Product Life Cycle

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Compaq notebooks

1.0 INTRODUCTION
Compaq Computer, based in Houston, Texas, is the world’s largest personal computer manufacturer and the fourth largest information technology (IT) company. From 1992-1997, the company’s aggressive high volume PC strategy propelled it to high growth rates in revenues, while its leadership in PC servers sustained strong margins and drove profit growth. Starting in 1995, former CEO Eckhard Pfieffer began to transform Compaq from a pure PC company to a full-service IT company, with the goal of becoming a $50 billion company that could compete with the likes of IBM and Hewlett-Packard. The key strategic moves were the acquisitions of Tandem Computer and Digital Equipment Corporation in 1997 and 1998, giving Compaq a diverse line of technologies and service capabilities. Compaq began revamping its information systems in 1994, building global enterprise information systems to support its globally optimized manufacturing and order fulfillment operations. The systems were built primarily around SAP applications, running on Compaq PC servers and the Windows NT operating system in order to demonstrate that large enterprise systems could run on Compaq hardware. Compaq’s IT people were forced to distribute the SAP applications across ten interconnected sites around the world and customize extensively in order to run on Windows NT and meet Compaq’s needs. Compaq stumbled badly in 1998 as it faced new challenges in the PC market and tried to assimilate Tandem and Digital. In particular, Compaq struggled to catch up with Dell Computer, whose direct sales; build-to-order model gave it a big advantage in cost and speed over Compaq’s indirect sales, build-to-forecast approach. When the company disappointed investors with poor results in 1999, the board removed Pfieffer, who had been credited for Compaq’s previously stellar performance. Since Pfieffer’s departure, Compaq has reorganized itself along business lines, streamlined its distribution channels and developed a new electronic commerce strategy called “NonStop eBusiness.” Compaq has gone through a series of IT reorganizations aimed at giving business units more control over IT decisions and resources. Compaq’s new CEO, Michael Capellas, came to the company in 1998 as CIO and was the force behind this reshaping of the IT organization. It is likely that newly hired CIO Robert V. Napier will continue the process in order to align IT with the new corporate structure, while also working to implement Compaq’s e-business strategies. Since 2007 till now Compaq Company has many products as follow: in 2007 they provide laptop Compaq Presarios to their customer, in 2008 they improve and developed Aero 4/33c Notebooks, and in 2009 they provide new model E500S Notebooks, 2011 EZ2700 Desktops and LT 486/33 Desktops at the same year.

2.0 Compaq Cash flow
The issues of cash flow for each stage of the product life cycle they are complete each other. Cash flow for a product as it moves on the life cycle curve will change. It’s very important to know and plan each stage for our product to be success.

2.1cash flow in the five stages
Introduction stage,
The introduction of a new product onto the market is typically characterised by very slow sales, which may grow only very slightly over a long period of time. Whilst profits will gradually improve during this stage, it may take until near the completion of the introductory stage in the PLC before the company witness’s positive profitability. The reason for such low profitability during this stage is not so much the limited success of the product – measured in terms of low, albeit growing, sales – but the high costs of production and promotion that are required to try to develop customer awareness.

R&D expenses are really high for Compaq in especially in terms of smart laptop, because now Compaq is moving in a new path of technology and there is no resource for them to use in order to reduce the R&D...
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