Chapter 13

Case 13-3. Texas Instruments and Hewlett-Packard

Case Overview
Texas Instruments (TI) and Hewlett-Packard (HP) are two companies famous for
introducing electric and electronic products. Developed, manufactured, and sold high-
technology electric and electronic products. Although competing in similar industries,
their strategies are very much different.
Texas Instruments had three main lines of business in 1984: component, which
include semiconductor integrated circuits, semiconductor subassemblies, and electronic
control devices; digital products, which included minicomputers, personal computers,
scientific instruments, and calculators; and government electronics, which included
radar systems, missile guidance and control systems, and infrared surveillance systems.
The three businesses generated 46 percent, 19 percent, and 24 percent, respectively, of
TI’s sales in 1984.
Hewlett-Packard operated in two main lines of business: computer products,
which included factory automation computers, engineering workstations, data terminals,
personal computers, and calculators; and electronic test and measurement systems,
which included instruments that were used to evaluate the operation of electrical
equipment against standards, instruments that would measure and display electronic
signals, voltmeters, and oscilloscopes. These businesses generated 53 percent and 37
percent, respectively, of HP’s 1984 sales.

Analysis and Discussion

Inferred from the case, I expect some differences in planning and control system
between Texas Instruments and Hewlett Packard.
Strategic Planning Systems: In term of corporate level strategy, both firms have the
same definition of business in which the firm will participate. TI and Hewlett-Packard
(HP) are both in high-technology electric and electronics. But, the second aspect of
corporate level strategy, which is deployment of resources among the business, may be
different for each firm depends on the objectives that they want to achieve and
competitive advantages that they have.
 TI is well known for its first to entry, stay and try to achieve market leadership
by cost leadership strategy. Meanwhile, HP is well known for offering unique, high
value, high featured products. In addition, both firms use related diversification as they
operate main business lines which connect to each other and may achieve operating
synergy. For example, TI's business lines, each business line can act as both suppliers
and consumers for others (e.g.: digital products line acts as consumers for component
business line and suppliers for the government electronics business line). The same
condition may be applied in HP.
Budgeting Systems: On Texas Instrument role of the budget is considered as a control
tool for the company. Business unit managers have a low impact in preparing the
budget, but they have to start from scratch every year and justify the budget as a whole,
while at the Hewlett-Packard considered the role of the budget as a means of short-term
planning. Manager of the business unit operates in the immediate environment and they
have a better knowledge about the environment because they greatly affect the budget.
Reporting Systems: TI is more concentrated on reporting issues as the company's
operations as the company's main activities such as the operation (manufacturing and
assembly). Reporting policy issues are less frequent. Instead, HP is more concentrated
on the problem of reporting policy as more companies are engaged in developing new
products. Therefore, less frequent reporting of operating issues.
Performance Evaluation Systems: On TI, performance standards focus more on short-
term results and use criteria such as cost control, operating income, cash flow from
operations. While HP is likely to promote the long-term focus based on market share,
new product development, market development, and human resource development.
Incentive Compensation Systems: In HP, the company gives special incentives to
innovation and the successful market acceptance of new products. In TI, management
are likely to be less reliant on bonuses and more on regular salaries and compensation.
Conclusion
The HP has a more flexible but higher risk strategy. They require constant
innovations to lead the market and these new products demand a premium price. Budget
flexible and there is greater dependent in constant updates and reporting. Management
performance is measured on long-term, non-financial parameters and they are motivated
by higher, but less frequent, special compensations.
TI has a more structured, lower risk strategy, they require efficiency and
productivity to keep maintain low cost and sell prices. Budgets are very important forms
of control and actual performances are expected to adhere to the budget. Management
performance is ensured on short-term, financial parameter and they are motivated by
more frequent but relatively lower special compensations.

Recommendation
Recommended the firms to use the management control tools above as they
correspond to a build or harvest strategy. The use of these expected control systems are
crucial for the strategies of HP and TI to work and for them to achieve their goals.