Today we’re going to explore this topic further by examining Hewlett Packard as a case study.


We looked at Porter’s model last week and we will look at a case study this week where we can use this model as an aid to help us analyse it. it Remember that for a Five Forces analysis of an organisation or of a division of an organisation, in a similar manner to a SWOT analysis, you seek to identify and list the major items for each category. So for the five forces, develop a brief list of major items for each. Keep in mind that the perspective here is of the organisation and its interaction with its external environment. Unlike SWOT analysis, you do not attempt to review the internals of the organisation.


A copy is provided in the Required Reading section – make sure you read it. and an accompanying strategy for our organisation that is viable and makes sense. The underlying theme is that the Internet is not a strategy it is a technology. This is how we should view technologies such as the Internet and h we should include technology in our business planning activities such as goal d how h ld i l d h l i b i l i i ii h l setting and strategy development. We can include it as a technology in developing our business strategy but we still need to have goals. objectives. the Internet affects many of the factors involved in the five forces affecting an organisation. needed 3 . This demands much better management of organisations so that their planning is more thoroughly performed and reviewed on a much shorter periodic cycle or as needed. As shown above.This diagram is from Professor Porter’s 2001 paper titled Strategy and the Internet. Importantly the Internet as a technology has been as is extremely disruptive to many industries and in particular the rate of change has accelerated tremendously because of it. The Internet does not replace the need to competently perform the PLANNING function when managing ANY organisation.

Strategy and the Internet.Make sure to read Porter’s paper. 4 .

If an organisation or it’s competitors is affected or plans to exploit the Internet for advantage then it should be considering these types of impacts on how it functions and provides its products and services. 5 .Here Porter has considered the impact of the Internet and related-technologies on an organisation’s value chain.

6 . At the same time Dell was slipping losing its #1 position to HP and forcing the company’s founder. the main winner was Hewlett Packard that grew sales of its PCs worldwide to become the #1 supplier of PC’s for the global market with over 17% of the market share. to come out of retirement and takeover once again as the CEO of Dell Computer in order to try and fix its problems. especially during 2006.At the time IBM decided to exit the PC business the #1 competitor globally was Dell Computer with about 18% market share (of all PC’s sold worldwide). Michael Dell. In the short term.

It appears that the re-direction IBM took in 2004/05 was the right one and it’s subsequent and current business strategy is on track. 7 .Over the last 5 years IBM has been solid investment – reflecting the solid performance of the company.

Importantly IBM appears to be headed in a direction where revenue growth is being achieved and is sustainable.This document is available from IBM’s website and their latest 2011 Annual planned and according to their strategy. It has reduced it’s reliance on IT hardware revenue by more than half to only 15% of total revenues. The top chart clearly shows the direction IBM has taken since 2004/05 when it sold the PC business. It has also significantly increased the revenue share from software services to 44% . 8 .

So let’s look at one of IBM’s competitors. 9 . Compare its sources of revenue to the IBM chart a few slides ago. Founded by entreprenuers today it is world #1 in supplying personal computer equipment. Hewlett Packard (HP).

Also look a the market share for Apple – for computers. This data is from the period where Apple was shifting focus from PC’s to telecommunications and entertainment (iPhone) and just about to announce the iPad (in ( ) j ( Jan 2010) to expand into e-book publishing and further into entertainment. 10 . Not even in the global top 5 and barely in the top 5 for the USA.Since this chart HP’s market share has slipped further from about 20% to about 18%.

and inkjet printers).HP’s history has long been in developing and manufacturing electrical and electronic equipment – and that was the initial reason it was founded. It was there early on with PC’s too – from 1980. And remember when we looked at Kodak? HP is a global leader in supplying digital printers (such as laser printers. 11 .

Competitor to HP’s personal computing business was/is Apple. And in early 2010 they announced the new iPad tablet PC. 12 .

netbook pc’s..Apple’s competitors HP and Samsung both reacted quickly to Apple’s news about the iPad and rapidly sought to compete with their own Tablet PC as soon as possible.e. 13 . that both had products for. Also the Tablet PC quickly proved to be a substitute for compact laptops. i.

Like the iPad set the benchmark for Tablet PC’s in 2010 the Palm Pilot set the benchmark for PDA’s in 1996 and set the technological trend that evolved into the Smartphones of the early 21st century. It was expensive. was a market failure. For HP the primary reason to acquire Palm Inc. d b ii 14 .. The original HP tablet PC was to use Microsoft Windows for the operating system software. HP reviewed its plans and cancelled the Windows-based tablet PC – apparently since HP realised the iPad was a far superior product and it needed a better product to be competitive. After Apple’s announcement of the iPad. first major decisions he made was to cancel development and production of the Newton. was to acquire the webOS software. p Actually HP did have a tablet PC in development in 2009 which it announced in early 2010 around the same time Apple announced the iPad.The Palm Pilot was the first widely successful Personal Digital Assistant (PDA) in the mid-1990’s. complicated. and the handwriting recognition on the pen-based screen proved unreliable When Steve Jobs returned to Apple in 1997 as CEO one of the unreliable. which was failing as a company and heading towards bankruptcy. the Apple Newton launched in 1993. HP hoped that webOS would enable it to jumpstart the development of new products – such as their own tablet PC to compete with the iPad. Interestingly Apple attempt at a PDA.

couldn’t it Around this time last year Apple held about 60% share of the global tablet PC market with its iPad compared to Android software-based tablet PC’s from various manufacturers (including Samsung) that held about 30% market share collectively. Initial reviews of the TouchPad rated it poorly and put much of the blame on the webOS software on it.) 15 . (Android is an operating system for mobile devices such as smartphones and tablet PC’s being developed by an open alliance of various organisations led by Google Inc. The stampede to buy the TouchPad at $99 at least proved something: that the marketplace would accept an alternative to Apple iPad as long as it was significantly cheaper than it if it couldn t be technically better that it. HP unexpectedly announces it is dumping the product altogether and abandoning any further development and production of Tablet PCs. The webOS software that HP acquired with Palm in mid-2010 appeared to be effectively worthless.Only 7 weeks after sales commence of the TouchPad.

end-user (non-PC) devices. Leo’s plan was that HP would abandon the PC business (of which it primarily manufactured and supplied hardware) and would re-direct itself towards software. But HP is the world #1 in the PC business.Sound familiar? CEO Leo Apotheker seemingly was attempting to copy IBM’s change in direction in 2004/05 when it exited the PC business to focus on software and services. Quit while the leader? It also was world #1 in the associated printer business. and services. 16 . The problem was that IBM’s change in planning and strategy made sense for IBM – at the time it’s market share in the PC business was slipping rapidly. What L f il d Wh Leo failed to consider was that the B d of Di id h h Board f Directors at HP had a reputation – f h d i for firing their CEO.

Since then she has focused on stabilising confidence in the company and planning the “new” new direction for HP new HP. minus the PC business and almost a copy of IBM’s redirection plans since 2004. observing the interests of shareholders for the company. But she saved the smartphone products (still made and sold today) and re-started the Tablet PC development program. She was too late to save the production of the Touchpad – which remained cancelled. was rejected by investors. The Board of Directors at HP. HP is once again developing a Tablet PC – most likely to be launched in 2013. 17 . Immediately (on her 1st day as CEO). reacted swiftly by removing Leo Apotheker and replacing him with Meg Whitman as CEO. Whitman announced that HP had cancelled all plans for the new direction and would keep the PC business.The new direction for HP.

18 .HP has dumped the webOS software it acquired with Palm Inc as the platform for its Tablet PC products. The other significance of this decision is that HP is retreating from an expansion of their own in-house software development plans – instead choosing to license “off-the-shelf” software from others. The new Tablet PC (TouchPad 2 ?) will use the new Windows 8 software from Microsoft.

And there it is. Apotheker. At least under CEO Whitman the price stabilised and has stayed higher than the lows it reached when HP shocked investors in August 2011. And in the 2011 HP got it wrong – and the significant detrimental impacts started to show. This company has been unstable in its leadership since CEO Fiorina was fired in early p y p y 2005 with four CEO’s since then (including Hurd. as quoted above. the most important management function is the planning function. It remains to be seen if under Whitman’s leadership they get it right. and Whitman).Under CEO Apotheker and during his brief 1 year leadership of HP the company’s share price plunged from the low 40’s to the low 20’s. 19 . What better case study to consider the relationship between technology and strategy than Hewlett Packard in recent times? As Meg Whitman seemingly admits. Will HP finally resolve it’s executive leadership problems and develop an effective competitive strategy? With low profit margins in the PC business it needs to figure out what technological directions to follow and what strategy will be right for them.

Next set of study notes: strategy and more on technology (as part of strategy). 20 .

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