Industry Analysis Porter Five Forces

Threat of new Entrant (Low) Defining Question Assess the power of Buyers Circle one of the following. 1 = low, 5 = high, or N/A if it doesnt apply to your industry. Economies of Scale Does successful entry require that 1 2 3 4 5 and experience companies have significant N/A economies of scale or experience
Determinants

Brand Identity Product Differentiation

Switching Costs

Do new companies need to spend heavily on brand identification? Do new entrants need to differentiate by spending heavily on advertising, customer services or product differences to over come existing customer loyalty? Does the buyer have to pay to switch from one supplier product to another?

3 N/A 2 3 N/A

4
4

5
5

3
N/A

Capital Required Access to Distribution Cost advantage

Does the new company need to invest large financial resources? Does the new comer have access to distribution channel for product or services? Established companies have cost advantages over new rivals. Government policies can help to preserve or limit competition.

1 1

3 N/A 2 3 N/A 2 3 N/A 3

4
4 4

5
5

Government policies

N/A
(Threat of new Entrant of Low)

Intensity of Rivalry (High)

Determinants Defining Question Assess the power of Buyers Circle one of the following. 1 = low, 5 = high, or N/A if it doesnt apply to your industry. 1 2 3 4 5 N/A

Industry growth

How slowly or quickly is the industry growing? Intense fight among rivals for market share Does your business have a high fixed cost? Is your product commodity? The closer the product is to being a commodity the higher intensity of rivalry. How costly is it for your buyer to switch between providers?

Fixed Cost Product Differentiation

1 1

2 2

3 N/A

4 4

5
5

3
N/A

Switching Costs

3 N/A

Brand Identity

Is branding critical for your Rivals success? Brand identification by buyer reduces the threat of rivals.

3 N/A

Concentration and Are there a large number of firms balance of equal size and power, all chasing after the same customer? Diversity of competitors

3 N/A

Are there competitors with 1 2 3 4 5 different strategies and frame of N/A reference? When competitors are diverse it is more difficult to establish the rules of game (Intensity of Rivalry is high)

Bargaining power of Buyer (High) Determinants Defining Question Assess the power of Buyers Circle one of the following. 1 = low, 5 = high, or N/A if it doesnt apply to your industry. 1 2 3 4 5 N/A

Concentration

Buyer is fragmented because to cosmetic covers all Demographic segments.

Product Cost versus Does your product buyers purchase Total Purchases represent a significant fraction of the buyers cost? If so, buyer bargaining power is typically high. Product Product is standard and Differentiation undifferentiated or differentiated

3 N/A 3 N/A

Switching Costs

Switching cost are high with related to Brands or Low.

3 N/A

Backward Integration

Can they make what you make themselves?

3 N/A

Impact on Quality/ Performance

Is the product you offer important to the quality of the buyers product or services?

3 N/A

(Bargaining power of Buyer is high)

Bargaining power of Suppliers (High) Determinants Defining Question Assess the power of Buyers Circle one of the following. 1 = low, 5 = high, or N/A if it doesnt apply to your industry. 1 2 3 4 5 N/A

Concentration

Are you supplier are fragmented or highly concentrated?

Presences of Substitute inputs Product Differentiation

Are there any substitutes for your supplier products? Product is standard and undifferentiated.

N/A
1 2 3 N/A

Switching Costs

How costly is it for you to switch from suppliers product?

3
N/A

Importance Relative to Customer.

Is your industry an important customer the supplier group?

3
N/A

Forward Integration

Can the supplier produce the product you make?

3 N/A

Impact on Quality/ Performance

Is your supplier product essential to the quality or performance of your business?

3 N/A

(Bargaining power of Suppliers is High) Threat of substitute (Low)

Determinants

Defining Question

Price performance Switching Cost

Does the substitute offer a better price performance? Is it costly for buyer to switch to the substitute product?

Assess the power of Buyers Circle one of the following. 1 = low, 5 = high, or N/A if it doesnt apply to your industry. 1 2 3 4 5

N/A
1

N/A

(Threat of substitute is Low)

Porter Analysis
Barrier to entry: (Low/ High Barrier) Capital requirement: This is the industry which demands huge investment so due to high investment there is barrier for completely new entrants.

Product Differentiation: In computer industry product differentiation is a big challenge these days. In short here is very low chance for product differentiation.

Access to distribution channel: Distribution channel of existing big companies is already very strong in this industry. If any new company wants to enter in this market, it must have strong plan and resources for its distribution channel network.

Switching cost: People are conscious about brands in this industry. If some one is using hp and one is satisfy, he/she will not change brand easily.

Bargaining power of supplier: (High)

Suppliers are in power in this industry in terms of raising price and lowing quality. In computer hardware industry, there are few suppliers so customers have no much option. Intels microprocessor chips are used in approximately 85% of personal computers. Microsoft operating system are used in 90% of computers Bargaining power of buyer: (High) Power of buyer is increasing as it is becoming commodity product. Another factor which could be the reason for the power of buyer is the possibility of backward integeration. So we can say that in case of Individual, buyer power is moderately high while in case of organization, buyer power is high. Threat of new substitute: (Low) There is no as such anything which is proper substitute of personal computer and laptop. But a little threat of substitutes of its printing products. It obviously has substitutes as there are following things like PDAs, Palm tops and Smart phones which have similar functions. Rivalry Among existing customers (High) Rivalry is high in this market because there are some brands that have strong brand recognition in market n rivalry for market share is also high. As we can see there are a lot of companies which giving tough time to Hewlett Packard. As quickly the industry is growing so its very hard to compete with competitors such as Hewlett Packard is competing with Dell, IBM, CANNON, Lenovo, Acer, Toshiba, Apple and so many other its competitors in different segments and different products. Such as this business have a high fixed cost co there is very hard to out from this industry which makes competition intents. And Switching cost in this field high so its very hard to any company to get customers which makes intensity of rivalry high for existing firm such as Dell, IBM, CANNON, Lenovo, Acer, Toshiba, Apple etc facing

Hewlett Packard EFE (External Factor Evaluation)

We got weight of 2.87 of External Factor Evaluation which show that performance of Hewlett Packard currently a little better then the industry average which shows by 2.50 but we have 0.37 more then that its weight. So its clear that Hewlett Packard needs more focus on its performance for becoming real market leader.

Hewlett Packard EFE (External Factor Evaluation)

Opportunities
1 2 3 4 5 6 7 8 9 10 11 12 Globalization in (PC,s) Acquisitions Customized ( Solution provider ) Covering Major Market Sectors (public,edu ,Business) Up-Selling Cross Selling Product Deployment Innovation (more t towards mobile device ) Related Diversification (software, web securities , printing ) Strong/Active Distributers B2B selling (to Dell) Product Differentiation

Weight
0.08 0.07 0.05 0.04 0.05 0.05 0.06 0.05 0.07 0.06 0.06 0.04

Rating
3.00 3.00 3.00 2.00 2.00 2.00 3.00 2.00 2.00 4.00 3.00 1.00

Weight Score
0.24 0.21 0.15 0.08 0.10 0.10 0.18 0.10 0.14 0.24 0.18 0.04

Threats Weight Intense competition from other PC 1 0.06 manufacturers

2 3 4 5 6 7 Short Product life Cycle High Switching Cost Frequent changing customer Demand and Behaviors Price war (ink cartridges) new viable competitors 0.09 0.06 0.08 0.03 0.05 0.05 1.00

Rating
2.00 3.00 2.00 3.00 2.00 3.00 3.00

Weight Score
0.12 0.27 0.12 0.24 0.06 0.15 0.15 2.87

Increasing competition on imaging and printing

Total:

Hewlett Packard CPM (Competitive Profile Matrix)

We take two competitors in the Competitive Profile Matrix of Hewlett Packard those are Dell and IBM. After evaluating performance of Hewlett Packard by Critical Success Factors performance. So after evaluation we got valuation of 3.24of Hewlett Packard and 3.18 of Dell and 2.93 of IBM. Which shows that among its nearest competitors Hewlett Packard is performing well and at second number is Dell and then after that IMB which shows HP could face threat from Dell. (Table attached below)

The Internal Factor Evaluation (IFE) Matrix:

In this we analysis internal factors of HP and this also HP having a little stronger then average performance so it should improve its internal strengths by improving its efficiency and its resources. (Table attached below)

Competitive Analysis (Summary Statement)

Competitive Analysis (Summary Statement)
Sales HP IBM $ 97.06 B $ 92.79 B # of Employees 156,000 366,486 Market Share N/A N/A Gross Profit 24.46% / $ 23.74 B 42.33.% / $ 39.28 B 49.74% / $ 17.23 B EBITDA $ 10.72 B $ 19.20 B EPS $2.30 $6.26 Net Income $ 6.39 B $ 9.55 B

CANON

$ 34.63 B

118,499

N/A

$ 8.29 B

$2.92

$3.88 B

We can see that while revenues are very near of HP and IBM and much smaller of CANNON but gross margins of its competitors very high then HP and even while having lower sales CANNON giving very high Earning per share which makes investors attract. And even Net Incomes of IBM are more then HP even his Sales were less then HP.

SWOT analysis
Strength:

Technology advancement Decrease Expanse (R & D) Branding obvious and easily recognized Technology Research Labs Customer loyalty International Trade Worlds leading brand Product line Extension Larger IT Firms (Application industry) Engineering Design

Weakness:
Unit vendor shipment Lack of in-house management consulting division Decreasing its investments in R&D compared to past spending Not using online selling

Opportunities:
Globalization in (PCs) Acquisitions Customized (Solution provider) Covering Major Market Sectors (public, education, Busiuness) Up-Selling Cross Selling Product Development Innovation (more towards mobile device) Related Diversification (software, web securities, printing) Strong/Active Distributors B2B selling (to Dell) Product Differentiation

Threats:

Intense competition from other PC manufacturers Short Product life Cycle High Switching Cost Frequent changing customer Demand and Behaviors Price war (ink cartridges) New viable competitors Increasing competition on imaging and printing

Value Chain Analysis

Current Strategies:
Up selling: Hp currently using Up selling strategy for their loyal customers and in ESS and HPS. Cross selling: HP also using cross selling strategy by expending product lines and its verity of services and products HPs Macro Environment: PEST Analysis Political: Private ownership is the dominant market system in the United States. Moreover, both home and private businesses are granted the authority for decentralized decisionmaking. The free system in the American business sector is made evident by the amount of the production and output of private businesses. Statistics showed that about two-thirds of the overall American economic outputs are for the individuals and their private businesses. A third of these output are the only part that goes to the government (US Department of State, 2006). This statistical division indicates that the private businesses and the consumers have a more essential role in the business sector as compared to the political level. Still, the government plays a significant role to the countrys economy including the business sector. One of the important roles of the government in business is the development and enforcement of various business-related laws. These laws include business and property right protection as well as the prohibition of business practices that are perceived as unjust. Product safety is also part of these legislations (Microsoft Encarta Online Encyclopedia, 2005). Economical: The United States economy is considered one of the largest in the world. The businesses in the country are mainly market-oriented where most decisions and activities are developed by the people (Wikipedia, 2005). This has been made evident by the annual purchases of the American consumers, which on the average, totaled to more than 5 trillion dollars every year. This suggests that about 80% of the total goods and services produced by US businesses are purchased and supported by the local consumers. In 1999, a total of $2.9 trillion was the USs gross domestic product (Microsoft Encarta Online Encyclopedia, 2005). Based on a more recent statistical estimation, the US GDP per capita is at $41, 800 and has a real growth of 3.5%. The GDP purchasing parity on the other hand is at $12.37 trillion based on the 2005 estimation (The World Factbook, 2006). The activeness of the US economy is mainly attributed to its rich and diverse business sectors. One of the most important sectors in the country is the manufacturing industry. HP is actually under the industrial machinery sector where computer as well as engines and other equipment are

produced. This manufacturing sector actually accounts for 10.7% of the annual value from manufacturers (Microsoft Encarta Online Encyclopedia, 2005). This suggests the ability of the American to live a fairly good standard of living. There are some economic problems however in the US which could affect the growth and strategic plans of the economy. One of these problems is the significant level of unemployment rate in the country; in addition, report also indicated that a considerable percentage of young Americans fail to graduate (Microsoft Encarta Online Encyclopedia, 2005). Socio-cultural: The population of the country is considered as the third most populated country in the world, which is estimated to be around 296 million (Microsoft Encarta Online Encyclopedia, 2005). In addition to size, the United States is said to be a pluralistic society. This indicates that the countrys inhabitants are highly diverse in terms of religions, races and nationalities. In addition to the presence of minority groups, the diversity in the country is also attributable to open trade and influx of immigrant workers. The rise of immigrant workers suggests the growing working sector of the country, which increases the need for computers and technology. In the employment factor, certain problems are evident. For example, in terms of the wages given to the people, sixteen states in the country provide a wage higher than the minimum, which is at $5.15 for every hour. There are 26 states that provide minimum wages based on the national level. Ohio and Kansas on the other hand offer wages below the minimum, while six other states do not apply any state laws (Wikipedia, 2006). The problem on discrimination is also an occurrence as female workers typically earns less than 10 percent than their male counterparts performing similar responsibilities and with same level of training and education. The 1996 statistical findings also showed that male college graduates typically earn $63, 127 every year whereas female college graduates earn an average of $41, 339. Unemployment rates are significantly related to the peoples education level as the unemployment rate of 7.1% in 1998 was observed among individuals who were not able to finish their high school education. On the other hand, the same statistics revealed that only 1.8% of the college graduates were unemployed (Microsoft Encarta Online Encyclopedia, 2005). Technological: Being one of the countries who were able to use the computer and the internet for the first time, the American society is very mush adapted to technology. In fact, statistics suggested that the employment sector is continuously using computers and related gadgets in their work activities; this greatly contributed to the growth of the computer industry. In addition, job openings for computer professionals are also said to double from 1996 until 2006. People had also grown accustomed to using the internet for work, paying bills, reserving airline tickets as well as shopping. Statistics showed that in 1999, a total of 84 million American have Internet access either at home or at work (Microsoft Encarta Online Encyclopedia, 2005). Problems and Issues

Based from the tools used for analysis, certain issues and problems of HP have been stressed. One of the major problems of the company is the presence of several competitors within the industry. Though the company has access to a myriad of marketing strategies, companies applying similar strategies can limit their positive effects. The company should then apply a marketing strategy that will give the best results. In order to overcome these problems, HP then plans to distribute its products online. While at resent, the company is already connected to major online retailers, there is also the opportunity to create a company direct online service. The company is then caught between whether this alternative is worth the risk or should it just optimize its current strategy. In this aspect, the main issue is whether the change of strategy is a cost-effective move for HP. Despite the fact that HP has the resources to support this strategy, it is essential that the company will gain the expected results from this investment. It is important that the ability of the strategy to overcome HPs business concerns is considered. Will the strategy help HP distribute its products effectively to the market? Will this overcome competitors? Will it result to fast return of investment?

Recommendation and Implementation: Based from the analysis of the companys strengths and options, the first alternative appears to be the most recommendable. There are two main reasons for this judgment. One is that the company has the resources and capabilities to design a website of its own, which has been pointed out in the company analysis. With its available capital, strong brand name, loyal customers and talented workforce, HP has access to the major elements for internet retailing through a customized website. The second reason is that the HP will most likely benefit from this alternative. By facing the possible risks involved in developing a company website, HP can apply a strategy that is different from its major rivals; hence, this alternative will help the company achieve its aim of overcoming business rivalry. As the companys major markets are capable of accessing the internet, the company will be able to improve its means of product distribution as well as increase market growth. The macro environment, micro environment and company analysis for HP all indicated that in order for HP to overcome its major sources of threats, cost effective and distinctive business strategies should be developed. The first alternative is then recommended as it answers to these needs. In conclusion, the resources, capabilities and business environment of HP can all contribute to the efficacy of implementing internet retailing by the company. The company should then design a project plan for this strategy. Important resources that will serve as the strategys framework should be prepared. It is also suggested that the company develop a monitoring system, which will regularly evaluate the strategys progress. This will be helpful for detecting problems ahead of time as well as in implementing strategy changes or improvements.