HP Strategic Analysis
The company belongs to the Technology industry, specifically information technology. The primary products for the company are Personal Computers, Printers, Scanners, Copiers, Cloud services, 3D Printing, and Displays. HP HP headquarters is at the Palo Alto, California, United States. The company was formed 79 years ago, and it was called Hewellet-Packard. The company was formed by two Stanford graduates: William Reddington Hewlett and David Packard. 526 billion (NASDAQ,2018). HP is a public company, and it is traded as HPQ at the NYSE. It is also traded as HPE at NYSE as they split into two companies traded separately at the exchange markets. It is also a component of the S&P 500. The company operations and activities are placed under the information technology industry, a subsidiary of the technology industry (NASDAQ, 2018).
It was also one of the first companies to build program, one of the first commercial desktop and Wired one of the first personal computers. The company had a chance to branch into personal computers when Steve Wozniak (Co-Founder of Apple Inc. ) suggested to them a few apple models, but they turned him down. The main reason was that the company wanted to remain in the industrial markets, business and scientific sectors. The company, however, maintained advancement and moved to produce the inkjets printers (Pearce and Robson, 2000). It was a strategic move as the company continued to trade in the NYSE as HPQ while its counterpart Hewlett Packard Enterprises could trade as HPE. From the split, HP Inc. will sell printers and PCs, while HPE will sell servers storage, software’s networking, and any associated services.
SECTION 1 (Technology Industry) 1. Industry Economic Features—What are the industry’s dominant economic features? Market features- The top ten technology companies in 2018 alone was$ 1 trillion. The degree of vertical integration- Biggest firms (Including HP specifically) are vertically integrated such that the sectors in the companies with new products operate independent of the firm and even compete with it (Kokko, 2018). Most companies adopted the strategy to maintain their competitive advantages. Ease of entry or exit – The ease of the entry into the industry is moderate, the new business only requires capital and skilled labor to create new products. Technology/innovation- The industry is dynamic as it is faced with constant technological advancements as that is the main competitive advantage. Due to competition, HP has to come up with new products and services periodically to maintain their competitive advantage and customers.
It is a sector that has each company relying on invention and innovativeness as the primary competitive advantage. With each invention or technological advancement, there is a significant change in the competitive structure and business environment (Porter, 2018). The products either shift the customer’s preferences or create demand and substitute other products. That causes the business environment and competitive structure to change significantly. The technology sector competitive structure and business environment are significantly affected by the competition among the firms (Porter, 2018). The main reason is that it is no longer enough for a company to have a few services or technological equipment to survive in the highly dynamic and changing business environment (Bresnahan and Greenstein, 2017). The companies have to keep up to date with the technology companies which creates increased demand for the companies in the sector.
Additionally, the technology sector has become the foundation of most organizations. Explicitly, the businesses now depend on internet, websites, programme, computers, some applications, robots, and a range of products to conduct their daily business. Therefore, the companies are now on the race to build the most extensive group globally that delivers the broadest portfolio for their customer bases (Bresnahan and Greenstein, 2017). The future of the industry is bright, as the most skilled, experienced and dedicated individuals have been employed and are aspiring to work in the sector (Bresnahan and Greenstein, 2017). Finally, while many may think that the technology sector is its peak, the reality contradicts it. The technology industry is in a sea of change that will lead to potential tripling demand for their products in the next ten years.
Specifically, the wireless innovation (5G Network), internet of things, smarter cities, cars, and equipment, improved healthcare, virtual and augmented healthcare and data centers are among the products that will give the industry several key success factors (Bresnahan and Greenstein, 2017). HP has also aligned their strategies and future production in that line to ensure smarter products, connectivity for the internet of things and efficiency. Inventory depreciation and price competition characterize the competition. The competition has intensified with the introduction of the tablets and other form factors that have shifted the customer preferences. The main competitors for HP in this sector are Apple Inc. , Lenovo Group Limited, ASUSTeK Computer Inc. , Samsung Electronics, Toshiba Corporation, Dell Inc. The sector is characterized by dynamic and ever-changing technological inventing and price competition.
The primary competitions for HP in these two sectors are IBM Global services, Dell Inc. , Cisco Corporations, EMC Corporation, Computer Science Corporation, and Tata Consultable services among other companies (HP, 2018). This sector is highly competitive, and most of their primary competitors provide a broad range of products and services while enjoying global brand recognition hence preferred by customers. The company is only able to survive in the industry due to their deep technology expertise, ownership of the differentiated intellectual property, reputation of high-quality services, cooperation with corporations like Microsoft and Oracle and access to skilled global resources from SAP Platforms (Kokko, 2018). While one may say it is easy to predict the rivals next move, since they will just come up with a new product, it is not as easy as it seems.
All the companies in the sector are aware of the fact that the primary competitive advantage of any company in the industry lies in the new products and innovativeness. They will thus strive to come up with new products. HP rivals next moves will be to counter any new product that HP avails in the market for their customers (Bresnahan and Greenstein, 2018). That way, the companies will stand a chance to have significant sales. The successful companies have in the past always posted above-average growth rates. From past year December to around March, the sector has had a good performance. However, since March the industry has faced a slump and suffered a 10% average reduction in stocks prices (NASDAQ, 2018). Investing in the sector is advisable as their stocks are valued highly but for a reason.
HP, alongside Google, Facebook, Amazon, Netflix, Apple and the top 20 stocks are highly valued because they have shown consistency over the years. The investors should then compromise as in this sector details matter before investing. One must carry out research have self-education and invest y if the valuations make sense (Bresnahan and Greenstein, 2018). It is critical for an investor to understand the company products, those of the rivals as they can provide an investable edge. Section 3 INTERNAL ANALYSIS 8) Current Strategy—How well is the company’s present strategy working? HP Strategy To deal with the competition that they face the company has devised a marketing strategy that will allow them to stay ahead. HP uses segmentation, Targeting, and position as their main marketing strategies.
2 • Most of the company’s products are highly differentiated from their competitors regarding their quality, durability, and pricing • The company has an effective marketing strategy and always uses catchy advertisements that enhance their brand image and awareness • The company is facing declining demand overall in most of their products • The company has weak financial; the financials have been on the decrease since 2014 • The HP computers have a poor after sales services mainly in the emerging or countries • The company is over depending on the revenues that they are collecting from the PC, which may fall soon hurting the company significantly. • The company has a low presence in the tablets market. The market for tablets is set to grow as it is perceived the replacement of the personal computers OPPORTUNITIES THREATS • 3D Printing – the company has invested in the 3D printing sector which set to grow, and the market will reach about 30.
2 billion by 2022 (HP Strategic Report, 2018) • The company has managed printing services market which can grow to 94. 9 billion by 2024 • The electronic market has always been on the rise and is set to reach $ 299 billion by 2019. 2: rank of HP Financial Analysis The following analysis is for the 2017/2018 financial year of HP Inc. Currently, the share for the company is trading at $ 23. 09 per share. Daily average rise or increase average about 0. However, the prices have been relatively stable for the last one year. 31 (NASDAQ, 2018). The company can meet its short-term obligations but will have to struggle since it has a quick ratio of less than one. Overall the company performed well. HP Stock Quote from Yahoo Finance as of 26/06/2018 Stock Price 23. 09 52wk High – Low 24.
The huge company success has also been attributed to its practical and active marketing strategy and competitive pricing of its products. That way the company can make sure that most of its products are easily accessible to all of its customers. However, the company is facing stiff competition from the already established global company in most of their products, to cope up with them they have to exploit all their competitive advantages. One of this strategy is that HP products are highly affordable for both middle-income earners and high-income earners due to differentiation (HP Strategic Report, 2018). The company also makes sure that it has competitively priced all the products. It is one of the few strategies that might save the company from the struggle that it is going through, even though it remains one of the top global manufacturers (HP Strategic Report, 2018).
Another strategic issue at HP is that the company relies heavily on acquisitions and buying out companies. In addition to that, the move to buy and acquire are not well timed such that the steps do not support the business strategy of the company. In 2001, HP made a move to purchase Compaq Computer, so that it can be able to compete with the emerging Asian computers like Dell, IBM, and others. However, What HP failed to recognize is that at that moment the PC market was so flooded that the sellers were engaging in unhealthy price wars against each other (Valentin, 2001). For a moment, during the same year, the company estimated savings that will amount form the exercises would be 27 cents per share.
In that year and the following years, the company was able to increase the earning per share from 1. 70 to 1. 80 for its shareholders (NASDAQ, 2018). However, Merrill, a research firm, said that the company still needs to address its strategic issues if they are to maintain the increasing upward trend (NASDAQ, 2018). POTENTIAL OPTIONS (Possible Strategic Initiatives Organized by Issue) According to annual Financial Report of 2018, one option that the company can use is to partner with global players and those that have already established themselves in the market. HP is a worldwide company and enjoys an outreach to some geographical regions, brand awareness, marketing capability, and customer loyalty. The only thing is they might not have up to date latest technology in some products.
Instead of waiting to be crashed out of the market by the technology, the company should focus on getting deals, signing partnerships and acquiring patents that will allow them to hold an advantage in the market (Porter,2018). HP can enter into assembly deals with other manufacturers, supplying deals or outsource some of their resources like premises for sales and showrooms. The company should strive to be one of the innovators, coming up with one product after another. It is a company with the financial capabilities to finance research and developments that will allow them to come up with new products periodically. In doing so, the company will pioneer its markets rather than trying to colonize markets that already belong to other companies (WSJ, 2018).
The company should diversify away from Personal computers related products and focus more on the future products. The market for the personal computers have dropped significantly and will continue falling. The company has the cloud services, the internet services and the IT solution among their product portfolio. Instead of facing the stiff competition in the retail sector of the information technology the company should focus on being a wholesaler of the services. Businesses are currently moving towards sustainable technologies that enhance their service delivery and customer care. That is a niche that HP is better laced to exploit than other companies. Before the big players can come in the market HP will have already taken a more significant share of the market.
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