Every person has a dream, an ambition; to achieve a goal, to get something; the very same person has emotions, emotions bounded to the dream. The person protects the dream and has special feelings for that. Same is the case with the company; the company has dreams to achieve a certain position, in the market or industry or internationally. The company's dream is known as Vision and every vision has some Mission statement; i.e. where does the company want to be in the next couple of years? Within this mission, there are certain objectives or goals to be achieved. The stated objectives or goals require a certain plan of action; that plan of action is known as Strategy. In simple words, Strategy is the plan of action to achieve your vision. The plan of action can be for smaller tenures (also known as Tactics) and for longer term.
One of the most interesting facts about business is that most of the models, theories of successful businesses came from the war strategies and games. A few examples of typical strategies are discussed below
The basic aim of this strategy is to get maximum output out of minimum i.e. optimal utilization of resources in order to get most cost benefit and efficient product. This approach was first used by British in the Second World War as British were quite low on supplies and resources. So, the armed forces had to devise a formula to get out such critical situation; and they were quite successful in that. On the other hand, Germany was just mass producing the most favourable equipment which eventually led them to ultimate defeat due to depletion of resources. (Johnson, 2000)
It's a most widely used strategy among fierce competitors. In this model, the company picks the weakest spot (as in business customer or service) of the competitor and hit it; once down; the company moves to the second weakest spot and so on. The Guerrilla warfare is one of the oldest warfare techniques in which the 'rebels' who were not only low on resources but also human capital, they attack again and again until the particular checkpoint or area gets captured. The example is Taliban in Afghanistan or Iraqi rebels in Iraq. (Harrigan, 1987; McCabe, 2009)
The statistical probability originated from the deck of cards. The people who used to play cards tried to formulate the happenings so that they can predict the occurrence of the Chances and try to manipulate the game for their sake.
This came from the legends of battles in which the army of one side got out numbered but the leader of the army presents a highly motivational speech to boost the morale and ultimately they won the battle. History is full of such examples; the Islamic Wars, the freedom wars etc. (Kouzes & Posner, 2002)
The above noted examples are just a couple of them but they are present in the history. The advertisements, marketing campaigns, propaganda etc all derived from war strategies. The Corporate Wars are not less deadly than real wars, the company needs intelligence, consultation etc. to beat the rivals, claim the market share and the toughest of all; sustain it. The example is Google; Google was used to boast the maximum number of unique visitors daily, but the spot got light got took over by Facebook when the recent research conducted by an independent firm revealed that number of unique visitors are more on Facebook than that of Google. (Archer & Cameron, 2009; Messinger et al., 2009)
Moving on the corporate strategy, Corporate strategy; in simple words; is the stated Mission Statement of the Company. Where does the company want to see after e.g. five years? The corporate strategy involves the bold steps like mergers, hostile take overs, acquisitions or buys outs etc. The companies formulate these strategies upon the business level i.e. top level. The policy makers make sure that they are in the right business with the right products. The company's business should be in accordance with the company's policies and legal documentation. The corporate level strategies clearly answer questions like: Where we are and where we should be? Are we doing the right business? Etc. (Ambrosini & Bowman, 2003; Hall & Lobina, 2007)
The policy makers or the think tankers have to evaluate all the possible risks for the company; because "You Can't beat 'em without knowing 'em" The risks involve not only business risks, but also market, technology, political, international, geographical etc. risks. One of the major headaches for the policy makers is to cater these. One of the techniques for managing these risks is known as diversification. (Chkir & Cosset, 2001; Riahi-Belkaoui, 1996)
Now this strategy works in a very systematic manner i.e. if the investor is incurring loss on one side, he'll gaining on the other side, so the loss gets compensated accordingly. The major question of the Diversification is the same as that of Corporate Strategy; which two or more things correlate. The essence of the diversification is that it benefits from the difference or negative relationship of the two objects. E.g. Coke and Pepsi, Petrol and Ethanol etc and tries to save the investor from the losses resulting from the ups and downs of the stocks or market impacts.
The corporate policy and diversification are somewhat equal because they both ask the same set of questions, i.e. where we are and where we should be? , Are we doing the right business?
Corporate strategy uses diversification to reduce risks. The examples are Pepsi Cola Co. launched LAYS Chips in order to diversify in the products (i.e. beverages and snacks), Google; a whole range of search engine services; web, books, images, videos, articles, source codes etc.
Strategy is quite necessary for the company, not only to achieve its goal effectively but also to utilize the scarce resources of materials and human capital. A company is never short of ideas or innovation or motivation to achieve big. The company which is going for losses has the lack of strategy.
Hewlett Packard Case Study
The world entered into the new millennium, with new energy and new challenges. The United States was going through a period of mild recession and this resulted in slow sales and declining profits of the industries. As far as industry is concerned, the industries were fighting ruthlessly for the market share with new products and innovative technology. In 2001, the online e-commerce web portals were proving to be most cost effective web portal due to their high operational profits and low operating costs. The consumers found it quite convenient from purchasing the stuff from their very spot
HP has to devise the strategies of corporate level as well as business level.
Corporate Level Strategies:
In order to survive in the market and gain profits, instead of taking each other's units, the two companies; HP and COMPAQ; must join hands, the options available are:
As far as joint venture is concerned, both HP and Compaq will join hands to form up the new company, but this will increase only costs and the revenues would not be sufficient for any of them. Joint venture company is only successful in the cases where both of the companies are financially strong and they come up with some new technological breakthrough.
This is a good option as both companies would not only join hands towards a single goal but also share resources, human capital and expertise with each other. This is a very good option as both of the companies are in the deep well of problems and they have to cut down costs.
It's the option that none of them would want to practice. Acquiring company means, taking the whole company, means more investment, more strategies to form, more work to do and little gain as Compaq is already a sinking ship due to the declining profits and low revenues.
The SWOT ANALYSIS OF HP:
As far strengths of HP is concerned, the most significant strength of HP is in the industry of Printing and Imaging due to a staggering market share of 51.2% as compared to the second highest market share of 9% of LEXMARK in the industry. The strength lies in the cost effective printers and a very low cost printer series like HP LASERJET 1000. This hit the market of the consumers who can't afford big printers for their businesses.
HP's markets share in IT Services industry 1.9% as compared to its direct competitor IBM's 8.4%. Some major weaknesses can be HP's conventional sales and logistics and HP's slow response to the dynamic environment
New Opportunities arise with the innovation and new technological advancement. The opportunities lie in the cost effective and low cost products. The economic will have a sudden rise creating a very large boom due to penetration of IT in the third world countries and developing businesses. HP can cater them and generate huge profits along with capturing of market share.
New entrants with innovative technology have always been a threat to the companies. However, in IT industry, this threat has a larger impact as the new technology obsoletes the previous one. Moreover, the threats of counterfeit products which not only decline the sales but also leave a bad reputation of the company. The recession in the market is also a threat.
In terms of the competing forces of the market, the model presented by (Porter, 1985)can be used to analyse the effects of the market competition on HP. The forces that can affect the competition are the threats posed by substitutes, new entrants, conventional rivals and the influence and the clout of the buyers and suppliers.
As far as the resource analysis is concerned, the industry was full of resources, from material to man; everything was available due to the developing sense of use of internet. Companies and suppliers were coming closer with more negotiable prices and services.
The industry responded accordingly to the recession, declining sales and slowing the growth of the companies. The industry's effect setback Compaq when it decreased its Net income to 8.8% in 1998 but Compaq tried to revive and was a little lucky. The slow growth trends and high market competition clearly showed the companies have to think about it. The technological bloodbath of the companies led to their own destruction and low profits.
Inside HP, the operational profit experienced a sudden decline due to increase in operational costs and administrative expenditures. HP needed to control its expenses in order to gain maximum profits. The decline in revenues was due to the fact of selling the printers in low costs in order to gain secondary printer devices market like cartridges which has a gross profit margin of 70% as compared to the normal gross profit margin of 15% of the printer. HP has many shareholders and low profits are not an option.
Outside HP, Samsung was planning to launch its new Printer Range. Samsung was planning to capture market share by the offering some innovative product with low costs. However, HP launched its series of low cost printers HP LASERJET 1000 which rapidly captured the market.
Here comes the important point of substitutes, the substitutes in the industry are high as COMPAQ, IBM, SUN etc. are fighting a lot to capture market share; either by diversifying their products and services portfolio or coming up with innovative technology.
As far as Imaging and Printing technology is concerned, there were no new entrants in 2010. One of the world's leading Digital camera manufacturers KODAK didn't go for printing device manufacturing due to the fact of extensive expenditures on Research and Development of the product and the market analysis. Despite of the profit margin up to 15%, the Imaging and Printing segment of the IT Industry was not very attractive for the companies. Moreover, the competitors like Compaq, HP etc. won't let the new entrant to survive in the competition.
As far as other segments are concerned, the economy was heading towards a slight recession, resulting in the predicted change in consumer behaviour and consumer's buying patterns. The new entrants in the Hardware are of IT proved to be tough because of the fact of cut throat competition among competitors and the state of the art technology used by the companies.
The industry competitors are DELL, COMPAQ, IBM, LEXMARK, SUN. SUN was leading in the server manufacturing services while DELL was leading in sales of the computer systems due to its successful 'direct to customers' approach. (Ahmed, Lim & Loh, 2002; Zell, D., 2001)
The other industry competitors include APPLE with its innovative i-mac and i-book. Moreover, the Fujistu Siemens from the Japan hold a very strengthening position in the market share sales in Western market. In the competition, there is Sony with the most diversified product portfolio ranging from audio, video devices to Information technology, same goes for Samsung, ASUS etc. Samsung is also moving fast towards establishing its own printers and cartridges for getting the maximum share of the IT Industry. (Junnarkar, Levers & Madanmohan, 2005; Zell, D. M., Glassman & Duron, 2007)