Core problems faced by Gateway Computers

Gateway computers is facing crisis as it is suffering from loss in terms of the market share. The company has been a fortune 500 company that is now facing the problem of depleting sales. The other issue is the problem of the advertising and branding for which company. The study will take into account the core issues associated with the company and the SWOT analysis of the company will be done. Apart from that the company plan of action and the contingency plan will be discussed. The recommendations to the company will be given in regards to the change of the stance and the new strategy for competing in the markets.

The core problem that looks intrinsic to the company Gateway is that despite being a big player in the market it has not been able to form the right strategy in the markets that are able to sustain the sales. The dual issue is that the company is not able to market the PC products due to change in dynamics of the customers on the other hand, the company has not been able to form the right branding and marketing strategy due to constant change in stance for advertisement agencies. The taglines of the company have been changed several times over the years and the situation now is that the customers find it difficult to relate to the products. Even in case of good advertisements and positive responses from Siltanen/Keehn. However the tenure of advertisements was short lived. The problems lie that the company has not persisted with any viable option in a period of time. They kept on changing in the environment that has been competitive and the other companies are looking to grab the market share. Dell has been trying hard by competing in the markets and grabbing the share from its low costs strategies. Therefore the organization should be forming branding strategies that allow them to grab the market share. It has been seen that the company has been changing the strategies of advertisements quite a lot of times. Therefore it is important to understand that the problem lies in change of advertisement plans on a regular basis. The company should be able to check for the new options rather than keeping the focus on the PC sales that is a declining business. The company should be able to check for the new options rather than keeping the strategies only for the business that is showing declines.

Porter Five forces model has been used in order to understand the situational dynamics of the company (Porter, 1985).

Threat of Substitutes

The threat of substitutes is higher in this industry. This is due to the fact that the technology is changing and the dynamic nature of the industry is making the consumers shift to other products like laptops and therefore PC sales are depleting.

Threat of Rivals

The threat of rivals in the industry is very high as the aggressive style of marketing from Dell is declining the market share for other companies like Gateway. Dell is marketing the products through low cost strategies. Other companies like Hewlett Packard is opting the strategies of acquisition.

Porter Five forces model analysis

Threat of New Entrants

This threat is probably lower in the case of Gateway as the company entering into the business should have rich experience in terms of the technology and should have sound finances in order to market and advertise its brands. Established players are already there in the market that reduces the possibility of easy entry for the new companies by aggressive marketing efforts.

Threat of Suppliers

The threat of suppliers is higher as the suppliers in this case are the advertising agencies. These agencies are strategizing for the company’s marketing and therefore company should keep a watch on how to handle these suppliers of services. In case of Gateway the issue has been the advertisement agency selection and the use of the branding strategies for the customers.

Threat from Buyers

The buyer’s threat for this industry is high as the buyers can choose from variety of options in the PC business. The technology is always dynamic and therefore Gateway should be facing the issues of changes of customer perception if a value added product is given to the customer.

Strengths

Strength of the company is market presence and the image of the company. Company has also expanded the presence in the plasma markets and therefore the share in the same has been 10 percent. The company has reached a peak in the year 2000 due to rapidly growing sales and therefore the company has the experience of capturing the markets with its innovative products. The easy to use products of the company along with unparallel customer services and supports are the unique feature.

Weakness

The company oflate is giving too much attention to the branding and advertisements of the products to create a differentiation in the market. This is unlike of the image of the company that has been focusing on the innovation. The other weakness of the company is the lack of persisting good advertising agencies. Just because of the comfort levels of Ted Waitts the company has been paying the price of rapidly changing the branding strategies. The other companies have been keeping the focus on only targeting the market.

Opportunities

Opportunities in the areas of plasma televisions, digital video gear, and MP3 players are emerging. Although there are players available in the market the company is focusing on the better way to shop the products. The company is focusing on superior customer service that will enrich the experience of the customer in purchasing the products.

Threats

The company sales are declining on a constant basis with Ted Waitt not able to understand the markets this time. The changing of policies again and again and switching to the old way of working is problematic for the company.  

1. The first alternative with the company is to switch to Siltanen/Keehn for the last time. This is required because the policies of the company was understood and liked by the customers. However the demerit in this case is the constant switch over the last few years that the company has adopted by changing tag lines and advertisements again and again (Porter, 1996).

SWOT analysis of Gateway Computers

2. The second alternative with the company is the diversification in business like the plasma TVs in which company is already making a good pie. The company can also evolve in creating substitutes of PCs like Palmtops, Laptops and other electronic gadgets that are in demand. The problem of the company in this case would be the heavy reliance on the PC business that will take time to be changed.

3. The third alternative for the company is to innovate new products or try and be in the acquisition race so that the competitiveness is rebuild and rejigged. However, the restructuring in terms of the size of the innovation can cost company big bucks.

The company opened 200 Gateway country stores so that the customers can get the look and feel of the products and purchase the same through a brick and mortar model. This model is becoming obsolete and the changes have been due to the rapid rise of e-commerce. The company is also struggling to communicate the product offerings to the potential buyers and therefore it is clear that the brick and mortar stores viability should be re accessed. The company should therefore bring innovative ways even in marketing and that is possible by strengthening the websites. The stores that have been non viable in terms of sales should be closed or operated as a electronics stores with new product offerings of the company. The closure of some of the stores can bring revenue to the company. The other problem is the uncertain nature of the employees that sometimes are lured by better value deals from Dell or aggressive marketing like acquisitions by HP. For Gateway, the television commercials should be on the benefits the company provide to the user rather than focusing too much on the change and commercials. The higher the changes in the commercials the lower is the level of visibility and retention among the customers.

The action plan should be to target new market segments like youths and young people rather than only focusing on the business products. Rather than keeping the advertisements in house, it should be outsourced to a competitive company and time should be given to that company for atleast 3 to 4 quarters so that the analysis of the advertisements and its impact on the sales can be analyzed. The other thing should be that the taken into account is that the problems in the earlier advertisement campaigns should be highlighted (Levis et al., 2002). The new ad campaign should take care of the problems and understand why the earlier ones failed was it because of the less time given to these campaigns.

New marketing channels should be accessed; e-commerce has been expanding the businesses of the organization at a rapid pace. The company should redesign the website so that the orders and can be taken from there and the management should be shifted to the e-commerce options.

The contingency plan for the company should be to keep the next advertising campaign and strategy ready. Changing the tagline is not the solution always; company should focus more on the changes in regards to the STP which is the Segmentation, Targeting and Promotion. Wasting the efforts on the depleting technology of PC should not be extended, the target markets should be accessed and the promotion should be made on that way.

References

1. Levis, W, Palmade, V, Regout, B and Webb, A 2002, What’s right with the US economy, The Mckinsey Quarterly.

1. Porter, M E 1985, Competitive Advantage: Creating and Sustaining Superior Performance, Free Press, New York, NY.

1. Porter, M E 1996, What is strategy?, Harvard Business Review, November/December.