The WSJ discusses Dell's plan to sell the factories where it assembles computers, probably to contract computer makers. One reason is that the factories are no longer efficient being linked to the marketing organization of a large, integrated organization. By contrast, HP and Apple largely contract with separate companies to make their computers. As the article says,
Contract manufacturers can generally produce computers more cheaply because their entire operations are narrowly focused on finding efficiencies in manufacturing, as opposed to large firms like Dell, which must also balance marketing and other considerations.
Even slightly lower costs are significant in this highly competitive industry.
I've been writing about how the move from fully integrated to unbundled firms is one of the factors underlying the rise of the uncorporation.
The corporate form, in the view of Margaret Blair and other writers, was critical to the rise of large firms like Sears and GM described by Alfred Chandler in The Visible Hand. Chandler argued that these firms were successful because they could combine vast manufacturing and marketing operations into a seamless whole. In order to do this, corporations had to be able to "lock-in" owners' capital and keep it at the disposal of centralized managers. The partnership form, subject to dissolution at will, was unsuitable.
Dell's history shows how things are changing. Firms are now networks of contracts rather than owners of vast integrated operations. Dell illustrated this change to the extent that it didn't own its parts suppliers. See Lamoreaux et al., Beyond Markets and Hierarchies: Toward a New Synthesis of American Business History, 108 Am. Historical Rev. 404 (2003) and my Why Corporations?. But modern computer firms, as discussed above, have proceeded further toward disintegration.
The reduced need for capital lock-in reduces a critical advantage of the corporate form over the less permanent partnership. And so we move toward Uncorporating the Large Firm. Sears and Chrysler have uncorporated. Can Dell, LLC be far behind?
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