The Restructuring of Dell Corporation

Introduction

Business Policy and Strategy (Strategic Management), as a field of study, pertains to the combined utility of both proper and sound business policy in addition to effective strategic management. A business policy pertains to the overall study of responsibilities and functions of an entity’s senior management; their crucial decision-making process, which determines the overall direction and future growth of an organization, in addition to the prevailing issues which would ultimately affect the entity’s competitiveness and overall success.

Strategic management, on the other hand, pertains to the overall strategic procedures of a business entity, in addition to, the initiatives and responsibilities espoused by top-level management towards an overall business venture’s success. Specifically, it pertains to an organization’s vision, objectives, mission, development of a company`s plans and policies (usually programs or projects), in addition to an overall allocation of funds/resources towards the implementation of the above. It provides a future company`s direction towards economic viability and competitiveness towards the achievement of its set goals (House, 2004).

Dell Corporation as a business entity

Dell Inc. is an American multinational computer technology corporation headquartered in Round Rock, Texas, USA. As an entity that engages in the development, repair, sale, and support of computers and other related services and products, the corporation stands as one of the largest technological entities globally with an estimate total employment of 103,300 employees. The company is listed at number 44 in the Fortune 500 List; it is a clear indication of its success, dynamism, and economic adaptability.

Bearing its founders name, Michael Dell, the corporation is the 3rd leading PC vendor globally after both HP and Lenovo. Its tremendous growth is attributable to its increased customer base, in addition to various mergers and acquisitions including Perot Systems (2009) and Alienware (2006). As an entity that sells and manufactures electronics, its originality in both electronic commerce and supply-chain management endears it to millions of customers particularly through its configure-to-order method (in manufacturing consumer specified products) and its direct-sales model of a business venture.

On February 5th, 2013 the entity announced a leveraged buyout by Silver Lake Partners and its founder, Michael Dell, with supplementary funding by the computer giant Microsoft Inc. Even though there is less access to capital, the purpose of this research is to explore the opportunity of Dell Corporation in restructuring to a private corporation in a new millennium. In the 21st Century, restructuring is a prerequisite towards a more streamlined, effective and hence efficient company with an aim of sustaining its competitive advantage in the world of electronic products manufacturing and provision of services (Mumford, 2000).

Business Policy and Strategy

Like the aforementioned, business policy is vital towards overall business competitiveness and hence future survival in the contemporary dynamic global arena. As a field of study, it has undergone through 4 different Paradigm Shifts in an overlapping nature since its inception. Founded and aligned towards existent business demands, its origins, as a discipline, are traceable back to 1911 when Harvard’s Business School introduced integrative courses in management aimed specifically at creating general management capacity/capability (Magretta, 1998).

Accordingly, its development arose as a result of the utility of different future planning techniques by existent management offices through activities like budget preparation, and the utility of variants of control systems, such as objective management and capital budgeting. However, due to the unavailability of such systems inadequately emphasizing future business entity roles, long-term planning procedures came to be considered. Consequently, long-term planning was to be replaced by Strategic planning, later changed to Strategic management.

Therefore, problems of Policy in the business arena, as in public affairs, entail the continuous definition of company mission; the purpose (s) of the entity; the development of both organizational culture (character and identity), in addition to the mobilization of prerequisite capital (resources) for an entity’s overall goal attainment in the contemporary competitive global arena. Business policy, hence, presents an outline towards understanding strategic decision-making (management) ultimately aiding an official in the managerial responsibilities/ tasks he/ she faces in the business arena (Kaiser, 2008).

Elements of Business Policy and Strategy

Business Policy and Strategy (strategic management as aforementioned) pertain to the overall competitiveness and hence future survival of a business entity in a dynamic and competitive contemporary global arena. Though there are different unique fields in Economics and Business Management, the above two are interrelated invariants of aspects and hence their utility is combined. As a whole, they are composed of different elements that are critical to the well-being of the entity.

These elements include Management; Marketing; Economics; Accounting; Finance; Business Law, and Leadership and Organizational Behavior, all being fundamentally important to the business venture’s future endeavors.

Management

Management (business) pertains to an overall goal of combining different elements of an entity towards the accomplishment of a company`s objectives and desired goals (mission and vision) through the utility of available resources in effective and efficient ways. It is inclusive of other functions, organizing, planning, directing/leading, staffing, and overall control of the entity. Since organizations may be viewed as system entities, management may also refer to the human action and design entailed towards the facilitation of useful outputs from the system’s overall production capabilities (Shirani, 2012).

In the economic arena of a profit-based business venture, management primarily functions towards satisfaction of its various stakeholders’ expectations and is focused on the firm’s profit realization/making, creation of valuable products and services at the cheapest costs possible, in addition to the provision of reward opportunities towards its existent labor force. The primary aspect of management focuses on leadership qualities best espoused in its Board of Directors and the requisite top/senior management.

It should be noted that in the contemporary arena, despite a move towards a more democratic workplace, workplace democracy where managerial functions are distributed among various workers present, command and control structures still exist, as de facto systems of organizational structure. There hence is a presence of both vertical and horizontal (level-based) hierarchical levels, which are aimed at enhancing the overall entity’s positive progression, through solid control and command of direction and progress (Bruce, 2008).

Marketing

Marketing, as an element, refers to a corporation/firm’s set of institutions, activities, and procedures present towards creation, communication, delivery and exchange of products and services (for money), which are consumer value-added. Thus, it is critical to attraction, retention and hence the growth of the firm’s consumer base. Marketing is then the ability to satisfy consumer wants and needs, through various exchange procedures and hence it is the process of cementing long-term customer relationships (Tallant, 2011).

It is, therefore, the process of communicating services or product’s value through its positioning angle towards its customers. Hence, through product/service value communication to its consumer base, and the management of existing customer relationships, an entity and its composite shareholder base are able to benefit economically, through an overall profit realization. As a science, it pertains to choosing target markets through both market segmentation and analysis, provision of superior customer value/service, in addition to an understanding of existent consumer spending behavioral traits (Gomez-Mejia & Cardy, 2008).

Economics

This pertains to an analysis of a business entity’s capacity/capability in its production, sale, and distribution of products and services to its existent consumer base. As an element in the business arena, it pertains to an analysis of business enterprises in addition to factors which contribute towards a specific business entity’s unique organizational structure and culture, in addition to its existent relationships with its labor force (employees), consumer/customer base (product market), and capital (resources) present (Manataki, 2007).

It, therefore, involves the study of how a firm can utilize its resources towards its overall production, supply, and consumption of either goods or services. This entails an analysis of existent social institutions, banking sector, stock market arenas, and government; in addition to the relationship with its employees (labor law issues). It is also concerned with such matters as environmental and urban issues, tax laws/policies and the existent global trade and trends therein (Yukl, 2006).

Accounting

Accounting refers to the collection of an entity’s collective information/data through recording, classifying and then summarizing (in terms of monetary value) an entity’s different events and transactions, and finally analyzing/interpreting such results. Communication of such information/data is generally performed through financial statements and aids in showing the existent economic resources under management’s control (firm/organization).

As an avenue through which financial information is reported to variants of parties, about an entity’s economic outlook, management accounting provides crucial data to its auditors, management, shareholders, and employees, among others. Primarily, it is concerned with the provision of a basis for educating operating or management decision-making processes. Such information, if given to outsiders (unrelated to a business entity), is known as financial accounting providing data to both existent and potential shareholder parties, government agencies, economists, financial analysts and creditors (such as banks) among other entities (Dennis Adcock, 2001).

Finance

Finance is closely related to the above; it pertains to the study of how entities allocate their asset base/resources/capital over a period of time under circumstances or environments of both certainty and uncertainty. The key to this is the assumption (time value of money) that currency today is worth more than tomorrow. Hence, corporate/managerial finance entails the provision of resources/money for a business entity’s overall activities and expenditure. It involves the top management’s balancing between profitability and risk with the aim of maximizing an entity’s stock/share value and overall wealth (Schmid, Kelber, & Krasel, 2006).

Pertaining to three interconnected decisions including investment, financing aspect and dividend decision, such arenas often overlap with the entity’s accounting function, though the latter is more concerned with the collection, analysis, and communication of all financial information. Regarding investment decisions, top management makes decisions related to which projects can develop into ventures, while financing decisions relate to the means/mode of funding of chosen projects/ ventures. As pertaining to dividend decisions, management is tasked with determining if any profit made is to be ploughed back into the business as the new capital, or instead to be paid out as dividends to existent shareholders (Lasher, 2010).

Business Law

Business or Commercial Law pertains to the existent laws/policies applicable to relations, rights and conduct of businesses and persons engaging in any commercial venture. As a branch of Civil Law, it deals with both public and private law issues. Hence, it is critical to the regulation of others: hiring practices, issuance and honoring of corporate contracts, in addition to production and sale of consumer products. Such regulation is espoused in the variants of Civil Codes present throughout the global economic arena. In addition, Business or Commercial Law is the existence of a variety of regulatory mechanisms to control the overall conduct of commerce in a given area. Also, there are such examples as safety laws, privacy laws, and drug and food laws, which act as regulations in the commercial arena towards the consumer and overall environmental protection (Moschandreas, 2000).

Leadership and Organizational Behavior

Organizational behavior/culture entails the overall impacts of not only individuals and groups but also existent structures upon the existent behavior/culture within an entity. In such a context, both regional and national cultures impact significantly all entailing aspects of organizational behavior. It is vital in the eventual dealing/business conduct of an entity with other commercial parties, in addition to organizational structuring and managing employees from diverse global cultures as it is espoused in Hofstede’s Cultural Dimensions theory/principle (Ignatiuk, 2009).

Consequently, six dimensions exist, which affect overall individual behavior within organizations being Power Distance, aspect of Individualism, the ideal of Masculinity, Uncertainty Avoidance and Long-Term Employee Orientation. In addition, there are an organization’s beliefs, rituals, symbols and values among others which espouse its organizational culture. These can be identified as belonging either to the levels of the organization’s espoused values, behaviors and artifacts, and its shared basic assumptions. Thus, a divergence of the above three levels in an organization is most likely to lead to tensions and resultant organizational conflicts (Hogan, 1994).

Leadership pertains to a process of social influence where an individual (leader) enlists both the support and help of others towards the accomplishment of a common endeavor/goal. Closely associated with management in its philosophical terminology, it entails either the transactional form of leadership exemplified by exceptional management, presence of systems of contingent reward, and an emphasis on procedural behavior and attitudes. On the other hand, transformational leadership is generally characterized by the presence of creativity, positive personal relationships and an aspect of charisma.

New Business Opportunities

The aforementioned global entity, Dell Corporation, is in talks on a leveraged buyout, which will see it regain some liquidity in its overall capital holdings, rejuvenate its management and hence efficiency. In addition, through such a deal the company would be able to save about $4 – $5 billion (USD) in the form of taxes payable on repatriated profits, which are controlled by subsidiaries located in tax havens. These saved resources can be reinvested with an aim to enable its restructuring process (Canak, 2006).

This buyout, aimed at wholesome privatization of the entity, will enable Dell Inc. to build up its existent cloud computing and enterprise-solutions arena, in addition to the radical restructuring of its legacy PC business. It should be noted that this transaction is unique, due to the fact that atypical from normal leveraged buyouts (viewed as vulture capitalists tools/avenues of firm dismantling and layoffs, aiming at restructuring and appointment of new management), Dell’s venture is primarily initiated by its founder, Board Chairman and CEO, Michael Dell, as the largest single shareholder of the corporation.

Hence, management control will still remain as it is through the same leadership, the overall aim being the rejuvenation of its overall financial structure. The deal, a $24.4 billion venture, will entail a delisting of its shares from both the Hong Kong Stock Exchange and America’s NASDAQ, making it fully private. Microsoft will input a $2 billion (USD) capital injection; with the deal buying the public (listed) shares at $13.65 per share. Overall, the buyout, $24.4 billion, will be the largest since the financial crisis of 2007 aided by private equity (Zaccaro, 2001).

Similarly, it will entail the biggest technology-based entity buyout; the price being representative of a little premium over the listed share price whose an all-time high was $65 USD per share (achieved during the 2000 dotcom bubble) vis-?-vis its $40 USD per share during the recent post-dotcom period. Rejections to the above deal included those from T. Rowe Price (the 3rd largest shareholding entity) and also from Southeastern Asset Management, which is the largest outside shareholder of Dell’s (8.5%), informed by the low price per share value, estimated at being $23.72 per share.

With the restructuring procedure eminent, the corporation entails boosting its capital input in its enterprise solutions venture, a potential economic market arena. Also known as enterprise application software (EAS), such products are utilized by organizations and governments to aid in better connectivity and communication. As a collection of programs possessing universal business tools and applications, enterprise solutions aid in modeling the way how entire organizations or firms operate. Furtherance is an aspect of developing tools for the production of applications distinctive to a firm/business entity (Christensen, 1997).

Application of Seven Elements of Business Policy and Strategy: Dell Corporation in the New Millennium and the Viability of a Restructuring Option

Management

As pertaining to management, the new opportunity will be a welcome venture, as the firm’s performance under Michael Dell has proven to be positive as espoused by the entity’s annual sales volumes/turnover. As a result of globalization, different entities are in need of such software suited to their individual operational models. By retaining the same leadership style and model, the corporation remains focused on its vision and mission towards becoming the leading production entity of such enterprise solutions software. However, some problems as aforementioned are still pending and are to be sorted through mutual understanding and consensus among the various shareholding parties, some of which are against such a move (Judge, 2002).

Marketing

Regarding marketing, the corporation will be advantaged due to the fact that it already possesses a brand name that has endeared it to its wide customer base. Through the utility of such an advantage, the corporation is sure to carve a niche for itself in the electronics and software market through the utility of its existent production and sales models based on individual preferences and liking, as opposed to universal product market appeal. As one of the leading entities in the technologies arena, it will be advantaged in incorporating such software applications to its existing products and services, therefore boosting its overall sales. Such a venture may be incorporated under the firm’s brand name or maybe managed as a different subsidiary entity.

Economics

As pertaining to economics, Dell Inc. is capable of handling its production capacity towards satisfying its already existent customer base, in addition to new target areas. Through its already cultivated consumer services, in addition to its sales and distribution (logistics) capacity/capability, such a venture would prove to be a gold mine, as contemporary technological advances are directing competitiveness towards not only the physical aspects of the business but also the technological (software and applications) arena (Roger Kerin, 2009).

Accounting and Finance

The leveraged buyout, a multi-billion dollar venture, is surely going to inject much-needed liquidity (liquid/flowing capital) towards its restructuring program and thus boosting its new venture in the provision of enterprise solutions. The avoidance of tax returns to tax haven subsidiaries under its control will further add needed capital for such an ambitious venture into the highly competitive software applications market. By delisting its shares in both the American NASDAQ and Hong Kong’s Stock Exchange, in addition to its undervaluation of share value, such a move would ultimately affect both its accounting and finance arena in a negative way, which may prove to be costly in the long-term (Cascio, 2005).

Business Law

As pertaining to Business Law, such a venture would be quite okay rooted in the fact that as a technologies manufacture/producer, Dell Corporation has in the past, and still continues to adhere to the prescribed existent laws as pertaining to consumer product and arenas in which such products are sold. Furtherance is its compliance with different commercial rules existent on such aspects as health and safety of products manufactured, privacy laws and other civil laws present. However, the fact that such a venture would result from the overall restructuring process of the company, it would be in a bad light as the buyout would entail potential employee layoffs going contrary to the proscribed hiring and firing procedures (Lawrence R. Jauch, 1988).

Leadership and Organizational Behavior

With Michael Dell still in a leadership position, the corporation is sure to follow its already set course/path, as espoused by successful years as one of the globally leading manufacturers of products and services associated with technologies. Through his unique leadership qualities, Michael is sure to continue leading the organization in the best ways possible. Furtherance is the fact that as a private entity, and him being a majority shareholder in the new restructured entity, he is most probably going to be more involved and assertive as to the general direction taken by the organization in its different ventures (Manataki & Chen-Burger, 2009).

The existent organizational behavior/culture, though dented by the restructuring process and its resultant negative effects (job layoffs), is likely to normalize, once the new venture picks up and other aspects of the business return to normalcy and hence profit-making. With new job opportunities, good management-employee relations, the new venture portended great strides and hence bigger sale volumes translating to profit-making (Antonakis, 2004).

Conclusion

The future looks bright for this technological giant, as the new venture into the enterprise solutions arena portends greater growth and economic competitiveness. As a future endeavor, the entity is most likely to critically utilize past experiences towards charting better, efficient and thus economically viable production systems/avenues of its solutions software production. Furtherance is its already existent universally acclaimed brand name critical to its overall viability and competitiveness in the technologies arena.

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