Micheal Dell (Leadership Term Report)

May 3, 2013
LEADERSHIP
TERM REPORT ON
MICHAEL DELL

LEADERSHIP
BAHRIA UNIVERSITY KARACHI
LEADERSHIP TERM REPORT ON MICHAEL DELL

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BAHRIA UNIVERSITY KARACHI CAMPUS

ACKNOWLEDGEMENT LETTER

Firstly I would like to thank Almighty Allah who is the most Beneficial and
Merciful.
I am also thankful to my course facilitator Sir Reza H. Syed for providing me the
opportunity and guiding me through the making of this report.

It was a great experience for me in making this report and it was a great learning
opportunity as I got to know more about Michael Dell, business leader, his way of
leading people and flaws in his leadership style.
I hope that in future I will get the opportunity to apply my skills and to engage in
such kind of activities that contributes worthy knowledge in my study.


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TABLE OF CONTENTS
SUMMARY OF BIOGRAPHY OF ............................................................................................................. 4
MICHAEL DELL ......................................................................................................................................... 4
ABOUT MICHAEL DELL .......................................................................................................................... 5
Early life and education .................................................................................................................... 6
Career ................................................................................................................................................ 6
Wealth and personal life ................................................................................................................... 7
Social and Economic Impact ............................................................................................................. 7
Political lobbying and contributions ................................................................................................. 8
Feud with Steve Jobs ................................................................................................................................... 8
Expansion to BRIC ........................................................................................................................... 8
ANALYSIS OF MICHAEL DELL AS A BUSINESS LEADER ................................................................ 9
TRAITS THAT MAKE MICHAEL DELL A BUSINESS LEADER ......................................................... 9
Innovation and initiative ................................................................................................................... 9
Higher need of achievement ........................................................................................................... 10
BEING 100% COMMITTED ......................................................................................................... 10
ALWAYS EXCEEDS EXPECTATIONS ...................................................................................... 10
BALANCING PROFESSIONAL AND PERSONAL LIFE .......................................................... 11
Overcoming obstacles ..................................................................................................................... 12
Michael's golden gut ....................................................................................................................... 13
Entrepreneurial Abilities ................................................................................................................. 13
No excuses ...................................................................................................................................... 14
Direct-Sales Strategy - Key to Success ........................................................................................... 15
Kept Close Ties with Suppliers ....................................................................................................... 16
SETBACKS IN MICHAEL DELLS LEADERSHIP ................................................................................ 17
Making some wrong business decisions ......................................................................................... 17
Intense and hurry ............................................................................................................................. 18
Raising conflicts with political figures ........................................................................................... 18
No stars ........................................................................................................................................... 19
MICHAEL DELLS ACHIEVEMENTS .................................................................................................... 20
Awards ............................................................................................................................................ 20

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Founding Dell Computer Corporation ............................................................................................ 20
Maintaining the Entrepreneurial Spirit in a Global Corporation..................................................... 21
CONTRIBUTIONS TO THE SOCIETY ................................................................................................... 23
Dells social welfare ....................................................................................................................... 23
Unique contributions to the American economy ............................................................................ 23
Created innovations that improve our quality of life ...................................................................... 24
Created new jobs ....................................................................................................................................... 24
Improved position in global economic competition ........................................................................ 24
Philanthropy .................................................................................................................................... 24
RECOMMENDATIONS ............................................................................................................................ 25


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SUMMARY OF BIOGRAPHY OF
MICHAEL DELL

MICHAEL DELL A BRIEF INTRODUCTION
He was born in February 23, 1965 (age 44) in Houston, Texas, U.S.
Education: Attended University of Texas, Austin, 19831984
Occupation: CEO and founder, Dell, Inc.
Net worth: $12.3 billion (2009)
Religious beliefs: Judaism
Spouse: Susan Dell
Children: 4

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ABOUT MICHAEL DELL

Michael Dell an American businessman and the founder and CEO of Dell, Inc was born in Houston, Texas,
in February 1965, the son of Dr. Alexander Dell, an orthodontist, and his wife Lorraine, a stockbroker. In
October 1989, Dell married Susan Lieberman, a commercial leasing agent. The couple has two children. At
one point, Dell would often tell his employees that his daughters first words were a plea to beat the
competition: Daddy, kill Compaq. Daddy, kill IBM.
When Michael Dell was only eight years old, he sent off for information on a high-school equivalency
diploma, hoping he could avoid putting in a full 12 years in school. His parents, however kept him in school
and later sent him to the University of Texas at Austin, hoping he might become a doctor. With his fledgling
computer company (which he operated from his dorm room) making $80,000 a month, however, he had
other plans. After his freshman year, he told them he wanted to spend the summer working in his business,
and if things did not work out with his venture, he would return to school. He never went back.
If there is such a thing as a born entrepreneur, Dell surely is one. When he was only 12, he made $2,000
through a stamp and baseball card trading enterprise that he operated through the mail. In high school, as
a newspaper delivery boy for the Houston Post, he aggressively sought out new subscribers by obtaining
mailing lists of newlyweds, then sending them a trial offer of two weeks free service, which he then
followed up with phone calls. The extremely enterprising young man made over $18,000 this way, which he
used to pay cash for a fully loaded BMW even though he was not yet able to drive.
This period in his life is also when Michael Dell discovered computers and found that he enjoyed taking
them apart and putting them back together. He soon realized that he could make money by adding
components to units and selling them for a profit. Soon he started doing business through magazines, as
he had earlier operated his stamp and card trading business. In college, he operated his business out of his
dorm room, which irritated his roommates so much that they barricaded his door with piles of his computer
equipment.


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EARLY LIFE AND EDUCATION
Dell was born into a family which liberally practiced Judaism. The son of an orthodontist and a stockbroker,
Dell attended Herod Elementary School in Houston, Texas. Dell had his first encounter with a computer at
the age of 15 when he broke down a brand new Apple II computer and rebuilt it, just to see if he could. Dell
attended Memorial High School in Houston where he did not excel academically. During that time he did
however exhibit formidable business instincts selling subscriptions for the Houston Post. Selling to
newlyweds Dell made $18,000 and bought a car and a computer with it.
CAREER
While at the University Of Texas At Austin, he started a computer company called PC's Limited in his room
in Dobie Center. The company became successful enough that, with the help of an additional loan from his
grandparents, Dell dropped out of the university at the age of 19 to run PC's Limited, which later became
Dell Computer Corporation, then ultimately Dell, Inc.
Over time, and despite a number of setbacks (including laptops that caught on fire in 1993, temporarily
losing the consumer market to Gateway in the mid 1990s, and others), Dell survived the race to become
the most profitable PC manufacturer in the world, with sales of $49 billion and profits of $3 billion in 2004.
The company was also one of the very first to sell computers via the Web. In July 1996, Dell offered online
purchasing. Even with no promotion or advertisement whatsoever, the site began selling 30 to 50
computers a day. As Dell expanded its product line to more than computers, shareholders voted to rename
the corporation Dell, Inc. in 2003.
Dells sales strategy has been to market to large corporations and computer enthusiasts rather than to first-
time buyers, reasoning that a consumer is a first-time buyer only once. Among its largest customers are
Shell Oil, Boeing, and Toyota. Another aspect of the companys business success stems from the fact it
only manufactures units it has already sold. Therefore, it maintains no inventory and is free of storage and
other overhead costs associated with maintaining a large warehouse stock.
On March 4, 2004, he stepped down as CEO of Dell but stayed as chairman of the board, while Kevin B.
Rollins, then president and COO, became president and CEO. On January 31, 2007, Dell returned as CEO,
succeeding Kevin Rollins (who resigned earlier in the day).

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Accolades for Dell include: "Entrepreneur of the Year" from Inc. magazine; "Man of the Year" from PC
Magazine; "Top CEO in American Business" from Worth Magazine; "CEO of the Year" from Financial
World, Industry Week and Chief Executive Magazine. At a speech before the Detroit Economic Club in
November, 1999, Dell defined the "3 C's" of e-commerce (content, commerce, and community) while
articulating his strategy for offering a superior customer experience online.
He appeared in the film, The Sno Cone Stand Inc., during the summer of 2008.
WEALTH AND PERSONAL LIFE
Dell currently resides in Austin, Texas with his wife, Susan, and their children, Kira, Alexa, and fraternal
twins Zachary and Juliette. Michael Dell uses some of his great wealth for philanthropic activities and has
started the "Michael and Susan Dell Foundation" with his wife Susan. The organization is committed to
improving the lives of children in the United States of America and internationally. A letter from Susan and
Michael Dell states that the role of the foundation is to focus on quality education and good health for
children. We recognize that these issues are directly connected. If children have the tools they need to take
care of their bodies and minds now, their potential for success in the future is greatly increased."
The Dell family lives in one of the largest houses in Austin, Texas and has been reported
SOCIAL AND ECONOMIC IMPACT
In 1991 Michael Dell said that he hoped to make his company a billion-dollar-a-year enterprise, a goal he
has surpassed significantly. In September 1997 Andrew E. Serwer asserted in Fortune that Dell
Computer has become the driving force in the PC business. By fiscal 1998 Dells revenues topped $12
billion, according to Internet Week, which also reported the companys income at $944 million for the
same period. Dell has also announced that he hopes to remain CEO for the next 60 years, and his 1993
reorganization helped to ensure that he would maintain power. Describing the position of Dell Computer in
the year 2000, Dell told an Internet Week interviewer, We dont want to be all things to all people. We
only have six percent of the PC market share. Some analysts have said that by growing at 40 percent a
year for five years, well have 12 percent share. That would be a good position to be in. He has said that
he is not afraid of dire predictions that the personal computer market will be saturated, since his focus is on
repeat rather than first-time buyers.

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POLITICAL LOBBYING AND CONTRIBUTIONS
In 2005, Susan and Michael Dell were among 53 entities that each contributed $250,000 (the maximum
legal donation) to the second inauguration of President George W. Bush.
FEUD WITH STEVE JOBS
Michael Dell had a public war of words with Apple, Inc. CEO Steve Jobs, starting when Jobs first criticized
Dell for making "un-innovative beige boxes". On October 6, 1997, when Michael Dell was asked what he
would do if he owned then-troubled Apple Computer, he said "I'd shut it down and give the money back to
the shareholders." In 2002, Dell's online store started selling Apple's iPod music players. They stopped
selling iPods in 2003, due to contract issues between Dell and Apple. On January 13, 2006, Apple's market
capitalization surpassed that of Dell.
EXPANSION TO BRIC
Michael Dell expressed his desire to expand Dell's market share in BRIC. To this, Vladimir Putin responded
by saying, "We don't need help. We are not invalids."
The success of Dell Computer has brought numerous awards and distinctions to founder Michael Dell,
including an Entrepreneur of the Year citation from Inc. magazine in 1990. In addition, he was named Man
of the Year by PC magazine in 1992 and CEO of the Year by Financial World in 1993. Dell is also the
richest man in Texas with earnings of up to $10 million a day. Comparing his own success with that of Dell,
whose company is an important Microsoft customer, Bill Gates noted in Fortune, We have both stuck
with our convictions, and learned from our mistakes Michael has the same passion for the industry I do.


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ANALYSIS OF MICHAEL DELL AS A BUSINESS
LEADER
TRAITS THAT MAKE MICHAEL DELL A BUSINESS
LEADER

INNOVATION AND INITIATIVE
When he was twelve years old, he operated a mail-order trading business for stamps and baseball cards,
earning $2,000. At the age of fourteen, Dell got his first computer, an Apple II and soon realized that he had
a knack for taking computers apart and putting them back together. While in high school, Dell took a job
delivering newspapers for the Houston Post. His aggressive selling strategies: which included obtaining
mailing lists of newly married people, offering them free trial subscriptions, and then following up with
phone calls resulted in earnings of $18,000? Not one to hold on to his spoils, Dell spent the money on a
new BMW.
"What people have never understood is that we're not like other companies."
In 1983, when Dell entered his freshman year at the University of Texas at Austin, his parents hoped he
would become a doctor, but Dell's skills lay elsewhere. In examining the personal computer, or PC,
industry, he noticed an opportunity to sell PCs for less, as he explained to Richard Murphy of Success
magazine: "I saw that you'd buy a PC for about $3,000, and inside that PC was about $600 worth of parts.
IBM would buy most of these parts from other companies, assemble them, and sell the computer to a
dealer for $2,000. Then the dealer, who knew very little about selling or supporting computers, would sell it
for $3,000, which was even more outrageous." Dell realized that he could assemble computer parts, skip
the step of selling to a dealer, and go directly to the consumer. That way the consumer could buy the
product for less, and Dell held on to every penny of the profits. Dell thus combined his knowledge of
computers with his well-developed business sense and began his own business, assembling upgrade kits
for personal computers.

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HIGHER NEED OF ACHIEVEMENT
By early 1985, at the age of twenty, Dell had thirty employees working for him. During the summer of that
year, the company began producing the Turbo PC, its first computer made entirely from scratch, rather than
a customized version of another company's machine. In 1987 Dell changed the name of the company from
PCs Unlimited to Dell Computer Corporation. At that time he began a program offered by no one else in the
industry: rather than having customers bring broken-down computers to a store for repair, Dell Computer
would pay house calls to service its customers' PCs. In Success magazine, Dell pointed out that this offer
came out of necessity rather than an ingenious plan to outperform competitors: "That was a pretty
important plus because we didn't have any stores," he recalled. During 1988 Dell began offering the public
the opportunity to buy stock in his company. Just four years after the company had begun, sales reached
$159 million. Dell found success in his personal life at that time, too; he married Susan Lieberman in
October of 1989. Residing in Austin's hill country, the couple has four children.

BEING 100% COMMITTED

In 1984, Michael started his dream venture with $1,000. He followed through his business plan and keep on
working on it. In his room in the university, he assembled computers for customers according to their
requirements and sells them directly to his customers.
His business idea was new because he assembled all the computers according to his customers
preferences and sell directly at a low price. He was the first to introduce the direct sales method in the IT
industry. The direct sales clicked and there was huge demand for computers. Dell knew that he could beat
computer dealers by selling a lower price with good technical service.

ALWAYS EXCEEDS EXPECTATIONS

Just like every other successful people, Dell started small. Most of his orders were placed through friends
and acquaintances that spread the word around. And by steadily developing his business, he moved to a

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small office and hired a few people to take orders and upgrade machines. Avoiding a third party to sell
computers turned out to be profitable and the company grew at a seriously fast clip.

Later in May 1983, Dell incorporated the company as Dell Computer Corporation. In 1985, Dell started to
design and make computers with components sourced from outside. His focus, right from the beginning,
was on customers and good service. He kept his vision and move toward his dreams step-by-step.

All his hard work paid off handsomely. By 1992, Dell Computer Corporation entered the Fortune 500 list of
the largest companies in the world. At the age of 27, he became the youngest CEO of a Fortune 500
company. And the rest is history.
Another one of the success strategies that Dell used is that the company was one of the very first to sell
computers on the Internet. This too became a huge hit. In 1999, Dell launched Gigabuys.com, an online
store featuring computer-related products.
Not only that, his business kept on growing and become the No. 1 player in the American market. Can you
see it now? How Michael Dell started from $1,000 and built his giant IT business worth more than $100
billion. It has been a very successful journey for Dell.
In 1999, with his wife, he formed the Michael and Susan Dell Foundation, which has an endowment of
more than $1 billion and focuses on childrens issues. This shows that Dell knows the miracle of tithing. If
you want to be a successful i your life, you must first make other people successful. If you want to be a
millionaire, donate and help more people to become richer. This is the law of the universe.

BALANCING PROFESSIONAL AND PERSONAL LIFE
Today, Michael Dell is recognized around the world, author of a best-selling book and frequently on the
cover of magazines such as Fortune. Despite his fame, Dell is a very private person.
Of his life outside the company, he says only: "I've got four kids. That keeps me pretty busy. I've got a very
active family life. . . . I like various sports and that sort of thing. I like to stay up to date on what's going on in
the world."
Although many people claim to know Dell, few claim to know him well. Those who do place a premium on
the friendship, not because of who Dell is, but what he does. "Family is his number one priority," said Jeff

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Newberg, a friend and co-founder of Endeavor Real Estate Group. "Most people don't have an appreciation
for the demands of being CEO of a company like Dell. I'm always amazed at how he makes his kid's
baseball games. He's a regular dad."
When asked to name his favorite place in Austin, Dell instantly answers: "Home." He's also a husband who
revels in his wife's athletic success as much as his company's achievements. Dell went to when Susan ran
the 2001 New York City Marathon.
OVERCOMING OBSTACLES
For nearly a decade, Dell has traveled a rare, steady spiral to the top without the controversies that have
engulfed other fast-growing companies. But it had to navigate some serious early crises. In 1993, the
company had spent millions developing its own line of notebooks, which were becoming a profitable
segment of the computer business. But Dell's products were flops. The company pulled its line, writing off
millions worth of inventory and wasted research and development and reporting its first quarterly loss.
Things looked bleak. It was a tough test for the CEO, who was just 28. "Michael was mortified. He was
really shaken up by this," Everett recalled.
A year later, the company ended a brief experiment with selling its computers in stores. Together, the two
incidents could have derailed the young company.
"Near-death is in the eye of the beholder," Dell said, although he acknowledges that those were challenging
days for the company. "You could find people that would say, 'Hey, she's gonna blow, and we saved it.' The
truth is, I don't think there were many of those times." With the help of a new senior management team,
Dell regrouped and rebounded, although it was still largely in the shadow of companies such as Compaq,
Apple Computer Inc. and Packard Bell.
"He was probably helped early on by being a small player in a rapidly growing market," said Young, the
retired analyst. "He honed his skills and management team, and whatever flaws he had, which were few,
were gone by the late '90s, and he chewed up everybody in sight."
Everett said one of Dell's toughest decisions came amid the tech slump in 2001, when the company had its
first big layoffs, firing 5,700 workers, nearly all of them in Central Texas.

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The layoffs also forced Dell to re-evaluate its stock-driven culture. The company embarked on an effort,
called "the soul of Dell," to become more employee-friendly, and began evaluating managers on employee
morale along with pure business performance.
MICHAEL'S GOLDEN GUT
Even then, the shy CEO with the thick glasses impressed others with his intelligence and an extremely
quick mind. "When he made a mistake, he wasn't terribly defensive about the fact that he'd made it. He
wanted to understand why, and he was determined not to make the same mistakes again." Dell's other gift,
is a golden gut, a "feel for where the user was in acceptance of new technology." But perhaps most
important, Dell long has surrounded himself with other smart people, leaving the day-to-day management
to them while he set the tone and plotted the technology road map for the company.
ENTREPRENEURIAL ABILITIES
Dell understood the meaning of "business opportunity" early in life, as his mother's profession, stockbroker,
frequently raised discussions of business and economic affairs at the family dinner table. So when he
began to collect stamps at age 12 and noticed prices rising, Dell recognized a business opportunity. He
determined the most profitable way to sell stamps would be to bypass the auctioneer and sell direct to
collectors. He compiled a 12-page catalog of his and his friends' stamps and advertised in a stamp
collectors' magazine. In this first business venture Dell earned $2000.
Dell further developed his business acumen at the age of 16, when he sold newspaper subscriptions for the
Houston Post. The inefficiency of cold-calling prompted Dell to find better marketing methods. He
determined that the people most likely to subscribe were newly married couples and people who had
moved. He obtained lists of marriage license applicants and mortgage applicants then used his Apple II
computer to address sales letters to people on these lists. The approach succeeded so well that Dell
earned $18,000 the first year and had bought a BMW automobile by the time he went to college. In the
back seat of that BMW, Dell carried three personal computers, the seeds of PC's Limited and Dell
Computer Corporation.
Dell's fascination with computers began with exposure to a data processor in junior high school then to
computers at the local Radio Shack store. After much persuasion, Dell's parents allowed him to use
savings to buy an Apple II computer at the age of 15. To the fury of his parents, upon arriving home Dell

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dismantled the computer to see how it operated. The following year, in 1981, Dell bought an IBM desktop
computer and learned how to upgrade and add new components. With insight that IBM-compatible
computers would become the choice of business, Dell began to buy, upgrade, and resell personal
computers for friends and acquaintances, eventually purchasing components at wholesale rates from
distributors. Exposure to the computer industry fostered Dell's desire to start a computer business. In June
1982 he skipped classes for most of a week to attend the National Computer Conference. After saving
money to buy a hard disk drive (not standard equipment at the time), Dell communicated with other
computer enthusiasts on a bulletin board system and learned how the industry operated. He found dealers
sold computers for $3,000 and made $1,000 gross profit, yet he could purchase components for less than
$700.
NO EXCUSES
Just as crucial is Michael Dell's belief that once a problem is uncovered, it should be dealt quickly and
directly, without excuses. "There's no 'The dog ate my homework here," says Dell. No indeed after,
Randall D Groves, then head of the server business, delivered 16 percent higher sales last year, he was
demoted. Never mind that none of Dell's rivals came close to that. It could have been better, say two former
Dell Executives. Groves referred calls to a Dell spokesman, who says that Groves job change was part of
a broader reorganization.
Above all, Michael Dell expects everyone to watch each dime-and turn it into at least a quarter. Unlike most
technology bosses, Dell believes that every product should be profitable from Day One. To ensure that, he
expects his managers to be walking databases, able to cough up information on everything from top-line
growth to the average number of times a part has to be replaced in the first 30 days after a computer is
sold.
But there's one number he cares about most: operating margin. To Dell, it's not enough to rack up profits or
grow fast. Executives must do both to maximize long-term profitability. That means that products need to
be priced low enough to induce shoppers to buy, but not so low that they reduce profits unnecessarily.
When Dell's top managers in Europe lost out on profits in 1999 because they hadn't cut costs far enough,
they were replaced. "There are some organizations where people think they are a hero if they invent a new
thing," says Rollins. "Being a hero at Dell, means saving money."

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How did this Mike come by his management philosophy? It started 19 years ago, when he was ditching
classes to sell homemade PCs out of his University of Texas dorm room. Dell was the scrappy underdog,
fighting for his company's life against the likes of IBM and Compaq Computer Corp with a direct-sales
model that people thought was plain nuts. Now, Michael Dell is worth $17 billion, while his 40,000-
employee company is about to top $40 billion in sales. Yet he continues to manage Dell with the urgency
and determination of a college kid with his back to the wall. "I still think of us as a challenger, he says, "I
still think of us attacking."
DIRECT-SALES STRATEGY - KEY TO SUCCESS

At the heart of his computer company's success has been its adherence to Dell's original concept of a
direct-sales model. Customers can place their orders by calling Dell's toll-free number or by logging on to
the company's Web site. Their orders produce a made-to-order computer that is shipped within 36 hours.
Because the company builds only to order, it has managed to keep its inventory to less than 6 percent of
sales. Further slashing its inventories, Dell maintains a close relationship with most of its suppliers, many of
whom have built new facilities close to Dell's headquarters outside of Austin.
By 1993 Dell's annual sales had climbed to $2 billion, although the company reported a loss of $36 million
for the fiscal year, which ended January 31, 1994. That same year, Dell joined the ranks of the top five
computer system manufacturers worldwide. The following year the company powered back with a profit of
$149 million.
Dell was quick to recognize the potential of the Internet as a marketing tool. By 1996 the company's Web
site (http://www.dell.com) was booking orders from customers. In the late 1990s Dell appeared on the
company's television commercials to plug the company's newly created online technical support called "E-
Support-Direct from Dell." Of the company's new advertising strategy and its growing use of the World
Wide Web as a selling tool, one Dell executive said "it will leverage our position on the Internet and show
how it's easier for customers to do business with us." Dell's Internet strategy paid off well, favorably
impressing major customers like the Ford Motor Company. In September 1999, Ford's CEO observed: "We
can interact much, much more efficiently with them [Dell] than with their rivals."


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KEPT CLOSE TIES WITH SUPPLIERS
Dell has continued to refine his company's Internet strategy, moving aggressively to maintain close
communications with Dell's key suppliers. By the dawn of the new millennium the company had connected
90 percent of its suppliers onto Dell's factory floors via the World Wide Web, allowing suppliers to see
current information on orders and thus replenish supplies only as needed. Using this and other techniques,
Dell was able to cut its inventories to a mere five days' worth in 2000, a sharp reduction from 13 days' worth
in 1997. By contrast rival Compaq Computer (since merged into Hewlett Packard) had more than three
weeks of inventories on hand in the first quarter of 2001.
Another important element in Dell's growth strategy has been its expansion into overseas markets. As early
as 1987, the company opened a subsidiary to serve the United Kingdom. In 1990 Dell opened a
manufacturing facility in Limerick, Ireland, to build computers for sale in its European, Middle Eastern, and
African markets. In 1993 the company expanded into the Asia-Pacific region with the opening of
subsidiaries in Australia and Japan. This was followed in 1996 with the opening of an Asia-Pacific
manufacturing center in Penang, Malaysia. To serve its growing market in China, Dell in 1998 opened a
production center in Xiamen, China. The following year saw the opening of a factory in El Dorado do Sul,
Brazil, to serve Dell's growing Latin American market.
Interviewed in October 2002 by Esther Wang of the Daily Texan, Dell was asked what it was that set his
company apart from its competitors. In response, he pointed out that "we took a very different approach to
customers. Our business, I think, understood and anticipated customer needs much better than our
competitors," most of which sold their products through intermediaries and dealers, "which certainly was
the industry started, but it's not the way it's evolved. Our business system has proven to be more
responsive and more efficient in providing what customers want."


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SETBACKS IN MICHAEL DELLS LEADERSHIP

MAKING SOME WRONG BUSINESS DECISIONS
Rapid growth challenged Dell's abilities as a businessman. Although he made many mistakes, Dell credited
those mistakes with helping him learn quickly. It was ironic that when Dell made big mistakes, those
mistakes conflicted with his most cherished ideas: to manage inventory, to focus on the customer, and to
sell direct to the customer.
The first major mistake involved excess parts inventory and led to innovation in high-tech production.
Growing at a rapid pace, the company bought as many parts as it could. When technology changed in
1989, however, the company was left with memory chips that could not be used or sold. The company had
to raise prices to compensate for the loss, slowing growth. Taking an unconventional approach to problem
solving, the company implemented supply process in partnership with vendors. This strategy limited parts
inventory, so that when technology changed, Dell Computer could adopt the new technology quickly.
During the late 1990s Dell refined supply chain management to less than an eight-day lead, whereas
competitors maintained inventory of preconfigured computers for more than 60 days. The vendor
relationships worked because Dell shared information and helped vendors stay abreast of technological
change.
The second major mistake involved development of the Olympic computer, introduced in 1990 with
technology that far exceeded anything in the industry. Customers said they did not need that much
technology. While certain elements of the new technology were applied elsewhere, Dell realized he had not
communicated with his customers before product development. He learned that slow, incremental change
served the customer better.
The third problem involved entry into the retail market in 1990. Once profit and loss analysis by business
segment was put into place, Dell discovered that the company lost money in retail. Although retail sales
accounted for 10 percent of total sales, and retail sales were growing more than 15 percent industry wide,

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Dell risked an exit from retail in 1994 and refocused on the direct model. Dell launched www.dell.com that
year, introduced online pricing in 1995, and initiated online sales in 1996. Internet sales quickly reached $1
million per day and increased to $50 million per day in 2000. Dell Computer entered the market for servers
in 1996 and storage products in 1998, passing the cost savings of the direct model to customers. Again,
Dell's direct method, selling servers and storage products directly over the telephone and then via the
Internet, defied conventional wisdom.
INTENSE AND HURRY
That intensity carries over into Dell's private life, says Paul Carrozza, owner of the RunTex shoe chain in
Austin, who frequently runs and plays racquetball or basketball with Dell.
"I like any good competitive game where there's a lot of noise and smashing things," Dell said. "It's OK if I
lose, just as long as I get to play again."
Dell has always been in a hurry. And that might cause make big mistakes. But still Dell's story of starting a
computer company with $1,000 and growing it to a $1 billion public company in less than 10 years already
is the stuff of American business legend.
But when he opens a binder of mementos from the company's early days, Dell clearly is proud of the
company's journey. Old products and ads tell the story of what was very much a work in progress.
"Here's an ad saying we shipped 25,000 computers in the last nine months; today, that would be a really
slow morning for us," Dell said.
RAISING CONFLICTS WITH POLITICAL FIGURES
DAVOS, Switzerland (Fortune) - Ever since Vladimir Putin rose to power in 2000, his political opponents
and entire countries have learned to their cost that he has a tough, demeaning streak. Wednesday it was
Michael Dell's turn.
At the official opening ceremony of the World Economic Forum in Davos, Putin, now Russian Prime
Minister, delivered a 40-minute speech touching on everything from why the dollar should not be the sole
reserve currency to how the world needed to enter into a smart energy partnership with Russia. Then it was

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time for questions. First up: Dell. He praised Russia's technical and scientific prowess, and then asked:
"How can we help" you to expand IT in Russia.
Big mistake: Russia has been allergic to offers of aid from the West ever since hundreds of overpaid
consultants arrived in Moscow after the collapse of Communism, in 1991, and proceeded to hand out an
array of advice that proved, at times, useless or dangerous.
Putin's withering reply to Dell: "We don't need help. We are not invalids. We don't have limited mental
capacity." The slap down took many of the people in the audience by surprise. Putin then went on to outline
some of the steps the Russian government has taken to wire up the country, including remote villages in
Siberia. And, in a final dig at Dell, he talked about how Russian scientists were rightly respected not for
their hardware, but for their software. The implication: Any old fool can build a PC outfit.
NO STARS
It's not that Michael Dell leads by force of personality. He's blessed with neither the tough-guy charisma of
Jack Welch nor the folksy charm of the late Sam Walton. Once, after hearing about the exploits of
flamboyant Oracle Corp CEO Lawrence J Ellison, he held up a piece of paper and deadpanned to an aide:
"See this? It's vanilla and square, and so am I." This egoless demeanor permeates the company.
Everyone is expected to sacrifice his or her own interests for the good of the business, and no one gets to
be a star. If Michael Dell is willing to modify the personality traits he was born with, other top executives are
expected to be just as self-sacrificing. Frequently, Dell pairs executives to run an important business, an
approach called "two-in-a-box." That way, they work together, checking each other's weaknesses and
sharing the blame when something goes wrong. One such executive calls Dell's senior leadership "the no-
name management team.


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MICHAEL DELLS ACHIEVEMENTS
AWARDS
Customer Satisfaction Award, J. D. Power and Associates, 1991; CEO of the Year, Financial World, 1993;
CEO of the Year, Industry Week, 1998; Entrepreneur of the Year, Inc., 1998; Chief Executive of the Year,
Chief Executive, 2001.
Dell's breathtaking success made him, at age 27, the youngest CEO of a Fortune 500 company in history,
and Fortune magazine named his company one of the most admired firms in America, following General
Electric, Coca-Cola, and Microsoft. Michael Dell defied conventional wisdomthat consumers would not
purchase computer equipment over the telephoneand built a billion-dollar company doing just that.
Through his direct method of offering low-cost, custom-configured personal computers direct to customers,
Dell changed the competitive dynamic of the computer industry. Notable for a natural business talent
coupled with a willingness to share power, Dell carried the company through rapid growth and economic
difficulties. He innovated operating processes, took risks, learned through his mistakes, and built Dell Inc.
from a college dormitory operation to a global corporation. Along the way Dell became one of the wealthiest
Americans and the youngest CEO of a company on the Fortune 500 list of largest American companies.

FOUNDING DELL COMPUTER CORPORATION
Dell determined that he could compete with retail computer dealers by selling direct to consumers at a
lower price and offering better technical service, Dell went to the University of Texas at Austin in fall 1983.
While he attended to premed studies, Dell continued to upgrade and resell computers, finding customers
among students and local business-people through word-of-mouth. In early 1984 Dell registered PC's
Limited with the state of Texas and moved to a two-bedroom condominium. Between word-of-mouth
referrals and a small advertisement in the local newspaper, PC's Limited sold between $50,000 and

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$80,000 per month in computers, add-on components, and upgrade kits. The week before final
examinations in May 1983 Dell incorporated the company as Dell Computer Corporation with the state-
required minimum of $1,000 capital. He never returned to college.
PC's Limited moved to a 1,000-square-foot office, and Dell hired a few people to take and fill orders and
upgrade basic machines. Computer sales increased so rapidly that the company outgrew that facility and
two larger ones in one year. When the company moved into a 30,000-square-foot facility in 1985, Dell
believed the space would never be used. But that year the company began to design and build computers
with purchased components. Dell hired an engineer to develop a 286 microprocessor from chip sets, a
strategy that simplified computer design. In spring 1986 Dell introduced the fastest personal computer of
the time, a 12-megahertz 286 processor. The price of $1,995 compared favorably with IBM's price of
$3,995 for a 6-megahertz 286 processor. The machine caught the attention of the news media and
garnered excellent performance reviews and a cover story in PC Week. Sales exploded to $60 million that
year.
In May 1994 Dell hired the former Motorola executive Morton L. Topfer as vice chairman. Topfer's
experience in product cycles and management restructuring fit well with Dell Computer's needs for
executive leadership. Dell handled products, technology, and general strategy and took a more public role,
that of customer relations, dealing with the press, and giving speeches. Topfer handled budget, day-to-day
operations, sales, and marketing. The change allowed Dell to spend more time with his growing family, and
Topfer brought ideas and discipline to a new emphasis on detailed, long-range planning. A three-year goal
of achieving $10 billion in revenue by the end of 1997 was exceeded by $2 billion.

MAINTAINING THE ENTREPRENEURIAL SPIRIT IN A GLOBAL
CORPORATION

During the company's early years of rapid growth, unconventional thinking and new ideas pervaded the
decision-making process at Dell. A simple, informal business process was the consequence and the
facilitator of rapid expansion. Employees frequently handled any task needed, such as taking orders when

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the telephone lines were busy. Those salespeople had to set up their own computers cultivated customer
service through hands-on experience with the product from the point of view of the user.
As sales rose from the millions into the billions, Dell sought to maintain an entrepreneurial company culture
while addressing the needs of a publicly owned, global corporation. Involving more facts and data in the
decision-making processes constituted a major adjustment to the free-spirited, entrepreneurial culture of
the company. A careful approach involved not pursuing every business opportunity but prioritizing, because
growth can occur too quickly and threaten the existence of the company. Rather than pursue every idea,
Dell chose to examine ideas more closely in relation to the whole of the company and to develop chosen
ideas to their full potential.
One way that Dell strove to maintain the intimacy of a small company involved creating manageable
business units, beginning in the mid-1990s. Corporate sales divided into small and large companies, then
medium-sized companies. International divisions divided into specific markets as sales increased. In 2003
sales to educational institutions segmented into kindergarten through grade 12 and higher education.
Segmentation allowed executives to move into positions of manageable, if fewer, responsibilities. The
challenge of segmentation involved sustaining a sense of common goals. To unify a large organization of
people with diverse responsibilities, Dell believed that each individual needed to understand his or her role
in contributing to overall success. Communication throughout the company via e-mail newsletters and
posters as well as compensation incentives furthered this goal.


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CONTRIBUTIONS TO THE SOCIETY

DELLS SOCIAL WELFARE

Dell intends to share some of the wealth. In recent years, he has plowed more than $1 billion worth of stock
into the Michael and Susan Dell Foundation, which now is one of the country's largest private charities.
Dell began giving substantial sums of money more than a decade ago. One of the first instances involved a
long wished-for campus for Austin's growing Jewish community. It was just talk until 1992 or 1993, when
the group learned about a 40-acre site on Hart Lane in Northwest Austin.
"It was a very, very valuable piece of property," said attorney Michael Deitch, who chaired the committee
that oversaw construction of the Dell Jewish Community Campus. "So we asked the Dells, 'Would you help
us out?' And they bought the land and donated it."
It became a model for Dell's giving. "I'm a pretty results-oriented guy," he said. "If I'm going to give away
some money, I want something good to happen rather than just people feeling good for a while. I want
something really good to happen."
Last year, Dell family foundation gave away about $20 million. It's part of a conscious effort to give money
away before they die. Dell doesn't micromanage his donations, Deitch said. And despite multimillion-dollar
donations to the Jewish community campus, the Austin Children's Museum and the Long Center for the
Performing Arts, as well as children's health insurance and education programs, the Dells keep a
surprisingly low public profile.
UNIQUE CONTRIBUTIONS TO THE AMERICAN ECONOMY

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Dell currently has offices in 34 countries with nearly 36,000 employees. Recognizing the extra and
unnecessary costs of retail distribution, Dells innovative direct service industry has created a PC that is
inexpensive and designed to meet the needs of the individual customer. Michael Dell currently is the
longest-serving CEO in the PC industry.
CREATED INNOVATIONS THAT IMPROVE OUR QUALITY OF
LIFE
Michael Dell has established a number of foundations within his organization committed to philanthropic
and community services. These foundations work to advance educational, environmental, business,
economic, and social issues.
CREATED NEW JOBS
In just 18 years, Dell has grown from a one-person operation to a company of 36,000 employees. In 1988,
when Michael Dell took his company public, Dell employed 650 people and posted sales of $159 million.
IMPROVED POSITION IN GLOBAL ECONOMIC COMPETITION
Dells corporate headquarters are in Austin, Texas, where the company was founded. Texas also is home
to Dell Americas, the regional business unit for the United States, Canada and Latin America. Dell has
regional headquarters in England, for Europe, Middle East and Africa; in Singapore to serve Asia-Pacific;
and in Kawasaki, Japan, for the Japanese market. The company manufactures its computers in six
locations: Texas, Tennessee, Brazil, Ireland, Malaysia, and China.
PHILANTHROPY
On May 15, 2006, The University of Texas At Austin announced a $50 million grant from the Michael and
Susan Dell Foundation to "bring excellence in children's health and education to Austin". The grant will
enable the construction of three new facilities at the university. The first is the Dell Pediatric Research
Institute which is expected to complement the new Dell Children's Medical Center nearby. The second is a
new computer science building on the UT campus named Dell Computer Science Hall. The third is

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the Michael and Susan Dell Center for Advancement of Healthy Living, which is intended to address issues
that affect healthy childhood development.
In 2002, he received an Honorary Doctorate in Economic Science from the University of Limerick, in honor
of his investment in Ireland and the local community along with his support for educational initiatives.

RECOMMENDATIONS

Compatibility - Since Michael Dell believed in innovation and he wanted to manufacture
innovative products, he should not buy access inventory in the future as this can lead to losses.
However, even if he purchases extra inventory, it should be compatible with other products he is
manufacturing.

Complexity - Dell must conduct research to know what the customers actually want before he
decides to launch a very high-tech computer. This is because the people do not like to purchase
products that are difficult to use.

Opportunity - Dell must focus on customization only instead of moving towards the retail business
where he had to face losses previously. There are certain situations that need time and it is not
always beneficial to be in a hurry of taking decisions.

Cross-culture communication - Dell must increase his knowledge about various countries before
he aims to start business since every country has their own culture and values. Like the Russia did
not welcome Dells gesture when he offered help to expand IT, there might be some other
countries too that might take this gesture in a negative manner.

Incubation - Dell must learn to make sacrifices in certain cases since every situation would not be
always in his favor.


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REFERENCE
Durbin, A.J. (2006). Leadership: Research Findings, Practice, and Skills. 5
th
Edn. Houghton Mifflin.
Friedman, L.S. (2008). Business Leaders: Michael Dell. Morgan Reynolds Publishing.

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