Case Study on Business Strategies: Failure Stories of Gateway and Alcatel

Gateway falls short of their strategies.

Gateway has attempted to revive itself by becoming a producer of a wide variety of consumer electronics products branded with the group’s name. But PCs still make up the bulk of its sales

Compare Dell’s and Apple’s highly disciplined innovation efforts to Gateway’s shoot-anything-that-moves approach. Gateway started as a process innovator, becoming, with Dell, a pioneer of direct distribution, but it also tried to be a product differentiator, maintaining relatively high-cost manufacturing plants, investing more than Dell in R&D, and launching expensive brand-advertising campaigns. It innovated aggressively on the retailing end as well, pioneering the exclusive stores that Apple would later (and more successfully) copy. It even tried to be a service innovator, pursuing a highly publicized “beyond the box” strategy involving the provision of various consulting services to small businesses. By trying to innovate everywhere, Gateway failed to build a strong competitive advantage.

Company fail to leverage their brand name, they were investing every where, in electronic industry and missed their core competencies as PC maker, eventually they looses ground in market place, by clearly not understanding the behavior of consumer market. Moreover, Gateway complex website for selling Personal Computers is hard to understand and customizing it, company website is poorly segmented where advance and simple features are on the same HTML (hyper text machine language). Further, their value added advantages are next to zero, including customer support solution, in addition, Gateway’s, AMD (Athelon, Intel rival) 1.8Ghz notebook designs are exact imitation of exact Compaq V1000 Presario.

When Gateway, was the market leader in the US, the company was not aggressively emphasized on competing with the other Japanese firms where at that time, the Japanese products were starting to enter the US market with low-priced and high-quality personal computers. The ignorance and the poor response of Gateway had cost the company to lose huge percentage of its market share in the US and worldwide. Gateway was unable to lower its costs and improve its brand image.

Alcatel failure

Alcatel market share deteriorated, and this is partially due to the slow movement made by the company to shift from a wireless phone industry to digital technology.  Other words from AMPS (Advanced Mobile Phone System), D-Amps (Digital-Advance Mobile phone systems) to GSM (Global system mobile system) technology.

These problems were aggravated when analyst found that there is a high level of competition within the mobile industry. There is a risk of supplier threats, the industry was mature and growth was slow where in many cases manufacturers are consolidating. And at the same time, Motorola does not have the capitalization or expertise to compete effectively with its fierce rivals such as Nokia and Sony Ericsson.

The biggest setback of Alcatel was a fail M&A between lucent technology and Alcatel. Company managers was having a high expectations, experiencing Sony and Ericsson M&A. Moreover, the  problems with the proposed merger was the duplication in the two companies’ product lines and  both companies had a lot of traditional products in their portfolio that overlapped significantly, and it would be a logistical nightmare to decide which ones they would retain. Moreover, The megamerger could also have raised some antitrust issues. This fail M&A between Alcatel cost $550 million liqudation. (Fyffe, 2001).

On the other hand, Nokia which has a competitive advantage over Alcatel, through being a low cost company. Nokia achieved this through utilizing a small number of platforms to produce a wide range of phones (creating economies of scales) and managing its inventories more efficiently than its rivals like Alcatel. Furthermore, Alcatel Corporate strategy was hierarchal, which means more paper work, consuming time on, making manager frustrated on work, Alcatel starting to loosing their best talent headcounts in late 90’s resulting failure in company, now Alcatel have to adapt their strategies to be more focused on 3G mobile and 4G mobile system, in today’s customer needs in order to find a niche of the company.


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