Hp and Compaq Merger

Dell and Hewlett Packard (HP) are two of the most influential companies in the PC market. The CEO of HP requires an understanding of how dells strategy allows it to achieve a competitive advantage so that he/she can counteract it. This report has been carried out to provide the CEO with the necessary information to do this. Therefore the objective of the report is to provide the CEO with detailed information on Dell as a business and its strategy. In order to achieve this, first the main strategies of Dell and how they provide competitive advantage will be identified, then the business models and e-business initiatives used

Changing Market Conditions In the early 1990's, while technological innovation continued to drive the company's success, many business units were being forced to compete on other dimensions. In consumer product lines, low prices, broad availability and ease of use had become competitive requirements. Lew Platt, HP's current President and Chief Executive Officer, once acknowledged the importance of improving customer service and responsiveness, We're not doing as good a job in order fulfillment as we need to. In fact, it's where we get our lowest marks from customers. We have to be a lot easier to do business with. Improvement in order fulfillment will strengthen HP's competitiveness, increase customer satisfaction and reduce expenses, so this is an

HP entered into an agreement with Compaq Computer Corporation in September 2001. In this definitive agreement, HP is going to purchase all of Compaq’s common shares outstanding, and pay a total price of 0.6325 shares of its common stock for each share of Compaq’s common stock.

As mentioned a few months ago HP is splitting into two distinct companies, one side is the PC and Printers (HP, Inc.) and the other side is the Servers and storage (HP Enterprise). This message is focused on the HP Inc., or PC division).

Hewlett-Packard: Develops, assembles, and sells computer hardware and printers. The firm outsources many of its computer and printer components.

Hewlett Packard also known as HP was founded by William Hewlett and Dave Packard in a small rented garage in Palo Alto, California which is now known as the original Silicon Valley. HP is one of the world’s largest Information Technology (IT) companies operating on a global level. HP specializes in computers, computer systems and software. Also, in the development and manufacture of hardware, software design, service delivery as well as data storage. Identified Strategies

In 1992, Hewlett Packard made the decision to produce 1.3 inch disk drives, leapfrogging over the 1.8 inch format to position themselves as market leaders for the smaller drive. Prior to this time, HP prided itself on its leadership position within this industry and its ability to innovate more quickly than its competitors. However, the Disk Memory Division (DMD) was lagging behind the company standard, comprising only 3.2% of total HP revenues in 1992. HP was trying to use the Kittyhawk project to propel the company into a higher profile position within the disk drive market.

Cisco rapidly grew from a start-up to $500M global corporation by January, 1993 when the case begins with Pete Solvick, CIO of the company faced with the daunting task of upgrading its transaction systems and data warehouse. Cisco had exponential growth through the 1990s, averaging at one point an 80% compound annual growth rate while also accelerating new product development and introductions throughout its direct and indirect sales channels. Systems outages were becoming more common as were product shortcomings due to the IT systems supporting key processes becoming faulty and only partially operating the majority of the time. Clearly Cisco had outgrown its current transaction processes and data warehousing infrastructure.

HP is one of the few companies in the world to successfully marry the technologies of measurement, computing and communication. The company makes new advances in portable computing, enters the home-computing market and continues to invent new printing and imaging solutions. For most of the decade, HP enjoys growth rates of 20 percent.

And these analyses will be done with the help of Porter’s 5 forces (see appendix 1, 2, 3). This analysing toll deals with issues which are from outside the industry that impacts the nature of competition within the certain industry. Thurlby, (1998) stated “Understanding the nature of each of these forces gives organisations the necessary insights to enable them to formulate the appropriate strategies to be successful in their market”1. The analysis of the three industry are given belowPC industry (See appendix 1) This competition within the PC industry is extraordinarily high consisting with top companies like Dell, HP, Apple, Gateway and Sony. In order to gain competitive advantage, the key factors are advancement in technology, custom built PCs, reliability and standard customer service. The life cycle of PC industry can be seen as mature (See appendix 6); however the growth of PC’s has not decline. The reason is due to the globalisation trends taking place within the major firms. The barriers very high where there are already five main firms that dominate the market. Therefore, the chances of new PC companies entering the market and get significant hold of market share is very slender. The main two factors that are making the entry level high are mainly cost and distribution and the top five firms also control 70 per cent of the global personal computer market. Another factor may be is that

By the late 1990s, HP’s business was facing major problems which are reflected in its financial results. Despite a 9.71% increase in total net revenue, HP faced declining net earnings of 6% from 1997 to 1998. The company had also experienced a slow and decreasing growth in revenue in comparison to its main competitors. From 1996 to 1998, HP’s annual revenue growth decreased from 21.89% to 9.71%, while one of its main rivals, Dell, was able to maintain an over-40% revenue growth in each year within the same period. Moreover, HP’s failure to satisfy customer needs and catch

PC industry is characterized by fast declining ASP year over year. Together with the increasing component costs from 2009, both Dell and HP are facing squeezing profit margins (HP 2010; Dell 2010). In the first quarter of 2011, HP’s gross margin for its Personal System Group (PSG) is as low as 6.4% (Epstein 2011). Similarly, Dell’s gross margin of PCs is often 3 to 5% (Wang 2010). This indicates that if both

Hewlett Packard began in 1939 in Palo Alto, California. The company was founded by Bill Hewlett and Dave Packard who were friends at the time and remained that until both of their passing. Hewlett Packard has been a leader in technology that encompasses globally, into space exploration, the entertainment industry, the medical industry, the hospitality industry, and many others. In the early 2000’s, the economic landscape was changing globally and Hewlett Packard was beginning to feel the financial hardships of a very competitive industry. In an effort to remain competitive, Hewlett Packard and Compaq decided upon a merger that did aid in transforming both companies, but only to a degree.

Compaq and Dell stole IBM’s PC market with the right price and the right message.

Page eight of the case begins to outline some of the challenges that the HP-Cisco alliance had already faced concerning the sale of joint products. For example, we learn that at HP, Cisco products did not count towards a sales representative’s quota and this resulted in a decline in sales of Cisco equipment by HP sales representatives. Further, if HP or Cisco sales staff had to master not only their parent company product line,