Gateway Inc.Issues: · The US personal computer market continues to struggle and Dell has just cut its prices by about 20%. As a result, its stock price increased by 13% and its market share increased. · How should Gateway respond to Dell and its recent price cuts? o Gateway's price cut could jeopardize gross profit margins. o Conversely, unit sales were already declining, potentially leading to additional lost sales. Resource Allocation: o Should Gateway focus more on sales to US consumers or sales to US businesses?§ Keeping in mind that Gateway plans to discontinue the company's operations outside of North America in late 2001. o How should Gateway manage its sales and advertising operations? (Keeping in mind that the 2001 advertising budget is about $20 million less than the 1999 budget of $239.6 million.)§ How much emphasis should be placed on PC and PC-related units versus "beyond the box" products and services?§ Where should Gateway's marketing efforts direct customers: over the phone and to its website or to its national stores? · Operating issues with respect to selling, general and administrative expenses (s, g, a): o Overall company expenses, g, a would decrease due to:§ Closure of manufacturing operations, sales and service in North America§ Reduction in the number of national stores§ Fewer advertising fees and expenses§ End of the alliance with OfficeMax o However, decisions regarding continued spending still had to be made:§ The concept of Does Gateway store require further consideration regarding Gateway's business model of operating as a built-to-order product? · Gateway's gross margin and operating costs required attention in order to become profitable again o The influential aspects of its customers' sales mix, its product sales mix, and its sales mix across its 3 distribution channels needed to be monitored at once and combat Dell's lower prices. This could potentially happen by offering off-the-shelf core products with the purchase of a PC and aggressively encouraging upgrades and additional features that customers can't refuse. Another way to counter other PC manufacturers is to differentiate yourself. By focusing on operating its make-to-order method as efficiently as possible, leveraging its third, distinct channel of stores, and remaining technologically as innovative as possible, it is able to differentiate itself from its competitors. Finally, in addition to its pursuit of the consumer market, I think Gateway could benefit from more assertive targeting of the commercial segment led by Dell. It is a fact that PCs sold for professional purposes tend to be of better quality and therefore more expensive with higher margins. In 2000, 65% of Dell's PC sales were intended for the professional sector while Gateway's main market was consumer sales, which were often less profitable. If Gateway could address the enterprise market, without completely losing its consumer sales base, it would be able to better compete, notably with Dell..