HP Global Expansion: IT Hardware Strategy in South Korea

Introduction and HP's Strategic Vision

This paper provides a strategic plan for the U.S.-based computer hardware designer Hewlett-Packard (HP) through an analysis of the information technology (IT) hardware industry in South Korea, Russia, India, and China. The analysis determines which country is best suited for HP, as well as which IT hardware manufacturer in that country HP should engage in a joint venture to align with HP's strategy for global expansion.

The paper has three parts. Part 1 consists of an overall industry analysis examining market size and growth potential in each country and comparing this to the IT hardware industry in the U.S. Part 2 examines the risks and opportunities associated with this venture, taking into account market potential, industry structure, and the overall business climate in each country. Part 3 examines multinational and local South Korean IT hardware manufacturers to determine a target company for a joint venture.

The main analytical tools used for comparison are Porter's Five Forces and PESTEL. In 1980, Michael Porter identified five competitive forces that shape every industry. These forces assist in analyzing an industry's strengths and weaknesses: competition within the industry, the potential of new entrants, the power of suppliers, the power of customers, and the threat of substitute products.

To determine HP's growth trajectory, it is necessary to tie HP's vision and global strategy to an understanding of the market environment and HP's ideal growth style. From HP's most recent 10-K filing, HP's global vision states: "Our products and services are available worldwide. We believe this geographic diversity allows us to meet demand on a worldwide basis for both consumer and enterprise customers, draws on business and technical expertise from a worldwide workforce, provides stability to our operations, provides revenue streams that may offset geographic economic trends and offers us an opportunity to access new markets for maturing products. In addition, we believe that future growth is dependent in part on our ability to develop products and sales models that target developing countries. In this regard, we believe that our broad geographic presence gives us a solid base on which to build such future growth."

HP's strategic focus, also drawn from its 10-K filing, is stated as follows: "Our strategy is focused on leveraging our existing portfolio of products, services and solutions to meet the demands of a continually changing technological landscape and to offset certain areas of industry decline. To successfully execute this strategy, we must emphasize the aspects of our core business where demand remains strong, identify and capitalize on natural areas of growth, and innovate and develop new products and services that will enable us to expand beyond our existing technology categories. Any failure to successfully execute this strategy, including any failure to invest sufficiently in strategic growth areas, could adversely affect our business, results of operations and financial condition."

To determine the strategic growth needs of HP, it is vital to understand the business environment in which HP currently operates. Porter's Five Forces Framework is used to analyze that environment, and the BCG strategy style matrix is then used to identify the strategic style most beneficial for HP.

HP's primary business is computers and peripherals. This business model falls in the top-left quadrant of the BCG matrix — "Adaptive." HP needs an adaptive approach to meeting growth goals, as market offerings change extremely fast and the company must be able to shift and adapt quickly to remain competitive. Rather than committing to five-year goals and plans, HP needs shorter-term goals because technological advances occur frequently throughout the year. Many of these advancements are unpredictable and require operations and manufacturing to respond very quickly, as products can become obsolete overnight.

To be adaptive and meet HP's global vision and strategic focus, the team identified the following strategic growth needs:

Speed to market: HP must be quick at testing and rolling out new products globally, including in developing countries. This can be achieved by having the right global partners for R&D and local market sales.

Supplier relationships: HP must develop strong relationships with local suppliers in global markets in order to fulfill orders quickly and ramp up or shut down production when needed. Close cooperation also reduces the time and resources spent seeking new suppliers or renegotiating contracts every few months as product enhancements are made.

Flexible partnerships: HP should acquire or partner with companies globally in ways that increase growth flexibility and adaptability, so that product investments and divestitures can happen quickly. Countries where partner firms are based must have regulations that support this model of rapid change rather than slowing it down with government restrictions.

Integrated global operations: HP must tie its global strategy very closely to its global operations so that as soon as the market environment changes, the company can react, strategy can adapt, and necessary production changes can be made as soon as possible.

Short-cycle corporate culture: HP must develop a global corporate culture that relies less on long-term corporate planning cycles and more on short-term tactics.

HP's Competitive Environment: Porter's Five Forces

New Entry Threats — Low: There is low risk of new entrants threatening the market due to barriers to entry arising from high capital and resource requirements.

Power of Suppliers — Moderate to High depending on the component: The power of suppliers is high for specialized, high-quality components, as there are few suppliers capable of meeting those standards. However, for components that are easier to manufacture at high quality, supplier power is lower because many more suppliers are available.

Power of Buyers — High: The market offers buyers numerous choices of products and services, giving them high bargaining power.

Threats of Substitutes — High: There are many comparable products available in the market, creating a high risk of substitution.

Existing Rivalries — High: Rivalry is very intense, as established market players have made large global investments to secure their positions. Competition keeps product margins low, and there is fierce rivalry for expansion into additional products and global markets.

Conclusion

This paper provided a strategic plan for Hewlett-Packard (HP) through an analysis of the IT hardware industry in South Korea, Russia, India, and China. The analysis found HP's current competitive environment to be characterized by abundant substitutes, strong rivalry from established industry leaders, and intense overall competition. Accordingly, if HP is to meet its objectives, it must remain flexible, invest heavily in R&D, and innovate continuously. HP must also leverage its distribution opportunities and establish itself as a global brand in emerging and new markets efficiently and effectively.

To build a truly global corporate culture, HP will need to rely less on long-term corporate planning cycles and more on short-term, adaptive tactics. While there is clear growth potential in the IT hardware industry, significant risks accompany expansion into each of the four countries examined, and the market structure and business environment in each country are unique.

Russia presents the most challenging environment of all four countries, primarily because of its adverse macroeconomic conditions. India offers dynamic growth but is accompanied by structural uncertainties in supply chains and market organization. China, despite its historical appeal as a manufacturing hub, carries more risks than many would expect, as rising costs and quality demands erode its traditional competitive advantage. South Korea, by contrast, offers a highly skilled workforce, strong consumer purchasing power, a willingness to spend on quality brands, government policies friendly to international business, and one of the most business-conducive regulatory environments in the region.

For these reasons, South Korea is the recommended destination for HP's expansion, and the next phase of analysis would focus on identifying the most suitable South Korean IT hardware company for a joint venture partnership.

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