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Hewlett-Packard CompanyÂ is an American basedÂ information technologyÂ organisation. The company was founded in a garage in by friends, Bill HewlettÂ andÂ David Packard, and is now the market leader in its industry. HP specialises in manufacturing and developing computing, data storage, networking hardware, delivering services and designing software. HP primary markets are households, small to medium sized enterprises and businesses directly as well as through online distribution, consumer electronic retailers, software partners and major technology retailers. HP also operates a services and consulting business incorporating its products (Shawn, 2007).
2.1 SWOT Analysis - (Internal & External)
Strong Market PositionÂ - The recent edition of Forbes top 2000 companies has HP listed as the biggest manufacturer of computer hardware in the world and 43rd biggest company overall with an estimated market value of $90.3 Billion dollars in 2011 (Forbes, 2011). This continues a trend that saw the company ease pass the previous global pc leader Dell in 2006.
Prominent Brand Name RecognitionÂ - Hewlett Packard is one of the world's most well-known and recognisable computer brands. In a worldwide global brands comparison by Interbrand, HP ranks as the tenth overall most recognisable brand in the world (Interbrand, 2010).
Successful Strategic AcquisitionsÂ - Hewlett Packard continues to seek strategic acquisitions. The company's major mergers and acquisitions in recent past include Compaq Computer Corporation in 2002, Mercury Interactive in 2006 and Electronic Data Systems Corporation (EDS) in 2008 and 3Com in 2009, which notably is a provider of computer network equipment, which plans of an assault on the market leader in networking, Cisco Systems. Computer networking is a high growth market with high profit margins and little competition.
Financial dependency - HP's financial condition is very dependent on the state of the worldwide economy as consumer electronics are very price volatile.
R&D - HP's research and development department has in the past few years, invested significantly less in comparison to previous years in comparison to its historical spending. This issue could affect HP due to the ever changing nature of its business environment if they fail to keep up with rapid moving advances.
Pay cuts - Throughout the restructure of HP pay cuts have been implemented in order to cut costs amongst the organisation this has brought lower morale to employees, which can lead to reduced productivity if not managed correctly.
Third party suppliers - HP depends on third-party suppliers, thus its revenue and gross margin could diminish if it fails to correctly manage it suppliers.
Expanding presence in cloud computing marketÂ - Cloud computing is the next major avenue for IT services. In July 2008, HP along with Intel and Yahoo! created a global, open source test bed for cloud computing research and education. The increasing demand for cloud computing is likely to create demand for HP's solutions in coming years. The global spending on cloud computing is forecast to cross a value of over $40 billion by 2012
Expanding portfolio of imaging and printing solutionsÂ - Hewlett Packard has made several strategic acquisitions and introduced new products in the imaging solutions segment in recent times. Its imaging solutions strategy entails the commercial markets, from print services solutions to new growth opportunities in commercial printing and capturing high-value pages in areas such as industrial applications, outdoor signage, and graphic arts.
Projected decreases in the IT marketsÂ - Forecasters predict a decrease in the worldwide demand for various IT products offered by HP. The economic slowdown has negatively affected many market segments, including information technology. Hewlett Packard has experienced this decline in most of its global markets.
Highly competitive environmentÂ - Although Hewlett Packard is currently the market leader, it operates in a highly competitive market, with other strong competitors such as Dell, Toshiba, Lenova Group and Acer. It competes in terms of price, quality, brand, technology, reputation, distribution and range of products, among other factors. In some regions, the company faces competition from local companies and from generically-branded manufacturers.
3.0 Structural Issues
There are few key structural issues evident in this study, which are detrimental to the HP organisation.
The first key structural issue facing HP in this case is the multitude of layers which were evident within the organisation. These additional and unnecessary layers of management not only create increased bureaucracy within the organisation but also (as quoted in the case study) can be "confusing" for both customers and workers alike. Increased management layers also lead to slower communication between departments, as it was stated in the case that it "once took three months to get approval to hire 100 sales specialists". This structural problem resulting in slow communication can be highly detrimental to an organisation such as HP, who relies greatly on their sales department to sell their products to corporate customers.
Before mark Hurd's appointment as CEO of HP, the former leader, Carly Fiorina, had Hewlett Packard structured in a complex matrix structure (Ricadela, A, 2006). The matrix structure formalises horizontal teams and along with the traditional vertical hierarchy, with many organisations finding it hard to implement due to its confusing dual authority (Daft, 2009). This structure created blurred accountability lines and substantially slowed the decision making process in HP, leading to significant communication problems within the organisation.
The fact that salespeople were "typically spending only 33-36 per cent of their time with customers", was another key issue facing HP when Mark Hurd took control of the company. This shows strong structural issues within the company due to the fact that workers spent the rest of their time "negotiating internal H-P bureaucracy", and were often burdened with "administrative tasks". For primary roles as salespeople, 33-36% of time spent with customers is not optimum, and needed to be addressed. The fact that less than 60% of a 17000 strong, corporate sales team actually sold to customers is also alarming. After Hurds organisational changes were implemented it was estimated that 40% of the sales people's time was being spent with customers up from 30% in the previous year. For salespeople, 40% of their time is still a startling number and still needs to be improved further.
4.0 Discussion of ways to help solve some of the structural issues
There are few possible ways to go about solving the structural issues in which HP faced in this case.
The first possible way of helping solve the structural issues faced is by flattening the organisation out and removing unnecessary layers in the hierarchy of command. When Hurd took control he eliminated 3 layers of sales management. There are many benefits of adapting a more flat organisational structure which include the reduction in wages and overhead and the increased communication flow up and down the hierarchy from the lower line employees to upper management.
Simplifying the confusing matrix structure into a more clear-cut divisional structure is also a possible way of solving the communication, and sales issues facing HP. This would solve the problem of the corporate customers not knowing who to call at HP, as each line of products is aligned with its own division and hierarchy. Thus it eliminates the "dual authority" seen in the previous matrix structure, and removes the confusion of who to contact at the organisation. Hewlett Packard was built from the ground-up with this divisional structure and it has been highly successful in the past (Daft, 2008). Advantages of the divisional structure include flexibility and responsiveness to environmental change, due to each smaller divisional unit being better tuned into its environment and increased awareness of customers' needs due to employees focusing on a single product line (Daft, 2010). Both are of uttermost importance in the rapid moving technology industry, where new breakthroughs are made every day.
Clinching customers through sales is an important part of HP's organisational operations. This requires its sales-team to be proactive about always seeking out new customers, and pitching new products to corporate customers. Hurd increased his salespeople's time with customers from 30%-40%, although it can be argued that further improvements still need to be made in regards to this issue. A study conducted in 2010 by global consulting firm, Watson Wyatt Worldwide, concluded that the world's top performing companies spend on average 40% more face time with its best customers than those at lower performing companies (Meirita & Hanifiah, 2010). Thus to increase its sales efforts further, HP must push to increase its face time with its key customers even further and scale back administrative tasks to be successful in this area.
It has been stated that organisations with a weak customer service direction tend to manage by bureaucratic rules (as stated in the case), which limit perceptions of empowerment by either salespeople or customers (Anderson & Huang, 2006), however organisations with a strong sales force have few bureaucratic controls and generally release negotiating power to sales staff and customers, thus giving them a sense of control (Anderson & Huang, 2006). For this to change in an organisation, salespeople must be rewarded and encouraged, to exercise self-direction when interacting with customers.
5.0 Conclusion and Recommendations
Before Mark Hurd's appointment, Hewlett Packard was facing major structural and communication issues. The matrix structure introduced by Hurd's predecessor, Fiorina, was both confusing to HP's top corporate customers, and caused unnecessary amounts of bureaucracy within its sales team, which had an ultimate goal of sealing sales deals. It also confused communication channels which slowed the decision making process thus making HP somewhat inefficient in its sales efforts.
This report recommends that the following actions be taken:
Revert HP back to a divisional structure, which facilitates greater communication throughout the organisation, gives customers clear knowledge of who to contact about relevant issues and is successful in unstable environments such as technology.
Flatten out the organisational structure and remove unwanted layers of management, which obstruct the communication channels and increase bureaucracy, costs and overhead.
Increasing salespeople's face time with key customers and removing unnecessary administrative tasks, in an effort to increase sales interest and revenue. A study concluded that the world's top organisations spent on average 40% more time with key customers than lower performing companies.
If these strategies are implemented it should greatly increase communication and sales efficiency thus giving HP a much greater chance of retaining its place at the top of the information technology industry.