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back are positive, and will help prepare HP for the new millenium. Section 7 Internal Analysis Strengths Diversification Brand awareness R & D new product development/improvement Alliances Creation of Agilent Tech International Sales Diversification: Nearly 85% of HPs revenue comes from its computer and related products/services. This leaves almost 15% of revenue to come from Agilent, where sales come from testing and measurement equipment and medical equipment. Brand awareness: HP, established in 1966, has a long-standing reputation and good brand awareness in the computer industry. R & D: HP spent $3.4 billion in R&D during 1998 and placed on the market 24 new products company wide.
HP is positioning itself well in the Internet market either by providing E-services or Internet sales of products. Alliances: AT&T announced an alliance with HP to provide Internet service to small/medium businesses using the new HP Brio line targeted at this segment. Another recently announced alliance is with Viador to introduce the industrys first on-line implementation service to enable e-services. Agilent Technologies: Creation of this separate company provides two distinct industries that HP is involved in.
These industries focus on computer and related products/services in HP, and scientific equipment and services in Agilent.This divergence gives each company a distinct focus, where previously each SBU stood alone within HP. International Sales: Only 50% of HPs sales are within the U.S, proving HP is known, purchased and respected worldwide.
Within the U.S. PC market, saturation rate is high and profit margins are becoming increasingly smaller making the international market increasingly important. Like other PC companies, HP has not fully developed the international market.Viewing the whole world as the market instead of just North America will help HP broaden its sales.
As technology advances, servers, networking solutions and even e-services can be expanded in the international market. HPs PC products are easily imitated, but HP works to create consumer/brand loyalty. To achieve this loyalty HP is continually giving value-added improvements to products. An example of this is HPs new Brio new line of computers for small/medium businesses.
An Alliance with AT&T has been established to provide Internet service for these consumers. HP continues to do an excellent job of communication with customers to find out what improvement could be made to their products, by HP alone, or by involving other companies. Weaknesses Diverging from original vision? Too diversified? Is HPs core competency changing? Too many alliances? Will this create conflict of interest? Diverging from original vision? HP needs to be careful not to stray too far from the original vision set forth by David Packard and Bill Hewlett. This vision has gotten HP were it is today, and could take it into the future. Customers should always be the focus of a business. Knowing what your customers needs are and to how to meet they need them has been HP focus since its inception.
Jumping too quickly into unknown markets or products could potentially hurt HPs brand loyalty, and revenues.Too diversified? HP currently concentrates on computers, computer related products and services. By creating Agilent Technologies, will this pull valuable resources away from its core competency of computers, etc? Could the funds allocated to Agilent show a better return in the computer side? Less than 20% of HPs sales came from this branch in 1998. Is HPs core competency changing? PCs were HPs mainstream revenue makers, but with the evolving PC markets, profit margins shrinking and consumer knowledge increasing, HP is force to move into different markets. Examples are servers and e-services.
Too many alliances? Will this create conflict of interest? By collaborating with too many companies, such as AT&T and others, will this create a conflict of interest for HP? Getting into bed with too many companies, HP could find itself without strong alliances. The best approach for HP would be to develop strong, long-term, alliances that will benefit both parties for many years in the future.Section 8 Business Level Strategy With respect to the computer related market, HP is attempting to pursue a somewhat low price strategy, meaning that HP keeps its prices in the same range as competitors, but at the same time give additional products or services to differentiate its products from the competition. HP has high brand awareness and as the PC market is moving from a cash cow to a dog in the BCG matrix, HP is capitalizing on new markets to create stars within its SBUs. HPs differentiation can be either a tangible difference, such as adding Internet service with the purchase of a PC or an intangible difference by the level of technical service and customer service provided HP addresses the entire market, but has separate products targeted to segments.
The Pavilion line is targeted to home/personal PC use, while the Vectra and the new Brio lines is targeted to business use. HP focuses on providing its customers with the products and services it needs. This is a valid strategy, but can cost the firm profitability because there is a high cost associated with providing so many products. As long as this strategy is profitable, HP can and should continue this diversification.
One of the most important business level strategies HP developed was spinning off the medical equipment, test and measurement, etc. to Agilent Technologies. While Agilent will continue to follow HPs mission and goals, Agilent's customers and markets are very different from HP. This realignment was a positive move given HP's new focus on servers and E-services.
HP has envisioned where the Internet will take the world, and can now focus all its efforts and resources on creating new competitive advantages in E-services and Server markets.Section 9 Corporate Level Strategy HP has five basic priorities for its business level strategies. These priorities are also reflective in HPs organizational chart (see Appendix A). Printers Computer Products Enterprise Computing HP Labs Agilent Technologies Printers: In nearly five years, HPs inkjet imaging business has achieved more than 25% annual growth, the installed number of units has grown from 17 million to 85 million printers. This growth is largely a result of introducing new technologies into new product categories.
Inkjet Imaging Solutions has been accelerating its technology into new categories at the over-$500 end of the inkjet market, the extremely fast-growing sub-$150 end of the market, and beyond the desktop.Color is now becoming increasingly common in offices for presentations, reports etc. Making this technology affordable and high quality is one of HP goals. In 1997, HP introduced an entirely new category of inkjet color printers for the office, the HP 2000C and HP 2500C Professional Series color printers, these printers offer laser-class color print speeds and low cost-per-page. HP intends to continue to aggressively push the adoption of color in the office by offering the widest array of color printing solutions at all price points. The company expects office color printing adoption rates to accelerate rapidly in the next decade, with inkjet gaining full legitimacy along with color laser printing as a printing technology for these users.
Computer Products: HP's Computer Products was formed in 1991 to improve the way individuals and organizations around the world use information on the road or from the desktop, office or home. Listed below are HPs top six categories within its computer products branch. Personal Information Appliances HP is a leading supplier of handheld computing devices, and HP calculators. Since its introduction in May 1991, the HP palmsize PC family has won more end-user awards than any product in the handheld PC category. Notebook PCs HPs OmniBook family of notebook PCs for professionals is marketed throughout the world.
These notebooks are some of the industrys fastest and lightest on the market today.Home PCs HP markets the Pavilion line of PCs for the home through major U.S. retail outlets and internationally in 12 countries.
Pavilion PCs remained one of HPs fastest-growing product families. Commercial PCs The Vectra, Brio and Kayak brand PCs for business environments and feature a wide range of desktop and tower PC designs, ranging from low-cost, entry-level models to powerful dual-processor systems. Technical Workstations HP designs these for demanding technical and computing-intensive environments, With the Kayak, and Visualize systems, HP now offers the industry's broadest range of performance, flexibility and price points in workstation solutions.Networking Products Developed and marketed the ProCurve family of network hardware, including hubs, routers and all-in-one network-solution kits. These six areas of major importance for the future of the computer market.
Mostly for the ease of use, cost, mobility, networking capability, and power. The range of people demanding information devices and desktop systems is expanding, requiring the development of PCs and information appliances that are increasingly easy to use. Businesses are concerned with not only the cost of PCs, but also about the total cost of owning and maintaining desktop systems.Customers now require access to information anywhere, anytime, which is driving the design of desktop and mobile devices that can create, transmit and receive many kinds of information in multiple forms. Communication capabilities are being standardized, developed and implemented to move information across networks, locally and globally. Certain firms, such as engineering companies need workstation solutions that will help them compete globally, reduce product time to the market and improve product quality.
Enterprise Computing HPs Enterprise Computing (EC) business is a worldwide supplier of solutions, systems, software, services, support and financing for enterprise customers. HPs vision of the computing future centers on the evolution of the Internet and the increasing importance of e-services.Listed below are areas of concentration by HP to expand its enterprise computing. Mission-critical Solutions (Systems, Services, Software) UNIX -- HP products and services provide the scalability, manageability, availability and top performance on the Web and through OnLine Transaction Processing that is needed for e-services. NT EC services and supports NT, NT tools and system interoperability, critical pieces of the e-services foundation, and offers NT servers through HPs Computer Products Group.
Linux -- HPs Enterprise Computing has mobilized to meet the strong demand for anticipated Linux-optimized systems, software and services, including 24x7 worldwide support. Storage -- HPs storage systems have the high availability and robust disaster recovery, as well as data sharing, centralized storage management and efficient backup and restore needed to capture, store, manage and access e-services data. Technologies available that will help HP make Enterprise Computing a continued success. Quality of Service - HP Web Quality of Service software (WebQoS) allows service providers to handle unexpected surges in demand on the Internet, communicate an exact wait time to customers and offer their most important customers premier service levels.
Security - HP Praesidium technology affords security for people, transactions and information across increasingly dynamic company IT boundaries. HP Virtual Vault allows partners and customers to access designated applications through a companys firewalls, and currently protects more than $5 trillion of assets in more than 100 banks worldwide. Protocol - HP e-speak is a universal language and protocol that makes it easy to build e-services and allows them to connect and interact with each other securely, regardless of what or where they are. Using this new html for services, customers can access e-services faster, more cost-effectively and securely -- and from a variety of appliances and locations. Embedded Software - HPs Chai family of embedded software products adds intelligence to appliances and devices, and allows users to access and create new and powerful e-services.
Application to Application Integration and Web Development - HPs end-to-end platforms allow companies to easily open all or part of their enterprise applications to new users, business partners and suppliers, with no changes to the existing applications.Storage Architecture - With 100 percent availability and infinite scalability, HP Equation Architecture ensures that all applications in the system can access all information in the enterprise at all times. Services Consulting - Enterprise Computing partners with other industry leaders, such as Sapient and Viant, to help customers design and create a net-ready IT infrastructure, build and rapidly implement ERP and other e-business solutions, and transform the online experience for their target audiences. The organization has deep expertise in the communications industry, where e-services will first develop. Mission-critical Support - With the advent of e-services, IT infrastructures will become even more critical to organizations. Whether the infrastructure is UNIX, NT or Linux-based, HPs focus is to keep it running and fix it fast, through world-class infrastructure planning, operational assessments, proactive support programs and business-recovery planning capabilities.
HPs proprietary support technologies and proactive system-monitoring capabilities identify potential system problems before they occur and help prevent downtime.HP Labs HPs central research organization, HP Labs ranks as one of the worlds leading research centers. HP Labs role is to be the innovation engine that propels HPs continued growth. HP Labs pursues this goal by supporting current businesses and creating new business opportunities that exploit HPs core competencies in measurement, computing and communications. Since its inception in 1966, HP Labs has been the creative site for major HP business, including the world's first desktop and pocket scientific calculators, thermal inkjet printers, and portable scanners. Two major areas of research are conducted.
The first is under HPs umbrella, the second under Agilent. Information Technology Center This center conducts research in enterprise computer systems and architectures, software, network, Internet and multimedia technologies, computer peripherals, imaging, and information appliances. Microelectronics and Measurement Solutions Center This center conducts research in electronic, medical, analytical and optical instruments; photonics and high-speed communication; solid-state materials and devices; and components. Agilent Technologies: While this is a separate company, Agilent continues to follow the HP way.
Meaning Agilent will continue to innovate, as HP always has, to produce quality products and services that make a clear contribution. Secondly, Agilent will work according to the HPs strategies with partners, customers, and employees in innovative ways, using the same set of business practices {MBO, MBWA, etc}. These practices embody the values that have built HP into the successful company that it is today. Agilent is the world's leading designer, developer, manufacturer and provider of communications components as well as electronic and optical test, measurement and monitoring instruments, systems and solutions. The company's customers span essential industries, including electronics, communications, semiconductors, healthcare and life sciences.Four main areas were moved from HP to create Agilent Technologies: Test and Measurement The automated test business is a market leader in the design, manufacture and service of systems that test semiconductor and electronic printed circuit boards.
These systems are used to verify quality in manufacturing processes and ensure the performance and reliability of the end product. These systems and services enable customers to design, build, install, manage and maintain the networks that make up the global communications infrastructure. This infrastructure enables worldwide access to, and transmission of, data, voice and images. The electronic products and solutions business is the world's leading supplier of test and measurement instrumentation for the electronics industry, including manufacturers of equipment for wireless networks.
This business markets general-purpose test instruments for use in research and development laboratories, and repair shops.Chemical Analysis Group The Chemical Analysis Group is a leading provider of analytical instrument systems that enable customers to identify, quantify, analyze and test the atomic, molecular, physical and biological properties of thousands of substances and products Healthcare Solutions Group The Healthcare Solutions Group is a leader in clinical measurement and diagnostic solutions for the healthcare marketplace. Its products and systems enable medical professionals to gather data and analyze information in hospital intensive-care units, outpatient clinics, doctors' offices and patients' homes. Semiconductor Products Group (Components) The Semiconductor Products Group is a leading supplier of semiconductor components, modules and assemblies for high-performance communications infrastructure, computing devices and mobile information appliances. Four of the five HP priorities within corporate level strategies are interrelated (this excludes Agilent) and affect the others. HP labs is crucial in creating and improving printers, computer products and enterprise consulting products.
Printers, computers, and enterprise consulting can be bundled together providing a one-stop shopping mechanism for customers. Whether the customer is a personal/home computer user or a large corporate customer, bundling creates a differentiation for HP. Given the choice, most people or organizations would prefer to work with one company for all their needs (so long as all needs are provided and the quality of products is high), as opposed to working with six different vendors for PCs, printers, scanners, servers, networking service and e-services. Section 10 Summary of Issues, Strategic Recommendations and Implementation Summary of Issues The growth of the PC market is topping off, as far as US profit margins go. All PC companies will be faced with this same situation, and developing solutions to maintain profitability.
Diversifying into new product lines, line extensions, or all new categories will become increasingly common among the PC manufacturers. Again, this was apparent in HPs situation with Agilent Technologies. Other key points that HP needs to focus on to maintain profitability, and customer base worldwide are: Continued emphasis on customers needs; value added improvements to existing products or the creation of new products to meet the needs. Alliances with key companies. Do not get into bed with too many companies, but form strategic alliances that have major impact and potential for long-term, mutual benefit. Continue to provide PCs but put more emphasis into expanding areas like the server market and providing E-services.
Continue to develop International sales. These sales are not topped out, as the rest of the world is not as technologically advanced as the U.S. Strategic Recommendations Customers needs: HPs commitment to providing services and products that customers want has always been apparent. To continue to grow and expand into other facets of the computer world, staying in close contact with customers is key to forecasting and defining the needs.
It is also key in projecting where additional needs will be. The customers may be thinking of short-term only, but by defining a short-term need, a long-term one may be forecasted, giving HP an edge. Alliances: Key alliances will be beneficial to HP. The recent AT&T is an example of such an alliance. HP will provide Internet service for its Brio line computers, working with AT&T.
Success of this agreement could lead to additional agreements of providing Internet service with its Pavilion or other lines of computers. AT&T has a large share of the telecommunications market, as computers and telecommunications become so entwined, this alliance has a multitude of potential for the future. Another key alliance was just announced October 20th. This is the Viador alliance for enterprise portal deployment, and gives HP the first on-line implementation service for E-services. Development of new products/services outside PCs: The first part of the Internet was dominated by data exchange and growth of sites featuring simple transaction processes.In the next part, successful companies will turn their assets into services delivered securely via the Internet.
The future of E-services will be in combining and recombining capabilities to solve problems, and making everyones lives easier. Some of these services will be available on Web sites; others will be delivered from telephone, pager, or e-mail. E-services will work behind the scenes, automatically linking together transactions across partners, suppliers, employees and customers. [Here again, an alliance with a telecommunications giant would prove beneficial.] One of the hindrances to E-services is the complexity of computing systems and the absence of a common language to allow systems to interact with each other. HP should develop solutions to these problems and help customers understand how to build e-services, both internally in their IT departments and externally for their own customers.
Major areas that HP is and should continue to focus its E-services on: E-marketing and selling -- Developing new front-end communications and marketing capabilities, such as manufacturers storefronts and hosted online banking. E-supplier integration -- Moving customers beyond the traditional supply chain model to engage more interactively with the design, production, delivery and support of products and services, through e-procurement and e-order management solutions. E-business intelligence -- Helping customers generate new business through cross selling and marketing, and by offering more personalized e-services. Mission-critical e-computing -- Using new high-availability and systems management technologies to build a robust secure infrastructure with the maximum uptime that e-services require.
End-to-end e-payments -- Protecting the integrity of transactions from start to finish for consumers, financial institutions and merchants. Services provider hosted e-services -- Developing turnkey hosted merchant platforms for a variety of HP customers with whom HP shares risk and revenue. International Sales: While the U.S.PC market is becoming more saturated and less money is being made.
The worlds market is not. 50% of HPs computer sales are outside the U.S. right now, and given a larger focus of resources, could greatly increase. Part of the world is not saturated with PCs and provides a potential initially for PC sales, but again for additional services when technology is available.
Targeting large international markets can create brand loyalty and awareness so that when the entire world is ready for e-services, networking, servers, etc, HPs name will have recognition. HP should work with international retailers to increase indirect sales worldwide. This penetration could be targeted at certain geographical locations where the market potential is highest. Hiring an outside marketing firm to investigate these key markets identified by HP would provide initial information on how the target the segments and penetration strategies. Strategic Implementation As discussed earlier, HP is diversified and flexible within its organization and provides a large number of products in a multitude of markets.
HP has adapted well to the changes in the markets by realigning itself and entrance into newly emerging markets. This is key to implementing new products/services into new markets.HPs employees will continue to become important as the shift from the product to added services increases. The more customers that have HP products/services, the volume of technical and customer service needs will increase.
Service representatives will be the first line link to its customers. Customers that receive unsatisfactory service will spread the word. Negative publicity like this will hurt the firm in the short and long run.Therefore, an investment in its hiring, training and value-added services for employees is advised.
HPs employees will also be important as the international market develops. This expansive will require additional training for employees to develop the skills needed to succeed in this market. There is success in the international market all ready, but to really penetrate the world, HP needs to focus on providing the same support to the world as it does in the U.S. HPs culture is one of informality and service-orientation.
This culture is exactly what is needed survive in the ever-changing computer & related products industry. Companies that do not have this culture, flexibility and attitude will be unable to adapt to the rapid changes now and in the future. HP can monitor its progress by reviewing industry market potential and its share, quarterly/annual financial information, stock price, but most importantly charting its customer feedback. Customers are HPs focus and in order to rate its progress and success, customer satisfaction should be the main factor. Are the products and services in all HPs markets meeting the needs? If not, what can be changed in existing products/services to meet the needs or how to quickly develop products/services that will.Also reviewing all product lines within markets should be attempted.
Some products or services offered may not be meeting customer needs or making HP a profit. In this event, it should be discontinued. Monitoring production and inventory levels are important given the ever-changing markets. Developing too high of inventory could result in having to sell products at a very small profit, if a profit at all, having dramatic affects on the overall financial condition of HP. Section 11 Conclusion HP continued to grow, as did the U.S.
PC market during the mid-1990s. As the PC market declined in the late 1990s, so did HPs financial situation.HP has reacted well to the setbacks by implementing realignment, developing within new markets all while continuing to provide PCs. HP works diligently to develop new products and services to meet its customers needs, in addition to hiring and training employees to focus on these needs also.
In order for HP to have continued success, it should focus on the four main areas described in the summary of issues: Continued emphasis on customers needs; value added improvements to existing products or the creation of new products to meet the needs. Alliances with key companies. Continue to provide PCs but put more emphasis into expanding areas like the server market and providing E-services. Continue to develop International sales.
If HP correctly implements these essential points, it will be positioning itself well for wherever the Internet and millenium will take it. Bibliography Ziff Davis Web Site; http://www.zdnet.com Microsoft Investor Web Site; http://www.investor.
msn.com Computers: Hardware, November 19, 1998, Standard & Poor's, Industry Survey, page 1-9. 4 Computers: Software, March 4, 1999, Standard & Poor's, Industry Survey, page 1-9. 5 Computers: Commercial Services, December 3, 1998, Standard & Poor's Industry Survey, page 1-7.Business Reports.
