hp case study strategic management

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HP Business Strategy & HP Strategic Plan Analysis

Hp business strategy: introduction.

Hewlett Packard (HP) is a company that plays a leading role in providing its customers and other businesses with products and services such as IT infrastructure, computing technologies, and solutions (Ghori 120). It also offers global services in imaging, personal computers, printing, and access devices. The company has enlarged its market borders and improved its provision of products and services by coming up with new ideas and inventions. Each year, HP carries out research on the newly available markets, how best to serve its customers and develop its business strategy. The IT firm invests up to about four billion dollars each year for the purpose of research.

It has been able to get into new markets and offer better products and services through its innovative solutions to IT hardware and software, as well as emerging technologies. Over the years, HP has seen significant growth in its market changes that have been accompanied by success in business. This has been due to innovation. In addition, this innovative focus has attracted many other great and successful companies to it. For instance, because of its significant market strength, it was able to merge with Compaq. In 2003, HP came up with methods of getting the best out of investing in IT. This was through the adaptive enterprise strategy that spelled the type of technology and services as well as the practices to be used.

HP Strategy: Industry Analysis

The modern global economy is largely dependent on the Information Technology (IT) industry in driving communication needs as well as providing the much-needed software and hardware products. Needless to say, the IT industry has grown into a giant economic accelerator throughout the world. So to speak, this industry is the most robust in the world today and especially in the industrialized countries. The needs of enterprises and consumers in terms of both insatiable demand and economies of scale have significantly contributed towards the precedent growth of this sector.

The fact that computers and the associated information systems are utilized by all organizations in the contemporary explains why the IT industry is fast on track in accelerating economic growth both at the local and global scale (Grünig 144). For a complete IT industry, several components come into play. It all begins with the computing system, software and hardware development, creation of IT management systems, as well as the study and design of IT knowledge and infrastructure.

There is a growing base of available IT products that have made it possible for both consumers and business enterprises to easily access the much-needed services and products (Hill & Jones 65). Besides, recent years have witnessed a substantial growth of the industry, mainly due to emerging trends in the globalization of the world economy. The characteristics of the IT industry can be identified at a glance due to the outstanding and unique nature of the sector. For instance, the economies of scale are undoubtedly surging in this industry. This is attributed to the fact that the value addition that results from an extra software or hardware product is large and surpasses the marginal cost by far. Hence, the more units produced, the higher the returns.

Secondly, the IT industry relies on the creation, storage, processing, analysis, retrieval, and dissemination of knowledge. In other words, it is knowledge-based, unlike other industries.

HP Strategy: Industry Life Cycle

Any other industry will undergo a series of growth stages in the course of its operations. The first stage in the life cycle of the IT industry is introduction. This is perceived to be the point in time when the initial investments were being made in the industry. For installation, the acquisition of computing knowledge, as well as setting up the needed IT infrastructure, was instrumental at the introductory stage of the industry. In addition, this stage of development was also marked with the offering of new products to the market that required rigorous marketing so that consumers would be knowledgeable about it. Realistically, heavy investments in Research and Development (R&D) took place before IT could be fully-fledged as a fully equipped industry.

In order to remain stable at the introduction stage, the IT industry used the focus strategy to lay more emphasis on the consumers about how the new products (hardware and software) were unique. The industry started by targeting small scale enterprises and a group of customers. The latter are usually known as adopters or innovators in marketing literature. The level of IT marketing that took place during the introductory phase of the industry was initially meant to create consumer awareness about the availability of IT-related products as well as how they are used(Stonehouse & Campbell 126).

Indeed, the growth rate and immense success that has been experienced in the IT industry is believed to have been initiated during the introduction of the sector since this is the period when a niche for dominance can be superficially established. For instance, this life cycle stage marks the right point at which early and lasting impressions about technological superiority and product quality are created. Besides, the relationship between supply chain and vendors in the IT industry was developed during this stage.

The second stage in the lifecycle of the IT industry was characterized by the real growth of the sector. Unlike in the introduction cycle, this stage was characterized by both geographical expansion of the industry and impressive returns on investment. Although the growth stage also required significant capital investment, the industry got a reprieve due to increased profitability. Hewlett Packard (HP), as an IT firm, differentiating the products being offered with those of other competitors was the main goal behind marketing.

This was deemed necessary by the marketing department of the company since the growth stage is usually characterized by cut-throat competition. As such, HP invested heavily in marketing campaigns in order to have the lion’s share of the consumer (Hill & Jones 86). In addition, the IT firm did not stop investing in its plant and property development so that it could robust and provide more innovative and competitive products in the consumer market as part of not only meeting the demand but also creating a consumption culture of the company’s products.

In spite of the growth momentum at HP during this life cycle, rigorous product standardization was being experienced by the IT industry. This proved to be overly beneficial for the company since production efficiency was at its peak alongside the economies of scale. In fact, it is out of production efficiency that the IT firm has fully established itself in the market apart from being one of the outstanding companies in the provision of computer hardware and software products. At present, HP has a global presence as an IT company.

Furthermore, the growth stage of the life cycle of the industry also witnessed intensive development in research and development that was specifically aimed at improving the standards of products in meeting the shifting needs of consumers as well as the demand of the dynamic market. As a result, growth in sales was evident in the company due to the continually growing demand (Grünig 144). The long term positive growth in profitability has put the company at a vantage point in competing effectively in this highly volatile, innovative, and knowledge-based company. As already mentioned, market rivalry is the main subject of concern for any IT firm during this stage of development in the life cycle.

As a matter of fact, the growth stage tends to attract more investors in the industry who are well convinced that they are likely to grow their revenue upon investing in the sector. Moreover, this point in the life cycle of the IT industry is also envisaged by other competitors as a breakthrough in investment, and hence they can also dare to invest both human and monetary capital with the anticipation of impressive returns (Campbell & Craig 440). Unlike other industries, the IT sector has experienced one of the longest growth periods in the global economy. Needless to say, a company like HP and many others in this sector are still in the growth phase since Information and Communication Technology (ICT) is a recent development that has not been fully exploited, especially in the developing and underdeveloped economies.

Any growth stage in an industry is easily identified with a steep lifecycle. An assessment of HPs growth since its inception reveals that the curve has been getting steeper gradually. This is a phenomenon when a firm is spreading its tentacles far and wide in terms of geographical expansion.

Definitely, the IT industry and HP company, in particular, is far from attaining the maturity stage in its operation. When the life cycle reaches maturity, a company’s growth curve will often have a negligible gradient, that is, the curve becomes almost horizontal(Stonehouse & Campbell 132). On the same note, the last phase in the life cycle of an industry, also referred to as the decline stage, has not been experienced in the IT industry and HP company since the momentum of growth is still superficially high while demand for IT related products is still at its peak.

The Porter Five Forces analysis of the IT industry

This framework assists in analyzing the nature of business strategy adopted by an industry and how the very strategies can affect performance. The five forces determine how effective an industry can be in terms of its competitive structure. There are both internal threats and market rivalry emanating from outside an industry that is analyzed in the Porter Five Forces.

The IT industry can be affected by both the macro and micro environment. Although the IT industry has faced its own share of challenges, HP Company has also gone through various periods of transition. However, one factor is parallel in the performance of HP and the IT industry at large: both are still undergoing growth periods and the returns, both current and expected, are impressive (Hill & Jones 206).

Horizontal competition is addressed by the first three of the Porter’s Five Forces. To begin with, it is common knowledge that HP is producing products that have potential market substitutes. As such, other market rivals in the industry can equally produce substitute software and hardware products that will draw serious completion to the company. For instance, the International Business Machines (IBM) has grown over the years to emerge as one of the notable market leaders in the manufacturing of software and hardware used in computing systems. It has a global presence as a multinational corporation dealing with all consultations related to Information Technology and latest technology in computers. Indeed, IBM has the production capability to offer substitute and perhaps affordable products to beat its market rivals in the competition.

Secondly, the established rivals have also been a real threat for HP’s operation. A case in point is IBM. The historical development of this company can be traced back even before the actual development of computing system was fully on board. It started as a Tabulating Machine Company towards the close of 19 th century (1896) and its line of specialisation was in the development of machines known as the punched card data. However, this was not the first time this technology was being applied(Stonehouse & Campbell 120). It had earlier been used in 1884.

The population Census of 1890 necessitated the demand for tabulating machines and the technology grew by leaps and bounds thereafter. The 1896 punched cards gave the impetus for the generation of machines which would later be referred to as IBM. However, in 1911, the business exchanged hands when Charles Flint bought it at slightly over two million dollars. This enabled the original founder of the company to develop Computing Tabulating Recording Corporation (CRT) which was later incorporated on 16 th June 1911.

A merger of three companies took place whereby Flint as the key investor. His membership lasted until 1930. Elsewhere, the CTR management was taken over by Thomas J. Watson Sr. in 1914 and before the close of 1917; CTR established its presence in Canada with a brand name of International Business Machines Co. Limited which later transformed to IBM Inc. Such a long and robust growth history of IBM jeopardises the growth prospects and market stability of HP Company. A well established competitor like IBM among others not motioned in this case study, are highly likely to have better marketing skills and competences, higher production capacity and the associated economies of scale as well as a broader competitive advantage largely due to market acceptance by consumers.

New entrants in the IT industry can also pose a serious business threat to HP company. While HP was incepted way back in 1939, new entrants like Samsung Electronics (1969) and Sony (1946) have devised more competitive products that are effectively competing in the market. Besides, it is pertinent to note that quite a number of new players like AU Optronics established in 1996 and Asus started in 1990 have to some extent, flooded the IT market thereby making innovation a costly venture for long term players like HP. On the other hand, the vertical competition within the IT industry is addressed by the reaming two of the Porter Five forces. This includes both customers and suppliers and their related bargaining powers.

There are quite a number of success factors that have boosted the performance of the IT industry as a whole. First, the high demand for ICT applications in almost all areas of life, both at the individual and organizational level, has grown by double digits over the years. Second, the innovative nature of the industry has pushed up the growth rate. third, stiff competition has necessitated better service and product provision. In other words, the high efficiency levels being experienced in the IT industry has been a real impetus to growth of the sector (Grünig 164).

HP Business Strategy: Company Analysis

Swot analysis of hewlett packard (hp).

Over the years, HP has offered its products in IT globally. It has addressed challenges and problems related to technology that people and companies are faced with through creation of ideas, improving the working and living conditions of their customers and using trusted and valuable experience.

To begin with, HP has demonstrated great influence in the IT market. Its position in the market has been Strengthening and growing robust. For instance, the company closed its market shares at $53.15 in April last year (House & Price 86). Also, a report from the NASDAQ indicates that in the previous year, its strength in terms of stock led in the whole market by 62%. Since 2006, HP has steadfastly kept rising in the market sector. In 2008, it rose above Dell, which was a global PC leader in the PC market to clock 17% in terms of stock value. This was 3% above that of Dell.

Moreover, as a server, HP dominates 30% of the world market and 40% shares in the printer market globally. It got an EDS in 2008. This improved its performance in offering IT services to its customers thereby strengthening its market position.

Secondly, HP’s brand is well recognized and prominent. It has been aware of the influence that a name brand has in the market (House & Price 86). Therefore, to keep up with the changing market environment, Hewlett Packard adjusted its brand to cover a broader market area than just a segment of one business. However, it continues to conduct business with the small retailers.

The firm has an outstanding brand that has put together computer hardware and consumer electronics. This brand referred to as “One Voice” has been introduced. It has a new packaging style and a unique design. The company has put effort to have all its products given this new brand in order to maintain its prominence in the consumer market. In 2009, Interbrand.com gave a report of the ranking of the Hewlett Packard Company at number 11 from its previous 12th position as the most recognized brand.

Thirdly, its strength has been on its booming strategic acquisitions which it has continued to capitalize on. Since 2002, the company has successfully merged with other companies like Compaq Computer Corporation. It merged with Compaq in 2002 and later with Electronic Data Systems. Another merger with Mercury Interactive Company took place in 2006.

Additionally, HP Company has acquired a machine worth $2.7 billion referred to as a 3Com that provides computer network services. A similar machine like this is used by the Cisco Company and it earns Cisco an annual $ 40 billion market profit thereby making it a market leader in providing of network services (Ruan 156). However, HP is intending to use the 3Com machine it has acquired to counter and compete with Cisco which has dominated the market for a long time.

Although Hewitt Packard has displayed its strength in a number of ways in the market, there are some sections in the provision of products and services that are not felt in the market. For instance, other major competitors of HP are providing managing consulting services and other software products that HP doesn’t (Ruan 165). This has made HP’s presence in the market to be less felt as compared with its fellow competitors like the IBM, EMC and Accenture. These companies are coming up with comprehensive ways of providing a variety of products and services through the management consulting divisions they have established. However, HP is in the process of addressing this problem. For instance, in order to provide other services like front office processes to private firms, HP has partnered with Thomson eXimius.

Opportunities

Hewlett Packard Company has been able to use the available opportunities in the market to improve its offerings of products, technologies and services. To begin with, it has increased its provision of IT services in the market thereby making its presence to be felt in the cloud computing market. HP worked with Yahoo! and Intel Corporation in the year 2008 and were able to build a global multi-data center that deals with education and research on cloud computing. The global multi-data center became a project aimed at uniting the governments, academic centers and industries to work together. Also the project aimed at removing logistical and financial barriers.

Moreover, in the year 2009, HP expanded more opportunities by providing more cloud-based services like the new SaaS and HP Assure to assist other businesses to grow. It is important to note that HP Cloud Assure is made up of software and other services which include HP Business Availability Center and HP Performance Center. Moreover, it has a HP Application Security Center. Customers receive these software and services via the HP SaaS platform. Therefore, cloud computing has given HP an opportunity to gain market growth. It can be observed that the demand for HP solutions is likely to increase in the coming years. Before the close of 2012, the company is planning to have spent an estimated amount of above 40 billion dollars as part of its strategic expansion.

On the same note, HP is up in arms to boost its imaging and printing department. For example, it plans to explore commercial markets in imaging and printing services so that it can be in a position to identify new growth opportunities far and beyond the regional markets. Besides, HP has made several acquisitions such as ColorSpan, Tabblo, MacDermid and Logoworks.

In addition HP has provided its customers with methods of customizing and publishing photos. It has achieved this through launching of solutions that deal with photo printing. The company has introduced other technologies that assist its customers to create and print materials. These digital printing technologies include HP Latex Inks and HP Inkjet Web Press (Hill & Alvarado 434). Also, as a part of its graphic arts offering, HP has introduced three Indigo presses. Recently, HP launched a new technology called the HP Photosmart printer.

HP has been faced by a number of threats coming from the markets and the environment. To begin with, the IT market is faced with a decrease in demand for IT products. This has negative impacts on HP since it is a provider of IT products. Also, the information technology segment among other markets segments is faced with a threat of economic slowdown. This has tremendously affected global markets and more so negatively affected HP. In 2009 the global spending was predicted to have declined by 4% in the IT market.

Secondly, HP is faced with a hyper competitive environment. Its strong competitors include companies like Aver, Lenova Group, Dell and Toshiba. It is important to note that Dell has remained a formidable competitor of HP despite the HP overtaking it in sales. HP does not only compete with these companies in sales only but also competes in terms of range of products, distributions, brand and quality. In addition, it also competes with these companies in areas of reputation, technology and price among other factors.

Local companies and generically-branded companies are some of the main competitors at the regional front. Moreover, the company also faces threats from other server companies. There is stiff competition from quite a number of other market players. For example, companies such as IBM and EMC Corporation have been close competitors for decades now. Moreover, it faces challenges from other servers like the industry standard servers that are offered by Dell and the UNIX-based servers offered by the Sun Microsystems.

HP also gets competition from imaging and printing groups. These groups include Samsung Electronics, Seiko Epson Corporation and Dell. Other imaging and printing groups posing a threat to HP include Xerox Corporation, Lexmark International and Canon USA.

Additionally, re-manufacturing companies such as the original equipment manufacturers (OEMs) of Lexmark is a threat to the HP. At this point, it is pertinent to observe that used cartridges are bought from users then refill them with ink. The new product is later sold at a discount to Lexmark. Private brand stores as well as vendors who carry out their selling activities online are also potential threats to HP Company.

HP Strategy: Value Chain Analysis and Outsourcing

Value chain concept was advanced by Michael Porter in the 1980s. The concept can be used by companies in areas where there is competition. A value chain is formed when an organization links its activities with the activities of other organizations to form value in the business (Koontz & Weihrich 436). The activities that can be done together include marketing and distribution, manufacturing and purchasing of products and many others. The value chain framework has been used as a viable planning tool most advancing organizations for quite a lengthy period of time. Value chain works well in minimizing costs while maximizing value creation.

HP value chain analysis

HP has used value chain as a tool to identify the potential it has. It has been able to identify the activities in the organization that forms the value chain and has used it to gain advantage over other companies it is competing with (Ireland, Hoskisson & Hitt 74). This has been made possible by its ability to keenly perform crucial and key activities within the organization that their competitors are not performing.

Value chain links the functional parts of the HP Company with its organizational activities. This has given it a competitive over other companies. In addition HP has analysed the value chain and split it two sections mainly the primary activities and the support activities. Support activities for the HP Company are done by the human resource management. These activities provide the background that is required for the firm to work effectively and efficiently (Ireland, Hoskisson & Hitt 76). On the other hand, primary activities are mainly related with operations of the firm which include production of services as well as products, inbound logistics such receiving ad storing supplies and materials for external sources and using them. In addition, other primary activities include outbound logistics which involves delivering to the customers’ goods and services as well as performing other functions like sales and marketing.

Outsourcing at HP

Outsourcing is the provision of an in-house business function to an outside provider. HP has involved itself in a contractual agreement with other companies that involves them in exchange of payments and services (Koontz & Weihrich 438). For instance, it has been able to strike a deal with the company like Compaq to exchange services. HP has branches in different regions in the in the world and therefore can outsource to suppliers outside the nation a process referred to as offshore outsourcing.

HP has involved itself in outsourcing for reasons of saving costs, developing its core business, restructuring its core business, improving quality of service to gain knowledge and expertise in its business operations and to enhance capacity for innovation.

HP Strategic Plan: Value Creation and Capture

Value can be categorized in two different ways namely exchange and use value. The latter refers to the quality of a product, task or a job and how it meets the needs of the customer. Exchange value is the amount of money given or received for an exchange of a product, a task or a job. HP offers value creation and capture to its customers (House & Price 411). For instance, it offers an individual a source of value creation by offering products, technologies and services that are of value to the target user. The target user in this case would be the customer, employer or a client. HP offers a variety of products that meet the needs of its users and the needs of other companies. It creates value to people and to other businesses by developing appropriate products, services that adds value and improve the living standards of individuals and the company.

Secondly it’s a source of value creation to an organization. In this case value creation is evidenced by invention of new technologies that impacts the value creation process. HP is an innovative organization that introduces new products and services through innovations. In addition, it looks for ideas, markets and resources. Through this, HP has been able to reap great benefits from the availability of markets and its products that have become popular. Also, the company has been concerned by how to add value by creating new possibilities in the market. The market environmental changes prompt the company to seek new ways on how the company can create new advantages. Also, it encourages organizations to expand their values to the society by venturing into innovations.

Thirdly, HP provides a source of value creation for the society. It has begun incentives and programs that will expand value to members of the society. This has been through incentives for innovation and entrepreneurship.

Resource-based analysis and the resources of the companies

HP has laid a strong foundation in the market with most of its product being widely used by the businesses and the customers. Some of these products include PDAs, calculators, scanners, computers, digital cameras and so on. Today, HP Company not only supplies hardware but it also supplies software and a variety of services that support and design IT infrastructure. In addition HP has become the number one provider of imaging and printing products and services (Hill & Alvarado 434). The products and technologies include the LaserJet and Inkjet printers as well as officejet printer. Other products by HP include software like LightScribe, Snapfish, HP SPaM and HP Photosmart.

HP is also the leader of vending companies. It leads in supplying of PCs all over the world. Some of the examples of PCs supplied include Compaq Presario, VoodooPC, iPAQ PC for the pocket and the HP Pavilion. In addition, the company provides IT support solutions to other organizations and companies.

Capabilities of the company

Over the years, HP has maintained a good name in the IT industry and its popularity has continually grown (Weihrich & Cannice 470). A report from the Business Week Study indicates that HP Company ranks at number 11 in the world as the most valuable brand. It has maintained a popular global logo that consumers can easily identify with. Moreover, HP has been a sponsor of many organizations such as football clubs. It has also sponsored motor races and other sports activities. In addition, it has maintained its brand on most laptops and home desktops as Compaq Pressario (Weihrich & Cannice 434).

Strategic options

The profitability of a firm is likely to be affected by two closely inter-related factors. Both the position of the particular firm in the given industry and the attractive a level of the industry itself are two integral factors that can be used to differentiate strategic factors that determine profitability of a firm. In the case study of HP, it is evident that both the IT industry and the firm in question are at optimal performance although they may be facing different challenges at the same time. in other instances, it is possible for an individual firm to remain highly profitable in spite of the fact that the industry is dismally performing.

HP has leveraged on its strengths as identified in the SWOT analysis to position itself in the grossly dynamic IT industry. According to Porter’s generic strategies, there are two main pillars that the strength of a firm can rely on. These are differentiation and cost advantage. When these strengths are applied, there are three generic strategies that come into place. These are focus, differentiation and cost leadership (Stonehouse & Campbell 118). The growth ratio of HP is a vivid indication that the management of the IT firm has applied the aforementioned strategies at the level of the business. They do not depend on the industry or the firm and that is why they are referred to as generic strategies.

HP Business Strategy: Cost Leadership Strategy

The cost leadership strategy applies when a firm can opt to lower its production costs in an industry with respect to maintaining a certain standard of quality. For instance, the HP Company may decide maintain a selling price that is averagely at the same level with that of the IT industry. On the other hand, the firm can opt for a higher market price than that of its competitors. Another option would be to sell company’s products at a price lower than that of the IT industry. The purpose of selling at a lower price contrary to what the industry is offering is to boost the level of market share. Moreover, it is imperative to note that HP and other IT players in the industry have had price wars for long. As a result, the company has mostly worked towards maintaining profitability while competition remaining on the suffering end.

Nonetheless, it is anticipated that HP will start producing at a lower cost as the IT industry advances towards maturity even in the event that there will be absence of price war. At this point, HP will be in a position to attain long term profitability. In order to reach out on the wider market, the cost leadership strategy has been found to be profoundly applicable.

HP Business Strategy: Differentiation Strategy

When differentiation strategy is used, an innovative way is used to manufacture products that consumers prefer to those of other rivals. The new products developed should have higher attributes that prompts customers to buy them and increase demand. It is against this rationale that HP has been producing unique brands that capture the tastes and preference of customers. Additionally, such products at HP have also been charged at premium price thereby boosting profitability of the company.

So to speak, HP has been successful in implementing differentiation strategy due to quite a number of internal success factors. To begin with, the IT Company has invested mammoth sums of finances in research and development and therefore it has access to leading scientific knowledge necessary for innovation. Secondly, the development team at HP is highly creative and skilled. This has extended in the sales department that is endowed with strong sales and marketing team. Lastly, the corporate reputation of HP has been sound for long, a feature that has enabled the company to not only retain its chronic customers, but also attract prospective ones who have identified with the taste of the company’s software and hardware products.

Having brought into focus the industry and company analysis in the above literature review, a mission statement for HP Company could be as follows: “At HP, we are striving to be market leaders in the innovation and manufacture of most advanced IT infrastructure that will increase value to our consumers worldwide” The vision for the company would be as follows: “Perfect IT solution for the world”

In summing up, the Chief Executive Officer (CEO) at HP should be able to embrace participatory leadership style and ought to work hand in hand with other immediate executives in implementing the policies of the organisation (Hill & Jones 136). Leadership in the different departments within HP should also be participatory although the CEO still remains to be accountable on the final decisions made. In addition, HP has seen significant growth in its market changes that has been accompanied by success in business. This has been due to innovation. In addition, this innovative focus has attracted many other great and successful companies to it.

Works Cited

Campbell, J. David & Craig, Tom. Organisations and the business environment , Burlington: Elsevier, 2005.

Ghori, Asghar HP Certified Systems Administrator (2nd Edition) UK: Light House Source Inc, 2007.

Grünig, Rudolf. Process-based Strategic Planning , New York: Springer, 2010.

Hill, Charles & Jones, Gareth. Strategic Management Theory: An Integrated Approach , Mason: South Western Cengage Learning, 2009.

Hill, Terri & Alvarado, Ellen . XYPRO Technology Corporation HP Nonstop server security: a practical handbook, Burlington:Digital Press, 2004.

House, Charles H. & Price, Raymond Lewis. The HP phenomenon: innovation and business transformation , Stanford: Stanford University press, 2009.

Ireland, R. Duane, Hoskisson, Robert E. & Hitt, Michael A. Understanding Business Strategy: Concepts and Cases .Mason: South Western Cengage Learning, 2009.

Koontz, Harold & Weihrich. Heinz. Essentials Of Management . New Delhi: Tata McGraw Hill Education Private Limited, 2007.

Ruan, Da. Applied computational intelligence: proceedings of the 6th International FLINS conference , Toh Tuck Link: World Scientific Publishing Co. Pte. Ltd, 2004.

Stonehouse, George & Campbell, David. Global and transnational business: strategy and management , West Sussex: John Wiley & Sons, 2004.

Weihrich, Heinz & Cannice, Mark V. Management. New Delhi: Tata McGraw Hill Education Private Limited, 2010.

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Management as a Success Factor: Hewlett-Packard Case Study Example

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Hewlett-Packard Case Study Introduction

Hewlett packard history timeline, hewlett packard swot: strengths, hewlett packard swot: weaknesses, computers, desktops, printers & imaging products printers & all-in-ones workstations, and laptops, smart-phones, scanners & fax, ink, toner & paper & handhelds, marketing research and development of the company, market segmentation and target market, customer relationship management program, strategy and implementation, hp case study conclusion.

Hewlett-Packard Company is an international company incorporated in the United States of America as an information and technology company; it is one of the world’s largest technology company with its headquarters at Palo Alto; California.

It is involved in the business of developing hardware, software, computing, printing, and digital imaging; in terms of sales, it is ranged world’s second largest company in sales volume of desktop computers, servers, peripherals, and services. Other than the personal and corporate computer devises, it also makes other computer preferential devises like the printers (HP Official website, 2011).

The company was incorporated on August 18, 1947, by two friends; Bill Hewlett and Dave Packard who were graduates in electrical engineering from Stanford University; on November 6, 1957, the company was register as a public company. Since its incorporation, the company has been performing well and recording a profit and technological development.

Despite global financial crisis of 2007, HP was able to make a profit of $115 billion in 2009; the largest position of the amount came from sale of hardware devises but services offered about $40 billion of the profits.

This was a 100milion increase from the one reported in 2007, which was $104 billion in 2008 the company was the number one producer and seller of inkjet, laser, large format and multi-function printers market, and hardware’s.

There have been major changes which of late include in 1999 a spin-off of part of its business as Agilent Technologies. In 2008, there was yet another acquisition where EDS was taken over by Compaq company in after the successful deal, the net worth of the combined companies was US$ 118.4 Billion in 2008; in the following year, the company was ranked nine by Fortune 500.

In November 2009, there was another acquisition of 3Com; despite after the completion of the deal, the next target was Palm Company which was completed in April/May, 2010 at $1.2; the acquisitions where part of strengthening the companies operating base and improvement of services.

Of the sales recorded the company records over 85% of its sales from sales of computers; about 50% of the company’s sales take place outside the United States; some of the main competitors of the company are Lexmark International, Inc.,apple Computer, Inc., International Business Machines Corporation, Dell Inc., and Toshiba Corporation (HP Official website, 2011).

The company already has a strong brand name in the computer world; with the strength within and outside the United States; the strength has enabled it to develop appropriate infrastructure, personal computing and access devices, global services, and imaging and printing services. The diversification that the company has been able to attain offers it with an ever increasing sales and competitiveness. Other than the company itself, the companies that it has acquired are also doing well. With this even after introducing the new products, it will be easier for it to sell.

There is the expertise that the company boosts of. This again is the one gotten from the acquired companies and the one that it has developed over the years. Using this, the company should come up with measures that are aimed to counter competition by offering quality to the clients. The name and the market structure of the company is strengthened by its effective management team who are able to make intervention on products, services and the general approach of the company.

The company has created an environment of greatest dichotomy that seems to support individualism, however the ideology and philosophy of the company supports a high sense of collective responsibility and team work (HP Official website, 2011).

In attempting to counteract the market forces of demand and supply brought about by the advanced technology, myriad of challenges may be encountered on the way. Competition in the industry is high and calls for continuous improvement which is a costly exercise; of late the innovations made by Apple Inc. are one of the challenging issues that the company has; there is much competition in the industry.

Another area of inevitable weakness is an expansion plan which entails diversifying the level of the company activities. This may take different forms. A critical look at geographical expansion depicts a glaring possibility of other stringent market uncertainties. Right at the onset, strategic planning will demand strategic resources, both human and financial, to make any significant move.

Besides, implementation of the proposed market research will require mutual consent from all the affected divisions in the company. This will not only consume time as decisions are being made, but a lot of uncertainties abound especially on the verdict of the company (Varadarajan, 2010).

Products and services

HP is involved in information and technology business where it offers products and services in the line; with time the products and services keeps changing and improving to meet the demands of the people. The products by the company can be divided into five major areas as:

The company makes desktops, laptops, monitors, and central processing units; with the demand so the customer as well as the level of technology, the company ensures that its products are commensurate to the prevailing situation.

There are some simple computers and laptops used for house works and general office work and at the same time there are some complex machines used for programming and in management of large business institutes.

The company is in the business of making printers, fax machines, toners, and other accessories to be used with the products or similar products. When making the different products the company ensures that it meets the current level of technology and the expected quality.

HP recognizes that the world is taking another route in technology. Respect to this, the recent acquisition of Palm is seen as a strategic move towards this recognition. The era of personal laptops and desktops is slowly coming to an end and replaced by the smart phone.

This is in the efforts as the people seek their independence with time. Palm Company was/ is the producer of Smartphone’s powered by the Palm webOS mobile operating system. This acquisition will help the company to be in a position to participate in the fast growing mobile technology market in the world.

When the company merged with Palm’s, it got the chance to use unique technology by the company called webOS and other informational sharing strategies; other than the technology that the firm will come with, there will be the increased sharing of the human resource personal that the two companies have. This merger is seen as the way that the company is using to venture in the world mobile market.

To venture here there is the need to have the software and the technology that you need incorporated. Very soon we hope to seen smart phones of the Brand of Hp. When reporting on the merger on April 28, 2010 Todd Bradley, executive vice president, Personal Systems Group, HP said, “Palm’s innovative operating system provides an ideal platform to expand HP’s mobility strategy and create a unique HP experience spanning multiple mobile connected devices.” (Anon, April 28, 2010).

Analyzing the merger from a different angle, it is seen as a way to curb competition; Palm Company was one of the companies that was offering HP competition. Before the above acquisition /merger, the company was positioning itself for the future; what is doing is the development of smaller and smaller (but more efficient) computers. It was initially the Thin film Transistor (T. F. T.) Desktops, then to a less heavy laptop and finally the notebook computers the notebook for instance can fit in the hand bag and more efficient to carry.

HP has a number of services that it sells to their customers; they include computer operating systems and other business related software. Some of the software produced by the company includes enterprises resources software.

In the case a corporate customer is in need of maintenance of their computers, the technical team is used to offer the service. Other services by the company include business outsourcing, IT infrastructure outsourcing, transformational application as well as offering business support services to demanding customers.

Hewlett Packard Market Analysis

Development in technology in different parts of the world where HP operates offers the company a market and window to sell its products. Depending with the segmentation, the population, the technology and the strength of its competitors, HP makes strategic marketing interventions to ensure it remains the choice of majority.

Before developing a marketing strategy, the first thing that the company embarks on is analyzing the current position that it has in the world market. The strategy that the assist the company to analyze itself in two dimensions; market share and Market Growth; when the position has been learnt, then the decisions on the way that the company should adopt should be put in place. Marketing policies have two main agenda as:

• Retaining the existing companies customers and growing the market
• Entering the new venture market and become competitive

After the analysis HP takes an analysis of the internal strength, opportunities and threats offered by the market; strength of the undoubtedly be engineers internal managerial mechanisms. In order to have a competitive edge in selling its product and services, it is advisable for the company to take advantage of its ability to compete favorably with equal players in the market.

A strategic marketing plan is the only way out. Through this arrangement, the company should be able to adopt different modalities and outreach programs of reaching out to its consumers.

In a market mostly controlled by price levels rather than quality, it will be an open strength for the company to explore more on quality than price. In retrospect, strategic marketing plan should be in a position to explicitly document the various channels that can be used by the company to allocate more resources towards improving quality (Hsuen-Ho & Jia-Wei, 2010)

To ensure that the company meets demands of different category of people, the management divides the marketing using three parameters as demographics, economic situation, location/place, and price.

Generation Y is fast adjusting to current technology and they are willing to adopt the nest high technology that is affordable. On the other hand, the older generations are more likely to be interested with basic product that will meet their demand. Depending with the component and the strength that a certain machine has, the cost follows suit.

The approach ensures that the company can produce products of high quality and be able to sell them at an affordable price; the research and development center ensures that there is high innovation and invention to make the company’s products the products of choice by customers.

HP operates one of the world’s most successful customer care service, the service ensures that customer complaints are well handled and addressed with immediate effect. Other than addressing customers issues, the department are involved in offering corporate responsibility tasks that are aimed at improving customer relations and improving their strategies (Constantinides, 2006).

As much as the company can be commended on its advertising models, the use of online advertising should be increased. This is for the old business and new venture; there are many advantages that come with online marketing and advertisement; in the hard economic times and the opening of regional and international trade.

One of the remedy that have been proposed, to try and fight global financial crisis is the enhancing the international trade. This trade will be enhanced at low costs if online marketing is embraced by both the trader and the customer. The education level that the world is continuously undertaking will also be another boost.

The growing population of the youth who are finding the world with the technology in place is more likely to adopt it. Despite the growing need and the advantages that come with the mode of advertising, there is the population that the mode of advertising cannot cater for at any one time, thus a blend of the two is required (Vorhies, Morgan & Autry, 2009).

On the other hand the new venture of the mobiles is not the core business of the company; it should not be misinterpreted to get the major focus of the company. The company should then embark on campaigns to gain an increased customer loyalty and building a strong brand name. The only way that this can be attained is by adopting more and more technology advancement.

The more efficient the company will become the more the demand for its products. Innovation is the way forward that the company should adopt in its efforts to ensure that the customers remain loyal. There is also the simplification of the computer devises. The laptops and the desktops should be made as simple as possible to carry around or keep in the ever reducing office/ home places.

In this the users will not see it as a burden and can still prefer them. The other way that the company can keep afloat in the changing business environment is the diversification of business as well as recognizing other areas of business.

This has been seen through the mergers that the company has of late, as discussed above the merger with 3Com were deliberate measures that were targeted to get in the Chinese market. In 2002 with Compaq Computer Company, this was another way of neutralizing the competition as well as to get more and more customers.

With current competition, HP should consider adopting the “blue ocean theory” of sales and marketing. This is a recent theory that was developed in 2005 by W. Chan Kim and Renée Mauborgne of The Blue Ocean Strategy Institute, the theory focuses on target of the untapped markets instead of focusing on the already populated area.

The main concern and advocacy of the theory is that there is always a niche market that is not fulfilled by current market situations, thus a company needs to venture in thus areas more than the concentrated ones. By areas, the theory is of the option that it can be physical location or can be a market niche that needs are not met by the prevailing condition (Bell, 2011).

The success of HP as the second largest information and technology firm in the world can be attributed to its effective management team and orchestrate team. The management makes strategic decisions when to ensure that the firm remains competitive in the fiercely competitive world.

Research and development team is mandated with the task of advising the management on the best products and services to offer the market; the department works closely with sales and customer service to incorporate customer needs and demands. To improve their market volume, the company should use strategies advocated by Blue-ocean theory; the approach focuses on establishing niche markets instead of concentrating with highly concentrated markets.

Bell, K. (2011). Blue Ocean Fiction. Harvard Business Review , 89(5), 142-143.

Constantinides, E. E. (2006). The Marketing Mix Revisited: Towards the 21st Century Marketing. Journal of Marketing Management , 22(3/4), 407-438.

HP Official website.(2011). Hewlett-Packard Company. Web.

Hsuen-Ho, H., & Jia-Wei, T. (2010). A Model of Marketing Strategic Alliances to Develop Long-Term Relationships for Retailing. International Journal of Business & Information , 5(2), 151-172.

Varadarajan, R. (2010). Strategic marketing and marketing strategy: domain, definition, fundamental issues and foundational premises. Journal of the Academy of Marketing Science , 38(2), 119-140.

Vorhies, D. W., Morgan, R. E., & Autry, C. W. (2009). Product-market strategy and the marketing capabilities of the firm: impact on market effectiveness and cash flow performance. Strategic Management Journal , 30(12), 1310-1334.

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Hp-cisco alliance (a) description.

In 2002, Hewlett-Packard and Cisco Systems strove to develop their long-standing partnership into a strategic alliance with increasing impact. Critical components of successful alliance implementation emerge from the analysis. Specifically, the case illuminates the links among alliance strategy, formal design of alliance structure and processes, and informal management of interpersonal dynamics where trust, perceptions, and emotions can both create and overcome formidable obstacles to effective interfirm relationships.

Case Description HP-Cisco Alliance (A)

Strategic managment tools used in case study analysis of hp-cisco alliance (a), step 1. problem identification in hp-cisco alliance (a) case study, step 2. external environment analysis - pestel / pest / step analysis of hp-cisco alliance (a) case study, step 3. industry specific / porter five forces analysis of hp-cisco alliance (a) case study, step 4. evaluating alternatives / swot analysis of hp-cisco alliance (a) case study, step 5. porter value chain analysis / vrio / vrin analysis hp-cisco alliance (a) case study, step 6. recommendations hp-cisco alliance (a) case study, step 7. basis of recommendations for hp-cisco alliance (a) case study, quality & on time delivery.

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Case Analysis of HP-Cisco Alliance (A)

HP-Cisco Alliance (A) is a Harvard Business (HBR) Case Study on Organizational Development , Texas Business School provides HBR case study assignment help for just $9. Texas Business School(TBS) case study solution is based on HBR Case Study Method framework, TBS expertise & global insights. HP-Cisco Alliance (A) is designed and drafted in a manner to allow the HBR case study reader to analyze a real-world problem by putting reader into the position of the decision maker. HP-Cisco Alliance (A) case study will help professionals, MBA, EMBA, and leaders to develop a broad and clear understanding of casecategory challenges. HP-Cisco Alliance (A) will also provide insight into areas such as – wordlist , strategy, leadership, sales and marketing, and negotiations.

Case Study Solutions Background Work

HP-Cisco Alliance (A) case study solution is focused on solving the strategic and operational challenges the protagonist of the case is facing. The challenges involve – evaluation of strategic options, key role of Organizational Development, leadership qualities of the protagonist, and dynamics of the external environment. The challenge in front of the protagonist, of HP-Cisco Alliance (A), is to not only build a competitive position of the organization but also to sustain it over a period of time.

Strategic Management Tools Used in Case Study Solution

The HP-Cisco Alliance (A) case study solution requires the MBA, EMBA, executive, professional to have a deep understanding of various strategic management tools such as SWOT Analysis, PESTEL Analysis / PEST Analysis / STEP Analysis, Porter Five Forces Analysis, Go To Market Strategy, BCG Matrix Analysis, Porter Value Chain Analysis, Ansoff Matrix Analysis, VRIO / VRIN and Marketing Mix Analysis.

Texas Business School Approach to Organizational Development Solutions

In the Texas Business School, HP-Cisco Alliance (A) case study solution – following strategic tools are used - SWOT Analysis, PESTEL Analysis / PEST Analysis / STEP Analysis, Porter Five Forces Analysis, Go To Market Strategy, BCG Matrix Analysis, Porter Value Chain Analysis, Ansoff Matrix Analysis, VRIO / VRIN and Marketing Mix Analysis. We have additionally used the concept of supply chain management and leadership framework to build a comprehensive case study solution for the case – HP-Cisco Alliance (A)

Step 1 – Problem Identification of HP-Cisco Alliance (A) - Harvard Business School Case Study

The first step to solve HBR HP-Cisco Alliance (A) case study solution is to identify the problem present in the case. The problem statement of the case is provided in the beginning of the case where the protagonist is contemplating various options in the face of numerous challenges that Alliance Cisco is facing right now. Even though the problem statement is essentially – “Organizational Development” challenge but it has impacted by others factors such as communication in the organization, uncertainty in the external environment, leadership in Alliance Cisco, style of leadership and organization structure, marketing and sales, organizational behavior, strategy, internal politics, stakeholders priorities and more.

Step 2 – External Environment Analysis

Texas Business School approach of case study analysis – Conclusion, Reasons, Evidences - provides a framework to analyze every HBR case study. It requires conducting robust external environmental analysis to decipher evidences for the reasons presented in the HP-Cisco Alliance (A). The external environment analysis of HP-Cisco Alliance (A) will ensure that we are keeping a tab on the macro-environment factors that are directly and indirectly impacting the business of the firm.

What is PESTEL Analysis? Briefly Explained

PESTEL stands for political, economic, social, technological, environmental and legal factors that impact the external environment of firm in HP-Cisco Alliance (A) case study. PESTEL analysis of " HP-Cisco Alliance (A)" can help us understand why the organization is performing badly, what are the factors in the external environment that are impacting the performance of the organization, and how the organization can either manage or mitigate the impact of these external factors.

How to do PESTEL / PEST / STEP Analysis? What are the components of PESTEL Analysis?

As mentioned above PESTEL Analysis has six elements – political, economic, social, technological, environmental, and legal. All the six elements are explained in context with HP-Cisco Alliance (A) macro-environment and how it impacts the businesses of the firm.

How to do PESTEL Analysis for HP-Cisco Alliance (A)

To do comprehensive PESTEL analysis of case study – HP-Cisco Alliance (A) , we have researched numerous components under the six factors of PESTEL analysis.

Political Factors that Impact HP-Cisco Alliance (A)

Political factors impact seven key decision making areas – economic environment, socio-cultural environment, rate of innovation & investment in research & development, environmental laws, legal requirements, and acceptance of new technologies.

Government policies have significant impact on the business environment of any country. The firm in “ HP-Cisco Alliance (A) ” needs to navigate these policy decisions to create either an edge for itself or reduce the negative impact of the policy as far as possible.

Data safety laws – The countries in which Alliance Cisco is operating, firms are required to store customer data within the premises of the country. Alliance Cisco needs to restructure its IT policies to accommodate these changes. In the EU countries, firms are required to make special provision for privacy issues and other laws.

Competition Regulations – Numerous countries have strong competition laws both regarding the monopoly conditions and day to day fair business practices. HP-Cisco Alliance (A) has numerous instances where the competition regulations aspects can be scrutinized.

Import restrictions on products – Before entering the new market, Alliance Cisco in case study HP-Cisco Alliance (A)" should look into the import restrictions that may be present in the prospective market.

Export restrictions on products – Apart from direct product export restrictions in field of technology and agriculture, a number of countries also have capital controls. Alliance Cisco in case study “ HP-Cisco Alliance (A) ” should look into these export restrictions policies.

Foreign Direct Investment Policies – Government policies favors local companies over international policies, Alliance Cisco in case study “ HP-Cisco Alliance (A) ” should understand in minute details regarding the Foreign Direct Investment policies of the prospective market.

Corporate Taxes – The rate of taxes is often used by governments to lure foreign direct investments or increase domestic investment in a certain sector. Corporate taxation can be divided into two categories – taxes on profits and taxes on operations. Taxes on profits number is important for companies that already have a sustainable business model, while taxes on operations is far more significant for companies that are looking to set up new plants or operations.

Tariffs – Chekout how much tariffs the firm needs to pay in the “ HP-Cisco Alliance (A) ” case study. The level of tariffs will determine the viability of the business model that the firm is contemplating. If the tariffs are high then it will be extremely difficult to compete with the local competitors. But if the tariffs are between 5-10% then Alliance Cisco can compete against other competitors.

Research and Development Subsidies and Policies – Governments often provide tax breaks and other incentives for companies to innovate in various sectors of priority. Managers at HP-Cisco Alliance (A) case study have to assess whether their business can benefit from such government assistance and subsidies.

Consumer protection – Different countries have different consumer protection laws. Managers need to clarify not only the consumer protection laws in advance but also legal implications if the firm fails to meet any of them.

Political System and Its Implications – Different political systems have different approach to free market and entrepreneurship. Managers need to assess these factors even before entering the market.

Freedom of Press is critical for fair trade and transparency. Countries where freedom of press is not prevalent there are high chances of both political and commercial corruption.

Corruption level – Alliance Cisco needs to assess the level of corruptions both at the official level and at the market level, even before entering a new market. To tackle the menace of corruption – a firm should have a clear SOP that provides managers at each level what to do when they encounter instances of either systematic corruption or bureaucrats looking to take bribes from the firm.

Independence of judiciary – It is critical for fair business practices. If a country doesn’t have independent judiciary then there is no point entry into such a country for business.

Government attitude towards trade unions – Different political systems and government have different attitude towards trade unions and collective bargaining. The firm needs to assess – its comfort dealing with the unions and regulations regarding unions in a given market or industry. If both are on the same page then it makes sense to enter, otherwise it doesn’t.

Economic Factors that Impact HP-Cisco Alliance (A)

Social factors that impact hp-cisco alliance (a), technological factors that impact hp-cisco alliance (a), environmental factors that impact hp-cisco alliance (a), legal factors that impact hp-cisco alliance (a), step 3 – industry specific analysis, what is porter five forces analysis, step 4 – swot analysis / internal environment analysis, step 5 – porter value chain / vrio / vrin analysis, step 6 – evaluating alternatives & recommendations, step 7 – basis for recommendations, references :: hp-cisco alliance (a) case study solution.

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Leadership and Change Management: A Case Study of HP

Case Study , 2019 , 16 Pages , Grade: 1,3

Autor:in: Alexander Kahlert (Author)

• eBook for only 15.99 € Download immediately. Incl. VAT Format: PDF – for all devices

The paper discusses the former issues of HP. Based on that insights, new leadership and organizational structures are discussed and proposed to bring HP back on a growth track. Various models from modern leadership literature and best practices from peer group companies are used to evaluate recommendations.

List of Figures

1 introduction.

2 Strategy analysis for the company HP 2.1 Current challenges of HP 2.2 HP’s organizational complexities 2.3 Leadership approach of HP’s senior management

3 Strategic Change Plan for HP 3.1 Determination of the required type of change 3.2 Execution plan of the change path 3.3 Required leadership skills for HP’s revolution

Figure 1- Hewlett Packard's dysfunctional organisation

Figure 2- Agile organization as the new dominant organizational paradigm

Figure 3- HP's leadership issues

Figure 4- Types of Change

Figure 5- Lewin's change management model

Figure 6- HP's change path

Figure 7- HP's required leadership profile

Figure 8- HP's path to future success

The company Hewlett Packard (HP) is an international acting technology enterprise with the focus on manufacturing software, hardware and services to individual clients, corpora- tions, governmental and education sector (cf. HP Inc. 2017: I; HPE Ent. 2018: 3.).

HP had a widespread product line starting enterprise standard servers, computing devices, networking products, software and IT-consulting services (cf. Glassman / Zell / Duron 2005: 10.).

Today, HP is structured into two separate companies. HP Inc. is focused on the former hardware product line (computing products, printers, etc.) and the Hewlett Packard Enter- prise (HPE). HPE’s strategy is to use “capabilities focused on technology, people and eco- nomics to enable customer’s digital transformation” (HPE Ent. 2018: 2.). The current share prices of the two HP companies show high volatility in the share price (cf. Yahoo Finance 2019; Yahoo Finance 2019a.).

In 2012, no spin-off was conducted and HP was one IT company. HP struggled with internal structures, significant internal clashes of culture and finding a path to future success. All of these issues are related to a lack of leadership and change management skills within the enterprise (cf. Goleman 2011: 3.; Cook / Macaulay 2004: 5).

This term paper wants to answer the question:

How could a successful strategic turnaround of HP could be structured and implemented?

In answering this question, the focus lies on change management and leadership theories for a successful transformation. The paper is mainly structured in two parts: Chapter two describes the current state of HP in 2012 taking the dimensions of challenges, organiza- tional complexities and leadership issues into account. Based on that insights, a fitting trans- formation plan is derived by using modern leadership and change management tools.

As a result, all gained insights are summarized and finally assessed in the last chapter.

2 Strategy analysis for the company HP

Abbildung in dieser Leseprobe nicht enthalten

Figure 1- Hewlett Packard's dysfunctional organisation.

2.1 Current challenges of HP

In 2011, HP struggled with declining financial performances which was expressed by 19% lower profits and losing market share (cf. Bandler / Burke 2012: 1-2.). This lead to an in- creasing investor pressure on the company to perform better in the short term.

Simultaneously, HP had to deal with an intensive competition with a strong innovation ca- pability (cf. Bandler / Burke 2012: 3.). However, HP showed a significant lack of innovation (cf. Economist 2015). This lead to a vicious circle because HP was also not able to build up innovation capabilities caused by talent hiring issues (cf. Economist 2015.). This resulted in the need for external acquisitions, but significant investments could not be financed (cf. Hall 2017). Furthermore, HP had to decide which strategy it wants to follow. The hardware fo- cused strategy faced a declining market share. The combination of short term pressure from the investor base and the need to reconfigure internal capabilities and the strategy made a challenging general condition for HP. Further disturbances like ongoing law suits against HP (TomorrowNow case) averted to focus on important decisions.

2.2 HP’s organizational complexities

Modern technology companies established a new form of organizational structure: The agile organization. An agile organization consists of a network of smaller teams which are strongly customer-centered. The employees of the different sub-teams are all committed to one predefined vision (cf. Nadella / London 2018: 5.). Furthermore, it operates in fast de- cision and learning cycles so that the ability of quickly reconfiguring structures and strate- gies toward value-creating opportunities is possible (cf. Aghina et al. 2017: 3.).

However, HP did not establish the required culture and structure to cope with similar chal- lenges of the modern companies.

HP’s culture is poisoned. HP’s employees were preoccupied with internal conflicts and power rivalries. Cross-functional collaboration was not accepted (cf. Bandler / Burke 2012: 1-5.). Overall, the culture was damaged by a significant lack of trust between employees and directors (cf. Bandler / Burke 2012: 13.).

Simultaneously, HP established an efficient and cost-saving driven internal structure. Even trash pickups were cut (cf. Bandler / Burke 2012: 4.). This Taylorism management approach was successful in an environment that was stable and predictable. McKinsey defines this kind of organization as “organizations as machines” (Aghina et al. 2017:3.). There was a strong hierarchy and efficiency management rationale established and the business units were clearly silo-thinking driven which led to dramatic misalignments of the business units. For instance, HP printer software could not be run on HP computers (cf. Bandler / Burke 2012: 11.). Modern companies are structured like an organism (flexible and responsive) with strong leadership as the core (cf. Aghina et al. 2017: 5.). HP showed a significant gap in terms of an environment fitting structure and culture which was simultaneously poisoned by internal conflicts.

Figure 2- Agile organization as the new dominant organizational paradigm (Authors own illustration based on Aghina et al. 2017: 5.).

2.3 Leadership approach of HP’s senior management

Good leadership is directly interrelated with the success of a strategic transformation pro- gram (cf. Kotter 2000: 60.). The former CEO Leo Apotheker wanted to take HP towards more software business with focus on big data analytics (cf. Bandler / Burke 2012: 10.). As described in the case, the transformation failed. The leadership approach of HP is evaluated in five dimensions of failure:

( 1) Not Establishing a Great Enough Sense of Urgency

According to Kotter, the first leadership fault in a transformation is to not seed sufficient urgency for the change in an organization. Only motivated and committed people can achieve successful change (cf. Kotter 1996: 4.).

Apotheker did not communicate the urgency in a way that the organization was committed to the change. The process was “messy and contentious” and even senior management participants were not aligned to the new strategy (cf. Bandler / Burke 2012: 10.).

(2) Not Creating a Powerful Enough Guiding Coalition

It is essential to build up a change coalition that supports the efforts. This is a process of a growing fan base of the future state after the transformation (cf. Kotter 2000: 62.).

Apotheker was clearly committed to his own vision for HP and did not seek for different perspectives (cf. Bandler / Burke 2012: 13.). Kotter says that a transformation need a co- alition throughout the hierarchy and it has to grow from the senior management down to the employees (cf. Kotter 1996: 6.). The coalition growth stopped at Apotheker and an opposi- tion gained participants which finally stopped the change.

(3) Lacking a Vision

The vision of a leader for the company plays a key role in producing change. It helps to align and inspire large numbers of people dealing with the company (cf. Kotter 1996: 7.).

Apotheker derived a strategy of how to develop HP further, but never defined a clear vision. The strategy could have been the right one, but the main reason why it was confronted with resistance was that no one saw a clear vision. A transformation without vision leads to in- compatible projects and finally to failure (cf. Kotter 2000: 63.).

(4) Not Removing Obstacles to the New Vision

To achieve a high amount of committed people, obstacles have to be removed. Obstacles can be the structure, compensation systems or middle management directors who want to stop the proposed change (cf. Kotter 1996: 10.).

HP’s hierarchical and silo-focused structure is not able to fastly change. Apotheker started with dictating the strategy without reconfigure the internal structure of HP. Apotheker and his team did not show any supportive or inspiring approaches to convince the directors to follow his strategy. Apotheker did not realize that fear is one of the most important feelings in a process of change (cf. Kotter 2000: 65).

(5) Not Systematically Planning For and Creating Short-Term Wins

People of an organization have to see short-term wins to believe in the long-term success (cf. Kotter 2000: 65.). Apotheker’s short-term performance was insufficient and lead to doubts (cf. Bandler / Burke 2012: 10.). The occurrence of leaks show that the employees did not believe in the strategy and felt confirmed that HP does not follow the right path. Resistence was built up.

Figure 3- HP's leadership issues (Authors own illustration based on Kotter 1996: 16.).

3 Strategic Change Plan for HP

HP had to face multiple challenges that were obviously not solvable with the current state of HP. A restructuring of a company is commonly very costly and complex (cf. Katowski / Wysocki 2014: 116). Therefore, a successful transformation always has to predefine the required type of change and derive a proper change path supported by a fitting leadership approach (cf. Katowski / Wysocki 2014: 116).

3.1 Determination of the required type of change

To define the type of change, speed and extent of HP’s change is evaluated.

( 1) Speed of Change

In HP’s case, investor’s trust is decreasing caused by poor financial performances; no clear strategic path can be defined; cultural issues like leaks and mistrust are increasing dramat- ically and a significant lack of innovation is present (cf. Ibarra / Rattan / Johnston 2018: 10). Therefore, HP’s planned change has to be fastly executed. Otherwise, HP is in danger of losing the trust of workforce and investors. HP needs a “ Big Bang ” (cf. Balogun 2001: 3.).

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The HP Ways: Lessons on Strategy and Culture

By chm editorial | march 21, 2017.

Webb McKinney Philip E. Meza Coauthors Becoming Hewlett Packard: Why Strategic Leadership Matters

HP was once famous and admired for its culture. The “HP Way” shaped several generations of companies in Silicon Valley and beyond. HP’s culture has been a source of significant advantages and challenges for the company under many different leaders. In this article, we can trace the lessons from where and how HP’s culture has supported the thrust of its strategy, and discuss where and how its culture conflicted with its strategy.

When Hewlett-Packard split into two companies in late 2015, it was 15 years overdue. Hewlett Packard Enterprise got the computing systems assets and IT services and software businesses, while Hewlett Packard Inc. got the imaging and printing and PC businesses. But which elements of HP’s corporate culture would the newly separate companies want to keep? HP’s culture, once widely admired, fragmented during the decade and a half of large acquisitions and acrimonious leadership changes prior to the 2015 split.

The interplay between HP’s culture and strategy had a vital role in HP’s successes and failures. Research in the new book, Becoming Hewlett Packard: Why Strategic Leadership Matters (Oxford University Press) by Robert A. Burgelman, Webb McKinney, and Philip E. Meza, shows the crucial ways that corporate culture impacted each CEO’s ability to execute on strategy, and how strategy and corporate structure, in turn, influenced HP’s culture.

Bill Hewlett and Dave Packard.

HP has existed for nine decades and navigated several major technology and market shifts. It is very hard for technology companies to survive these fundamental changes. For HP, however, doing so was easier than surviving the cultural challenges that resulted from some of those shifts.HP’s original culture was shaped and maintained by its co-founders Bill Hewlett and Dave Packard. The essence of HP’s culture, known as the “HP Way” could be expressed in a few straightforward objectives including self-financed growth, highly differentiated products, respect for employees, and good corporate citizenship. As HP grew, Bill and Dave created independent divisions to encourage innovation and accountability, while the CEO drove overall strategy. The HP Way, under Bill and Dave, was supple enough to help the founders steer the company through the earth-shaking shifts from vacuum tubes to transistors to integrated circuits. HP ably incorporated all of these new technologies into their core business of designing and manufacturing highly differentiated test and measurement instruments. Under Packard’s and Hewlett’s tenures as CEO, HP became a world leading test and measurement company.

By the time the founders handed over the reigns to longtime HP executive John Young in 1978, HP earned almost half its revenue from computer systems. Over time, as a result of the independent division model favored by Bill and Dave, however, three of HP’s independent divisions had developed separate, incompatible 16-bit microprocessor computer systems. When the state of the art shifted to 32-bit microprocessor technology, Young tasked HP Labs to create a new 32-bit architecture to replace the incompatible 16-bit systems and to make HP a leader in computers. To accomplish this huge effort, Young took control of the budgets and discretion that HP’s powerful division heads prized. This conflicted with HP’s longstanding independent division model and was viewed as a violation of the HP Way by many. Others felt this was necessary to make HP a successful computer systems company.

Young’s massive investments in the 32-bit system, called HP PA/RISC, hurt HP’s bottom line. The company’s stock price underperformed its competitors’ as Young ploughed more money and talent into developing the new system. Frustrated by HP’s performance and buttonholed by employees unhappy with Young’s complex operating models, board Chairman Packard got involved. He forced Young to simplify HP’s operational model to be more consistent with HP tradition. In 1992 Young retired from HP before the returns from HP PA/ RISC fully paid off. Young’s successor, HP veteran Lew Platt, had orders from Packard to “restore the HP Way.” To do so, Platt instituted an even more decentralized operating model that delegated strategy to operating units. Platt, however, did not develop an overall corporate strategy.

For the first few years of Platt’s tenure, these problems were not apparent because revenue from HP PA/RISC finally rolled in and HP’s profitable new printer business took off. This success, however, was fleeting. HP missed the emergence of the internet, and “Wintel” industry-standard computers began to replace HP’s proprietary architecture systems, reducing HP’s differentiation and profits. The lack of an overall strategy and the weak corporate controls created major conflict between divisions. HP’s performance lagged compared to its internet bubble fueled competitors. Platt proposed splitting the company into four independent companies (test and measurement; printers; computing systems; and PCs). HP’s board of directors, a “founder’s board” used to taking direction from Packard, who had died, and from Hewlett who was unwell and no longer involved, struggled with this decision. Ultimately, they decided to spin-off only the test and measurement group and in 1999 looked for a new CEO from outside to lead HP. By the end of the Platt era, HP was struggling without an overall strategy, but still had most of the original HP Way culture intact.

HP’s next four CEOs, all outsiders, dramatically changed the culture of the company. Their tenures were marked by strong top-down strategy, growth through major acquisitions, and ongoing layoffs to improve profits. These progressively fragmented HP’s once strong culture. Platt’s successor, Carly Fiorina, a star sales executive from telecommunications company Lucent, purchased Compaq, a company nearly the same size as HP but with a very different culture. Unfortunately, HP did not execute well under Fiorina. The company missed several quarterly profit estimates and its share price suffered. HP’s board of directors, itself becoming increasingly dysfunctional, lost faith in Fiorina and dismissed her while they again looked outside the company for leadership.

They selected Mark Hurd, the CEO of NCR, who had a reputation for operational excellence. Hurd imposed on HP a strong focus on efficiency and cost reductions. After improving HP’s operational performance and profits, Hurd made multiple large acquisitions in search of growth. He also replaced many longtime HP executives with outsiders who managed in an aggressive, operational style. These changes created growing cultural divides. Hurd delivered operational and stock market success that had eluded HP for several years, however, his tenure was cut short by a personal controversy. Hurd’s successor inherited a much larger and more complex company that was struggling to grow.

The next executive selected to become CEO, software executive Léo Apotheker, formerly from SAP, was the third outsider in a row to lead HP. Apotheker was shocked by the low morale and fragmented culture he found when he arrived at HP. He feared the company’s product offerings were undifferentiated and quickly becoming irrelevant to the market. Apotheker thought fast action was needed. He made a large acquisition of a (subsequently troubled) data mining company and publicly mused about splitting off HP’s PC assets. This unnerved customers, and HP’s board of directors, which by this time had become highly dysfunctional. They fired Apotheker after only 11 months on the job.

Meg Whitman, then a new member of HP’s board, and past CEO of eBay, was selected to succeed Apotheker. Whitman initially determined HP was still “better together,” and kept the scale and scope strategy Fiorina and Hurd pursued. Whitman focused on improving HP’s operations and business performance and aligning these with its culture. She reinforced the centralized leadership model used by Fiorina and Hurd. Whitman, however, moved top executives out of plush offices and into cubes. She ditched the executive parking lot and provided much more transparent interactions with leaders and rank and file employees. In doing so, Whitman restored many of the “soft” elements of the HP Way that Packard and Hewlett would have welcomed, while reestablishing centralized corporate strategy, operational excellence, and accountability. However, HP’s culture remained an admixture of elements from the prior major acquisitions. After stabilizing the company and improving performance, Whitman still was unable to make this large and complex corporation grow sufficiently. Whitman decided to split HP into two companies, echoing Lew Platt’s proposal in 1999.

These new companies will have to establish their cultures and align them with strategy and structure each thinks best for their businesses. This is not easy to do. Even giants like Dave Packard and Bill Hewlett struggled with this after getting right for decades. Subsequent talented leaders at HP all struggled to shape their HP Ways to align with the strategies and structures they inherited and then constructed. If the new HP companies can create HP Ways that help them grow, they too might become long-lived like the company Bill and Dave created.

This blog was written in connection with the CHM Live show “The Six Transformations of Hewlett-Packard: A Conversation with Becoming Hewlett Packard Authors Webb McKinney and Philip E. Meza,” moderated by Software History Center Director David C. Brock. The event took place at the Computer History Museum on February 16, 2017.

This event was broadcasted live via Facebook Live. Watch all future events live on the Museum’s Facebook page .

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Home » Management Case Studies » Case Study: The Hewlett-Packard and Compaq Merger

Case Study: The Hewlett-Packard and Compaq Merger

The following is a brief description of the two companies:

Hewlett-Packar d (HP)

It all began in the year 1938 when two electrical engineering graduates from Stanford University called William Hewlett and David Packard started their business in a garage in Palo Alto. In a year’s time, the partnership called Hewlett-Packard was made and by the year 1947, HP was incorporated. The company has been prospering ever since as its profits grew from five and half million dollars in 1951 to about 3 billion dollars in 1981. The pace of growth knew no bounds as HP’s net revenue went up to 42 billion dollars in 1997. Starting with manufacturing audio oscillators, the company made its first computer in the year 1966 and it was by 1972 that it introduced the concept of personal computing by a calculator first which was further advanced into a personal computer in the year 1980. The company is also known for the laser-printer which it introduced in the year 1985.

The company is better known as Compaq Computer Corporation. This was company that started itself as a personal computer company in the year 1982. It had the charm of being called the largest manufacturers of personal computing devices worldwide. The company was formed by two senior managers at Texas Instruments. The name of the company had come from-“Compatibility and Quality”. The company introduced its first computer in the year 1983 after at a price of 2995 dollars. In spite of being portable, the problem with the computer was that it seemed to be a suitcase. Nevertheless, there were huge commercial benefits from the computer as it sold more than 53,000 units in the first year with a revenue generation of 111 million dollars.

Reasons for the Merger

A very simple question that arises here is that, if HP was progressing at such a tremendous pace, what was the reason that the company had to merge with Compaq? Carly Fiorina , who became the CEO of HP in the year 1999, had a key role to play in the merger that took place in 2001. She was the first woman to have taken over as CEO of such a big company and the first outsider too. She worked very efficiently as she travelled more than 250,000 miles in the first year as a CEO. Her basic aim was to modernize the culture of operation of HP. She laid great emphasis on the profitable sides of the business. This shows that she was very extravagant in her approach as a CEO. In spite of the growth in the market value of HP’s share from 54.43 to 74.48 dollars, the company was still inefficient. This was because it could not meet the targets due to a failure of both company and industry. HP was forced to cut down on jobs and also be eluded from the privilege of having Price Water House Cooper’s to take care of its audit. So, even the job of Fiorina was under threat. This meant that improvement in the internal strategies of the company was not going to be sufficient for the company’s success . Ultimately, the company had to certainly plan out something different. So, it was decided that the company would be acquiring Compaq in a stock transaction whose net worth was 25 billion dollars. Initially, this merger was not planned. It started with a telephonic conversation between CEO HP, Fiorina and Chairman and CEO Compaq, Capellas. The idea behind the conversation was to discuss on a licensing agreement but it continued as a discussion on competitive strategy and finally a merger. It took two months for further studies and by September, 2001, the boards of the two companies approved of the merger. In spite of the decision coming from the CEO of HP, the merger was strongly opposed in the company. The two CEOs believed that the only way to fight the growing competition in terms of prices was to have a merger. But the investors and the other stakeholders thought that the company would never be able to have the loyalty of the Compaq customers, if products are sold with an HP logo on it. Other than this, there were questions on the synchronization of the organization’s members with each other. This was because of the change in the organization culture as well. Even though these were supposed to serious problems with respect to the merger, the CEO of HP, Fiorina justified the same with the fact that the merger would remove one serious competitor in the over-supplied PC market of those days. She said that the market share of the company is bound to increase with the merger and also the working unit would double.

Advantages of the Merger

Even though it seemed to be advantageous to very few people in the beginning, it was the strong determination of Fiorina that she was able to stand by her decision. Wall Street and all her investors had gone against the company lampooning her ideas with the saying that she has made 1+1=1.5 by her extravagant ways of expansion. Fiorina had put it this way that after the company’s merger, not only would it have a larger share in the market but also the units of production would double. This would mean that the company would grow tremendously in volume. Her dream of competing with the giants in the field, IBM would also come true. She was of the view that much of the redundancy in the two companies would decrease as the internal costs on promotion, marketing and shipping would come down with the merger. This would produce the slightest harm to the collection of revenue. She used the ideas of competitive positioning to justify her plans of the merger. She said that the merger is based on the ideologies of consolidation and not on diversification . She could also defend allegations against the change in the HP was. She was of the view that the HP has always encouraged changes as it is about innovating and taking bold steps. She said that the company requires being consistent with creativity, improvement and modification . This merger had the capability of providing exactly the same.

Advantages to the Shareholders

The following are the ways in which the company can be advantageous to its shareholders:

• Unique Opportunity: The position of the enterprise is bound to better with the merger. The reason for the same was that now the value creation would be fresh, leadership qualities would improve, capabilities would improve and so would the sales and also the company’s strategic differentiation would be better than the existing competitors. Other than this, one can also access the capabilities of Compaq directly hence reducing the cost structure in becoming the largest in the industry. Finally, one could also see an opportunity in reinvesting.
• Stronger Company: The profitability is bound to increase in the enterprise, access and services sectors in high degrees. The company can also see a better opportunity in its research and development . The financial conditions of the company with respect to its EBIT and net cash are also on the incremental side.
• Compelling Economics: The expected accumulation in IIP gains would be 13% in the first financial year. The company could also conduct a better segmentation of the market to forecast its revenues generation. This would go to as much as 2 and a half billion dollars of annual synergy.
• Ability to Execute: As there would be integration in the planning procedures of the company, the chances of value creation would also be huge. Along with that the experience of leading a diversified employee structure would also be there.

Opposition to the Merger

In fact, it was only CEO Fiorina who was in favor of going with the merger. This is a practical application of Agency problem that arises because of change in financial strategies of the company owners and the management. Fiorina was certain to lose her job if the merger didn’t take effect. The reason was that HP was not able to meet the demand targets under her leadership. But the owners were against the merger due to the following beliefs of the owners:

• The new portfolio would be less preferable: The position of the company as a larger supplier of PCs would certainly increase the amount of risk and involve a lot of investment as well. Another important reason in this context is that HP’s prime interest in Imaging and Printing would not exist anymore as a result diluting the interest of the stockholders . In fact the company owners also feel that there would be a lower margin and ROI (return on investment) .
• Strategic Problems would remain Unsolved: The market position in high-end servers and services would still remain in spite of the merger. The price of the PCS would not come down to be affordable by all. The requisite change in material for imaging and printing also would not exist. This merger would have no effect on the low end servers as Dell would be there in the lead and high-end servers either where IBM and Sun would have the lead. The company would also be eluded from the advantages of outsourcing because of the surplus labor it would have. So, the quality is not guaranteed to improve. Finally, the merger would not equal IBM under any condition as thought by Fiorina.
• Huge Integrated Risks: There have been no examples of success with such huge mergers. Generally when the market doesn’t support such mergers, don’t do well as is the case here. When HP could not manage its organization properly, integration would only add on to the difficulties. It would be even more difficult under the conditions because of the existing competitions between HP and Compaq. Being prone to such risky conditions, the company would also have to vary its costs causing greater trouble for the owner. The biggest factor of all is that to integrate the culture existing in the two companies would be a very difficult job.
• Financial Impact: This is mostly because the market reactions are negative. On the other hand, the position of Compaq was totally different from HP. As the company would have a greater contribution to the revenue and HP being diluted at the same time, the problems are bound to develop. This would mean that drawing money from the equity market would also be difficult for HP. In fact this might not seem to be a very profitable merger for Compaq as well in the future.

The basic problem that the owners of the company had with this merger was that it would hamper the core values of HP. They felt that it is better to preserve wealth rather than to risk it with extravagant risk taking. This high risk profile of Fiorina was a little unacceptable for the owners of the company in light of its prospects.

So, as far as this merger between HP and Compaq is concerned, on side there was this strong determination of the CEO, Fiorina and on the other side was the strong opposition from the company owners. This opposition continued from the market including all the investors of the company. So, this practical Agency problem was very famous considering the fact that it contained two of the most powerful hardware companies in the world. There were a number of options like Change Management , Economic wise Management, and Organizational Management which could be considered to analyze the issue. But this case study can be solved best by a strategy wise analysis. (HP-Compaq merger faces stiff opposition from shareholders stock prices fall again, 2001)

Strategic Analysis of the Case

Positive aspects.

A CEO will always consider such a merger to be an occasion to take a competitive advantage over its rivals like IBM as in this case and also be of some interest to the shareholders as well. The following are the strategies that are related to this merger between HP and Compaq:

• Having an eye over shareholders’ value : If one sees this merger from the eyes of Fiorina, it would be certain that the shareholders have a lot to gain from it. The reason for the same is the increment in the control of the market. So, even of the conditions were not suitable from the financial perspective, this truth would certainly make a lot of profits for the company in the future.
• Development of Markets: Two organizations get involved in mergers as they want to expand their market both on the domestic and the international level. Integration with a domestic company doesn’t need much effort but when a company merges internationally as in this case, a challenging task is on head. A thorough situation scanning is significant before putting your feet in International arena. Here, the competitor for HP was Compaq to a large degree, so this merger certainly required a lot of thinking. Organizations merge with the international companies in order to set up their brands first and let people know about what they are capable of and also what they eye in the future. This is the reason that after this merger the products of Compaq would also have the logo of HP. Once the market is well-known, then HP would not have to suffer the branding created by Compaq. They would be able to draw all the customers of Compaq as well.
• Propagated Efficiencies: Any company by acquiring another or by merging makes an attempt to add to its efficiencies by increasing the operations and also having control over it to the maximum extent. We can see that HP would now have an increased set of employees. The only factor is that they would have to be controlled properly as they are of different organizational cultures. (Benefits of Mergers:, 2010)
• Allowances to use more resources: An improvised organization of monetary resources, intellectual capital and raw materials offers a competitive advantage to the companies. When such companies merge, many of the intellects come together and work towards a common mission to excel with financial profits to the company. Here, one can’t deny the fact that even the top brains of Compaq would be taking part in forming the strategies of the company in the future.
• Management of risks: If we particularly take an example of this case, HP and Compaq entering into this merger can decrease the risk level they would have diversified business opportunities. The options for making choice of the supply chain also increase. Now even though HP is a pioneer in inkjet orienting, it would not have to use the Product based Facility layout which is more expensive. It can manage the risk of taking process based facility layout and make things cheaper. Manufacturing and Processing can now be done in various nations according to the cost viability as the major issue.
• Listing potential: Even though Wall Street and all the investors of the company are against the merger, when IPOs are offered, a development will definitely be there because of the flourishing earnings and turnover value which HP would be making with this merger.
• Necessary political regulations: When organizations take a leap into other nations, they need to consider the different regulations in that country which administer the policies of the place. As HP is already a pioneer in all the countries that Compaq used to do its business, this would not be of much difficulty for the company. The company would only need to make certain minor regulations with the political parties of some countries where Compaq was flourishing more than HP.
• Better Opportunities: When companies merge with another company , later they can put up for sale as per as the needs of the company. This could also be done partially. If HP feels that it would not need much of warehouse space it can sell the same at increased profits. It depends on whether the company would now be regarded a s a make to stock or a make to order company.
• Extra products, services, and facilities: Services get copyrights which enhances the level of trade. Additional Warehouse services and distribution channels offer business values. Here HP can use all such values integrated with Compaq so as to increase its prospects.

Negative Aspects

There are a number of mergers and acquisitions that fail before they actually start to function. In the critical phase of implementation itself, the companies come to know that it would not be beneficial if they continue as a merger. This can occur in this merger between HP and Compaq due to the following reasons.

• Conversations are not implemented: Because of unlike cultures, ambitions and risk profiles; many of the deals are cancelled. As per as the reactions of the owners of HP, this seems to be extremely likely. So, motivation amongst the employees is an extremely important consideration in this case. This requires an extra effort by the CEO, Fiorina. This could also help her maintain her position in the company.
• Legal Contemplations: Anti-competitive deals are often limited by the rules presiding over the competition rules in a country. This leads to out of order functioning of one company and they try to separate from each other. A lot of unnecessary marketing failures get attached to these conditions. If this happens in this case, then all that money which went in publicizing the venture would go to be a waste. Moreover, even more would be required to re-promote as a single entity. Even the packaging where the entire inventory from Compaq had the logo of HP would have to be re-done, thus hampering the finance even further.
• Compatibility problems: Every company runs on different platforms and ideas. Compatibility problems often occur because of synchronization issues. In IT companies such as HP and Compaq, many problems can take place because both the companies have worked on different strategies in the past. Now, it might not seem necessary for the HP management to make changes as per as those from Compaq. Thus such problems have become of greatest concern these days.
• Fiscal catastrophes: Both the companies after signing an agreement hope to have some return on the money they have put in to make this merger happen and also desire profitability and turnovers. If due to any reason, they are not able to attain that position, then they develop a abhorrence sense towards each other and also start charging each other for the failure.
• Human Resource Differences: Problems as a result of cultural dissimilarities , hospitality and hostility issues, and also other behavior related issues can take apart the origin of the merger.
• Lack of Determination: When organizations involve, they have plans in their minds, they have a vision set; but because of a variety of problems as mentioned above, development of the combined company to accomplish its mission is delayed. Merged companies set the goal and when the goal is not accomplished due to some faults of any of the two; then both of them develop a certain degree of hatred for each other. Also clashes can occur because of bias reactions.
• Risk management failure: Companies that are involved in mergers and acquisitions, become over confident that they are going to make a profit out of this decision. This can be seen as with Fiorina. In fact she can fight the whole world for that. When their self-confidence turns out into over-confidence then they fail. Adequate risk management methods should be adopted which would take care of the effects if the decision takes a downturn. These risk policies should rule fiscal, productions, marketing, manufacturing, and inventory and HR risks associated with the merger.

Strategic Sharing

• Marketing : HP and Compaq would now have common channels as far as their buying is concerned. So, the benefits in this concern is that even for those materials which were initially of high cost for HP would now be available at a cheaper price. The end users are also likely to increase. Now, the company can re frame its competitive strategy where the greatest concern can be given to all time rivals IBM. The advantages of this merger in the field of marketing can be seen in the case of shared branding, sales and service. Even the distribution procedure is likely to be enhanced with Compaq playing its part. Now, the company can look forward to cross selling, subsidization and also a reduced cost.
• Operations : The foremost advantage in this area is that in the location of raw material. Even the processing style would be same making the products and services synchronized with the ideas and also in making a decent operational strategy. As the philosophical and mechanical control would also be in common, the operational strategy would now be to become the top most in the market. In this respect, the two companies would now have co-production, design and also location of staff. So, the operational strategy of HP would now be to use the process based facility layout and function with the mentioned shared values.
• Technology : The technical strategy of the company can also be designed in common now. There is a disadvantage from the perspective of the differentiation that HP had in the field of inkjet printers but the advantages are also plentiful. With a common product and process technology, the technological strategy of the merged company would promote highly economical functioning. This can be done through a common research and development and designing team.
• Buying : The buying strategy of the company would also follow a common mechanism. Here, the raw materials, machinery, and power would be common hence decreasing the cost once again. This can be done through a centralized mechanism with a lead purchaser keeping common policies in mind. Now HP would have to think with a similar attitude for both inkjet printers as well as personal computers. This is because the parameters for manufacturing would also run on equal grounds.
• Infrastructure : This is the most important part of the strategies that would be made after the merger. The companies would have common shareholders for providing the requisite infrastructure. The capital source, management style, and legislation would also be in common. So, the infrastructure strategies would have to take these things into account. This can be done by having a common accounting system. HP does have an option to have a separate accounting system for the products that it manufactures but that would only arouse an internal competition. So, the infrastructural benefits can be made through a common accounting, legal and human resource system. This would ensure that the investment relations of the company would improve. None of the Compaq investors would hesitate in making an investment if HP follows a common strategy.

HP would now have to ensure another fact that with this merger they would be able to prove competitors to the present target and those of competitors like IBM as well. Even the operations and the output market needs to be above what exists at present. The company needs to ensure that the corporate strategy that it uses is efficient enough to help such a future. The degree of diversification needs to be managed thoroughly as well. This is because; the products from the two companies have performed exceptionally well in the past. So, the most optimum degree of diversification is required under the context so that the company is able to meet the demands of the customers. This has been challenged by the owners of HP but needs to be carried by the CEO Fiorina.

Related posts:

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• Case Study: The Merger between Daimler and Chrysler
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• Freeman N Keskin B McCullough C (2020) IJAA Interfaces 10.1287/inte.2020.1060 50 :6 (355-372) Online publication date: 1-Nov-2020 https://dl.acm.org/doi/10.1287/inte.2020.1060
• Modrak V Soltysova Z (2017) Novel Complexity Indicator of Manufacturing Process Chains and Its Relations to Indirect Complexity Indicators Complexity 10.1155/2017/9102824 2017 Online publication date: 21-Jun-2017 https://dl.acm.org/doi/10.1155/2017/9102824
• Leung L Chen G Van Hui Y He W (2016) An Airfreight Forwarder's Shipment Bidding and Logistics Planning Transportation Science 10.1287/trsc.2015.0604 50 :1 (275-287) Online publication date: 1-Feb-2016 https://dl.acm.org/doi/10.1287/trsc.2015.0604
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• Moynihan P Dai W (2015) A rule-based service framework for supply chain management International Journal of High Performance Computing and Networking 10.1504/IJHPCN.2015.066526 8 :1 (28-46) Online publication date: 1-Dec-2015 https://dl.acm.org/doi/10.1504/IJHPCN.2015.066526
• Hijaz S Al-Hujran O Al-Debei M Abu-Khajil N (2015) Green supply chain management and SMEs International Journal of Business Information Systems 10.1504/IJBIS.2015.067264 18 :2 (198-220) Online publication date: 1-Feb-2015 https://dl.acm.org/doi/10.1504/IJBIS.2015.067264
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• Claypool E Norman B Needy K (2014) Modeling risk in a Design for Supply Chain problem Computers and Industrial Engineering 10.1016/j.cie.2014.09.026 78 :C (44-54) Online publication date: 1-Dec-2014 https://dl.acm.org/doi/10.1016/j.cie.2014.09.026
• Lu M Zhao H (2011) Modeling and optimizing of joint inventory in supply chain management Transactions on edutainment V 10.5555/1985739.1985745 (71-79) Online publication date: 1-Jan-2011 https://dl.acm.org/doi/10.5555/1985739.1985745
• Sharma S Jitpaiboon T (2011) The Influence of Information Technology Utilization ITU on Supply Chain Integration SCI International Journal of E-Business Research 10.4018/jebr.2011070102 7 :3 (19-43) Online publication date: 1-Jul-2011 https://dl.acm.org/doi/10.4018/jebr.2011070102
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Microsoft: A Case Study in Strategy Transformation

If you’re leading your team through big changes, this episode is for you.

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In early 2015, Microsoft’s senior leaders were facing a set of difficult decisions. The firm had been struggling to innovate and grow as fast as its competitors. Now they were considering new opportunities that would yield higher growth but lower margins — like shifting away from perpetual licensing to focus on subscription sales.

Harvard Business School professor Fritz Foley studied this period of transformative change at Microsoft for a business case study he wrote. In this episode, he shares how Microsoft’s leaders analyzed different options and worked to get both investors and employees on board with new ideas about growth. He also explains how the company’s risk-averse culture evolved in order to execute such a huge transformation.

Key episode topics include: strategy, growth strategy, business models, corporate governance.  

HBR On Strategy curates the best case studies and conversations with the world’s top business and management experts, to help you unlock new ways of doing business. New episodes every week.

• Listen to the original Cold Call episode: The Transformation of Microsoft (2018)
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HANNAH BATES: Welcome to HBR On Strategy , case studies and conversations with the world’s top business and management experts, hand selected to help you unlock new ways of doing business.

In early 2015, Microsoft’s senior leadership team was facing a set of difficult decisions. The firm had been struggling to innovate and grow as fast as its competitors. Now, they were considering new opportunities that would yield higher growth, but lower margins like shifting away from perpetual licensing to focus on subscription sales.

Today, we bring you a conversation with Harvard Business School professor Fritz Foley, who studied this period of transformative change at Microsoft for a business case study he wrote. In this episode, you’ll get a window into how Microsoft’s leaders analyzed different options and got both investors and employees on board with a different idea of growth. You’ll also learn how the company’s risk-averse culture had to evolve in order to execute such a huge transformation.

This episode originally aired on Cold Call in July 2018. Here it is.

BRIAN KENNY: Electronics enthusiasts in the 1970s looked forward to it every year: the January issue of Popular Electronics . That is because that issue was known for featuring the coolest up-and-coming products in the world of electronics. And when the January 1975 issue hit newsstands, it did not disappoint. The cover was adorned with the first available image of the Altair 8,800, the world’s first mini-computer kit. It may not have been the shot heard around the world, but many say that it was the spark that ignited the home computer revolution. That very magazine inspired a young Paul Allen and Bill Gates to turn their passion for computers into a business that subsequently became an empire.

Today, Microsoft Corporation is the third most valuable company in the world and the world’s largest software company. But after four decades of buffeting the headwinds of the very industry it helped to create, Microsoft is at a turning point and the way forward is not entirely clear. Today we’ll hear from Professor Fritz Foley about his case entitled “The Transformation of Microsoft.” I’m your host, Brian Kenny, and you’re listening to Cold Call .

SPEAKER 1: So, we’re all sitting there in the classroom.

SPEAKER 2: Professor walks in.

SPEAKER 3: And they look up and you know it’s coming. The dreaded cold call.

BRIAN KENNY: Professor Fritz Foley’s Research focuses on corporate finance. He’s an expert on investment capital structure, working capital management, and a range of related topics, all of which probably factor into the case today. Fritz, thanks for joining us.

FRITZ FOLEY: Thanks so much for having me.

BRIAN KENNY: So, everybody pretty much knows who Microsoft is, and I think people will be really interested in getting a glimpse into where they were at this turning point in the company’s history. Still a very, very important company in the landscape of the technology industry and beyond. So, I think people will relate right away to this, but let me ask you, if you could start just by setting the stage for us. How does the case begin? Who’s the protagonist and what’s on her mind?

FRITZ FOLEY: Yeah, so the protagonist is Amy Hood, who is Microsoft’s CFO. She also was a student here at HBS at the time that I was in the PhD program. So, I’ve known her for some time and she’s facing a set of choices that really revolve around whether or not Microsoft should try to pursue increased margin or increased growth.

BRIAN KENNY: Okay. What prompted you to write the case? Your connection with Amy obviously is part of that, but why Microsoft and why now?

FRITZ FOLEY: I think I have been struck by the transformation that they are in the midst of. This is a company that… I mean, it’s hard to remember this. In the early two thousands, the stock price was stuck in the 20 to $30 a share range. And there was a group of people who were calling for the firm to be managed essentially for cash distributions and for increased margins. And then there were some growth opportunities that the company faced simultaneously. So, there was a real choice as to what direction to head. And I think this is a compelling choice that many other companies face. So, it’s a powerful example for me to highlight in course I teach about chief financial officers.

BRIAN KENNY: Microsoft was the first player on this stage really, but then Apple came along and I think many people look at these two as fierce competitors. But can you just talk about the difference between these two companies in terms of how they manage their financial strategy?

FRITZ FOLEY: Yeah, I can say a bit about that. So, at one level, they certainly are similar. They’re in tech space and in fact, many things that Microsoft was attracted to phones in particular, is something that Apple has excelled at. And I think that at the time of the case, they were quite different in the eyes of investors, I would say. I would say that investors still viewed Apple as having a lot of a growth emphasis of a commitment to innovating new products and solving problems that people weren’t even sure they had. Whereas Microsoft was the older, more established tech firm that I think, in the eyes of some, had become not a relic of the past, but less relevant when thinking about future innovations. And in some sense, the cases about how Microsoft tried to shed that view and become a relevant growth-oriented entity again.

BRIAN KENNY: And they’d certainly been criticized over the decades for not moving quickly enough to innovate and getting caught up in their own. And you think about IBM maybe as a company that faced similar criticisms getting caught up in just their size and the bureaucracy of the place. What did Microsoft’s business look like in 2012? Because that seemed to be the beginning of the turning point?

FRITZ FOLEY: Yeah. I mean, it was one where there was varying performance across divisions. There was interest by value activist investors given the large cash holdings that the firm had. Obviously, their market share when it came to the office suite of products and windows, those were quite high. And they were obviously very successful in continuing to provide versions of that to a whole variety of users. They had emerging cloud business, but it wasn’t clear that they would win in that space and had really struggled in other spaces.

In search, Bing never got traction relative to Google. In phones, they were really struggling in 2012 right before they tried to make more headway in phones by buying Nokia, which also subsequently didn’t work out as well as they had hoped. So, I think along a series of dimensions, they were really trying to get some traction, trying to get footing in new spaces. And there were a group of investors that actually felt like that wasn’t what they should do. That they should just focus on Office, focus on Windows, enjoy the high margins that came with their on-premises server and tool business offerings. So, they faced some really hard choices.

BRIAN KENNY: And they were also, in terms of just the organization itself up against some issues, what were some of the things they were encountering culturally at the time?

FRITZ FOLEY: Yeah. I mean, it’s a fascinating story from a cultural standpoint. It was an environment where there were high returns to showing that you were the smartest person in the room. Some of the stories that I have heard are a little jarring. I am not sure I would’ve survived in this environment. There were these very long mid-year reviews that took place and were incredibly demanding. It was an environment that was beginning to really emphasize the desire to be efficient, to be right, and in fairness to them, and Microsoft was coming from a culture or their culture came from a place where they were selling a product that couldn’t really fail. People had very high expectations for the performance of everything Microsoft provided them. And unlike today where there’s more room to update things through online updates, a lot of the software, it shipped and it had to be close to perfect when it shipped.

BRIAN KENNY: Actually, I can remember a time when the launch of a new Windows system was similar to the launch of a new iPhone. People were really excited to get the new system, but inevitably there were bugs and those were highly publicized, and so they fell under a lot of criticism. They were really operating under a microscope for a long time.

FRITZ FOLEY: For sure. And we’re keenly aware that time to fail in their products, which is a measure of how long it took for some product or process to break down, had to be very long. Otherwise, they would meet with a lot of customer dissatisfaction.

BRIAN KENNY: Yeah. Okay. So, let’s move into the transformation phase for them. What was the fundamental shift they made in terms of changing or restructuring the organization?

FRITZ FOLEY: In my view, I think that they did a variety of things to adopt more of a growth orientation. And some of this dealt with their metrics. Some of it dealt with very explicit changes to the culture, and I think some of it also dealt with a realization that pursuing growth would enhance value much more than trying to increase margins and have large dividend payouts or larger dividend payouts to shareholders. So this was, I would say in the 2012, 2013 timeframe, we began to see pieces of this. And they also faced significant managerial changes at that time. That’s when Steve Ballmer retired and they needed to pick a new CEO and could have gone a variety of directions there. And by picking Satya Nadella, effectively we’re committing to more of a growth path.

BRIAN KENNY: Can you think of an example of a company that chose the margins path? And I mean, these are both potentially successful choices, but I would guess.

FRITZ FOLEY: For sure. And it’s a very hard trade-off to make. In teaching my MBA students and executive education students I’m always struck, when I ask them, “Would you sacrifice some margin for growth,” how hard that question can be and how many people don’t have much intuition for it. So, other companies did go the margin route.

BRIAN KENNY: Yeah. Is it a situation where the margin choice is one that’s probably more comfortable and the returns are going to come sooner and the growth choice is a little riskier, and for a risk-averse culture probably harder to implement and you’re betting on the future? Is that fundamentally what the choice is?

FRITZ FOLEY: Yeah. I think that’s a really good way of putting it. Many people find it easier to see the benefits that come with cutting costs and looking for efficiencies and worry that what may come with growth could be elusive. And in some regards, I have heard senior finance managers say that they had to earn the permission to go after growth. They have to get the buy-in from a group of investors who feel as if the senior leadership team has credibility in pursuing growth.

BRIAN KENNY: So, here we have Microsoft, an enormous company, 130,000 or so employees, something like that, large by any measure about to pursue an option that is in many ways counter to the culture of the organization. How do you do that? How do you cascade this kind of a change through an organization of that size?

FRITZ FOLEY: On the cultural side, one thing that they did was very explicitly dropped a growth mindset culture. And Satya Nadella writes about this in his recent book, Refresh. The story is, for me, very compelling. It’s incredibly hard to get any organization to change its culture. Whenever I’ve been a part of an organization that tried to engage in a cultural shift, whatever the tagline was, quickly became the punchline for a set of office jokes.

BRIAN KENNY: I’ve been on the other side of that. I’m the guy who writes the punchlines most often.

FRITZ FOLEY: Yeah. So, you know how hard this is. And I think that they were very wise in picking Kathleen Hogan who had led one of the divisions of Microsoft to head up the charge to describe and roll out this cultural change. They brought senior leaders on board, and ultimately, I think there was a lot of demand for it that many people who were working at Microsoft were innovative engineers and a very creative set of employees who wanted to pursue growth. And when given the choice to move away from review processes and given the opportunity to go to meetings where they didn’t feel like they had to be exactly right in making a point, but could stimulate the beginning of a discussion set of ideas that could lead to something that was new, people embraced that.

BRIAN KENNY: And here we are in the age of the millennial worker. Millennials don’t want to work for the old Microsoft for sure. And Microsoft is competing with the likes of Google and Apple and other firms that are definitely perceived as open and innovative, and they want people with energy and ideas. So, they have to adopt that same personality, I guess.

FRITZ FOLEY: Yeah, I agree with that. I think there’s a new buzz about Microsoft, at least among my students, they’re much more intrigued by what it would mean to work there and what opportunities exist to do some things that would be truly novel and have a big impact on how people get work done.

BRIAN KENNY: So, let’s go back to our protagonists. Amy Hood in the case actually delves into her mindset a little bit. She’s getting ready to communicate these changes to the financial community. What are the kinds of things a CFO would have to think about? Because I can imagine the financial probably is more comfortable with the margin choice than the growth choice

FRITZ FOLEY: Yeah, for sure. It’s fun for me to imagine her faced with this choice really of, okay, I can go this path of growth, but if I do this, I am going to have to go to my investors and say, our margins are going to go down for some period of time, and you’re not going to like that. But there’s going to be some upside and it will take some time for that upside to show up. So, I think she needed to find ways to communicate or signal what that upside would be and how big it might be to the investors so that she wouldn’t lose credibility with them and would have the permission essentially to pursue growth.

BRIAN KENNY: Yeah. Now we hear it all the time about the emphasis on the short-term, short-termism in the financial community, and people want returns and they want them right away. In your experience, are you seeing a shift in the financial community, or are the analysts getting a little more comfortable with this notion of you can’t always go for the margins, you’ve got to find some sustainable growth in the long term?

FRITZ FOLEY: Yeah. It’s a great question. It’s one that troubles me or is something I think about our financial system generally. I happen to be probably more optimistic relative to many when it comes to how short-term-oriented, or really how financial markets aren’t as, as some might worry, or that concern about short-termism doesn’t resonate as much with me. I do think there is a big burden on senior finance teams to explain how value is created by thinking long-term and embracing growth opportunities. And in some sense, when I look at what Amy has been doing at Microsoft, I applaud her and her team for taking on that challenge. They quite explicitly set a target of a $20 billion run rate for their commercial cloud business, and once analysts had that number, they could begin to build off of it and get a feel for how much value could be created if Microsoft succeeded at pulling this off.

So, by having the courage to commit to that path and help analysts understand what the path meant, I think that they have been effective in pursuing it. More generally, I do worry that there are some analysts that simply take an earnings-per-share number and apply some current multiple and don’t think much about what the future will look like. I am hopeful that finance teams and organizations will play a role in educating analysts as to how they should think about the future, when growth opportunities do exist and are attractive.

BRIAN KENNY: Yeah. You mentioned earlier that you’ve talked about this in class, and I’m just curious, do the MBA students come at this differently than the executive education students who have been in fiduciary roles and organizations already?

FRITZ FOLEY: Yeah. That’s an interesting question. Let me reflect on that for a moment. I think the approach is fairly similar. I would say that some MBA students are probably less aware of the constraints that capital markets may put on senior management teams to pursue growth. They’re less aware of what an activist who wants cash now might push management to do, whereas executive education students tend to be keenly aware of those pressures. If anything, I find that MBA students, it’s a little bit harder for them to articulate what is the case for pursuing margin for Microsoft in 2012, 2013. Many executive education students are quick to come up with lists of things that could be done strategically financially in picking leadership.

BRIAN KENNY: Yeah, it’s interesting. And anybody who’s worked in an organization for any period of time, going back to that whole notion of how hard it is to change a culture, it’s pretty easy to think of reasons why not to pursue that path. So, I thought maybe some of the exec ed students might come at with those constraints already wrapped around themselves.

FRITZ FOLEY: Yeah, I agree.

BRIAN KENNY: Yeah. Fritz, thanks for joining us today.

FRITZ FOLEY: Thanks very much for having me.

HANNAH BATES: That was Harvard Business School Professor Fritz Foley in conversation with Brian Kenny on Cold Call . We’ll be back next Wednesday with another handpicked conversation about business strategy from Harvard Business Review.

If you found this episode helpful, share it with your friends and colleagues and follow our show on Apple Podcasts, Spotify, or wherever you get your podcasts. While you’re there, be sure to leave us a review. And when you’re ready for more podcasts, articles, case studies, books, and videos with the world’s top business and management experts, find it all at HBR.org.

This episode was produced by Ann Saini and me, Hannah Bates. Ian Fox is our editor. Special thanks to Maureen Hoch, Adi Ignatius, Erica Truxler, Ramsey Khabbaz, Nicole Smith, Anne Bartholomew, and you, our listener. See you next week.

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• Project Types
• Client Eligibility Criteria
• Client Screening
• ACT Leadership
• Social Innovation & Nonprofit Management Resources
• Develop Your Organization’s Talent
• Centers & Initiatives
• Student Fellowships