ONLY ANSWER QUESTIONS BELOW.

1. What organizational structures has Dell Computer used since its inception? What seemed to drive all these changes in the firm's organizational structure? (5 points)
2. How does the firm use organizational structures, organizational controls and culture to support its low-cost strategy? (5 points)

Strategy Implementation at Dell Computer Dell Computer was one of the fastest-growing com from IBM and Compaq. With their help, he created panies of the 1990s, and its stock price increased at a functional structure, one in which employees were the rate of 100% per year, delighting its stockhold grouped by their common skills or tasks they per- ers. Achieving this high return has been a constant formed, such as sales or manufacturing, to organize challenge for Michael Dell. One of his biggest battles the value chain activities necessary to deliver his PCs has been to manage and change Dell's organizational to customers. As a part of this organizing process, structure, control systems, and culture as his com Dell's structure also became taller, with more levels pany grows. in the management hierarchy, to ensure that he and Michael Dell was 19 in 1984, when he took his managers had sufficient control over the differ- $1,000 and spent it on the computer parts he assem ent activities of his growing business. Michael Dell bled into PCs that he sold over the phone. Increasing delegated authority to control Dell's functional value demand for his PCs meant that within a few weeks, chain activities to his managers, which gave him the he needed to hire people to help him. Soon he found time he needed to perform his entrepreneurial task of himself supervising three employees who worked finding new opportunities for the company. together around a six-foot table to assemble com Dell's functional structure worked well and, under puters while two more employees took orders over its new management team, the company's growth the phone.54 continued to soar. Moreover, Dell's new structure had By 1993, Dell employed 4,500 workers and was given functional managers the control they needed to hiring more than 100 new workers each week just to squeeze out costs, and Dell had become the lowest- keep pace with the demand for the computers. When cost PC maker. Analysts also reported that Dell had he found himself working 18-hour days managing the developed a lean organizational culture, meaning company, he realized that he could not lead the com- that employees had developed norms and values that pany single-handedly. The company's growth had to emphasized the importance of working hard to help be managed, and he knew that he had to recruit and each other find innovative new ways of making prod- hire strategic managers who had experience in man ucts to keep costs low and increase their reliability. aging different functional areas, such as marketing, Indeed, Dell rose to the top of the customer satisfac- finance, and manufacturing. He recruited executives tion rankings for PC makers because few customers complained about its products. Its employees became and Internet sales over a wider range of computer known for the excellent customer service they gave hardware products. He decided to begin assembling to PC buyers who were experiencing problems with servers, workstations, and storage devices to compete setting up their computers. with IBM, Sun, and HP. The increasing importance However, Michael Dell realized that new and of the Internet also led him to pay more attention to different kinds of problems were arising. Dell was more specialized groups of customers and find the now selling huge numbers of computers to differ best way to customize its approach to best meet each ent kinds of customers, for example, home, business, group's specific needs over the Internet. Today, for and educational customers and different branches example, Dell can offer large and small companies of government. Because customers were demanding and private buyers a complete range of computers, computers with different features or more comput workstations, and storage devices that can be cus- ing power, the company's product line broadened tomized to their needs. rapidly. It became more difficult for employees to To help coordinate its growing activities, Dell is meet the needs of these customers efficiently because increasingly making use of its corporate Intranet to each employee needed information about all product standardize activities across divisions and integrate features or all of Dell's thousands of different sales its activities across functions to reduce costs. Dell's offers across its product range. hierarchy is shrinking as managers increasingly By the late 1990s, Michael Dell moved to change delegate decision making to employees who use its his company to a market structure and created sepa advanced IT to access the information they need to rate divisions, each geared to the needs of a different provide excellent customer service. To reduce costs, group of customers: a consumer division, a busi- Dell has also outsourced most of its customer ser- ness division, and so on. In each division, teams of vice function to India.56 As a result of these moves, employees specialized in servicing the needs of one of Dell's smaller United States workforce has become these customer groups. This move to a more complex even more committed to maintain a low-cost advan- structure also allowed each division to develop a tage. Its cost-conscious culture is more than ever an unique subculture that suited its tasks, and employ important factor affecting its competitive advantage ees were able to obtain in-depth knowledge about the that has been threatened by the many cost-saving needs of their market that helped them to respond moves made by competitors such as Apple and HP better to their customers' needs. So successful was that have imitated and even improved on its cost- this change in structure and culture that by 2000, saving strategies.57 Dell's revenues were more than $35 billion and its profits in excess of $3 billion, a staggering increase Case Discussion Questions from 1984.55 1. Why has Dell moved to different kinds of orga- Michael Dell has continued to change his com- nizational structures over time? pany's structure in the 2000s to respond to changing 2. Has Dell's performance been improved? customer needs and increasing competitive chal- 3. Search the Internet to find out how Dell has lenges from Apple and HP. For example, Michael been trying to increase its performance and how Dell realized that he could leverage his company's its competitors such as Apple and HP have also strengths in materials management, manufacturing, been working to improve theirs