Introduction
Technology in today’s world is moving at a supersonic speed and so is the rate of churning out the number of players in the industry. As such competition has been cut throat with the involved companies generating various ideas that they figure will give them a competitive edge over their rivals. Some of the strategies that we have witnessed since the turn of the millennium have seen the merging of many companies (computer makers) in this regard Compaq and Hewlett Packard.
Industry analysts and managers have projected that results of such horizontal intergeneration measures by such big companies could result in either way as beneficial or detrimental to the involved parties. Now almost six years down the line since the merger of Compaq and HP, the company is down on the hills of EDS one of their main rivals and talks to acquire it is underway. However one thing remains to be seen; whether the talks will go through and how it will affect the two parties.
Of importance to note is that the announcement of HP’s intentions drove the EDS shares up by 28% while HP’s share fell by 5%. In this paper we thus look at the possible strategies that the HP CEO Mark Hurd would adopt should the deal go or fail to go through. Again contrasting this pending deal with the HP Compaq one helps as in speculating on what to expect.
Company analysis
One of the greatest strengths in any company or business venture is the ability of a company to fully comprehend the strengths and weaknesses it has in the face of competition. It therefore happens that the task lies in the management maximizing and protecting business strengths and opportunities. In the face of weaknesses the thing is to beat competition by minimizing threats and working on the weaknesses.
In the case of HP the company has for a long time admitted its position in the market in response to the one held by their competitors. Competition is the factor that is driving more and more companies into debating whether to take the merger and acquisition route or simply integrate. One of the best ways that the company can improve on its business performance if the deal was to go through was to reinstate the investor confidence in the original company and not just because of the acquisition itself. The process of doing so may mainly be said to be secondary as it usually results from improved overall performance of the company after the deal.
The question now shifts into making this deal work for the benefit of the investors trading in the company’s stocks. If the merger with EDS was to go through then I think according to empirical evidence and theoretical support, the company should now focus on reducing its production costs so it can scale down the prices of its commodities. This comes in light of the fact that the company dominates some sectors of the computer electronics industry and especially the market for printers.
On the other hand, EDS in more bent on software development. As a competitive factor, it might be put into perspective that the company is horizontally and vertically integrating at the same time given the specifications of EDS in certain fields of the industry. Therefore ,in the sense that the company has a wide product range, dominated sectors in the industry should not be neutralized in a bid to spread its dominance equitably across the industry.
On the other hand, our expectations are not guaranteed in that it is not obvious that EDS is optimistic about forging a merger with HP. In that case, the CEO should direct his merger and acquisition talks into corresponding industry players other than competitors. This would prove a strong point in that though the company has a strong brand name in the market; it does not match up to its management. This can be pointed out by the failure of the company to acquire the consulting division of PriceWaterHouse Coopers. HP though had offered a more handsome amount for the same the deal was taken up by IBM for a very small amount compared to what HP had initially offered.
This is one of the weaknesses facing the big company. For once the company has been faced with the decision of splitting the company into two to give the PC printer unit its own entity. The rejection by the board of directors according to analysts was the one responsible for the tumbling of the company’s stock and its subsequent loss of a substantial market share. Another weak point in the company’s management lies in its combining of markets. Analysts have been keen in highlighting HP’s aspect of serving the consumer market and at the same time business customers. This is one factor that makes the company target EDS as it is better in serving business customers than HP.
However, many analysts have been quick to point at Fiorina and blaming her for the company’s downfall. What they don’t appreciate about her is the vision that she had laid out for the company. In 2004, she said that she mapped three key goals for HP: ”improving current business, growing current business and growing new business….It is now no longer about our potential. Our potential is clear, it is all about leveraging that potential and executing.” Her view of the company by then was very correct. So the question remains whether she was allowed a shorter period to set the record straight or she did it the wrong way. As of now splitting the company seems to be the only way out for the CEO if at all he can sway the board into this way of thinking.
References
Fiorina: HP’s future is all about execution. Web.
PC magazine. Web.