Computer hardware industry overview and trends

¶ … Computer Hardware Industry: Marketing and Advertising Strategies

Within this research paper, an overview will be provided of marketing and advertising strategies utilized within the computer hardware industry. For the purposes of accomplishing this aim, the strategies used by Gateway, Dell, and Hewlett Packard will be examined. As each company is analyzed, comparisons and contrasts will be made with strategies used by the competitors.

Gateway

According to Fikes (2003), Gateway Inc., once famous for its incorporation of cows within its marketing put its famous cow out to pasture last year and repackaged itself as the hub of digital technologies from cameras to computers to plasma televisions and MP3 players. With the company's struggle to maintain itself within the top three in the computer hardware industry, Gateway hopes that its new efforts will lead to an increase in loyalty on the part of customers, resulting in increased profits and the potential for ongoing sustainability.

As explained by Kelly (2002), new marketing efforts by Gateway have emerged after persistent evidence of recent and ongoing recent downward trends impacting profitability. According to Kelly, while the company took in $992 million in 2002's first quarter, it also evidenced a net loss of $123 million. As compared to Dell's success in selling 4.5 million computers during the first quarter of 2002, Gateway shipped 645,000. As well, as reported by Kelly, since 2001, Gateway has faced ongoing employees cuts, resulting in the company's having to let go of approximately 14, 000 between 2001 and 2002.

The new retail store marketing strategy to be utilized will take place within Gateway's 272 retail stores located throughout the U.S. (Fikes, 2003). Gateway hopes that old-fashioned foot traffic and superior in-store customer services and products will bring about enough changes to aid in turning the company around. As well, it is hoped that the implementation of marketing strategies focused on diversification of products and revenue streams will further aid the company in pulling itself up out of its' more recent financial slump (Fikes, 2003). Fikes reported that while some analysts are doubtful as to the degree to which diversification will alter Gateway's financial struggles, it appears that Gateway may have little choice. According to Fikes, analysts have indicated that should Gateway abandon marketing itself through its stores and attempt to compete like Dell in sole use of the internet, the company will find itself further headed towards collapse.

As further reported by Kelly (2002), Gateway has also recently adopted a value pricing strategy, dropping prices across the board on its PCs and notebooks in an effort to regain market share. The average unit price decreased to $1,538 during the first quarter of 2002, compared with $1,667 in the fourth quarter of 2001. As Kelly explained, the company has also withdrawn itself from the international market while competitors such as IBM and HP have continued to expanded internationally by leveraging their relationships with resellers. Lacking an adequate marketing budget and the requisite brand recognition to be successful in international marketing, Gateway has returned its focus once more to the U.S. market, where it began and initially experienced massive growth (Kelly, 2002). Gateway was founded in 1985 in an Iowa farmhouse, and its trademark Holstein cow pattern became an effective marketing symbol of quality and good prices within the U.S. computer hardware industry.

Dell

As reported by McWilliams (1997), within a six-month period, Dell emerged as the number one PC retailer on the Web. Moving from the company's direct-sales program via the telephone, Dell recognized the potential advantage that direct-sales marketing via the internet offered and placed itself in the position to assume first place within the computer hardware industry. McWilliams also reported that Dell has been successful in offering a manufacturing and assembly process that is fast and fine-tuned, allowing for a custom order placed at 9 a.m. On a Monday to be placed on a delivery truck by 9 p.m. Tuesday. The speed associated with its production of PCs has allowed the company to slash inventories and keep parts costs down so low it can underprice its rivals by 10% to 15%.

The results of Dell's marketing strategies cannot be understated. As reported by McWilliams (1997), in 1996, unit sales for Dell in the U.S. jumped 71%, more than five times the industry's 13.6% growth rate. Revenues rose from being up 47%, to $7.8 billion, and, combined with Dell's low-cost style of doing business, sent profits skyrocketing 91%, to $518 million. In contrast to Dell's approach at speeding up production, Gateway takes 16.4 days to build its custom ordered PCs.

More recently, as reported by Finney (2002), Dell's marketing strategy has been developed on a number of principles that are believed to be associated with the company's ongoing success. The principles include:

Developing products from the customer's viewpoint

Targeting a customer of one

Adding value "beyond the box" with a focus on the total customer experience and service opportunities.

Hewlett-Packard

As reported by Hoover's Online (2003), Hewlett-Packard (HP) has developed into a high-tech Hydra with a multitude of hardware heads. Currently, approximately 80% of HP's sales have emerged from three groups involved primarily in marketing hardware products: Imaging and Printing, Personal Systems, and Enterprise Systems. Imaging and printing systems, its largest segment, encompasses printers, scanners, fax machines, digital cameras, and copiers. HPs personal systems include PCs, handheld devices, workstations, and calculators. Its enterprise systems group primarily markets servers (Windows-, Unix-, and Linux-based) and storage systems; it also handles HP's ever-expanding network management software offerings.

Hoover's Online (2003) also reported that HP has increasingly developed into a much larger company, offering enterprise and consumer customers a full range of high-tech products, including personal computers, servers, storage products, printers, software, and computer-related services. In 2002, HP acquired Compaq Computer, representing the largest deal in the history of the computer hardware industry. The transaction was valued at approximately $19 billion (Hoover's Online, 2003).