HP Case Study Essay

The company Hewlett Packard (HP) was founded in 1938 by William Hewlett and David Packard, two electrical engineers from the Stanford University. They initially started it in a garage behind Packard’s home in the state of California, manufacturing only electronic instruments at that time. Their first product was a resistance-capacity audio oscillator, an instrument used to test the sound equipment. The biggest customer of that product was Walt Disney Company. In 1940, HP was formed, with the establishment of Hewlett and Packard’s own factory in Palo Alto. By the end of this year, HP’s revenue exceeded $2 million and the company employed 166 employees. During 1950’s HP gained popularity as a producer of innovative measuring and testing equipment of premium quality. HP first acquired the F. L. Moseley Company in 1957, which was the producer of quality graphic recorders. After this, HP started to globalize its Business. In 1959, it opened the first Marketing office in Switzerland and a manufacturing plant in Germany. Realizing the need to sustain the synergy in the organization Hewlett and Packard formulated the values and objectives of the organization, these values and objectives formed the basis of the management style at the company, referred as ‘The HP Way’ nowadays. (Moganty, n. d. ) Thus HP transformed into a democratic organization where every employee has the autonomy to talk to his immediate boss and other employees having different hierarchical positions. The company continued to diversify its business and entered the Asian market in 1963 forming a joint venture with a Japanese firm. In 1968, HP invented the HP 9100 desktop scientific calculator, after that many innovative computing products in the 1970s, hence, till 1980s HP’s business portfolio was filled with a wide array of products and to strengthen its position HP acquired Apollo Computers, which was then the leading manufacturer of workstations. By 1990s HP had 92,000 employees and earned revenues of approximately $13. billion. External Environment With the recession in PC industry of the United States in 1990, HP started to lag behind, and significantly loss a share in innovative products, it was not able to cope with the changing conductions in the industry due to its old fashioned organizational culture. Employees started becoming dissatisfied with the way the company was managed. According to a poll conducted among HP employees, HP lacked in clear directions and was said to have become too product oriented. In order to deal with this situation, HP decided to focus on its computer business and spun off its measuring, testing and medical equipment division into a new company. This was done in early 1999 and a new company named Agilent Technologies Inc. was founded, which only dealt with the devices other than those related to computing. As a consequence, HP was left with only four main divisions; Personal computers, inkjet printers, laser printers and servers. Despite the measures, taken by the company to reduce costs and drafting a new internet strategy, it was believed that what HP actually needs is a change in leadership. So a CEO named Carly Fiorina was hired. Soon after becoming the CEO, she started a mass marketing program for HP, new advertisements were made in which the employees of HP were referred as ‘A fearless collection of inventors,’ many of those advertisements had Fiornia herself. But all of this went in vain, and on the top of it the merger between HP and Compaq Computers Corp. made the conditions even worst for HP. As a consequence, the company’s culture change and new rules were set which were in the favor of the company according to Fiornia. But the laying off of approximately 17,000 HP employees was beyond the level of understanding of all the people. Ever since the merger took place HP was having disappointing earnings which indicated the epic fail of Fiornia’s leadership. HP was facing continuous losses and the estimated sales forecasts also turned out to be lower than what was expected. HP’s share price also fall up to 13% and Fiornia was blamed for all this. According to critics, she was unsuccessful in managing the company well because during her tenure she behaved like a celebrity, travelling in limousine and not communicating with the employees face to face. Fiornia was terminated for not being able to delegate the firm’s strategies. (Paul, 2005) Industry Analysis Based on the Porter’s framework of industry analysis the following results are most likely to occur for HP: Threat of New Entrants Since HP only has two major competitors, Lenovo and Dell, the threat of new entrants is not as a matter of concern for HP now-a-days. Because the products of HP are unique and are innovative and are not easy to copy by the rival companies or any new firm that is trying to enter in the PC industry. Even if the products of HP are copied they would not be as reliable as of HP. Bargaining Power of Suppliers HP believes in providing its customers with products that are of premium quality, and since there are only few suppliers in the computing market, they may have an effective bargaining effect on HP to give them high charges for assembling or providing parts for their computing devices. Bargaining Power of Suppliers Customers are the main priority for any company and so for HP. In order to retain its customers, Hp made a number of efforts. It had provided its customers with innovative and unique products that no one else in the industry provided before. Threat of Substitutes Substitutes are available in the market for HP products, but as discussed earlier, the quality of HP products is much higher. Since, different technologies were introducing at the time of Fiornia’s tenure, HP was not able to keep up with its traditional image of producing innovative computer, so as a result the customers switched to other brands due to which the company started to get in losses. Vyomesh, 2005) Rivalry Dell and Lenovo are major rivals of HP; these companies gained the most when HP was facing different kinds of leadership crisis. When people started switching to these brands, the companies started to make the most of it and increased their prices, while disappointed customers of HP were ready to purchase other brands because HP was not performing up to the mark. (Novelguide, n. d. )