Case of the Profitless PC (HBR Case Study)
For teaching purposes, this is the case-only version of the HBR case study. The commentary-only version is reprint 98603Z. The complete case study and commentary is reprint 98603. 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? And if so, how? What resources need to be mustered? Where should they be directed? After years of strong profits, Praxim is being dragged down by increasing competition in the consumer segment of the PC market. In response, CEO Jack Thompson has hired a new manager for the consumer division, Linda Marcus, luring her away from a leading packaged-goods company. Linda wants to make Praxim into a trusted brand by putting Praxim's people into retail stores at peak selling times, setting up an 800 number to answer consumers' technical questions in plain English, and bundling extensively. But the other members of the senior staff are skeptical. The vice president of the commercial division argues that PCs are a commodity and urges Linda to concentrate on cutting costs. The chief technology officer wants Praxim to concentrate on developing the next killer app so that it can charge consumers a premium for new technology. The CFO thinks Praxim should cut its losses and mostly give up on the consumer segment. Mindful that continued losses in the consumer segment will pull down Praxim's share price and put his top executives' stock options at risk, Jack is at a loss. Should he try to make money selling PCs to consumers? Can he keep the doubters on his staff from defecting if he goes ahead with Linda's plan? In 98603 and 98603Z, Geoff Moore, Donna Dubinsky, Larry Keeley, George Quesnelle, Scott Ward, and Philip Pifer give Jack their advice.