Hewlett-Packard – Compaq Strategy Report
The Hewlett-Packard and Compaq merger decision case study provided many points necessary in the understanding of why these two companies would undergo a risky business venture. Compaq was a company that began successfully with record setting financial statements, but in an attempt to expand its market, threatened company stability. With the acquisition of Tandem Computer and Digital Equipment Corporation, Compaq experienced decreased revenues resulting in their inability to fully recover. In a competitive information technology market, HP was one of the industry leaders. Due to a failure to be proactive to market changes, HP grew stagnant and looked to reinvent company strategies through newly appointed President/CEO Carly Fiorina. Competitive advantages for both HP and Compaq included imaging and printing segment and high performance PC technology respectively. Management’s reasons for the merger included their assumption that together, HP and Compaq would be able to replicate and overtake competitors. Oppositions to the merger included a decrease in shareholder interests, a reduction of focus for company core competencies, and an unprofitable future. Several financial advisors and industry analysts were in agreement that the proposed merger would not be in the best interests of either company. Despite the uncertainties, information gathered and forecasts projected were in favor of the merger, which resulted in shareholder approval and the merger of Hewlett-Packard and Compaq Computer.
In researching Hewlett-Packard’s present-day company position, a strengths, weaknesses, opportunities, and threats (SWOT) analysis was conducted. Strengths found include HP’s strong market position internationally and on the domestic end, a successful growth throughout large acquisitions, and a considerable brand value. HP currently has a 28.6% market share in the United States of America while internationally they stand at 17.7%. As the current number one leader in PC sales, HP has a solid market position. Although the strengths are allowing HP to maintain market position, there are also weaknesses present in all companies. Compared to other companies in the same industry, Hewlett-Packard lacks significant software product and management consulting services. As a result, Hewlett-Packard’s weakness is its weak market segment integration. HP is able to answer consumer demand when it comes to PC technology and imaging and printing software, but they fall short in the software product creation and consulting services to combine with their successful departments of PC technology and imaging and printing services. As Hewlett-Packard continues to grow and seek an increase in market position, opportunities surface. A spin-off of the PC technology business, entering the cloud computing market, and expanding imaging and printing solutions portfolio are opportunities HP has going forward. In placing more emphasis on the PC technology aspect of the company, HP may find that this venture will become as profitable as the imaging and printing department in the long-run. With the announcement of this spin-off, their share of US PC shipment increased from 25.4% to 28.9%. This positive reaction from consumers is an early indicator of possible success as a result of placing resources to build up the PC technology department. Cloud computing is a fairly new concept in which resources and software are delivered through a network, mainly over the Internet. As this is market quickly growing in demand, HP’s introduction of HP Cloud Assure is a great opportunity for future prosperity. With success comes opportunities of threats, and Hewlett-Packard is no exception. With projected decrease in information technology (IT) in the near future, an increase in demand for non PC devices, and competitors with more diversified portfolios, HP’s threats are numerous. Industry analysts...
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