This fictitious case written by Andy Blackburn, a Boston Consulting Group vice president based in San Francisco, explores the question of how PC companies can make money in the increasingly price-competitive consumer market. The senior staff of Praxim, a multibillion-dollar maker of desktop computers, face some tough questions: Is it possible to make money selling personal computers to consumers? Should he try to make money selling PCs to consumers?
Andy Blackburn; Matt Halprin; Ruth Veloria
Harvard Business Review (98603X-PDF-ENG)
November 01, 1998
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Case of the Profitless PC Case Answers
The Case of the Profitless PC – Praxim Company
While focusing on reducing costs and not on creating differentiation, value, customer satisfaction, and customer loyalty, Praxim is pursuing the wrong strategy. Because Praxim did not take consumer insight information nor conduct marketing research, it could not understand what its target market needed. In such a way, its value-driven strategy was unsuccessful as it didn’t segment and target the market properly, nor did it offer a detailed value-proposition.
The management of Praxim is focused more on the physical aspect of their products alongside the cost of producing their PCs, rather than satisfying customers. In other words, they are experiencing a market myopia state as they wrongfully assume that customers will look only at the physical aspect of PCs and view them as commodity products.
Furthermore, Praxim is not analyzing customer need, wants, and demands for PCs as they by mistake believe that customers care only about the price of their commodities, and not taking into account the true reasons why customers purchase PCs, e.g. work, communication, and so forth. Praxim is not taking into careful consideration the other elements of the marketing mix such as product (not only physical aspect), place, and promotion, to convey to their customers their value proposition which in essence is very vague.
Praxim’s product diversification approach for creating the PC-TV combo; entering a new target market with a new product simply won’t work because the company has not yet created true friends in its target market, nor differentiated itself from its competitors (gaining competitive advantage through the quality, features, style, and design of their PCs), nor positioned itself in the market.
Another very important cause of Praxim’s problems is that they didn’t establish profitable and loyal relationships with their supposed target market, i.e. “individuals willing to pay +2000$ for their PCs”. Praxim did not establish a credible customer relationship management with their consumer market. In other words, they did not focus on how to serve the customer in the best way possible.
Praxim’s value chain network is in bad shape. The management of Praxim is still focused on a cost-based approach, not a value-based approach. While the chief officers are concerned about cutting expenditures and serving the commercial market, the customer-division manager is concerned with marketing, selling, and communicating differently to different consumer segments.
Other problems that the company did not see coming were from their marketing environment. From the microenvironment, they did not respond well to new competitors; while from the macroenvironment— they did not respond well to the economic recession.
Even though Praxim seems to be in a difficult position, a solution can be found if they follow the steps below.
First, Praxim needs to define its…
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