Business Analysis: Hewlett Packard

Impression of the Operation of Hewlett Packard

The company was founded in 1939 by Mr. Bill Hewlett and Mr. Dave Packard. Both gentlemen were classmates at Stanford University. Mr. Packard was the company's president and Mr. Hewlett was the Vice-President. 70 years later, when Hewlett-Packard merged with Compaq computers, the company became the largest computer hardware company in the world.

The operations of the company are very impressive. The timeline is as follows: founded in 1939; company is incorporated in 1947; stock options offered to employees 1950, this is a rare occurrence for the time; Hewlett Packard invents a high speed frequency counter, this invention is revolutionary, as the counters assist banks and business worldwide 1951; company is traded on the stock market 1957; company purchases F.L. Moseley Company 1958; company expands globally 1959, the rest is history. (Connolly, 2003, pp.49-59)

The company through the years has been innovative in implementation, expansion and market share. Today, almost every has some sort of Hewlett Packard device in their place of business or home office. This is because the company has a proven track record of success and a proven track record quality. The company sells laptop computers and extensive Information Technologies software for large business operations. The company stands behind their products and the dedication of the product the company is also dedicated to the environment, as they offer product return and recycling through the HP Environmental Division. Even through today's tough stock markets, Hewlett Packard's stock has remained stable in the $30 range over a 12 month period. (Cyert, 1963, pp: 154-167)

Porter analysis of the industry structure:

The five forces that influence the intensity of competition in a particular industry, and therefore the profitability of the firms within the industry:

Force 1: the degree of rivalry (or competition) between the competitors; Force 2: the threat of new entrants (or the inverse of this force, the barrier to entry); Force 3: the threat of substitutes; Force 4: Buyer Power (to demand lower prices); Force 5: Supplier Power (to increase material prices).

For each force, determine the key structural determinants which affect the intensity of the force. Porter provides a detailed set of the determinants for each force, some of which are given in the table below. In the last column of this table we indicate plausible values of each force for the PC industry in the nineteen nineties.

In theory, one would, qualitatively determine the strength of each force, as indicated in the third column of the above table, and then determine the cumulative or combined intensity of the five forces. The collective intensity or strength of the forces will determine the structural strength of the industry, as characterized by attractiveness, or the profit potential of the industry. The profit potential is measured by the long term return on invested capital (ROIC). If the collective strength of the forces is high, as in the steel industry, then the corresponding profit potential or attractiveness is low, and vice-versa. (Dean, 1996, pp: 67-92)

Force

Key ...