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Hewlett-Packard (HP) is one of the largest technology companies in the world. Founded in 1939, HP employs nearly 88,000 worldwide, supports 540 sales and administrative offices, and distributes to more than 120 countries. HP is a technology solutions provider to consumers, businesses and institutions globally. The company offers IT infrastructure, global services, business and home computing, imaging and printing.
The case study reflects the appraisal of HPÐ²Ð‚â„¢s high performers, internal and external problems and the growth of the companyÐ²Ð‚â„¢s future. We see their sales have grown but profits have fallen $230 million short. With a slow economy on the rise HP needs to find a solution to their growth problem. A clear cut to their problem I suggested is by merging with the rival company Compaq due to their same visions and tactics and it will decrease the competition while strengthening the companyÐ²Ð‚â„¢s image in business field.
I have also elaborated the merger in my recommendation analysis by explaining how HP can gain its profits and find solution to its current problem. HP split is another solution to the problem which I have breakdown in the alternative analysis. This case provides overall problems HP has with a SWOT analysis given with an alternative solution and forwarded with a recommendation plan.
Hewlett-Packard is striving to survive the tough competition in the market growth by trying to eliminate its competitors like Dell Computer in PCs, Sun in servers and IBM in services. HP has also seen profit margins erode in its cash cow business, printing and imaging, because of increased pressure from rival businesses. Due to the aggressive management extreme makeover the companies profit is even weaker were sales growth has beaten the companyÐ²Ð‚â„¢s expectation but profit has fallen off $230 million short. What needs to be done now is the companyÐ²Ð‚â„¢s motto and the new CEO of HP Ð²Ð‚ÑšCarleton S. Ð²Ð‚ÑšCarlyÐ²Ð‚Ñœ FiorinaÐ²Ð‚Ñœ has the solution. Even though her new changes and plans are on the table, the solution is almost a failure in every sense. She lacked vision and focus.
The strength of the company lies in the recognition of the vital role they play in driving HP technology, service and solution sales in the marketplace. The new HP is well-positioned to deliver the additional value customers demand through its product leadership, greater product innovation and global brand presence. The companies fast changing business environment and the need to pursue the goal for profit margins is another shift toward strength of the company. To raise the HPÐ²Ð‚â„¢s computer sales force, Fiorina tied more sales compensation to performance and changed the bonus period from once a year to every six months to prevent salespeople from coasting until the fourth quarter. Another innovative method is to sell a server at a lower margin to customers who commit to long-term consulting services in order to raise profit and good customer relationship.
The weak point of the company is that Hewlett-PackardÐ²Ð‚â„¢s new shift is moving too fast and taking many risks such as outsourcing which means HP has to let go some of its current workers, management split-ups, redrawing the lines of communication and getting veterans of rival divisions to work together. The plan is to transform all aspects of HP which means strategy, structure, culture, compensation and emphasizing on technology, software and consulting in every corner of computing in regards to services strength. HPÐ²Ð‚â„¢s experts and gurus have no clue whether the plan will work. Risks, uncertainties and assumptions include the development, performance and market acceptance of products and services.
Another problem is that HP has a wide range of products and services. There are consumer-oriented areas and business-oriented ones. Consequently, HP has a problem of positioning itself, because it has too wide a portfolio. It tries to succeed in enterprise IT, personal computing, peripherals, and emerging technologies. It competes with Dell in the low- and mid-range PC business and against IBM in the enterprise. All of these two competitors are focused on their industries.
Some of the opportunities HP figured out are by pursuing long-term visions that will create new markets. This includes the new HP Fiorina Way where she breaks the management into two sectors, front end and back end. The new structure boosts collaboration, giving sales and marketing executives a direct pipeline to engineers so products are developed from the ground up to solve customer problems. Another one is to come up with new e-services and then making the gear to deliver them. Couple other new innovations HP is thinking taking their company to the Web where they identified three solutions Ð²Ð‚â€œ the digital imaging effort to make photos, drawings, and videos as easy to create, store and send as e-mail. A commercial printing thrust aims to capture business that now goes to offset presses. And a wireless services effort might, say, turn a wristwatch into a full function. A net device that tracks the wearerÐ²Ð‚â„¢s heart rate and transmits that info to a hospital.
The threats HP posses are from its rival members such as Dell, Sun and IBM. The printing and imaging business is the companyÐ²Ð‚â„¢s crown jewel. As HP becomes more heavily reliant on commoditizing markets like PCs and servers the company will continue to face margin pressure. HP's biggest threats on a system level looking at companies with a broad breadth of storage, servers, and professional services - would be IBM. Dell Computer also poises a different kind of threat: increasing the overall pricing pressure in the midrange storage system market, which would have a big impact not only on HP but IBM and Sun. In PCs, too, HP is caught between Dell's mass-produced boxes on the low end and IBMÐ²Ð‚â„¢s ability to offer a comprehensive set of hardware and services at the high end.
Among the alternatives that HP will have to explore will be whether or not HP should remain in its current structure or if the company should spin-off or sell various divisions, such as the PC business. They want to bring someone in who is going to drive revenues up and costs down. A section of the industry advocates that HP be split up into two companies, with very different markets to target. The alternative to an outright split-up is to build a conglomerate out of HP, like GE. The advantage of a conglomerate is it can take advantage of market fluctuations. When certain segments of the market are doing badly, the management can focus strategy around the other segments, thus minimizing overall impact. In HP's case when consumer spending is hot, it can gain an overall edge on IBM, which has no consumer business but competes against HP for corporate contracts; if corporate zooms, HP can then move ahead of rival Dell in consumer electronics. This appears to be a less popular sentiment than either a spin-off of the printing and imaging business, and a split of HP.
HP and Compaq should consider merging in order to strengthen its competition among other fields. A key reason why any two companies would want to merge would be to foster expansion and efficiency in their field. The merger will produce higher margins with recurring revenue. In short, the overall benefits for the consumer, HP, and Compaq are:
Ð²Ð‚ÑÅ¾ A long standing commitment to partners
Ð²Ð‚ÑÅ¾ Trust, respect, integrity and opportunity for employees
Ð²Ð‚ÑÅ¾ Emphasis on community and corporate responsibility
Ð²Ð‚ÑÅ¾ Leadership across markets
Ð²Ð‚ÑÅ¾ Leadership across products
Ð²Ð‚ÑÅ¾ Global footprint
Ð²Ð‚ÑÅ¾ Intellectual property
Ð²Ð‚ÑÅ¾ Leading global brand
Ð²Ð‚ÑÅ¾ The new hp way
HP is the leader in their printing and imaging services. The merger would be complimentary for both companies for the following reasons: similar business strategy, economies of scope, economies of scale, product diversification, efficiency, expansion of market, service and profits. HP and Compaq the merger would do exactly this in four main facets: IT Infrastructure, Access Devices, Services and a diversified product line of Printing and Imaging. The bottom line is HP-Compaq will improve tremendously because they will reduce their costs and also increase their revenues through compatibility and increased knowledge. Their ability to compete both in the United States and around the world will increase their market share and revenue.
Recommendation Ð²Ð‚â€œ Action Plan
HP should go ahead and expand its business with a partnership with some of the conglomerate companies like Microsoft for web, ink and printer development. HP should also merge with Compaq in order to decrease its current competition which strengthens the companyÐ²Ð‚â„¢s performance for future. The focus on management level should be thoroughly understand and focus their organizationÐ²Ð‚â„¢s business structure goals by reviewing documentation and conducting interviews to evaluate the following:
Ð²Ð‚ÑÅ¾ Business needs and objectives
Ð²Ð‚ÑÅ¾ Procedures and processes
Ð²Ð‚ÑÅ¾ Desired changes
Under the management level the first focus HP should do is to identify its business goal. To measure the existing skills gap HP consultants should develop job profiles and determine skills needed. They should identify the most appropriate data collection technique based on the business goals. And lastly they should test the evaluation method and conduct data collection. The HP consultants should evaluate their environment to determine its disaster risks and availability requirements. Through prudent consulting, the solution should include
Ð²Ð‚ÑÅ¾ Risk Analysis - Identifies threats and offers recommended improvements for loss prevention and disaster preparedness
Ð²Ð‚ÑÅ¾ Business Impact Analysis - Assesses the operational, financial, legal and market impact a disaster is likely to have on their business. Recovery Assessment Evaluates HPs current level of preparedness, with a focus on critical applications and recommendations for improvement
Ð²Ð‚ÑÅ¾ Contingency Plan Development - Documents procedures for restoring operations following a catastrophic event or business disruptions
The right strategy is one that strikes a balance between the need for HP to redefine itself radically, and yet maintains the strength of a unified HP. That one appears to be restructuring HP completely around its printing and imaging business. That way, HP can target both the consumer and the enterprise, position itself attractively as the ultimate in everything print and image, and keep itself from a difficult and risk-ridden split.