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EXECUTIVE SUMMARY
In the Spring of 2000, Gateway executives had increasingly focused on moving their revenue streams “beyond the box” – that is, away from a dependence on PC product sales toward PC solutions sales. ... In 2000, Dell and Gateway were the fifth and sixth largest PC-manufacturers in the world, respectively.
The purpose of this paper is to examine Gateway’s transition from a PC-manufacturer to a solutions provider, provide an overview and analysis of the market situation and the company’s “hexagon” strategy, and observe whether this strategy is sufficient to stem the erosion of their market share and reposition Gateway as a market leader.
COMPANY BACKGROUND
Gateway was founded by Ted Waitt on a South Dakota farm in 1985. ... By eliminating resellers, Gateway was able to offer these buyers a full-featured system for approximately the same price as competitors’ stripped-down systems.
Gateway differentiated itself with folksy advertising campaigns that played up its Midwestern roots (complete with cow-spotted shipping boxes), and by providing personal service throughout the lifecycle of the sale and beyond. Gateway’s only sales channel was the telephone, as it eschewed developing a corporate sales force or using retail outlets and other resellers. ... Gateway was a link in a linear supply chain, buying components from suppliers and assembling them for sale to the final customer. ... Gateway assembled PCs at its own plants as orders were received, and shipped them directly to the customer. ... Sales surpassed $1 billion by 1992 and were nearly $9 billion by the end of 1999, but Gateway dramatically trailed rival Dell in both growth rate and margin.
Dell and Gateway share similar business models: from inception each offered affordable personal computers built to customer specifications via a primary channel of direct telephone sales. However, Dell focused their energies on large corporate accounts while Gateway ruled the home consumer market. ... Moreover, customers often pay for the final product before the vendor pays suppliers for the parts that go into the PC; direct vendors Dell and Gateway both operate on a negative cash conversion cycle.
Approximate Word count = 1681
Approximate Pages = 6.7
(250 words per page double spaced)
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