Hewlett-Packard is one of the largest US companies that focuses on personal computer and laptop production, software development and providing services in the IT sphere, targeting both individuals and organizations. The company’s headquarters are in Palo Alto, Unites States. The company and its different branches are actively developing and modernizing IT infrastructure, programs, IT customer services, commercial services, cloud-based technologies, printing and scanning systems, servers, etc. Hewlett-Packard continues its process of evolution by actively merging with other companies, expanding the market, overtaking innovations, increasing the competitiveness, involving investments and diversifying production lines. With its competitors fighting for leading positions on world markets and technology developing rapidly, the company recently started taking care of its weaknesses.
Relevant History and Vision
William Hewlett and David Packard, who graduated from Stanford University in 1934, established HP on January 1, 1939 as a manufacturer of measurement equipment (Crittenden & Dunphy, 2000). In 2002, the company merged with Compaq, becoming the leader in personal computer sales. In 2009, after acquiring Electronic Data Systems, Hewlett-Packard became second-largest company on the international market of services (Crittenden & Dunphy, 2000). In 2006, the company absorbed the Israeli company Mercury Interactive, thus gaining leadership on the software testing market (“HP History,” n.d.). On November 11, 2009, HP announced the purchase of 3Com company. The acquisition of 3Com gave HP the possibility to enter the market of network equipment (“HP History,” n.d.). In 2010, they acquired Palm Inc., the manufacturer of PDAs and smartphones.
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In August 2011, the company announced the acquisition of Autonomy, a $10.3 billion software maker (“HP History,” n.d.). In November 2012, the corporation wrote off about $8.8 billion of the acquired company’s assets, accusing the former Autonomy management of deliberately overstating financial performance (“HP History,” n.d.). In September 2014, Meg Whitman announced the division of Hewlett-Packard Corporation into two independent public companies dealing with traditional IT business and the production and sale of personal computers and printers, by the end of 2015 (Mukherjee & Chan, 2014). The company named HP, Inc. was to deal with the traditional business, and the company named the Hewlett-Packard Enterprise was to deal with the rest (servers, services, and solutions for enterprise customers) (Mukherjee & Chan, 2014). After the announcement of division, an assumption appeared that the separation was related to a possible future merger of the Hewlett-Packard Enterprise and EMC storage provider (Mukherjee & Chan, 2014).
The value of a vision is of critical importance for the organization. The vision gives meaning to company’s work. Besides, it becomes a means of motivating employees and focuses the activities of many in the same direction. It is not based on the desire to make a profit, and it integrates individual ideals. It ensures the continuity of following the organization’s objectives and helps to develop the criteria for their achievements.
The mission of HP is to offer technologies and services that improve business efficiency, promote the welfare of society and improve the quality of life of the clients. Additionally, the company strives to provide its products to the maximum number of people. No other company can offer such a wide range of technological solutions as HP does. It provides infrastructure and products ranging from handheld devices to some of the world’s most powerful supercomputers. Moreover, it provides numerous kinds of products and services for consumers and for the entertainment industry, from digital cameras to computers and printing devices. The wide range of products allows the company to offer technologies and services to customers with any individual needs in any country. However, the company still needs changes for several reasons: the increased awareness of customers on the subject of IT technologies and subsequent higher demands; the need to adjust to most recent innovations; the emergence of new IT leaders that could occupy more niches on the same market as Hewlett-Packard.
Industry Analysis and SWOT
The IT industry is growing rapidly. The largest market segment in terms of costs is the equipment. The explosive growth of data volumes is driving the demand for servers and data storage systems. The ubiquity of data center and cloud solutions guarantees a steady demand for various types of network equipment. The PC market is gradually shrinking in volume, while the mobile device market is growing steadily. The demand for printing and copying technology is relatively stable while sales of monitors have been steadily declining. The demand for IT services is guaranteed by the growing diversity and complexity of the use of corporate IT systems, requiring high costs of installation, integration, training and maintenance. IT outsourcing, i.e. the transfer of functions to other organizations for support and maintenance of IT infrastructure, is one of the most promising areas in the IT market. The most dynamic segment of the global IT market is the software, which has been showing annual growth higher than 6% in the past few years (Kaiser, 2013).
There are external and internal factors that influence Hewlett-Packard. The external factors in analysis are those related to opportunities (competition with others, factors of the IT market, etc.) and threats. Consequently, internal conditions are those defined as weaknesses and strengths, which depend on the level of development of the company, management, employees, corporative ethics, strategies, etc.
It is necessary to define strengths, weaknesses, opportunities, and threats to make SWOT analysis of HP Inc.
- Large number of employees
- Maximum share at PC market
- Focus on customers and their satisfaction
- Good after sales service
- Diversification of products
- Affordable price of new products
- Developed infrastructure
- Wide presentation on China market
- Good reputation
- Increasing competition with main competitors
- Slow market share growth
- Absent customized solutions for customers
- No presentation on digital entertainment market
- Weak on tablet market
- Fake HP products affecting company sales
- Developing in service industry
- Growing demand for laptops and desktop computers
- Cloud-based technologies and services
- Profit margins and pricing
- Component pricing
- Technological changes that are too fast and abrupt
- Increased competition
- Rapidly growing market
- Slow growth of profits
One of the strengths of Hewlett-Packard is the large number of employees all over the world, coming up to almost 300,000 people (“HP Inc. Finance,” n.d.). The next is its high position on the PC market where it has the maximum share. Hewlett-Packard also focuses on customers and builds its marketing strategy aiming at gaining customer trust. Another strength is the after sales service that provides necessary software and customer support. Hewlett-Packard has very diversified product lines and good reputation on the IT market (“HP Inc. Finance,” n.d.). Additionally, HP is providing affordable new products with the newest design and innovations. HP also has good infrastructure in every country within its market. It is also important that HP is widely represented and popular in China.
HP’s weaknesses include increasing competition, especially from the main competitors such as Dell, Acer, Toshiba, Cisco, Lenovo, Fujitsu, Sony, Apple and others (Kaiser, 2013). Therefore, the market share growth is decreasing. Another weakness is the decrease of sales caused by imitations of HP products. HP cannot afford to provide customized solutions because of mass production. Additionally, HP is not involved in the digital entertainment market. Lastly, HP does not focus on tablet production.
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The opportunities available to HP include growing demand for desktops and laptops with the spread of the IT technology. Additionally, the acquiring of EDS gave them the opportunity to become the service industry leader (Kaiser, 2013). The company can develop in the direction of cloud technologies that have become very popular in recent years.
The threats are the risks of pricing and decreasing profit margins. The competition is rapidly growing, thus it is the most important issue. Under present conditions, the success and profitability of a business largely depend on the speed with which it responds to changes in the market situation. This factor, combined with the performance, becomes a strategic asset of enterprises in various industries. The use of advanced information technology is increasingly becoming a critical success factor in the fight for the leadership. The last threat is component pricing, growing along with the number of local players.
In October 2015, HP had revenue of 103,335 million USD (“HP Inc. Key Ratios,” n. d.). However, after the peak in 2011, the revenues were decreasing every year and gross profit showed the same tendency The working capital has grown considerably since 2012 and now it is 9.596 million USD (“HP Inc. Key Ratios,” n. d.). HP also demonstrates positive dynamics in R&D spending that consists 3,39 % of sales (“HP Inc. Key Ratios,” n. d.). The operating margin is 6,1 %, which is not enough for such powerful company (“HP Inc. Key Ratios,” n. d.). Generally, financial ration shows that, in the recent years, the company has been facing competition and tries to change its strategy in order to be in a better financial situation (for example, by spending more for R&D).
Issue Discovery and HP Strategy Formulation
The SWOT analysis shows that the principal issues of HP are those belonging to its weaknesses and threats. They include profit margins and pricing, component pricing, too fast technological changes, increased competition, rapidly growing market, slow growth of profits; slow market share growth, no customized solutions for customers, no presentation on digital entertainment market, weak development of the tablet branch. A critical issue for Hewlett-Packard is improving its competitiveness on the global market.
Strategy Formulation and Implementation
The most suitable strategy for HP is adjusting its management and business strategies to increase competitiveness. It can be achieved in several ways: finding less developed niches on the IT market, improving technologies, creating new product lines or changing the competitiveness strategy. The first strategy can be based on focusing on cloud-based technologies or starting to produce tablets.
Another way is changing the management and business strategy. HP has been a model company in terms of management for sixty years. Slow growth in recent years has led to the Board of Directors’ decision to appoint an energetic CEO who would pull the company out of the state of near-death similar to the one in which 1BM was 10 years ago, and in which Xerox is at present (Bruke, 2015). The new CEO proposed a plan consisting of several steps to revive HP (Bruke, 2015). The first step was to consolidate advertising agencies from 43 to two and update the brand. The result was the advertising campaign run under the slogan “reinvent” (Bruke, 2015). The second step was to unite 83 current departments into four that would need to work with two branches of sales and marketing (Bruke, 2015). The last step was to create a new product category in the Internet-related business, such as digital image and wireless services (Bruke, 2015). However, all these initiatives may seem too aggressive and too fast for such a big company, and would create confusion.
The third strategy is focusing on competitors. Another problem HP is facing is the vision of competitors on their market. Today, HP is the second largest computer company in the world (World’s Most Admired Companies, n.d.). This certainly is a very strong position, but more importantly, it clearly shows the company’s main competitor and the strategy it needs to adapt. When competing with a larger competitor, it is necessary to identify its strengths and try to avoid collisions in this area. For example, IBM is one of Hewlett-Packard’s major competitors. IBM’s strength lies in the commercial systems running on mainframe computers installed in many large companies (Crittenden & Dunphy, 2000). In fact, sales of large systems is the locomotive that guarantees IBM rapid growth in business systems integration and consulting. In general, the world is changing in the direction of open systems based on the internet, so the mainframe will be gradually replaced. This makes it possible to use IBM’s weakness in this growing category. Hewlett-Packard occupied the second position on the market with the help of its open client-server systems. IBM had the benefit of having their systems installed on big computer mainframes. By using the benefits correctly, HP became the world’s largest provider of open systems, the world’s largest supplier of UNIX systems (open source operating system) and led more companies to using open systems than any other company did (Crittenden & Dunphy, 2000).
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It provides HP an opportunity to strengthen its position and build a service business that competes with IBM, Accenture and EDS (Crittenden & Dunphy, 2000). HP could reform its service business into the organization of open computing of Hewlett-Packard systems. The aim of this organization should be to help enterprises during transition to the usage of open systems. Therefore, Hewlett-Packard has an excellent opportunity to play on the contrast between itself and IBM, the management of which is ready to make any kind of computers. HP could emphasize this negative side of the competitor.
HP’s main advantage is the low risk. A thorough understanding of the “open” technology and Hewlett-Packard’s extensive experience allows it to use Sincerity Act, which means recognizing their weaknesses. The potential customer will reward them with trust (Crittenden & Dunphy, 2000). The truth is that many companies that provide maintenance services promise more than they do. Additionally, many service companies underestimate the time and cost of the transition from mainframe to open systems. That led to the fact that many CEOs are dissatisfied with corporations’ results. About half of all completed technology projects do not meet the expectations of leaders. This provides HP with an excellent opportunity to speak about the dark side of the transition from mainframe to client-server system; to speak about something that is impossible to achieve. Hewlett-Packard provides the new-speak of the Internet services, avoiding myths and promises of “security” proving that they are the best provider of complex software products (Crittenden & Dunphy, 2000).
Those small examples give a general understanding of how knowledge of competitors can help avoid problems. However, there is one rule of competition that needs to be taken into account is that it is necessary to avoid the strengths of competitors and use their weaknesses.
In conclusion, Hewlett-Packard is one of the largest IT-companies in the world. It has many advantages as well as problems, including increasing competitiveness of the global IT market. HP offers consumer devices, enterprise servers and storage devices, units for the production of software, and even the ability to provide services, including cloud technologies. All this allows Hewlett-Packard to provide complete enterprise solutions including both hardware and software components, as well as network infrastructure all the way up to cloud structures, without resorting to third-party organizations. This versatility is convenient for HP customers who can get all the necessary hardware, software and even services from a single source with guaranteed teamwork and quality technical support. However, HP still has to change is strategies as well as create the new ones.
HP provides solutions for all business models of development and is ready to offer the most technologically advanced and effective tools for success in the IT solutions market. For now, the most promising technologies to use are cloud-based technologies that ensure cost savings, ease of use of services, and access to applications and data from anywhere. Moreover, HP should focus on creating products and work with the widest range of customers in all possible countries.