Issues in Global Business and Strategic
Concepts
Case Study Analysis of Hewlett-Packard (HP)

Executive Summary

In the contemporary business environment no organization is left untouched by the impact of
globalization. Globalization is both a blessing and curse for organizations. It is mainly because
with globalization companies are offered a number of scopes to expand and gain long term
sustainability. But at the same time it raises a number of global issues that act as hindrance and
thus adoption of successful strategies to overcome the same are highly critical.
In this paper the case of Hewlett-Packard (referred to as HP from now on in this paper) is
discussed in details with regards to global issues faced by the company, solutions crafted by
them to overcome such issues, evaluation of solutions and finally proposing suggestions based
on analysis.
Based on analysis it was discovered that the major issues confronted by HP are four-fold. They
are namely, ineffective strategic expansion through inorganic measures, cultural diversities,
inabilities to cope up with changing nature of global business and lack of innovation and
entrepreneurship skills. In order to combat these issues, HP has resorted to a number of
strategies. Some of these strategies were successful like management of cultural diversities
whereas others failed to achieve desired objectives. Upon in-depth analysis it was also revealed
that mostly it is internal inabilities of HP that prohibits the company from overcoming global
issues. The study finally proposes that HP needs to pursue turnaround strategy along with
adoption of practices like lean management, transparent communication systems, whistle
blowing and investments in research and development to support innovation for sustaineddevelopment in long run.

1. Introduction
   Hewlett-Packard, one of the prominent global IT giant has its roots in a rented car garage in Palo
   Alto by two Stanford classmates, Bill Hewlett and Dave Packard. Initially, with the impending
   resources constraints, the firm instigated with audio oscillators required in sound engineering but
   gradually over the years, through innovation and leadership, it developed a product portfolio
   encompassing hardware, software and allied services to an expansive clientele of both large and
   small and medium sized enterprises from public and private sectors across the globe (HP 2015) .
   From its inception in 1939, the company has evolved across seven business vertices: “Personal
   Systems, Printing, Enterprise Group, Enterprise Services, Software, HP Financial Services and
   Corporate Investments” and ranks 35 th in the latest list of most valuable brands of the world by
   the Forbes Magazine (Forbes 2015) . The firm is currently being spearheaded by Ms. Margaret
   Whitman as the CEO (Forbes 2015) . However, HP has its share of hardships and challenges as
   well especially emerging from the globalized economic business landscape where markets are
   approaching saturation, competition is getting intensified and technology is evolving at a rapid
   pace. Innovation is regarded as the sole saviour (Gault 2010; Atkinson & Ezell 2012) . This
   report presents that key strategic issues confronted by the IT titan and how the firm has
   succumbed to its wrong decisions and dubious strategic moves. The report explores each of the
   issue in-depth while critically analysing the firm’s subsequent strategies based on a thorough
   secondary investigation based on management theories and business information.
2. Background to Case Study

5 | Page
As per the reports of Gartner (2015) , HP was the global number one firm in personal computer
manufacturing from 2007 to the second quarter of 2013. It was then, Lenovo surpassed it. This is
just the tip of the ice berg. The problems at HP are much graver.
Strategic management has emerged as one of the most critical functions of contemporary
organisations. Top level managers make strategies to tackle issues and complexities imposed by
the excessively dynamic and complex businesses environment (SRINIVASAN 2014; Hitt et al.
2012; Orcullo 2008) . The decisions firms make for business have repercussions for years (Hitt et
al. 2012) . HP is no exception to this. Firstly, it acquired Compaq Computer in 2001 in
anticipation of leveraging the PC market globally and outshining the Asian counterparts.
Strangely, the decision makers ignored the by now matured PC market and absence of internal
innovation system at Compaq. Further, in 2010, HP again acquired financial crisis stricken Palm
as a gateway to the emergent mobile devices market. This served no purpose as HP was a
follower of Apple and Palm brought its own plethora of issues. Similar blunder was acquisition
of software company Autonomy. HP wanted to ride on external sources of innovation and
ignored the importance of internal innovation practices (Mourdoukoutas 2011) . Other strategic
issues were that CEOs were getting changed quite often (four CEOs in seven years); HP’s tablet
PC was a total flop and uncertainty about the key business segment: personal computers. There
was a lot of internal unrest, feuds and scams etc. that made HP miss out on business
opportunities. This led to the trajectory of declining revenues and bereaved market share (Bandler
2012) . These issues clubbed with extravagant acquisitions led to a massive downsizing initiative.
This was also attributed to unnecessary focus on cost-cutting rather than innovation (Kalb 2012) .
The case report explores these issues in light of the strategic management literature to bring out
the impact of the strategic decisions that led to the misery of this renowned IT firm and also

6 | Page
focusing on remedial measures through which HP can regain its glory through innovation for
which it is was always known.

1. Methodology of Analysis
   The case is analysed on the basis of the data and information acquired from the secondary
   sources like published journal, article, books, literature review, articles published in magazines
   and newspapers. Only popular and authentic sources of information have been referred and duly
   acknowledged in the paper. Blogs and unworthy websites, books, journals have been ignored.
   Facts and figures are reported only based on company’s website, newspapers, business
   consultancies and government’s official websites.
   The analysis of the issues have been done through the case study mechanism where each issue is
   explained, linked with relevant theories and literature and then a solution is proposed based on
   the inferences.
2. Issues and Problems
   Out of a number of issues faced by organizations like HP while undertaking business in a global
   platform some of the most critical ones are identified and discussed in this section. These issues
   primarily relate to four major areas strategic expansion through acquisition, cultural diversities,
   changing nature of global business management and innovation and entrepreneurship.

7 | Page

Global Issues
Affecting HP

Management of
Cultural Diversity in
Workforce

Frequently
Changing CEO’s and
Focus on Cost
reduction against
Innovation

Mass-
Customization due
to dynamic
customer tastes
and preferences

Ineffective Strategic
Alliances and
Acquisitions

Figure 1 Global Issues Affecting HP
Source: Author

Strategic expansions are a road to market development and product development which helps
companies to diversify their risks by thus gain long term sustainability. HP too in lieu of
diversifications and expansions underwent a number of strategic alliances. But these alliances
and acquisitions in many circumstances left the company in utter dismay (Bandler & Burke
2012) . A number of acquisitions by HP namely of companies like Autonomy, EDS, Palm, and
Compaq resulted in huge losses for the company within a short span of time. The consequences
were downfall of company’s market value. Though HP paid out 25 billion USD for acquiring
Compaq but had to write it off in only 1.2 billion USD (Nuttall 2012) . Similarly, in 2012, in spite
of the fact that HP paid 14 billion USD for acquiring EDS in 2008 but it was written off for only
8 billion USD (Nuttall 2012) . These two instances depict inability of HP to take right decisions
to support strategic expansions through strategic alliances.

The second issue that was faced by HP in global arena was managing with dynamic consumer
tastes and preferences. For companies in order to excel in global markets standardization is
generally considered to be a preferable option (Powers & Loyka 2007) . But as HP planned to
cater international markets, it was challenged with the problem of customized consumer
requirements. The consumers not only sought for quality products but they also wanted tailor-
made products that too with faster deliveries (Feitzinger & Lee, 1997 ; Huang et al, 2015) .
Tailoring of products for consumers which are spread across the world at cost effective prices
was highly challenging for HP. These changing customer requirements affected all business lines
of HP ranging from computers to printers to medical related products.
Thirdly, while operating successfully in international markets, HP has been also exposed to
issues related to cultural diversities and business ethics. During its initial period, HP was facing
problems related to understanding and managing diversities among employees culture that was
prevalent within the company. It was mainly because people from differing cultures, origin and
expertise from across the world were working for HP (Kamal & Ferdousi 2009) . Presently the
organization employs more than 3 lakh people across the world and thus management of
diversity is highly critical.

9 | Page

Figure 2 Number of employees in HP between year 2001 to 2014

Source: (Statista 2015)

Another major issue faced by HP is related to entrepreneurship and innovation. Being in an
industry that is exposed to dynamic business environment and is completely driven by
technology, innovation is the key to its success (Brem & Voigt 2009) . But in many instances, it
has been observed that the policies of HP were more driven by cost minimization rather than
focusing on innovation (Kalb 2012) . As a result of which HP’s investment in research and
development was reduced to a large extent. The major reasons put forward for the same was
enhancement of organizational efficiency through massive cost reductions. Even Chief Executive
Officers (CEOs) in HP have been changed very frequently which has affected its operations in
global markets to a greater degree (Thibodeau 2012) . It is due to this a number of investors have
switched over dumping HP’s share resulting a loss of approximately 60 billion USD in two years
between 2010 to 2012 (Hartung 2012) .

10 | Page

1. Solution
   To recover from problems identified above that have affected HP vehemently since a long time,
   the company has undertaken a number of steps to overcome the same. It is due to these measures
   that HP has been yet able to manage its position within top 10 among Fortune 500 companies
   (Bandler & Burke 2012) .
   For overcoming issues related to mass-customization through minimized costs, HP set up
   manufacturing and designing units in economies where cost of production is low primarily due to
   abundance availability of resources at lower costs (Porter 2008) . These countries were mainly
   those who belonged to Pacific Rim along with Indian subcontinent (Pearson Higher Education
   n.d.) . This helped the company to produce customized computers and servers at lower prices by
   capitalizing on costs related to human resources, taxes and impediment in shipping. Further such
   set ups helped HP to enhance efficiency in form of augmented production along with innovative
   designs, quality development and effective distribution mechanisms. Such activities helped HP
   in overcoming wastefulness that was acting as a hindrance in organization’s global operations
   ultimately resulting in enhancement of competitive edge (Porter 2008) .
   Management of diversity in HP has always been a major concern. With changing times and
   dynamics of diversities in workforce, HP has also been responsive towards them (refer annexure
   1) and designed new strategies to cater diversities as depicted in figure below.

11 | Page

Figure 3 HP Way of Diversity Management
Source: (Kamal & Ferdousi 2009)

In order to support a strong work culture in HP that is free from all diversities related issues the
company designed ‘open corporate policy’, ‘management by objectives’ and ‘management by
walking around’ (Menke et al. 2006) . These policies were also adopted by the organization to
support development of a culture that would in turn support innovation.
Though HP has been suffering from a number of issues but under the leadership of its new CEO,
Meg Whitman, the company has been able to stabilize its activities (Merchant 2012) . The
company has enhanced efficiency and has been able to minimize costs also. Further under new
leadership the organization has adopted ‘Turnaround’ strategy that will fetch HP with long term
profitability and sustainability (Merchant 2012) . It is this innovation that motivated company to
depart from its core business and venture into markets related to cloud, solutions and
software were expected to fetch the company with higher profitability through increased margins
(Dediu 2013) . Innovation has always been the driving factor for HP which is the reason behind
emergence of Silicon Valley but then the same needs to be revived. Thus under the new strategic

12 | Page
orientation, HP would focus on HP Multi Jet Fusion Technology and Sprout that will aid the
company to rejuvenate its existence and thus gain long term sustainability (Moorhead 2014) . The
benefits from these innovative technological solutions are yet to be realized (Moorhead 2014) .
Irrespective of this fact, these innovative approaches are expected to revive HP’s declining
position.

1. Evaluation
   The present position of HP can be evaluated using the (Boston Consulting Group) BCG Model.
   The model is a matrix of 2×2 which depicts the position of a firm / product / service in terms of
   market share and market growth as depicted in diagram below.

Figure 4 BCG Matrix Analysis
Source: (Schermerhorn 2010)

In current situation HP which is predominantly operating in markets of personal computers is
considered to be a market experiencing lower growth. In order to compete in the same, HP
resorts to lower profit margins for sustaining competitive pressures (Kalb 2012) . Based on such
facts it can be stated that presently HP is operating in the Dog category. This indicates presence
of very minimum scope for the company in future if continued to do business in the same

13 | Page
segment. The company is having a tough time in surviving with such a product portfolio. Further
when the main priority of HP should be adoption of retrenchment strategy, HP on the contrary
has been resorting to growth and diversification strategies. It is evident from the number of
strategic acquisition that has been executed by HP. Retrenchment strategies provides an
organization with opportunities to condense organizational operations and thus concentrate on
selected few that will support company with long run financial stability and sustainability
(Schermerhorn 2010) . In addition to the above without innovative approaches, it is almost
impossible for HP to revive its position in such industry.
The organizational system of the company is very intricate making it difficult for CEOs to
understand the same (Enderle 2011) . Before they are in a position to understand and act, a new
CEO emerges which has adversely affected HP’s growth and culture. Thus the major issue that is
affecting HP is lack of effective leadership. None of the entrepreneurs so far who have been
leading the organization have been able to prove their entrepreneurial skills as classified by the
entrepreneurship model depicted below.

For More Info, Please do write to us at : info@findtutoronline.net or findtutoronline.net@gmail.com or WhatsApp +91 8697669523

Please do visit our Linkedin Page : https://www.linkedin.com/in/ranadeb-singha-mba-cma-bcom-h-sap-certification-cfa-4730b721/

Please do visit our Twitter page :https://twitter.com/FindTutorOnline

Please do visit our Facebook page : https://www.facebook.com/cqfmodulesolutions

Please do visit our Instagram page : https://www.instagram.com/findtutoronline.net_2013/