(Porter, this it can be hard to minimise the

(Porter, 1980). For example, with
Dell the bargaining power of suppliers is low due to the PC industry being an
industry heavily populated with suppliers with only a smaller number of brands
that they can sell to. This gives Dell the ability to make sure that their
suppliers keep up to standards, by making suppliers undergo regular social and environmental
audits (Dell-CSR-Supplychain, 2017) as suppliers will not want to lose the business
as there are a limited number of other brands they can supply to – Dell has the
control. However, the level of industry rivalry Dell faces is high as there are
many rival brands such as Apple, HP this means that they must consider
investing into strategies such as innovation (Porter, 1980) to maintain profitability,
but with the rest of the key brands also doing this it can be hard to minimise the
threat.

Another way in which Dell
establishes its network position is through using Porter’s generic strategy
model (1980) which is using generic strategies to create a competitive advantage.
Dell operates on a ‘hybrid broad-focus” strategy (Mind tools, 2010) which is a
strategy which “seeks simultaneously to achieve differentiation and a price
lower than that of competitors” (Johnson et al, 2008, p3). In terms of cost
leadership, Dell bypasses distributors and retailers which are used by
competitors, selling computers directly to end consumers. This therefore means
that they can keep a portion of the dealer’s profit pool for themselves and
share it with consumers in terms of lower prices (Gadiesh & Gilbert, 1998).
By reducing the cost of intermediaries and using a ‘built to order’ system they
are able to achieve lower costs than their competitors across a broad range of
segments (Ogden & Wersun, 20017, p.282). Through their reduced costs, they
are able to implement an aggressive pricing policy which other competitors
cannot, this also enables them to gain market share from any competitor that
has “taken their eye off the ball and let costs increase (Ogden &
Wersun,2007, p.60). In terms of differentiation, Dell enable customers to
purchase their own customised computers which specific software requirements, a
throughout the 1990’s Dell was offering a business proposition which was unique
(IBS&SCM Lecture notes, week 2). Therefore, Dell was operating a hybrid broad-focus
strategy.

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Once firms are placed in an
advantageous position, just like Dell in the 1990’s, they have the option to
think about movement, which can suggest that it is simple for firms to
successfully move into new positions (IBS&SCM Lecture notes, week 3).
However, Peter Clark, 2000, introduced the concept of ‘zones of manoeuvre,
which suggests that firms have zones which they are able to operate, but moving
beyond these is a challenge due to finite capabilities. Boundary of the firm decisions
are also required, which involve firms deciding what will be undertaken in the
business and which activities to outsource. Factors such as national context
and organisational politics can affect this, as employees may challenge change
creating a conflict of interest. Many firms now decide to choose the option of
outsourcing certain activities, which previously would’ve been undertaken
internally. But, it is key for a firm to factor in their capabilities, as they wouldn’t
want to outsource their core capabilities as suppliers may then supply it to competitors.
However, it may be beneficial to them to outsource their ‘zones of irrelevance’
(Grant, 1998) as they aren’t particularly good at these anyway so they are not
beneficial to success (IBS&SCM Lecture notes, week 3). An example of this
is, in 2009, Dell decided to expand its global supply chain to include
retailers and design manufacturers, which meant that they acquired IT service provider
Perot Systemsin. But unfortunately, this placed too heavy a burden on Dell’s
supplier management process, so in order to combat this they decided to
outsource these processes and systems to Inovis, an IT-based ‘business-to-business’
outsourcing provider (Information Age, 2010).

So, to be able to operate in an
attractive network position, the firm must consider a variety of different
factors and influences. Once the firm has considered boundary decisions and
positioning, it must focus on its management of its downstream and upstream
relationships, as they want to be able to place themselves in a position where
they can maximise surplus value (IBS&SCM lecture notes, week 4).  Through regularly getting a good share of
surplus value (downstream and upstream) rents are made more likely for the firm
– meaning they stand a higher chance of being sustainably profitable. If a firm
has power over both its suppliers and customers, a firm can achieve a high
share of surplus value, however this is not easy to achieve. Power can play a
key factor in achieving surplus value, according to Emerson’s (1962, 1972)
power-dependence theory, the power of one party over another is an inverse
function of his or her dependence on the other party, therefore meaning that
the party who is most dependent on the other has the least power. In a
buyer-supplier relationship, both the buyer and supplier want the power as then
they can get a larger share of surplus value.  Buyer-supplier relationships are characterised
by four generic structures; buyer dominance, buyer-supplier independence,
buyer-supplier interdependence and supplier dominance (Campbell &
Cunningham, 1983).

Buyer’s want to ensure that they
are getting their ideal level of value for money (VFM), which is described as a
trade-off between ‘whole-life-cost’ and ‘functionality’ (IBS&SCM lecture
notes, week 4). Dell has a strong relationship with its suppliers as it uses “virtual
integration” in its supply chain (The Economist, 2009), which means that rather
than being vertically integrated, they in fact assemble computers from other firm’s
parts whilst having relationships with suppliers that are more binding than
traditional links. This means they could seek out long term relationships
(Marsdd, 2011) with key suppliers such as Samsung & LG (Dell, 2017). Through
establishing stronger relationships with suppliers, it means Dell has more
power than the supplier as they won’t want to use the business, whereas Dell
could move to a different supplier in the populated industry, meaning they can
require suppliers conform to their regulations (Dell, 2017). They use a JIT management
system (Cox, 2008) meaning that they need to have strong relationships with
suppliers or they risk not getting their raw materials on time, which would
damage their whole model and mean that they use customers, losing out on part
of their percentage of the profit pool, and damaging their network position.
So, in this case the relationship with suppliers is vital.