Exercise 5: Hewlett Packard- Formulate strategy (SWOT Analysis & SPACE Matrix) SWOT Matrix

Internal origin

External origin

Helpful Strengths Strong market position Prominent brand name Strategic acquisition In house development of software and hardware Green technology by managing aging and unwanted computers Opportunities Expanding presence in cloud computing market Expanding portfolio of imaging and printing solutions

Harmful Weaknesses High leverage Flaw in product design Weak market segment integration Weak financial position which is evidenced by massive pay cut Threats Projected decreases in the IT market. Hyper-competitive environment. Less control of global market

(London Roah North End Portsmouth, -) Strengths1. Strong market position

According to businessdictionary.com, strong market position is defined as an effort to influence consumer perception of a brand or product relative to the perception of competing brands or products. Its objective is to occupy a clear, unique, and advantageous position in the consumers mind. Hewlett-packages strong market position can be seen when HP led Dell over 17% of the PC market while Dell settled for second at 14% in 2008. Besides that, HP dominated the global printer market by its 40% market share. In 2008, Ho took a major step in strengthening its position in the IT services market by acquiring EDS. (London Roah North End Portsmouth, -) 2. Prominent brand name recognition Hewlett Packard knew the importance of branding towards the success of HP. In the late nineties, it began to shift its image to encompass more than just the business to business segment making adjustments to increase its presence in the consumer market as well. (London Roah North End Portsmouth, -)A branding launching called one voice is initiated to integrate the line of consumer electronic and computer hardware products.

Weakness 1. Weak market segment integration

Although Hewlett-Packard is solving its lack of presence in some seemingly obvious segments, there remains room for improvement. The company lack notable software product or manage consulting services when compared to major competitors including, Accenture, EMC and IBM. Opportunities 1. Expanding presence in cloud computing market Cloud computing describes a new delivery model for IT services. HP engaged with Intel Corporation and Yahoo ! to create a global, multi data center, open sources test bed for cloud computing research and education. In 2009, HP announced Ho Cloud Assure, a new Software as a Service (SaaS) to facilitate businesses safely and effectively to embrace cloud based services. HP Cloud Assure consists of HP services and software, including HP Application Security Center, HP Performance Center and HP Business Availability Center. The increasing demand for Cloud Computing is likely to create demand for HPs solutions in coming years. The global spending on cloud computing is forecast to cross a value of over $ 40 billion by 2012. 2. Expanding portfolio of imaging and printing solutions. Hewlett Packard has made several strategic acquisitions and introduced new products in the imaging solutions segment in recent times. Its imaging solutions include the commercial markets, from print services solutions to new growth opportunities in commercial printing and capturing high-value pages in areas such as industrial applications, outdoor signage, and graphic arts. Threats 1. Projected decreases in the IT markets. Forecasters predict a decrease in the worldwide demand for various IT products offered by HP. The economic downturn has seriously affected many market segments including Information technology. HP has experienced a decrease in IT market in U.S and global market. Worldwide spending on IT was predicted to decline by 4% in 2009 (London Roah North End Portsmouth, -). 2. Hyper-Competitive environment. Although Hewlett-Packard recently overtook Dell in sales,, the latter remains a inspiring competitor, as are other companies such as Toshiba, lenovaGroup and Aver. It competes in terms of price, quality, brand, technology, reputation, distribution and range of products. The companys competitors in enterprise servers and storage include IBM an in storage there is the EMC Corporation, Dell in industry standard servers and Sun Microsystems in UNIX-based servers. The Strategic Position and Action Evaluation (SPACE) The strategic Position and Action Evaluation or the SPACE Matrix is a four-quadrant framework which indicates whether aggressive, conservative, defensive or competitive strategies are most appropriate for a given enterprise or company. The axes of the SPACE matrix represent the two internal dimension of a company which are competitive advantage (CA) and financial stability (FS) and two external dimensions which are environmental stability (ES) and industry strength (IS). (Caroline, 2008)

Financial Srength In the Space Matrix- Y (+1 worst, +6 best) HP Million Ranking Dell Million Ranking Apple Million Ranking

Liquidity

51,021.00 = 50,442.00

1.01

29,021.00 19,483.00

1.49

44,988.00 27,970.00

1.61

Cash Flow

10,929.00

13,913.00

9,815.00

Return on Investment

5.00 = 8,761.00 0.0006 6 5

452.00 2,635.00

16,137.00 0.17 5 5 25,922.00

0.62 4 4

Average - FS Competitive Advantage Space matrix-X (-6 Worst, -1 best) Market Share 17.20%

-2

12.10%

-3

18.50%

-1

http://en.wikipedia.org/wiki/Market_share_of_leading_PC_vendors#cite_note-6 Product Malfunction rate 25.60% -5 18.30% http://www.engadget.com/2009/11/17/laptop-reliability-survey-asus-and-toshiba-win-hp-fails/ Customer Loyalty/ SATISFACTION 7.80% -6 7.80% file:///C:/Users/LEE/Desktop/0,2817,2400794,00.asp.htm Average-CA

-4

17.40%

-2

-6

9.20%

-1

-4.3

-4.33

-1.33

Internal Strategic Position Competitive Advantage (CA) Product Quality Customer Loyalty Market Share Average -5 -6 -1 -4.00

External Strategic Position Industry Strength (IS) Growth Potential Profit Potential Labour Cost Average 5 5 4 4.70

Total X-axis Score = 0.75 Financial Strength (FS) Liquidity Cash Flow Return On Investment Average 4 4 6 5.00 Environmental Stability (ES) Pressure from Substitutes Barriers to Entry Rate of Inflation Average -5 -4 -2 -3.70

Total Y-axis Score= 1.30

(Simister, 2011) Figure 1 According to SPACE matrix above, HP is located in the aggressive quadrant. SPACE Analysis recommends that business in such a strong position take the following actions: (a) Grow within the market through acquisition (Simister, 2011). This can be observed when HP successfully acquire computer companies like Compaq, it can eliminate its competitors by merging with other mega computer company thus improve the survivability of HP. (b) Continue to invest in innovation to sustain and build the competitive advantage (Simister, 2011).HP can increase its research and development efforts as the technology of HP is less innovative compared to Apple which is excellent in innovation. Thus, HP needs to develop unique technology for its product series.

(c) Raise the stakes for other competitors to play the game. This may be through reducing prices to levels that competitors find difficult to match. Record-setting earnings for the December quarter put Apple ahead of HP as the world's number one PC vendor, with the company's combined sales of 15.4 million iPads and 5.2 million Macs. Apple's top performance was followed by HP, Lenovo, Dell and Acer, respectively. (Apple Insider, 2012). Since HP used to be the worlds largest technology vendor in term of sales, it should be economies of scale strategy to produce products in large quantity at the lowest cost. (d) Get feedback from customers. Since HP is a multinational company, cultural and management may differ across countries. Therefore, HP can incorporate customer feedback in its product development to better understand the needs of the customers. (e) Restructure their financial management. To improve their financial structure, HP can issue IPO to finance its expansion so that its capital is not dominated by debt. The high leverage ratio increase the solvency risk and interest cost to HP.

Bibliography
Apple Insider. (2012). Caroline. (2008, Jun 6). The Space Matrix Explained. Retrieved March 26, 2012, from Pressbox.co.uk: http://www.pressbox.co.uk/detailed/Education/The_SPACE_MATRIX_Explained_201490.html London Roah North End Portsmouth. (-, - -). SWOT AnalysisnHewlett Packard. Retrieved March 22, 2012, from http://www.marketingteacher.com/swot/hewlett-packard-swot.html# Simister, P. (2011, September 1). SPACE Analysis- Strategic Position and Ac. Retrieved March 26, 2012, from http://www.differentiateyourbusiness.co.uk/space-analysis-strategic-position-and-actionevaluation-matrix