Can a company dependent on a revered luxury item boost its sales with a low-end product without alienating long-time customers?
Question: Can a company dependent on a revered luxury item boost its sales with a low-end product without alienating long-time customers?
After studying a few exceptions to the pattern of disruption, Christensen concluded that the only way a big company could avoid being disrupted was to set up a small spinoff company that would function as a start-up, make the new low-end product, and be independent enough to ignore what counted as sensible for the mother ship.
But some executives worry that a low-end disruptive product might harm their established brand.
The various pieces would then be lined up and laminated together to form a working print head, a process which required HP to have two different manufacturing lines and product designs for low-end and high-end print heads.
"Lenovo has had a more diversified product portfolio, making low-end and high-end PCs as well as smartphones, and has a deeper pocket to support its immense marketing needs, " Chen said.
Toyota is in search of the most efficient (read: low-cost) regional producer of pieces of the end product--in this case, the 5, 000-odd parts it takes to make a car.
Intel brought out the Celeron chip, a cheap product that was ideal for the new low-end PCs, and within a year it had captured thirty-five per cent of the market.
It would be a mistake for Apple to compete at the low end, for the above-cited reasons of lack of product focus, consumer confusion and brand dilution, just to gain market share when it, to date, still innovates and has brand loyalty to keep its profitability in tact.
FORBES: Apple and Google: Why Current Market Share Results Don't Matter Yet, Part 2
The lower sales number can also, in part, be attributed to the company's shift in product groups to high-end products, away from low-quality printers.
Schwartz, senior product manager at Gateway, says manufacturers lose money on the low-end machines but can make a gross profit of 20% to 30% on the fancy ones.
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