Group Assignment I

Case of the Profitless PC

Submitted By Group 6 | Section B
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Arti Mehta
Pranit Sood
S. Suchita
Sagar Jain
Srishti Arora
Vandana
Vidhusekhar
Sathyanathan
Disha Sharma
Nashit Ansari
Amruta

What are the key characteristics of the PC industry?

PC industry is highly Price Competitive
making a PC is not that difficult.
few barriers to entry to the market
Margins are low
survive on post-warranty support and consulting
Price Fluctuations in industry is high
Usually, prices are decreasing
Vendors Keep Low Inventories
Prices are fluctuating
Its a risky industry
Competition levels of industry make profit margin predictability difficult
Customer demand and desire for innovation could affect revenue and profit
margin

Porters 5 forces

Bargaining power of
buyers is high as
they have multiple
options to go to as
they are only
concerned about
specifications and
cost.

Substitute
products like
tablets/smartpho
nes are eating
into the PC
market share.

Rivalry within
the industry is
high with each
vendor trying
to reduce
price, innovate
to ask for
premium,
provide end to
end solution.

Threat of new
entrants is
moderate as
biggest entry
barriers are cost
and distribution
( can be taken care
by online platform)

Bargaining power
of suppliers is low
as there are
multiple vendors
and the industry is
facing stiff
competition based
on price

19982015:: Is the case relevant??

Yes, the issues that have been raised still holds true for the current state of PC
industry
1. Does not work on Economies of scale
2. Few repeat buyers in consumer segment
Buyers are interested in quality and specifications thus making consumer
loyalty low
3. Improving the experience of buying and owning a computer better
Sales people ready to assist consumers, talk in their language
Warranty schemes
Aftersales service

4. Sell solutions and not just a product

5. Innovate
"All of you know where I think we should be investing. We should he beating everybody else to the

next killer app-the device that's coming after the PC-TV combo. Whoever gets there first will
leapfrog the competition. #Quoted from case

Current state of PC industry

Growing demand for tablets and
smartphones:: competing for PC market
share
These also provide a viable computing platform
currently; act as a replacement of PC
Lengthening of the replacement cycle for PC
products or prompting consumers to buy cheaper
options for the needs not sufficed by
tablets/smartphones

Eg: Consumersonly use a PC or laptop 20% of the

time, the highest price they want to pay is $599
(most preferring price points of $399-$449). This is
why Ultrabook sales have been very disappointing
for the PC vendors who hoped that their touchbased Ultrabooks priced from $799-$1099 would be
big sellers.

How IDC's forecast for PC sales by region and category has

changed since June 2011. Source: IDC, Guardian

Problems at Praxim:
Company had no particular target audience
Gross margin for consumer division dropped to 12%
Poor financial performance resulting in plummeting stock price
Clash of old school thoughts vs new thoughts
This used to be a technology company. Now we just talk marketing
garbage.
Commodity business vs building a service scape

Top talent leaving

What could Praxim do?

Follow Lindas approach
Focus on shareholder value

What is Lindas Approach:

Build a genuine relationship with customers
rather than
focussing on just making a sale
Build a service scape bundles (peripherals,
software and consumables), better customer
service and technical support
Create a presales staff of about 800 who can
answer questions in plain English
Pros

Cons

High gross margin on

bundles resulting in better
profits

High investment with no

surety of result

Will improve brand image

Trusted brand

Risk of losing top talent

Increased customer loyalty

Could have negative impact

on valuation

Focussing on shareholder value:

Focus on commercial segment accounts for 80% of Praxims sales - and limit
investment in consumer market
Sell commercial product in consumer segment
Reduce spends on marketing, G&A, and customer service in customer segment
Reduce cost but keep the selling price high to have positive contribution margin per
unit

Pros

Cons

If bottom line improves,

shareholder value will
improve

Consumer segment has

different requirement than
commercial

Retention of top talent

Risk of losing sales since its

essentially a price sensitive
industry
Nature of industry demands
investment in marketing
activities

Execution Plan
Company Level:
Differentiation strategy with a Product
Life Cycle Focus
Promotional and sales investments to
create maximum awareness and
accessibilty
Invest in R&D. Since Praxim is technology
company, focus on developing new
software and technologies that could
serve the taste of modern consumer
Since current market is saturated, explore
new markets especially EMEA

Execution Plan
Consumer Level:
1)Better STP Tap the Untapped
Office users (B2B segment)
Less specification needs than industrial users
Bulk sales

Home Users (B2C segment)

First time users

Bundling could be effective
Scope of customization in terms of peripherals, software, etc.
Offers and schemes
Personalised attention

2) Change in the production setup for consumer

segment devices
3) Extensive dealer network
Company authorized dealer network
Freelancers

3) Contractual Workforce instead of investing in full time

workers
4) Invest in call centres - Outsource a part of work
5) Create a service-blueprint

References
http://techland.time.com/2013/04/22/can-the-pc-industryresurrect-itself/
http://www.theguardian.com/technology/2012/apr/25/tab
let-pc-market-analysis