Hewlett Packard - Essay Example

Introduction Hewlett-Packard is a global technology company providing solutions in personal systems, imaging and printing products, and, technology solutions. The vast range of HP products and services includes PCs and related access devices, imaging and printing-related products and services, enterprise information technology (IT) infrastructure, and technology services. It is the market leader in the inkjet printer and laser printer market as well as the global PC market. Based out of Palo Alto, California, it has employee strength of 304,000 people worldwide. The current PR crisis arising out of ousting of its CEO Mark Hurd who was accused of harassing has affected the company’s reputation but by engaging APCO that built crisis unit handling WorldCom, Vioxx, HP has been successful in saving a lot in terms of goodwill and credit rating by disclosing the facts itself to the outside world (Rabil 2010). As per SWOT analysis of HP, the company’s internal analysis is based on its strengths and weaknesses. Let’s discuss its strengths first. Strengths Products and solutions of HP are competitive and provide cost advantage. During the recession of 2009, efforts focused at reducing cost base and making it variable got succeeded in giving it the competitive advantage. It was the result of following proper processes that it could control spending and maintain the organization stability by integrating the services businesses attained from Electronic Data Systems Corporation (EDS). It has been successful in maintaining the strength of its products, services, and brand HP. Workforce of HP stands high in technical expertise providing a solid base by adding stability to its functions. Restructuring of the workforce in services and product businesses in the fiscal year 2008 and 2009 has added value by controlling total costs and expenses (HP Annual Report 2009). HP is competitively positioned to benefit from the business trends to align its printing businesses from analog to digital printing, producing innovative products like web-enabled home printer, web and mobile printing, graphics and retail photo printing in annuity businesses, and in managed print services business. HP is well positioned to integrate storage, networking, servers and management software. Further, its IT management software development would fulfill virtualization management besides automating processes (ibid). To increase operational efficiency and reduce cost, HP is working in the direction of strengthening its real estate facilities to lesser numbers to reduce IT expenditure and property costs. From the fiscal year 2009 onwards, HP has changed the compensation structure of employees from fixed to variable to reduce costs. Sales cover is getting enlarged by investing for growth. HP is expanding business to emerging markets, namely China, India, and Brazil. In PC segment, innovation products have been introduced and new ways of connecting with customers have been found through acquisitions and organic growth. The acquisition of 3Com Corporation in $2.7 billion would be completed in 2010 (ibid). HP is able to leverage from one of the widest IT industry’s portfolios of products and services to its strategic benefit. In enterprise segment, it has aligned provision of servers, storage and networking with services offered in customized way to its customers – be it in-house, outsourced, or through the internet. Supply chain management is providing added strength by simplifying processes, minimizing fixed costs, and managing inventory efficiently (ibid). Weaknesses Pressure of competition can be detrimental in realizing earnings, total margins, and future prospects. Competition is so severe in all businesses that it can affect major markets of HP negatively. As competition with rival companies is on technology, performance, price, quality, reliability, brand, reputation, distribution, range of products and services, customized products, account relationships, customer training, service and support, security, availability of application software, and Internet infrastructure offerings, any weakness can affect operations and performance (ibid). A large portfolio of products and services requires sufficient resources to compete. Some business segments can face lack of investment. Competitor companies might have better allocation of resources in financial, technical, and marketing segments. HP has to engage continuously in price reduction to remain in competition, which affects earnings and gross margins. In personal computers and printers market, competitors have been reducing their prices, which is detrimental to the company’s interests particularly in lower-cost jurisdictions (ibid). The cost of innovation by investing in research and development initiatives is another burden, which competitors don’t carry. HP cannot change its cost structure all of a sudden to compete on prices. Financial weakness and doubtfulness affects HP earnings, total profits, and expenses. Over-dependence on third-party suppliers and failure in managing supply chain could be harmful to the business interests of HP. Main hurdles are faced in shortages, over-supply, contractual conditions, and single-source suppliers’ end. Internal operations of HP or its information technology services could be a victim of data theft, system security risks, disrupting system integration, thus, negatively impacting company’s image and stock price. Contingent workers have been an issue that could affect the company’s operations’ result adversely (ibid). Opportunities HP has been successful in increasing its market share in the fiscal year 2009. It has leveraged from growth opportunities in sales through acquisitions and research and development in its portfolio of products particularly in Personal Systems Group. It has maintained its leadership position in world market through its widest portfolio by evolving the industry and creating huge opportunities for suppliers, customers, and stockholders (ibid). In services segment, opportunities abound in infrastructure technology outsourcing, application services, business process outsourcing, and technology services. HP is realizing business expansion in new and emerging markets using its acquired potential to remain in the leading position. In imaging and printing group, it has huge business opportunities from gained expertise in inkjet, LaserJet, graphic solutions, industrial applications and printer supplies. HP market is truly international, as geographic diversity provides HP a solid ground to future growth. About 64 % of HP earnings are received from outside USA. Threats The very global outlook of HP businesses provides business, political, and economic threats in the country of their origin like emerging countries. A number of international factors include concurrent political and economic instable conditions in a country or region like inflation, recession, interest rate fluctuations and actual or anticipated military or political conflicts; financial instability among customers, trade regulations affecting production, pricing and marketing of products; foreign market’s labor conditions and regulations, geographically dispersed workforce, different regulatory or legal environment, varied technology standards or customer requirements, business licensing requirements or requirements relating to making foreign direct investments, which could hold shipping, adversely affect business terms, leading to penalties (ibid). There is risk in distribution failure and management of supply line effectively. If third-party suppliers don’t perform and provide timely supplies, revenue streams of HP could be negatively affected. Any hurdle in business transactions poses a threat to the company’s stake. Future financial performance can not be guaranteed as profits come from varied businesses; there is no sure historical path to success. Further, violation of intellectual property rights poses another threat to the stability of HP businesses. Threat lies in sudden changes in tax structure with the adoption of new tax legislation by the U.S. government or added income tax liabilities could pose a threat as well (ibid). Works Cited HP 2009 Annual Report. 2009. HP Overview. 25 September 2010. http://h30261.www3.hp.com/phoenix.zhtml?c=71087&p=irol-irhome. Rabil, Sarah. “HP Adviser APCO Built Crisis Unit Handling WorldCom, Vioxx.” Bloomberg. 11 August 2010. 25 September 2010. . Read More