HPs Strategy - Case Study Example

HP: Strategy Analysis Report Introduction This essay is an analysis of HP’s strategy based on the framework developed by Hambrick and Fredrickson (2001). It is divided into two parts. In the first part, a detailed analysis of the strategy of the company is presented. The analysis is done on the following elements as recommend in the framework: arenas, vehicles, differentiators, staging and economic logic. In the second part, information on the level of consistency in the strategy of the company and how the different elements support each other is presented. Part 1: Analysis of Strategy Arenas HP operates in seven distinct areas with a wide range of products and services that are offered to the market (HP 2013, p. 4). First, the company has the personal systems segment which is concerned with the development of personal computers, workstations, retail point of sale software and calculators. Second is the printing segment through which the organization provides hardware, software and supplies for consumer and commercial printers. Thirdly, the company has the enterprise group segment through which it provides, servers, storage and networking services to different companies. The fourth segment of the company is the enterprise services segment through which the company provides consultancy, outsourcing and support services to a wide array of corporate clients. Also, through the HP financial services segment, the company provides a range of value-added asset management and financing services to clients. The sixth segment of the company is the software segment through which the company provides various security solutions and information technology management services to clients. Lastly, HP’s corporate investments business segment is primarily concerned with the management of the company’s laboratories and business incubation centres. According to data provided by CSI Market (2015), by the third quarter of the year 2014, every business segment of the company had provided a substantial amount of revenue for the company. For instance, the revenue from financial services, software and enterprise systems segments of the company was $855 million, $959 million and $6894 million respectively. That from personal systems, printing and enterprise group segments was $8649 million, $5590 million and $5590 million respectively. With regard to the sales for different regions, for the year 2014, the company made sales worth $40,284 million from the US market, which was 35.87% of the total sales (CSI Market 2015). The remaining amount, $72,014 million, was generated from the international market, thus underlining HP’s status as a multinational corporation. Vehicles HP has used different types of approaches to get to its current position in the market. The type of approach used has varied depending on the prevailing needs of the company at particular times in history. One of the key vehicles that the company has been using is acquisition of smaller companies that offer products and services which are relevant to its business. For instance, between 2008 and 2010, it acquired three companies (Electronic Data Systems, Palm and 3Com) to facilitate expansion and growth (Ludwig 2010, p. 2). The second one is joint ventures. The company has formed joint ventures with different companies that manufacture different products that it uses. The various companies that have been involved in joint ventures with HP for the supply of components and services include Intel, Microsoft, AMD, and LaserJet supplies among others (HP 2013, p. 8). The third one is mergers. The most important merger was that between the original HP Company and Compaq, which was then a small manufacturer of personal computers and valued at $25 billion (Hoopes 2011, p. 4). With regard to manufacturing, HP primarily uses outsourced manufacturers to manufacture its products or, in some instances, purchases products from original equipment manufacturers before selling them under its own brand name. One advantage that this approach provides for the company is that it is able to effectively compete at the global stage (Robbins et al. 2011, p. 143). Differentiators There are specific attributes that make HP and its products different from the rest of the competition in the market. First, the company has sought to build its brand over the years as a way of not only meeting the expectations of its different stakeholders but also influencing their perceptions about the company and its products (Zhang 2010, p. 185). One method that has been used to achieve this has been involvement in a number of corporate social responsibility activities over the years. Primarily, the company has focused on the global citizenship initiative by streamlining its supply chain operations, developing energy-efficient products and engaging in reuse and recycling of products (Lowitt & Grimsley 2009, p. 3). Secondly, the company seeks to identify the changing needs of customers and, through intensive research and development, deliver the right products and services that meet the new needs of customers in the market. By understanding new trends in the market, HP is able to leverage on its core competencies of efficiency and good capital strategy to take advantage of the demand and achieve targeted growth (Datamonitor 2008, p. 32). Staging With regard to staging and sequencing of moves, it can be seen that the company has pursued an aggressive growth and expansion approach throughout the years. Immediately following its inception, the company sought to provide a wide range of products to customers. This was seen at the time as the most effective way of expanding its operations and market reach and clearly underscored by the decision of the company to become a global corporation back in 1959. Once it had become a global company, HP realised the intense competitive environment that existed in the markets in which it operated. This was enhanced by the growing trend of globalisation that was experienced towards the end of the 1990s and at the beginning of the 2000s. This marked the start of an aggressive process of mergers and acquisitions by the company. Beginning in 2005 when the company acquired Snapfish and Scietex Vision, this approach has continued with the recent acquisitions of 3Com and ArcSight. The growth-oriented approach that the management of HP has been pursuing in the recent past has served the purpose of ensuring that the company develops new products and services for the market. Through this, it has continuously updated its product portfolio, improved its value offering and increased its global reach. Economic logic It is clear that the economic logic of HP rests on the provision of a wide range of products and services that are effectively marketed to a wide client base at different prices. By widening its portfolio of products and services and targeting a wide range of clients who fall into two categories of corporate and individuals, the company has managed to operate profitably since its inception. HP also uses various tactics to increase its profits and ensure that it delivers value to shareholders. For instance, through the adoption of sustainable practices in its supply chain activities, the company is able to reduce its operating costs and, in the process, increase profitability over time (Lowitt & Grimsley 2009, p. 5). Another tactic is remarketing. Generally the practice, which was started in the European market, entails reconditioning, re-testing and remarketing products that have been returned to the company by customers (Guide Jr, Muyldermans & van Wassenhove 2005, p. 281). Through this process, the company has managed to tap the value potential of remarketing returned products, primarily personal computers. Part 2: Consistency in the Strategy How the elements support each other All the elements of the strategy of HP described in the first part of this report support each other in several ways. First, the vehicles of mergers and acquisitions and joint ventures that the company has used to achieve its position in the market have complemented the objectives of growing and expanding on the global scale that have formed the foundation of the company’s staging process. Additionally, the approach of offering a wide range of products and services to different market segments is augmented by the rapid expansionist objectives that the company has been pursuing to date. By making strategic alliances with different organisations, the company is able to not only deepen its reach in the global markets but also build on its economies of scale to bolster its economic logic. Consistency among the five elements According to Hambrick and Fredrickson (2001, p. 50), a strategy is only effective if it takes into consideration the mission and objectives of an organisation and attunes them to the prevailing conditions in the business environment as a means of supporting the organisation to achieve its objectives in the course of time. For this to happen, there must be a high level of consistency among the five elements of strategy. From the analysis presented in the first part of this report, a high level of consistency among the five elements can be seen. Basically, HP seeks to achieve the following objectives: (a) earn customer loyalty through quality, (b) achieve sufficient profit to finance growth, (c) seize opportunities for growth, (d) lead the market in terms of innovation, and (e) demonstrate commitment to employees. While seeking to achieve these objectives, the company counts on its values of trust, achievement, teamwork, innovation and integrity. Therefore, all the five elements not only to seek help HP achieve its objectives but are also built on the company’s values. Conclusion It is clear that HP’s strategy is consistent with both the company‘s values and objectives and the existing factors of the business environment in which it operates. Further, all the elements of arenas, vehicles, differentiators, staging and economic logic support each other in different ways. It is this level of interconnectedness among the elements that makes HP’s strategy effective. References CSI Market 2015, Hewlett-Packard Company, viewed 22 January 2015, . Datamonitor 2008, Hewlett-Packard Company: company profile, viewed 22 January 2015, . Guide Jr, VDR, Muyldermans, L & van Wassenhove, LN 2005, ‘Hewlettt-Packard company unlocks the value potential from time-sensitive returns’, Interfaces, vol. 35, no. 4, pp. 281- 293, viewed 22 January 2015, . Hambrick, DC & Fredrickson, JW 2001, ‘Are you sure you have a strategy?’ Academy of Management Executive, vol. 15, no. 4, pp. 48-59. Hoopes, CL 2011, The Hewlett-Packard and Compaq merger: a case study in business communication, viewed 21 January 2015, HP 2013, HPQ Annual report, 2013, viewed 21 January 2015, Lowitt, EM & Grimsley, J 2009, Hewlett-Packard: sustainability as a competitive advantage, viewed 22 January 2015, . Ludwig, J 2010, HP, viewed 22 January 2015, . Robbins, S, Bergman, R, Stagg, I & Coulter, M 2011, Management, Pearson, Sydney. Zhang, H 2010, ‘Research Hewlett-Packard through its value chain’, International Journal of Business and Management, ­vol. 5, no. 8, pp. 179-190. Read More