INTRODUCTION
The purpose of this report is to analyze the Hewlett Packard’s internal environment. The internal environment is very important because it is comprised of factors that are within the company; therefore, the company has control over these elements. This report with analyze factors within the company that will have an overall effect on the day to day operations of HP. Hewlett Packard is the world leading supplier of PCs and also consumer and printer hardware. The industry is highly competitive. The largest companies control 77% of the industry revenues (IBISWorld, 2011d).
This competition is why it is very important for HP to stay on top of operations; it is extremely difficult in this industry to keep the number one spot. Lately, acquisitions have been a very popular way of expanding computer companies. HP acquired Compaq in 2001, and has since made a very important acquisition with Palm. With the acquisition of Palm, HP acquired touch screen technology. This new software is important in creating innovative technology that can compete against Apple and keep HP as a leader in innovation.
HP has been a leader in the industry through innovative technology. The company has won many awards for their computers, laptops, and touch screen technology. HP is also a leader in the cultural trend of going green. Hp has research labs around the world studying the environment and is one of three firms that established the European Recycling Platform (ERP) in 2002.
To stay on top, the leaders of the corporation must know and understand the internal environment. Therefore, the report will analyze HP’s internal environment through core competencies, resources, and HP’s market strategies. This includes the value chain, a weighted analysis, and analyzing the company’s capabilities. This report will take in-depth look at HP’s activities, operations, services and distribution.
RESOURCES
The resources of Hewlett-Packard are immense this global enterprise represents seven business divisions with net Revenues of 114,552 million for 2009.
Table 1: HP Division Revenues
Business Divisions | Segment Representation | Revenue Fiscal Year 2009 | Revenue Comparison Fiscal Year 2008 |
Personal Systems Group | 30.3% | 35,305 million | (16.5%) |
Services | 29.8% | 34,693 million | 65.4% |
Imaging and Printing | 20.6% | 24,011 million | (18.9%) |
Enterprise Storage and Servers | 13.2% | 15,359 million | (20.8%) |
HP Software | 3.1% | 3,572 million | (15.4%) |
HP Financial Services | 2.3% | 2,673 million | (0.9%) |
Corporate Investments | 0.7% | 768 million | (20.4%) |
The largest geographical market for HP is the US, which represented 36.1% of total revenues for 2009 with an annual increase of 11.9% from 2008. Hewlett-Packard operates in 170 countries totaling 63.9% of total revenue; HP’s international operations experienced a 10.1% decrease from 2008 (Datamonitor, 2010).
The resource strengths of HP are embodied in their tangible and intangible resources. This multi-national-enterprise exhibits a unique ability to diversify across the IT industry being a leader in multiple segments simultaneously.
Tangible Resources
The tangible resources of a company are defined by their Financial resources (ex. borrowing capacity and ability to deploy internal funds), Physical resources (plant and equipment and access to raw materials) Technological resources (ex. stock of technological advancements and patents) and Organizational resources (ex. formal reporting, planning and coordination) (Hitt et al., 2004). Hewlett-Packard has strength in tangible resources and is able to deploy such resources in broaden and expand business capabilities.
Financial Resources
The financial resources of HP are distinguished by their wealth of successful acquisitions and valuable partnerships. The depth of HP’s acquisitions will be further discussed in the core competencies section of this document. Their financial ability has also allowed HP to develop expertise in their supply chain and distribution channels. With collaboration of their own manufacturing equipment and by utilizing out sourced manufactures (OM’s) HP has been able to develop high quality devices with efficient and accurate modes of international distribution. Custom configuration of systems prior to distribution by HP’s skilled technicians offers HP consumers a streamlined transaction. By utilizing OM’s the time it takes a product to reach the market is decreased and OM’s provide added cost efficiencies for the company. The internal revenue being used is the company’s investments in research and development expenditures were three billion in fiscal 2010 (Hewlett Packard Annual Report, 2010). The company is operating with 124,503 million dollars in assets (Hewlett Packard Annual Report, 2010). This internal revenue gives the company an ability to set sites on expansions that are in alignment with market trends. The printing division has been experienced growth due to the switch from analog to digital printing. The company has deployed resources to develop web based home printers and mobile printing capabilities in hand held devices. From an enterprise perspective the company is moving towards the further development of converged infrastructure products integrating networking, servers, and storage and management software. These products are being developed to fit specific client needs and satisfy demands for increased automation and virtualization management (Hewlett Packard Annual Report, 2010).
Physical Resources
Property, plant and equipment are another tangible resource of HP. The enterprise has sixteen locations across the globe in addition to their headquarters in Palo Alto Ca. The facilities are maintained for development and manufacturing. These facilities are in Ireland, Singapore, United Kingdom, Japan, China, Vietnam, India, Egypt and Thailand. The physical resources of these properties are a symbol of the financial strength and competency of this company. HP owns 41% of all their property, a liquid asset of 41 billion dollars (Datamonitor, 2010). Meanwhile Hewlett Packard is also aware of the expense of managing and maintaining plant property and equipment. It has launched a multi-year plan to consolidate real estate locations and optimize efficiency through-out the company. The company plans on reducing the number of core sites in order to decrease IT spending and alleviate real estate costs. This movement will enable Hewlett-Packard to reduce its financial risks (Hewlett-Packard Annual report, 2010).
Technology
Technological resources of Hewlett-Packard are represented by a large patent portfolio. As of October 2010, the company’s patent portfolio boasted of 37,000 patents. They believe that these patents allow competitive differentiation of their products and services. Patents are a strategy utilized by HP to maximize return on research and development while enhancing access to technology with third party venders. These licensed patents have a twenty year life cycle. These patents allow HP to maintain current and exceed innovative capabilities of their competitors (Datamonitor, 2010).
The development of HP’s own operating system WebOS is another representation of the company’s technological capabilities. This operating system will reduce the company’s costs by eliminating the use of Microsoft’s Windows and internalizing the generated revenue of this product.
HP has also led global environment with its Energy-saving PC. The HP rp5700 Desktop PC can save up to 80 percent of the energy that the computer before it had used. It also has the longest useful life of any HP business PC and it is easier to recycle. In addition, the Electronic Products Environmental Assessment Tool gave the HP rp5700 a gold rating. It was also the first product meet the requirements to receive a gold rating. HP is also leading the environment portfolio in the technology industry.
Up to half of the total energy used in laptop computers is merely to keep cool. In 2007, HP launched a new product to lower this use of energy, called Dynamic Smart Cooling (DSC) service. DSC can measure heat produced by servers. It constantly adjusts the cooling response, and can reduce energy consumption in the cooling portion of a computer by up to 40 percent. This can reduce energy by 480 tons of carbon dioxide in a year (Hewlett-Packard, 2010a).
Researchers at HP labs around the globe are also building an internal system within the Earth that will monitor our Environment. This will help people react more quickly to the environment, such as, natural disasters, manufacturing line failures, hazardous road conditions, and gas leaks (Hewlett Packard, 2010b). These signs of cultural awareness within and outside their industry will score HP socially conscious points with their customers and help the environment at the same time.
Organizational
Important organizational resources of HP are structure and business plans. The structure of the company is broken down into seven segments. These segments are structured by activity. The Enterprise Storage and Servers segment offers storage and server products. The Software segment provides IT, information management, business intelligence, communications, and media solutions. The Personal Systems Group segment consists of commercial and consumer PCs, workstations, handheld computing devices, calculators and other related accessories, software and services for the commercial and consumer markets. The Imaging and Printing Group segment provides printer hardware, printing supplies, printing media, and scanning devices. The Financial Services segment offers leasing, financing, utility programs, and asset recovery services (Yahoo Finance, 2011). Basing the structure around activities or product groupings makes it easier for HP to focus on customer needs in each division, and market segments for different divisions. The disadvantage of having a structure based around activities is that some company functions may be duplicated. For example, there are sales teams in each division. Also, coordination between divisions often takes longer with this type of structure (Biz/ed, 2003).
As part of HP’s recent business plan, HP has utilized acquisitions and restructuring as an organizational tool for company growth. The recent acquisitions of Palm and 3Com were done in order to acquire technological advances of these companies. In 2010 HP acquired Palm. With acquisitions like Palm, 3Com, and Compaq, HP needs to restructure the operations of the company that is acquired. The company expects the restructuring of Palm to cost $46 million. These costs include severance pay for Palm employees, cost to vacate unneeded facilities, contract cancellations fees with suppliers, ect. HP also expects to pay the majority of these costs by the second quarter of 2011. In 2010, HP also acquired 3Com, the expected cost is $42 million, and they have already recorded $18 of these costs. The remainder is expected to be paid in full by the end of 2016. The restructuring program for these companies includes consolidating locations, tools, equipment, and applications (Hewlett Packard Annual Report, 2010).
Intangible Resources
The intangible assets of a company can be quantified as Human Resource (ex. corporate culture, knowledge and trust), Innovation (ex. capacity to innovate, scientific capability and ideas) and Reputation (brand value, customer loyalty and market representation)
(Hitt et al., 2004). The values of these assets are difficult to be replicated. The very nature of the IT industry demands that company’s intangible resources be as strong if not stronger than its tangible assets. Due to this characteristic a company must strive to have a competitive advantage in its intangible resources.
Innovation
Innovation has defined the success of HP. The culture of the organization has embraced the value of knowledge sharing. Described as a top down management approach; executives of varying divisions review what is coined the Innovation Portfolio and examine individual projects as an organization. Group meetings are held with executives but are open to all departments. These sessions allow the design team to discuss their work and gain feedback and input from top executives and colleagues of different departments. Collaboration is the way business is addressed at HP. It is a matrix organization that shares knowledge and skill throughout the process of developing new products. The company has gone so far as to develop an award called the “eAward” that are given to individuals or departments that strive to collaborate with their peers or superiors (Desouza, 2007).
Intellectual property can also be attributed to the strength in HP’s innovative capabilities. As earlier discussed the patent portfolio is a symbol of the intellectual strength and capability that is fueling the enterprise. Through a history of acquisitions and mergers HP has gained not only financial assets but has gained intellectual collaboration and expertise from teams of individuals.
Human Resources
There are over 304,000 people employed by HP in many different countries across the world (Hewlett-Packard Annual Report, 2010). In a recent interview the new CEO indicated that they planned on continuing to embrace the collaborative environment HP was built upon. He stated “we can’t do this alone” in reference to the work that is being done with cloud computing. The performance potential of a work force this size is something that rivals of the industry have trouble competing with (eWeek, 2011).
HP prides themselves on their corporate culture. Uniquely, the company provides a five day orientation where employees from all over the world have to come to the California headquarters to be oriented. There, the new hires learn a full history of the company. HR management feels that this trip gives employees a connection to the big corporation and is the start to a global corporate culture (All Business, 2002). Cross departmental innovation is another way in which the company utilizes the human capitol of the firm. The top down structure provides guidance and influence to employees and fosters an environment which strives to draw from individual’s knowledge across business divisions for the benefit of the company as a whole.
Reputation
Finally the brand value of HP is a significant asset; it was valued at 18.9 billion dollars in 2009 (datamonitor, 2010). This is a strong reputational asset. HP has distinguished itself by marketing to private consumers, small to medium business’s (SMB), large enterprises and government agencies. The brand named is recognized and respected by a wide socioeconomic demographic which has enabled HP to enter many markets with a desirable reputation. The HP brand further enhances the company’s financial leverage and growth.
The reputational asset of Hewlett Packard has driven the company to examine the environmental responsibilities that the company has in manufacturing and development. There is a current focus on going green. HP received the #1 spot in America’s Newsweek’s 2009 Green Ranking. The company received a #1 rating out of 500 U.S. corporations. HP received this rating for strong programs to reduce carbon emissions, environmental policies, performance, reputation, and research and analysis on environmental performance (Hewlett Packard, 2011).
Hp along with three other firms established the European Recycling Platform (ERP) in 2002. This project sets standards for recycling contracts in other counties and even audits the companies to ensure that they are complying with recycling rules.
Hewlett Packard has a wide array of awards and acknowledgements which illustrate are reputational assets. These include:
· ASP's 'Ten Best Web Support Sites,” 2006
· SSPA Hall of Fame Induction: an award given in recognition of companies that have won five SSPA STAR Awards. Only 10 companies in the Association's history have won this award, 2006
· Fortune Magazine voted HP “an environmentally responsible Green Giant,” 2007
· PC World named HP’s TouchSmart IQ770 one of “Today’s Most Innovative Products,” 2008
· PC Magazine's 'Editor's Choice Award' for HP Pavilion Elite m9040n PC, 2008
· Dataquest: IDC Customer Satisfaction Audit 2008-09 ranked#1 in two categories, Laser Printers & MFDs and customer satisfaction
· Named one of 100 best companies for working mothers by Working Mother Magazine
· Ranked #1 in Newsweek’s first Green Ranking, 2009
· DQ channel gold award in Best after sales support, 2009
· DQ channel gold award in Best online support, 2009
· HP received the Service Excellence in Innovative Support Award, 2009
· STAR Award for Service Excellence in Support Innovation, 2009
· HP received SSPA certification for “providing superior technical support and services to business notebook and desktop PC customers in the Americas region. HP is currently the only PC manufacturer with the afore-mentioned certification” Hewlett Packard, 2011).
CAPABILITIES
Together tangible and intangible resources work to better define the organizational capabilities of HP. It can be said that a company’s capabilities are the key to its competitive advantages. HP has the capability to deploy resources efficiently and manage an enterprise that operates with seven business divisions all of rich complexity and skill. As a result of this capability the company has been able to acquire an outstanding amount of businesses. This has allowed for the growth and development of different segments of the IT industry. Most recently the merger with Electronic Data Systems (EDS) a global technology service company specializing in business solutions. The merger of EDS has expanded the service division and produced the highest revenue of all divisions in 2009. This can be credited to the 568 million dollar contract by EDS from The British Columbia Ministry of Labor and Citizens to provide all data center services. In addition a 10 billion dollar contract was gained with Aviva, one of the largest global insurers, to manage and redevelop two data centers (Datamonitor, 2010).
This capability is teamed with the company’s fluent innovative expertise. In addition to acquisitions HP has had long standing partnerships with many of its market rivals. Microsoft has been a partner and ally of HP for years. Because Microsoft has had the only well respected operating system this collaboration has been beneficial for both companies. The upcoming launch of HP’s own operating system WebOS will soon change that relationship. HP is prepared to install WebOS in all PC computers manufactured by HP in the next year. The company believes that this will provide a symbiotic relationship with software developers and further enhance the industries depth and potential of future partnerships (Hewlett Packard Annual Report, 2010).
CORE COMPETENCIES
A firm’s profitability can be described by market power and superior resources (Grant, 2007). Therefore, it can be deduced that HP, as an industry leader, have core competencies that allow for both market power and superior resources. The core competencies are multidivisional coordination, acquisition management and innovative collaboration.
Multidivisional coordination is a success factor for this company. They are the leader in PC’s and have one of the best known printing and imaging segments of its industry. The merger of EDS illustrates the ability to adopt a new segment and produce the highest revenue of divisions within the first year. Operating in over 107 countries with a total of 85 million square feet of space in use, HP is able to align the vision and goal of the company fluidly (Hewlett Packard Annual Report, 2010).
Acquisition management is one of Hewlett Packard’s key core competencies. The acquisition of Compaq has proven to be a highly profitable decision that is practically shadowed by the enormous list of companies acquired in the past ten years. IBRIX, 3 Com Corp., Voodoo PC, US Robotics are only a few of the successful companies that have been taken in by HP. The company has remarkable expertise in acquiring and expanding the product and services of the company.
The company’s innovative collaborations are underlined by the research and design expansion in Singapore. This facility is home to one of the region’s largest research laboratory. This was a wise decision as the industry in the Asia Pacific region is gaining financial strength. The launch of the tablet Slate, the HP EliteBook and WebOS all emphasize the company’s strong competency in nurturing innovation and producing fast cycle product development (Hewlett Packard Annual Report, 2010). The value of innovation has been a core competency of Hewlett Packard from the beginning.
FOUR CRITERIA TEST
Table 2: Four Criteria Test for Determining Distinctive Competencies
Valuable | Rare | Costly to Imitate | Non-substitutable | Competitive Consequences | Performance Implications | |
Brand Image | Yes | No | Yes | No/Yes | Competitive Parity –Temporary Advantage | Average to Above Returns |
Distribution (logistics) | Yes | No | Yes | No | Competitive Parity | Average Returns |
Production (Skills/Capacity) | Yes | Yes | Yes | No | Temporary Competitive Advantage | Above Average Returns |
Innovation Reputation | Yes | Yes | Yes | No | Same Competitive Advantage | Above Average Returns |
Knowledge and Abilities | Yes | Yes | Yes | Yes | Substantial Sustainable Competitive Advantage | Above Average Returns |
Marketing | Yes | No | Yes | No | Competitive Parity | Average Returns |
The brand image of Hewlett Packard is a valuable resource that is not rare in the IT industry. Apple, Dell and Microsoft are all highly recognizable and distinguishable brands. However, because HP’s brand is valued at 18.9 million dollars it could be costly to imitate. As an industry leader this advantage may not be substituted in the near future but because of the competitive nature of this industry it is subject to change. This combination of attributes provides a competitive parity will a slight advantage, but this could be captured by an industry rival.
Distribution and manufacturing is strength for HP. It has a wide range of third party venders and out sourced manufacturers in addition to operating their own manufacturing plants across the globe. Cohesive distribution and supply channels are an essential component to competitors and HP’s fluency in this area is not rare. All PC and IT enterprises must have a highly capable distribution process in order to keep the pace with its evolving market. But because of HP’s strong resources and elaborate network of third party providers again this strength could be costly to imitate but is substitutable. The company possesses a competitive parity of their rivals.
Hewlett Packard has a well-known reputation for its commitment to innovation. With seven operating divisions across 170 countries the company has deployed teams of engineers and knowledge workers to enhance existing systems and continue new product development. The life cycle of IT devices and equipment are in constant flux and require innovation to stay ahead of the curve. As an industry leader HP has made significant investments in R&D to ensure its position is held. Although this currently gives the company a competitive advantage innovation is substitutable among rivals, as new business enters the market and existing business gains strength.
The knowledge and capabilities of HP can be attributed to the company’s commitment to innovation. The business requires highly specialized executives to execute efficient and profitable acquisitions. This capability is one of the company’s core competencies. This is valuable and rare because intellectual property cannot be replicated and is costly to imitate. It can be concluded that the knowledge and skill of a specific workforce cannot be substituted and gives HP a competitive advantage.
The value of HP’s marketing investments is significant due to the company’s financial strength which makes them costly to imitate but are not rare. HP began aggressively marketing to the consumer market and not just business to business in the ninety and has since become the industry leader for PC’s. This movement was a marketing strategy that enabled the company to excel in business to business segment and expand appeal into the consumer market. In addition HP has worked to keep cost of PC systems low and increase desirability to consumers in troubled economic times. This marketing strategy is widely used by market rivals and is substitutable which gives HP competitive parity.
VALUE CHAIN
Primary Activities
Hewlett Packard operates in more than 170 countries (Zhang, 2010). The company’s offering spans from business process outsourcing, personal computing, other access devices, enterprise storage, server technology, multi vender customer services, imaging and printing and many others. It manufactures and operate it products through outsourcing, inbound logistics, outbound logistics, marketing and sales service, research and development expenditures for product innovation, distribution, and strategic planning. HP’s principal executive offices are in Palo Alto, California. The company also has headquarters of geographical operations in Geneva, Switzerland (serving Europe), the Middle East, Africa, Singapore, Tokyo and Japan (serving Asia Pacific) and finally in Houston, Miami, and Mississauga, Canada (serving Americas).
Inbound Logistics (Supply Chain Management)
Hewlett Packard has more than 700 production suppliers that are responsible for product materials components, manufacturing and distribution services. Their suppliers are working in more than 1200 locations worldwide (Hewlett Packard, 2009b). The company has over 300,000 inspectors who audit the sites that produce HP’s products (Hewlett Packard, 2009b). These inspectors make sure the suppliers are integrating social and environmental requirement into their operations. The company also requires the suppliers to be more energy efficient to help reduce greenhouse gas emissions.
Hewlett Packard utilizes its significant number of outsourced suppliers to generate cost efficiencies and reduce time, and to market the company’s designed products. These suppliers are also relied on to maintain the flexibility in the supply chain processes. All these processes have helped improved HP’s product quality.
Operations
HP manufactures a limited number of products from sub assemblies to components that are acquire from a wide range of their vendors. The company outsources manufactures around the world to manufacture HP products. This helps Hewlett Packard cut operating cost and reduce time to market its products. More than half of HP’s PCs are built by subcontractors (Hewlett Packard Annual Report, 2010). Some products are manufactured by third party original equipment manufacturers that HP buys and resell under the HP brand.
Hewlett Packard’s operations are subject to local, state, federal and foreign laws relating to environmental protection. For example, disposal of hazardous substances or wastes and discharge of pollutants into air and water are two regulations the company needs to be aware of (Hewlett Packard Annual Report, 2010). HP is committed to making its global operations more energy efficient by seeking low carbon energy sources where possible. They also want to install more efficient equipment. Hewlett Packard is on target to cut its greenhouse gas emissions to twenty percent by 2013 (Hewlett Packard, 2009a).
HP bases products and operations around being environmentally friendly. This has become a huge piece to the overall company. The company’s executives believe that this will promote the welfare of their employees and customers. HP has developed operations around an Environment Management System which focuses on employee safety. This policy has been put into place to go above and beyond legal requirements for employees and customers. It focuses around actively reducing job related injuries and the risk of employees to illnesses. It also focuses on safety of products, as well as, pollution. To promote this, HP’s employees are constantly being trained on Health and Safety. They attend overall health and safety seminars as well as job specific training. They also have employees that are trained in first aid, spill prevention, and control operations (Hewlett Packard, 2011).
HP’s commitment to innovation is the key element of its corporation’s culture. The company’s focus is designing and developing products, services and solutions that suit the customers’ continuously changing needs and emerging technological trends. The employees’ talents drive everything from innovating products to how the company connects with customers and collaborate with partners.
Hewlett Packard’s operations depends on its ability to anticipate its needs for components, products and services and its suppliers ability to deliver sufficient quantities of quality components, products, and services at reasonable prices in time for HP to meet critical schedules (Hewlett Packard Annual Report, 2010). HP has developed a supplier portal that manages the supplier relationships. It is an advanced technology to improve the relationship with the supply base. It includes electronic auctions, e-quoting, e-invoicing and e-payments.
HP is the leading provider of products, software, solutions and services to individual consumers, and small medium and large businesses. This includes providing products to the government, healthcare facilities, and education. The operations are organized into seven segments including services, enterprise storage and servers, HP software, the personal systems group, the imaging and printing group, and HP financial services and corporate investments (Hewlett Packard Annual Report, 2010).
Outbound Logistics (Distribution)
HP’s distribution logistics program has improved its transportation efficiency. It has reduced its energy use and cost by shifting its product transport to more efficient methods. HP did this by influencing its transport providers to improve on their environmental performance.
Hewlett Packard’s distributors include, independent distributors that sell HP products into geographies where HP has little or no presence, resellers that sell HP’s products alongside their own value added products to a targeted customer group, and retailers that sell HP products in their own physical and internet stores.
HP has an established relationship with the world’s largest and most reputable shipping companies, which allows HP to offer very economical pricing (Zhang, 2010).
HP’s products and services provided to customers are distributed by direct and channel. Its business by channel or direct sale depends on the type of business or region. That is distribution is tailored according to customers buying pattern and different regional market conditions. The combination of HP’s business by channel or direct sales differs based on the region that is being sold to and the businesses that are distributed to. HP’s focus in the distribution segment is on coverage, efficiency and productivity gains.
HP’s partners in the channel include:
- Retailers that sell HP products to the public through physical or Internet stores
- Resellers that sell HP products and services with value-added products or services, to targeted customer groups
- Distribution partners that supply HP solutions to smaller resellers that HP does not have a direct relationships with
- Independent distributors that sell HP products into geographical locations where HP has no presence
- Original equipment manufacturers that integrate HP products with their own hardware or software
- Independent software vendors that provide clients with specialized software products often assist in selling HP products and services to their clients
- Systems integrators that designing and implementing custom IT solutions often partner with our services business to have more extensive expertise
(Hewlett Packard Annual Report, 2010)
Sales and Marketing
HP began to shift its image in the late nineties. It shifted its image to have presence in the consumer market, not just the business to business segment. The company did this even though the business to business market continued to excel. Due to this addition, HP’s current products are business models stripped of their costly features in order to appeal to the needs and pocketbooks of the consumer market (Market Teacher, 2010).
One of the marketing promotions that HP utilizes is collaborating with the blogosphere to run its online marketing promotion. For example, in 2008, over five thousand computers were handed over to about thirty one bloggers to give away as prizes to their readers. Hewlett Packard’s intention was to reach that particular market. This promotion was to increase sales for HP’s HDX Dragon Entertainment Notebook. As a result, fifty million impressions were registered during the thirty one day promotion, leading to 84% increase in HDX Dragon sales, 10% increase in overall consumer PC sales and a 14% jump in web traffic and that is comparing the first five weeks period before the contest to the five week period after it (Smith, 2008).
Hewlett Packard’s marketing strategy is to continue to lower its prices on its products and services in order to stay competitive. The price competition in the computer and printing market has been very intense, competitors continue to aggressively cut prices and lower their product margins for these products.
Hewlett Packard has also strategized, to take advantage of the market trends for its products and services. For example, in the printing market, HP is shifting from analog to digital printing. They are also working toward enabling web and mobile printing.
HP is also increasing its sales coverage by investing in its sales channels to address the markets HP covers. This includes emerging markets.
Service
HP’s success all these years is based on its customer loyalty. By providing the customers with the best quality, makes them want to come back.
HP supports its global products and services by providing information technology solutions, including hardware and software service to its customers. HP offers asset recovery services for its global customers. The company also offers innovative, customized and flexible alternatives to balance a unique customer cash flow, technology obsolescence and capacity needs (Hewlett Packard Annual Report, 2010).
Hewlett Packard supports its customers through the entire lifecycle of their product ownership. The company also delivers education programs that are associated with HP services and products. Customers can get technical support by online interaction with a technical support technician, sending email or calling the service centers overseas. The Asia-Pacific region where HP operates its most of the offshore online customer service call centers - business process outsourcing (BPO) units has the best network of service, its net revenue in BPO sector reduced by 3.5 % in the fiscal year 2010 from 2009 (hp annual report, 2010).
In the year 2009, three of the BPO sectors of HP in India were on block, each valued at US $ 50 million. HP tried to sell those unites to large cap IT giant firms like Infosys and Cognizant and HP supposed to contact IBM and Accenture to acquire declining BPO units, however no further comments or declaration heard from any firms [CNBC TV-18, 2009]. This situation was contrary to HP’s commitment in the year 2007 when HP committed to increase staff in Indian BPO units by 20% (PTI, 2007). It can be figured out that global recession might have played major role in weakening BPO segment.
HP sees decline in net revenue due to, economic conditions in certain countries and possible offset by currency impact (hp annual report). To recover from this condition, HP designs its objectives under Fiscal 2011-2012 Enterprise Services restructuring plan (hp annual report, 2010).
Support Activities
R &D
Hewlett Packard’s commitment to innovation is the key element to its success. The company is focused on researching, designing and developing products, services and solutions that suit customers changing needs and emerging technological trends. HP focuses on areas where it can make unique contribution or areas where it can form a partnership with other leading technological companies to leverage its cost structure and maximize its customers’ experiences.
HP anticipates that it will continue to have significant research and development expenditures in the future to provide a continuing flow of innovative, high quality products and services to maintain and enhance customer value (Hewlett Packard, 2009a).
Technology
HP has one of the largest worldwide private networks. It provides instant connectivity, such as transactions, voice and graphics video and email via the internet with partners and customers (Hewlett Packard, 2009). Information technology is the backbone of HP’s supply. Its e-business allows customers to personalize and customize their orders and is delivered at the requested time and specified place.
Human Resource
The human resource supports the businesses, HP subsidiaries, the managers and employees with operational matters, direction and guidance. This is done through recruitment and selection, training and development, organization design, including culture and structure, employee and industrial relations, compensation and benefits and workforce management programs (Hewlett Packard, 2009a). HP recruits the best diverse talents and prepares them to be leaders. HP believes in a diverse workforce because it promotes creativity and innovation. Its workforce comprises of people of diverse ages, cultures, ethnicities and experiences. This is one reason the company is very successful.
Finance
Hewlett Packard’s financial processes have ensured proper financial management and have provided key information on a company wide basis. HP’s processes helps track and consolidate forecasts with actual results and analyzing the variances for each subsidiary (Hewlett-Packard, 2009a). This information helps reach business decisions in a timely manner.
WEIGHTED ANALYSIS
Weighted competitive strength assessment is an advanced benchmark test to evaluate a company’s overall strength / market position compared to its rival and reveals if the company has any significant advantage or disadvantage over its competitors (Thompson et al, 2010, 128). Some of HP’s major market competitors in the PC segment are Dell Inc., Acer Inc. and Lenovo Group Ltd.
Weighted Rating System is a quantitative test that measures key success factors like product quality, market reputation, innovation capability, production capacity, supply chain, and cost control, to name a few. The Weighted Competitive Strength Assessment of HP was performed by using a numerical scale, ranking various key success factors from 1 to 10, 1 being the lowest and 10 being the highest.
In the chart, key success factors are weighted. They each have a different percentage based on the importance of the factor in the PC industry. For example, 0.20 was where as lower important key success factors given scale of 0.05. The total sum of weights is 1. Cost control and new product innovation given more weighted followed by product quality, supply chain and customer services, whereas Revenue, manufacturing capacity and reputation given least score. Cost control and new product innovation given more weighted because cost is one of the prime factors for customers in Asia-Pacific countries like India. This area is important because it is a new market that is growing quickly. Cost is also an important factor currently in the U.S. as well due to the economic downtime and high unemployment. This is followed by product quality because customers are always looking for high quality computer systems that have current technological features. Supply chain was next because the industry is constantly changing, and as new technology emerges, it is very important to have a fast supply chain so products can get to the market as fast as possible and Customer Service. Revenue, manufacturing capacity and reputation were given lesser weights. Revenue was given a lesser weight because factors such as, cost is important to customers, and a highly competitive industry will lessen profit potential.
HP leads Dell, Acer and Lenovo in terms of talented workforce, manufacturing capacity, supply chain and revenue (Datamonitor, 2010a). Since HP has a vast amount of geographical business location, the production capacity and human resource is double that of Dell. Dell has nearly 30% of total staff that HP has. The production capacity and human resource is fifty times larger than lowest scoring company, Acer Inc. Hence, HP received a strength rating of 10, whereas, Dell received a 4, followed by Lenovo and Acer – 2 and 1 respectively.
Furthermore, HP’s cost control has enabled the company to lower the PCs market price which is a major advantage over competitors. HP offers the best quality configuration PCs at much lower prices than the rival Dell and Acer. Dell and Acer are very close in cost control whereas, Lenovo is a quite expensive comparison for the same configuration product.
HP’s major rival Dell leads in product quality, new product innovation, customer services and market reputation (Datamonitor, 2010b). Last year Dell beat HP in India’s PCs market and became top brand in the country (BS Reporter, 2010). Also, Dell successfully introduced its first 4G running tablet Dell Streak 7 after last year’s success with Dell Streak 5, whereas HP still has Pandora in the box, HP’s WebOS based tablet that is still not ready. Acer is also in the competition with successfully launched Android based smart phones, dual screen virtual navigation, and keypad equipped high end Acer ICONIA laptop which will give a major hit to HP and other PC rivals in the market. Acer already rose as HP’s biggest rival followed by Dell and Lenovo in the global PCs segment (Datamonitor, 2010e). Lenovo is giving tight competition to HP and Acer in Asia-Pacific region.
In terms of revenue, HP generated US $114,552 M (Datamonitor, 2010c) at the yearend October 2010, Dell was runner up with US $ 52, 902 M at the yearend January 2010, followed by Acer US $17,397.4 M at the yearend December 2009, and Lenovo earned US $16,604.8 M in revenue at the yearend March 2010 (Datamonitor, 2010d).
The weighted strength score is calculated by rating each competitor on numeric scale 1 to 10 and multiplying the assigned rating by the assigned weight with no two companies having the same score in the same strength. For example, HP’s strength for talented workforce measured 10, therefore, to find the weighted score for HP, the strength of 10 was multiplied by 0.10 (the weighted rating) to come up with HP’s weighted score for talented workforce which measured 1.
When drawing conclusions, HP seems like they are ahead with a 67 overall strength followed by Dell 64, Acer 31 and Lenovo 29. However, the final weighted competitive strength ranking put Dell Inc. slightly ahead of HP with percentages of 7.55 and 7.3, followed by Acer 3.7 and Lenovo 3.35. The strength score reveals where the company can use offensive or defensive strategies to expand in competitive strengths and reduce competitive vulnerabilities (Thompson et al, 2010, 131).
The final verdict is that HP needs to a more furnished product line and more frequent innovation in the PC market. For instance, PCs are transforming now in tablets; HP needs an aggressive strategy to beat competitors. Furthermore, HP’s emerging rivals in Asia-Pacific may stress to lower product price and this may lead to more cost cutting strategies for the company.
SWOT
Table 4: SWOT Analysis
INTERNAL | |
STRENGTHS | WEAKNESSES |
Ø Successful Acquisitions (company growth) Ø Strong brand name Ø Vast amount of awards Ø Development and Manufacturing facilities Ø Outsource Manufacturing Ø 37,000 patents Ø Sell high quality printers and other accessories that come with the computer Ø Already competing in some other global markets Ø Largest computer hardware and peripheral company in the world Ø Business in 170 countries Ø 10th in Fortune 500 list Ø Strong product line Ø Best server system provider Ø Best after market support Ø Supplier Portal System Ø Structure by division makes it easier to focus on customer needs Ø Structure makes it easier to differentiate between market segments | Ø No on-line consumer sales (becoming a bigger market) Ø Innovation is happening too slowly Ø Pandora tablet not ready Ø Unfurnished product line Ø Not aggressive enough (with competitor) Ø High restructuring costs Ø Structure leads to duplicated functions Ø Structure makes coordination between divisions more time consuming |
EXTERNAL | |
OPPORTUNITIES | THREATS |
Ø Effective Marketing / Branding Ø Cost control Ø Talented Workforce Ø New WebOS system (can compete with Apple) Ø Going Green technology Ø Touch screen technology and other technological advances Ø Research labs around the globe Ø Research labs working on environmentally safer computers Ø Selling On-line Ø Other global markets Ø Expanding into cloud computing | Ø Current economy / unemployment Ø Competitive Environment (High rivalry) Ø Good substitutes within the industry Ø Apples applets are always advancing Ø Dell’s strength in the online market Ø Constantly Changing technology Ø Many choices within the PC Market Ø New substitutes emerging Ø Difficult and costly to continually train staff on new products / technology Ø Short product lifecycle Ø Bargaining power of Intel and Microsoft |
CONCLUSION
Hp focuses its operations around the concept of going green. They do this not only through their product line, but also through employee training and safety. The overall effects of being environmentally safer will benefit the employees as well as the customers. The company has thrived recently through acquisitions. The new WebOS System acquired by Palm has lead HP to win awards for their touch screen capabilities and has increased company revenues as well.
This acquisition is an example of one of HP’s many tangible resources. Other important tangible resources are HP’s outsource manufacturing. This enables the company to put forth new product quickly. Also, they have 37,000 patents. This is important because patents can’t be replicated for a number of years, and technology in the industry is rapidly changing. Therefore, these patents give HP a major advantage over competition.
The company also has many intangible resources that are important for the company’s position within the industry. HP has received numerous awards for outstanding products, services, and innovative technology. The company was even inducted into the SSPA Hall of Fame for technological advances. Only 10 companies have ever received this award.
The supply chain also establishes that innovative technology is the backbone of HP. If HP does not constantly stay on top of changes in technology, they will quickly lose their place as the leader in this industry.
The supply chain shows that HP’s success is based on the loyalty of their customers. A valuable piece of the supply chain is outbound logistics. HP has created a unique system with their suppliers called the Supplier Portal. The system tracks supplies from the suppliers all the way to the production line. If HP runs out of supplies, the suppliers will know about HP’s supply need before they even have time to place an order. This reduces time constraints, and every second counts in a technology oriented industry.
The weighted analysis gives an overview of where the company stands against competitors. This analysis suggests that HP needs a more aggressive strategy to keep their number one position in the industry. Currently, the analysis shows that Dell is slightly ahead when the strengths are weighed. This analysis also suggests that that HP needs more frequent innovation. Even though the new software is comparable to Apple, the company has not mastered tablet applications. Also, the company was the first to come out with the touch screen computer, however, the company is taking too long with Pandora which, means that the company need to become more consist with the speed of technological innovation.
Overall, HP is a strong competitor within the PC industry. They are very successful and have accomplished very innovative technology; however, there is always room for growth.
REFERENCES
All Business. (2002). Hewlett Packard: A Strong Foundation. http://www.allbusiness.com/services/educational-services/4281165-1.html
Biz/ed. (2003). Organizational Structure. Business Education. Retrieved on April 10, 2011 from http://www.bized.co.uk/educators/16-19/business/strategy/lesson/orgstructures.htm
Datamonitor. (2010). Hewlett Packard Company; Company Profile. Retrieved on March 20, 2011 from Datamonitor Database.
Desouza, K. C. (2007). Leveraging Ideas for Organizational Innovation. Blogspot. Retrieved on April 4, 2011 from http://ideas4innovation.blogspot.com/2007/01/hewlett-packard-part-1-holistic.html
eWeek. (2011). HPs Apotheker Gets More Specific About Company’s Road Map. Retrieved on April 9, 2011 from Gale, Cengage Learning, A252706779.
Grant, R. (2007). Contemporary Strategy Analysis: Concepts, Techniques, Applications. (4th ed.). Hoboken: Blackwell Publishing.
Hewlett-Packard. (2009a). Global Citizenship Report. Retrieved on March 31, 2011 from http://www.hp.com/go/globalcitizenship
Hewlett-Packard. (2009b). Supply Chain Responsibility. Retrieved on March 28, 2011 from http://www.hp.com/hpinfo/globalcitizenship/society/supplychain/index.html
Hewlett-Packard. (2011). Why HP. Retrieved on April 9, 2011 from http://h20424.www2.hp.com/news/whyhp/in/en/index.asp#awards2
Hewlett-Packard Annual Report. (2010). Annual Report Pursuant To Section 13 OR 15(d) Of The Securities Exchange Act of 1934. Retrieved March 16, 2011, from http//www.hoovers.api.edgar-online.com/EFX_dll/EdgarPro.dll?FetchFilingHTML1?SessionID
Hitt, Ireland, and Hoskisson. (2004). Strategic Management: Competitiveness and Globalization Concepts. (6th ed.) Topeka: South-Western Publishing.
Marketing Teacher. (2010). SWOT Analysis Hewlett Packard. Retrieved on March 17, 2011 from http://www.marketingteacher.com/swot/hewlett-packard-swot.html
Smith, K. (2008). How HP Boosted Product Sales 84% by Letting the Blogosphere Run Its Online Marketing Promotion. Retrieved on March 31, 2011 from http://www.marketingprofs.com/casestudy
Yahoo! Finance. (2011). Hewlett-Packard Company (HPQ): Company Profile. Retrieved on April 10, 2011 from http://finance.yahoo.com/q/pr?s=HPQ+Profile
Zhang, H. (2010). Research Hewlett Packard Through its Value Chain. Retrieved on March 18, 2011 from www.ccsenet.org/ijbm
