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I. CASE ABSTRACT In late 1995, John Peter, a marketing manager of Hewlett-Packard Asia Pacific Limited, a subsidiary of The Hewlett-Packard Company, was evaluating its strategic options for doing business in Vietnam. Vietnam represented a bright prospect for investment. The United States had lifted its embargo on the country in February 1994, and the country had adopted an open-door policy and normalized relationships with many other countries, including China. The current (1995) economic development in Vietnam was rather slow and limited, and the infrastructures and the political-legal systems appeared to be underdeveloped. However, the long-term prospects appeared very bright. Hewlett-Packard’s current operation in Vietnam was limited to the distribution of a small range of its products through local intermediaries. Either Hewlett-Packard’s competitors had some form of set up (for example, representative office) in Vietnam, or they planned to do so in the near future. John took a field trip to Vietnam and concluded that the future of the information technology market in Vietnam appeared bright. The market size was expected to be around US$500 million by the year 2000. The company has identified seven market segments for the IT market. Several business units within HP had begun to distribute some HP products in Vietnam. Decision Date: Late 1995 1995 Revenue: 1995 Profit: $24,991,000,000 $ 1,599,000,000
NOTE: 1. Vietnam and the U.S. government had not normalized relations in 1995. 2. In 1994, the U.S. government removed its embargo and Vietnam adopted an open-door policy.
____________ Copyright © 2001 and 2003 by Thomas L. Wheelen and J. David Hunger. Reprinted by our permission only for the Eighth and Ninth Editions of Strategic
Case 6 Hewlett-Packard Company in Vietnam Management and Business Policy and Cases in Strategic Management.
Case 6 Hewlett-Packard Company in Vietnam II. To illustrate the problems of a company entering into a nation. 3. 4.3) Task Environment Analysis Industry Analysis Culture and Business Practices International Entry Options Political/Legal Force Marketing Strategies Differentiation Strategies Currencies and Investment Regulations Practice of “guan xi” Competitive and Company Analysis Vietnam’s Infrastructure Modes of Entry into Vietnam III. 5. STEPS COVERED IN STRATEGIC DECISION-MAKING PROCESS (See Figure 1. CASE OBJECTIVES X = Covered in Case 1. The case author provided the following our (4) teaching objectives: 6-3 . To illustrate the strategic management model as a company plans its entry into another nation. 2. To discuss the role of a societal environment of another country and how it impacts foreign investment. To help the students familiarize themselves with Vietnam. CASE ISSUES AND SUBJECTS Information Technology (IT) Industry Modes of Entry to Vietnam International Societal Environment Analysis (see Table 3.5 on pages 20 and 21) Strategy Implementation Review Objectives & Mission Strategy Formulation Strategic Posture Strategic Factors External Factors Evaluation & Control Internal Factors Performance Corporate Governance 1A 1B 2 3 4 5A 5B Strategic Alternatives 6 7 8 O O X O X O O O O O O = Emphasized in Case IV. To allow the students to understand and discuss the process of normalizing relations between nations. especially one where normalization between company’s parent nation and new country does not fully exist.
2. 3. 4. then students can examine the various possible modes of entry for the Vietnam market. To allow students to examine and evaluate the seven segments for the IT market in Vietnam and to appreciate the choice of the primary and secondary segments. We would have the students do library or Internet (www. especially those in Asia.Case 6 Hewlett-Packard Company in Vietnam 1. 6-4 . The instructor may want to begin by asking if anyone in the class has visited Vietnam recently and allow one or two (if there are any) of these students to relate their experiences and observations for a few minutes. since it tends to invoke a certain degree of excitement in the classroom. We suggest the placement of this case toward the end of the course. 3. To allow students to examine the business environment and assess the attractiveness of the IT market in Vietnam.html) research on Vietnam. American students may have certain images about Vietnam due to their knowledge of the Vietnam War and they should also be allowed to air their observations before the instructor begins the discussion on the case itself. Most of our students have little knowledge on Southeast Asia.odci. 2. If the decision is to go ahead. This case is an excellent case for team presentation. To familiarize the students with the country and business environment in Vietnam.gov/cia/publications/factbook/index. to be aware of this important market. • Team needs to bring map to class for this region of the world to set the environment. This case works very well for a team strategic audit at the undergraduate level. The case author’s excellent teaching strategy is cited below. • We only assign as an individual strategic audit or paper at the MBA level. It is important for managers and potential managers. This case is best used in a class discussion. 4. To allow students to grapple with the decision whether HewlettPackard should enter the Vietnam market in the immediate future or to delay the decision. V. Vietnam is an emerging market with a population of over 70 million. It will supplement the case author’s information. SUGGESTED CLASSROOM APPROACHES TO THE CASE 1.
how they fit into our capabilities and choice of market segments. Analyze the competitors and HP’s capabilities. and if so. Research Basis for the Case The information in the case was provided by Mr. It can also be used in an executive program in general management. What are the attractive and unattractive aspects of each segment? How would you prioritize the segments in terms of their potential? 3. How does HP measure up? Who represents HP’s major threat? How should HP compete in order to capitalize on its key strengths? 4. Although the author seeks to provide as much information as possible in the case. What are the attractive and unattractive aspects of the market at this time? Is this the right time to consider entering the market? What are the major advantages of doing so. to (c) the analysis of the possible modes of entry and choice of an appropriate mode. Examine the segments for the IT market in Vietnam. What mode would you recommend for Hewlett-Packard? B. strategic marketing. as the issues involved may be fairly complex. strategic marketing. the class may encounter difficulties in analysis and decision due to lack of some information. and what are the barriers? 2. international marketing. HP 6-5 . Assess the various modes of entry into the Vietnam IT market. It may not be productive to ask students up front for their decisions at the beginning of the class. The instructor may also want to ask the students to make reasonable assumptions and move on with the analysis and decision making process. to (b) the analysis of the market segments. The students can be asked to carry out library or Internet research to find out as much as they can about the Vietnam market. Asia-Pacific marketing. or marketing management for senior and middle managers. The key issues in the case are whether Hewlett-Packard AsiaPacific Limited should enter the Vietnam market at this time. or marketing management. students may still feel ill at ease because of their unfamiliarity with that country. Student Assignments 1.Case 6 Hewlett-Packard Company in Vietnam The instructor should move the discussion progressively from (a) the analysis of the market and a go/no go decision. how (entry modes and detailed plans)? C. Dennis Khoo from the Hewlett-Packard Asia-Pacific Limited office in Singapore. Vietnam is a fairly obscure country and even students in Asia do not know much about it. At times. Analyze the information technology (IT) market in Vietnam market. A. Teaching Objectives and Issues This case is suitable for a MBA course or an advanced undergraduate course in international business.
Case 6 Hewlett-Packard Company in Vietnam has carried out relevant research to explore the Vietnam market. What are the seven information technology (IT) segments in the Vietnam market? What do you feel are the primary and secondary segments for Hewlett-Packard? How would you prioritize (1-7) each of these seven segments? 13. What are the five possible modes of entry into the Vietnam market? 8. None of the information provided in the case was disguised. Khoo to identify the primary sources of some of the information provided from HP files. What are the target (industry) segments for Hewlett-Packard entering Vietnam? 9. What would you recommend to Hewlett-Packard about entering Vietnam at this time? Be specific in your recommendation. If you select future option then what must occur in Vietnam for Hewlett-Packard to enter country? 12. DISCUSSION QUESTIONS 1. 7. What are the five forces in Porter’s model? • Site how each one pertains to this case. what is it? 6. the 6-6 . What are the strengths and weaknesses of Hewlett-Packard in Vietnam? What are the opportunities and threats facing Hewlett-Packard in Vietnam? What are the strategic factors facing Hewlett-Packard in Does Hewlett-Packard in Vietnam have any core competencies? what are they? Vietnam? If yes. The author could not get Mr. 5. What are barriers to entry into Vietnam for Hewlett-Packard? 14. What is “guan xi”? What impact could it have on Hewlett-Packard’s options to enter Vietnam? 10. 3. 2. VI. The author does not have any information regarding what happened after this case was written. Discuss what it means that Vietnam is an emerging market and/or country. 11. 4. If Does Hewlett-Packard in Vietnam have a distinctive competency? yes. Should Hewlett-Packard enter Vietnam in immediate future or postpone to a future time? Explain your choice.
as hard currency is still hard to come by. “Case Objectives” and Section V. Teaching Objectives and Issues Presented earlier in Section IV.and medium-sized enterprises (25%). “Case Abstract. ties have not yet been normalized. CASE AUTHOR’S TEACHING NOTE by Geok Theng Lou* A. The Porter’s five forces model can be used to examine the attractive and unattractive aspects of the market. multinational corporations (35%). Analysis of IT Market and Decision on Market Entry The IT market in Vietnam is in its infancy.” B. Entry and Exit Barriers Computer products have limited intrinsic proprietary attributes and most innovations are easily imitated.” C. only to find that their European and Japanese competitors have the edge against them when it come to extending credit. The fact that the Vietnamese market favored U. American IT companies such as UNlSYS have invested heavily in at least 2 large IT bids.Case 6 Hewlett-Packard Company in Vietnam VII. Case Synopsis Presented earlier in Section I. small. “Suggested Classroom Approaches to the Case. “Suggested Classroom Approaches to the Case. especially in larger projects. The current market segments are government (35%). and home offices (5%). brands is a positive factor for HP. Although the trade embargo has been lifted. especially the low end segment. “Suggested Classroom Approaches to the Case. * Reprinted by permission of the case author. Student Assignments Presented earlier in Section VI. is characterized by fierce price retaliation and low switching costs from one manufacturer to another. American banks are not able to provide credit.” D. and thus. This is a key necessity in doing business in Vietnam.” E.S. One barrier to entry for American multinationals is the problems associated with the lack of normalized ties between the UNITED STATES and Vietnam. Case Analysis 1. Teaching Strategy Presented earlier in Section VI. The computer industry in Vietnam. The market size is estimated to be US$30 million in 1995 and is forecasted to be US$500 million in the year 2000. 6-7 .
Another possible exit barrier may be obligations to customers in Vietnam. these substitutes generally serve slightly different market segments. These customers may expect continued service support. Different types of computers. With a hardworking and well-educated workforce in abundant supply in Vietnam. RISC based workstations. The deal sizes are forecast to be large as the government departments and foreign companies make initial investments in information technology infrastructure. minicomputers. especially local ones who may demand large compensation for opting out of any cooperative ventures. most large players carry a full range of computers. However. Bargaining Power of Suppliers IT expertise is the most important “supplier” of production. In addition. especially since alternative suppliers may be available. However. Local and regional competitors can have some advantages over American multinationals. and may have built up their own networks since they may have entered the market before the trade embargo was lifted. HP may be able to leverage these ties to its benefit. “guan xi” (explained in the case) is an important factor in doing business in Vietnam. which is sold through the reseller channel today.Case 6 Hewlett-Packard Company in Vietnam Another barrier to entry is the practice of “guan xi.” As in other Asian countries. Since the computer industry in Vietnam is still in its infancy. and competitors have just entered or are just beginning to enter the market. For example. especially those whom we are serving in other markets as well. Overall. such as personal computers. Bargaining Power of Buyers Computer products are increasingly becoming less differentiated and buyers are fairly sensitive to quality. HP’s main channel of distribution in Vietnam today have strong ties with MOSTE and through them. These large customers tend to have moderate to strong bargaining power. However. they may have a better understanding of this culture and practice. and mainframes. 6-8 . HP is already known in the Vietnamese market for its printer and high-end PC products. One possible exit barrier may be obligations to joint venture partners. In addition. which we may find difficult to withdraw. HiPT. can to a certain extent be substitutes for one another. skilled local expertise in IT is somewhat limited. The buyers in the foreseeable future will be the public sector and major foreign companies. there are low to moderate barriers to entry. There will probably be few barriers to exit except big losses if large amount of investments have been committed there. due to the price differences. HP can quickly train a local first-tier workforce by structured training and on-the-job training in Singapore. technology. and price. other barriers to entry like distribution channels and customer loyalty are low. HP can hire exVietnamese HP personnel currently working in HP facilitates in the UNITED STATES or other experienced personnel to Vietnam to facilitate the management of the entity.
and we have to start now. Western Europe. What are the barriers for doing so now? Some barriers are: (1) the relationship between the United States and Vietnam is not normalized now. (3) the market size is still small and will not be attractive in the near future. and (3) we can make above average profits. (3) the business environment. as there are no clear leaders in the market yet. with the largest manufacturers market share at only 10 percent to 20 percent. and (c) the IT2000 plan by the Vietnam government shows that it is committed to the business area. It is expected. so we may be able to establish leadership in the market.Case 6 Hewlett-Packard Company in Vietnam Intensity of Rivalry In more developed markets like United States. Hong Kong. competition in Vietnam is not as intense. it is possible for the leading computer companies to develop a loyal customer base.S. (2) we currently have contacts and ties in the market. (b) competition is currently not intense and there are few substitutes. and as a U. the support could be: (1) some of our competitors. since in the past few years. have already developed a presence there. What are the advantages for going into the Vietnam market now? Some advantages are: (1) to gain early market share. company. For no. (5) the IT market in Vietnam is currently generally small. For yes. The unattractive aspects of the market are: (1) the IT boom is at least two years away. the support could be: (1) the current political. the attractive aspects of the market are: (a) the potential growth is high. however. including the legal framework. but they must support their answers. and (6) the barriers of entry in the market are low. Australia. (4) we can still serve home customers in Vietnam with our operations from other parts of Asia. Singapore. such as IBM. legal and business environment is uncertain and there is too much risk. (5) the HP brand is already well known in the Vietnam market. the market has doubled in size and growth is expected to be more rapid over the next few years. the computer industry is highly fragmented and intensely competitive. With clearly thought-out and well-defined strategies. (2) there is a lack of IT personnel in Vietnam. that demand will build up over the next few years and more players will enter the market. Singapore. (2) there is no clear leader in the market yet. 6-9 . (3) it will take time to build up the business. is uncertain. In the short term however. for example. Overall. (4) we need to have a presence in the Vietnam market to serve some of our home customers who are there. and (6) the entry barriers for the market are low. (2) there is a lack of infrastructure for IT in Vietnam. Is this the right time to enter the market? Students will give a “yes” or “no” answer. there is still some risk in doing business in that country. (4) there is a lack of IT personnel in Vietnam. and Japan. there is a window of opportunity for first mover advantage in getting market share. Since Vietnam is still an emerging market. and (3) there is credit squeeze and lack of funding in the country. (2) there is currently a lack of funds and credit squeeze in Vietnam.
Although explosive growth is expected for this sector. The second segment is the telecommunications segment. this sector represents a fairly attractive segment for HP since HP is quite familiar with the requirements of this sector. The fourth segment is the manufacturing sector. may be low. the timing is uncertain. Overall. since HP has strong expertise in this area. This industry is experiencing regulatory liberalization and investment in this sector is expected to total around US$1. and may not be opened up in the near future and. This sector is seen as crucial for other developments. The positive aspects of this sector are: (1) it tends to view IT as a tool for competitive advantage and will likely invest in IT and become a heavy user of IT.2 billion and growth is expected to surge. Overall.32 billion. Analysis of Market Segments The case provides two bases of segmentation: (1) by industry and (2) by customer benefits sought. thus. The negative aspects of this segment are: (1) it may be price sensitive. this sector is attractive to HP only in the long run as the sector moves into more sophisticated manufacturing operations. Even if IT is utilized. Overall. The negative aspects of this sector are: (1) it may develop its own IT technology. The first segment is the financial services industry.Case 6 Hewlett-Packard Company in Vietnam 2. and (3) this sector may be a light user of IT at the initial stages of development since management may elect to adopt a manual system of operation. The positive aspect of this segment is that reliability is an important requirement and HP has this capability. The sector is currently a public monopoly. This sector is still in its infancy. this sector may not be an attractive area for HP as growth potential is uncertain and HP is not familiar with this sector. The Vietnam population lacks the skill to handle sophisticated IT equipment at this stage. this sector represents an attractive segment for HP. The positive aspect of this market is: (1) it may be a heavy user of IT. This sector currently has investment of US$2. The negative aspect of this segment is that the technology required is fairly standard and entry barrier. and (2) the sector is currently government-based and this type of customer may have strong bargaining power. We shall examine the segments by industry and relate these segments to the benefits they look for. 6-10 . (2) the technology is fairly standard and entry barrier may be low. It is experiencing explosive growth and has government support. thus. Overall. and (4) this segment will be very demanding when it comes to reliability and service since IT is critical to their operation and HP is capable of providing this level of reliability and service. (2) this sector may not be price sensitive. The third segment is the hotel and tourism segment. (3) global integration is probably a requirement and HP has this capability. real explosive growth may come much later. This sector. however. may not take off due to the current lack of hard currencies in Vietnam. (2) it requires complex technology which HP probably has the capability. IT growth in this sector is expected to be slow as Vietnam is expected to attract low value-added and labor-intensive manufacturing operations. and (3) reliability is an important requirement and HP has this capability too. the technology involved may be fairly rudimentary at the initial stages.
and (4) it may be a relatively light user of IT in the near future. may not be a heavy user of IT and HP seems to be quite inexperienced in this sector. finance and telecommunications are the top segments HP should target. The negative aspects of this sector are: (1) it has relatively high bargaining power. requiring light usage of IT. Some useful criteria that can be used are: (1) probable level of usage of IT. however. Competitive and Company Analysis We can examine the competitors and the company by focusing on various areas. one way to prioritize the segments is to rank the target industries against the benefit segments. IBM is number one with HP a distanced second with less than 40 percent of 6-11 . The positive aspect is the government focus on IT and its IT2000 plan. Performance Exhibit 6 of the case provides some figures. Based on the case information. These can be analyzed in the light of other information provided in the case and those from other sources. it is important that HP focuses its efforts where they can have the most effect. but the incorporation of IT in the short and medium term may be uncertain. This sector is expected to experience explosive growth. Some students may suggest other segments. 3. Exhibit TN-1 of this note shows the relevant analysis. Since resources are limited. the retail sector. In terms of revenue. Overall. The level of investment the industries and HP is likely to receive. HP appears to lack extensive experience in this sector. (3) speed of IT diffusion in the segments. The last segment is the government sector. and (4) customer buying criteria and their fit with company capability. (2) price sensitivity. For the retail sector. for example. (2) it will likely be price sensitive. The sixth segment is the oil and gas sector. How can the segments be prioritized? One way is to identify some criteria and to assess the segments against these criteria.Case 6 Hewlett-Packard Company in Vietnam The fifth segment is the utilities sector. as well as their fit to HP’s installedbase and presence worldwide can analyzed. The sector appears to be taking off with huge growth and with a fairly high degree of privatesector involvement. Utilities and government are selected as secondary target segments. (3) it lacks the funds and skilled manpower to manage IT. the adoption rate of IT in each industry. The sector may also not be opened up to the private sector and the government-related customer is likely to have strong bargaining power. This sector represents only a mild opportunity for HP and the company may want to participate in this sector mainly to improve its profile in the country. The retail sector is not really taking off in Vietnam and their operation tends to be labor-intensive. the technology required may be fairly standard and so entry barrier may be low. From this analysis. This sector. this sector may only be fairly attractive to HP since it lacks experience in this sector.
IBM has representative office in Hanoi since 1992.021 while HP was a distanced second with revenue per employee of US$234. DEC’s revenue is about half of HP’s while UNISYS’s and Compaq’s were around half of DEC’s. mission sensitive. mission sensitive Telecommunications Mission critical. while both HP and Compaq had net profit margin of around 6. It’s considered a global player and has strong presence in the AsiaPacific. and employment. mission sensitive Technology Government Size Depending on sectors Low In specific (initially) countries to High (mature) Medium to High (IT-2000 No High plan) In terms of size based on capitalization.4 percent. UNISYS had the highest net profit margin of around 7.3 percent. assets. Compaq had achieved the highest revenue per employee of US$716. or Technology Hotel and Tourism Economy Manufacturing Utilities Oil and Gas Geographical presence Mission critical. They have a representative office in Hanoi since 1992. 6-12 . In terms of productivity.719. both IBM and DEC had made losses. including Japan. the various players can be rated as follows: IBM: large Hewlett-Packard: medium DEC: medium Compaq: medium Bulls: small UNISYS: small Involvement in Asia-Pacific Region DEC IBM Ten percent of its activities are in the Asia-Pacific. Exhibit TN-1 Industry Analysis of Target Segments Benefit Segment Investment Adoption Rate HP Presence Level of IT in Sector High High Yes High Medium High High High High Low Low Medium Yes No Yes No Financial Services Mission critical.Case 6 Hewlett-Packard Company in Vietnam IBM’s revenue. In terms of net income in 1994. with both of them facing increased losses from 1993.
Singapore. 6-13 . retail. financial services. and telecommunications. insurance. There is no information on their current level of involvement in the Vietnam market. Japan. UNISYS Manufactures and markets computer-based networked information systems and software.Case 6 Hewlett-Packard Company in Vietnam UNISYS Has 5 percent of activities from Asia-Pacific region and 7 percent from Japan. IBM IBM is a total solution provider. experience. It has 1500 consultants Worldwide and provides insights. Indonesia. and servers) in the world. Key focus is in finance. HP is currently represented by several distributors in Vietnam. and specialized skills to customers. Focuses on airlines. Offers related services such as IT outsourcing and systems integration. Has strong and long (over 25 years) presence in many AsiaPacific countries such as Hong Kong. Bull HP Considered a global player but has only small set-ups in many Asia-Pacific countries. utilities and retail. transportation. portables. and China. banking and finance. and Korea. Compaq Leading manufacturer and supplier of PCs (desktops. They also have production facilities in some Asia-Pacific countries. Experienced in healthcare. software and services. and telecommunications. Compaq Compaq’s products are widely available in the Asia-Pacific region. Has a strong client base in government. Also has presence in emerging Asia-Pacific markets such as the Philippines. public sectors. Taiwan. UNISYS has a representative office with 15 marketing staff stationed in Vietnam targeting to set up a subsidiary operation there. and manufacturing. UNISYS specializes in business-critical solutions based on open information networks in transaction-intensive environments. Key Areas of Operation/ Differentiation DEC Leading supplier of networked computer systems. They recently installed equipment for the banking sector for SWIFT in Vietnam. They have established strong and intensive distribution network in the region.
Global support. 4. The strengths and weaknesses of the various competitors are summarized in Exhibit TN-2 of this case. Of these. and they may start with stand-alone computers and simple server systems. followed by majority joint venture with local partner. HP should focus on simple computer systems and stress on quality and value for money. IBM. Hewlett-Packard is in a strong competitive position and is in good shape to enter the Vietnam market. Modes of Entry The case listed five possible modes of entry into the Vietnam market. Here. For open systems. Strong in indirect marketing through distribution channels for their products. Control Control over its strategy and operation will be greatest with the direct presence option. UNIX computing. Initially. HP’s key threats are from UNISYS and Bull who also have expertise in this area. both IBM and DEC are formidable threats and HP may want to develop stronger market presence in Vietnam since both these players already have a presence in this market. Students may also identify other possible modes of entry. Compaq may be a strong contender. Initially. distribution (ex-HP employee) and distribution (independent partner). and UNISYS who have experiences in these areas.Case 6 Hewlett-Packard Company in Vietnam Strong in both consumer and corporate computing markets. They may want to use their extensive experience in computer education to help customers learn to assimilate the tool. For the attractive finance and telecommunications sectors. These modes can be evaluated using some common criteria. the Vietnamese customers may not have the resources and expertise to use complex computer systems. cooperative venture/ franchising. HP’s key threats come from DEC. Overall. Open systems. 6-14 . client-server computing system. Vietnam is an emerging market and the premium price position of HP may not work well in this market. Bull HP Open systems with stress on global coverage. but both these competitors are weak in size and influence.
or majority joint venture) will result in heavier fixed costs and overheads. Strong network management offering. Functional silos (independent corporate entities within HP) create chunks within products and solution offerings. The options involving greater commitment (for example. No strong UNIX client-server offerings. mission-sensitive enterprise computing market. Number three in Intel PC servers. may 6-15 . Worldwide support and service infrastructure. Weaknesses New entrant in missioncritical. Lacked a credible open-system client-server image. and service infrastructure. Number one in customer satisfaction. Strong current demand for ALPHA products.Case 6 Hewlett-Packard Company in Vietnam Exhibit TN-2 Company Compaq DEC Strengths Leader in Intel PC desktops and servers. Largest IT company status and enormous resources. Number one in UNIX computing. Strong in selected focus industries and areas. direct presence. Weak financial position. HP The best performer among computer hardware and service vendors. Huge installed base of mainframe customers. Uncertainty in long-term future of new ALPHA products. Variable costs. Worldwide support and service infrastructure. Downsized over last several years. Spent millions on OS/2 with little results. Costs and Profits The issue of costs and profits are not so clear cut. UNISYS Mainly a system integrator in selected industries today. IBM Mainframe market growth was stagnant. Number two in Intel PC worldwide. which competitors could attack. worldwide support. Recognized as leader in opensystems client-server computing.
and distribution. the costs and profits will depend on volume and turnover. If turnover is low. be lower due to HP performing many of the tasks and marketing functions. using distributors) may result in lower fixed costs. If distributor power is high. The use of options involving greater commitment will result in high fixed costs and overheads. Variable costs may be higher since these distributors will have to be paid a margin for performing various tasks and functions. Going all alone ourselves (direct presence) may be weakest in providing local knowledge and contacts. If long run profit is the key driving force. Decision There is no right or wrong answer here. Resource and Investment Requirements Resource and investment requirements will be highest with direct presence. since if we engage distributors in the market. 6-16 . overhead and fixed turnover is high. unless the headquarters are willing to bear the overheads for a period of time. The options involving less commitment (for example. As such. margins paid to distributors become an erosion of the profit margin. Speed of Market Penetration The use of distributors or cooperative ventures/ franchising may enable HP to penetrate the market quickly. The long-term use of distributors may result in continuous payment of margin and may represent an erosion of our profit margin. If control is important to HP. It is a matter of where the priority is. Direct presence and majority joint venture will result in slower penetration of the market since HP has to go through the process of setting up the business from scratch and this involves time and efforts.Case 6 Hewlett-Packard Company in Vietnam however. Overall. the options of using distributor (local partner). followed by majority joint venture with local partner. they may become entrenched. Market Knowledge and Contacts A local partner will be able to provide the local knowledge and contacts. since all the set-up and overheads will be borne by the distributors. and steps have to be taken to generate volume and contribution for these overheads. then management may opt for less commitment. and joint venture with a local partner will enhance this area. it may also represent a threat in the future. cooperative venture/ franchising. options involving greater commitment may be favored. then a heavier commitment (direct presence) is called for. and it may be difficult to break a distributor relationship in the long run. cooperative venture/ franchising with local partner. If risk and uncertainty is considered too high in the Vietnam market.
to ensure them a safe and pleasant 6-17 . 1999. yet lessen the resource and investment requirements. • Customers To provide products and services of the highest quality and the greatest possible value to customers. • Fields of interest To participate in those fields of interest that build upon our technology and customer base. This will help to maintain the image of HP. CURRENT SITUATION A. Posture 1. Objectives • Profit To achieve sufficient profit to finance our growth and to achieve corporate objectives through self-generated resources. Revenue = $25 billion • Headquarters in Singapore B. • People To help HP share in the company’s success which they make possible. STUDENT STRATEGIC AUDIT/STUDENT PAPER VIII. but set up a branch office in Vietnam to control and support the operation of distributors. and that enable us to make a needed and profitable contribution. 2. to provide employment security based on their performance. I.000 employees worldwide • Second in IT market. first in net income • Strong reputation and brand identity • Industry leader—open systems technology and solutions • Initial step formed relationships with Vietnamese distributors • 1994 net income = $1. Mission To provide customers with devices superior to any competitive offering in performance. quality.Case 6 Hewlett-Packard Company in Vietnam It is also possible to use a combination of some options. HP can use primarily distributors. thereby gaining and holding their respect and loyalty. Current Performance • 1995 annual sales $25 billion • 90. • Growth To let growth be limited only by our profits and ability to develop and produce innovative products that satisfy real customer needs. that offer opportunities for continuing growth. and overall value.6 billion.
Not given Top Management • • • • • • • Heads of seven SBU’s CSO—Computer Systems Organization CPO—Computer Products Organization TMO—Test and Measurements Organization APO—Analytical Products Group MPG—Medical Products Group WCSO—Worldwide Customer Support Organization III. • Getting the best output from a given technology. • Possess low overhead cost. 4. • Boast diversified products and services in computation. Strategies • Build up many major customer accounts with multinational corporations with offices worldwide. • Giving the customer the best performance for price paid. and to help them gain a sense of satisfaction and accomplishment from their work. and communications. to recognize their individual achievements. Board of Directors • B. its people. II. • Have a large network of subsidiaries and associated companies in different countries in AsiaPacific. measurement. • Citizenship To honor our obligations to society by being an economic. Policies • Getting the highest return out of the company’s most important asset. CORPORATE GOVERNANCE A. • Possess efficient distribution and marketing channels. Social Environment 6-18 . 3. • Management To foster initiative and creativity by allowing the individual great freedom of action in attaining welldefined objectives.Case 6 Hewlett-Packard Company in Vietnam work environment. EXTERNAL ENVIRONMENT (EFAS see Exhibit 1) A. intellectual and social asset to each nation and each community in which we operate.
seven SBU’s B. Task Environment • • • • • • • (O) (T) (O) (O) (T) (T) (O) IT market in Vietnam has potential Bad Telecommunications System IT 2000 Financial services market High competition Dropping computer prices Cellular IV. Sociocultural • (O) Young population • (O) Well-educated workforce • (O/T) Guanxi 4. Corporate Culture • Focus on capable. and enthusiastic people • Gaining customer respect • Employees should share in HP’s success • Pleasant work environment • Satisfaction and sense of accomplishment from work • Recognize individual achievements C. Corporate Environment • • Decentralized decision making Divisional structure. Corporate Resources 6-19 . Technological • (T) Industries are inefficient B.Case 6 Hewlett-Packard Company in Vietnam 1. INTERNAL ENVIRONMENT (IFAS see Exhibit 2) A. innovative.S. embargo lifted • (T) Vietnam under-urbanized • (T) Lack of fully convertible currency • (O) Lowered corporate income tax • (T) Bad banking system • (O) Low wages in Vietnam • (T) High inflation 2. Economic • (O) Vietnam economy opening up/U. well-trained. Political-Legal • (T) Political instability 3.
Case 6 Hewlett-Packard Company in Vietnam 1. Strategic Alternatives 1. Stability Pro: Minimize risk and costs Con: Forego on emerging markets 2. Finance • • • Profitable and growing company (+) Consistently strong sales (+) Increasing costs of revenue (-) 3. Information Systems • None mentioned V. Operations • Experience with emerging markets (+) • High customer satisfaction ratings (+) • Client/Server computing (+) • Leader in open systems (+) • Diversified products and services (+) • Inadequate communication between SBU’s (-) • Inability to provide support to end-users through channel members (-) 5. Growth Pro: Gain market share and increase revenue Con: Increase risk and cost 6-20 . Marketing • Quality brand identity (+) • Highly diversified products (+) • Good relationships with major multinational corporations (+) • Respond quickly to changes in consumer market (+) • Tracked consumer buying preferences (+) 2. Research and Development • Past 5 years reinvested 10 percent of revenue (+) 4. Human Resource Management • Recruit local people (+) • Commitment to employees (+) 6. STRATEGIC ALTERNATIVES AND RECOMMENDED STRATEGY A. STRATEGIC FACTORS (SFAS see Exhibit 3) VI. Retrenchment Pro: Preserve liquid assets Con: Lose current and future market share 3.
IMPLEMENTATION Strategic Factor: Priority: Action Plan: Set up by: Implemented by: Reviewed by: Factor Reviewed: How Often: Strategic Factor: Priority: Action Plan: Set up by: Implemented by: Reviewed by: Factor Reviewed: How Often: Strategic Factor: Priority: Action Plan: Set up by: Implemented by: Reviewed by: Factor Reviewed: How Often: Strategic Factor: Priority: Action Plan: Set up by: Implemented by: Reviewed by: Factor Reviewed: How Often: Strategic Factor: Priority: Action Plan: Set up by: Implemented by: Reviewed by: Factor Reviewed: How Often: Strategic Factor: Priority: Action Plan: Set up by: IT 2000 2 Establish relationship with MOSTE Asian Management Team (AMT) Head of CPO John Peters Government Commitment Monthly U. Recommended Strategy Growth. Embargo and Relations 1 Evaluate the environment AMT John Peters John Peters Environment Monthly High Competition 2 Stay ahead AMT COP John Peters Market Share Monthly Financial Position 1 Maintain position Head of finance department Finance Department Top Management Revenue and net income Monthly Experience with emerging markets 1 Sustain and utilize experience AMT John Peters Top management Business relationships Monthly Quality Brand 1 Maintain quality identity AMT 6-21 .Case 6 Hewlett-Packard Company in Vietnam B. To take primary advantage of emerging SoutheastAsia markets and increase revenues and sales VII.S.
6-22 .Case 6 Hewlett-Packard Company in Vietnam Implemented by: Reviewed by: Factor Reviewed: How Often: Strategic Factor: Priority: Action Plan: Set up by: Implemented by: Reviewed by: Factor Reviewed: How Often: Strategic Factor: Priority: Action Plan: Set up by: Implemented by: Reviewed by: Factor Reviewed: How Often: Strategic Factor: Priority: Action Plan: Set up by: Implemented by: Reviewed by: Factor Reviewed: How Often: Strategic Factor: Priority: Action Plan: Set up by: Implemented by: Reviewed by: Factor Reviewed: How Often: VIII. John Peters Top management Customer ratings Monthly Political environment 2 Keep abreast with political changes AMT John Peters Top management Political climate Quarterly Guanxi 1 Develop and maintain local contacts AMT John Peters Top management Good relationships Monthly Diversified products and services 1 Respond to market fluctuations AMT John Peters Top management Sales Monthly Good relations with multinationals 1 Maintain and seek new relationships Marketing department John Peters Top management Number of contracts and relationships Monthly EVALUATION AND CONTROL Covered in Section VII.
05 4 4 4 3 4 .10 .20 .40 .60 .40 .05 .Case 6 Hewlett-Packard Company in Vietnam IX. EFAS.20 Business units taken initial/ad hoc steps Open systems center to assist MOSTE Asian management team advantage Signed up distributors/wholesalers/ resellers “The HP Way” – A commitment to employees Weight Rating Weighted Score Comments TOTAL SCORES 3.20 .80 .15 . IFAS.15 .10 . and SFAS EXHIBITS Exhibit 1 EFAS (External Factor Analysis Summary) Key External Factors Opportunities U.S.05 .05 4 4 4 4 4 .10 . embargo/relations IT 2000 program Guanxi IT market in Vietnam Well-educated Vietnamese work force Threats Completion Slow banking and finance systems Inefficient telecommunication systems Political environment Lake of technology in manufacturing industry .95 6-23 .15 .60 .20 HP’s knowledge and experience Major Rivals/HP ahead of most Extensive experience with this industry Extensive experience with this industry HP aware of uncertainties .40 .
60 Extensive in Asian markets Strong reputation Profitable and growing Good with many major accounts Diversified Weight Rating Weighted Score Comments TOTAL SCORES 4.75 .00 .30 . EFAS.30 6-24 .10 3 3 .15 5 5 5 4 4 1. IFAS.60 .15 .30 Difficult Often acted as separate companies .Case 6 Hewlett-Packard Company in Vietnam IX.15 .15 . and SFAS EXHIBITS Exhibit 2 IFAS (Internal Factor Analysis Summary) Key Internal Factors Strengths Experience with emerging markets Quality brand identity Financial position Relationships with multinational companies Products and services Weaknesses Quality of end-user support Communication between SBU’s .10 .20 .75 .
S.50 .40 .10 .50 .10 .50 . embargo/relations Competition Financial position Experience with emerging markets Brand identity Relationships with multinational company Guanxi Political environment Products and services TOTAL SCORES Weight .10 .10 .10 .40 . SFAS.15 . and IFAS EXHIBITS Exhibit 3 SFAS (Strategic Factor Analysis Summary) Duration Key Strategic Factors IT 2000 program U.00 Rating 4 4 4 5 5 5 4 4 3 4 Weighted Score .25 X X X X X X Comments S X X X I X X X X X X X X X X X X X X X Diversified L X X X X Open systems center to assist MOSTE Business units taken initial/ad hoc steps Major Rivals/HP ahead of most Profitable and growing Extensive in Asian markets Strong reputation Good with many major accounts Asian management team advantage HP aware of uncertainties X. FINANCIAL RATIO ANALYSIS 6-25 .60 .15 .05 .10 .Case 6 Hewlett-Packard Company in Vietnam IX.20 4. EFAS.60 .40 .05 1.15 .
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