HEWLETT PACKARD CORPORATION

Mernoush Banton Florida International University

Strategic Management

INTRODUCTION
Hewlett-Packard: The Company
In 1938, two Stanford graduates in electrical engineering, William Hewlett and David Packard, started their own business in a garage behind Packards Palo Alto home. One year later, Hewlett and Packard formalized their business into a partnership called Hewlett-Packard. HP was incorporated in 1947 and began offering stock for public trading 10 years later. Annual net revenue for the company grew from $5.5 million in 1951 to $3 billion in 1980. By 1997, annual net revenue exceeded $42 billion and HP had become the worlds second largest computer supplier. The company, which originally produced audio oscillators, introduced its first computer in 1966. In 1972, the company pioneered the era of personal computing by introducing the first scientific, hand-held calculator. Hewlett-Packard introduced its first personal computer in 1980. Five years later, HP introduced the LaserJet printer, which would become the companys most successful product ever.

The HP Way
In 1956, Bill Hewlett, Dave Packard, and a handful of other HP executives gathered at the Mission Inn in Sonoma, California, to create a set of values and principles to guide their company. The six objectives that this small group subsequently created not only helped shape a new kind of company, but ultimately became the foundation for what came to be known as the HP way.

The six objectives, which later became seven, are:

1. Recognize that profit is the best measure of a companys contribution to society and the ultimate source of corporate strength; 2. Continually improve the value of the products and services offered to customers; 3. Seek new opportunities for growth but focus efforts on fields in which the company can make a contribution; 4. Provide employment opportunities that include the chance to share in the companys success; 5. Maintain an organizational environment that fosters individual motivation, initiative and creativity; 6. Demonstrate good citizenship by making contributions to the community; 7. Emphasize growth as a requirement for survival.

Hewlett-Packard is the world's largest technology company. Largely known as a maker of printers, the company is the world's top maker of PCs and has been tied with Dell for the lead in the United States. HP focuses its Social Innovations in three areas:

HP in Education HP in Health HP in the Community HP believes education is the keystone to social progress and prosperity. We are working to give educators, students and young entrepreneurs the knowledge and skills to address urgent challenges in their communities and around the world. Health is a key priority for governments all over the world. The quality of healthcare determines the quality of peoples lives. Millions of people do not have access to the very basics of health care services, and in many countries health services are simply not delivering quality care in an effective and efficient manner. Even in the countries where health services are strong, the cost structure is unsustainable for the patients, providers and payers. Each year, thousands of HP employees donate money, time and expertise to help others.

Products & Services

Hp is a leading company, offering products, technologies, software, solutions and services to consumers, small and medium sized businesses and large organizations Hewlett-Packard Company (HP)is a leading company offering a wide range of products, technologies, software, solutions and services to individual consumers, small- and medium-sized businesses (SMBs) and large enterprises, including customers in the government, health and education sectors. Its operations are organized into seven segments: Services, Enterprise Storage and Servers (ESS), HP Software, the Personal Systems Group (PSG), the Imaging and Printing Group (IPG), HP Financial Services (HPFS), and Corporate Investments. Services, ESS and HP Software are reported collectively as a broader HP Enterprise Business.

Hewlett-Packard's business is vast in scope and size. The company manufactures more than 24,000 electronic products and systems for measurement, computing, and calculation. The

worldwide operation with research facilities; manufacturing plants; and sales, service, and support offices spread across the U.S. and more than 120 countries.

Mission Statement of Hewlett Packard

We are committed to developing a wide range of innovative products and multimedia services that challenge the way consumers access and enjoy digital entertainment. By ensuring synergy between businesses within the organization, we are also constantly striving to create exciting new worlds of entertainment that can be experienced on a variety of different products.

Vision statement of Hewlett Packard

We recognize and seize opportunities for growth that builds upon our strengths and competencies.

Improved Mission statement

To provide product, services and solution of highest quality and deliver more value to our customers that earn their respect and loyalty.

Improved Vision statement

To view change in market as an opportunity to grow, to use our profit and to ability to develop and produce innovative products, services and solutions that satisfy customers need.

Why?
They are brief and to the point. It is highlighting all the main points.

Comparison of Mission statement to a leading competitor statement

IBM IBM, we strive to lead in the invention, development and manufacture of the industry most advanced information technologies, including computer systems, software, storage systems and microelectronics. We translate these advanced technologies into value for our customers through our professional solutions, services and consulting businesses worldwide.

DELL Dell mission is to be the most successful computer company in the world at delivering the best customer experience in markets we serve.

Mission Statement Evaluation Matrix

Self-Concept Concern for Public Image Concern for Survival, Growth, Profitability Concern for Employees Products or Services Technology Philosophy Customers Markets

Organization

Hewlett Packard

Yes

Yes

No

Yes

Yes

Yes

Yes

Yes

Yes

Ibm

Yes

Yes

Yes

No

Yes

No

No

Yes

No

Dell

Yes

Yes

Yes

No

Yes

No

Yes

Yes

No

INTERNAL ASSESSMENT Financial Ratio Analysis

Ratio Gross profit margin Operating profit margin Net profit margin Current ratio Quick ratio Inventory turnover ratio Sales to receivables ratio Return on assets Debt to worth ratio Working capital

2006 24.53% 7.15% 6.76% 1.35 1.13 8.93 8.43 13.0% 6.52% $12,414

2005 23.61% 4.00% 2.7% 1.38 1.16 9.63 8.75 6.9% 9.12% $11,874

Gross profit margin ratio

The gross profit has increased from 23.61% to 24.53%. This means that profitability at the basic level has increased from previous year. This is a sign of good ratio.

Operating profit margin

Profitability before interest and tax has increased from 4.00% to 7.15%. This means that efficiency of the business before taking any financing has increased from the previous year. This also is a sign of good ratio.

Net profit margin

This also has increased from 2.7% to 6.76%. This means that overall profitability has also increased. This is a sign of good ratio.

Current ratio
Current ratio has decreased from 1.38 to 1.35. This means that working capital to meet short term obligations has decreased, which shows a poor use of working capital. This is a sign of bad ratio.

Quick ratio
This ratio has also decreased from 1.16 to 1.13. So this shows that the ability to pay immediate financial obligations has also decreased. This quick ratio is acceptable but has decreased.

Inventory turnover ratio

The ratio has decreased from 9.63 to 8.93, which means that more capital is tied up in inventory which is not a good sign.

Sales to receivables ratio

It also has decreased from 8.75 to 8.43. This means that the efficiency in collecting accounts receivables has deceased.

Return on assets
This ratio has increased from 6.9% to 13.0% .This is the sign of good ratio.

Debt to worth ratio

This ratio has decreased to 6.52% from 9.12%. This means that debt financing has decreased and hence the risk also has decreased.

Working capital
company to endure difficult financial periods has increased.

Working capital has increased from $11,874 to $12,414. This shows that the ability of a

Market Positioning Map

High Quality
Apple Sony HP Dell

High price
Gateway Toshiba

Competitive price

Low Quality

Strengths
1. 2.

Leading provider of personal computers and imaging and printing Hewlett-Packards primary strength is its business position. The enterprise has a large amount of cash in hand.

3.

Multi-vendor customer services, including infrastructure technology and business process outsourcing, technology support and maintenance, application development and support services and consulting and integration services

4.

The company competes both at local and international level. It has increased its competitiveness through policies and strategies that supports free-market economies.

5. 6.

Organized into 7 business sections with strong position in each Hewlett-Packard is a global enterprise and especially after its merger with Compaq, the company became worlds biggest computer hardware and peripherals consort in the world and has ranked 20th in the Fortune 500 list.

7.

Strong financial condition

8. 9.

Global presence Ability to provide end-t0-end IT solution H/W, application development and support

10. Highly talented workforce 11. Good Operational Efficiency

Weaknesses
1.

Financial condition leans very heavily on the state of our economy not just in the US but worldwide

2. 3. 4. 5.

Lack of in-house management consulting division R&D department has significantly less investments compared to historical spending Pay cuts has brought low morale to employees Dependency on third-party suppliers, and our revenue and gross margin could suffer if HP fails to manage suppliers properly.

6. 7.

Struggling to Add Value and Remain Profitable in Low-Cost High-Volume PC Business. HP did not yet hit a CMDB product that includes discovery and mapping. This cause many customers to switch the brand. The past acquisition of Peregrine made the HPs portfolio even more diverse and complete but HP Open Views lack of mainframe management capabilities created several problems.

8.

9.

Slow speed to market or responsiveness

INTERNAL FACTOR EVALUATION

NO,s

INTERNAL STRENGTHS

WEIGHTS

RATINGS

WEIGHTED SCORE

Production Adaptability

.10

.40

2 3

Financial Ratio Product Reliability

.10 .15

4 4

.40 .60

Customer Relationship

.10

.40

5 6

Build To Order Price Supply Chain

.05 .10 .10 .10

3 3 3 4

.15 .30 .30 .40

Leading technology INTERNAL WEAKNESSES

WEIGHT

RATING

WEIGHTED SCORE

Little Product Diversification

.05

.15

Intellectual capital is underestimated

.10

.30

10

No Business Diversification

.10

.20

Total

1.00

3.6

EXTERNAL ASSESSMENT

Major Competitors of HEWLETT PACKARD CORPORATION: HP faces a very strong competition with a number of companies manufacturing quality and technologically advanced products. As HP has specialized in a number of products ranging from printers to laptops and PCs, it faces competition with different companies in different categories. In the laptop manufacturing industry HP has competitors like: 1. Apple Inc. 2. Acer 3. Lenovo 4. Dell Inc. 5. Toshiba In the printing supply market tough competition was presented by: 1. Kodak 2. Canon 3. Staples 4. Office Depot HP is a corporation that has diversified its products to a very good extent. It is a popular brand known for printers and Laptops. Its competitors are from both the sides. It faces a very tough competition with Apple Inc. Apple has been growing in the last few decades as a major name in technologically very advanced products like Mac. HP laptops sale has see a very significant increase in the 2007 worldwide. As the demand for PCs goes t increase day by day, companies are continuously evolving their technologies to improve the function ability of the devices. According to the statistics HP has 16 percent of the laptop market in their hands which is second to Dell which controls 19 percent of the market. Dell and HP are considered as the top competitors in the laptops industry. The market that the Apple Inc holds is not affected by the changes occurring in the Microsoft Windows.

COMPETITIVE PROFILE MATRIX

Hewlett Package CRITICAL SUCCESS FACTOR Technological advancement Product Quality Price Competitiveness Customer Loyalty Global expansion Globally fully functional Innovation Advertising Market Share After sale services Management Global Availability TOTAL 0.1 0.1 0.05 0.1 0.1 0.15 0.05 0.05 0.05 0.02 0.08 1.00 3 3 3 4 4 3 3 3 3 3 4 0.3 0.3 0.15 0.4 0.4 0.45 0.15 0.15 0.15 0.06 0.36 3.47 2 4 2 4 4 2 2 4 3 3 3 0.2 0.4 0.1 0.4 0.4 0.3 0.1 0.2 0.15 0.06 0.24 3.15 4 3 4 3 3 4 4 3 2 4 2 0.4 0.3 0.2 0.3 0.3 0.6 0.6 0.15 0.1 0.08 0.16 3.99 0.2 3 0.6 3 0.6 4 0.8 Weight Rating Score DELL Rating Score Apple Inc. Rating Score

OPPORTUNITIES 1. Globally acceptable software used in the laptops which makes them easy to use and repair. 2. The company is spread through the world and has a very effective management that constantly keeps a check on their products functioning. 3. The prices are very affordable. 4. The HP is continuously keeps on updating their technology which keeps the interest of the customers intact. 5. They have a line of laptops specifically for the different classes of people based on their affordability. 6. Their line of Laptops COMPAQ has a very strong hold of the middle class people which includes students also.

7. HP is preferred by business people because of its easy usage. 8. Being globally available people find it easier to get their laptops or printers repaired.

9. The cartridges are easily available for the printers. 10. The management at the company has taken a great step and advertised in different countries very interestingly. 11. HP has marketed itself a user friendly and a brand that is meant for the ordinary people making them feel extraordinary. 12. Being technologically friendly their operations can even be carried out globally which cuts down their expenditures. 13. In the printing industry HP has been able to introduce very advanced printers and has erased a market for the laser jets. 14. HP because of the printing industry has a name and reputation in the big businesses. 15. The guarantees that the HP gives for their products attract the customers. 16. Innovation is the key to the success of HP. 17. They are continuously introducing new products and diversifications in their products. 18. HP is developing corporate "immune systems" aimed at helping businesses prevent and defend against growing security threats. 19. Constant research being carried out in HP Labs 20. The new HP Labs Innovation Research Program invites the worldwide academic community to submit proposals related to current research in the areas of information explosion, dynamic cloud services, content transformation, intelligent infrastructure and sustainability. THREATS 1. Biggest threat to the HP is Apple Inc's MAC. The popularity of the Mac can seriously harm the market for the HP laptops. 2. The HP is not paying attention to the designing of their Laptops or customization like DELL and VIVO does. 3. The innovative behavior of Apple Inc can be a serious factor in the falling of sales of HP. 4. HP has marketed itself as a brand for the ordinary people which is very well appreciated but their ads need to have celebrities to endorse their products.

5. H P's biggest threats on a system level - looking at companies with a broad breadth of storage, servers, and professional services - would be IBM. I would also point to EMC as their strongest overall threat in the storage market, especially since the beginning of 2003. 6. HP association with the spying scandal. 7. Many small companies are rising developing cartridges for the printers of HP. This can harm the market that the HP holds of the cartridges. 8. Invoking both the controversial 1998 DMCA and computer crime laws, HP has threatened to sue a team of researchers who publicized vulnerability in the company's Tru64 Unix operating system. 9. ACER is becoming the new threat to the laptop market that the hp holds because of affordable prices. 10. The new Acer product has an unheard of battery life of up to eight hours. The PC is light and thin. It will retail for less than $1000. 11. The ACER laptops are of lower price and more affordable. 12. The ACER and DELL offer better quality and features in the same price where HP offers a laptop with ordinary features. 13. HP differentiated the market by offering COMPAQ computers which are of lower price and meant for the middle class. Thus kind of classification can turn away the customers. 14. IPads and Samsung hand tablets are a serious threat to the hp laptops. 15. Dell is squeezing HP on price in the low-end server market, while IBM is having more success winning lucrative deals for strategic services. Analysts expect a software acquisition to boost profits. 16. The Compaq merger helped HP vault to No. 1 in storage and No. 2 in servers while becoming stronger in tech services. In the fourth quarter the corporate unit's sales rose a surprising 10%. Still, HP is struggling with profitability at the same time IBM and others are reaping strong profits. Even with HP's top-line gains, the margins and profits declined. 17. HP's inconsistency has taken a toll on its stock price. The company's shares trade just shy of the level that analysts say the printer business is worth all on its own. Fiorina has improved HP's record of meeting Wall Street's expectations. But she still has missed

analyst forecasts in seven of the past 20 quarters, trailing the track records of major rivals. 18. Hewlett-Packard had been losing its effectiveness due to the changing profile of the company. 19. HP Labs, as an organization, has not been as successful with technology transfer as it should be within the context of a corporate research lab.
20. HP's board decided to replace Fiorina, following a rollercoaster ride as CEO that included

the controversial acquisition of Compaq Computer Corp., a massive reorganization of the company's business units -- and a significant rise in revenues since Fiorina's arrival.