Introduction

Hewlett-Packard Company (NYSE: HPQ), commonly referred to as HP, is an

American multinational information technology corporation headquartered in Palo Alto,
California, USA. HP is one of the world's largest information technology companies and
operates in nearly every country. HP specializes in developing and manufacturing
computing, data storage, and networking hardware, designing software and delivering
services. Major product lines include personal computing devices, enterprise servers,
related storage devices, as well as a diverse range of printers and other imaging products.
HP markets its products to households, small- to medium-sized businesses and
enterprises directly as well as via online distribution, consumer-electronics and office-
supply retailers, software partners and major technology vendors.

HP's posted net revenue in 2009 was $115 billion, with approximately $40 billion coming
from services. In 2006, the intense competition between HP and IBM tipped in HP's
favor, with HP posting revenue of US$91.7 billion, compared to $91.4 billion for IBM;
the gap between the companies widened to $21 billion in 2009. In 2007, HP's revenue
was $104 billion, making HP the first IT Company in history to report revenues
exceeding $100 billion. In 2008 HP retained its global leadership position in inkjet, laser,
large format and multi-function printers market, and its leadership position in the
hardware industry. Also HP became #2 globally in IT services as reported by IDC &
Gartner.

Major company changes include a spin-off of part of its business as Agilent Technologies
in 1999, its merger with Compaq in 2002, and the acquisition of EDS in 2008, which led
to combined revenues of $118.4 billion in 2008 and a Fortune 500 ranking of 9 in 2009.
In November 2009, HP announced the acquisition of 3Com. On April 28, 2010, HP
announced the buyout of Palm for $1.2 billion. On May 16, 2010, the acquisition of Palm
was final.
 Industry Analysis Porter Five Forces

Threat of new Entrant (Low)

Determinants 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 Does successful entry require that 1 2 3 4 5
Scale and companies have significant N/A
experience economies of scale or experience

Brand Identity Do new companies need to spend 1 2 3 4 5

heavily on brand identification? N/A
Product Do new entrants need to differentiate 1 2 3 4 5
Differentiation by spending heavily on advertising, N/A
customer services or product
differences to over come existing
customer loyalty?
Switching Costs Does the buyer have to pay to switch 1 2 3 4 5
from one supplier product to N/A
another?

Capital Required Does the new company need to 1 2 3 4 5

invest large financial resources? N/A
Access to Does the new comer have access to 1 2 3 4 5
Distribution distribution channel for product or N/A
services?
Cost advantage Established companies have cost 1 2 3 4 5
advantages over new rivals. N/A

Government Government policies can help to 1 2 3 4 5

policies preserve or limit competition. N/A

(Threat of new Entrant of Low)

 Intensity of Rivalry (High)

Determinants 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.
Industry growth How slowly or quickly is the 1 2 3 4 5
industry growing? Intense fight N/A
among rivals for market share

Fixed Cost Does your business have a high 1 2 3 4 5

fixed cost? N/A
Product Is your product commodity? The 1 2 3 4 5
Differentiation closer the product is to being a N/A
commodity the higher intensity
of rivalry.

Switching Costs How costly is it for your buyer 1 2 3 4 5

to switch between providers? N/A

Brand Identity Is branding critical for your 1 2 3 44 5

Rival’s success? Brand N/A
identification by buyer reduces
the threat of rivals.

Concentration Are there a large number of 1 2 3 4 5

and balance firms of equal size and power, N/A
all chasing after the same
customer?
Diversity of Are there competitors with 1 2 3 4 5
competitors different strategies and frame of N/A
reference? When competitors are
diverse it is more difficult to
establish the rules of game
(Intensity of Rivalry is high)
 Bargaining power of Buyer (High)

Determinants 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.
Concentration Buyer is fragmented because to 1 2 3 4 5
cosmetic covers all Demographic N/A
segments.

Product Cost Does your product buyer’s purchase 1 2 3 4 5

versus Total represent a significant fraction of the N/A
Purchases buyer’s cost? If so, buyer bargaining
power is typically high.

Product Product is standard and 1 2 3 4 5

Differentiation undifferentiated or differentiated N/A

Switching Costs Switching cost are high with related 1 2 3 4 5

to Brands or Low. N/A

Backward Can they make what you make 1 2 3 4 5

Integration themselves? N/A

Impact on Quality/ Is the product you offer important to 1 2 3 4 5

Performance the quality of the buyer’s product or N/A
services?

(Bargaining power of Buyer is high)

 Bargaining power of Suppliers (High)

Determinants 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.
Concentration Are you supplier are fragmented 1 2 3 4 5
or highly concentrated? N/A

Presences of Are there any substitutes for your 1 2 3 4 5

Substitute inputs supplier products? N/A
Product Product is standard and 1 2 3 4 5
Differentiation undifferentiated. N/A

Switching Costs How costly is it for you to switch 1 2 3 4 5

from suppliers product? N/A

Importance Is your industry an important 1 2 3 4 5

Relative to customer the supplier group? N/A
Customer.

Forward Can the supplier produce the 1 2 3 4 5

Integration product you make? N/A

Impact on Is your supplier product essential 1 2 3 4 5

Quality/ to the quality or performance of N/A
Performance your business?

(Bargaining power of Suppliers is High)

 Threat of substitute (Low)

Determinants 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.
Price performance Does the substitute offer a better 1 2 3 4 5
price performance? N/A
Switching Cost Is it costly for buyer to switch to 1 2 3 4 5
the substitute product? N/A

(Threat of substitute is Low)

Porter Analysis
Barrier to entry: (Low/ High Barrier)

• Capital requirement: This is the industry which demands huge investment so due
to high investment there is barrier for completely new entrants.

• Product Differentiation: In computer industry product differentiation is a big

challenge these days. In short here is very low chance for product differentiation.

• Access to distribution channel: Distribution channel of existing big companies is

already very strong in this industry. If any new company wants to enter in this
market, it must have strong plan and resources for its distribution channel network.

• Switching cost: People are conscious about brands in this industry. If some one is
using hp and one is satisfy, he/she will not change brand easily.
Bargaining power of supplier: (High)

Suppliers are in power in this industry in terms of raising price and lowing quality. In
computer hardware industry, there are few suppliers so customers have no much
option. Intel’s microprocessor chips are used in approximately 85% of personal
computers. Microsoft operating system are used in 90% of computers

Bargaining power of buyer: (High)

Power of buyer is increasing as it is becoming commodity product. Another factor which

could be the reason for the power of buyer is the possibility of backward integeration. So
we can say that in case of Individual, buyer power is moderately high while in case of
organization, buyer power is high.

Threat of new substitute: (Low)

There is no as such anything which is proper substitute of personal computer and laptop.
But a little threat of substitutes of its printing products. It obviously has substitutes as
there are following things like PDAs, Palm tops and Smart phones which have similar
functions.

Rivalry Among existing customers (High)

Rivalry is high in this market because there are some brands that have strong brand
recognition in market n rivalry for market share is also high.

As we can see there are a lot of companies which giving tough time to Hewlett Packard.
As quickly the industry is growing so it’s very hard to compete with competitors such as
Hewlett Packard is competing with Dell, IBM, CANNON, Lenovo, Acer, Toshiba, Apple
and so many other its competitors in different segments and different products. Such as
this business have a high fixed cost co there is very hard to out from this industry which
makes competition intents. And Switching cost in this field high so its very hard to any
company to get customers which makes intensity of rivalry high for existing firm such as
Dell, IBM, CANNON, Lenovo, Acer, Toshiba, Apple etc facing
Hewlett Packard EFE (External Factor Evaluation)
We got weight of 2.87 of External Factor Evaluation which show that performance of
Hewlett Packard currently a little better then the industry average which shows by 2.50
but we have 0.37 more then that its weight. So its clear that Hewlett Packard needs more
focus on its performance for becoming real market leader.

Hewlett Packard EFE (External Factor Evaluation)

Opportunities Weight Rating Weight Score

1 Globalization in (PC,s) 0.08 3.00 0.24
2 Acquisitions 0.07 3.00 0.21
3 Customized ( Solution provider ) 0.05 3.00 0.15
Covering Major Market Sectors
4 0.04 2.00 0.08
(public,edu ,Business)
5 Up-Selling 0.05 2.00 0.10
6 Cross Selling 0.05 2.00 0.10
7 Product Deployment 0.06 3.00 0.18
Innovation (more t towards mobile
8 0.05 2.00 0.10
device )
Related Diversification (software,
9 0.07 2.00 0.14
web securities , printing )
10 Strong/Active Distributers 0.06 4.00 0.24
11 B2B selling (to Dell) 0.06 3.00 0.18
12 Product Differentiation 0.04 1.00 0.04
Threats Weight Rating Weight Score
Intense competition from other
1 0.06 2.00 0.12
PC manufacturers
2 Short Product life Cycle 0.09 3.00 0.27
3 High Switching Cost 0.06 2.00 0.12
Frequent changing customer
4 0.08 3.00 0.24
Demand and Behaviors
5 Price war (ink cartridges) 0.03 2.00 0.06
6 new viable competitors 0.05 3.00 0.15
Increasing competition on
7 0.05 3.00 0.15
imaging and printing
Total: 1.00 2.87
 Hewlett Packard CPM (Competitive Profile Matrix)
We take two competitors in the Competitive Profile Matrix of Hewlett Packard those are
Dell and IBM. After evaluating performance of Hewlett Packard by Critical Success
Factors performance. So after evaluation we got valuation of 3.24of Hewlett Packard and
3.18 of Dell and 2.93 of IBM. Which shows that among its nearest competitors Hewlett
Packard is performing well and at second number is Dell and then after that IMB which
shows HP could face threat from Dell.
(Table attached below)

The Internal Factor Evaluation (IFE) Matrix:

In this we analysis internal factors of HP and this also HP having a little stronger then
average performance so it should improve its internal strengths by improving its
efficiency and its resources.
(Table attached below)

Competitive Analysis (Summary Statement)

Competitive Analysis (Summary Statement)

# of Net
Sales Employees Market Share Gross Profit EBITDA EPS Income
24.46% / $ $ 10.72
HP $ 97.06 B 156,000 N/A 23.74 B B $2.30 $ 6.39 B
42.33.% / $ $ 19.20
IBM $ 92.79 B 366,486 N/A 39.28 B B $6.26 $ 9.55 B

49.74% / $
CANON $ 34.63 B 118,499 N/A 17.23 B $ 8.29 B $2.92 $3.88 B

We can see that while revenues are very near of HP and IBM and much smaller of
CANNON but gross margins of its competitors very high then HP and even while having
lower sales CANNON giving very high Earning per share which makes investors attract.
And even Net Incomes of IBM are more then HP even his Sales were less then HP.
 SWOT analysis
Strength:

 Technology advancement
 Decrease Expanse (R & D)
 Branding obvious and easily recognized
 Technology Research Labs
 Customer loyalty
 International Trade
 World’s leading brand
 Product line Extension
 Larger IT Firms (Application industry)
 Engineering Design

Weakness:

 Unit vendor shipment

 Lack of in-house management consulting division
 Decreasing its investments in R&D compared to past spending
 Not using online selling

Opportunities:

 Globalization in (PC’s)
 Acquisitions
 Customized (Solution provider)
 Covering Major Market Sectors (public, education, Busiuness)
 Up-Selling
 Cross Selling
 Product Development
 Innovation (more towards mobile device)
 Related Diversification (software, web securities, printing)
 Strong/Active Distributors
 B2B selling (to Dell)
 Product Differentiation
Threats:

 Intense competition from other PC manufacturers

 Short Product life Cycle
 High Switching Cost
 Frequent changing customer Demand and Behaviors
 Price war (ink cartridges)
 New viable competitors
 Increasing competition on imaging and printing

Value Chain Analysis

 Current Strategies:
Up selling:

Hp currently using Up selling strategy for their loyal customers and in ESS and HPS.

Cross selling:

HP also using cross selling strategy by expending product lines and its verity of
services and products

HP’s Macro Environment: PEST Analysis

Political:

Private ownership is the dominant market system in the United States. Moreover,
both home and private businesses are granted the authority for decentralized decision-
making. The free system in the American business sector is made evident by the amount
of the production and output of private businesses. Statistics showed that about two-thirds
of the overall American economic outputs are for the individuals and their private
businesses. A third of these output are the only part that goes to the government (US
Department of State, 2006). This statistical division indicates that the private businesses
and the consumers have a more essential role in the business sector as compared to the
political level. Still, the government plays a significant role to the country’s economy
including the business sector. One of the important roles of the government in business is
the development and enforcement of various business-related laws. These laws include
business and property right protection as well as the prohibition of business practices that
are perceived as unjust. Product safety is also part of these legislations (Microsoft Encarta
Online Encyclopedia, 2005).

Economical:

The United States economy is considered one of the largest in the world. The
businesses in the country are mainly market-oriented where most decisions and activities
are developed by the people (Wikipedia, 2005). This has been made evident by the
annual purchases of the American consumers, which on the average, totaled to more than
5 trillion dollars every year. This suggests that about 80% of the total goods and services
produced by US businesses are purchased and supported by the local consumers. In 1999,
a total of $2.9 trillion was the US’s gross domestic product (Microsoft Encarta Online
Encyclopedia, 2005). Based on a more recent statistical estimation, the US GDP per
capita is at $41, 800 and has a real growth of 3.5%. The GDP purchasing parity on the
other hand is at $12.37 trillion based on the 2005 estimation (The World Factbook, 2006).
The activeness of the US economy is mainly attributed to its rich and diverse business
sectors. One of the most important sectors in the country is the manufacturing industry.
HP is actually under the industrial machinery sector where computer as well as engines
and other equipment are produced. This manufacturing sector actually accounts for
10.7% of the annual value from manufacturers (Microsoft Encarta Online Encyclopedia,
2005). This suggests the ability of the American to live a fairly good standard of living.
There are some economic problems however in the US which could affect the growth and
strategic plans of the economy. One of these problems is the significant level of
unemployment rate in the country; in addition, report also indicated that a considerable
percentage of young Americans fail to graduate (Microsoft Encarta Online Encyclopedia,
2005).

Socio-cultural:

The population of the country is considered as the third most populated country in
the world, which is estimated to be around 296 million (Microsoft Encarta Online
Encyclopedia, 2005). In addition to size, the United States is said to be a pluralistic
society. This indicates that the country’s inhabitants are highly diverse in terms of
religions, races and nationalities. In addition to the presence of minority groups, the
diversity in the country is also attributable to open trade and influx of immigrant workers.
The rise of immigrant workers suggests the growing working sector of the country, which
increases the need for computers and technology. In the employment factor, certain
problems are evident. For example, in terms of the wages given to the people, sixteen
states in the country provide a wage higher than the minimum, which is at $5.15 for every
hour. There are 26 states that provide minimum wages based on the national level. Ohio
and Kansas on the other hand offer wages below the minimum, while six other states do
not apply any state laws (Wikipedia, 2006). The problem on discrimination is also an
occurrence as female workers typically earns less than 10 percent than their male
counterparts performing similar responsibilities and with same level of training and
education. The 1996 statistical findings also showed that male college graduates typically
earn $63, 127 every year whereas female college graduates earn an average of $41, 339.
Unemployment rates are significantly related to the people’s education level as the
unemployment rate of 7.1% in 1998 was observed among individuals who were not able
to finish their high school education. On the other hand, the same statistics revealed that
only 1.8% of the college graduates were unemployed (Microsoft Encarta Online
Encyclopedia, 2005).

Technological:

Being one of the countries who were able to use the computer and the internet for
the first time, the American society is very mush adapted to technology. In fact, statistics
suggested that the employment sector is continuously using computers and related
gadgets in their work activities; this greatly contributed to the growth of the computer
industry. In addition, job openings for computer professionals are also said to double
from 1996 until 2006. People had also grown accustomed to using the internet for work,
paying bills, reserving airline tickets as well as shopping. Statistics showed that in 1999,
a total of 84 million American have Internet access either at home or at work (Microsoft
Encarta Online Encyclopedia, 2005).
Problems and Issues

Based from the tools used for analysis, certain issues and problems of HP have
been stressed. One of the major problems of the company is the presence of several
competitors within the industry. Though the company has access to a myriad of
marketing strategies, companies applying similar strategies can limit their positive
effects. The company should then apply a marketing strategy that will give the best
results. In order to overcome these problems, HP then plans to distribute its products
online. While at resent, the company is already connected to major online retailers, there
is also the opportunity to create a company direct online service. The company is then
caught between whether this alternative is worth the risk or should it just optimize its
current strategy. In this aspect, the main issue is whether the change of strategy is a cost-
effective move for HP. Despite the fact that HP has the resources to support this strategy,
it is essential that the company will gain the expected results from this investment. It is
important that the ability of the strategy to overcome HP’s business concerns is
considered. Will the strategy help HP distribute its products effectively to the market?
Will this overcome competitors? Will it result to fast return of investment?

Recommendation and Implementation:

Based from the analysis of the company’s strengths and options, the first
alternative appears to be the most recommendable. There are two main reasons for this
judgment. One is that the company has the resources and capabilities to design a website
of its own, which has been pointed out in the company analysis. With its available
capital, strong brand name, loyal customers and talented workforce, HP has access to the
major elements for internet retailing through a customized website. The second reason is
that the HP will most likely benefit from this alternative. By facing the possible risks
involved in developing a company website, HP can apply a strategy that is different from
its major rivals; hence, this alternative will help the company achieve its aim of
overcoming business rivalry. As the company’s major markets are capable of accessing
the internet, the company will be able to improve its means of product distribution as well
as increase market growth. The macro environment, micro environment and company
analysis for HP all indicated that in order for HP to overcome its major sources of threats,
cost effective and distinctive business strategies should be developed. The first alternative
is then recommended as it answers to these needs.

In conclusion, the resources, capabilities and business environment of HP can all

contribute to the efficacy of implementing internet retailing by the company. The
company should then design a project plan for this strategy. Important resources that will
serve as the strategy’s framework should be prepared. It is also suggested that the
company develop a monitoring system, which will regularly evaluate the strategy’s
progress. This will be helpful for detecting problems ahead of time as well as in
implementing strategy changes or improvements.