Case Study Description of Hewlett-Packard-Compaq: The Merger Decision
Hewlett-Packard's proposed $24 billion acquisition of rival Compaq marked the largest merger in the history of the computer industry. The merger was Hewlett-Packard's response to sweeping changes impacting the technology industry. The severity of the stock market's reaction to the deal's announcement, coupled with a "slim but sufficient" 51.4% shareholder approval margin, left many wondering whether the deal was beneficial for shareholders.
Swot Analysis of "Hewlett-Packard-Compaq: The Merger Decision" written by Krishna G. Palepu, Jonathan Barnett includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Hewlett Packard's facing as an external strategic factors. Some of the topics covered in Hewlett-Packard-Compaq: The Merger Decision case study are - Strategic Management Strategies, Change management, Financial management, Leadership, Mergers & acquisitions and Strategy & Execution.
Some of the macro environment factors that can be used to understand the Hewlett-Packard-Compaq: The Merger Decision casestudy better are - – there is increasing trade war between United States & China, there is backlash against globalization, increasing energy prices, technology disruption, cloud computing is disrupting traditional business models, central banks are concerned over increasing inflation, talent flight as more people leaving formal jobs,
customer relationship management is fast transforming because of increasing concerns over data privacy, wage bills are increasing, etc
Introduction to SWOT Analysis of Hewlett-Packard-Compaq: The Merger Decision
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Hewlett-Packard-Compaq: The Merger Decision case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Hewlett Packard's, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Hewlett Packard's operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Hewlett-Packard-Compaq: The Merger Decision can be done for the following purposes –
1. Strategic planning using facts provided in Hewlett-Packard-Compaq: The Merger Decision case study
2. Improving business portfolio management of Hewlett Packard's
3. Assessing feasibility of the new initiative in Strategy & Execution field.
4. Making a Strategy & Execution topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Hewlett Packard's
Strengths Hewlett-Packard-Compaq: The Merger Decision | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Hewlett Packard's in Hewlett-Packard-Compaq: The Merger Decision Harvard Business Review case study are -
Superior customer experience
– The customer experience strategy of Hewlett Packard's in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Training and development
– Hewlett Packard's has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Hewlett-Packard-Compaq: The Merger Decision Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Organizational Resilience of Hewlett Packard's
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Hewlett Packard's does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Diverse revenue streams
– Hewlett Packard's is present in almost all the verticals within the industry. This has provided firm in Hewlett-Packard-Compaq: The Merger Decision case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Ability to lead change in Strategy & Execution field
– Hewlett Packard's is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Hewlett Packard's in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Strong track record of project management
– Hewlett Packard's is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Sustainable margins compare to other players in Strategy & Execution industry
– Hewlett-Packard-Compaq: The Merger Decision firm has clearly differentiated products in the market place. This has enabled Hewlett Packard's to fetch slight price premium compare to the competitors in the Strategy & Execution industry. The sustainable margins have also helped Hewlett Packard's to invest into research and development (R&D) and innovation.
High switching costs
– The high switching costs that Hewlett Packard's has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Low bargaining power of suppliers
– Suppliers of Hewlett Packard's in the sector have low bargaining power. Hewlett-Packard-Compaq: The Merger Decision has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Hewlett Packard's to manage not only supply disruptions but also source products at highly competitive prices.
Analytics focus
– Hewlett Packard's is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Krishna G. Palepu, Jonathan Barnett can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
High brand equity
– Hewlett Packard's has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Hewlett Packard's to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Operational resilience
– The operational resilience strategy in the Hewlett-Packard-Compaq: The Merger Decision Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Weaknesses Hewlett-Packard-Compaq: The Merger Decision | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Hewlett-Packard-Compaq: The Merger Decision are -
No frontier risks strategy
– After analyzing the HBR case study Hewlett-Packard-Compaq: The Merger Decision, it seems that company is thinking about the frontier risks that can impact Strategy & Execution strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Hewlett-Packard-Compaq: The Merger Decision, is just above the industry average. Hewlett Packard's needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
Interest costs
– Compare to the competition, Hewlett Packard's has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
High bargaining power of channel partners
– Because of the regulatory requirements, Krishna G. Palepu, Jonathan Barnett suggests that, Hewlett Packard's is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
Low market penetration in new markets
– Outside its home market of Hewlett Packard's, firm in the HBR case study Hewlett-Packard-Compaq: The Merger Decision needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Slow to strategic competitive environment developments
– As Hewlett-Packard-Compaq: The Merger Decision HBR case study mentions - Hewlett Packard's takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
Aligning sales with marketing
– It come across in the case study Hewlett-Packard-Compaq: The Merger Decision that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case Hewlett-Packard-Compaq: The Merger Decision can leverage the sales team experience to cultivate customer relationships as Hewlett Packard's is planning to shift buying processes online.
High cash cycle compare to competitors
Hewlett Packard's has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Workers concerns about automation
– As automation is fast increasing in the segment, Hewlett Packard's needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Hewlett-Packard-Compaq: The Merger Decision, it seems that the employees of Hewlett Packard's don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Lack of clear differentiation of Hewlett Packard's products
– To increase the profitability and margins on the products, Hewlett Packard's needs to provide more differentiated products than what it is currently offering in the marketplace.
Opportunities Hewlett-Packard-Compaq: The Merger Decision | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Hewlett-Packard-Compaq: The Merger Decision are -
Learning at scale
– Online learning technologies has now opened space for Hewlett Packard's to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Developing new processes and practices
– Hewlett Packard's can develop new processes and procedures in Strategy & Execution industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Better consumer reach
– The expansion of the 5G network will help Hewlett Packard's to increase its market reach. Hewlett Packard's will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Hewlett Packard's to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Strategy & Execution industry, but it has also influenced the consumer preferences. Hewlett Packard's can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Hewlett Packard's can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Hewlett Packard's can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Loyalty marketing
– Hewlett Packard's has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Building a culture of innovation
– managers at Hewlett Packard's can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Strategy & Execution segment.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Hewlett Packard's can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, Hewlett-Packard-Compaq: The Merger Decision, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Hewlett Packard's is facing challenges because of the dominance of functional experts in the organization. Hewlett-Packard-Compaq: The Merger Decision case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Leveraging digital technologies
– Hewlett Packard's can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Strategy & Execution industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Hewlett Packard's can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Hewlett Packard's can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Threats Hewlett-Packard-Compaq: The Merger Decision External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Hewlett-Packard-Compaq: The Merger Decision are -
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Hewlett Packard's.
Technology acceleration in Forth Industrial Revolution
– Hewlett Packard's has witnessed rapid integration of technology during Covid-19 in the Strategy & Execution industry. As one of the leading players in the industry, Hewlett Packard's needs to keep up with the evolution of technology in the Strategy & Execution sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Easy access to finance
– Easy access to finance in Strategy & Execution field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Hewlett Packard's can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Hewlett Packard's in the Strategy & Execution sector and impact the bottomline of the organization.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Hewlett Packard's with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Hewlett Packard's in the Strategy & Execution industry. The Strategy & Execution industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Hewlett-Packard-Compaq: The Merger Decision, Hewlett Packard's may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Strategy & Execution .
Regulatory challenges
– Hewlett Packard's needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Strategy & Execution industry regulations.
Consumer confidence and its impact on Hewlett Packard's demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Increasing wage structure of Hewlett Packard's
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Hewlett Packard's.
Environmental challenges
– Hewlett Packard's needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Hewlett Packard's can take advantage of this fund but it will also bring new competitors in the Strategy & Execution industry.
High dependence on third party suppliers
– Hewlett Packard's high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Weighted SWOT Analysis of Hewlett-Packard-Compaq: The Merger Decision Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Hewlett-Packard-Compaq: The Merger Decision needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Hewlett-Packard-Compaq: The Merger Decision is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Hewlett-Packard-Compaq: The Merger Decision is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Hewlett-Packard-Compaq: The Merger Decision is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Hewlett Packard's needs to make to build a sustainable competitive advantage.