Crisis management of the pricing mistakes committed by Dell

Abstract

Purpose

There are two purposes of this study. First, it aims to discuss some measures managers would take on the basis of an empirical case study – Dell's pricing mistakes on the web site – and find out the underlying motivation regarding consumers' attitude toward Dell. Second, there appears to be a fruitful opportunity to explore whether consumers' requests or different degrees of compensation will have any impact on organizational reputation (intangible assets).

Design/methodology/approach

The survey investigates consumers' attitude toward the Dell crisis case, including how and why it affected the reputation of the company. The main questionnaire survey was conducted after the Dell pricing mistakes. In total, 433 samples were found valid and kept for further examination. The study tests the proposed hypotheses by structural equation modeling (SEM).

Findings

By taking Dell's pricing mistake on the web site as an example, the study finds that managers sometimes opt for solutions unfavorable to the whole organization, in order to ensure self interest, including over quota coupons to reimburse consumers, which would be harmful to other stakeholders. Managers face not only consumers' interests but also other stakeholders' as well as corporate intangible assets. Also, consumers have different backgrounds and these characteristics will exercise influence on perceived crisis management.

Originality/value

Although the academic literature has given much attention to the internet issues or crisis management, little attention seems to have been paid to the crisis potential coming from the internet. The power of consumers may hugely increase in the internet age and make the crisis graver, because the internet changes the ability of external commentators to make their opinions widely known, and hurts the reputation of corporations more deeply. A major theoretical contribution of this study is comprehension and filling the gaps in the existing literature. Agency theory and stakeholders' view provides a logical explanation of how and why these things happened.

Citation

Chi, D. and Hung, H. (2011), "Crisis management of the pricing mistakes committed by Dell", Management Decision, Vol. 49 No. 6, pp. 860-873. https://doi.org/10.1108/00251741111143586