Electronic Computer Industry in the United States Essay.

computers

Strategic analysis of the electronic computer industry in the United States

Instructions:

Project – Part 1 Requirements (this paper is analyzing the computer company HP)

1. Part 1 is an industry (external) analysis.  What matters is the industry in which your company lies. For those who chose the computer industry, you need to analyze the computer industry, which is SIC code 3571.  For those who chose retail locations, you need to analyze the retail industry, which is SIC code 5331. Please make sure your paper has an industry focus, not a company analysis.  Yes, it is an industry analysis focused on your firm, so there will be some firm specifics, but the primary focus of the paper is to describe the boundaries outside the firm.  All (or even most) of your analysis should NOT be based on how your firm is located in the industry.

• The first paragraph is an executive summary, which summarizes the following points. 1) Which industry you are analyzing: the computer industry or the retail industry. 2) What are the five forces of this industry? 3) What is the intensity of each force (strong, medium, or weak)? 4) What is the profitability of this industry (high, low, medium) and are there any opportunities or threats? The first paragraph is a summary of your entire paper. It has to be short, clear, straightforward and key to the points.   I suggest you write this paragraph last, not first.  Use a highlighted sentence to remember to come back.

• The second to the sixth paragraphs are an analysis of each of Porter’s 5 forces for your industry. You need to spend at least one paragraph analyzing each force. If there is a force that you want to elaborate on, then you can (and should) spend more than one paragraph on that. When you analyze each force, you need to identify: 1) what this force is.  2) What is the intensity of this force (strong, medium, weak)? You should build your arguments based on the factors we discussed in class. You can find them from my lecture notes or in your textbook. In addition, you need to provide evidence for your arguments. The evidence comes from your library and internet research.

• In the concluding paragraphs, you 1) draw your conclusion on the industry’s profitability based on your five forces analysis.  2) Identify which forces are most threatening. 3) Identify which forces are the weakest. 4) Indicate the major opportunities or threats that this industry has.

• Please write in full sentences, not in bullet points.  USE SECTION HEADINGS.

• Other requirements include: 1) minimum of 5 pages, maximum of 10 pages.  References and/or tables, figures etc. can surpass this amount, and should not be included in the page total.  2) double spaced, font size 12, 1-inch standard margin. 3) At least four references provided, at least one of which should include our library sources. In order to do a good job, you may need to have more than four references. 4) Make sure to have a reference list, format isn’t crucial.

• To reiterate:  Please remember our discussion in class about plagiarism.

Here are the requirements on the Part Two of your Project.

1. Part Two is a company analysis. You will analyze the company you chose for your project.

• The first paragraph is an executive summary, you need to indicate: 1) which company you analyze in your paper. 2) what competitive advantages and disadvantages the company has in its value chain activities. 3) what competitive advantages and disadvantages your company has based on your financial ratio analysis of your company and its competitors.  Again it may be easier to write this paragraph last.

• The first part of your paper is the value chain analysis. You need to: 1) Describe your company’s main products / services. 2) Identify the products’ / services’ suppliers, end users and if there is any distributors or retailers in between your company and the end users. 3) Identify the primary value chain activities of your company and describe what these activities consists of. 4) Indicate in which value chain activities your company has competitive advantages and explain why. 5) Indicate in which value chain activities your company has competitive disadvantages and explain why. When you talk about advantages and disadvantages, this should be relative to competitors you identify. 

• The second part of your paper is the financial ratio analysis of your company and its competitor. You need to: Identify a competitor of your company and download the financial ratios of both your company and the competitor from our library’s database: Mergent Online.  For each company, please download the financial ratios of the recent three years.  To download ratios:  1.  Go to http://csulb.libguides.com/mergent.  2.  Log in with your library login.  3.  Enter your company name in the search box – sometimes multiple entities will show up – click the one that is your primary parent company.  4.  Click the “Company Financials” tab. 5. Click “Ratios” underneath the tabs.  6.  Finally, download the ratios using the excel link in the upper right.  Do this again for the other company.  THE TICKER FOR HP IS NOW “HPQ”.  Use this when searching for HP in Mergent. 

• Several important things about financial ratio analysis: 1) Discuss these ratios:  Quick ratio, current ratio, inventory turnover, receivables turnover, total asset turnover, return on assets, and return on equity.  2) Please attach the two companies’ financial ratios to the end of your paper (via copy and paste).  Remember our discussion about viewing changes over time and so forth.  Ideally for each ratio you should have a chart showing both companies, and then an explanation below it talking about what the ratio means, how it is changing over time, etc.  Compare and interpret the differences in the ratios of the two companies. Conclude what competitive advantages your company has over its competitor and what competitive disadvantages your company has over its competitor based on those ratios.

• Please write in full sentences, not in bullet points.  USE SECTION HEADINGS.

• Other requirements include: 1) minimum of 4 pages, maximum of 6 pages plus references and two pages of financial ratios. (to be included at the end of your entire paper) 2) double spaced, font size 12, 1-inch standard margin. 3) at least two references provided, including our library source. In order to do a good job, you may need to have more than two references. 4) Please provide correct and complete references.

• Remember our conversations about plagiarism.  Feel free to discuss your issues with classmates, but write in your own voice, and come to your own conclusions.

Here are the requirements on the Part Three of your Project (and info on combining the parts for final submission at the end).

1. Part Three is a Strategy Recommendation. Please make recommendations to your company’s business level strategy or corporate level strategy.

• NO executive summary is required for this part. 

• The first section is to analyze your company’s business level strategy. You need to: 1) identify your company’s business level strategy, i.e. whether it is cost leadership, differentiation, focused cost leadership, focused differentiation or a combination.  Please explain why you think this is your company’s business level strategy. 2) Analyze how this business level strategy is achieved through your company’s value chain activities. 

• The second section is to analyze your company’s corporate level strategy. You need to: 1) Identify one of your company’s corporate level strategies. Please choose one from the following: horizontal integration, vertical integration, outsourcing, related diversification, and unrelated diversification. Please explain why you think this is your company’s primary corporate level strategy.  It is possible they participate in more than one of these, try to find the one that has the greatest apparent focus.  You may discuss the others briefly as well and how they relate, but try to focus on the primary one you identify.  2) Discuss how your company implements this corporate level strategy, whether through merger and acquisition, strategic alliance, joint venture, internal development, or through other means.

5.   For the first and second sections, you can prioritize your writing on either one, based on your company’s strategy preference. If you company mainly uses business level strategy to achieve its goals, then you may want to discuss more on the first section. Similarly, if your company mainly uses corporate level strategy to create values, then you may want to elaborate on the second section. You can also allocate your writing equally on these two sections, if you find your company does not have a specific focus on either of these two strategies.

6.   The third section is to make recommendations to your company’s business level or corporate level strategy. In your Part one and Part two analyses, you have identified the opportunities and threats in your company’s industry, and the competitive advantages and disadvantages that your company has. How can your company improve its business level strategy or corporate level strategy in order to either strengthen its competitive advantages, or overcome its competitive disadvantages, to utilize the industry’s opportunities or mitigate the industry’s threats? Please explain the rationale of your strategy recommendations. (You need to spend at least one page on this section.)

7.  Please write in full sentences, not in bullet points.

8.  Other requirements include: 1) minimum of 3 pages, maximum of 5 pages plus references.  2) double spaced, font size 12, 1-inch standard margin. 3) at least two references provided, including our library source. In order to do a good job, you may need to have more than two references. 4) Please provide correct and complete references.  Formatting of them doesn’t matter – just make sure it’s good enough that I can find it based on what info you give me.  Do NOT just copy and paste a library URL (unless you check it yourself and it works).

9.  Bottom line: NO PLAGARIASM IS ALLOWED!  This means if you use block quotes, make sure to quote and cite the source.  Also, a vast majority of your paper should be your own, regardless of quotes.  Only quote information that is unusually perfect in its current form, where paraphrasing would hurt the meaning.  Your paper should be yours, not a copy and paste of several sources, regardless of whether you cite them or not.

10. Combine all three of your parts in this file.  Have headings for each part – “External Analysis”, “Internal Analysis”, “Strategy Recommendation”.  You’ll have executive summaries in both the external and internal section, but no overall summary.  The first thing that should be in your doc is your external analysis, then drop in your internal analysis, then do part 3.  I don’t need the spreadsheets of your ratios.  Congratulations!  You’re done!

Solution

PART I: Electronic computers industry- External analysis

Executive summary

In this part, we analyze the electronic computers industry (SIC 3571) which covers analog and digital computers and hybrids such as mainframe computers, mini and microcomputers, personal computers and tablets.The paper identifies demand, products and technological innovations as some of the key factors that determine its success. Technological advances and innovation and consumer disposable income and corporate business spending circles are some of the factors that affect performance in this industry while Individual company performance is dependent on the efficiency of the existing supply chains, client support and ancillary products and services.  This paper utilizes the porter’s five forces in order to analyze the industry where Buyer power is deemed to be at the medium level, highlighting the mixed distribution of consumers and the fact that most electronic computers are consumed in countries outside of the United States.  Supplier’s power and the threat of new entrants remain low, given the standardized nature of most components and the high barriers to entry into this market. Product and service substitutability and competition power remain the most significant threat to the industry, with HP holding the highest market share in the United States at 28.1 % while Lenovo leads the global market with 21.4% market share. Despite these challenges, the industry posted strong results, with about $75.6 billion in profits.

Industry overview

SIC 3571 covers those establishments that are primarily involved in the manufacturing of electronic computers. By definition and classification, electronic computers are machines that have the capacity to store software and the data necessary to execute such software, are freely programmable according to the user’s needs, have the ability to perform arithmetic functions as desired by the users etc. The electronic computers industry includes analog and digital computers and hybrids such as mainframe computers, mini and microcomputers, personal computers and tablets.

In the US market, personal computers are now everyday standard tools with an estimated penetration rate of close to 80 % as of the 2013 survey.  While personal computers originally emerged in form of desktops, the definition has since been widened to cover portable gadgets such as laptops, notebooks, tablets and netbooks and other hand-held computer devices. Some of the major US-based companies include Dell, HP, and Apple, while foreign brands include Acer group, Toshiba, and Lenovo. Although most PC companies in the US are regarded as manufacturers, most of the actual manufacturing is done offshore.

As of the end of 2015, the leading electronic computer vendors were Lenovo, HP Inc, Dell Inc and Apple Inc. Hp, which has held the electronic computers market leadership has recently been overtaken by the Chinese technology giant Lenovo in terms of worldwide computer shipments. It’s estimated that in 2015, over 290 million computers were shipped globally an eight percent decline from the previous year.

Competitive Landscape

Demand in the electronic computers industry is driven by technological advances and innovation, consumer disposable income, and corporate business spending circles. Individual company performance is dependent on the efficiency of the existing supply chains, client support and ancillary products and services (Akter, et al, 2014. In order to maintain market leadership, large companies leverage on extensive marketing budgets and supply chains, discounts on component purchases and efficiencies in the manufacturing processes due to their ability to deploy the latest technology. Smaller players, on the other hand, attain a competitive advantage by offering unique products and personalized services and support. Despite the unique capacity of each category of dealers in the industry, the US PC market is very concentrated with the top 30 dealers accounting for virtually all revenue in the industry.

Products, Operations & Technology

As expected, most of the personal computers fall into one of either designs i.e. traditional desktops or portable computing devices. They come in a variety of sizes and shapes and are often customizable depending on user requirements which are a differentiation mechanism that also determines the prices for each unit. With advancements in computing and communication technology, there have been significant diversifications with all dealers trying to reduce the size of their gadgets while increasing their capacity and capability and convenience.

Due to the highly standardized nature of most of the products traded under the electronic computers category, competition is very aggressive and affects all factors in the business and market segments.  To this end, competition is primarily in the areas of price, technology, performance, reputation, reliability, innovation, brand, product range, customer service, and after-sale support, relationships, security and supply chains. A failure in any of these areas has a significant impact on a company’s performance and survival. Increased customer information as a result of ease of information access does not make the situation better, as customers are now more discerning and demanding.  Despite the challenges that characterized the electronic computer industry especially in the United States, the industry has remained solid and steady, delivering a strong performance year in year out. This paper utilizes the porters- five forces to establish the profitability and sustainability of the electronic computer market in a bid to recommend an ideal business strategy for the industry.

Porter 5 Forces Industry Analysis

The porter’s 5 forces analysis is an industry analysis model that helps in determining the profitability and sustainability of a given industry. It’s a tool that helps in understanding the balance of power in a business situation. It helps industry players to understand the strength of their currently competitive industry position and the position that one intends to move to (Porter, 1985). For instance, a porters five forces can help investors to determine the business to invest in, depending on its standing in the industry food chain. Knowledge of the industry power balance helps investors in taking advantage of their current strong position, improving on their weaknesses and also makes the best investment decisions given the prevailing business circumstances. It also helps industry players to identify the probability of success of new products before such products are placed on the market.

Analysis of the electronic computers industry

Buyers bargaining power

 This force is concerned about the buyer’s ability to drive prices down, often driven by the number of buyers available in the market. Other factors that impact on the buyer bargaining power include the importance of the buyers to the business and cost of switching from one dealer products to the other. If a business deals with just a few buyers who are powerful, then such buyers are likely to dictate prices.

Just like most other industries, the electronic computer industry is affected by buyer bargaining power, albeit being a medium threat.The past few years have witnessed an increased number of alternative computing devices such as tablets, smartphones as well as other handheld devices such as iPods, devices that have similar capabilities as electronic computers. These gadgets are even trendier, sleeker, often cheaper and easily available in the market. These characteristics have become increasingly popular.  In order to remain relevant, conventional electronic computers such as laptops and desktops will need to continually differentiate them and   ensure that their prices are manageable to the mass market.

Suppliers’ bargaining power

An industry’s attractiveness is also determined by supplier’s ability to increase prices.This power depends on the number of suppliers available for key inputs, strength, and control of the suppliers, the exclusiveness of their supplies, and lastly the cost of switching from one supplier to the other. The fewer the suppliers and the more unique their supplies, the more likely that they are to adjust their prices, and ultimately the more powerful they are in the equation.

In the electronic computers industry, suppliers can be categorized into three, i.e. hardware component suppliers, software vendors, and services suppliers. Generally, most of their products are standardized and their competition is anchored mainly on creating ideal and advanced products at the best possible prices, often without significant differentiation. This means that companies in this industry can easily switch between their suppliers with minimal damage to their brands. With the quality of products in this industry being determined mainly by their processing speeds and applications, hardware and software vendors play a significant role in the product pricing mechanics. Mostly, products are priced depending on the quality of components, speeds of its microprocessors as well as storage capacities, which translate to the costs paid to suppliers. Service providers, on the other hand, are varied and include technology support, repair services, and the internet. In most cases, these suppliers’ primary focus is on relationships and operational performance in order to enhance customer experience and satisfaction. They provide various customer loyalty arrangements with the aim of locking in customers in order to attain a competitive advantage over the competition.

Competitive Rivalry

In an industry power balance, the strength of competition has a significant implication on the profitability of players in the industry.  The number, size, and capability of competitors determine how a player in the industry performs. For instance, if there are many competitors with the same attractive product and service offerings, there is little power left for a particular business, since buyers can easily shift to other players if one business does not offer good deals. Conversely, if one player is so dominant that there are products and services that they can offer that others cannot, then they have tremendous strength akin to a monopoly.

In the electronic computer industry, there is a cutthroat competition from top manufacturers, with leading brands competing for the ever shrinking market share. Due to the high level of competition in both pricing and quality, most manufacturers are now banking on low-cost gadgets and leveraging the most advanced operating systems so as to beat the competition.

Threat of substitution

Industry power balance is clearly impacted by customers’ ability to substitute products with others, or ways of doing things. For instance, the electronic computers industry provides solutions through automation of processes. People may decide to do those things manually or even outsource them, reducing or eliminating the need for such products.  A company may decide to automate its accounting or payroll function, meaning that the need to purchase computers may be extinguished. The ease of substitution reduces the bargaining power of industry players.

In the electronic computers category, tablets, and smartphones have significantly affected the sales of computers since they have similar benefits as computers. As the sales of smartphones and other mobile gadgets continue to soar, the sales and prices of computers continue to decline. Currently, personal computers including laptops support unique applications and are also more compatible with more software as compared to smartphones. In the future, with advances in technology, if these gadgets have similar capabilities, then they will be ideal substitutes for electronic computers.

Threat of New Entry

Industry’s power is also affected by the ability of other players to enter the market. The ability of other players to enter an industry and subsequently weaken player’s industry position is influenced by factors such as the capital outlay required, economies of scale,and level of protection for key innovations and technology. Strong barriers to entry enable existing industry players to preserve and take advantage of a favorable position.

The Electronic computers market is currently dominated by a few majors’ players whose sheer strength and market share is likely to discourage any new entrants.Such huge barriers to entry because of the large capital outlay, significant research, and development as well as patenting of key technology make it very difficult for any other vendors to come up. This means that the resultant threat from new entrants is significantly low, leaving the major vendors to continue to enjoy large profits and market share.

Conclusion

The above discussion points at forces that continue to threaten the success of the electronic computers industry. Buyer power is deemed to be at the medium level, highlighting the mixed distribution of consumers and the fact that most electronic computers are consumed in countries outside of the United States. Supplier’s power and the threat of new entrants remain low, given the standardized nature of most components and the high barriers to entry into this market. Product and service substitutability and competition power remain the most significant threat to the industry. Substitutability is anchored on advancements in technology that continue to develop new products that can easily perform similar tasks as electronic computers. Competition, on the other hand, is heightened by the adoption of handheld computing devices and continued innovation by competitors that threatens to erode the gains made in the industry over the years.

Despite these challenges, the industry continues to post strong performances with a profit of approximately 75.6 billion dollars in 2015. HP retains its lead in the United States market with approximately 28.1% market share; dell is second with 23.9 % while Apple averages 12.7%.Other significant players in the US market include Lenovo, Acer, and Toshiba. Globally, Lenovo leads the part with a 21.4% market share, HP (19.9 %), Dell (14.1%), ASUS (7.9%) and Apple (7.9%) (HP Annual report, 2015)

Part II. Internal analysis

Section I- HP Inc- Overview

In this section, we analyze Hewlett Packard, a premier technology solutions company based in the United States. The company derives its competitive strength from its leadership in innovation which enables it to develop the best products in the market.  Unlike most of its competitors who focus on one or two technology areas such as software, Pc or cloud computing, HP  is a one-stop-shop for all technology needs from  the latest personal computers, touch-smart devices , printing solutions to networking, cloud computing, and  information security. It leverages on its superior supply chains to improve on its operations, reduce costs and ultimately attain a superior financial performance and market share.  This is reflected in its superior financial ratios as compared to Lenovo, its key competitor in the global technology market.

Hewlett Packard (HP) is a technology company that was founded in 1939 with its headquarters in Palo Alto California, its operations spanning across Europe, Americas, Africa, Asia-pacific and the Middle East in over 170 countries. The company is involved in the design, manufacturing and marketing of various computer products such as desktops, tablets, and laptops, with product offerings such as HP Pavillion, HP Spectre, HP chrome book, HP split and Slate and a series of tablets and notebooks. It also provides a wide range of printing solutions flagged by lead products such as inkjet and laser jet printers. The company is also diversified into other technology products such as the provision of networking and cloud technology solutions to clients, IT implementation, optimization and server migrations, communication networks and information security solutions. The company’s main clients include small and medium size businesses, large enterprises, and individual and government institutions.

HP Inc value chain analysis

According to Zhang, (2010), value chains are business efforts that are utilized to in order to attain competitive advantages through reduction of costs, improved market efficiencies, enhanced customer experience and ultimately superior competitive and financial positions. The value chain concept was introduced in 1985 Michael Porter in his groundbreaking work ‘competitive advantage’, where he suggested that organizations should seek to optimize its supply chain processes for them to attain any competitive edge.

Inbound logistics

The company improves efficiency in its transport system in order to optimize energy use through the use of most efficient transportation methods, optimized distribution channels, and networks and ensuring that transport providers are environmentally sound. Through its arm, HP financial services, the company is under contract with some of the world’s largest transportation providers and shipping companies that allow the company to obtain significant discounts on its transportation costs.

For the last 10 years, the company has been on a cost-cutting mission, by reducing the layers of management in the supply chain, reorganizing its business operations into the various reportable segments and finally outsourcing most of the production activities. This saw the company increase outsourced products to almost half, which subsequently increased the company’s profit margin to about 10% in 2008, a growth of almost 6%. The company continues to look for avenues of improving its processes and optimizing efficiency its supply chain.

Outbound Logistics

The company employs the 3PL model which has dramatically reduced its fixed costs. Internationally, the company engages more than 40 3PLs with about 15 core partners who support the business. The process of certification as a 3PL for the company is very demanding as the company ensures that 3PLs have the requisite technology capabilities (Zhang, 2010)

Marketing and sales

The company has a strong presence in almost all technology segments unlike its close competitors Lenovo, IBM and Dell which have a different area of focus.  Dell and Lenovo make most of their revenue from PCs and servers while IBM is mostly in IT services. HP, on the other hand, deals in all these segments and much more, with a superior presence in printing technology, an area not covered by most of its competitors.

Service

 A key part of HP’s business is its software and related services. Its acquisition of Mercury Interactive Corporation in 2006 made HP the dominant corporation in the software and IT services segment, which gave it an edge over existing players such as IBM and Accenture.

Support activities

Procurement

The company leverages technology to optimize its procurement processes by enhancing relationships with suppliers, using electronic auctions, e-invoicing, and e-payments.  The company supports a chain of global suppliers and has standardized most of terms and conditions of procurement contracts to enhance efficiency in the procurement process.

Technology development

HP deploys a unique service identified as adaptive network architecture which allows the company to manage its technological and innovative agenda. Besides the company has invested heavily in research and development which has led to the development of new products and services as well as improvement in existing products, services and processes, presenting a great opportunity for competitive advantage.

Section II- Financial Ratio Analysis

1. Return on assets

Commentary

This ratio measures the company’s efficiency in the utilization of assets to generate profits. It shows how much profit was generated by the business per unit of assets invested. From the above ratios, it’s evident that HP posted more superior ratio, indicating better performance as compared to Lenovo. Notably, however, both companies’ ratios are on a declining trend, indicating a tougher operating environment and dwindling returns.

• Return on equity

Commentary

This ratio measures the company’s efficiency in generating profits from the funds invested by shareholders. In the years 2014 and 2015, Lenovo posted more superior ratios as compared to HP. However, HP has been more consistent, unlike Lenovo which has plunged into negative returns as of 2016. The above ratios also denote a declining trend in both company’s performance, an indicator of declining returns in a challenging operating environment.

• Quick ratio

Commentary

Quick ratio denotes a company’s ability to settle current liabilities with the most liquid assets. HP has higher ratios as compared to Lenovo, indicating the company’s superior ability to meet its current obligations as they fall due. It’s noteworthy that HP’s ratios are on an increasing trajectory, an indicator of better management of cash flows while Lenovo seems to experience challenges in its cash flows management as indicated by a declining ratio.

• Current ratio

Commentary

Current ratio denotes the ability of the company to settle its current obligations as they fall due using current assets. A ratio of more than 1 indicates that the company has more current assets compared to current liabilities while a ratio of less than one indicates that the company’s current liabilities exceed the current assets, which may signal some problems in case current liabilities are recalled. HP posts better ratios over the years as compared to Lenovo. Its current ratio position is improving by the day while Lenovo seems to experience a deteriorating trend with time.

• Inventory turnover

This ratio indicates the number of times a company sells its inventory and replenishes it, in an operating cycle. A higher ratio indicates that a company has been more efficient in its management of inventory which also means increased sales. From the ratios above, Lenovo has an upper hand in how efficiently it manages its inventory as compared to HP. In both companies, however, there is a declining trend in the ratios, which may indicate challenges in the supply chains of these two companies.

• Receivables turnover

Commentary

Receivables turnover ratio denotes the company’s ability to manage its credit policies. It’s an indicator of how efficient a company is in managing its working capital through issuing and collecting debts.  Lenovo again has been more efficient in their credit management. There is, however, a declining trend in this ratio for both companies over the period, an indicator of a challenging operating environment.

Conclusion

The above ratio analysis points at areas where HP has a competitive advantage over its competitor Lenovo, as well as areas of improvement. The company’s financial ratios show that it has been more efficient in its utilization of assets to generate profits and value for shareholders. The company is also in a much stronger position as compared to its competitor, in its ability to meet its current obligations as they fall due. Stronger liquidity and profitability ratios indicate that the company is in a better position to take advantage of investments and expansion opportunities as compared to its competitor. On the other hand, Lenovo is more efficient in the management of inventory and receivables, indicating significant strengths in its supply chain management.

Part III- Strategy recommendations

Hp has weathered a tough operating environment characterized by poor economic conditions coupled with stiff competition from other vendors such as Apple, IBM etc. to remain at the top of the United States electronic computers market. It has managed to do this by employing successful business and corporate strategies that have delivered value to shareholders. This segment reviews the company’s business and corporate level strategies and recommends the best strategy to ensure that the company improves its performance.

Business level strategy

According to Beard & Gregory (1981), a business level strategy is a strategy employed by the business that determines its focus in the market, aimed at attaining competitive advantage. Business-level strategies are adopted by businesses with the aim of differentiating themselves from their competitors in a manner that is attractive to customers. A review of HP Inc business, as explained in section two above, points to a successful differentiation strategy.

Salimian,et al (2012) define a differentiation strategy as one that demands the development of products and services that have unique attributes that offer value to customers and create a perception of superiority compared to competitor products.

As explained earlier, Hewlett Packard (HP) is a technology company that provides infrastructure, cloud, computing and software solutions and other related services. The company is involved in the design, manufacturing and marketing of various computer products such as desktops, tablets, and laptops, with product offerings such as HP Pavillion, HP Spectre, HP chrome book, HP split and Slate and a series of tablets and notebooks. It also provides a wide range of printing solutions flagged by lead products such as inkjet and laser jet printers. Its cloud infrastructure technology, TouchSmart enabled devices such as desktops and notebooks. While most of these products are produced by other vendors, HP ensures that they have the latest technology that meets their clients changing needs. Its flagship PC’s such as pro-book and Chromebook offer advanced user experience which differentiates the company’s products from those of competitors.

Corporate strategy

At the corporate level, the company utilizes the related diversification strategy. Roth & Morrison,(2005) defines related diversification as a form of business diversification that occurs when a company expands or adds to its existing line or products. Under this form of diversification, the company invests in related ventures that can easily fit into the company business activities. It’s done to ensure that goods or services provided are complimentary to the existing ones.

The foregoing section classified the HP operations into seven distinct but related and complementary segments. These include the Personal systems that deals with the production and marketing of personal computers including desktops, laptops, pro-books., elite-books, HP elite pads, tablets etc. ; the printing section that provides home and enterprise printing solutions through inkjet and LaserJet technology, imaging and specialized printing; The enterprise group segment in involved in networking, servers, technology, storage and business critical systems.  These comprise of density optimized racks, micro servers, integrity servers and data solutions, storage platforms, external disks and  networking solutions such as wireless and WLAN access, switches and controllers; the enterprise systems segment provides outsourcing services for technology infrastructure, workplace technology, communication networks, cloud computing solutions, data center and IT security among other technology solutions. Other services offered in this segment include development and testing of applications, system integration, management and maintenance and modernization and lastly the HP software solutions offered include enterprise security and big data, applications management and marketing optimization. These services point at a model of diversification into related areas that offer complementing products and services. For instance, an entity can procure personal computers, networking services, cloud computing and storage services, printing solutions, and information security solutions all under one roof at HP.

The related diversification strategy at HP helps the company to easily share resources in the production process as well as the integration of strategies in the marketing of all the products and services offered, which provides the company with additional competitive advantages.

Strategy recommendation

Businesses operating in the technology sector face increased challenges as a result of the dynamic nature of the industry, with frequent innovations that render yesterday’s technology obsolete. There is the need for continuous research and development in order to ensure that the company is cognizant of the changing customer needs and is making enough efforts to meet such needs. This is because companies that fail to innovate are quickly written off the industry, a classic example being Nokia, a giant mobile technology company that found itself dumped into oblivion as a result of significant strides made by competitors in the mobile technology sector. The electronic computers segment is no different and companies must continually innovate so as to remain relevant.

Based on the above observation, and cognizant of the dynamic nature of this industry, it’s recommended that the company adopts a corporate level strategy. While there is a need for product differentiation at all levels, the business must remain open to opportunities that are brought about by advancements in technology and take advantage of those opportunities to maximize shareholder returns. For instance, the invention of cloud computing technology is a perfect example of how the technology world is full of opportunities that must be taken advantage of. By related diversification, the company is able to integrate products and services and leverage its technology to take advantage of this new frontier in computing. A broad-based corporate strategy such related diversification enables the company to take advantage of resources sharing and integration of marketing strategies that leads to significant efficiencies in business processes.  This will significantly reduce the inherent threats of competition, by guaranteeing the company several streams of income, whose contribution is important especially in times when traditional revenue streams are dwindling by the day.

References

Akter,S et al (2014) Competitive Strategies in the Computer Industry. International Journal of Technology Diffusion Volume 5 Issue 1, January 2014. Available at http://dl.acm.org/citation.cfm?id=2648827

Beard,W , Gregory,G.D  (1981)Corporate-Level Strategy, Business-Level Strategy, and Firm Performance. The Academy of Management Journal. Vol. 24, No. 4 (Dec. 1981), pp. 663-688

Hewlett-Packard Company: Technology and communications -company profile, SWOT and financial analysis. (2016).().London: Progressive Digital Media. Retrieved from:Http://ezproxy.library.csulb.edu/login?url=http://search.proquest.com/docview/1820065308?accountid=10351

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Appendix 1.