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Hewlett Packard
Introduction
Hewlett Packard has the tradition to introduce the innovative products in IT and technological solution to their customer. Hp headquarter is situated in Palo Alto, California with large number of workforce of 156,000 employees. It is the one of the world’s largest firm with great revenue of 91,658 million at the end of 2006 with increase of 5.7 percent as compare to 2005.Hp formed by the two people Bill Hewlett and Dave Packard in a garage with the investment of 538$. They use participative decision making management system in their organization, which gives them an edge in the industry. In 1957 the company went public and went for the other markets of the world for the expansion. In 1960 they launch their first computer HP2116A, at the end of 1990’s they spin off its some operations and they try to reinvent the company by some acquisitions of some large companies the market.In 2002 the Hp completes its merger with Compaq computers and provides the great solutions of IT in the market and earns the revenue of 91.6 billion at the end of 2006.
Products and Services
HP is the one of the largest company which is providing products like different technologies, software, solutions and different services to the consumers or to small and medium size business.
Technology Solution Group (TSG)This group provides the services of information technology to different enterprise and mid market business customers, in this group Enterprise Storage and Server offer a slandered server plate form for their customers. They are providing the products as industry standard Server, Business Critical Systems, etc. HP services provide information technology services to support to a more complex business environment, also providing consulting and integration solutions for the large companies, and manage different services for different countries. Hp is also providing the software solution to different organization to maintain the different organizational and financial operations of the firm.
Personal System GroupThis part of the company is providing commercial and personal PCs, notebooks, workstations, handled computing devices, digital entertainment systems and different software for the commercial and consumer market.
Imaging and printing GroupThis group of the HP is providing the imaging and printing solutions to the consumers like printers, printing media and scanning devices this segment is also providing the printing solution for different advertisement purpose like they providing the devices to print the large signage and graphic art business. They are also providing the laser jet printers, ink jet printers and image products to the business and household consumers.
HP Financial Services This segment is providing the wide rang of financial management services to their customers, this segment is offering their customers alternative financing solutions to improve their cash flow, technology and capacity needs.
Corporate InvestmentThis segment of HP is working under the office of strategy and technology and includes in HP laboratories.
FinanceThe financial position of the company is very strong and shows the continuous growth in the sales, net earnings per shares.
Marketing HP promotes their products direct to their end users businesses and also using different business partners. The design their selling and marketing goals to get the high level of profit margin through different methods. They are heavily investing in research and development and in patent their products. They are efficiently managing their labor and procurement channels. They also are providing the solutions for the unwanted computers in order to minimize the impact on the environment.
CompetitionHP had a 28 percent increase in unit sale worldwide and 26 percent in U.S. whereas Dell had 6.2 percent worldwide and 14 percent in U.S market.
Apple ComputersSales of apple computer are increase in the first quarter of 2007. In U.S computer market Apple is one of the fast growing name, and Microsoft Window Vista also help them to improve the market share in the market. In laptop market Lenovo, Acer, Apple, HP and Dell are actively searching the markets. Lenovo has 12% market share dell has 19% and HP has 12% market share in the global corporate market. Other companies also market their products like Panasonic corp. they are offering their high price Ultra rugged computers in market. In printing market they are facing competition with Eastman Kodak, Cannon, and other generic brands. Substitutes products such as remanufacturing or refilled of inkjet is also getting market share. To reduce this competition company is selling printers on low price and selling the refilling components of high price.
International OperationsNow days china is one of the fastest computer markets. In recent years shipment of computers for china has increased by 10 percent and in china it is 21%. Recently Dell Inc. announce that they are offering a new computer with the price 335$, and they start it selling from china and after they expand their business to India and Brazil. In China’s market the market leader is Lenovo, then Founder Technology Group Corporation and then Dell inc. so to cover the market of Asia HP is aggressively targeting these markets
for their products, they reported that they earn 60% of it profit outside of U.S. they are also operating in the Europe but restructured their operations their twice they face failure in Germany and they are struggling in France and U.K.
Vision Statement (proposed)
“Our vision is to become the most recognized and leading computer company in the world.”
Mission Statement (proposed)
1. Customer2. Products or services3. Markets4. Technology5. Concern for survival, profitability, growth6. Philosophy7. Self-concept8. Concern for public image9. Concern for employees
Hewlett-Packard mission is to being the best in technology, software and solutions provider to consumers, small and medium businesses and public education sectors globally by providing superior products and services for businesses and personal consumers (1, 2, 8). We provide information technology systems to serve our customers more efficiently (4). We are dedicated to quality domestically and globally and consistency to maintain and gain customer loyalty (6, 3).We are dedicated to growth and profitability (5) by treating employees (9) in ways that create value to them.
HP corporate Objective
Customer loyalty We earn customer respect and loyalty by consistently providing the highest quality and value.
Profit We achieve sufficient profit to finance growth, create value for our shareholders and achieve our corporate objectives.
Growth We recognize and seize opportunities for growth that builds upon our strengths and competencies.
Market leadership We lead in the marketplace by developing and delivering useful and innovative products, services and solutions.
Commitment to employeesWe demonstrate our commitment to employees by promoting and rewarding based on performance and by creating a work environment that reflects our values.
Leadership capability We develop leaders at all levels who achieve business results, exemplify our values and lead us to grow and win.
Global citizenship We fulfill our responsibility to society by being an economic, intellectual and social asset to each country and community where we do business.
HP Core Values
Passion for customersWe put our customers first in everything we do.
Trust and respect for individuals We work together to create a culture of inclusion built on trust, respect and dignity for all.
Achievement and contribution We strive for excellence in all we do; each person's contribution is critical to our success.
Results through teamwork We effectively collaborate, always looking for more efficient ways to serve our customers.
Speed and agility We are resourceful and adaptable, and we achieve results faster than our competitors.
Meaningful innovation We are the technology company that invents the useful and the significant.
Uncompromising integrity We are open, honest and direct in our dealings
PEST
Political
In case study there are no political issues available which affect the industry positively or
negatively.
Economic
Economic conditions of the country will defiantly threat for the industry like the lowering
power of dollar and the global recession also influence the buying power of consumer so
it will also affect the introduction and launching of new innovative products.
Social/Ecological
Recycling of unwanted computers and printing supplies are have the positive affect on
the industry because this act will reduce the wastage of raw material consumption and
have the positive impact on the Environment.
Donation of used computers to National Christiana Foundation by HP is also crating the
positive effect on the organization and this act shows that HP is also focusing on the
corporate social responsibility.
Financial services pays (FSP) companies for qualified computer equipment that no longer
is need or wanted is also affect the HP socially and have positive impact on the
organization.
Technology
Technology is the most dynamic thing in the today’s business Environment, these
products have very short life cycle and need continuous improvement so HP should have
intense research and development department to remain in the market and for the
improvement.
Porter Five Forces Analysis
Threat of new EntrantDeterminants Defining Question Assess the power of Buyers
Circle one of the following.1 = low, 5 = high, or N/A if it doesn’t apply to your industry.
Economies of Scale and experience
Does successful entry require that companies have significant economies of scale or experience
1 2 3 4 5 N/A
Brand Identity Do new companies need to spend heavily on brand identification?
1 2 3 4 5 N/A
Product Differentiation
Do new entrants need to differentiate by spending heavily on advertising, customer services or product differences to over come existing customer loyalty?
1 2 3 4 5 N/A
Switching Costs Does the buyer have to pay to switch from one supplier product to another?
1 2 3 4 5 N/A
Capital Required Does the new company need to invest large financial resources?
1 2 3 4 5 N/A
Access to Distribution
Does the new comer have access to distribution channel for product or services?
1 2 3 4 5 N/A
Cost advantage Established companies have cost advantages over new rivals.
1 2 3 4 5 N/A
Government policies
Government policies can help to preserve or limit competition.
1 2 3 4 5 N/A
(Threat of new Entrant of High)
Intensity of RivalryDeterminants Defining Question Assess the power of
BuyersCircle one of the following.1 = low, 5 = high, or N/A if it doesn’t apply to your industry.
Industry growth How slowly or quickly is the industry growing? Intense fight among rivals for market share
1 2 3 4 5 N/A
Fixed Cost Does your business have a high fixed cost?
1 2 3 4 5 N/A
Product Differentiation
Is your product commodity? The closer the product is to being a commodity the higher intensity of rivalry.
1 2 3 4 5 N/A
Switching Costs How costly is it for your buyer to switch between providers?
1 2 3 4 5 N/A
Intermittent Overcapacity
How frequently is there a problem of excess capacity in your industry? Is the period when there is excess capacity?
1 2 3 4 5 N/A
Brand Identity Is branding critical for your Rival’s success? Brand identification by buyer reduces the threat of rivals.
1 2 3 4 5 N/A
Concentration and balance
Are there a large number of firms of equal size and power, all chasing after the same customer?
1 2 3 4 5 N/A
Diversity of competitors
Are there competitors with different strategies and frame of reference? When competitors are diverse it is more difficult to establish the rules of game
1 2 3 4 5 N/A
(Intensity of Rivalry is high) Bargaining power of Buyer
Determinants Defining Question Assess the power of BuyersCircle one of the following.1 = low, 5 = high, or N/A if it doesn’t apply to your industry.
Concentration Buyer is fragmented or concentrated. If they are concentrated the bargaining power is high.
1 2 3 4 5 N/A
Product Cost versus Total Purchases
Does your product buyer’s purchase represent a significant fraction of the buyer’s cost? If so, buyer bargaining power is typically high.
1 2 3 4 5 N/A
Product Differentiation
Product is standard and undifferentiated or differentiated
1 2 3 4 5 N/A
Switching Costs Switching cost are high with related to Brands or Low.
1 2 3 4 5 N/A
Backward Integration
Can they make what you make themselves?
1 2 3 4 5 N/A
Impact on Quality/Performance
Is the product you offer important to the quality of the buyer’s product or services? If not buyer power is typically high
1 2 3 4 5 N/A
Buyers Information
Does the buyer have complete information on the product he may purchase?
1 2 3 4 5 N/A
(Bargaining power of Buyer is Moderate)Bargaining power of Suppliers
Determinants Defining Question Assess the power of BuyersCircle one of the following.1 = low, 5 = high, or N/A if it doesn’t apply to your industry.
Concentration Are you supplier are fragmented or highly concentrated?
1 2 3 4 5 N/A
Presences of Substitute inputs
Are there any substitutes for your supplier products? Very few
1 2 3 4 5 N/A
Product Differentiation
Product is standard and undifferentiated.
1 2 3 4 5 N/A
Switching Costs How costly is it for you to switch from suppliers product?
1 2 3 4 5 N/A
Importance Relative to Customer.
Is your industry an important customer of the supplier group? If yes supplier are typically not powerful.
1 2 3 4 5 N/A
Forward Integration
Can the supplier produce the product you make?
1 2 3 4 5 N/A
Impact on Quality/Performance
Is your supplier product essential to the quality or performance of your business?
1 2 3 4 5 N/A
(Bargaining power of Suppliers is high)Threat of substitute
Determinants Defining Question Assess the power of BuyersCircle one of the following.1 = low, 5 = high, or N/A if it doesn’t apply to your industry.
Price performance Does the substitute offer a better price performance?
1 2 3 4 5 N/A
Switching Cost Is it costly for buyer to switch to the substitute product?
1 2 3 4 5 N/A
(Threat of substitute is moderate )
Porter Five Force Analysis
Threats of New Entrants:
(Entry barrier is high)In order to switch from one brand to another switching cost is high.
All the players are very big and have their own distribution channel it will be difficult for
a new entrant to come and create a new distribution channel. Product differentiation is
not much in this industry computer are almost with the same configuration but price very
brand to brand and it can be very high. Capital requirement are also high.
Intensity of Rivalry
(Rivalry is high) The rivalry among competing firms is very high HP, DELL
COMPAC IBM etc are some of the big names and because there are many other
companies exist as well in the industry that also have strong brand name and market
share so rivalry is high.
Bargaining power of buyer
(Bargaining power is moderate) Buyers are fragmented in this industry. Backward
integration is also a factor in the industry of the pc buyers bargaining power because
more and more people are building their own computers but consumers are also very
much conscious about the quality.
Bargaining power of supplier
(Bargaining power of supplier is high) In computer are industry supplier are dominant
and are few also supplier product have few substitute Intel’s microprocessor chips and
Microsoft operating system are used in 90% of personal computers.
Threat of new substitute:
Threats of substitute are also moderate in this industry Smart phone, Pal tops and PDA is
some substitutes but theses are not the major threat to computer industry.
SWOT Analysis:
Strengths: World’s largest technology vendor in term of sales
Open door policy
21% market share in India personal computer market
Strong Retail distribution
Huge technology research lab in banglor.
Innovative products
Strong Marketing and Direct promotions
Market share lead from 3.5%
Complete technology solutions to consumers business and institute.
Diversified product and services portfolio(TGS, PSG, IPG etc)
Solid market position in key segments
Recycle computer hardware and printers.
Brand Recognition
Patent their new product.
Employee compensation & benefit
Stand alone product support to more complex business environment.
Manage procurement and labor Expanses
Used PC Donation
28% increase in unit sales world wide.
Acquisition with many companies.
Weakness:
Net Income decreased R&D expense.
Lack of in-house management consulting division
No web site selling.
Inventory Turnover decrease from 12.61 to 11.83
Opportunities:
Fastest growing geographical area Asian pacific region.
up-selling & cross-selling
Subsidiary
Trade in
World wide unit sales of PC rose to 10.9%
Increasing demand of new and innovative features
Consumer awareness
Globalization
Return of Cash(HPFS pays companies for comp that no longer is needed)Threats:
Technology product have Short product life cycle
Intense Competition( Canon, Dell, IBM etc)
Increasing competition on imaging and printing
Substitute product (Remanufacturing or refill ink cartridges).
Private labeled (staples, offices depot, office max)
IFE
Strength: Weight Rating Weight
Score
Comments
1. World’s largest technology vendor in term of sales
2. Open door policy
3. 21% market share in India personal computer market
4. Strong Retail distribution
5. Huge technology research lab in banglor
6. Innovative products
7. Strong Marketing and Direct promotions
8. Market share lead from 3.5%
0.05
0.05
0.05
0.06
0.05
0.05
0.04
0.06
4
3
4
4
3
4
3
4
0.20
0.15
0.20
0.24
0.15
0.20
0.12
0.24
HP is world’s largest vendors in term of sales in 2006 with revenue $91.7 billion.
HP creates the open door corporate culture.
Asian pacific region HP earn max revenue form here
HP focused on retail distribution rather than online.
HP has huge research technology labs in Bangalore.
It introduces numerous innovative products
HP directly promoted its products to consumers and business.
HP has 3.5 % market share lead.
9. Stand alone product support complete technology solutions to consumers business and institute.
10. Diversified product and services portfolio(TGS, PSG, IPG etc
11. Recycle computer hardware and printers.
12. Brand Recognition
13. Patent their new product.
14. Employee compensation & benefit.
15. Manage procurement and labor Expanses
16. Used PC Donation( Partnership with NCF)
17. Hp 28% increase in unit sales world wide.
18. Acquisition with many companies.
0.05
0.05
0.03
0.04
0.04
0.04
0.04
0.03
0.05
0.05
3
4
3
3
4
3
3
3
4
4
0.15
0.20
0.09
0.12
0.16
0.12
0.12
0.09
0.20
0.20
It provides complete technology solutions to consumer, business and institutions
HP provides a diversified product portfolio with seven different segments.
It offers easy to recycle unwanted computer hardware and printers.
Exhibit 5 shows that the good will of HP increase every year.
HP actively patents their products
Exhibit 5 shows that the benefits are increase every year.
HP actively manages their procurement and labor benefits
It helps to make easy to donate the used P.C.
Hp 28% increase worldwide and 26% gained in U.S
Exhibit 11 Shows HP’s Recent Acquisitions.
Weakness: Weight Rating Weight
Score
19. Net Income decreased R&D expense.
20. Lack of in-house management consulting division
21. No web site selling
22. Inventory Turnover decrease from 12.61 to 11.83
0.05
0.04
0.05
0.03
2
2
1
1
0.20
0.08
0.05
0.03
Net income reflects
decrease expenses in
research and
development.
HP not focused on in-
house management
consulting division.
HP is not focusing on
online selling but its
competitors is doing
that
Inventory Turnover is
decreased form 2005
to 2006 0.78%
Total 1 3.21
The result of IFE matrix shows that the company Hewlett parker is good to handle its
internal situations. The total weighted score of HP is 3.21 which show that it’s good
EFE
External Factors Weight Rating Weighted Score
Comments
OPPORTUNITIES1. Trade in 0.08 4 0.32 This Service
offers the opportunity to capture the fair market of aging technology.
2. Increasing demand of new and innovative features
0.09 3 0.27 Consumers aggressively shopping for new products.
3. Fastest growing geographical area
0.05 3 0.15 16% increase shows the fastest growing area.
3. up-selling & cross-selling
0.09 4 0.36 ESS, HPS, and software are Structured through TSG.
5. Return of cash 0.08 4 0.32 HPFS pays companies for comp that no longer is needed.
6. Subsidiary 0.08 3 0.24 Continue its expansion by forming its subsidies in Asia.
7. Globalization 0.09 2 0.18
8. Consumer awareness
0.06 4 0.24 Customers use internet research before purchasing.
9. World wide unit sales of PC rose to 10.9%
0.05 3 0.15
THREATS10. Technology product have Short product life cycle
0.09 3 0.27 Technology has short Life Cycle.
11. Intense competition on personal computers
0.08 4 0.32 Diff companies compete on PCMarket.( IBM, Dell Cannon etc)
12.Private labeled
(staples, offices
depot, office max)
0.05 2 0.10 Private labels are in a price competition. They are trying to capture the market by pricing and technology copy.
Substitute
product
( remanufacturin
g or refill ink
catridges).
0.05 3 0.15 In printer supply market substitute products have been gaining the market share.
Increasing
competition on
imaging and
printing
0.06 4 0.12
TOTAL 1.0 3.31
The result of EFE matrix shows that the company Hewlett parker is good to handle its
internal situations. The total weighted score of HP is 3.19 which show that it’s good
CPM
HP Dell IBM
Critical success factors
Weight Rating Score Rating Score Rating Score
Financial position 0.1 4 0.4 2 0.2 2 0.2
Distribution and selling
0.08 3 0.24 4 0.32 4 0.32
Technological change 0.2 3 0.6 3 0.6 2 0.4
Global expansion 0.1 3 0.3 4 0.4 4 0.4
Good will 0.1 3 0.3 3 0.3 3 0.3
Market share 0.2 4 0.8 3 0.6 2 0.4
Advertisement 0.05 2 0.1 2 0.1 3 0.15
Innovation 0.07 4 0.28 3 0.21 3 0.21
Management 0.1 4 0.4 4 0.4 3 0.3
Total 1 3.42 3.13 2.78
After doing the critical success factor analysis we say that HP is better than its
competitors DELL and IBM to handle the critical factors of industry.
Tows
Strengths.1. World’s largest
technology vendor in term of sales
2. Open door policy3. 21% market share in
India personal computer market
4. Strong Retail distribution
5. Huge technology research lab in banglor
6. Innovative products7. Strong Marketing and
Direct promotions8. Market share lead from
3.5% 9. Complete technology
solutions to consumers business and institute.
10. Diversified product and services portfolio(TGS, PSG, IPG etc)
11. Solid market position in key segments
12. Recycle computer hardware and printers.
13. Brand Recognition 14. Patent their new
product.15. Employee compensation
& benefit16. Stand alone product
support to more complex business environment.
17. Manage procurement and labor Expanses
Weaknesses.1. Net Income
decreased R&D expense.
2. Lack of in-house management consulting division
3. No web site selling.4. Inventory Turnover
decrease from 12.61 to 11.83
18. Used PC Donation19. 28% increase in unit
sales world wide.20. Acquisition with many
companies.
Opportunities.1. Fastest growing
geographical area Asian pacific region.
2. up-selling & cross-selling
3. Subsidiary4. Trade in5. World wide
unit sales of PC rose to 10.9%
6. Consumer awareness
7. Globalization8. Increasing
demand of new and innovative features
9. Return of Cash(HPFS pays companies for comp that no longer is needed)
SO Strategies.
(O8,S5,S6)By doing technology research they can add new values and features to their products and make them innovative according to consumers demand.(O6,S7)Educate consumer about the product will increase in sale and customer loyalty
(S14O1) They can capture more geographical area through direct promotions to increase their sales.
WO Strategies.
(W1O9). HPFS cash comes for selling of not needed computers can be used for research and development.
(W3, O6).They can minimize the threat of online selling through consumer awareness of their products.
Threats.
1. Technology product have Short product life cycle
2. Intense Competition( Canon, Dell, IBM etc)
ST Strategies.
(S6, S5, T1).Continues innovation and research help to overcome the threat of short product life cycle.
( S6,S5,T2) Innovative products and research help to take the competitive edge upon intense
WT Strategies.
(W1T2).Focus on R&D and continues improvement in products can minimize the threat of fierce competition.
3. Increasing competition on imaging and printing
4. Substitute product ( remanufacturing or refill ink catridges).
5. Private labeled (staples, offices depot, office max)
competition.
IE Matrix.
Strong(3.0-4.0)
Average(2.0-2.99)
Weak(1.0-1.99)
High3.0-4.0
3.0
I
------------(HP)EFE Score
II III
Medium2.0-2.99
2.0
IV V VI
Low1.0-1.99
VII VIII IX
The IFE Total Weighted Scores
4.0 3.0 2.0 1.0 1.0
Growth and Build (I, II, IV ) Hold and Maintain (III, V, VII ) Harvest or Divest ( VI, VIII, IX )
IFE score 3.21 and EFE score is 3.31which means that the company comes in 1st quadrant that is in (I, II, IV) so the company should go for the growth and build strategies..
Strategies that HP is using
HP is currently using horizontal integration, related diversification, and product
development strategies.
Horizontal integration.
In September 2007 HP is complete the acquisition of Opsware Inc. and Neoware Inc.
Exhibit 11 of the case study show how rapidly Hp is doing Acquisition with other
companies.
Related Diversification.
HP is also adopted related diversification strategy for targeted the three diversified groups
of people
Technology solution group (TSG)
Personal system group (PSG)
Imaging and printing group (IPG)
The technology solution Group is developed to cater the need of the institutional
clients and HP up selling and cross selling, ESS, HPS and software are structured
through (TSG ).While to take care of the individuals, personal system group is
designed and the imaging and printing group is designed to fulfill the need of the
business customers. Through the related diversification of their products HP hold
major market share of the computer industry.
Product Development.
Hp is also using this strategy as technology related product have very short product
life cycle. HP is continues to develop new innovative products and continuously
increasing sales by improving product and services.
Suggested Strategies for HP:
HP should focus on Market development strategy and cover other geographical
area as well
HP should use Cost leadership strategy for Selling existing brands with decrease
price in Asia pacific region because Hp has major market share in this region 21
percent market share in India and in China which is the becoming the world
fastest growing market with growth rate of 21% .So by this strategy HP can create
huge competition.
HP should also use Forward integration by selling their product on web and
minimize distribution channel to save profit.
Start production in Asia with innovation.