A Comprehensive Marketing Strategy of Hewlett Packard - Term Paper Example

A Marketing Analysis of Hewlett Packard Product: Laptop Computers Principles of Marketing 301 Perry Haan Table of Contents Introduction 3 An Overview of Hewlett Packard 3-4 Environmental Factors 4-7 HP Laptop Computers 7-8 SWOT Analysis 8-10 Marketing Strategy 11-12 Global and Current Issues 12 Conclusion 12-13 References 14 Introduction The development of a comprehensive marketing strategy is one of the most important factors in the successful management of a large corporate enterprise. The timely and accurate assessment of economic conditions, the development of the right products to meet market demand and the effective promotion of the company’s brand are critical elements in meeting sales and revenue goals and generating expected rates of return for the company’s investors. This paper provides a comprehensive assessment of Hewlett Packard’s strengths and limitations with its marketing plan for its personal computer products. Current market factors as well as projected consumer demand for computer products are assessed in light of industry opportunities and threats. The analysis compares Hewlett Packard’s overall marketing effectiveness with two of its major competitors; Dell and Apple. A number of critical issues are raised for consideration by the President and members of the company’s Board of Directors. An Overview of Hewlett Packard Founded in 1939 by Bill Hewitt and Dave Packard, Hewlett Packard had its beginnings in a garage in Palo Alto, California and was later transformed into one of the world’s leading manufacturers and distributors of multi-media technology products and services (hp.com). Today, Hewlett Packard has five global regional offices serving sixty-eight countries and is the second largest technology company in the world behind Samsung. The company’s 2009 net revenues were $114.9 billion with operating profits of $10.1 billion. Sixty-four percent of net revenue was derived from operations located outside of the United States (Annual Report, 2009). The company’s core operations continue to relate to the sale of network and server platforms to businesses and government institutions and personal computers and printers. Recently, the company has attempted to develop and market its technology services division which provides technology systems design and engineering protocols for business. Since 2004, Hewlett Packard has invested in excess of $17 billion in research and product development and an additional $20 billion in the acquisition of technology-related companies such as Compaq and Palm that are intended to enhance the mission of HP (Consolidated Financial Statements, 2009). The company is governed by a twelve member Board of Directors which includes Mark Hurd as Chairman and Chief Executive Officer. There are nine Executive Vice-Presidents. The responsibility for corporate marketing falls under Chris Curtin, Vice-President, Digital and Corporate Marketing. Hewlett Packard’s 2009 marketing budget was $472 million (Annual Report, 2009). Hewlett Packard’s main global competitors are Samsung, Sony, Apple, Cisco Systems and Dell. Because HP has a diverse product base including digital media, IT support, network development and mobile technologies, the major competitors vary depending upon the market segment. The SWOT analysis presented later in this report identifies Apple and Dell as the two companies that pose the greatest threat to HP in the rapidly changing laptop computer market. Environmental Factors The multi-media technology industry is one of the most competitive in the world. As the global demand for innovative technologies continues to increase, the successful technology companies of the future must be able to identify and respond to market demand in a rapidly changing industry environment. If it is to remain competitive, it is critical that Hewlett Packard be positioned to respond to the micro and macro-level environmental factors that will determine its success or failure as a company. Understanding the internal and external environmental factors impacting a company is a primary tool used by marketing professionals. This in-depth knowledge of the environmental factors allows the company to develop strategies to meet changes in market conditions. The microeconomic environment relates to the firm’s ability to make internal adaptations in meeting the needs of its customers. Examples include quality and availability of suppliers, knowledge of the competitor’s products, consumer demand indictors, the effectiveness of the company’s distribution networks, internal research and development activities and product branding and other marketing initiatives. For the most part, Hewlett Packard does an effective job at managing the technical components of its internal environment such as supply chain management and product distribution. The company has a reputation for quality products especially in the area of digital media and printers. HP is also solid financially with easy access to large amounts of capital for investments in infrastructure and product development. There are several areas related to the microenvironment that are of concern that need to be brought the attention of the company leadership. First, the company has been slow to respond to changes in consumer demand. The company continues to focus the majority of its research and development efforts on improving engineering systems on its existing product line rather than developing new products targeted at emerging markets. Second, the company “brand” is not well known and certainly not universally recognized outside of its traditional business product markets. Third, the company has engaged in a potentially high risk strategy by targeting the bulk of its marketing efforts through digital media. These limitations are discussed in more detail in the SWOT analysis. Macro environmental factors are the external forces that present opportunities and challenges for the company. These include changing demographics, income distribution and macro economic policy, government regulation of business, technological advances, the relationship between business and the natural environment and social issues such as corporate social responsibility. In many respects, Hewlett Packard has been more successful in recognizing the macro-level issues than it has with addressing the micro-level environment described above. HP has played a leadership role in raising the level of corporate awareness around the new public expectations surrounding corporate social responsibility. In addition, the company devotes a special link on its web site to the need to protect the natural environment and opportunities arising out of the new “green economy.” (hp.com). The macroeconomic impact of the global recession and banking crisis which began in 2008 and continues today has affected all companies. Although HP’s sales have declined during the recession, the impact has been manageable. Government regulation does not appear to have a negative impact on the technology sector in general although the recent financial reform legislation passed by Congress will affect all private sector firms. A scan of the macro-level environment reveals two major weaknesses for Hewlett Packard that will be discussed in detail in the SWOT analysis. The first concerns the company’s seeming inability to position itself for the emergence of huge new markets for computers and other multi-media products in Africa and parts of South America. Second, HP appears to be far behind its competitors in responding to a major demographic shift in the technology products demanded by consumers under the age of thirty. The long term implications of failing to address these two challenges are indeed significant. HP Laptop Computers Although Hewlett Packard provides a large array of technology products, this analysis relates to its personal computer product line that includes laptops and notebook computers. The corporate website identifies five different laptop and notebook configurations. The basic model which is the bread and butter of HP’s laptop product line is called the Pavilion. All of the company’s laptops and notebooks are derived from this platform. The Pavilion product comes in a variety of configurations depending upon the needs of the customer. The Pavilion laptop starts at $449.99 for the basic configuration and goes up to $1,099.99 for the top model. All Pavilion laptops have an Intel processor and graphics package. The system memory and hard drive capacity varies considerably depending on the model. All HP laptops are equipped with Windows. However, most application software is extra. A middle of the line laptop with 4 GB of memory, a graphics package, a 512 GB hard drive and Microsoft Office will cost approximately $1,200. The machines are available in a variety of colors (hp.com). Two of Hewlett Packard’s major competitors in the laptop market are Dell and Apple. Dell offers six laptop and notebook options. The Inspiron is the core platform model and ranges in price from $349.99 to $949.99 excluding application software. The technical configurations that are available are similar to those provided by Hewlett Packard. However, Dell provides more hard drive capacity and a better quality monitor for less cost than the HP product. In addition, Dell guarantees that online customer orders are shipped within 24 hours (dell.com). Apple produces a laptop/notebook called the MacBook. It comes in five different configurations ranging in price from $999 to $1,499. Apple computers function on an internally developed operating system called OS 4 as opposed to a Windows platform. This gives Apple computers a graphics capability unsurpassed in the market. In addition, Apple laptops have the longest battery life without a recharge (Apple.com). On the lower end of the laptop market, Apple is not competitive with price but at the middle and upper ends of the laptop market they provide a product far superior to any of the company’s competitors. At first glance, one might conclude that laptop computers are pretty much the same. Customers appear to have a number of options available to them and product quality is very good with all three companies. Personal preference and product loyalty obviously influence consumer choices as well. What is not immediately apparent is the fact that Hewlett Packard may very well be at a marketing disadvantage in the portable computer market of the future because of recent decisions that the company has made through its strategic planning process. The SWOT analysis that follows provides an additional perspective on the three companies. Table 1 provides a graphic comparison of the strengths, weaknesses, opportunities and threats impacting Hewlett Packard, Dell and Apple. Recall the point made earlier that the marketing professional must always be cognizant of the internal and external environmental factors affecting the organization. The SWOT is one useful tool to assist in the analysis. Table 1 SWOT Analysis Hewlett Packard Dell Apple Strengths Reliable engineering Excellent printer interface Management continuity Affordability Internet sales protocol Custom build requiring less inventory Brand Proprietary software Outstanding graphics Transferability of technology to mobile devices Brand Weaknesses Marketing plan Inflexible Costs Inventory None perceived None perceived Opportunities Market share Product development Market share New products Market share Next gen product Threats Younger demographic R & D Acquisition Loss of senior ownership The SWOT of the relative position of the three companies in the laptop market reveals that Hewlett Packard is clearly at a competitive disadvantage. There are several factors within the company that point to this conclusion. Marketing is all about product branding. If one were to survey a sample of the general population of Americans and ask them to identify the best known laptop brands available in the market, they would respond with Dell, Apple and IBM. HP is simply not associated, in the public’s mind at least, with laptop computers. The fact is that the company is known for its printers and this image is a major constraint in its ability to successfully compete in the laptop market. A second major issue for Hewlett Packard is that it has redesigned its marketing strategy relying almost exclusively on a model that it calls social media marketing. This is discussed in detail in the next section of the paper. Third, HP has focused much of its research and development efforts toward improving existing products. This means that the company cannot begin to compete with Apple’s IPhone 4 technology that will make a powerful computer available in a hand held, mobile configuration within the next three years. Hewlett Packard’s continued emphasis on its traditional consumer base ignores the emerging market of people under thirty who have embraced Apple’s products. Fourth, Hewlett Packard has placed considerable emphasis on increasing its sales of computers in China and India, while markets in Africa and South America have largely been ignored. Dell, on the other hand, plans to market to developing countries a laptop that will sell for under $50. Finally, HP is not as cost effective as Dell, for example, because HP relies on a traditional supply chain and inventory management process. Maintaining large inventories in a global economy is costly. Dell, has mastered the “build to order” model where customers construct their own laptop online and transmit the specifications electronically to Dell. The company is able to assemble the components and ship the laptop to the customer within 24 hours. Marketing Strategy The foundation of any successful marketing plan incorporates what has become known as the 6 Ps of marketing; product, people, price, production, promotion and place (Arcilla, 2007). As noted earlier, Hewlett Packard’s marketing leader is an individual who spent over a decade at Disney working in its multi-media operations. Chris Curtin is a fundamental believer that a company’s marketing success is directly linked to its presence in the social media networks such as Twitter and Facebook (Curtin, 2010). The company spends hundreds of millions each year (48% of its marketing budget) on promoting its products through social media networks. This concentration on a single media may prove to be a bad marketing strategy in the long run. First, it is clear that the amount of information now available on social media networks is mind boggling. There is a danger that the HP marketing message may blend in with all of the other information and therefore not have the desired effect on the people whom the company is trying to target. Second, social media networks tend to be used by younger people and obviously by individuals who have easy access to a computer. This marketing strategy has the potential to miss hundreds of millions of people. Many older citizens do not use social networks and individuals in developing countries do yet have access to computers or internet technology. HP’s approach ignores the basic marketing criteria related to people and place. Hewlett Packard’s laptops are not price competitive when compared to the products available through Dell and Apple. Dell provides more memory and Apple provides superior graphics capabilities. Moreover, Dell and Apple have both done a much better job of promoting and branding their products. Apple and Dell laptops are universally recognized for their quality and reliability. HP laptops may be of similar quality and reliability but the brand is not recognized as such. Hewlett Packard really needs to rethink its approach to product production and its ongoing research and development planning. It must move from a model of re-engineering existing products to a more innovative approach. India has recently produced a $35 laptop which it plans to mass market (Bradley, 2010). Brian Hadel, in an article for Computerworld describes what the laptop will look like in 2015, only five years from now. It will be Mac based, the size of a cell phone, it will have no keyboard and it will not require its own software programs. The unit will be solar powered and sell for $50 (Hadel, 2010). Apple and Dell are clearly far ahead of Hewlett Packard in developing and marketing this product because they have developed the technology and strategy to do so. Global and Current Issues Global companies like Hewlett Packard are experiencing declining sales as a result of the recession. HP is probably less affected than companies in other sectors because it has a strong balance sheet and ample cash reserves. Moreover, the company’s sales in Asia continue to be robust and are supporting declines in North America and Europe. The major issue that most companies are currently facing is uncertainty over the impact that financial reform legislation recently passed by the United States Congress will have on capital markets. Time will tell how the global business climate will be affected by these government reforms. Conclusion This paper provided a detailed analysis of Hewlett Packard’s marketing strategies and the relationship between the company’s current practices and the evolution of the laptop computer market. The SWOT analysis revealed several areas that should be of concern to the President and members of the Board of Directors as the company engages in its strategic marketing planning over the next five years. Hewlett Packard is a solid company with excellent products and a global reputation for quality and reliability. The company needs to constantly evaluate its product development and marketing strategies to ensure that it remains a global leader in the technology industry. References Apple Computer. 2009 Annual Report. Retrieved from Apple website: http://www.apple.com/macbook. Arcilla, Willy E. (2007). 6 P’s of the Marketing Man. Retrieved from Business Inquirer website: http://business.inquirer.net Bradley, Tony. (2010). India’s $35 PC is the Future of Computing. PCWorld. July 23. pp.34-36. Curtin, Chris. (2010). Top Social Media and Marketing Trends. The Huffington Post. Retrieved from The Huffington Post website: http://www.huffingtonpost.com. Dell Computers 2009 Annual Report. Retrieved from Dell website: http://www.dell.com. Hadel, Brian. (2008). Hello, Gorgeous! Meet the laptop you’ll use in 2015. ComputerWorld. March 26. pp. 60-64. Hewlett Packard 2009 Annual Report. Retrieved from Hewlett Packard website: http://www.hp.com. Hewlett Packard 2009 Consolidated Financial Statements, Retrieved from Securities and Exchange Commission website: http://www.sec.gov. Read More