HP Palm Generic Strategy Porter's Generic Strategy

HP Palm Generic Strategy Porter's generic strategy typology highlights that firms succeed either by being a cost leader, a differentiated producer or by being a niche player, again with either a cost or differentiated focus (QuickMBA, 2010). Palm's approach is mass market, and the company is essentially competing as a differentiated player. With its proprietary operating system and lack of ultra-low price points, Palm is clearly adopting the same differentiated strategy with which it had considerable success in the handheld computer industry.

Key Input Factors The three input categories are environment, resources and history. To be a differentiated producer in the smartphone industry, Palm needs to have a strategy that is congruent with the key factors in each. The most important environmental input is the competitive environment; the most important resource is marketing ability and the most important historical factor is the company's brand.

These three key inputs will be analyzed in the context of Palm's smartphone, which while only a couple of years old, has experienced significant volatility, leading to its current poor state. The competitive environment is difficult and volatile. Competition is largely based on operating system rather than device manufacturer, although three of the major players are both. These producers are all competing with a differentiated strategy -- Apple, RIM and Palm. The other producers use either the Microsoft or Android operating systems.

The industry is driven by both marketing and technological innovation. The pace of innovation is rapid, and market share changes rapidly as a result of innovation. Palm has had difficulty carving out a niche as a differentiated player in part because it competes in both the business and consumer markets. RIM and Apple compete in business and consumer respectively, with little crossover. Thus, those firms dominate the differentiated markets for their target market, leaving little for Palm. The consumer simply does not understand Palm's points of differentiation.

This failure partly results from marketing. Although innovation is one key internal resource, all firms need good products to win customers. Where the top firms are truly differentiated is less in product features or performance but in marketing. One key element is distribution strategy, as smartphone makers select their channel partners -- typically data plan providers -- carefully.

Palm failed in this instance because it chose #3 Sprint Nextel (Paczkowski, 2010), and by the time it moved to one of the leaders it was a minor product and therefore not heavily promoted on those stores and the company had already vacated its own-branded stores (Gohring, 2008). In addition, Palm's advertising has been widely considered to be both weak and undersaturated.

These problems are unusual for Palm, which came into the smartphone business with a strong brand name stemming from its handheld computer business, which was effectively replaced in the market by smartphones. Palm was expected, partly on the strength of its brand and partly on the strength of its products, to be a major success in smartphones. The Palm brand was a rival to Blackberry, but the inability to capitalize on the power of this brand and its connotations of innovation and quality resulted in the company's failure.

It should be noted that most other leading smartphones also have strong brand associations -- in addition to Blackberry there is Apple, Google and Microsoft. Against the last three, Palm's brand could probably have been considered weak entering the smartphone business. It should be noted that technology is often thought to be a key input resource, but this is not the case. Technology is something of a hygiene factor in consumer electronics -- it needs to be modern (i.e.

good enough) but does not need to be at the cutting edge in order to win the market. An early example would be VHS beating out Beta among videocassettes, but even in smartphones Palm's technology was considered to be excellent, but consumer perception of Palm proved to be less dependent on Palm's technology than on Palm's marketing and its choice of data provider. Connections and Congruence There are significant connections between these inputs. At the generic level, a firm's brand is related in part to its marketing.

Apple, for example, is a heavily-marketed brand with lifestyle-oriented messages that foster brand loyalty. Although less-promoted, Blackberry takes a similar approach. A successful marketing campaign can significantly improve brand value. This is important in a highly-competitive external environment. While there are some feature differences between different smartphones, none are a source of sustainable competitive advantage. The brand, however, can be, and for the industry leaders it has proven to be so.

In order for the product to be viewed by consumers as differentiated, the brand must be viewed as differentiated, as it clearly the case for RIM and Apple, but not so for Palm. The strategy at Palm, therefore, is not congruent with the key inputs for success. The company's brand, while strong in handhelds, was unestablished in smartphones. The brands of three of four major competitors are much stronger, indicating that Palm perhaps overvalued its brand in this industry -- it was good but Palm is no Apple or Google.

The company's Pre and Pixi were well-received by critics, indicating that the technology itself was sufficiently differentiated, making the case that technology is not as much a key resource as marketing. Palm's marketing strategy -- teaming with the #3 data provider for example, was not congruent with a differentiated player. Palm should have sought the #1 data provider, not an also-ran. In addition, Palm's advertisements were not as effective as those of its major competitors. Given the competitive environment, therefore, Palm's strategic responses were.