Hewlett Packard Computers - Marketing Case Study

Case Study: Hewlett-Packard

1.

Problem Definition

1.

Primary Business – Technology Firm

1.

Imaging and Printing Group (IPG)

1.

Products: Printers and inks

2.

Revenue: 30% of total

2.

Personal Systems Group (PSG)

1.

Products: Desktop PCs, notebooks, servers, flat-screen TVs

2.

Revenue: 29% of total

3.

Technology Solutions Group (TSG)

1.

Technology and IT services for B2B segment

2.

Revenue: 37.5% of total

2.

Main Issue – HP is struggling to decide whether to continue selling PCs, a large revenue generator with consistently small and diminishing margins. Along with this decision, the firm is also wrestling with how to price the PCs in the market amidst strong competition from Dell and IBM.

1.

PCs are central to HP’s strategy to maintain their position as a complete technology provider to both the B2B and B2C segments.

2.

Through testing the market, HP has found that the demand for PCs are elastic to price. Increased prices resulted in loss of revenue but increase in margins. Whereas a decrease in prices improved market share, but saw margin erosion.

2.

Objectives

1.

Decide whether to keep PCs are part of product portfolio.

2.

Decide how to price PCs if decided to keep as part of portfolio.

3.

Situation Analysis

1. The Market

1. Size: In 2003, the global PC market was estimated at USD 170 billion. Estimated to grow at 11.4%, the forecast for 2004 was USD 182 billion.

2. Segments

1. Product: Desktop PCs and portable computers.

2. Customers: Enterprises, small businesses, and consumers.

3. HP's Position:

1. Product: HP sold it's own-branded computers and also HP Compaq products to customers.

2. Distribution: HP products were sold to business customers through their direct sales force and commercial retailers. They sold to consumer through retail stores.

3. Price: HP is priced approximately 15% higher than Dell PCs due to their brand equity.

4. Image: HP has tried very hard to redefine the brand for their customers. The overall theme is to become more customer-oriented, and less driven by internal innovation. The key aspects of HP's campaign were "adaptable", "straightforward", "trustworthy", and "human". The company implemented the Total Customer Experience "TCE" program in 2000 to "enhance the customer focus of HP's employees. By 2004 HP was ranked first in customer satisfaction with Dell and IBM both trailing behind.

2. Competition