Gateway Inc. Problems: · The US personal computer market continues to suffer, and Dell just lowered prices by about 20%. As a result, its stock price increased by 13% and it gained more market share. · How should Gateway respond to Dell and its recent price cuts? o Lowering Gateway's prices could jeopardize gross profit margins o In contrast, unit sales were already declining, so there was a risk of further sales losses · Resource allocation: o Gateway should focus more on consumer sales in the United States or on sales to U.S. businesses?§ Bearing in mind that Gateway planned to discontinue company-owned operations outside of North America at the end of 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 $239.6 million in 1999)§ How much emphasis should be placed on PCs and PC-related units versus “out of doors” products and services from the box”?§ Where should Gateway's marketing efforts direct customers: to the phone and its website or to its national stores? · Operational issues related to selling, general, and administrative (s, g, a) expenses: o The company's overall s, g, a expenses would decrease due to:§ Shutdown of manufacturing, sales and service operations in North America § Reduction in the number of national stores§ Fewer commissions and advertising expenses§ End of alliance with OfficeMax o However, decisions on continuing expenses still need to be made:§ Gateway store concept needs more thought regarding the business model of Gateway operating as built to order? · Gateway's gross margin and operating costs needed attention in order to be profitable again o Influential aspects in its customer sales mix, its product sales mix, and its sales mix across its 3 distribution channels had to be tracked at... middle of paper... to counteract Dell's lower prices. The way this could potentially happen is by offering core products out of the box with a PC purchase and aggressively encouraging upgrades and additional features that customers can't refuse. Another way to compete with other PC manufacturers is through differentiation. By focusing on managing its build-to-order method as efficiently as possible, Gateway leveraging its third store channel and remaining as technologically innovative as possible, Gateway is able to differentiate itself from its competitors. Finally, in addition to its pursuit of the consumer market, I think Gateway could benefit from stronger targeting in the business segment that has been governed by Dell. It's a fact that PCs sold for business use tend to be higher quality and therefore more expensive with higher margins. In 2000, 65 percent of Dell PC sales were to the business sector, while Gateway's primary market was consumer sales, which are often less profitable. If Gateway could pursue the business market, without completely losing its consumer base, it would be able to compete better, especially with Dell.