Case Study Description of HP's Acquisition of Autonomy
On August 18, 2011, Hewlett Packard, under the leadership of then-CEO LA?o Apotheker, announced a friendly acquisition of U.K.-based Autonomy, a market leader in the management of structured and unstructured data for business management solutions, for $11.1 billion. This acquisition attracted tremendous media attention, due to both its size and price. The offer price paid to Autonomy was at A?25.5 a share, a 64% premium over its previous day's stock price. Although a number of critics had argued that the price was excessive, many believed the change in HP's strategic direction was appropriate. On November 20, 2012, only one year later, HP made a shocking announcement that it was writing off $8.8 billion of the $11.1 billion purchase price, of which more than $5 billion was due to accounting improprieties and misrepresentations of Autonomy's financial results. How could this deal have gone so wrong? Did HP not carry out proper due diligence and valuation before the offer? Was this acquisition a strategic fit to HP? The case provides an opportunity for students to analyze the corporate strategy of HP, examine HP's financial performance overall and its various business segments, determine how and if Autonomy fits in with HP, and value the acquisition using discounted cash flow (DCF) and multiples analyses.
Authors :: Michael Moffett, Andrew Inkpen, Lena Booth
Swot Analysis of "HP's Acquisition of Autonomy" written by Michael Moffett, Andrew Inkpen, Lena Booth includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Hp Autonomy facing as an external strategic factors. Some of the topics covered in HP's Acquisition of Autonomy case study are - Strategic Management Strategies, and Leadership & Managing People.
Some of the macro environment factors that can be used to understand the HP's Acquisition of Autonomy casestudy better are - – geopolitical disruptions, competitive advantages are harder to sustain because of technology dispersion, challanges to central banks by blockchain based private currencies, increasing commodity prices, there is backlash against globalization, central banks are concerned over increasing inflation, there is increasing trade war between United States & China,
increasing energy prices, increasing household debt because of falling income levels, etc
Introduction to SWOT Analysis of HP's Acquisition of Autonomy
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in HP's Acquisition of Autonomy case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Hp Autonomy, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Hp Autonomy 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 HP's Acquisition of Autonomy can be done for the following purposes –
1. Strategic planning using facts provided in HP's Acquisition of Autonomy case study
2. Improving business portfolio management of Hp Autonomy
3. Assessing feasibility of the new initiative in Leadership & Managing People field.
4. Making a Leadership & Managing People topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Hp Autonomy
Strengths HP's Acquisition of Autonomy | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Hp Autonomy in HP's Acquisition of Autonomy Harvard Business Review case study are -
Highly skilled collaborators
– Hp Autonomy has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in HP's Acquisition of Autonomy HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
High brand equity
– Hp Autonomy has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Hp Autonomy to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Effective Research and Development (R&D)
– Hp Autonomy 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 HP's Acquisition of Autonomy - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Learning organization
- Hp Autonomy is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Hp Autonomy is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in HP's Acquisition of Autonomy Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Analytics focus
– Hp Autonomy 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 Michael Moffett, Andrew Inkpen, Lena Booth 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.
Successful track record of launching new products
– Hp Autonomy has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Hp Autonomy 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.
Strong track record of project management
– Hp Autonomy is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Operational resilience
– The operational resilience strategy in the HP's Acquisition of Autonomy 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.
Cross disciplinary teams
– Horizontal connected teams at the Hp Autonomy 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.
Superior customer experience
– The customer experience strategy of Hp Autonomy in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
High switching costs
– The high switching costs that Hp Autonomy 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.
Ability to lead change in Leadership & Managing People field
– Hp Autonomy 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 Hp Autonomy in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Weaknesses HP's Acquisition of Autonomy | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of HP's Acquisition of Autonomy are -
Need for greater diversity
– Hp Autonomy 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.
Increasing silos among functional specialists
– The organizational structure of Hp Autonomy is dominated by functional specialists. It is not different from other players in the Leadership & Managing People segment. Hp Autonomy needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Hp Autonomy to focus more on services rather than just following the product oriented approach.
High bargaining power of channel partners
– Because of the regulatory requirements, Michael Moffett, Andrew Inkpen, Lena Booth suggests that, Hp Autonomy 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.
Skills based hiring
– The stress on hiring functional specialists at Hp Autonomy has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Slow to strategic competitive environment developments
– As HP's Acquisition of Autonomy HBR case study mentions - Hp Autonomy 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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study HP's Acquisition of Autonomy, in the dynamic environment Hp Autonomy has struggled to respond to the nimble upstart competition. Hp Autonomy has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Workers concerns about automation
– As automation is fast increasing in the segment, Hp Autonomy 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.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the HP's Acquisition of Autonomy HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Hp Autonomy has relatively successful track record of launching new products.
Interest costs
– Compare to the competition, Hp Autonomy 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.
Lack of clear differentiation of Hp Autonomy products
– To increase the profitability and margins on the products, Hp Autonomy needs to provide more differentiated products than what it is currently offering in the marketplace.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Hp Autonomy is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study HP's Acquisition of Autonomy can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Opportunities HP's Acquisition of Autonomy | 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 HP's Acquisition of Autonomy are -
Building a culture of innovation
– managers at Hp Autonomy 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 Leadership & Managing People segment.
Better consumer reach
– The expansion of the 5G network will help Hp Autonomy to increase its market reach. Hp Autonomy 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Hp Autonomy in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Leadership & Managing People segment, and it will provide faster access to the consumers.
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 Hp Autonomy 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Hp Autonomy 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
– Hp Autonomy 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Hp Autonomy is facing challenges because of the dominance of functional experts in the organization. HP's Acquisition of Autonomy 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.
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. Hp Autonomy can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Developing new processes and practices
– Hp Autonomy can develop new processes and procedures in Leadership & Managing People 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.
Buying journey improvements
– Hp Autonomy can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. HP's Acquisition of Autonomy suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Hp Autonomy can use these opportunities to build new business models that can help the communities that Hp Autonomy operates in. Secondly it can use opportunities from government spending in Leadership & Managing People sector.
Low interest rates
– Even though inflation is raising its head in most developed economies, Hp Autonomy 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.
Leveraging digital technologies
– Hp Autonomy 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.
Threats HP's Acquisition of Autonomy External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study HP's Acquisition of Autonomy are -
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.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Hp Autonomy will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
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 Hp Autonomy business can come under increasing regulations regarding data privacy, data security, etc.
Environmental challenges
– Hp Autonomy 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. Hp Autonomy can take advantage of this fund but it will also bring new competitors in the Leadership & Managing People industry.
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.
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. Hp Autonomy needs to understand the core reasons impacting the Leadership & Managing People industry. This will help it in building a better workplace.
Stagnating economy with rate increase
– Hp Autonomy 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.
Increasing wage structure of Hp Autonomy
– 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 Hp Autonomy.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Hp Autonomy with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study HP's Acquisition of Autonomy, Hp Autonomy may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Leadership & Managing People .
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 Hp Autonomy in the Leadership & Managing People sector and impact the bottomline of the organization.
High dependence on third party suppliers
– Hp Autonomy 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.
Regulatory challenges
– Hp Autonomy 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 Leadership & Managing People industry regulations.
Weighted SWOT Analysis of HP's Acquisition of Autonomy 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 HP's Acquisition of Autonomy 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 HP's Acquisition of Autonomy 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 HP's Acquisition of Autonomy 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 HP's Acquisition of Autonomy 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 Hp Autonomy needs to make to build a sustainable competitive advantage.