Gateway: Moving Beyond the Box

Gateway.com

Advantages:

• The fastest growing channel accounted for 10% of sales

• Cost is half of other channel’s

Goal:

• go after additional discounting aggressively

• move people out of stores and phones and onto our website

• be successful as Dell in terms of putting its mentality and focus on the Web

Gateway Country Stores

Advantages:

• Projected customers will increase by 50% this year

• Gives differentiation from that of Dell because the kind of customers they attract are dissimilar

Goal:

• To attract the 75% of people are still buying in retail outlets

Product Strategy:

To augment Gateway’s PC hardware sales, they implemented the hexagon strategy with five different revenue streams: software and peripherals; service and training;** Internet access; portal/content; and financing.*

*in the YourWare Program

**in the Country Stores

Advantage:

• This strategy is consistent with the company’s philosophy.

Disadvantage:

• However, this strategy is radical since 90% of its revenue comes from PC systems orders and to transform into full-scale solutions provider would be a challenge.

• Other company applying the pieces of hexagon strategy did not succeed.

Goal:

• To leverage the 3 distribution channels in order to market these applications more effectively

Gateway’s Goal:

• To be regarded as PC hardware and solutions company and generate 40% profits from its non-PC revenue by 2001.

Company Background:

• In 1985, Ted Waitt made $3,000 computer purchase out of a 20-minute call. This telephone retail eliminated real distribution costs and markups and the finished goods inventory and showrooms costs.

• A company that offered built-to-order computers at a bargain, that is, high-end quality for low-end prices.

• In 1991 Inc. Magazine named Gateway 2000 the fastest-growing private company in the nation, with $626 million in annual sales and 1,300 employees because of their great service and