Running head: ENVIRONMENTAL SCAN AND STRATEGIC ANALYSIS OF HP
Environmental Scan and Strategic Analysis of HP
Introduction to HP
Hewlett-Packard (HP) is a computer and electronics company, and in the Fortune 500 list, it has been ranked 11th. It has an eminent team of 142,000 employees scattered around 170 countries. Palo Alto in California is the headquarter of HP. The company’s offerings are in the fields of Information Technology (IT) infrastructure, personal computing and access devices, imagining and printing, global services.
Silicon Valley start-up is the other name given to HP and is known for developing scientific calculator which was the first hand-held. It has a huge Product and service categories. The company has a huge investment in Research and Development (R&D), nearly about $4 billion. This has fuelled the invention of new products, technologies and solutions (Datamonitor, 2004).
Step – 1
Following are the three forces from remote environment, which Influence the company are: –
- Technological factor
- Political factors
- Ecological factors
Technological factor
Technological factors comprises of the factors that are associated with applied knowledge, machines, materials those are used for the production of goods and services that greatly has a impact on the business. Important factors that influence technological environment are – technological sources like company source, foreign source, external source, and cost of acquiring technology. Another factor is development in the technology, rate of change of technology and research and development.
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In Today’s world technology plays a vital role. This factor has a great relevance to the company, as it has a great impact on human beings and also effects communication in management. It is used as strategic weapon in order to fight the competition in a long run. The technology of HP addresses in China, Russia, Brazil, and India. It has successfully adapted to various needs; for example to the non-Western languages, infrastructures, that are unique. Researchers are striving for creating such a technology that can leverage a role of mass communications medium instead of television. As compared to internet, TV is much more persistent as more than 130 private channels are available. HP Labs researchers are looking for the ways to complement TV broadcasts with synchronized printed material that is used for education and other important applications (kotler, 2003).
The strategic implication of technological change has lead to change in competitive cost position, creating new markets and also refined business segments. The company’s major goal is to assist customers across the world by enhancing the access to information and communications technologies which can satisfy their needs in best possible manner; this can help the company to capture its next billion customers. HP has the ISS Technology that gives information about new updated technology innovations and their implementations in the Industry Standard Server (ISS) product line.
Conventionally management products were built on Simple Network Management Protocol (SNMP), which became a persistent management technology. However, relative to current alternatives SNMP-based management solutions has gained scrutiny for their simple structure. A new product which is based on Web-based Enterprise Management (WBEM) was introduced by HP, that consist of management and Internet standard technologies which help to unite the management of distributed computing environments. HP Insight Management WBEM Provides Many advantages for Windows.
Ecological Factors
The major global concern is the deteriorating environment. The concern arises because many global cities have crossed the dangerous level of air and water pollution. The greenhouse gases are the major cause of these environmental hazards. In many countries strict rules have been imposed in order to reduce industrial pollution. Many clubs and NGO’s have also came forward as watchdogs. New regulations being imposed on companies have proved expensive to them. The industries like steel, auto, IT, FMCG, have invested billions of dollars in environment pollution control equipments. Many other industries had to increase their products biodegradability (Misra & Puri, 2007).
The companies have to be more conscious about various opportunities and threats arising due to ecological degradation. Some of the areas of concern for the companies are shortage of raw material, increased energy cost, increased level of pollution and change in government rules. (Kazmi, 2002).HP was using Brominated flame Retardant (BFR) and polyvinyl chloride (PVC) for computing products which are harmful to the nature.
It has resorted to eliminate all uses of Brominated flame Retardant (BFR) and polyvinyl chloride (PVC) from its computing products which are to be launched in 2009 because of the availability of technologically feasible alternatives, which will not negotiate product performance and quality and will not adversely impact health and the environment.
HP eliminated more than 95 percent of the BFRs used in the external case parts of its products more than 10 years ago, including two, PBDE and PBB, which were subsequently among the substances restricted by the Restrictions of Hazardous Substances (RoHS) Directive. During the same timeframe, HP also eliminated polyvinyl chloride from the external case parts of its products.
It is further working with suppliers and identifying such materials which will have no/reduced adverse impact on the environment and the customers as well. They are in the process of evaluating the whole life cycle of the products, cost and environmental impact of new products and identifying alternative materials which will have less impact on the environment. In spite of their best efforts, it is difficult for them to confirm the claims for new materials used because the new materials may not have been researched as thoroughly as existing materials.
Political Factors
All the company decisions are very much affected by the political and legal developments taking place in the countries it is operating. This environment comprises of the pressure groups, laws and government agencies which influences and limits various companies and their working. It consists of factors related to management of public affairs and their impact on the businesses.
Industrialist shows keen interest in the politics of both home and host countries. The reasons may be several. Legislations affecting business are set by political parties. The government despite of taking liberalization measures, exercise enormous regulatory powers that can make or destroy any organization. Political funding of elections is widespread among the business houses. Several of them come openly in favor of a particular political party while a few join politics.
Political stability in the country also attracts multinationals, because the stability in the country is directly linked to the economic development of the country as a whole. Hewlett-Packard is also liable to follow the regulations regarding hazardous substances, such as the EU restrictions of Hazardous Substances and Japan J-MOSS. These restrictions have forced the company to use substitutes of hazardous materials. The other regulation REACH, which replaces the existing EU legislations of chemicals with a single system for all chemical substances, has also to be followed by the company. These regulations give greater responsibility to the company to assess the properties of chemicals and manage the environmental and health risks, and at the same time communicate information to suppliers and users for the supply of the materials of such specifications only.
While complying with all regulations, HP is supporting the overall objective of REACH to improve and protect human health and the environment. The long standing policy of Hewlett-Packard is to provide such products and services which are safe to use and environmentally favorable throughout their lifecycle.
The company is planning to meet all the specifications of such rules and is committed to provide its customers with the required information about the chemicals which are being used in their products, in order to comply with REACH. The company is also working with government and industry to ensure a workable system which satisfies the primary goal of REACH. The suppliers are also convinced to ensure that the companies products mach the needs of the regulations.
Step – 2
HP has gained Strategic adaptability through Sustainable competitive advantage, which helps the company to maintain and improve the competitive position in the market. Customer plays a key role in today’s world as they want the products quicker, cheaper, and also want it their way.
The company has built its sustainable competitive advantage around the following:
- The corporate capabilities: Competitive advantage can be determined in two ways- firstly based on distinctive capabilities and second reproducible capabilities.
- People also act as the Main Source for Competitive Advantage.
- Corporate Culture plays a vital role in achieving competitive advantage – HP has gained it through intricate interactions between individuals, organizations and environmental factors.
Environmental analysis of HP through SWOT analysis
For making the overall environmental analysis of Hewlett-Packard we analyze the company’s strengths, weaknesses, opportunities and threats. The strengths and weaknesses of the company constitute the internal environmental analysis while the opportunities and threats constitute the external environmental analysis.
Strengths of HP
Its customer loyalty is the main strength of HP. Apart from this; HP is the leading innovator for nearly seven decades as it invests almost $4 billion annually on R&D. Other strengths lie in Printer business, Brand, Technology Knowledge, relationships, Sales compensation. It has been able to supply the different features that consumers want at competitive prices. HP has been able to retain the customer loyalty because they are strongly attracted to the unique features of products. Technical superiority and quality products have kept the company at the top of the computer printers market.
Weaknesses of HP
Its wide range of operations all round the world possesses the problem of communication in the organization. Its manpower team of about 142000 employees round the world sometimes paves the way to cultural differences. Other weaknesses lie in Distribution of inventory, Culture, internally focused, incur excess Costs
Opportunities of HP
With its high and focused research team, it can make more innovative products and develop products of customer requirements. Its huge size and scope of operations will enable it to reach new markets and serve them with comparatively lower costs. Its supply chain of $52 billion will also help the company expand its business.
Threats of HP
The company being ranked at 11 positions in the world poses the competition from other big and small companies like DELL (producing cheap, quality, no inventory), IBM, Microsoft, Starbucks etc. Its main area of concern is to focus on a small segment of electronic goods only. It has been observed that other threat is weaken manufacturing system.
Remote environment
The Remote environment consists of Economic factors, Social factors, Political factors, Technological factors and Ecological factors.
Economic factor: – It involves factors related to production and tells about the distribution of wealth. A year ago, the revenue in third quarter rose to $21.9 billion, up 5%. In 2005, the quarter was greatly affected by a larger-than-normal provision for taxes of $960 million which resulted from the company’s decision in order to send home $14.5 billion in cash from foreign earnings. Company reported a 65.4% improvement that is in terms of operating income. According to the analyst of Goldman Sachs’s, HP does not seem to be tripping over out of its way to cite problems in the overall economic environment. According to the beat analyst of HP, the company announced to buy back $6 billion in stock, which is larger repurchase and represents more than 6% shares at current prices. The computer division in the competitive market is very profitable for the company. Due to this the revenue of the company has grew 8% to $6.9 billion.
Technological factors: – Development in the technology, rate of change in technology and research and development are the major factors. The latest technologies announced by the company are:-
Gesture keyboard: Roman alphabet was the prominent feature in Traditional keyboards; recently HP researchers have produced a stylus-and-tablet solution, which is easy for people to study and use.
For filling out forms, Pen-based solutions: it consists of digital ink which can be transferred to central location, here handwritten input gets converted to machine-readable text which helps in storage and processing .
TV broadcasts that are Print-supplemented: HP researchers are focusing on developing technology which can deliver print material in synchronization with TV programming.
Multimedia education centers: HP researchers are working on a technology that can provide on-demand broadcast education programming for learning institutions which can enable multimedia access.
Secured paper documents: Company is extending its public services to small towns in remote areas with the help of Internet cafes instead of local government offices. The problem in the secured paper documents is the authenticity of the transmitted documents.
Political Factors: Hewlett-Packard is also liable to follow the regulations regarding hazardous substances, such as the EU restrictions of Hazardous Substances and Japan J-MOSS. The other regulation like REACH, which replaces the existing EU legislations of chemicals with a single system for all chemical substances has also to be followed by the company.
Ecological Factors:
The companies have to be more conscious about various opportunities and threats arising due to ecological degradation. Some of the concerning areas for the companies are shortage of raw material, increased energy cost, increased level of pollution and change in government rules. HP was using Brominated flame Retardant (BFR) and polyvinyl chloride (PVC) for computing products which are harmful to the nature. It has resorted to eliminate all uses of Brominated flame Retardant (BFR) and polyvinyl chloride (PVC) from its computing products which are to be launched in 2009 because of the availability of technologically feasible
Political Factors
This environment comprises of the pressure groups, laws and government agencies which influences and limits various companies and their working. Hewlett-Packard is also liable to follow the regulations regarding hazardous substances, such as the EU restrictions of Hazardous Substances and Japan J-MOSS. These restrictions have forced the company to use substitutes of hazardous materials.
The other regulation like REACH which replaces the existing EU legislations of chemicals with a single system for all chemical substances has also to be followed by the company. These regulations give greater responsibility to the company to assess the properties of chemicals and manage the environmental and health risks, and at the same time communicate information to suppliers and users for the supply of the materials of such specifications only.
Social factors
HP is involved in various social issues. For e.g. it is engaged in various soil and ground water conservation products. It also recycles the PC’s and other electronic goods which it produces. This helps to safeguard the society. It also takes cares of its employee’s health and safety.
Global Environment
Reasons for firms going Global
In few years more companies are venturing into global operations in order to achieve the benefits of economies of scale and widen their customer base. The home country market becomes saturated after a period of time, which forces the company to search for new markets in order to enhance its revenues. Companies also venture foreign markets in order to take the advantage of cheaper sources of material and other resources. Going global also reduces the dependency on any on market.
Complexity of the global environment
When company goes global various complexities are faced by it, these include the differences in culture or know how to deal effectively with the national of other country, difficulty in understanding the preferences of the customers of that country, the company might also to offer a product which is competitively attractive. Various legal regulations also put forth many problems in front of the companies going abroad. The devaluation of currency, Political instability, property which is expropriated and huge cost involved in setting up plants and basic infrastructure are the other factors which creates complexities for the companies.
Control problems of the global firm
Major control problems of the firms include the differences in way of handling the issues and problems by the employees. For example the companies of US follow the X theory while the Japanese follow the Y theory of dealing with employees.
Global strategic planningIt is essential for every business in order to attain the growth of the business. Its future depends on the strategic plans it made I its die course of operations. In order to exploit various environmental opportunities and limit the adverse effects of environmental threats strategic planning is essential.
Industry environment
HP most complex global supply chain IT industry. Approximately $50 billion it spends annually in order to procure materials, components, manufacturing, and distribution. HP is investing in supply chain, social and environmental responsibility (SER) which reflects the global citizenship principles committed and shows whether supplier diversity meets stakeholder expectations. HP main foundation lies in the protection of international human rights HP is committed towards the lives of the workers who manufacture the products.
Competitive forces that helped HP in gaining competitive advantages
HP has gained Strategic adaptability through Sustainable competitive advantage which helps the company to maintain and improve the competitive position in the market. Customer plays a key role in today’s world as they want the products quicker, cheaper, and also want it their way.
The company has built its sustainable competitive advantage around the following:
- The corporate capabilities. Competitive advantage can be determined in two ways- firstly based on distinctive capabilities and second reproducible capabilities.
- People also act as the Main Source for Competitive Advantage.
- Corporate Culture plays a vital role, in achieving competitive advantage – HP has gained it through from intricate interactions between individuals, organizations and environmental factors.
Contending forces
Threat of entry: new entrants decrease profitability. The profit rate will fall unless the entry of new firms is blocked by incumbents. HP can focus on patents, rights, economies of product, brand equity, switching costs
Powerful suppliers: it can be described as the market of inputs. Raw materials, components, and services which are provided by suppliers can exercise power over the firm
Powerful buyers: it refers to final consumers or the distributors of the firm or the market of outputs. There bargaining power of customers puts the firm under pressure to change prices.
Substitute products: these are the alternatives available to the consumers; their availability enhances the propensity of customers to switch to other products (Ramaswamy & Namakumari, 2007).
Operating Environment
Competitive position: HP is the world’s largest computer and electronics company. It ranks 11th in the fortune 500 companies. The company is known for the first Silicon Valley start up. Its goodwill in the market is very good.
Customer profiles: As the company is working worldwide it has a large customer base which is loyal to it. The customers include both the direct customers and business houses as it customers.
Suppliers: Suppliers are the most important part of the organization. Without them no organization can survive. The supplier base of HP is of around $52 billion which is the largest in the IT industry. The company chooses them on the merit base of their products.
Creditors: The creditors constitute a very important part of the company. They are the firms and individuals which provide company with funds on credit. The suppliers also form a part of the creditors.
Human resources: The Company has a wide employee base with about 142000 workers working all round the world. Its employees are highly innovative and culturally diversified.
Vision and values of HP
Vision and values of HP has helped in achieving long term objectives. For about 7 decades, HP has proved to be a leader in innovative products. Its objectives and mission being aligned with its size and scale help the company to offer customers competitively priced products at lower costs. The company has a $52 billion supply-chain which is the largest in the IT industry. The company focuses on improving its customer relations and tries to make them learn about the company. Its strategies for supply are successful because it supplies competitive products at low prices. Its customer loyalty has also been excellent.
References
Kotler, P. (2003). Marketing management. 11th Edition, New Delhi: Prentice Hall of India.
Ramaswamy, V.S. & Namakumari, S. (2007). Strategic Planning – Formulation of Corporate strategy. New Delhi: MacMillan India Ltd.
Misra, S.K. & Puri, V.K. (2007). Economic environment of business. Mumbai: Himalaya Publishing House.
Kazmi, A. (2002). Business policy and Strategic Management. 2nd Edition, Delhi: Tata McGraw Hill.
Wheelen, T.L. & hunger, J.D, (2007), Strategic Management and Business Policy. 9th Edition. Delhi: Pearson Education Pte. Ltd.
H. R. practices. Retrieved March 20, 2008, from www.hp.com
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