The Merger of Hewlett-Packard and Compaq (A): Strategy and Valuation SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Strategy & Execution
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of The Merger of Hewlett-Packard and Compaq (A): Strategy and Valuation
In 2002, a money manager is considering how to vote her shares in Hewlett-Packard on the proposal to merge with Compaq. The (A) case presents information about the strategic and financial motivations of the merger. Included are completed valuations of both HP and Compaq and detailed summaries of the leading advocate (Carly Fiorina) and critic (Walter Hewlett). The tasks for the student are to value the prospective synergies in the deal and critically assess the strategic arguments (pro and con). The (B) case affords a detailed examination of the terms of the proposed merger. The tasks for the student are to critically assess the specific design of the deal and its impact on shareholders. Of particular interest are the impact on earnings per share (that is, EPS dilution), the governance of the new firm and whether this is, indeed, a merger of equals. The (C) case describes the outcome of the proxy contest. Here the task for the student is to evaluate the strategies of each side in communicating with shareholders and presenting arguments. The objectives of the case module are to expose students to the mechanics of proxy contests, exercise skills in valuation and strategic analysis, and critically evaluate deal terms. The (A) and (B) cases can be taught in sequential classes, or in one class. The (C) case is typically distributed at the end followed by a brief discussion.
Swot Analysis of "The Merger of Hewlett-Packard and Compaq (A): Strategy and Valuation" written by Robert F. Bruner, Anna Buchanan includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Compaq Critically facing as an external strategic factors. Some of the topics covered in The Merger of Hewlett-Packard and Compaq (A): Strategy and Valuation case study are - Strategic Management Strategies, Mergers & acquisitions, Technology and Strategy & Execution.
Some of the macro environment factors that can be used to understand the The Merger of Hewlett-Packard and Compaq (A): Strategy and Valuation casestudy better are - – increasing commodity prices, increasing government debt because of Covid-19 spendings, customer relationship management is fast transforming because of increasing concerns over data privacy, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing transportation and logistics costs, talent flight as more people leaving formal jobs, central banks are concerned over increasing inflation,
there is backlash against globalization, cloud computing is disrupting traditional business models, etc
Introduction to SWOT Analysis of The Merger of Hewlett-Packard and Compaq (A): Strategy and Valuation
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in The Merger of Hewlett-Packard and Compaq (A): Strategy and Valuation case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Compaq Critically, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Compaq Critically 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 The Merger of Hewlett-Packard and Compaq (A): Strategy and Valuation can be done for the following purposes –
1. Strategic planning using facts provided in The Merger of Hewlett-Packard and Compaq (A): Strategy and Valuation case study
2. Improving business portfolio management of Compaq Critically
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 Compaq Critically
Strengths The Merger of Hewlett-Packard and Compaq (A): Strategy and Valuation | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Compaq Critically in The Merger of Hewlett-Packard and Compaq (A): Strategy and Valuation Harvard Business Review case study are -
Successful track record of launching new products
– Compaq Critically has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Compaq Critically has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Analytics focus
– Compaq Critically 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 Robert F. Bruner, Anna Buchanan 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.
Ability to recruit top talent
– Compaq Critically is one of the leading recruiters in the industry. Managers in the The Merger of Hewlett-Packard and Compaq (A): Strategy and Valuation are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Digital Transformation in Strategy & Execution segment
- digital transformation varies from industry to industry. For Compaq Critically digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Compaq Critically has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Strong track record of project management
– Compaq Critically is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
High brand equity
– Compaq Critically has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Compaq Critically to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Cross disciplinary teams
– Horizontal connected teams at the Compaq Critically are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Effective Research and Development (R&D)
– Compaq Critically has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study The Merger of Hewlett-Packard and Compaq (A): Strategy and Valuation - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Training and development
– Compaq Critically has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in The Merger of Hewlett-Packard and Compaq (A): Strategy and Valuation 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.
Innovation driven organization
– Compaq Critically is one of the most innovative firm in sector. Manager in The Merger of Hewlett-Packard and Compaq (A): Strategy and Valuation Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Low bargaining power of suppliers
– Suppliers of Compaq Critically in the sector have low bargaining power. The Merger of Hewlett-Packard and Compaq (A): Strategy and Valuation has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Compaq Critically to manage not only supply disruptions but also source products at highly competitive prices.
Organizational Resilience of Compaq Critically
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Compaq Critically does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Weaknesses The Merger of Hewlett-Packard and Compaq (A): Strategy and Valuation | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of The Merger of Hewlett-Packard and Compaq (A): Strategy and Valuation are -
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Compaq Critically supply chain. Even after few cautionary changes mentioned in the HBR case study - The Merger of Hewlett-Packard and Compaq (A): Strategy and Valuation, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Compaq Critically vulnerable to further global disruptions in South East Asia.
Products dominated business model
– Even though Compaq Critically has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - The Merger of Hewlett-Packard and Compaq (A): Strategy and Valuation should strive to include more intangible value offerings along with its core products and services.
No frontier risks strategy
– After analyzing the HBR case study The Merger of Hewlett-Packard and Compaq (A): Strategy and Valuation, 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.
Lack of clear differentiation of Compaq Critically products
– To increase the profitability and margins on the products, Compaq Critically needs to provide more differentiated products than what it is currently offering in the marketplace.
Need for greater diversity
– Compaq Critically has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Slow decision making process
– As mentioned earlier in the report, Compaq Critically has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Compaq Critically even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Capital Spending Reduction
– Even during the low interest decade, Compaq Critically has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
Aligning sales with marketing
– It come across in the case study The Merger of Hewlett-Packard and Compaq (A): Strategy and Valuation 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 The Merger of Hewlett-Packard and Compaq (A): Strategy and Valuation can leverage the sales team experience to cultivate customer relationships as Compaq Critically is planning to shift buying processes online.
Interest costs
– Compare to the competition, Compaq Critically 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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study The Merger of Hewlett-Packard and Compaq (A): Strategy and Valuation, in the dynamic environment Compaq Critically has struggled to respond to the nimble upstart competition. Compaq Critically has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
High operating costs
– Compare to the competitors, firm in the HBR case study The Merger of Hewlett-Packard and Compaq (A): Strategy and Valuation has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Compaq Critically 's lucrative customers.
Opportunities The Merger of Hewlett-Packard and Compaq (A): Strategy and Valuation | 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 The Merger of Hewlett-Packard and Compaq (A): Strategy and Valuation are -
Better consumer reach
– The expansion of the 5G network will help Compaq Critically to increase its market reach. Compaq Critically 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.
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. Compaq Critically can explore opportunities that can attract volunteers and are consistent with its mission and vision.
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. Compaq Critically 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. Compaq Critically 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.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Compaq Critically in the consumer business. Now Compaq Critically can target international markets with far fewer capital restrictions requirements than the existing system.
Developing new processes and practices
– Compaq Critically 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.
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 Compaq Critically 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Compaq Critically in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Strategy & Execution segment, and it will provide faster access to the consumers.
Building a culture of innovation
– managers at Compaq Critically 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Compaq Critically can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Compaq Critically is facing challenges because of the dominance of functional experts in the organization. The Merger of Hewlett-Packard and Compaq (A): Strategy and Valuation 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Compaq Critically can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Compaq Critically 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, The Merger of Hewlett-Packard and Compaq (A): Strategy and Valuation, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Creating value in data economy
– The success of analytics program of Compaq Critically has opened avenues for new revenue streams for the organization in the industry. This can help Compaq Critically to build a more holistic ecosystem as suggested in the The Merger of Hewlett-Packard and Compaq (A): Strategy and Valuation case study. Compaq Critically can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Threats The Merger of Hewlett-Packard and Compaq (A): Strategy and Valuation External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study The Merger of Hewlett-Packard and Compaq (A): Strategy and Valuation are -
Shortening product life cycle
– it is one of the major threat that Compaq Critically is facing in Strategy & Execution sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Technology acceleration in Forth Industrial Revolution
– Compaq Critically has witnessed rapid integration of technology during Covid-19 in the Strategy & Execution industry. As one of the leading players in the industry, Compaq Critically 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Compaq Critically with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Consumer confidence and its impact on Compaq Critically 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.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Regulatory challenges
– Compaq Critically 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.
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. Compaq Critically can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Compaq Critically business can come under increasing regulations regarding data privacy, data security, etc.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Compaq Critically can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study The Merger of Hewlett-Packard and Compaq (A): Strategy and Valuation .
Increasing wage structure of Compaq Critically
– 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 Compaq Critically.
Stagnating economy with rate increase
– Compaq Critically can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
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 Compaq Critically.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Compaq Critically needs to understand the core reasons impacting the Strategy & Execution industry. This will help it in building a better workplace.
Weighted SWOT Analysis of The Merger of Hewlett-Packard and Compaq (A): Strategy and Valuation 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 The Merger of Hewlett-Packard and Compaq (A): Strategy and Valuation 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 The Merger of Hewlett-Packard and Compaq (A): Strategy and Valuation 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 The Merger of Hewlett-Packard and Compaq (A): Strategy and Valuation 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 The Merger of Hewlett-Packard and Compaq (A): Strategy and Valuation 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 Compaq Critically needs to make to build a sustainable competitive advantage.