Dell vs Hp

Topics: Personal computer, Economics of production, Microeconomics Pages: 8 (2489 words) Published: May 10, 2011
1. Introduction
Both Dell and HP are two strong players in PC industry which refers to an industry where companies produces PCs (desktops and notebooks), handheld devices (smart phones and tablets), and workstations. However, with growing global expansion, Dell and HP’s performance differs. Dell, once the world’s largest PC maker in 2001, has continually lost its market share to HP and Acer since 2007 (Guglielmo 2009). The cause is rooted in two differences of these companies: company diversifications and core competences. Therefore, how firms can continually survive in the PC business is more of an issue for Dell than for HP.

Nevertheless, survival is not enough. Mainly because of the fast declining average selling prices (ASP) annually, both Dell and HP’s PC business face pressures from thinner profit margins (Menn 2010) Therefore, to win the battle, finding a new growth opportunity should be in the center of Dell and HP’s future strategy. Hence, this essay first presents the background of these two companies. It then looks at how PC business can survive by analyzing the causes of Dell and HP’s different performances in PC business. Thirdly, it briefly evaluates four options as a future growth engine.

2. Background
3.1. Motivations
Motivation| Dell| HP|
Pre 1970sMarket and Resource Seeking| Not born yet| Provide growth1959: Establish the first foreign marketing organization and manufacturing plant in Europe, but did not focus on PC business | 1980s-2000sCompetitivePositioning| Capture global scale1990: Expansion to EMEA: Europe, the Middle East and Africa 1993: Entries into APJ: Asia Pacific and Japan| Match Dell’s scale in PC2002: Merger with Compad Computer Corp. | 1990s-2000sWorldwide Learning| Recruit skills, expertise2007: Decide to refocus on innovation and set up more R&D centers.2009: 7 design centers | Leverage global intelligence1990s: HP Labs opens in Japan and Israel2010: 23 HP Labs operate in 7 countries| TABLE 1 Motivations Comparison

Historically, HP started its global business earlier than Dell, but the focus was not on PCs until 2000. In contrast, Dell, focusing on PCs, quickly expanded its business globally since 1990 (Dell 2011). Therefore, to match Dell’s scale, HP merged with Compad in 2002 (HP 2011). In terms of worldwide learning, HP began to leverage global expertise much earlier while Dell did not realized the importance of worldwide learning until 2007 (Dell 2007).

3.2. Means
Means| Dell| HP|
Pre-requisites| One competenceLow cost business model| A portfolio of R&D competencesMeasurement, computing and communications, summarized as HP=MC2| Process| Born Global1990: Greenfield factories| Buy Global2002: Acquiring a global PC company, Compad| TABLE 2 Means Comparison

Apart from motivations, companies need to possess specific competences to succeed in foreign markets (Bartlett and Beamish 2011). Dell’s innovative direct sales and build-to-order model, which eliminates middlemen, gave it a unique low cost advantage. Since this advantage was embedded internally, Dell started its expansion by Greenfield rather than cooperate with local companies. On the contrary, HP had a portfolio of R&D competences rather than one (Prahalad and Hamel 1994). Instead of “Born Global”, HP’s PC business can be regarded as “Buy Global” since it expanded its global PC business by buying up global companies.

3.3. Evolving Mentality
| Evolving Mentality|
Dell| Pre 2007Global perspective | Transnational Perspective| HP| Pre 2002:Multinational perspective | |
TABLE 3 Mentality Comparisons

HP once had a multinational mentality, as evidenced by its decentralized organization structure and culture (Accenture 1998). In contrast, Dell once had a more global mentality because in the early years, Dell did not adjust its direct models and products that much from country to country (Hill and Jones 2007). However, both companies have...
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