Background of the Company
Also known as, Hewlett Packard, HP is one of the most successful American companies. The company develops and manufactures computer software and hardware. William Hewlett and Dave Packard founded the company in 1935 and named it Hewlett Packard. The founders started with a diminutive capital that did not match the revenues of other companies in the ICT sector at the time.
Therefore, HP specialized in the manufacture of oscillators. Currently, the headquarters of the company are in Palo Alto, California. The early years of the company were typical of innovation and creativity. In fact, the company manufactured cheap products between 1935 and 1940 with high efficiency.
Hills & Jones (2012) articulate that the first products of the company gave it a competitive edge over its rivals. In particular, HP was able to utilize technology and innovation to manufacture oscillators that were accurate, cheap and reliable.
Throughout the 20th century, HP had been able to capture the needs of the customers by ensuring that it adopted appropriate technology and appreciated change (Preston, 2007). Although HP is one of the largest multinationals in the world, the recent years have been tumultuous due to stiff competition within the ICT sectors across the world (Malone, 2007).
To quell the competition, Malone (2007) asserts that HP focuses on acquisition of companies and mergers as the main strategies to increase its market share and productivity. In 2002, the company merged with Compaq to create HPQ. Nevertheless, the merger did not yield the desired outcomes owing to the increase in the number of companies that had begun to manufacture similar products all over the world (Hills & Jones, 2012).
The failed merger led to the company’s poor performance over the last years. Coupled with the effects of the global financial crises of 2007-2008, HP‘s stock prices have decreased steadily over the last decade. HP has been unable to compete effectively with companies such as Apple and Samsung despite changing its strategies and leadership.
In 2010, the company exited smart phone and tablet business to concentrate on cloud computing and software solutions (Hills & Jones, 2012). The rationale is that the company suffered from inefficiencies in the production systems owing to the fact that raw materials had become scarce.
HP Products and Services
Malone (2007) says that HP has become an international brand owing to its superior products. In particular, the company has experienced success and growth in its technology products that include printers, cameras, personal computers as well as software. The merger with Compaq in 2002 increased the variety of the products for the company (Malone, 2007).
Particularly, HP ensured that Compaq computers represented a significant line of products. HP promotes itself as a supplier of hardware and computer applications. It is also a leader in developing computer applications (Malone, 2007). Besides, the company has focused on the development of technology infrastructure in numerous areas across the world.
According to Hills & Jones (2012), HP has cemented its position as the world’s leading multinational in the production of technology related products. Due to the wide variety of products that the company manufactures, it has various production divisions that specialize in specific lines of production.
Imaging and Printing Group (IPG) is the largest division within the company. The division deals with the production of printing and scanning products and other supplies that relate to printers and scanners (Malone, 2007). Laser Jet printer is one of the most successful products of the division. The annual sales of the laser jet printers surpassed $2 billion in the year 2009 (Hills & Jones, 2012).
The division also manufactures inkjets and provides solutions to customers using the products. For instance, the company released iPrint Photo in 2008. The product aimed at providing the customers with software that allows them to print different sizes of photos using their iPhones. Second, HP has another division that deals with personal computers.
The Personal Systems Group (PSG) division concentrates on the production of personal computers for the company. Among the notable products that the department has produced are HP Pavilion, i-PAQ and Presario.
In addition, the division also specializes in the manufacture of entertainment products including Media Smart TVs and DVD drives. It is important to note that the aforementioned divisions are the largest within the company. Preston (2007) points out that the two departments constitute over 60% of the total revenues of HP. Besides, HP has been able to locate some of the division’s plants strategically.
This allows the company to access cheap labor and raw materials in order to produce competitive products. In fact, HP has over 20 production plants located across the world (Preston, 2007). HP does not only deal with products and goods but also with specific business services and solutions.
Particularly, the company is in the forefront due to its network security and information security services. Through Enterprise Business (EB) department, HP is able to demonstrate responsiveness to technological and business needs of the customers. Finally, HP software division specializes in the development of computer applications not only for specific HP products but also for a myriad of other products.
Through the different divisions, HP has been in a position to increase its market presence and customer loyalty. Hills & Jones (2012) point out that the company was the sole manufacturer of software and hardware for over 50% of American-based small and medium enterprises in 1995 (Malone, 2007). Creativity and innovation was HP’s competitive edge.
For instance, the company was the first in the US to have a registered domain in the 1980s. Hp.com attracted numerous customers and retained customers that HP had. Until the economic crunch of 2007 and 2008, HP products had generated huge profits and revenues for the company.
However, the failure by the management to foresee aggressive competition from Asian firms and other multinationals predisposed the company to the risks of the financial crises of 2008. For the last four years, HP stock prices have declined by an average 7% percent annually (Malone, 2007). Besides, leadership crises within the company have made the company to lose its competitiveness in the international markets.
Hills & Jones (2012) posit that HP has been unable to cultivate a culture of transformative leadership in its organizational structure. A strong organizational structure allows the organization to experience creativity, teamwork and shared vision towards a common goal (Malone, 2007).
To this end, HP should ensure that its products and services are characterized by superior quality and uniqueness. It is after such efforts that the company will be able to remain competitive, innovative and relevant to the contemporary business environment.
HP’s Strategy to Go Global in China
Hills & Jones (2002) postulate that HP should venture in China in order to achieve competitiveness. China provides HP with a solution to its shortages in the production system. Hills & Jones (2002) point out that HP has not been able to put up with the competitive forces because of comparative disadvantage it suffers in the global market.
Being an American firm, HP relies on rare earth materials to manufacture screens, transistors and other components used to produce competitive products (Malone, 2007). This does not only limit its production capacity but it also its competitiveness. While Asian products are of high quality and are lowly priced, HP’s products with similar quality are highly priced (Preston, 2007).
This makes HP uncompetitive in comparison to Asian firms. The reason is that the customers will derive more value by consuming Asian products. As such, the company ought to go global and focus on venturing in China. There are various strategies that HP can prioritize vis a vis going global in China. At the outset, the company should be able to set up a production plant in China.
Currently, the company has exited the smart phone and mobile phone business to concentrate on cloud computing and software solutions. According to Hills & Jones (2012), HP should reverse the decision to exit the tablet and phone business after setting up a production plant. The reason is that the company will utilize its creativity and reduce its production costs (Malone, 2007).
This will in turn give HP a competitive edge in lieu of the fact that the prices of its products will match those of the competitors. Besides, China provides a substantial market for HP’s products owing to its enormous population size.
Secondly, HP should target China owing to the availability of cheap labor in the country. Labor costs constitute a substantial proportion of the total production costs of a product (Malone, 2007).
Preston (2007) says that the decision to venture in China will not only help HP to increase its market share but also improve its competitiveness in the global market. Hills & Jones (2012) articulate that HP should also consider acquisitions and mergers as international strategies.
This implies that HP should acquire strategic companies currently located in China. This will enhance its public image and strengthen its brand in China. Further, HP should ensure that it appreciates diversity and employ staff members from China. This will allow the society to own the company and inculcate a positive image in the Chinese society.
Besides, corporate social responsibility (CSR) has become an important feature of contemporary global companies and organizations (Hills & Jones, 2012). The rationale is that CSR boosts the company’s image and enhances customer loyalty and satisfaction. In other words, HP should be ready to embrace CSR initiatives as a strategy to increase its competitiveness in China and the entire Asian region.
Preston (2007) articulates that the company should use its strengths to penetrate the dynamic Asian markets. HP ought to ensure that it captures the needs of the customers located in the Far East. To do this, the organization should be able to increase its production capacity while reducing the costs associated with labor. Preston (2007) articulates that HP should focus on offering unique products.
This is a paradigm shift from the conventional products offered by such companies as Apple, Samsung and Toshiba. The financial resources that the company saves from cheap labor market and availability of raw materials ought to enhance innovation and creativity (Hills & Jones, 2012).
This will not only increase product differentiation but also enable the company’s products to address the needs of specific categories of consumers (Hills & Jones, 2012). To this end, HP should enhance its creativity and innovation in order to venture into the Chinese business environment.
Summary
In essence, Hewlett Packard (HP) is one of the largest American multinationals. The company was founded in 1935 and has used creativity and innovation to consolidate its position. It develops and manufactures hardware and software, computer applications, personal computers, entertainment devices, printers and network infrastructure. Due to its large size, the company has different divisions that specialize in specific products.
Since its entrance into the market, HP has become one of the biggest companies in the world. Nevertheless, the company has experienced many challenges ranging from 2007/08 financial crises to leadership crises of 2010. As such, it exited smart phone and tablets market in 2010. HP should go global in China to become profitable. The rationale is that it will be able to enjoy the benefits of reduced costs of labor and available raw materials.
HP should also embrace ethical leadership and acquire strategic companies. This way, the company will enjoy myriad of benefits that go together with international trade (Hills & Jones, 2012). HP will not only be able to enhance its competitiveness in the market but also command a substantial percentage of the market share (Malone, 2007).
References
Hills, C. & Jones, G. (2012). Strategic management: An Integrated Approach. New York: McGraw Hill Publishers.
Malone, M. (2007). Bill & Dave: How Hewlett and Packard Built the World’s Greatest Company. Journal of Strategic Management, 7(2), 34-95.
Preston, J. (2007). Sustainability at Hewlett-Packard from Theory to Practice. Journal of Business Management, 5(6), 24-89.