Hewlett-Packard’s Five Competitive Forces
"To provide products, services and solutions of the highest quality and deliver more value to our customers that earns their respect and loyalty. HP’s Mission Statement”
Hewlett-Packard or HP as commonly known is a leading global provider of products, technologies, software, solutions, and services to individual consumers, small-and-medium-sized business and large enterprises, including customers in the government, health and education sectors as stated in their 2011 10-K Report. HP was founded in 1939 by William R. Hewlett and David Packard; started its incorporation in California by 1947 and change it to Delaware in May 1998.
Their business operations are organized in seven segments, but the following four are the ones that generate HP’s greatest profits and have a considerable market share: * The Personal System Group: business and Consumer PCs, mobile computing devices and workstation * Services: consulting, outsourcing, and technology services in infrastructure, applications, and business process domains * The Imaging and Printing Group: inkjet, LaserJet and Commercial printing, printing suppliers * Enterprise Business: business products including storage and servers, enterprise service, software and networking. The other three are also HP’s business segments, but they do not have as much relevance as the three mentioned above. These include: HP software, HP financial services, and Corporate Investments.
Porter’s Five-Forces Analysis for HP
"To view change in the market as an opportunity to grow; to use our profits and our ability to develop and produce innovative products, services and solutions that satisfy emerging customer needs. HP’s Vision Statement”
HP understands that Products Life Cycles are short, and for that reason they must develop new products and services, and enhance their existing ones to remain effectively competitive. They also realize that their strategic management is a competitive advantage to future success of the company. Although on a revenue basis, HP is the largest company and among the leader in the four business segments, they acknowledge the competitive environment in each of these segments coming from major corporations that have long-established positions, and also from a large number of new and rapidly growing firms.
In order to have a better understanding of the company we shall start by doing a thorough analysis of the industry structure that drives competition and profitability at HP. For this, we will use Porter’s Five Competitive Forces Analysis framework to determine HP’s constraints, growth, and other profitability drivers that would make us understand more about the technology industry.
1. Threat of New Entrants
Since the technology industry provides higher profits and returns; it will result in attracting many new entrants due to the existence of moderate low barriers in the industry. Most companies in the industry have already achieved economies of scale as a competitive advantage. Some of the factors that new entrants might face in the industry would be:
1.1 High Capital Requirement. Technology companies need high capital requirements to research and develop new products due to rapid and continuous technological change, but these do not prevent competition from entering the industry. However, in order to generate cost efficiencies in order to produce profits, outsourced manufacturing is used and in some cases, third-party OEM’s. Within the imaging and printing segment of the business, there will be much more capital requirements since a lot of the parts are more specific to the manufacture based on their R&D levels and product design.
1.2 Product Differentiation. The way HP designed their personal systems and printers are geared to be consistent and unique. They have adopted Apples ergonomic keyboard design which some PC manufacturers have not yet done and...