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("HP") These different elements are important, because they are showing the overall financial strength of HP. Yet, they are also illustrating how they face tremendous amounts of competition in the industry. Part of the reason for this is because, of shifts in demand and the ability of new rivals to quickly enter the field. As a result, the company must be able to capitalize upon these changes, in order to maintain their domination.
Framework for Strategic Analysis
In the case of HP, there are a number of different issues that must be analyzed to determine the overall strengths of the company (strategically speaking). This involves, examining various elements to include: the nature of the product / service, the degree of integration within the value chain, the degree of geographical and industry diversification. These different elements are important, because they will tell you how quickly the company is adapting to the underlying challenges that they are facing.
The nature of the product / service is when you are looking at the overall amounts of demand from customers and how this will have an impact upon the company. As the branding of the product and the ability to remain competitively priced, will determine how successful a company will be in the future. In the case of HP, they have been offering a number of different products, at host of price ranges. This is important, because it has allowed the company to be able to maintain its dominance in the sector. While at the same time, helping them to: reach out to variety of consumers and businesses. When you put these different elements together, it means that the company has been able to keep up with the changes in markups and maintain their strong brand image.
The degree of integration in the value chain is when the company has control over the production process through vertical integration. This is when the number of competitors will decline, by one company purchasing another. In the case of HP, they have engaged in vertical integration with their purchase of Compaq. Even though there were a number of different challenges during the process (such as: integrating the two companies together). The reality is that this merger, allowed the company to be able to maintain its dominance, by using Compaq's distribution / manufacturing process and their focus on the low to medium end markets. This helped HP to be able to redefine itself, by offering a wide variety of electronic to consumers. While at the same time, they could be able to focus on their core markets. Once this took place, it meant that the company would be able to increase their domination of sector through: having multiple product channels. ("Case Study")
Geographical diversification is when you are spreading out the risk by not over investing in a particular region. The idea is that by limiting exposure to one area will help to protect the company against adverse events that could occur. In the case of HP, they are been embracing geographical diversification, by focusing on creating a host of different manufacturing facilities around the world. This has helped the company to be able to keep up with changes in demand and prevent adverse impacts from volatility in the currency markets. A good example of this can be seen with the company focused on offering variety of services to Asian markets. As they have built a number of different manufacturing facilities and sales offices in these regions. Where, they would establish a host of manufacturing plants in countries such as: Vietnam and China. This would help the company to maintain its dominance, while ensuring that they are maintaining low manufacturing costs. As they do not have to import the different product to the region and can use various regional free trade agreement to shield them against any kind of adverse influences from financial markets. This is important, because it is showing how this focus on diversifying throughout various regions of the world, would help to improve the company's overall bottom line. ("HP")
Industry diversification is when a company is trying to reduce their risk in a particular sector by investing in other areas. The idea is that by engaging in such a strategy, you can balance the business model through: having operations in other segments of the sector. This will help to prevent any kind of adverse changes from: the volatility associated with one single product line. While at the same time, it allows an organization to be able to cross market a host of different products / services to consumers. In the case of HP, they have been embracing industrial diversification. As they are focused on a number of different sectors inside the technology / it arena to include: outsourcing a variety of services to businesses / governments, enterprise storage / servers, personal computers / laptops, printers, infrastructure products and select smart phones. This is important, because it is showing how HP is diversified among a number of different product lines inside the technology sector. ("HP")
When you step back and put these different elements together, they are showing how HP was able to adapt to the changes that were taking place, by engaging in actions to maintain their dominance. Where, they would offer a number of different products at a host of prices ranges. Their merger of Compaq is a classic example of how the company is maintaining their lead in these areas, by expanding their overall reach into a host of segments. This is important, because it would allow the company to be able to maintain its core business model and augment it with one that reaches out to new customers.
At the same time, HP was involved in focusing on maintaining their low cost structure and lead through geographical / industrial diversification. As far as geographical diversification is concerned the company was able to maintain low costs by going into regions where free trade agreements were in place and labor costs were low. This helped them to focus on offering their products in these areas, without having to worry about other factors (i.e. volatility in international markets). The diversification in the industry meant that they were protected against sudden shifts in demand from new products that have been introduced or changes in consumer tastes. As a result, this is all showing how HP was able to maintain its lead, when many of its competitors are facing tremendous amounts of pressure.
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