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 Packard’s 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 world’s 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 company’s 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 company’s 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 company’s 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 people’s 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 consumer’s 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

Organization

Cu

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Pro

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Serv

ices

Mark

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Co

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for

Su

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Gro

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, P

rofita

bility

Tech

no

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y

Ph

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Self-C

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Co

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for

Pu

blic

Imag

e

Co

ncern

for

Em

plo

yees

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

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.

Ratio 2006 2005

Gross profit margin 24.53% 23.61%

Operating profit margin 7.15% 4.00%

Net profit margin 6.76% 2.7%

Current ratio 1.35 1.38

Quick ratio 1.13 1.16

Inventory turnover ratio 8.93 9.63

Sales to receivables ratio 8.43 8.75

Return on assets 13.0% 6.9%

Debt to worth ratio 6.52% 9.12%

Working capital $12,414 $11,874

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 .

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

company to endure difficult financial periods has increased.

Market Positioning Map

High Quality

High price Competitive price

Low Quality

Strengths

1. Leading provider of personal computers and imaging and printing

2. Hewlett-Packard’s 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. Organized into 7 business sections with strong position in each

6. Hewlett-Packard is a global enterprise and especially after its merger with Compaq, the

company became world’s biggest computer hardware and peripherals consort in the

world and has ranked 20th in the Fortune 500 list.

7. Strong financial condition

Sony HP

Dell

Apple

Gateway

Toshiba

8. Global presence

9. 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. Lack of in-house management consulting division

3. R&D department has significantly less investments compared to historical spending

4. Pay cuts has brought low morale to employees

5. Dependency on third-party suppliers, and our revenue and gross margin could suffer if

HP fails to manage suppliers properly.

6. Struggling to Add Value and Remain Profitable in Low-Cost High-Volume PC Business.

7. HP did not yet hit a CMDB product that includes discovery and mapping. This cause

many customers to switch the brand.

8. The past acquisition of Peregrine made the HP’s portfolio even more diverse and

complete but HP Open View’s lack of mainframe management capabilities created

several problems.

9. Slow speed to market or responsiveness

INTERNAL FACTOR EVALUATION

NO,s INTERNAL

STRENGTHS

WEIGHTS RATINGS WEIGHTED

SCORE

1 Production

Adaptability

.10 4 .40

2 Financial Ratio .10 4 .40

3 Product

Reliability

.15 4 .60

4 Customer

Relationship

.10 4 .40

5 Build To Order .05 3 .15

6 Price .10 3 .30

Supply Chain .10 3 .30

7 Leading

technology

.10 4 .40

INTERNAL

WEAKNESSES

WEIGHT RATING WEIGHTED

SCORE

8 Little Product

Diversification

.05 3 .15

9 Intellectual

capital is

underestimated

.10 3 .30

10 No Business

Diversification

.10 2 .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 DELL Apple Inc.

CRITICAL SUCCESS

FACTOR

Weight

Rating Score Rating Score Rating Score

Technological

advancement

0.2 3 0.6 3 0.6 4 0.8

Product Quality 0.1 3 0.3 2 0.2 4 0.4

Price Competitiveness 0.1 3 0.3 4 0.4 3 0.3

Customer Loyalty 0.05 3 0.15 2 0.1 4 0.2

Global expansion 0.1 4 0.4 4 0.4 3 0.3

Globally fully functional 0.1 4 0.4 4 0.4 3 0.3

Innovation 0.15 3 0.45 2 0.3 4 0.6

Advertising 0.05 3 0.15 2 0.1 4 0.6

Market Share 0.05 3 0.15 4 0.2 3 0.15

After sale services 0.05 3 0.15 3 0.15 2 0.1

Management 0.02 3 0.06 3 0.06 4 0.08

Global Availability 0.08 4 0.36 3 0.24 2 0.16

TOTAL 1.00 3.47 3.15 3.99

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.