Hewlett Packard Corporation
Business 490
February 27, 2011
BY
Litra Simms
Professor Hackenberg
Strayer University
Hewlett Packard Corporation
Hewlett Packard (HP) is a technology company that operates in more than 170 countries around the world. They help to explore how technology and services can help peoples and companies address their everyday challenges and problems and realize their possibilities. HP applies new ways of thinking and ideals to create simpler, valuable and trusted experiences with technology, continuously improving the way customers work and live.
No other company has been able to offer the same complete technology product as HP, because they provide infrastructure and business offering that spam from handheld devices to the most super power computer that are used around the world. They also offer the customers a wide range of products and services from digital entertainment to digital photography and from computing to home printing. For these changes to begin in 1996 HP, CEO Lew Platt realized that they needed to look into a new market and organizational opportunities while reducing sales and support costs. For these goals to reached Platt knew that HP had make a change in their selling approach, so decided not just to target large cooperation’s but the small population of people that used their products also.
For HP to start focusing on these new customers, they would need to be reorganizational of HP’s traditional sales approach. Since HP had already implemented major structural changes in the past that another overhaul would be more beneficial than detrimental to the future long-term success of the company. HP had to research and find the weakness of the company selling approach and had to find away to overcome this weakness. After a detailed and careful analysis Dudley (senior partner with Leap consulting) were able to find out where HP weakness lay and were they could advance on into better and new opportunities. He was also able to discover how HP would have to change their current sales strategies to overcome their weakness, and embark on their new opportunities. The entire future of HP relied on the finding of Dudley’s finding and being able to correctly interpret and utilize the information that were needed for these changes.
Hewlett Packard had a vision “together we can create the enterprises of tomorrow”. HP mission is “to provide world –class information technology, solution and services to enable our customer to serve” customer loyalty, profit, market leadership, growth, employee commitment, leadership capability, and global citizenship.
The Hewlett-Packard Company was founded in by Wil Hewlett and Dave Packard in 1935 in a garage located in Palo Alto, California. According to David (the HP Timeline) in 1938 Hewlett and Packard started part-time in a garage with $538 in working capital and their new product was HP200A, that was used to test sound equipment. In 1939 the company name was decided by the toss of a coin. The company began to grow in 1940 so the partners decided to create an open door policy that empowered the employees with a voice that would be heard by managers concerning different issues as a result of this the company’s revenue was $2.2 million with 166 employees in 1949. By 1950 HP grew by maturing its processes in technology of electronics and went public in 1957 and started it path to globalization by establishing manufacturing and marketing operation in Europe. So by the end of 1959, HP’s revenue was $48 million with 2,378 employees. In 1960 HP developed it first computer, HP2116A and the company continues to expanse overseas by subsidiaries in Asia. As a result by the end of 1969, the revenue for HP was $ 326 million with only 15,840 employees. HP had a significant growth so in 1970 there revenue reached $2.4 billion with over 50,000 employees. Celebrating their 50th anniversary in 1980 HP entered into the printer market and sales grew to $11.9 billion with 95,000 employees. In 1990 HP formed a new company called Agilent Technologies. Carly Fiorina a new CEO main goal were to force on reinventing the company’s growth by planning the acquisition of Compaq Computers Corporation. By this time HP revenue was $42 billion with 84,400 employees. HP completed it merge with Compaq Computers Corporation and further its products to an array of IT solutions in 2002. In the year of 2006, HP revenue was over $91.6 billion with 156,000 employees. This is why HP is considered one of the world’s largest information technology firms at the expense of Dell’s.
Comprehensive Strategy-Formulation Framework
According to the text Stage 1 of the formulation framework consists of the EFE Matrix, the IFE Matrix, and the Competitive Profile Matrix (CPM). Called the input stage, Stage1 summarizes the basic input information needed to formulate strategies. Stage 2 called the Matching stage, focuses upon generating feasible alternative strategies by aligning key external and internal factors. Stage 2 techniques include the Strength-Weakness-Opportunities-threats (SWOT) Matrix, the Strategic Position and Action Evaluation (SPACE) Matrix, the Boston Consulting Group (BCG) Matrix, the Internal-External (IE) Matrix, and the Grand Strategy Strategic Planning Matrix (QSPM).
External Factor Evaluation (EFE) Matrix
This allows strategist to summarize and evaluate economic, social, cultural, demographic, environment, political, governmental, legal, technological, and competitive information. This information is based off the external audit, which identifies the company’s opportunities and threats. Assign to each fact a weight that ranges from 0.0 (not important) to 1.0 (very important). The weight indicates the relative importance of that factor to being successful in the firm’s industry. Opportunities often receive higher weights than threats, but threats can receive high weight if they are especially severe or threatening. Appropriate weights can be determined by comparing successful with unsuccessful competitors or by discussing the factor and reaching a group consensus. The sum of all weights assigned to the factor must equal one. Assign a rating between 1 and 4 to each key external factor to indicate how effectively the firm’s current strategies respond to the factor where 4-superior, 3-above average, 2-average, and 1poor. Ratings are based on effectiveness of the fir’s strategies. Ratings are thus company based, whereas the weights in step 2 are industry-based. Multiply each factor’s weight by its rating to determine a weighted score. Sum the weighted scores for each variable to determine the total weighted score for the organization.
Hewlett Packard (EFE) Matrix
|Number |
|Opportunities
|1
|Globalization in (PC’s)
|2
|Acquisitions
|weight
|0.08 |0.07
|Rating
|3.00 |3.0
|Weight Score
|0.24 |0.21
| |
|3
|Customized
|4
|Up-Selling
|5 |
|Covering Major Market Sections
|6
|Product Development
|7
|Innovation
|8
|Related Diversification
|9
|Strong/Active Distributers
|10
|B2B Selling (to Dell)
|11
|Product Differentiation
|0.04
|
|
| |Number |
|
|0.05
|3.00
|0.05
|2.00
|
|0.10
|0.04
|
|2.00
|0.06
|0.08
|3.00
|0.05
|.18
|2.00
|0.07
|
|0.14
|4.00
|0.06
|
|0.10
|2.00
|0.06
|Threats
|0.15
|
|0.24
|3.00
|
|0.18
|1.00
|
|0.04
|
|
|
|Weight
|Rating
|Weight Score
|1
|Intense Competition
|0.06
|2.00
|0.12
|
|2
|Short Product life Cycle
|0.09
|3.00
|0.27
|
|3 |
|High Switch Customer Demand and Behavior |0.06
|4
|Price War (ink cart)
|5
|New Viable Competitors
|6 |
|Increasing Competition on imaging and
|0.05
|
|printing
|
|7 |
|Frequent changing customer Demand and
|
|Behavior
|
|Totals:
|0.03
|2.00
|0.03
|
|2.00
|.012
|0.06
|2.00
|
|0.15 |3.00
|
| |0.15
|
|0.08
|3.00
|
|
|
|1.00
|
|2.87
|0.24
| |
The total average weight score is 2.5 and the highest is 4.0. HP total weight score is 2.87 which means they are above average. This business is do pretty well taking care of the advantages of the external opportunities and avoiding threats.
Internal Factor Evaluation (IFE) Matrix
According to the text, this strategy-formulation tool summarizes and evaluates the major strengths and weaknesses in the functional area of a business and it also provides a basis for identifying and evaluating relationships among those areas. Intuitive judgments are required in developing an IFE Matrix. Use the same formula as EFE for obtaining weight/rating.
Hewlett Packard (IFE) Matrix
|Strengths
|
|Weight
|Rating (3 or 4)
|
|0.42
|
|1
|Technology Advancement
|2
|Branding Recognized
|3
|Technology Research Lab
|4
|Customer Loyalty
|0.05
|3.00
|0.15
|
|5.
|International Trade
|0.06
|3.00
|0.18
|
|6
|Worlds Leading Brand
|0.05
|3.00
|0.15
|
|7.
|Product Line Extension
|0.07
|4.00
|0.28
|
|8
|Larger IT Firms
|9
|Engineering Design
|Weakness |
|
|0.14
|Weight Score
|0.05
|3.00 |4.00
|0.09
|0.10 |0.05 |Weight
|0.08
|0.20
|3.00
|3.00 |3.00
|0.27
|0.30
|Unit Vendor Shipment
|2 |
|Lack of in house management Consult Division |0.07
|
|
|0.15
|Rating (1 or2)
|1
|
|
|Weight Score
|2.00
|0.16 |2.00
| |0.14
|3
|Decreasing R&D Budget
|4
|Not Using Online Selling
|
|Total:
|0.10 |0.09 |1.00
|
|1.00
|0.10
|2.00
|
|0.18 |2.68
| |
Hewlett Packard IFE score is 2.68 which is above the average 2.5 indicates a strong internal position.
The Competitive Profile Matrix (CPM)
According to the text the competitive Profile Matrix (CPM) identifies a firm’s major competitors and its strengths and weaknesses in relation to a sample firm’s strategic position. A tutorial written November 19, 2008 by scooper tutorials defines a competitive profile matrix as an essential tool used in strategic management process that contains all the important critical success factors of an industry. Success factor’s can vary from industry to industry every industry considers different success factors. All the companies in CPM are measured on same scale by considering the same success factor. Competitive profile matrix is not bound by any constraint all the success depends upon their importance it can be external or internal. The CPM includes the firm and also facilitates to add other competitors to make it easier to do a comparative analysis. To do an accurate CPM both the internal and external factors must be included to evaluate the overall position of the firm with respective to their major competitors. According to The Best Online MBA Community tutorials the competitive profile matrix consists of following attributes:
Critical Success Factors-Critical success factors are extracted after deep analysis of external and internal environment of the firm. The higher rating show that firm strategy is doing well to support this critical success factors and lower rating means firm strategy is lacking to support the factor.
Rating- Rating in CPM represents the response of firm toward the critical success factors. Highest the rating better the response of the firm towards the critical success factor rating range from 1.0 to 4.0 and can be applied to any factor. There are some important points related to rating in CPM: Rating is applied to each factor, The response is poor represented by 1.0, The response is average is represented by 2.0, The response is above average represented by 3.0,The response is superior represented by 4.0
Weight -Weight attribute in CPM indicates the relative importance of factor to being successful in the firm’s industry. The weight range from 0.0 means not important and 1.0 means important, sum of all assigned weight to factors must be equal to 1.0 otherwise the calculation would not be consider correct.
Weighted Score-Weighted score value is the result achieved after multiplying each factor rating with the weight.
Total Weighted Score- The sum of all weighted score is equal to the total weighted score, final value of total weighted score should be between 1.0 (low) to 4.0(high). The average weighted score for CPM matrix is 2.5 any company total weighted score fall below 2.5 consider as weak. The company total weighted score higher than 2.5 is consider as strong in position. The other dimension of CPM is the firm with higher total weighted score considered as the winner among the competitors. According to the competitive profile matrix (CPM) for Hewlett Packard provided by an internal audit the top competitors for Hewlett Packard are Dell and IBM. All companies are considered to be part of the diversified computer systems industry.
Hewlett Packard CPM (Competitive Profile Matrix)
[pic]
4 = Major Strength
3 = Minor Strength
2 = Minor Weakness
1 =Major Weakness
The competitive profile matrix shows that Hewlett Packard scores the highest with it strongest areas being in Financial position which is sales, marketing, advertising, research and development. Dell scores high in sales and variety of products. IBM has the highest scores in customer loyalty, quality of products and global expansion. Overall Hewlett Packard appears to be the company of choice. The strengths-Weaknesses-Opportunities-Threats (SWOT) Matrix According to the text this is an important matching tool that helps managers develop four types of strategies: SO (strengths-opportunities) Strategies, Wo (weakness-opportunities) Strategies, ST (strengths-threats) Strategies, WT (weakness-threats) Strategies. Matching each external and internal factor is the most difficult part of developing a SWOT Matrix and requires good judgment and there is no one best set of matches. SO Strategies use a firm’s internal strengths to take advantage of external opportunities. All managers would like their organization to be in a position in which internal strengths
can be used to take advantage of external trends and events. When a firm has major weakness, it will strive to overcome them and make them strengths. When an organization faces major threats, it will seek to avoid them to concentrate on opportunities. WO Strategies aim at improving internal weakness by taking advantage of external opportunities. Sometime key external opportunities exist, but a firm has internal weakness that prevents it from exploiting those opportunities. ST Strategies use a firm’s strengths to avoid or reduce the impact of external threats. WT Strategies are defensive tactics directed at reducing internal weakness and avoiding external threats. SWOT Matrix |
|STRENGTHS
|WEAKNESS
|
|Brand Names
|Internal control issues
| consulting division|
|Growing sales phones and I Pads
|Hewlett Packard | | estimated
|Low Debt
|Wide range of innovative products
| |
|Lack of in house management
|No aggressive investment in R&D
|Intellectual capital is under
|
| policy or H.R.
|Developing of own software and hardware
|No good people retention
|
| |
|Web technology used for product awareness
|OPPORTUNITIES |
|S-O STRATEGIES
|Expansion of retail stores for customer new H.R. policy in order to retain | |convince advantage of other
|policies
|W-O STRATEGIES
|Must open new retail stores through out the |Develop
|world to take advantage of financial strength |human capital by taking |
|Participate in joint ventures management (O2,W1,W5)
|Try to have joint venture with apple or other |firms |
|Make easy to use product for upcoming retirees |cell phone companies |
|
|Computer and cell phone software and hardware |Develop easy PC and Cell phone for x and y |
|
|to be developed |THREATS |
|generation (O3,S4)
|
|S-T STRATEGIES
|Competitors technology and pricing people retention policy or H.R. |
|W-T STRATEGIES
|Developed low price and innovative PC and cell|No good
|Low compatibility with non HP products | |Less global coverage than competitor | |Availability of substitute |
|
|phones than competitor (T1,S4)
|policies
|Developed such hardware and software for
|
|computer and cell phone which are compatible |
| |
|with other companies software and accessories |
|
|(T2,S5)
|
|
The Strategic Position and Action Evaluation (SPACE) Matrix According to the text SPACE Matrix is another important Stage 2 matching tool. Its four-quadrant framework indicates whether aggressive, conservative, defensive, or competitive strategies are most appropriate for a given organization. The axes of the SPACE Matrix represent two internal dimensions (financial strengthand competitive advantage and two external dimensions (environmental stability and industry strength ).These four factors are perhaps the most important determinants of an organization’s overall strategic position. Select a set of variable to define financial strength (FS), competitive advantage (CA), environmental stability (ES), and industry strength (IS). Assign a numerical value ranging from +1 (worst) to +6 (best) to each of the variables tht makes up the FS and IS dimensions. Assign a numerical value ranging from -1 (best) to -6 (worst) to each of the variable that make up the ES and CA dimensions. On the FS and CA axes, make comparisons to competitors. On the IS and ES axes, make comparison to other industries. Compute an average score for FS, CA, IS, and ES by summing the value given to the variable of each dimension and then by the number of variables included in the respective dimension. SPACE Matrix |Financial Strength |Leverage |Working Capital
rating 1(worst) to 6 (Best)
|Rate |3.00 |3.00
| | |
|Liquidity
|4.00
|
|Return on Investment
|5.00
|3 Year New Income |Industry Strength |
|
|5.00
|
rating 1 (worst) to 6 (Best
|Fs total 20.00
|Growth Potential
|4.00
|
|Profit Potential
|4.00
|
|Financial Stability
|5.00
|
|Ease of Entry into market
|2.00
|Labor Cost |Environmental Stability |
|3.00
|
rating -1(best) to -6(best)
|IS 18.00
|Rate of Inflation
|-2.00
|Technological Change
|
|-5.00
|Knee Elasticity of Demand
|
|-2.00
|Competitive Pressure
|
|-6.00
|Barrier for entry into market
|
|2.00
| |Competitive Advantage |
|
|
| |
rating -1(best) to -6(best)
|Es-17.00
|Market Share
|-1.00
|
|Product Quality
|-1.00
|
|Customer loyalty
|-1.00
|Technological know-how
|-1.00-
|Control over supplier and distributor |
| |
|2.00 |CA -6.00
| |
HP is in excellent condition to use its internal strength to (1) take advantage of external opportunities, (2) overcome internal weakness, and (3) avoid external threat; due to the fact its vector is located in the aggressive quadrant (upper right) The Boston Consulting Group (BCG) Matrix A post by literal thinking defines the Boston Consulting Group (BCG) Growth-Share Matrix known as the BCG Matrix, continues to be one of the more popular strategic management tools used today. The BCG Matrix classifies business units or product portfolios into four distinct categories based on market growth and market share, measured against competitors. Various portfolios can be classified as dogs, question marks, stars, or cash cows. Cash cows are leaders in a mature (low growth) market, dogs are cash traps, question marks have the potential of becoming stars or dogs, and stars are the high maintenance high performers. [pic] The diagram provided by quick MBA explains the four categories: Stars-Stars generate large sums of cash because of their strong relative market share but all consume large amounts of cash because of their high growth rate. So the cash being spent and brought in approximately nets out. If a star can maintain its large market share it will become a cash cow when the market growth rate declines. Cash Cows-As leaders in a mature market cash cows exhibit a return on assets that is greater than the market growth rate so they generate more cash than they consume. These units should be ‘milked’ extracting the profits and investing as little as possible. They provide the cash required to turn question marks into market leaders.
Question Marks-Question marks are products that grow rapidly and as a result consume large amounts of cash, but because they have low market shares they don’t generate much cash. The result is large net cash consumption. A question mark has the potential to gain market share and become a star, and eventually a cash cow when the market growth slows. If it doesn’t become a market leader it will become a dog when market growth declines. Question marks need to be analyzed carefully to determine if they are worth the investment required to grow market share. Dogs- Dogs have a low market share and a low growth rate and neither generate or consume a large amount of cash. Dogs are cash traps because of the money tied up in a business that has little potential. Such businesses are candidates for divestiture. Quantitative Strategic Planning Matrix (QSPM)
The Quantitative strategic planning Matrix is a strategic tool which is used to evaluate alternative set of strategies. The QSPM incorporate earlier stage details in an organize way to calculate the score of multiple strategies in order to find the best match strategy for the organization. The QSPM comes under the third stage of strategy formulation which is called “The Decision Stage” and also the final stage of this process. The best thing about QSPM is that it never insist the strategist to enter the information on assumptions, it extract the information from stage 1 The Input Stage and stage 2 the matching stage. The input stage is based on EFE Matrix, IFE Matrix and CPM and stage 2 made up of TOWS matrix, SPACE Matrix, BCG Matrix, IE Matrix, Grand Strategy Matrix. The QSPM combine the intuitive thinking of managers with the analytical process to decide the best strategy for the organization success Steps to develop Quantitative Strategic Planning Matrix (QSPM) Step 1 Make a list of the firm’s key external opportunities/threats and internal strengths/weaknesses in the left column of the QSPM. This information should be taken directly from the EFE Matrix and IFE Matrix. A minimum of 10 external critical success factors and 10 internal critical success factors should be included in the QSPM. Step 2 Assign weights to each key external and internal factor. These weights are identical to those in the EFE Matrix and the IFE Matrix. The weights are presented in a straight column just to the right of the external and internal critical success factors. Step 3 Examine the Stage 2 (matching) matrices and identify alternative strategies that the organization should consider implementing. Record these strategies in the top row of the QSPM. Group the strategies into mutually exclusive sets if possible. Step 4 Determine the Attractiveness Scores (AS), defined as numerical values that indicate the relative attractiveness of each strategy in a given set of alternatives. Attractiveness Scores are determined by examining each key external or internal factor, one at a time, and asking the question, “Does this factor affect the choice of strategies being made?” If the answer to this question is yes, then the strategies should be compared relative to that key factor. Specifically, Attractiveness Scores should be assigned to each strategy to indicate the relative attractiveness of one strategy over others, considering the particular factor. The range for Attractiveness Scores is 1 = not attractive, 2 = somewhat attractive, 3 = reasonably attractive, and 4 = highly attractive. If the answer to the above question is no, indicating that the respective key factor has no effect upon the specific choice being made, then do not assign Attractiveness Scores to the strategies in that set. Use a dash to indicate that the key factor does not affect the choice being made. Note: If you assign an AS score to one strategy, then assign AS score(s) to
the other. In other words, if one strategy receives a dash, then all others must receive a dash in a given row.
Step 5 Compute the Total Attractiveness Scores. Total Attractiveness Scores are defined as the product of multiplying the weights (Step 2) by the Attractiveness Scores (Step 4) in each row. The Total Attractiveness Scores indicate the relative attractiveness of each alternative strategy, considering only the impact of the adjacent external or internal critical success factor. The higher the Total Attractiveness Score, the more attractive the strategic alternative (considering only the adjacent critical success factor). Step 6 Compute the Sum Total Attractiveness Score. Add Total Attractiveness Scores in each strategy column of the QSPM. The Sum Total Attractiveness Scores reveal which strategy is most attractive in each set of alternatives. Higher scores indicate more attractive strategies, considering all the relevant external and internal factors that could affect the strategic decisions. The magnitude of the difference between the Sum Total Attractiveness Scores in a given set of strategic alternatives indicates the relative desirability of one strategy over another
References:
WWW.webhostingreport.com
WWW.answer.com
David, F.R. (2009). BUS 490: Strategic management concepts and cases: 2009 custom edition (12th ed.). Upper Saddle River, NJ: Prentice Hall/Pearson.
www.scoopertutorials.com
www.mba-tutorials.com
www.quickmba.com
www.literalthinking.com
http://www.scribd.com/doc/34912691/HP-CPM-IFE-EFE-CA
http://www.authorstream.com/Presentation/Aarifschah-562377-hp-case-study/
http://www.maxi-pedia.com/quantitative+strategic+planning+matrix+QPSM
