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HEWLETT PACKARD (HP) STRATEGIC GROUP ANALYSIS

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1 HEWLETT PACKARD (HP) STRATEGIC GROUP ANALYSIS
Group members Afor Okala Oluchi Iwuh Anthony Momoh Omamoke Om'iniabohs Asatur Tumanyan HEWLETT PACKARD (HP) STRATEGIC GROUP ANALYSIS

2 Hewlett Packard TABLE OF CONTENTS 1
Phase 1: Strategic Position Analysis 2 Phase 2: Formulation of Strategy 3 Phase 3: Conclusion and Recommendation

3 Organisational Background
Hewlett-Packard was founded in 1939, Palo Alto, California. Today HP is one of the world's largest computer peripheral companies and the foremost producer of test and measurement instruments. The company mainly produces computers and its related gadgets. It was founded by Bill Hewlett and Dave Packard.

4 PEST Analysis Russia

5 PEST Analysis Russia Political Factors Population 142 mln. People
Area ,075,200 sq km Income tax % Corporate tax 24 % Economic Factor GDP PPP (Purchasing Power Parity): 8th Position $2.11 trillion (2009 est.) $2.291 trillion (2008 est.) $2.17 trillion (2007 est.) GDP PPP (per capita) estimated: 72nd position Socio-cultural factors Gini index is 42 EU – 31 USA – 46 Lifestyle, attitude to work and leisure changes with increase in income. Welfare is mostly created by private businesses. State organisations still suffer from low wages. Technological factors Huge potential and qualified workforce Government encourages investments in hi-tech research and development. Internet eases access of Russian products to the International Market

6 PEST Analysis Political factors Economic factors
Government Stability Taxation, employment and safety law Social welfare policies Foreign trade regulations 'Green' issues that affect the environment Economic factors Total GDP and GDP per head growth rates (trends) Inflation Consumer expenditure and disposable income Interest rates Currency fluctuations and exchange rates Investment, by the state, private enterprise and foreign companies Business cycles Unemployment Socio-cultural factors Shifts in values and culture Change in lifestyle Consumerism Attitudes to work and leisure ‘Green’ environmental issues Education and health Social mobility Technological factors Government investment policy on research

7 X - Average ranks of PEST analysis Y - Rank
Hewlett Packard X - Average ranks of PEST analysis Y - Rank Y X (5-Most favourable, 4-Favourable, 3-Neutral, 2-Unfavourable, 1- Most unfavourable)

8 Hewlett Packard Major competitors

9 Strategic Group Analysis
Intra group competition Y Competitors Price (Ranking) Quality (Ranking) HP 7 6 Dell Lenovo 5 Sony Toshiba Acer 4 Samsung Asus (1-Very Low, 2-Low, 3-Low to Moderate, 4-Moderate, 5-Moderate to High, 6-High, 7-Very High) X X - Price Y - Quality

10 PC Industry Sales in Russia
Industry Life cycle PC Industry Sales in Russia Y Year Total industry Sales ($ US mln) 2004 1,775.2 2005 2,436.2 2006 3,504.2 2007 4,943.8 2008 5,315.3 2009 3,639.8 The Russian Personal computer industry shows a steep increase in sales over a 4 years ( ) and a sharp decline in 2009 which was a result of the economic down turn. All sales figures are in Million Dollars. X X - Year Y – Total Industry Sales

11 Porter’s 5 forces External Analysis Threat of New Entry
Economies of scale Differentiation Brand loyalty Access to supply and distribution channels Entry deterring price Competitive rivalry determinants Market growth rates (life cycle) Fixed costs Differentiation of the products/services Barriers to exit Determinants of buyer power Buyer's purchasing power Switching costs Threat of backward integration Determinants of supplier power The threat of forward integration by the supplier Threat of Substitutes Relative price / performance of substitutes Willingness of buyers to substitute

12 Porter’s 5 forces External Analysis Y Ranks 4
Low Threats, low bargaining power, low competitive rivalry 3 Moderate Threats, low bargaining power, low competitive rivalry 2 High Threats, low bargaining power, low competitive rivalry X

13 Internal Analysis Resource Audit Human Resource Analysis Rank
Number of staff 304,000 Employees 5 Skills Good technical (Engineering & Solution providers), sales, marketing and IT support teams Executive staffs Experience In-depth industry specific knowledge 4 Training Involved with staff and distributors training 3 Motivation Discount rates on products purchased, salaries, medical costs, long term return on plan assets. Turnover High risk in employee mobility 1 Attitude and cultural awareness Multi cultural employee population and language translations Flexibility Flexibility work hours and reduced work pressure (5-Most favourable, 4-Favourable, 3-Neutral, 2-Unfavourable, 1- Most unfavourable)

14 Internal Analysis Resource Audit Physical Resource Analysis Rank
Locations In several countries in the 5 Continents 4 Expansion potential Availability of funds, asset and other resources for moving into new markets and develop new products. R&D facilities Invest in R&D projects – 2.8 million in 2009 5 Quality Engages in extensive product quality programmes and processes. (5-Most favourable, 4-Favourable, 3-Neutral, 2-Unfavourable, 1- Most unfavourable)

15 Internal Analysis Resource Audit Financial Resources Analysis Rank
Borrowing capacity In the acquisition of Compaq 2 Internal funds generation Shareholders participation 3 Global accounts Special requirements for customers payment globally 5 Control systems Improvements in corporate governance and internal control procedures as a result of the activities of the leak investigation International accounting systems Compliance with IAS (5-Most favourable, 4-Favourable, 3-Neutral, 2-Unfavourable, 1- Most unfavourable)

16 Internal Analysis Resource Audit Intangible Resources Analysis Rank
Technology – ‘know how’ Intangible assets acquired, includes in-process research and development 5 Patents & Copyrights Rely on patent, copyright, trademark and trade secret laws Establish and maintain intellectual property rights in the technology and products they produce and sell 3 Customer loyalty Customer loyalty rating is high among other competitors Brands Two brands which are widely recognised are the HP and Compaq 4 (5-Most favourable, 4-Favourable, 3-Neutral, 2-Unfavourable, 1- Most unfavourable)

17 (5-Excellent, 4-Above average, 3-Average, 2-Below average, 1- Poor)
Value Chain Primary activities (5-Excellent, 4-Above average, 3-Average, 2-Below average, 1- Poor) Activities Analysis Ranks Inbound logistics Maximises the demand for its product based on capabilities and configuration, helping to minimize inventory holding. Reliant on sole vendors for the purchase of materials with short life span. E.g. Intel & AMD for processors and Microsoft for various software products. Efficient Distribution chain for products in order to reduce cost and energy use. 4 Operations Outsources manufacturing. Finished products from components and sub assemblies are acquired from a wide range of vendors. Products that are purchased are resold under the HP brand Outbound logistics PSG (Personal systems group) - SMB commercial resellers channel (retail and commercial channels) Volume direct organisation which manages the direct sales for volume products. Marketing & Sales Products are made available to customers through direct and channel sales. Competitors like Dell and IBM have strategically position themselves in the laptop industry, focusing their business on PC and server hardware. Customer service Extensive service and support - Total care provides after sales service, maintenance and installation Provides service for calls, s and chats with an HP technician online and HP house call for PCs.

18 (5-Excellent, 4-Above average, 3-Average, 2-Below average, 1- Poor)
Value Chain Secondary activities (5-Excellent, 4-Above average, 3-Average, 2-Below average, 1- Poor) Activities Analysis Ranks Firm infrastructure Infrastructure includes Information Management and Business Intelligence Solutions for Archiving, recording management products, data protection and enterprise data and leasing, financing, financial asset management services, etc. 4 Human resource management 304,000 employees worldwide. Large levels of responsibility. Employees' welfare and safety Impacts and ensuring employee satisfaction. 5 Technology development Adaptive Network Architecture (ANA) R&D - About $3.5bn was invested in 2008. Procurement/Purchasing Advanced technology such as e-auctions, e-quoting, e-invoicing and e-payments to sustain its relationship with the supply base. Capabilities of supporting suppliers with technological activities and training.

19 SWOT Analysis Strength S1 Strong brand equity
S2 Diversified product portfolio (offerings spans personal computing and other access devices; imaging and printing-related products and services; enterprise information technology infrastructure, multi-vendor customer services, consulting and integration and outsourcing services) S3 Solid market position in key segments S4 Strong financial condition S5 Human Resources Management S6 Marketing and Sales Weakness W1 Internal control issues W2 Lack of in-house management consulting division W3 Unrest among internal employees due to pay cuts and lack of "people care" W4 Intellectual Capital is under-estimated W5 No Good People retention policy or HR practices to ensure IC is protected W6 Recall on products Opportunities O1 Emerging markets, particularly BRIC countries O2 e-Commerce expansion O3 Restructuring of internal IT structure O4 Imaging and printing businesses O5 Consumers expenditure and disposable income Threats T1 Intense competition from other PC manufacturers T2 Increasing competition on imaging and printing T3 Slowdown in economic conditions in the world T4 Supply chain disruptions

20 SWOT Analysis Strength + Opportunities Weakness + Opportunities
S6+O5: The disposable income of Russians is high, meaning customers have the ability and are willing to purchase HP's quality products and services that have combined features over products of its competitors. W1+O3: Using the advantage of IT facilities to develop product and quality control S3+T2: HP has a high market share in the key segments, it should maintain its leading position in the printing and imagining business by coming up with products with advanced features to have an edge over its competitors. Strength + Threats Weakness + Threats

21 Organisational purpose
HP’s Vision “At HP, we believe diversity is a key driver of our success. Putting all our differences to work across the world is a continuous journey fuelled by personal leadership from everyone in our company. Our aspiration is that the behaviours and actions that support diversity and inclusion will come from the conviction of every HP employee - making diversity and inclusion a conscious part of how we run our business throughout the world. Diversity and inclusion are woven into the fabric of our company”. HP is a multinational company dealing with variety of IT equipments It supports diversity in culture and decision-making.

22 Organisational purpose
Mission Customer loyalty: Earn respect and loyalty by providing highest quality and value Profit: Attain sufficient profit for finance growth, value for shareholders investment and corporate objectives. Growth: To seize opportunities to growth and achieve, build on strengths and competencies. Market leadership: To lead in the marketplace by developing and delivering useful and innovative products, services and solutions Commitment to employees: To demonstrate our commitment to employees by promoting and rewarding based on performance and by creating a work environment that reflects our values. Leadership capability: To develop leaders at all levels who achieve business results, exemplify our values and lead us to grow and win. Global citizenship: To fulfill our responsibility to society by being an economic, intellectual and social asset to each country and community where we do business. Evaluation HP’s mission statement recognises that its needs to earn the respect and loyalty of its customers; to be a market leader; to commit itself to the welfare of its employees and engage in corporate social responsibility.

23 Organisational purpose
Objective Evaluation HP’s objectives are geared towards achieving its mission. This it does by providing its customers with high value and quality products; developing and delivering useful and innovative products, services and solutions; promoting and rewarding employees based on their performance and by creating a work environment that reflects its values and by being an economic, intellectual and social asset to each country and community where it does business.

24 Portfolio Analysis Products and services Computers Laptops
Laser printers Super computer (Servers) Software development

25 HP Products growth rate in Russia
Portfolio Analysis HP Products growth rate in Russia Laser printers Year Sales ($mln) Growth rate % 2005 366.4 20 2006 425.4 16 2007 491.4 15 2008 442.6 -10 Computers Year Sales ($mln) Growth rate % 2005 68.2 37 2006 98.1 44 2007 138.4 41 2008 148.8 8 Laptops Year Sales ($mln) Growth rate % 2005 83.9 2006 98.1 17 2007 110.4 12 2008 131.1 19 Servers Year Sales ($mln) Growth rate % 2006 180.3 2007 216.3 20 2008 288.4 33 Software development Year Sales ($bln) Growth rate % 2005 1.2 2006 1.4 17 2007 1.7 21 2008 2.0 18 2009 2.18

26 Relative Average Sales Share of the Business
Portfolio Analysis Relative Average Sales Share of the Business Products Sales for 2008 Relative average sales Printers 442,624,000 2.14 Computers 148,828,400 0.72 Laptops 131,100,000 0.63 Supercomputers (server) 288,480,000 1.39 Software 20,000,000 0.09 Total company sales 1,031,032,400

27 Hewlett Packard's BCG Matrix
Portfolio Analysis Hewlett Packard's BCG Matrix High market growth rate low BCG Matrix interpretation STARS Supercomputers QUESTION MARKS Laptops & software CASH COWS Printers DOGS Computers High Relative Market Share Low

28 Business Unit Level Strategy
Competitors Perceived Quality Price 3 2 1 (3-High 2-Average, 1- low) (3-Low 2-Average, 1- high)

29 Quality price matrix 3 2 1 3 2 QUALITY 1 Best offer Good offer
Best offer Good offer Value for money HP Dell Excellence Premier Quality Asus Acer Good Price No where Play safe Lenovo Samsung Sony Toshiba Too expensive No value for money Low Price Nonsense High Average Low 3 2 1 QUALITY Low Average High PRICE

30 Market Penetration and Consolidation
Development Strategy Market Penetration and Consolidation Market Penetration Business started January 1938 1938: Audio Oscillator (HP200A) High demand for HP electronics Acquired Boonton Radio Corp. HP and Compaq merger Market Consolidation/ Withdraw or Downsizing Suspected withdrawal of earlier products Maintain Market Share Strategies to gain more market share where embarked upon. Acquired Heartstream Inc. 2002-Acquired Indigo 2005-Acquired Scitex Vision 2006-Acquired Mercury Corp.

31 Development Strategy Product development Modified Product Development
A frequency synthesizer 1974-first minicomputer 1982-HP9000; HP-75C 1984–HP Thinkjet 1991-Deskjet 500C 1991-HP 3000 & HP 9000 systems 1994-World's brightest LED 1994-Colour laser jet printer 1994-HP 200LX Palmtop PC 1999-Jornada 420 2005-HP Photosmart 8250 Photo 2007-TouchSmart PC 2007-Touch screen consumer tab 2009-HP PhotoSmart premium wit New Product Development 1951-HP 524A A Logic Analyser 1979-Integrated microprocessor 1988-HP digital multimeter 1998-Jornada 820 PDA 2000-High-end server line Complimentary Product Development Grouping/ Bundling Strategy 1994:printer-fax-copier Cross Subsidisation Strategy Not applied

32 International Market Development
Development Strategy Market development New Market Segments 1960-Medical field 1991: HP 95LX Palmtop PC 1995: HP Pavilion PC 2004: Digital Entertainment Strategy New uses 1960:Medical electronics & Analysis New geographical Markets 1958-Acquires F.L Moseley 1960-Plant in Colorado 1973:Operations in Boise, Idaho International Market Development 1959: Switzerland & Germany 1963: Asia Switzerland 1981: Beijing, China

33 Development Strategy Diversification
Related diversification Related vertical backward integration acquires F.L Moseley acquires Apollo computer corroborates with Intel HPFS - financial services Related vertical forward integration Partakes in the distribution After sales service Related lateral/concentric integration 2006-diversification to games Related horizontal integration first computer 1984-laser jet printers inkjet, toner, paper, scanner fax Unrelated diversification 1943-microwave field 1961-medical field 1965-analytical instrumentation

34 Development Strategy Analysis
Products Existing products New products 1. Market Penetration / Consolidation 1997 -Audio oscillator HP 200A HP equipments High Demand Acquire Boonton Radio Corp. Acquire Heart stream Inc. HP and Compaq merger 2002-Acquire Indigo 2005-Acquire Scitex Vision 2006-Acquire Mercury Corp. 2. Product Development A frequency synthesize 1974-first minicomputer HP-85 HP consumer products 2004-Vivera Inks 2005-HP Photo-smart 8250 Photo 2007-TouchSmart PC 2008-HP2133 Mini-Note PC 2009-HP Photo-Smart premium 3. Market Development 1960 -Medical field 1991:HP 95LX Palmtop PC 1995:HP Pavilion PC 2004:Digital Entertainment Strategy 1960:Medical electronics & Ana 1958-Acquires F.L Moseley 1960-Plant in Colorado 1973:Operations in Boise, Idaho 1959: Switzerland & Germany 1963: Asia Switzerland 1981: Beijing, China 4. Diversification 1943- microwave field 1961-medical field 1965-analytical instrumentation 1958-acquires F.L Moseley 1989-acquires Apollo computer 1994-corborates with Intel HPFS - Financial services After sales service 2006-diversification to games 1966-ist computer Laser jet printers inkjet, toner, paper, scanner fax Existing markets Markets New markets

35 Conclusion In conclusion, the external environment is beneficial to the company because the Political, Economical, Socio-cultural and Technological factors are favourable to the operations of the business. The company has been able to organise resource audit and value chain which has helped it to carry out its internal activities. The company places heavy emphasis on its employees, customers and stakeholders, bearing in mind that employees/human resources are the most important assets of an organisation, and customer and stakeholder expectations are very high. The company has come up with different products and services, which have helped to give it a competitive edge in the industry in which it operates.

36 HP (EDS) should move to game programming in Russia.
Recommendation In Russia, HP is in the leading position in supercomputers and printers market; the gap between them and their competitors is wide. They should focus on these sustainable products. The company should also downsize computer and laptop imports from the US and invest in local manufacturing facilities. HP (EDS) should move to game programming in Russia.

37 Recommendation THANK YOU

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41 References The Inquirer (2010) Dell opens posh shop in Russia [online] available from <http://www.theinquirer.net/inquirer/news/ /dell-opens-posh-shop-in-russia > [19 September 2010] Toshiba (2010) Toshiba Download [online] available from <http://www.csd.toshiba.com/cgi-bin/tais/support/jsp/home.jsp?nav=Download> [16 September 2010] Trading Economics (2010) Interest rates [online] available from <www.tradingeconomics.com/Economics/Interest-Rate.aspx?Symbol > [27 September 2010] Wikipedia (2010) Lenovo Distribution [online] available from <http://en.wikipedia.org/wiki/Lenovo> [16 September 2010] WT Executive (2010) The Russia information technology report [online] available from <http://www.wtexecutive.com/cms/content.jsp?id=com.tms.cms.section.Section_bookstore_russiait> [26 September 2010] (26 September 2010) Market for laptop, notebook and notebook sales [online] available from <http://www.infonotebook.ru/dossier/d611.html> [2010]


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