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Apple and Hewlett Packard During 2008 Financial Crisis Case Study


Introduction

The 2008 financial crisis that was partly due to unlimited and unregulated speculations brought to an end many things had been experienced before. However, it changed the way countries approached their spending patterns and even the way corporations do business. The downturn caused a tremendous change in the consumption pattern as consumers became more sensitive to prices and value consciousness.

Technology companies that have taken advantage of the rising demand

Though the general demand has not reached the level it was before the crisis, many companies have taken advantage of the rising demand and have made tremendous sales. Apple and Hewlett Packard are such companies. The rising consumer demand is characterized by value consciousness, frugality and brand loyalty (Flatters & Willmont, 2009). In addition, the consumers are more sensitive to prices and quality.

Companies have no choice but to produce according to the consumer expectations. Companies have to adopt new strategies that would ensure customers’ value and provide low cost prices (Mansoor, 2011). Apple has adopted the cost cutting strategies in none priority areas. The company cut the functional budgets by 10% in 2008/2009 financial year as a strategic response to the crisis.

However, the company has increased its spending on the functional areas considered strategic for the growth of the business. These include marketing as well as research and development (R&D). Spending on research and development has helped the company innovate itself out of the crisis through development and manufacture of new products such as iPad. The customers perceived iPad as having high value and the product value corresponded with the price offered. The argument presented by the company is that the spending on research and development would result in innovations that will end up providing business with long-term competitive advantage.

The company also focused on marketing and it was placed in the same category with research and development. The company argued that investment in marketing would ensure increased production and satisfactory return on investments. The company focused its marketing on building the brand and PR activities. Hewlett and Packard, on the other hand, used the expansionist strategy through takeovers and acquisitions of its smaller competitors. With the contracting customers, the company has increased its customers’ base through acquisitions while drastically reducing competition. Moreover, the company has invested much in brand building as well as other marketing strategies.

Change in consumer demands

After the crisis, the consumer aspirations, attitudes and purchasing patterns changed. The crisis resulted into consumers looking for new landmarks, becoming more economical in their spending and moving the demand towards the most essential products. In other words, the crisis led to the drastic fall in demand in such items considered luxurious. According to studies done by Flatters & Willmont (2009), the financial crisis has caused new frugality among the consumers and it wouldn’t not end soon. The consumers have become more aware of the product value they buy and that has influenced on prices and brand image.

The studies also indicated that consumers are now more focused on low prices as they undertake cost-cutting measures in their spending. Consumers are focusing more on savings than before the crisis. Frugality and value consciousness are now the major determinants of the consumer spending (Mansoor, 2011). In as much as they continue to buy products at different prices, the price justification is a major factor that would determine the purchase. In other words, the value of the product must be seen commensurate to the price. Moreover, consumers can continue buying at higher prices but only if they would receive the quality advantage in return (Lewis & Bridger, 2011).

Brand loyalty also determined the behavior of consumers during the crisis. Consumers would always wait for the prices of their particular brands to fall in order to make the purchases (Flatters & Willmont, 2009). In the technology industry, the consumption pattern changed with consumers adopting the logical standby and waiting for the prices of their brands to decrease or substitute their brands with the cheaper but similar brands. This trend is not likely to change even if the economy recovers.

Upon the realization of the changing pattern of consumption, companies such as Apple and Hewlett Packard have come up with marketing strategies that have ensured the consumption of their products amid the financial crisis. These technology companies have lowered their prices while providing value to their customers. Apple has maintained dominance in innovative products that have been offered at reduced prices. In as much as the demand for similar products falls in the industry, the demand for Apple products is increasing. This is due to higher value of the products being offered at reduced prices (Lewis & Bridger, 2011).

For the loyal consumers, the company offered discounts and coupons that compromise the prices and comfort of the brand. Hewlett Packard adopted the expansionist strategy taking advantage of consumers of the absorbed companies. However, the company has also improved the quality of its products.

Strategies utilized by MNCs to make profit by leveraging the growing consumer demand

Cost maximization

With the shrinking economy and low demand, corporations have to adopt new strategies to remain competitive and increase revenue. One of these strategies is cost maximization. Basically, cost maximization is the strategy that will bring long-term gains to the business (Flatters & Willmont, 2009). These areas include research and development, marketing, human resources and IT functional areas.

Organizations that invested in such areas during the crisis like Apple are now reaping the benefits as the global demand rises. Cost optimization is all about focusing on those actions that will add value, build and sustain competitive advantage. In addition, cost optimization is about making the company efficient and as simple as possible in its operations. Finally, cost optimization is about making the company to be better in its business planning and to enable it to be smarter in its decision making.

Value creation

Value creation is another strategy that companies can apply in order to increase their revenues. Businesses must focus on those activities that will add value to their products and in turn add value to the customers (Flatters & Willmont, 2009). The organization management should put a lot of investments in areas where value is being created. The company should not focus its investments on low value-adding products that eventually will not benefit the organization.

Conclusion

The financial crisis changed the way companies conducted their business. The spread of the crisis caused a global fall in demand. In addition, the stocks of major companies declined drastically in major security markets. However, major gains in technology companies came to the rescue of the world economy. Such companies employed various strategies that made them continue making profit despite the crisis.

References

Flatters, P. & Willmont, M. (2009). Understanding the post recession consumer. Harvard Business Review, 7(8), 106-112.

Lewis, D. & Bridger, D. (2011). The soul of new consumer, authenticity what we buy and why in new economy. Londnon, UK: Nicholas Brealey Publishing.

Mansoor, D. (2011). The global business crisis and consumer behavior. International Journal of Business and Management, 6(1), 104-115.

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IvyPanda. (2020, November 28). Apple and Hewlett Packard During 2008 Financial Crisis. Retrieved from https://ivypanda.com/essays/apple-and-hewlett-packard-during-2008-financial-crisis/

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"Apple and Hewlett Packard During 2008 Financial Crisis." IvyPanda, 28 Nov. 2020, ivypanda.com/essays/apple-and-hewlett-packard-during-2008-financial-crisis/.

1. IvyPanda. "Apple and Hewlett Packard During 2008 Financial Crisis." November 28, 2020. https://ivypanda.com/essays/apple-and-hewlett-packard-during-2008-financial-crisis/.


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IvyPanda. "Apple and Hewlett Packard During 2008 Financial Crisis." November 28, 2020. https://ivypanda.com/essays/apple-and-hewlett-packard-during-2008-financial-crisis/.

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IvyPanda. 2020. "Apple and Hewlett Packard During 2008 Financial Crisis." November 28, 2020. https://ivypanda.com/essays/apple-and-hewlett-packard-during-2008-financial-crisis/.

References

IvyPanda. (2020) 'Apple and Hewlett Packard During 2008 Financial Crisis'. 28 November.

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