Global Strategic Management Case Study on Hewlett Packard’s Remarkable Business Strategies.
Technologically speaking, an electronic kind of market has been in red competition comprising from customer preferences, rapid technological advancement, price, cost effectiveness and product differentiation. These conditions were no exempt for Hewlett Packard (HP) to get impacted so the challenge to turn around its operating results been surfaced in 1990s which drive the company to review its supply chain processes to mitigate entailing massive loses. HP made its sophisticated recalibration of its supply chain strategy and identified that the catalyst to make its product profitable is to control its inventory by way of matching the demand and supply or production.
Table of Contents
1. Impressive Hewlett Packard’s Supply Chain Strategy
1.1 Component devaluation costs
1.2 Price protection costs
1.3 Product return costs
1.4 Obsolescence costs
2. HP’s Historical Bold Strategic Decision to Split HP into HP Inc. and HPE and Subsequent Restructuring
3. Conclusion
Research Objectives and Key Topics
This paper aims to analyze the strategic management decisions of Hewlett Packard, specifically focusing on how the company utilized supply chain optimization and corporate restructuring to maintain profitability and market competitiveness in the face of evolving industry challenges.
- Management of Inventory Driven Costs (IDC)
- Supply chain recalibration and efficiency measures
- Strategic corporate split into HP Inc. and HPE
- Business model transition towards as-a-service (aaS) operations
- Application of Michael Porter’s generic strategies in a modern context
Excerpt from the Book
Impressive Hewlett Packard’s Supply Chain Strategy
Technologically speaking, an electronic kind of market has been in red competition comprising from customer preferences, rapid technological advancement, price, cost effectiveness and product differentiation. These conditions were no exempt for Hewlett Packard (HP) to get impacted so the challenge to turn around its operating results been surfaced in 1990s which drive the company to review its supply chain processes to mitigate entailing massive loses. HP made its sophisticated recalibration of its supply chain strategy and identified that the catalyst to make its product profitable is to control its inventory by way of matching the demand and supply or production. Using this technique, HP has to focus not only with the traditional Inventory Cost such as Cost of Money, Storage Rental Cost, Warehouse Wastage, and Staff Cost but more so to the underlying cost resulting to excessive inventory due to mismatch of demand and supply (production) or the so called “Inventory Driven Cost” as follows: (Callioni, de Montgros, et al. 2005)
1. Component devaluation costs - to mitigate the entailing hit of Market Price fall to its related PC components, HP had controlled the inventory level by reducing the number of supply chain networks, consolidating manufacturing facilities, taking possession of components on a just-in-time basis, paying the going price at that time, and working with suppliers to minimize inventory when a price drop was anticipated.
2. Price protection costs – to reduce this cost resulting from HP’s market price reduction which the channel partner are entitled to reimburse for the price difference from unsold inventory, HP decided to keep its manufacturing turnaround times short and replenishment cycles frequent. HP also offered its channel partners incentives to carry the lower levels of inventory which proven the cost of incentives against the cost of reimbursing channel partners after price breaks is much lower.
Summary of Chapters
Impressive Hewlett Packard’s Supply Chain Strategy: This chapter details how HP mitigated massive losses in the 1990s by recalibrating its supply chain and addressing specific "Inventory Driven Costs" like devaluation and obsolescence.
HP’s Historical Bold Strategic Decision to Split HP into HP Inc. and HPE and Subsequent Restructuring: This section covers the strategic corporate split into two entities, HP Inc. and HPE, to better address specific market segments and shift towards an as-a-service business model.
Conclusion: The author summarizes how HP’s adherence to Porter’s generic strategies, combined with operational restructuring, allowed the firm to achieve sustainability and deliver shareholder value.
Keywords
Hewlett Packard, Supply Chain Strategy, Inventory Driven Cost, Corporate Restructuring, HP Inc., HPE, Michael Porter, Competitive Advantage, PC Manufacturing, Cloud Technology, As-a-Service, Market Competition, Strategic Management, Operational Efficiency, Shareholder Value
Frequently Asked Questions
What is the primary focus of this paper?
The paper focuses on Hewlett Packard’s response to intense market competition through supply chain management and structural transformation.
What are the central themes discussed?
The central themes include inventory cost reduction, the strategic split of the corporation, and the transition toward cloud-based and as-a-service business models.
What is the main objective of the research?
The goal is to examine how management decisions, such as splitting the company and optimizing the supply chain, lead to long-term business sustainability.
Which scientific framework is applied?
The author applies Michael Porter’s three generic strategies: overall cost leadership, differentiation, and focus strategy.
What is covered in the main body?
The main body covers the specifics of the supply chain recalibration, the logic behind the split into HP Inc. and HPE, and the resulting financial improvements.
Which keywords characterize this work?
Key terms include Supply Chain Strategy, Inventory Driven Cost, Corporate Restructuring, and Competitive Advantage.
How did HP manage Inventory Driven Costs?
HP managed these costs by minimizing component devaluation, controlling price protection expenses, managing product returns, and preventing product obsolescence through efficient launch cycles.
What prompted the split into HP Inc. and HPE?
The split was driven by unfavorable market conditions, slowing PC demand, and the need to provide better value to shareholders by allowing each entity to focus on its specific market segment.
How did the restructuring affect the business model?
It allowed HPE to shift toward a pay-per-usage "as-a-service" model while enabling HP Inc. to focus on personal systems and printing innovations.
What financial results followed these strategic changes?
Both entities saw improvements in their bottom-line (EPS) and generated strong Free Cash Flows (FCF), as reported in their FY21 forecast earnings.
- Quote paper
- MBA Edsrafel Andales (Author), 2021, Hewlett Packard’s Remarkable Business Strategies, Munich, GRIN Verlag, https://www.grin.com/document/1710918
