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Technology landscape is changing at neck breaking pace and technologies companies have to continuously rediscover themselves to remain in Business. Hewlett Packard is a technology giant which is facing similar situation. Its profit margin and market share in some of the markets and products are eroding fast. Hence the following strategic plan has been developed for the timelines of 3-5 years to make sure that HP become more profitable and continues to grow at high rate.
Slowly move out of the less profitable business and move into more profitable business in same or related field of business.
Focus on technologies of the future which could be threat to present technologies.
Hewlett-Packard is a technology mammoth with wide range of product portfolio and revenues of more than $105 billion dollars.
HP is organized in the form of strategic business units with each SBU handling a particular portfolio.
Personal Systems Group (PSG)
Laptops: Compaq and HP
Entry level servers and storage for home usage
Technology Solutions Group ( TSG)
TSG is by far the biggest revenue contributor to HP with contribution of more than $35 billion dollars to HP's top line.
Proliant Server Series: X86 based tower servers and blade servers
Solutions for storage problems
ProCurve: Networking software and hardware package
Managed IT services: HP will setup a IT help desk inside the premises of the companies.
Software solutions for the various hardware it sells like remote login troubleshooting, virtualization softwares etc.
Mphasis and EDS
Acquired by HP to boost its existence in services sector.
Traditional software services
Technical consultancy services and application development
Imaging and Printing Group ( IPG)
Ink Jet Printers for home purpose
Laser printers for medium and big businesses
End to end solution in the form of editing softwares
Snapfish portal for ordering prints of photographs online
Hewlett - Financial Services Financial services
It is like a in-house financing facility being used by various customers when they lease the equipments rather than buying them.
If one see the pattern of acquisition by Hewlett-Packard till now a conclusion that HP is trying very hard to build capabilities in services sector and at the same time is pushing hard to make room in its strength area of hardware sector
Recent acquisition of EDS and Mphasis is a case in point.
Also one should keep in mind that HP's recent acquisitions are aimed are leveraging synergies between its software and hardware divisions . It would enable HP to focus on end to end solutions spaces rather than bits and pieces of the value chain.
Acquisition of 3Com has been aimed to enabling entry in Chinese market.
Merger with Compaq few years back was to build capabilities in the server business and at the same time to get access to low end laptop market.
Higher management has been charged with spying charges on its board members
Big Banks like Citibank
Various stock exchanges around the world
Various institution like hospitals, schools, universities
Small and medium companies
Large organizations like Coca Cola
Mission and Vision
Mission defines purpose of existence of the organization. Mission is something organization strives to achieve every day.
Vision defines long term goals of the organizations. It could be open ended or close ended. By putting a time line Vision statement becomes close ended.
On the whole Vision defines a particular end state of existence and mission defines how to go there.
Mission and Vision together helps the organization in making various strategic decisions and at the same time brings everyone in the organization on the same platform. These come to the rescue when companies face any dilemma in terms of decision making.
HP's does not have Mission and Vision Statement but has Shared Values and Corporate Objectives. These are equivalent to Mission and Vision of any other organization.
HP's Shared Values
Strong customer focus by putting customer in forefront in all the actions of the company
The culture with respect, trust and dignity for individuals
Recognize contributions of every person
Be best in the class in whatever we do
Focus on team work and find out way to serve the customer efficiently
Be dynamic, agile and nimble so as to beat the competition
Invent technologies that are significant and useful for the customers
Honesty and integrity in all the actions
HP's Corporate Objectives
Strive for customer loyalty by giving best in the class value
Focus on profitable growth and maximize value for shareholders and achieve corporate objectives at the same time
Spot and seize the growth opportunities by building on the competencies and strengths of the organization
Be a market leader in innovation of products, solutions and services
Create a fair employee award system which is based entirely on meritocracy and in the process create a work culture which manifests organization's values
Develop future leaders who can demonstrate organization's values and can enable the organization to grow
Be socially responsible
HP has a huge brand name and is biggest IT Hardware Company of the world.
In the past HP has demonstrated ability to acquire and integrate companies with itself. Acquisition of Compaq is point in case.
In the past HP has successfully rediscovered itself by moving into new businesses altogether.
HP always focuses on product innovation rather than low cost.
Hardware market is suffering for period of low growth rate after the financial crisis of 2009. Dell suffered huge losses in 2009.
New technologies like cloud computing threatens hardware industry as I will make hardware with lots of companies redundant.
All major companies like IBM are moving towards software businesses as they are more lucrative.
Hardware business is becoming more of a commodity business. Chinese players are threatening viability of this business in the long run.
Innovation focused culture
Deep product portfolio with presence in both hardware space and software space
Bought companies in information technology software space
End to end presence in information technology space
Hewlett-Packard enjoys a solid brand name
Customers are embracing new innovation in an unprecedented manner
Outsource work to low cost destinations for overall cost reduction
Upcoming economies with huge middle class like China, Brazil, India
Bureaucratic setup results in slowed down functioning
Lack in overall vision
Huge Presence in high cost locations like North America
Hardware business ( low margin) occupying management's mind share
Intra HP controls are not strong
Inadequate focus on services business particularly consulting business
Lack of fire in the belly
Component supplier entering the space on the basis on cost advantage
Product life cycles are becoming shorter
New Technologies like cloud computing can lead to non viability of business in long run
Recession impact IT sector the most, both hardware and software
Not able to beat Dell which plays on price in many areas
Long Term Objectives
Improve overall portability of HP
Maintain high growth rate for the entire organization
These two objectives are also part of HP's corporate objectives.
Strategy Analysis and Choice
Slowly move out of the less profitable business and move into more profitable business in same or related field of business. HP wants to achieve leadership position in all the business it operates in terms of product innovation and hence it should move out of businesses where it thinks won't be able to achieve this position in the coming future.
Focus on technologies of the future which could be threat to present technologies. Technologies should be meaningful as HP's strive for meaningful innovation.
Maintaining Profitability and Growth are HP's corporate objectives. Hence the two strategies fit fully with HP's business philosophy.
Plan Goals and Implementation
Looking at the current scenario of Hardware industry which struggles with huge pricing pressures HP has following alternatives
HP could enter into new markets where competition is fairly low in a more convincing manner. Market of Networking hardware and software is a case in point.
HP will have to rethink its strategy of Imaging and Printing group as its low end printers are hit hard by Canon. Instead HP can shift its attention on laser print which are on the higher end of spectrum
Reconsider strategy on products like storage area networks and network area storage and basic entry level servers as these products are fairly standardized and commoditized by now and hence have razor thin margins. HP as per its values has always been an innovation oriented player and it has not taken the shelter of pricing alone as a competitive edge.
HP will have to make stronger efforts to integrate EDS into HP entirely and in spirit in order to reap benefits of synergy between them. Both the teams will have to sit and redo their product and service portfolios so that synergies could be drawn. This ultimately would allow HP to fill the software gap in its portfolio.
To fend of threat of cloud computing HP can preempt by acquiring data centers and can start to offers various related services.
Meaningful innovation is a part of HP's shared value. Leadership, Culture and Structure . HP has always driven by strong leadership. In the past HP has successfully acquired many companies and have integrated them into itself. At the same time leadership has always focused on product innovation rather than falling for low cost trap. At the same time HP has a strong culture and lots of focus is on HP values. HP's culture also focuses on innovation.
HP has several business divisions which run fairly independent of each other and enjoy huge independence. This gives HP flexibility and agility which is often found missing in big organizations.
These factors will definitely help HP in achieving above goals.
Critical Success Factors
Ability to acquire companies in the cloud computing domain and integrate them successfully with HP.
Strong leadership which could take courageous decision to drop few product lines where HP is not profitable. IBM displayed this when it moved out of its Laptop business by selling it to Lenovo.
Controls and Evaluation
Break even period of new investments will be 2-3 years. This figure is chosen by keeping in mind technology life cycles.
Profitability of new products based on new technologies should be around 15% which is considered to be high by any standards.
New product/service should fit into the overall portfolio of HP.