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Hewlett-Packard – Strategic Successes and Failures Research Paper


Introduction

Famously known as HP, Hewlett Packard is one of the biggest multinationals in the world. The company deals with information and technology (IT) in addition to other related products. It focuses on developing and producing computer software and hardware. In addition, it designs and develops software and delivers services to customers.

William Hewlett and Dave Packard founded the company in 1935 and it has remained one of the largest firms in the country in terms of revenues and performance since then (Eisenhardt et al., 1997). Currently, the company operates in numerous nations around the world. It has its headquarters in California.

Since its entrance into the market, Preston (2007) asserts that HP has grown in size and performance due to its superior strategies adopted by different managers. As elucidated by Eisenhardt et al. (1997), the company’s vision and mission have changed over the last decades to accommodate change and increase its competitiveness.

Despite the changes in strategy, the HP has experienced failures and successes in equal measure. However, the failures have provided important learning lessons for the company (Hill & Jones, 2012). This paper articulates that successful strategic planning has kept Hewlett-Packard (HP) alive and well for over seven decades.

This has in turn made it become the world’s largest PC vendor by market share in 2012. It utilizes scholarly sources that focus on strategies used by managers of HP since its inception in 1930s to 2012.

Early years (1939-1959)

In its early years, the company was unfocused and lacked a comprehensive strategy (Eisenhardt et al., 1997). Its managers, Dave Packard and William Hewlett faced stiff competition from other companies. They had inadequate capital that did not allow the company to compete effectively in the technology market (Packard, 2006).

Despite numerous attempts to keep the company afloat amid the fierce competition, the founders began an innovative project (Morris, et al., 1998). The Oscillator Project allowed the company to flourish in the long term. Particularly, Hewlett and Packard understood well that innovation and creativity would provide the company with a competitive edge over its rivals (Packard, 2006).

The Oscillator program entailed the use of the available resources to make a price-competitive product while at the same time introducing quality and reliability. Through this project, the two were convinced that the company would take off impressively. Oscillator HP200A used innovative technology that allowed the company to sell at it a sheer $54 compared to the rivals whose retail price was not less than $200 (Malone, 2007).

This product was an instant success that allowed the company to increase its innovation and creativity. According to Hill & Jones (2012), the project placed the company ahead of the rest in terms of innovation and technology.

The oscillator HP200A was not the only product that the company was offering the market. Such products as thermometers, oscilloscopes and signal generators were among many other products that the company was able to manufacture. The company began providing superior products that had higher accuracy than the competitors’ products.

This accuracy increased the ability of the company to enhance competitiveness and create a formidable customer base (Packard, 2006). These strategies were successful in placing the company among the most competitive and expansive companies at the time. The financial performance of the company was also superior. In 1935, the company had $548 only as the operating capital.

After the launch of HP200A and consequent acquisition of the patent, Preston (2007) says that the company’s average sales amounted to about $5000. This was about 1000% of growth the company experienced between 1935 and 1939. In addition, it is important to note that the company had no liabilities by the time it posted its financial information of fiscal year 1939 (Trompenaars & Hampden, 1998).

In the consequent years, the company continued to grow in strategies and performance through strong financial performance. Hills & Jones (2012) agree that the early years of HP were typical of rapid growth in sales and profits. The managers of the company were able to utilize strategic approaches to steer the company’s performance to high heights.

Trompenaars & Hampden (1998) articulate that they were able to implement such strategies as ‘pay as you go’ to allow their financial situation to remain stable (Trompenaars & Hampden, 1998). In addition, the company was able to win bids for major U.S. companies. Particularly, HP was the sole supplier of the HP200A oscillators to Disney Studios – one of the biggest entertainment companies in the US at the time.

Through changes in strategies, Hewlett Packard continued to grow in an unprecedented way in 1940s. By the end of 1947, HP has been able to increase its production capacity and ensure that it was the best company dealing with technology products (Jeffs, 2008). This was not only in the U.S. but also across the world.

The effects of the Second World allowed the company to experience growth since electronic and technology products had increased in demand. In 1950s, the strategy of the company had evolved enabling the company to produce new products that matched the consumers’ needs and wants (Trompenaars & Hampden, 1998).

To that end, it is imperative to point out that the company established its dominance from its foundation due to strong managerial practices. Throughout the first 25 years, the company used superior strategies to make one of the largest firms in the U.S.

The 1960s and 1970s

At the onset of 1960s, the company had experienced growth that surpassed its plants in many parts of the country. It became the founding company of the Silicon Valley in California (Preston, 2007). Despite its growth, the company had not been in a position to diversify its products. Indeed, Jeffs (2008) says that majority of its products continued to utilize conventional technology until 1968.

HP had developed a new semiconductor technology. However, the newfound technology was limited to internal processes of the company. Among the products that utilized semiconductor technology were calculators and other simple office equipments. Due to the apparent need to diversify its products, HP entered into various agreements with many multinationals (Packard, 2006).

Packard (2006) asserts that the company collaborated with Sony and other Japanese companies in order to develop and manufacture high quality products that addressed the needs of the consumers. This strategy lacked important components although it did not lead to diminished revenues. The management undermined the importance of evaluating the feasibility of the strategy.

Specifically, the company failed to foresee the high number of resources that would go to the production of similar looking products especially in Japan (Preston, 2007). Consequently, Sony withdrew from the partnership leaving HP and Yokogawa Electric as the only two companies within the agreement (Malone, 2007).

HP was dynamic in rectifying the strategic failures of increased collaborations with other multinationals. In fact, these strategic ‘flops’ led to a new strategy within the company. The company felt the need to increase its market share and competitiveness in the global market.

Accordingly, HP entered into a joint venture with Yokogawa Electric in 1963 in order to increase its market share and dominance especially in the Asian markets (Packard, 2006). HP had utilized this strategy in the previous years when it was attempting to consolidate its market share. It is through mergers and acquisition strategies that allowed the company to enter into the computer market at the onset of 1966.

HP developed two computers namely HP 1000 and HP 2100. The ability of the company to ensure that it acquired small and medium sized companies that had special and strategic importance for its success was outstanding (Jeffs, 2008). Superior innovation and ability to evolve its products was another important strategy that the company continued to use during the 1960s.

Its entrance into the computer manufacturing allowed the company to cement its place as the world’s most innovative and creative company in 1970. The rationale is that the company had developed a new product that reflected change and responsiveness to the demands of the consumers (Jeffs, 2008).

In 1970’s the company’s main strategy was to ensure that the new products (computers) continued to evolve and to signify change. The company began the development of new models in order to increase its status at the global market. It is in this era that the company developed its first personal computer in 1971 (Preston, 2007).

The HP 9100A was able to provide the customers with new products that allowed them to experience the new technology. According to Malone (2007), HP 9100A marked the digital revolution and a paradigm shift from conventional technology that had typified the previous years. To that end, the innovation that the company used to increase its competitiveness was impressive.

Specifically, the company became the world’s largest supplier and manufacturer of personal computers even surpassing IBM, which was the biggest retailer of the products at the time (Hills and Jones, 2012). It is imperative to point out that the strategies that the company emphasized involved acquisitions, merger, innovativeness and change (Hills and Jones, 2012).

Coupled with high sales revenues and ability to acquire technology, the company increased its value throughout the two decades.

This implies that many of the company’s strategies were effective except for the joint venture with Sony that did not increase the performance of the company in line with the expectations of the management (Trompenaars & Hampden, 1998). This has not only provided the management with the ability to maximize on performance but also a platform to learn from misinformed decisions.

The 1980s and 1990’s

The onset of 1980’s saw HP continue with its strategy of innovation and creativity in the development, design and manufacture of its products. The mission was to become a global leader whose products reflect innovation and creativity. The company introduced printers and inkjets in the same era (Eisenhardt et al., 1997). Besides, HP introduced its versions of scanners.

This did not only propel the organization to higher performance but created a product that was able to capture the needs of the customers. In particular, the laser printers gained meaningful popularity leading to higher sales revenues that exceeded expectations. When entering into this era, the CEO of HP recognized the strengths of his company.

According to Preston (2007), the innovation and creativity, that the company was associated with was the most valuable competitive edge it had over its rivals. This continued and led to the manufacture of data converters as well as hardware that would be able to store the generated data. Storage devices had increased in demand as many people acquired the software to convert data (Hills and Jones, 2012).

In 1985, the company came up with HP7935 storage device that had a capacity of approximately four megabytes. The strategy of creativity and invention continued when the company became the first to have a registered domain over the internet in 1986 (Packard, 2006). To that end, it is important to highlight that the culture of innovation shaped the strategy of the company in early 1980s.

Due to the increasing demand of computers and storage device, the technology and ICT sector were booming markets for HP products by the end of 1980s. The increased use of internet within the company’s internal structures and organization implied that the company had an immense potential in the market. According to Weiss & Hughes (2005), the registration of the domain increased the company’s brand image across the world.

In that year alone, the company registered approximately 26 percent of growth in profit and a sales revenue increase of 65% (Morris et al., 1998). The success of the innovation strategies allowed the company to enter the last decade of the century as a leader in the information technology sector. In 1990, HP strategists insisted on the continued use of innovation in the company.

This led to the introduction of numerous stakeholders of the company. The launch of HP’s convex computer in 1995 was a huge success that retells the way creativity allowed the company to stay ahead of the rest (Packard, 2006). However, it is important to highlight that it is during this time that the concept of corporate social responsibility emerged.

As a global brand, Morris et al. (1998) assert that the company was in a need of a strategy that would enhance customer loyalty and satisfaction. The CEO introduced the corporate social responsibility activities in many countries across the word. Although the strategy would cost HP approximately $20 million, it would pay off in the long term (Malone, 2007).

Corporate Social Responsibility (CSR) allowed the company to improve its public image and attract many customers in many parts of the world. In 1995, CSR initiative that sponsored Tottenham Hotspurs in English Premier League enhanced its image in many parts of Europe making it among the most successful company in the world (Eisenhardt et al., 1997).

The successes of these strategies allowed the company to value the element of planning and embrace technology. The phrase ‘The HP way’ that typifies HP products and strategies are an important indication of the success of HP strategies (Weiss &Hughes, 2005).

Besides, the increase in the demand of the company’s products was because of superior brand image that enhanced product differentiation to the advantage of HP. Despite the tremendous successes the company got from creative strategies, some of the decisions were not advantageous (Morris et al., 1998). The decision to abandon the acquisition strategy was not advantageous to the company.

The rationale is that the company would have performed better when it acquired other small companies that had strategic importance (Packard, 2006). This would not only increase the market share of the company but also increase sales revenues due to increased demand of the company’s products. In addition, mergers and acquisitions allow the company to enjoy a large monopoly of specific products.

However, the lessons that the management learned enhanced the ability of the company to become one of the most respected companies across the world at the onset of 21st century (Eisenhardt et al., 1997). To that end, HP’s successful strategic planning has kept it alive and well for over seven decades, becoming the world’s largest PC vendor by market share in 2012

The 2000s

HP had a vision statement that revolved around the concept of strategic acquisition and mergers, superior marketing and creativity. In particular, the company began the fiscal year 2001 by merging with Compaq. The decision to merge the companies was controversial as it had many opponents. However, the CEO, Carly Fiorina influenced the shareholders’ vote in favor of the merger.

The decision was not an immediate success as initially anticipated. At the outset, the companies changed their branding which affected their customer loyalty. According to Weiss & Hughes (2005), the HP brand commanded huge customers all over the word.

The strategy made the company lose immensely in its stock prices owing to reduced returns. The board decided to fire Carly Fiorini for the misinformed strategy. Nevertheless, the company embarked on its strategy to use creativity and innovativeness in 2004.

The launch of DV 1000 series was a strategic decision that assisted the company to withstand the failure of the merger with Compaq. The products were simple and reliable personal computers of the 21st century that allowed increased consumer choices (Hills and Jones, 2012).

The company’s innovativeness captured the markets and allowed the company to thrive amid competition from other companies that emerged. It is worth noting that the decision to merge the company with Compaq led to a substantial loss of global market share to competitors such as Apple, Dell and Toshiba (Preston, 2007).

However, the introduction of DV series redeemed the company’s image and captured the needs of numerous customers around the word. In fact, the DV series increased the total revenues of the company by 12% (Weiss & Hughes, 2005). Consequently, the stock prices improved tremendously through 2005 and 2006. The rationale is that the company utilized aggressive marketing and promotion strategy that attracted many consumers.

The portrayal of peer reference groups in HP’s advertisement was major marketing strategy that allowed the company to venture into new markets and attract more customers.

Particularly, HP launched “The Personal Computer Is back Again” campaign that involved influential people and celebrities such as Alicia Keys and Gwen Stefani (Hills and Jones, 2012). The strategy to combine creativity and aggressive marketing facilitated a strong financial performance in 2006 (Preston, 2007).

Amid the global financial and liquidity crises of 2007-08, HP management wanted the company to remain stable and withstand the volatile global markets. According to Hills and Jones (2012), the only way the company would remain stable was through acquisition and mergers. Although the adoption of the strategy was in the shadows of a failed merger strategy with Compaq, the CEO opted for an acquisition.

In 2008, HP through its CEO, Mark Hurd, entered into a negotiation with Electronic Data Systems (EDS) that aimed at allowing HP a whopping 100% ownership of the company (Hills and Jones, 2012).

Due to the apparent benefits that HP reaped from the acquisition strategy, the management decided to acquire 3Com. Hitt et al. (2012) say that the aggressive acquisition strategy also led to the acquisition of Palm Inc. and other small and medium companies. The rapid acquisition was because of the increase in the number of HP competitors.

Particularly, Dell was increasing its market share especially in Asian markets that were relatively unaffected by the global financial crises (Hitt et al., 2012). Besides, it had begun to dominate in some of the most attractive markets owing to acquisitions. It is worth mentioning that the rampant acquisition allowed the company to remain competitive during the economic meltdown.

To that end, the successes of strategic planning have allowed the company to thrive and become a leader in manufacture and development of computer software applications and hardware. This implies that many of the decisions that were in line with the objectives, goals, missions and values of the company enhanced strong financial performance and stability during the economic crunch (Hills and Jones, 2012).

Despite the strong strategies and major successes, the continuous trend of positive performance of the company came to halt due to global financial crises. Hitt et al. (2012) say that the stock markets scared many investors and the unemployment rates rendered the market unfavorable to al companies. As such, HP’s stock prices fell marginally like all other stock prices at the time.

Besides, the economic crises denied consumers flexible spending power leading to low and constrained demand for personal computers. The emergence of Apple as one of the major companies in information technology sector implied that HP would experience reduced growth (Preston, 2007).

However, innovation and creativity of HP allowed the company to consolidate its market and enhance customer satisfaction that is instrumental in global markets.

The 2010s

This era began with turbulent crises of leadership at HP (Hitt et al., 2012). The company’s strategy of acquisition suffered severe opposition in 2010. The CEO, Mark Hurd resigned leaving behind a myriad of controversies.

Despite acquiring Palm Inc., HP began to experience unprecedented competition from rivals. Particularly, the company had not ventured into mobile phones, which had now overtaken the demand for personal computers (Hill & Jones, 2012). Companies such as Apple and Samsung had commanded a majority in the market share. Besides, creativity at HP did not lead to improved performance.

To the contrary, the launch of ‘i-PAQ’ mobile phone did not subdue the competition in the market (Hitt et al., 2012). The reason is that the product did not achieve much success. The result was increased competition and decreased performance of HP both in domestic markets as well as in the global market.

The interim CEO, Cathie Lejsak, deviated from the main strategy of creativity and innovation and allowed the competitors to capture the large and attractive markets. Lack of creativity and innovativeness in HP has led to the dismal performance of its stocks. Indeed, the stock prices of HP have continued to go down since 2010.

In mid 2010, the company’s CEO announced that HP had made an exit in mobile phone and tablet business and that it would focus on cloud computing and other software solutions. The decision to abandon mobile and smart phone business was inevitable.

Hill & Jones (2012) point out that HP was lagging behind in terms of creativity and innovation that typified companies such as Apple Inc. and Samsung. Particularly, Apple was able to attract numerous customers due it innovative and attractive technology in addition to its responsiveness to consumers’ dynamic needs (Hitt et al., 2012).

HP also faced numerous challenges in its production system due to a global reduction in rare earth materials that are critical in the manufacture of tablets and smart phones (Hitt et al., 2012). These raw materials are abundant in China and Asia, which made HP to lose a substantial level of comparative advantage over the Asian firms.

As such, the management of the company foresaw the negative impact that competition would have on its financial performance. However, the decision to adopt cloud computing did not have an immediate impact on the performance of the company. The rationale is that various companies would venture into the business denying the company a competitive edge (Hitt et al., 2012).

The continued poor performance by HP in 2010 led to the appointment of Leo Apotheker As the new CEO. The CEO advocated for the continued focus on cloud computing and software solutions. This is despite unprecedented opposition from the board of directors. The rationale is that the decision would imply that the company would close some of its businesses and departments that deal with production (Hitt et al., 2012).

The strategy of exiting the smart phone and mobile phone business led to decreased brand image and sales. Importantly, the strategic decision would to the retrenchment of almost thirty thousand employees. The layoff was made official in 2012 when the CEO announced that the company would downsize (Hitt et al., 2012).

This was a major failure in strategic planning. The rationale is that the company stood to benefit from positive brand image if it maintained the number of the employees it intended to retrench. However, poor and vague strategies deprived the company of the positive brand it held (Hill & Jones, 2012).

This is not only devastating for the company but also for the investors who have seen the stock prices decline rapidly since 2010. Despite the failures of company, the company can focus on the mistakes and learn valuable lessons. Hitt et al. (2012) say that HP ought to make a return into the smart phone and mobile hone business in order to increase its sales revenues and profits both in the short term and in the long term.

The reason is that the company will be able to capture a specific market niche that will allow it compete effectively with other manufacturers. Besides, the company should be able to make a return into the smart phone business by ensuring that innovation and creativity typify the company. This will make the company be in a position to venture into new and emerging markets especially in Africa and Asia.

Despite the failures that the company has experienced in the last three years, the company can dwell on its strategies of creativity, innovation and change to drive its sales and performance (Hill & Jones, 2012). In the contemporary world, the company can focus its strategies on the growing demand for cloud computing and software solutions that may increase the company’s financial performance in the long term.

For the last seven decades, Hill & Jones (2012) articulate that the company has risen to become one of the biggest IT companies in the world. Through creativity and innovation, the HP has been able to lure many customers and achieve huge success.

To that end, HP’s superior planning and strategic decisions has kept it alive and well for over seven decades, becoming the world’s largest PC vendor by market share in 2012 (Hill & Jones, 2012).

Conclusion

In essence, Hewlett Packard that is also referred to as HP has grown in reaps and bounds for the last seven decades. The company experienced accelerated growth from 1935 to 1950s due to its innovativeness and creativity.

Both Hewlett and Packard (founders) understood the essence of bringing cheaper, more reliable and accurate products into the market and managed to become one of the largest companies in information and technology sector (Preston, 2007). By early 1960s, the company adopted acquisition and mergers strategy that aimed at consolidating its pole position in development, design and manufacture of technology products.

HP made a joint venture with Sony and Yokogawa Electric that flopped in 1964. It is here that the company enhanced its brand image when it began selling computers in 1965 (Hill & Jones, 2012). The growth of the company increased tremendously over the following decades since the company was responsive to technological change, innovation and creativity.

Packard (2006) asserts that it allowed the company to introduce new software and hardware making it the most profitable company in 1999. Since the onset of the 21st century, the company has experienced failures in strategic planning, leadership and lack of a vision. This has led to its subsequent exit in smart phone and mobile phone business.

References

Eisenhardt, T. et al. (1997). How management teams can have a good fight. Harvard Business Review, 5(3), 45-67.

Hill, C., & Jones, G. (2012). Strategic management: An Integrated Approach. New York: McGraw Hill Publishers.

Hitt, M. et al. (2012). Strategic Management: Competitiveness and Globalization. Boston, MASS: Cengage Learning.

Jeffs, C. (2008). Strategic Management. Upper saddle River, New Jersey: Pearson Publishers.

Malone, M. (2007). Bill & Dave: How Hewlett and Packard Built the World’s Greatest Company. Journal of Strategic Management, 7(2), 34-95.

Morris, M. et al. (1998). Conflict Management Style: Accounting for Cross-National Differences. Journal of International Business Studies, 29(4), 729-748.

Packard, D. (2006). The HP Way: How Bill Hewlett and I Built Our Company. California: Harper Collins Publishers.

Preston, J. (2007). Sustainability at Hewlett-Packard from Theory to Practice. Journal of Business Management, 5(6), 24-89.

Trompenaars, F., & Hampden, C. (1998). Riding the Waves of Culture. New York: Turner Publishers.

Weiss, J., & Hughes, J. (2005). Want collaboration? Accept – and actively manage – conflict. Harvard Business Review, 83(3), 87-99.

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