Strategic Management; Gaining And Sustaining Competitive Advantage At Hewlett Packard

The key strategic issues facing Hewlett Packard as it seeks to generate and sustain competitive advantage.

The objective of any organisation is to

"Create and sustain long term competitive advantage" get quote

Corporate strategy is central to achieving this through making assumptions of an organisation's external environment, its resources, and formulating a plan of how they should operate. The organisation upon which I have conducted my research: Hewlett Packard (HP), have recently been reported of having

"Some cost and profitability problems" (Analyst-Goldman Sachs 2005)

Added to this has been the threat from competitive rival Dell as their profits and market share grew. Using key frameworks, I will examine and conclude the key strategic issues contributing to these issues.

To complete this analysis, I will focus on the following key areas:

- What are the current strategic issues facing Hewlett Packard?

- In light of these issues, how does Hewlett Packard create value and why?

- How are these values organised and managed?

- Does this value enable Hewlett Packard to sustain competitive advantage?

Hewlett Packard operates as a market leader in the fast changing, highly competitive information technology market and was renowned for its collaborative and decentralised structure-directly influenced by the two original founders. In recent years however, a rapid economic slowdown and the end of a 'boom' in demand for computer products and downturn in consumer spending, has seen Hewlett Packard having to evaluate their external environment, internal structure and processes in order to generate competitive advantage over their rivals, and refrain from:

"Slowly declining into mediocrity and irrelevance" http://news.bbc.co.uk/1/hi/business/1168012.stm

A brief examination of Hewlett Packard's external environment is necessary in order to fully understand the current pressures of their marketplace, and enable an analysis of the organisation. To aid this, I will be using Porter's 'Five Forces' framework:

- Threat of New Entrants

- Threat of substitutes

- Bargaining power of buyers

- Bargaining power of suppliers

- Competitive rivalry

Hyper-competitive, fast changing marketplaces-such as that of the information technology industry-force organisations operating within them to react or become obsolete. The threat of new entrants, substitutes and competitive rivalry can be seen as defining features of the information technology market-constant advances in technology can see a product go from cutting edge to irrelevant within a matter of months, so organisations must ensure that they can react to whatever threat or change in external environment arises in order to keep up with competition. A major factor of HP's current success is that of its brand. This unique resource has enabled the organisation to trade on their name in some circumstances, exploiting their long established reputation when marketing their products. Competitors find unique resources difficult to imitate, although in this case, several competitors including close rivals Dell are gaining increasing market share within the industry due to greater consumer awareness, so Hewlett Packard is not able to rely on this intangible resource alone to secure competitive advantage. Therefore, it is a combination of resources and competencies that contributes to the organisation's overall strategic capability.

Referring back to the external environment, and looking outside of the industry- using an element of the PESTEL framework, the factor of economic pressure is key when assessing the issues facing HP. As previously mentioned, an ominous macro-economic environment threatened an end to the 'boom' in computer products and a downturn in consumer spending. In this sort of environment, organisations are forced to compete more intensely in order to attract the more limited number of consumers to their product, in short, The bargaining power of buyers is a force that HP need to recognise. It is in situations such as this that the strength of an organisations' strategic capability is integral in generating advantage.

Strategic Capability

"Strategic capability is the adequacy and suitability of the resources and competences of an organisation for it to survive and prosper" p117

An organisation needs to be capable of delivering against all odds, the demands and needs of the customer. Unique resources and core competences contribute to the strategic capability of an organisation to do so, and are essential when looking to sustain competitive advantage. (As mentioned, the HP brand is an example of a unique resource.) Competences, in simple terms:

"Enable firms to do things, to create forms of value" antony Beckett paper, uweonline, quote.

Hewlett Packard, despite being successful over a number of years, decided to change the way in which it went about its activities and processes. This move, a result of the impending economic downturn and increasing competition in its aforementioned environment, was proposed in order to bolster the organisation's strategic capability by practicing core competencies that would benefit them and be hard to imitate. HP simplified its structure by:

"Embedding sales and Marketing efforts directly into business units, providing a tighter link with customers. It cuts expenditures by restructuring support functions .....enabling HP to deliver to its full potential" http://www.hp.com/hpinfo/newsroom/press/2005/050719a.html?jumpid=reg_R1002_USEN

CEO of Hewlett Packard, had a vision when seeking to sustain their competitive advantage:

"make us simpler, nimbler and quicker." CEO Hurd

http://www.washingtonpost.com/wp-dyn/content/article/2005/07/19/AR2005071901785.html

Therefore, their previous four competencies of inventing, engineering and delivering technology solutions to the highest