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To: Board of Directors
RE: Praxim's Strategy Decision
Date: March 23, 2010
I. Executive Summary
This case analysis examines Praxim, which has recently been losing market share and profit because of increasingly intense competition in the consumer segment of personal computers. Praxim has hired a consumer-division manager to help solve its problems but senior staff members are at odds and each has their own solution to this problem. CEO Jack Thompson is left to decide if it is possible to make money selling personal computers to consumers. Furthermore, he must figure out which of the strategies the company should pursue. A complete analysis was conducted to look into Praxim's available options. This analysis led to a group recommendation of focusing on designing the next new killer app. This recommendation was supported on the ideas of the product life cycle and Michael Porter's three generic strategies.
II. Facts of the Case
In the last six quarters, Praxim's profits have fallen severely due to increasing competition in the consumer segment. In attempt to fix this problem, a new consumer-division manager, Linda Marcus, has been hired. She has suggested that Praxim adopts a focused differentiation strategy to target today's first time consumer buyers that are nervous about technology. Her idea is for Praxim to position itself as a trusted brand, to build brand loyalty among this target market, and to sell bundles of products rather than a box. Gross margins range from 20% to 80% on peripherals, software, and consumables, instead of the 12% to 14% the company receives on the box. Senior staff members are hesitant about these ideas because over the years they have tried a number of consumer strategies only to abandon them due to the lack of consumer loyalty.