Gateway: Implementing Innovative Strategies in the IT Industry

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Case Details:

Case Code : BSTR067
Case Length : 16 Pages
Period : 2003
Organization : Gateway Inc.
Pub Date : 2003
Teaching Note :Not Available
Countries : USA
Industry : PC

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"We're in the process of realigning our organization to bring better focus on accountability across our business segments, products and (sales) channels and adding operational expertise in key strategic areas." 1

- Brad Shaw, Senior Vice President, Corporate Communications, Gateway.


In 2003, Fortune ranked Gateway as the second most admired company in the Personal Computer (PC) industry in the US. Gateway enjoyed a strong brand and mind share in the consumer and small business market in the US. In spite of these recognitions, Gateway was facing tough times as the company reported reduced revenues and net losses in the fiscal 2000-01 and 2001-02 (Refer Exhibit I).

In the past, Gateway was acknowledged for its innovative strategies that had helped it capture a sizeable share in the PCs and PC-related products and services business. With its 'clicks-and- mortar' strategy, Gateway successfully leveraged the combination of its physical and online assets including its retail stores and its website. Gateway's 'beyond the box' strategy aimed at offering the consumers, services that were associated with owning the computer, such as conducting training classes, providing software and accessories, online content and leasing and financing. These strategies led to a significant growth in Gateway's revenues and profits during the late 1990s. During the initial years of the new millennium, due to the slowdown in the IT industry, Gateway's PC business performed badly.

The company also faced stiff competition in the various services it had newly introduced. Industry analysts lost all hopes of Gateway's revival when the company reported a huge loss of $1.033 billion in the financial year ending December 2001. However, with the implementation of its 'new strategy' launched in October 2002, Gateway seemed to be on the revival path.

The new strategy involved a change in its logo and retailing of many new consumer electronic products through its own stores. In spite of the stagnation in the IT industry, Gateway reported reduced losses of $297 million for the fiscal 2002 due to the measures it had taken. However, analysts' opinions were divided on Gateway's revival. A few analysts were optimistic about the company's future. Tim Bajarin, President of Silicon Valley tech research firm, Creative Strategies, observed, "Gateway is one of those companies that seem to have 900 lives. Every time you think they're about to go under, they resurrect themselves. It's fascinating to see the reinvention of Gateway on an annual basis. If there's one thing I've learned it's that you can't count them out."2

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1] As quoted in the article, "Gateway to Realign Business Strategy," by John G. Spooner, CNET News, January 6, 2003.

2] In the article "Gateway Gambles on a New Strategy," by Sam Diaz, Mercury News, December 2, 2002.


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