains a good relationship with all of its hardware suppliers. 3 good relation will enable them to get computer components at a very competitive price. The combination of these strategies enables .ell to stay e/tremely competitive in the $% industry and constantly provide the best values for its customers. The strength of the direct4sales doesn"t stop here9 because .ell is the only one leading $% manufacturers that can successful implement and harness the power of the direct4sales model. #nes might argue that .ell"s success is because they have been doing direct sales from day one of their business, and the entire company is at stake. The direct4sales model re!uires absolute precison on production, inventory control, and customer service. 3ny mistake will lead to a potential delay on the $% production. .ell is able to achieve all these through the use of information systems.

58

#ne of the early focuses of .ell about the .irect 2ales 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 .ell"s cake. %urrently, .ell provides a different product line to business and government customers J #pti$le/ which is more secure, more stable, easier to administer and maintain in networking condition. 7or home and individual customers, .imension product line is available providing higher processing and computing power. 0 5 De(( &$,p-terC. $perat"$' "' the #$r(+: .ell is a global company operating in *8 countries in three world regions, with about :(,))) employees and @52.:)2 billion 02. as of 2)1). .ell is organi ed along geographic lines into the 3mericas, 3sia4$acific and Aapan, and <uropeIDiddle <astI3frica &<D<3'. %orporate head!uarters is in Gound Gock, Te/as, which is also the regional head!uarters for .ell 3mericas. <ach of the regions has its own regional head!uarters and its own assembly plants and supply network. Gegional head!uarters include ,racknell, 0.F. for <D<3, Kong Fong for 3sia4$acific and Fawasaki for Aapan. The following figure is about percentage of .ell revenue from different parts of the world.

F")-re B: De(( Re!e'-e M"6 033B

55

(Source: !DC World4ide 6uarterl$ PC %racker' Se t5 7889 and Com an$ Estimates) 7rom the above figure, it can be seen that 02 remains the biggest market of .ell products, the follow comes <D<3 area as a whole, 3sia4$acific and Aapan comes third, and +atin 3merica stay at the last position. 3sia4$acific at the moment is considered as an emerging potential market for IT products. It can be e/pected that the future numbers will change remarkably. .ell has invested in high growth countries such as ,ra il, Gussia, India, and %hina, or M,GI%,N and be e/pected to continue its global e/pansion in the years ahead. .ell"s continued e/pansion outside of the 0.2. creates additional comple/ity in coordinating the design, development, procurement, manufacturing, distribution, and support of its increasingly comple/ product and service offerings. .ell intends to continue to e/pand its global capabilities as its international business continues to grow. .ell"s business activities are organi ed in each region around different customer segments. These vary somewhat, but generally include: &1' relationship

5(

&large corporate' customers9 &2' home and small business &sometimes called transaction customers'9 and &*' public sector &government and educational' customers. $roduct development is largely centrali ed in the 0.2., and the same base products are sold worldwide. These products are customi ed for different regional and country markets with appropriate power supplies, keyboards, software and documentation. #ther functions such as IT and e4commerce applications usually originate in the 0.2., and then are adopted with necessary modifications in the other regions. Danufacturing 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 e/isting plants as much as possible. The demands of .ell"s model have led it to adopt a new organi ational structure referred to as a virtual company or value web. It is marked by a focus on a few key strategic activities, and e/tensive outsourcing of non4strategic activities. .ell works closely with e/ternal partners to produce its $% products and to offer its customers an array of additional products and services that add value and allow .ell to capture a larger share of the customer"s IT spending. To manufacture its products, .ell coordinates a global production network that spans the 3mericas, <urope and 3sia, combining in4house final assembly with heavy reliance on outside suppliers and contract manufacturers. Danufacturing of printed circuit board assemblies, subassemblies, and some final products &mainly notebook $%s' is handled by contract manufacturers or original design manufacturers such as 2%I, 2olectron, %elestica, Kon Kai, Luanta and 3rima. +ike other $% makers, .ell relies on outside suppliers for components and peripherals such as disk drives, %.4G#D drives, semiconductors, add4on cards, monitors, keyboards, mice and speakers. Its $%s can be bundled with standard software such as Dicrosoft #ffice or with speciali ed software re!uested by corporate customers. .ell relies on outside partners for services such as system integration, installation, on4site repairs and consulting. $artners include Wang, 0nisys, I,D and ,ancTec. It also works with resellers who support .ell hardware and receive referral fees for recommending .ell to customers.

5;

3s .ell has moved beyond its home market in the 0.2., it has had to adapt its business activities and organi ational structure to the different markets in which it operates. In effect, .ell has had to create similar but distinct value webs in each of the ma-or regions, and to further customi e its marketing and service functions for individual countries. The process of globali ation has shaped .ell"s own structure, but .ell"s success has conversely helped to reshape the global structure of the $% industry. 2ince the beginning of its operation, .ell has shown a ma-or interest in e/panding their global e/posure. .ell has signed a deal with WalDart 2tores &WDT' to sell .ell desktops and notebooks in ,ra il and De/ico. .ell has also signed a deal with Bome Broup, which is the largest electronics retailer in %hina. %urrently .ell has 28,))) retail stores around the world, with a much bigger reach thanks to its partnerships and collaborations. .ell continues to pursue international sales through a variety of means. In addition to distribution agreements with large retailers, .ell has developed a number of products specifically targeted at emerging markets. The best e/ample of this is the .ell 5)) notebook, a low cost laptop designed to be affordable for a large phase of the population of developing countries. 2uch initiatives have proven successful for .ell9 unit sales for emerging markets have grown signifcantly. .espite this stellar performance there is still much room for growth, since only 5.16 of Indians and :6 of %hinese have computers, compared to ;56 of 3mericans. 7urthermore, >56 of the worldEs population lives in developing markets. Within .ell"s portfolio of offerings, non4$% products and services are showing larger growth potential than the company"s $% segment, which currently accounts for ()6 of sales. .ell is responding to this increased demand in the non4 $% segment, e/panding its line of servers, peripherals and accessories, and customer support services. These account for a smaller percentage of .ell"s revenue, leaving room for continued growth. In addition, margins on these goods and services are generally higher, especially for technical support services. The

5>

higher profitability and increased demand in the non4$% segment could bolster .ell"s earnings significantly if the company continues to improve its offerings in the segment. The $% market has become intensely competitive, especially in the 0nited 2tates. .ell must keep its prices competitive or risk losing business to competitors, putting pressure on .ell to cut production costs wherever possible. 7ollowing industry trends, .ell has begun outsourcing more components to third parties in order to lower its costs of production. 0nlike other leading $% manufacturers, such as Kewlett4$ackard %ompany or 3pple, .ell still assembles its own final products. In order to try and close the resultant gap in production costs, especially for highly demanded notebooks, .ell sells its factories worldwide to various contract producers. The purpose of this outsourcing is to minimi e production costs, increasing profit margins and allowing the company to reduce prices. #n the other hand, .ell"s increasing reliance on its technology partners can decrease its control over the supply chain as a whole. 3s more components are outsourced to third parties, .ell 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, .ell will make a strategic ac!uisition that will allow it to obtain a piece of the 0.2. government"s stimulus. 3s part of the 0.2. stimulus, the government is spending @1: billion over the ne/t five years into technology that will digiti e medical records. To get a piece of this, .ell will purchase $erot 2ystems, a provider of technology services with specialty in electronic health records, for @*.: billion9 $erot services 1,))) hospitals and automates patient records for 2)),))) doctors. This will secure revenue for .ell which has had difficulty during the downturn. While .ell does not manufacture its own components or subassemblies, it does handle final assembly for nearly all of its desktop $%s and servers. ?otebook $%s are manufactured by Taiwanese manufacturers Luanta and %ompal. In some cases the notebook $%s are shipped complete to the final customer. Kowever, .ell

5:

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, .ell organi es manufacturing by region, operating one or more assembly plants to serve its ma-or markets. $lants in the 3ustin, Te/as and ?ashville, Tennessee areas serve ?orth 3merica9 <ldorado do 2ul, ,ra il serves ,ra il and 2outh 3merica9 $enang, Dalaysia serves the 3sia4$acific region9 Piamen, %hina serves %hina and Aapan9 and +imerick, Ireland serves <urope, the Diddle <ast and 3frica .

Chapter 5: Le..$'. %$r te&h'$($)* e'terpr".e. "' V"et'a, "' )($/a("Aat"$'

()

5 1 O!er!"e# $% te&h'$($)* e'terpr".e. "' V"et'a, "' )($/a( "'te)rat"$' .&e'ar"$: 5 1 1 O!er!"e# $% te&h'$($)* +e!e($p,e't "' V"et'a,: 7or the last 1) years, 1iet ?am 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 socio4economic development of the country. %ontinuing with the achievements in 2)))42))5 period, in period of 2))(42)1) 1iet ?am"s IT industry maintains the high growth rates, and achieved significant results, become a key economic4technology sector, and also is one of the important driving force for the development, reducing poverty and improving people"s living standards, and help to bring 1iet ?am gradually catch up with developed countries in region and over the world. The development of 1iet ?am"s 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 e/pected to booming in coming years. 3mong IT industry, the field software development and services in period 2))(42)1) have achieved significant growth in both revenue and market9 become a most promising economic sector of the country. The revenue of this area growths at the average rate over *)6 a year, reached over 1 billion 02. in 2)1), four times increasing compare with that in the year 2))5, with the e/port revenue account for about *56, increasing 5 times as in 2))5. The main e/port markets of 1iet ?am"s software enterprises are Aapan and ?orth 3merica. 1iet ?am is often on the top 1) of the most attractive destinations for global outsourcing e/ports which ranked by international consulting organi ations such as F$DB, Bartner, 3T Fearney &In the report M#ffshoring #pportunities 3mid <conomic TurbulenceN by 3T Fearney announced in 2)11, 1ietnam is ranked at level > among the most attractive destinations for outsourcing'.

(1

IT services like IT outsourcing , business process outsourcing , data center infrastructure, hosting services, cloud computing, mobile applications, e4banking, e4 commerce, etc are popularly growing in the domestic market, as well as attracting outsourcing contracts with foreign partners. <specially, 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 *56 per year. 1iet ?am"s Kardware and <lectronic industry has developed rapidly in scale, with the strong contribution of multi4national corporations direct investing in this sector. In 2)1), the revenue of hardware, electronic industry reached 5.( billion 02., increasing 5 times as that in 2))5. This industry is in the top 5 industries which have highest e/port revenue of 1iet ?am, with e/port turnover in 2)1) about *.5 billion 02.. The mainly e/ported products are computer related products, electronics and components, which are e/ported to *5 countries in the region and the world. 0p to end of 2)1), there are about 12;,5)) labors work in hardware and electronic enterprises in 1iet ?am. There is around 1)6 labor force involved in manufacturing of telecom e!uipment, 256 involved in manufacturing of office e!uipments and computers, the rest are in manufacturing electronic products and electrical appliances. 3bout :)6 of workers have !ualification and e/pertise e/perience in electronics, telecom and IT. The rate of turnover on employees in the hardware and electronic area in 1iet ?am reached 88,1))02.IemployeeIyear. .igital content industry is the new immerging sector but rapidly growing with over 8)6 yearly. The key fields of this areas are content on mobile networks, content on the internet, online games, online entertainment, <4commerce, <4 libraries, digital television, electronic newspapers. In 2)1) the revenue of the digital content industry of 1iet ?am reached :*8 million 02., increasing : times compare with that in 2))5. Gecently the 1iet ?am"s digital content enterprises are e/panding their market and providing services to other countries such as +aos, %ambodia, Indonesia, 2outh Forea, etc.

(2

IT +e!e($p,e't p$("&"e. $% the )$!er',e't a'+ a&h"e!e,e't.: The 1ietnamese Bovernment always pays a special attention and provides favorable conditions and incentives to promote the development of the sector. #n #ctober 1;, 2))), the $olitburo of the %ommunist $arty of 1iet ?am issued .irective ?o. 5>4%TITW on M$romoting application and development of information technology for industriali ation and moderni ationN &.irective 5>'. In this .irective, the $olitburo has clarify that information technology is one of the most important power of the development, together with some other hi4tech industries which transform dramatically the economy, culture, society of modern world. This is the first time in 1ietnam9 information technology industry has an official general .irective, including all key factors: information technology industry, application of IT, IT work force, infrastructure and legal framework for developing and applying IT. The 5> .irective in an important turning point for the development of IT in 1ietnam since it has formed the basis to overcome a lot of difficulties and restrictions. 0nder the leadership of the $arty and the Bovernment in the last 1) years, the 1iet ?am I%T sector has gained many important achievements and met the ob-ectives. 3s stated in M1ietnam I%T White ,ook 2)11N: MThe IT industry has become an important economic sector, with annual growth rate higher than any other areas. The contribution to B.$ growth increases year to year. The whole IT industry average revenue growth in the period 2))142)): represented 2)4256 per year. ,y the end of 2)1), the revenue of the software industry and digital content industry reached 2 billion 02., the hardware industry revenue reached 5.( billion 02., revenue of telecommunications services reached over :.8 billion 02., bringing the total revenue of telecom and IT industry in 2)1) to 1; billion 02., 1: times higher than that in 2)))N. #n 2eptember 22, 2)1), the $rime Dinister signed .ecision ?o. 1;55IL.4 TTg to approve the ?ational 2trategy on MTransforming 1iet ?am into an

(*

3dvanced I%T countryN &referred to as The 2trategy from now on'. This reflects the political determination of the $arty of 1iet ?am and the Bovernment in developing I%T industry to keep pace with countries in the region and the world. The 2trategy sets out ob-ectives as: to develop I%T human resources to international standards9 to build I%T industry, especially software industry, digital content industry and IT services, to become a leading economic sector, so as to contribute significantly to B.$ growth and e/ports9 to set up a broadband information infrastructure in the whole country9 to apply IT effectively in all socio4 economic aspects and national security, defense. The annual growth rate of the I%T industry income is to reach at least 24* times the growth rate of B.$. ,y 2)2), the contribution of I%T industry to B.$ should be from >6 to 1)6. Ta/(e 13: N-,/er $% e,p($*ee. "' IT .e&t$r

(Source: +eneral Directorate of Customs) 2teering views of The 2trategy are: accelerating the development of 1iet ?am"s I%T on the basis of ensuring continuity with creative measures, targeting higher ob-ectives with higher speed9 reasonably developing on the basis of optimi ing internal resources and taking advantage of international knowledge and resources9 efficiently utili ing the state budget, attracting more investment from local and foreign enterprises9 applying the highest priorities and preferences in accordance with the law on the development of high technology, research and

(8

training for IT parks, research and training institutions, and all enterprisesIindividual who provide IT products and services. F")-re @: N-,/er $% -'"!er."t"e. $%%er"') ICT tra"'"')

(Source: +uidebook on universities and colle*es recruitment - (inistr$ of Education and %rainin*) ,ased on these views and ob-ectives, The 2trategy identifies si/ groups of tasks focusing on issues such as: developing I%T human resource9 developing I%T Industry9 continuing to develop and improve the telecommunications and IT infrastructure9 building and deploying suitable supporting solutions for providing digital information to households9 applying IT effectively in government agencies, enterprises and the society9 strengthening research capacity in the I%T sector9 mastering gradually and developing technologies for creating new products. The 2trategy also stated si/ solutions: enhancing information dissemination regarding the 2trategy9 promoting the sociali ation of investment in I%T, especially in the development of broadband telecommunications infrastructure9 providing investment incentives for priority areas9 building and improving institutional frameworks9 establishing a specific mechanism and renewing policies9 promoting international cooperation.

(5

3ccording to .r. +e .oan Kop, Dinister of DI%: MThis is intelligence, strength and determination of those who work in the I%T areas, of the 1iet ?am young generation, of the political system and people of 1iet ?am. Implementing The 2trategy is one of the central tasks of 1iet ?am from now until 2)2). The 2trategy also represents the aspirations of the 1iet ?am youth to change 1iet ?am"s position in the international arena in various fields, including information technologyN. 5 1 0 Lea+"') &$,pa'"e. a'+ .er!"&e. pr$!"+er. "' IT "'+-.tr* ?umber of enterprises in software, IT services also increased rapidly, which reached over 1,))) firms in 2)1), increased 2.5 times as in 2))5, which mainly located in big cities, with over ;),))) labors. 3verage labor productivity on the software and IT services reached 18,>))02.IemployeeIyear, but with high ranking businesses, this number may reach over the 2),)))02.IemployeeIyear, especially for the firms who provide the integrated services, the number reached over *),)))02.IemployeeIyear. 0p to now, 1iet ?am has many software firms which have more than 1,))) employees such as 7$T Information 2ystems, TD3, $21, ..., especially 7$T 2oftware has more than *,5)) employees. There are two software firms have achieved the %DDi level 5, and do ens of companies certified %DDi level 8, %DDi level * or I2#4:))1. %urrently there are seven IT parks operation in the country, which some !uite successful and well known such as Luang Trung 2oftware $ark, .a ?ang software park, IT $ark of the ?ational 0niversity in Ko %hi Dinh %ity, etc... Dany multinational corporations on I%T are planning to e/pand their investment and operation in 1iet ?am, such as Intel, 2amsung <lectronics, K$, ?okia, etc. The local hardware companies also invested modern production lines, and improve the !uality management system with international standard, and asserted their positions in the domestic market, such as 7$T <lead, %D2, 1T,, etc... 2ome 1ietnamese mobile brands have dominating a significant share in the

((

domestic market such as L4Dobile, 31I#4Dobile, ,luefone, etc... The areas of chip and electronic board design also achieved significant results. 1iet ?am now able to design and produce microprocessor >bit, 1(bit, *2bit, typically the *24bit micro4processor named 1?1(*2 make by The Gesearch and <ducation %enter &I%.G<%' of ?ational 0niversity in Ko %hi Dinh %ity. ,y 2)1), there were over 5)) content providers operation in 1iet ?am9 typically are 1T%, 1?B, 7$T, 132%, 1.%, etc.... This industry employed about 5),:)) labors, which ;)6 direct related to content production and services. Dost of the labor in the digital content industry are well educated, which about 1)6 have master degree, ;)6 have bachelor degree, and 2)6 have diploma or professional certificate. The rate of turnover on employees in the digital content industry in 1iet ?am reached 1>,*))02.IemployeeIyear. F")-re 1: Mar?et .hare $% I'ter'et pr$!"+er. 0311

(Source: %)e W)ite book 7811) 3s can be seen from the above chart, there are three main Internet service providers play on the market: 1?$T, 7T$ Telecom and 1iettel. 3mong them, 1?$T is the biggest, almost dominant one in this area.

(;

5 1 5 App("&at"$' $% the "'ter'et "' ("%e a'+ e&$'$,"& a&t"!"t"e. Ta/(e 11: the app("&at"$' $% the I'ter'et "' V"et'a, 0331=0313

(Source: W)ite Book 7811) The above figure shows a trend of increase in every aspect of 3pplication of the Internet between 2 years 2)): and 2)1). This is a clear sign for technology development in 1ietnam and the increase in IT4awareness of 1ietnamese. The IT application in society, community and businesses had positive changes because of the effective implementation of .irective 5>. 3ll classes in the society over the country have facilities for I%T application, and 1ietnam has become one of the countries which have the highest number of Internet users. In Aun 2)1), the percentage of households with laptops and computers increased 18.;(6, about ( times higher than in 2))2, the percentage of households with Internet access at home reached 12.>86.

(>

Ta/(e 10: N-,/er $% PC thr$-)h 033@ = 0313

(Source: +eneral Statistics &ffice) In the absolute term, the number of $% in4use in 1ietnam has increased continuously over years. This means the demand for computer of individuals, households, and organi ations has an increased trend. ,esides, the competition and technology changing have reduced the price of computer and computer4based products, giving more chances for 1ietnamese people to access to these devices. F")-re 13: H$-.eh$(+ #"th &$,p-ter per 133 h$-.eh$(+

(Source: +eneral Statistics &ffice)

(:

3s stated by I.% on :th Darch, 2)11, the consumption rate of 1ietnam $% 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 8th !uarter with (*:.))) units, increased 1(6, make the total of computer consumed in the year over 2.11 million units, increased :,>6 in comparison with the previous year. The laptop group in the 8th !uarter, 2)11 increased nearly *26 in comparison with the previous !uarter and 82.56 increased with the same period the year before. #n the contrary, the number of desktop decreased 56 and 156 in comparison with the previous !uarter 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. 3mong 5 leading $% providers in 1ietnam as of the 8th !uarter, 2)11, .ell continues to increase and keep the first position with 216 market share. Two Taiwan companies are 3cer and 3sus keep 1*6 and 1)6 respectively. K$ stays at number 8 with :6 but is the number one in desktop sector9 +enovo 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. <nterprises have been awared of the importance of IT in administration, management, and market researching and e/panding activites. Thus, the infrastructure of IT in enterprises has been enhanced significantly. Dost enterprises have Internet access to serve their business activities &about :)6', (;.;6 of enterprises have +3?s and the application of software in management has become a focus in enterprises" business. $ublic services &distant education, remote diagnosis, electronic libraries' have gained remarkable achievements by using I%T. Kigh4tech applications have been popular in the operation of many industries such as construction, mechanics, pressing, te/tiles, petroleum, hydro4meteorology, etc. The level of application of IT has changed remarkably through years. In 2))2, 1ietnam had only 525 thousands computer used in economic units. In 2));, the

;)

whole country had almost 2.)2 millions of computers, *.2> times higher and increased e!ually both in manufacturing and administrative areas. The number of computers with +3? connection for internal transactions has increased (.5 times and computers with Internet connection increased with a very high rate of 1(.1* times. The rate of computer using in business units is fairly high, e!uals ;86. 5 0 Le..$'. %r$, De(( %$r V"et'a,e.e te&h'$($)* e'terpr".e.: 7rom the .ell"s story, there is plenty of knowledge that can benefit 1ietnamese technology enterprises. .espite the differences in the situation and basis of the companies itself, many lessons withdrawn could be useful and applicable in the day4to4day operation of those companies. 5 0 1 Te&h'$($)* %$&-.: 7irst, continual innovation based on standardi ed products is what truly works at .ell. Innovation is incremental and continual J it never stops. It is daily. Dost innovation occurs step by step. It is rarely about the big idea. 2pending on GH. activities is important, but they could learn the .ell"s way to not only save this huge cost, but also still have updated products with the best working efficiency by the means of standards4based innovation. ,y using the standardi ed 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 globali ation scenario, 1ietnamese technology firms find a lot of difficulties in competing with strong international ones. #ne difficulty is the huge amount of capital invests in GH. laboratories. While 1ietnamese firm do not have a huge investment in comparison with already strong firms in the world, they could find the standard4based innovation as a solution. 7ollow that way could help them keep a lower e/pense for innovation but still have updated technology. This strategy has served .ell well for years, they achieve both: better products with leading technology than others and lower GH. e/pense9 these advantages form the basis for it e/tremely competitive prices, helping .ell to stay among the top $% provider in the world.

;1

2econd, the technology innovation process should be collaborative. %ollaboration 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. .ell has done this well in many years. Gemember one of * tenets of .ell is Malways listen to customersN. .irect relationship with customers reflects to it !uickly about the current need or new trend in customers" demand. .ell 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 e/pectation. This why people call this way is demand4driven 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. <very aspect of .ell"s operations uses one type of information system or another, from human resources to the customer tracking an order. ?ot only does .ell rely on its information systems 1))6, 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 .ell. It was achieved through the incorporation of information systems at every level within the organi ation which created more efficient and effective business processes. The success of .ell should be almost completely attributed to the use of information systems. 5 0 0 Creat"!e .trate)"e.: The direct sales model is one of the key factors for the long4term success of .ell. 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

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the item directly to their customers is what makes .ell"s business model superior. %ustomers are more than willing to support a company that offers them fle/ibility and convenience. ?o longer is the customer locked into strictly buying their computer from a retailer who can only offer them the Mone si e fits allN item. Boing online makes it possible for the customer to get what he or she desires and needs. Indeed, .ell"s business model has ignited a spark that is not likely to be e/tinguished in the near future. 1ietnamese 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 1ietnamese 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. Feeping -ust4in4time inventory is another strategy that .ell has done really well since the very beginning of its operation. This is another strategy that helps it cut a huge amount of e/pense for storing and maintaining inventory. <specially with the hi4tech industry, the value of inventory will decrease substantially from day to day due to !uick changes in new technology. %omputer 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. 7or e/ample, if you buy a %ompa! computer from a store, it may have been assembled with components that were in stock for three or more months. Dore than likely the %ompa! computer will cost more than a .ell computer because its components were bought at their market price three months ago, whereas a .ell computer will cost less because its components will be bought at their current market price. %omputer technology has been undergoing significant technological changes. 2ince many computer manufacturers maintain three to four months of inventory, they have to wait three to four months to bring new models to market. Danufacturers are also forced to mark down prices to sell older computer models. .ell 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. .isdaining

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inventory strategy, hence, saves .ell from the risk of losing value due to technology obsolete and, of course, cut cost also. ?evertheless, for 1ietnamese 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 .ell but failed. Feep almost ero inventory means that the operation is always Mon the moveN and one problem with one sector could affect badly the whole system. 3nother thing is that .ell could do it because it has significant power in bargaining with suppliers who bear the risk of keeping the entire inventory and supply it -ust4in4time.

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CONCLUSION
$eople will become more and more related to the use of the computer and the Internet when -obs in this century more than ever rely on knowledge and information. The direct conse!uence will be the continuous increase in the demand of computer and computer4based products. Thus, the $% industry will be e/pected to be more and more competitive and dynamic in many years to come. To be successful in a $% business, a company needs to consider many factors, both internally and e/ternally. 3mong 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. ,ecause the computer industry moves much faster than other industries, enterprises need to keep renewing themselves if they do not want to fall behind. #utstanding firms are often the ones who have the fle/ibility and adaptability in their technology focus, product development, and overall business operation. 7or many years, .ell computer has proven itself to be a very competitive computer vendor. What should be taken into consideration of .ell success include its wise technology innovation policy, efficient application of the IT system, direct sales model, and inventory management. 7ollowing technology innovation based on standardi ation, .ell has always tried to push its products to the limit of capacity and better than that of competitors. ,esides, 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, -ust4in4time inventory. These features shape the products of .ell to be competitive both in the !uality and in the price. 7or many years around the beginning of this century, .ell stayed the first position regarding the market share in the $% industry, only lose this position after the merger of two other leading companies K$ and %ompa!. ,eing aware of the importance of Information Technology to the development of the economy and society in this era, 1ietnam"s government has set up a pack of

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official policies and plans to speed up the development of this power. =ears 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 1ietnam take into their program IT training. In the globali ation scenario, technology enterprises in 1ietnam possess great opportunities to learn from success and failure e/perience of international firms. Doreover, they also could access with the latest technology in the world. #n the other hand, they are also e/posed 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 1ietnam. The development of .ell Inc. is one source of valuable lessons for 1ietnamese technology enterprises to think of. %onsidering every differences about .ell and themselves, they could still learn from the standards4based technology innovation, managing a smooth IT system, direct sales model, cost4cutting

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Re%ere'&e.
B$$?. a'+ paper.
1. %harles W. +. Kill MInternational business: competing in the global marketplaceN (th edition, DcBraw4Kill, 2));. 2. Aason .edrick and Fenneth +. Fraemer MBlobali ation of the $ersonal %omputer Industry: Trends and ImplicationsN %enter for Gesearch on Information Technology and #rgani ations, 0niversity of %alifornia, 2))2 *. 2teven Kol ner MK#W .<++ .#<2 IT: 0sing speed and Innovation to 3chieve </traodinary GesultsN, DcBraw4Kill, 2))(. 8. Dichael .ell, %atherine 7redman M.irect from .ell: 2trategies that revolutioni ed an IndustryN, %ollins ,usiness <ssentials, 2))( 5. Fenneth Fraemer and Aason .edrick M.ell %omputer: 0sing <4commerce To 2upport the 1irtual %ompanyN %enter for Geserch on Information Technology and #rgani ations, 0niversity of %alifornia, Irvine, 2))1 (. William 7.3chtmeyer M.ell computer corporationN, Tuck school of business at .artmouth, 2))2 ;. Aoan Dagretta MThe power of 1irtual Integration: 3n Interview with .ell %omputer"s Dichael .ellN Kavard ,usiness Geview, 1::> >. .ell Inc., M.ell annual report 2)11N :. Information and communications publishing house Mwhite book 2)11N 1). #<%., M#<%. Information Technology outlookN 2))8 11. <uropean %ommission, MInnovation 0nion %ompetitiveness report 2)11N

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We/."te.: 1. .ell Inc. link: http:IIwww.dell.comI 2. #<%. statistics library, link: http:IIstats.oecd.orgIInde/.asp/ *. 0? 2tatistics .ivision, link: http:IIunstats.un.orgIunsd 8. 1ietnam"s ministry of Information and %ommunications, link: http:IInews.mic.gov.vn 5. Bartner Inc., link: http:IIwww.gartner.com (. <tforecasts, link: http:IIwww.etforecasts.com