Gateway

Gateway Inc.

Issues:

· The US personal computer market continued to struggle and Dell had just lowered its prices about 20%. As a result, its stock price rose 13% and it gained more market share.

· How should Gateway respond to Dell and its recent price cuts?

o Lowering Gateway prices could jeopardize gross profit margins

o Conversely, unit sales were already down so there was the threat of additional sales loss

· Resource Allocation:

o Should Gateway focus on US consumer sales more or US business sales?

§ Keeping in mind that Gateway planned to discontinue company-owned operations outside North America at the end of 2001

o How should Gateway run its sales and advertising operations? (Keeping in mind, the 2001 advertising budget is about $20 million less than in 1999 at $239.6 million)

§ How much emphasis should be placed on PC’s and PC-related units v. “beyond-the-box” products and services?

§ Where should Gateway’s marketing efforts be directing customers: telephone and its website or to its Country Stores?

· Operating issues in regards to selling, general and administrative (s, g, a) expenses:

o Overall company s, g, a expenses would decline due to:

§ Closing of North America manufacturing, sales and service operations

§ Reduction in the number of Country Stores

§ Less advertising fees and expenditures

§ End of alliance with OfficeMax

o However, decisions about continued s, g, a expenses still needed to be made:

§ Does the Gateway store concept need more thought pertaining to Gateway’s business model of operating as built-to-order?

· Gateway’s gross margin and operating costs needed attention in order to once again be profitable

o The influential aspects among its customer sales mix, its product sales mix and its sales mix across its 3 distribution channels needed to be monitored and viewed as crucial elements to Gateway success

Strengths:

· 2000,