The Hewlett-Packard Company, which is a technology corporation in California, specializes in developing and developed computing, storage, network hardware, software and services. The main product lines contain personal computing hardware, activity servers and linked storage. This enterprise is one of the biggest technology companies in the world.
As we know, Hewlett Packard popularly called HP is a company that provides technology solutions to consumers, businesses and all forms of institutions worldwide. The company later expands its operations to IT infrastructure, personal computing and access devices, global services and imaging and printing services.
Moreover, the company is known throughout the world by operating in more than 170 countries around the world. The mission of the company is to facilitate how technology and services can assist individuals and institutions in addressing their problems and challenges so as to realize their dreams. The company applies new thinking and ideas come out with basic and valuable experiences with the technology with her IT corporation headquarter in Palo, Alto, California, USA.
Obviously, the HP is one of the world's leaders in providing solutions and services to individual consumers and businesses through information technology. They are classified in the Diversified Computer Systems Industry. The HP has made a place in the industry by continuing to deliver quality products with cutting edge technology, or differentiation. Their products have been set as the industry standard.
As usual like other companies, they have also many different competitors including, Apple, Dell, IBM, Cannon, and Gateway. The threat of new competitors in their market is low due to the many barriers of entry. When looking at the possibility of having substitute products in the market, there is little threat due to the inability to substitute computers and other technology devices. Because of this, buyers have little bargaining power but suppliers have high bargaining power. This can be attributed to the demand for technology.
The development of Hewlett Packard was mostly oriented to new and innovative technology products. The founders relied heavily on their ability to do technological research and development that would result in saleable products.
Initially, the products were mainly measurement machines, devices and instruments. With their growing success, HP broadened its scope of R&D (research and development), production and sales of technology-based products. As the following information reveals, the company developed an enviable record of breakthrough and innovative products that resulted in outstanding growth, profits/earnings, market leadership and its other objectives.
The HP strategy is highly efficient and its emphasis on standards-based technologies supply chain management organization combines its direct customer model with manufacturing. These HP strategies for customers are super related technology, customized systems, superior service support, services and products that are easy to buy and use. HP has more systems for example enterprise systems, client systems, printing and imaging systems, software and peripherals and it has designs, develops, manufactures, markets, sells, and supports a wide range of products that are customized to customer requirements.
HP is offering a full range of flexible seeks to simplify computing experience for customers' this is by applying the direct business model to its global services business, the HP help customers maximize the value of their Information Technology investments, rapidly deploy systems, and try consumers educate in Information Technology.
HP offers quality management services and financing alternatives, and other for customers business and consumer customers in the U. S. through HP Financial Services. It's dedicated sales council and sells its products and services directly to its customers through telephone and online www.hp.com and customers include large company, government, healthcare, and education account, as well as small-to-medium businesses and individual customer's resources which divides its sales and marketing between these groups inside geographic regions. Consolidated net income during any of the last three financial years for No single customer accounted for more than 10% of HP's. Its organized sales and marketing efforts are around the needs customers who are allowing the company to develop and improve its products and marketing programs for definite customer groups is continuous feedback from its customers.
Its topic to strong price competition with large branded companies, there are other branded and generic .important primarily based competes on technology, direct customer relationships, value, performance, customer service, quality, and reliability. HP made on cost declines for customers in order to enhance customer value although it is increasing global market share is at the competitive pricing environment continual it think will be challenging, and continue to reduce its pricing as necessary in response to future competitive and economic conditions. strength of HP's prove it direct business, as well as its strong liquidity position, liquidity position who strong make the company better positioned than its competitors and to continue profitable growth in any business climate.
BACKGROUND OF THE HEWLETT- PACKARD COMPANY.
In 1935, William Hewlett and David Packard both graduated from Stanford University electrical engineering during a fellowship they had with a past professor. The company originated in a garage in nearby Palo Alto, during the Great Depression at Stanford Frederick Term in 1939, Hewlett-Packard was considered a mentor to them in forming. The partnership was an investment of US$538 and formalized it. Hewlett-Packard was originated in 1939 by William R. Hewlett and David Packard.
In 1939, the two men decided to formalize their partnership and founded the Hewlett Packard Company. They chose the company's name with the toss of a coin. Bill Hewlett won the call. His came first in the company name. That year the company had revenues of $5,369 and two employees. During 1940, HP moved from the small rented garage to rented buildings in Palo Alto. The start of World War II in Europe resulted in a flood of orders by the United States' government for electronic instruments.
The first year of their partnership, Bill Hewlett and Dave Packard developed their first product, an audio oscillator. It was named the HP Model 200A "because we thought the name would make us look like we'd been around for awhile," said Dave years later. It was an electronic test instrument used by sound engineers. The product's distinctive feature was a temperature-stabilized resistor in a critical segment of the circuit. The innovation enabled HP to sell the Model 200A for $54.40 against competitors which were selling less stable oscillators for more than $200. One of their first customers was Walt Disney Studios which purchased eight Model 220B oscillators at $71.70 each, for use in testing the Fantasyland stereophonic sound system for the movie Fantasia.
In 1943, HP entered the microwave field with signal generators developed for the Naval Research Laboratory. At the end of the war, the company decided strategically to continue in the microwave market. Microwave products quickly became an important and growing share of the company's business. Following the war, HP's catalogue featured 39 products. By 1949, revenues exceed $2.2 million and the company has166 employees.
In 1951, HP invented the high speed frequency counter that greatly reduced the time required to measure high frequencies. Radio stations used the counter to set frequencies accurately and in compliance with Federal Communications Commission (FCC) regulations for frequency stability. In 1956, HP produced its first oscilloscopes, an instrument to show the variations in a fluctuating electrical quantity and a major part of the company's test and measurement products. That year Hewlett-Packard had 215 employees and revenues of $20.3 million. HP made its first acquisition in 1958, the F.L. Moseley Company of Pasadena. It produced high quality graphic recorders and marked HP's entry into the business of plotters, a forerunner of its printer business. The following year, revenues hit $48 million. That year, HP created an employee stock purchase plan for its 2,378 employees. At the end of the decade, the company established European marketing organization in Switzerland and a manufacturing plant in West Germany. From those bases, HP further expanded its size and scope of manufacturing and marketing operations in Europe.
During the 1960s, HP continued its growth with new products and diversification. In 1961, Hewlett Packard was listed on the New York Stock Exchange as well as on the Pacific stock exchange. That same year, it acquired the Sanborn Company of Waltham, Massachusetts, makers of medical electronics, enabling the company to enter a new market. Two years later, HP entered the Asian market. It formed its first joint venture, Yokogawa Hewlett-Packard (YHP) with Yokogawa Electric Works in Tokyo. By 1963, overseas sales accounted for 18 percent of HP's business. Its largest foreign markets were Western Europe, Canada and Japan. That same year, HP introduced the frequency synthesizer, one of the most complex instruments developed by the company. The synthesizer did the work of an entire battery of instruments and with greater accuracy. It was used for automated testing, advanced communications systems and communications with deep space vehicles. The following year, the company gained international recognition for its cesium-beam atomic clocks, designed to maintain accuracy of time for 3,000 years with just one second of error. The cesium beam standard becomes the standard for international time. Atomic clocks became integral components of time critical applications such as space shuttle operations, airplane collision avoidance systems and telecommunications. In 1965, the company entered the analytical instrumentation field with its acquisition of F&M Scientific Corporation of Avondale, Pennsylvania. The acquisition enables HP to expand further into chemical analysis with its measuring and testing expertise.
Hewlett Packard's expertise in research and development advanced greatly in 1966 with the establishment of the company's central research facility, the beginning of a long history as one of the world's leading commercial research centers. At the inception of HP Labs, the primary areas of research included solid state physics, physical electronics, electronics, medical and chemical electronics instruments. That year, HP's first computer was introduced. It was developed as a versatile instrument for the company's growing line of programmable test and measurement products. The HP2116A model was the largest single mechanical package that the company had built and marked its first use of integrated circuits. Prior to the introduction of the HP2116A, most computers had to be kept in air-conditioned rooms on spring-loaded floors. HP assumed that the 2116A should meet the same environmental standards as the instruments it was used with and be rugged and reliable. Its first sale was to Woods Hole Oceanographic Institute and was used aboard a research vessel in a salt air environment for more than a decade. In 1967, HP diversified into medical equipment with its introduction of a noninvasive fetal heart monitor that detected fetal distress during labor. The following year, the company brought out the world's first desktop scientific calculator. The high speed, programmable calculator stored programs on magnetic cards and let scientists perform complex calculations without the need to access much larger computers.
In 1970, HP produced a laser interferometer that was capable of measuring to millionths of an inch. It was ideal for machine tool accuracy and enabled the company to become a world leader in that market. Two years later, Hewlett Packard made another advance in personal computing by introducing the world's first scientific hand-held calculator. The same year, the company expanded into business computing with its first general purpose computer, the HP 3000. The computer advanced the capacity for distributed data processing and broadened customer uses from high tech engineering and research to daily administrative data processing operations. During the following year, HP introduced the first electronic calculator to print Japanese characters. It was marketed in Japan by Yokogawa-Hewlett-Packard. In 1974, the company introduced the first minicomputer to be based on 4K dynamic random access memory (DRAM) chips instead of magnetic cores. That same year, the world's first programmable pocket calculator was introduced. The following year, the electronics industry adopted the HP-IB (interface bus) as an international standard, thus allowing one or more instruments to connect readily to a computer.
Through the 1960s and 1970s, the miniaturization trend in electronics increased dramatically. In 1977, Hewlett Packard introduced a combination wristwatch, calculator and personal calendar. It was one of the first personal information appliances. The wrist instrument was capable of performing more than 36 functions when manipulating and interrelating time, calendar and numerical data. Both the miniaturization of the math functions and the small package engineering were considered to be extraordinary technological feats.
During the 1970s, Hewlett Packard continued to develop new ventures internationally. In 1972, People's Republic of China, under Chairman Mao Tse-tung, invited the company to be the first U.S. firm to discuss trade in electronics. Five years later, following the invitation of the Communist government, Dave Packard made his first visit to China. He made a commitment to helping China's modernization efforts and returned two years later. At that time he toured factories and other scientific facilities. At that time, their hosts expressed interest in a joint venture with the corporation. In 1981, HP products were officially available in China through the China Hewlett-Packard Representative Office in Beijing. Four years later, a joint venture, China Hewlett-Packard was established.
Through the 1980s, HP's flow of new and innovative products grew greatly. In 1980, it introduced its first personal computer and the first laser printer that was fast and inexpensive enough for use as an ancillary product. 1982 was a year of major advances for the company. In the United Kingdom, HP Limited developed an electronic mail system. It was the first major wide-area commercial network based on minicomputers. The same year, HP introduced the first "desktop mainframe", using 32-bit "superchip" technology. Its capacity was the same as the room-sized computers of the 1960s. The company's third innovative product brought out that year was its first hand-held computer. With 16K RAM and 48K ROM, it ran BASIC and VisiCalc. Weighing just 26 ounces, it provided 50 functions and was an early tool for mobile computing, connecting with peripherals such as a modem, digital cassette drive and printer/plotter. A touchscreen personal computer was introduced by HP in 1983.
In 1984, Hewlett Packard emphasis on technological research, development and commercialization continued. It opened a new research facility HP Labs in Bristol, England which was the largest such operation outside of Palo Alto. The same year, it introduced another breakthrough product, a high quality, low priced thermal inkjet printer based on the technology that the company had developed. This printer effectively made dot matrix printers obsolete. The company's inkjet technology R&D was started at the HP Labs in 1978. By miniaturizing the large, industrial inkjet marking devices and offering it as an ancillary product for personal computers, HP was able to offer better print quality, lower power consumption and low cost printing. Such competitive advantages enabled the company to gain a major share of the printer market. Currently, HP inkjet printers continue to provide technological advances at "ever decreasing prices". During the same year, the HP LaserJet printer was introduced. In subsequent years, it would become the company's most successful single product and the world's most popular personal desktop laser printer.
The corporation's growth was evident by its revenues of $6 billion in 1984, double what it was four years earlier. Its productivity advances were indicated by the company's 47 percent increase in employees to 84,000 while revenues jumped 100 percent during the period of 1980-84. At the end of the decade, revenues nearly quadrupled to $11.9 billion and the number of employees rose to 95,000, an increase of about 38,000 jobs or close to 67 percent more than in 1980.
Technological advances continued to impact on Hewlett Packard. In 1986, it was the first major computer company to introduce a commercial application of precision architecture based on reduced instructions set computing (RISC). The use of RISC microprocessors made computers more powerful, faster and less expensive. Developing the RISC technology took HP five years and was its most expensive R&D endeavor to that point. While technological advances and organizational growth abounded in HP, historical events were being experienced. In 1987, Bill Hewlett retired as Vice Chairman of the Board of Directors and named Director Emeritus. The original garage rented by Dave Packard in 1938 was granted state landmark status by California. In 1989, Hewlett Packard celebrated its 50th anniversary.
Miniaturizing its products continued at Hewlett Packard in 1991 as the company introduced the palmtop personal computer, weighing only 11 ounces. It was roughly the size of a large pocket calculator and had as much computing power as a desktop personal computer system. Programs in the palmtop included a financial calculator, telephone numbers and addresses, Lotus 1-2-3, a simple text editor and an infrared link for transferring data. The same year HP introduced the color DeskJet which created a revolution in color printing. Expensive, specialized machines were replaced by HP's high quality, relatively inexpensive color printing systems. In 1992, the HP Corporate Business Systems product line was introduced. It was comprised of nine HP computing systems with mainframe performance at a price that was as much as 90 percent lower than competing systems. That year heralded the development of HP's Design for Environment policies that were intended to make products more environmentally compatible. As part of its ongoing ecological initiatives, the company introduced it Energy Star label for printers. In 1996, HP recycled its 10 millionth LaserJet cartridge. The following year it expanded the recycling program to include HP inkjet print cartridges. By 1999, the company had tripled its recycling of LaserJet cartridges to 30 million.
In 1993, the company introduced the three pound OmniBook, a "superportable" personal computer with battery power enough for use during a flight across the United States. That same year, the company shipped its 10 millionth LaserJet printer. The following year was a bonanza with revenues increasing by $5 billion, reaching $25 billion, and more than double its level of 1989. 1994 was also a year of major product introductions, including the light-emitting diode (LED). LEDs replaced incandescent lights in new applications such as cars, traffic control signals and moving message panels. HP started collaborating with Intel to develop a common 64-bit microprocessor architecture for the computers of the 21st century. Their new technology drew on years of R&D at HP Labs that was intended to replace the PA-RISC processors. That year HP brought out its OfficeJet personal printer-fax-copier, a space-saving, cost-effective unit designed specifically for professional home office users. In 1995, the HP Pavilion PC was introduced into the home computing market.
Hewlett- Packard presently operates out of six business segments: Enterprise Storage and Servers, HP Services Software, Personal Systems Group, Imagine and Printing Group, HP Financial Services, and Corporate Investments. Technology Solutions Group is a non-operating segment that incorporates Enterprise Storage and Serves and HP Services into a single division. Underneath these different divisions, Hewlett Packard provides a wide variety of computer and peripheral products. This diverse product line includes: personal computers, handheld computer devices, home and business imaging and printing devices, publishing systems, storage and servers, a wide selection of information technology services and software solutions. In 1939, Hewlett-Packard was originated as a privately owned and operated company. On November 6, 1957, Hewlett-Packard made the transition into a publicly traded company at $16.00 per share. Today, Hewlett-Packard is publicly traded on the New York Stock Exchange.
Since 2001, Hewlett-Packard has nearly doubles in its sales volume. The chart below shows the sales of the past five years and the yearly change. As you can see, the sales volume had the largest jumps in from 2001-2002 and 2002-2003. This can be attributed to the acquisitions of some major companies. After 2003, the sales volume clearly evens out. Also shown are the sales thus far in 2006. As the chart shows, the annual sales are on track to stay in line with the previous years and should surpass that of 2005.
Hewlett-Packard has also grown in its total asset value. You can also see from this information that after the large jump from 2001-2002, there has consistent asset value growth. This large jump can also be attributed to the acquisition.
Hewlett-Packard is categorized in the Diversified Computer Systems industry of the Technology sector. Within the Computer Systems industry Hewlett-Packard has many high profile competitors such as: Canon, Dell, IBM, Apple, and Cisco Systems. The Computer Systems industry contains a large range of products including but not limited to: desktop computers, personal notebooks, printers, scanners, cameras, and different software programs. Most companies, such as Dell, Apple or Gateway, tend to be limited to a small product range. Compared to other industry competitors, Hewlett-Packard has a wide variety of consumer products. This gives HP a competitive advantage in the consumer market due to their brand name coverage in the technology industry. Hewlett-Packard offers desktops, notebooks, handhelds (pocket PC's), monitors, home networking, televisions, digital photography, printers and printing supplies. Hewlett-Packard does not specialize in just one product line. With new technology innovations, some of their previously lesser known lines have grown to be some of their largest. In the past five years, Hewlett-Packard's imaging and printing division has grown substantially due to the popular home photography printing.
FIVE FORCES MODEL:
Competitive Force 1: Rivalry among Existing Firms
Competition among existing firms is one of the biggest threats for Technology Industry companies. There are many large companies with a strong foothold in the technology industry, making each competitor's revolutionary idea a factor in the consumer's decisions. In the past ten years, the technology industry has grown exponentially. The size, quality, functions and appearance of all technological devices and software are continually improving. A good example of the technological revolution is the ever changing photography world. In the past decade, the camera has changed from a 35 mm camera, with removable exposures, to the now modernized, sleek digital camera which stores your images digitally until you are ready to print your pictures. With what seems like daily changes, companies have to stay on top of their research and development to keep their product up to date. The same updates are needed with computers, which are always become outdated faster than expected. All of these factors increase the competition among existing firms. There is a high degree of concentration in this industry within the largest companies including: Apple, Dell, HP, IBM, and Sony. At one point, IBM was the industry leader, setting the bar for price and quality, but over time, other major competitors have stepped up to the plate with new technology and price cutting initiatives.3 In today's market there is not one particular company which dictates the overall computer pricing, as these leaders work together to avoid harsh price competition. Along with these larger companies there are also smaller competitors including: Gateway, Compaq, eMachines, and Velocity Micro. Many of these companies overlap in competition, with products ranging from desktops to cameras to mp3 players. In each of these markets, there are different industry leaders.
In the computer technology industry, there are incentives to hold a strong market share by setting lower prices or having new innovative ideas. Dell came into the market aggressively with a ground-breaking business strategy. They cut out the middle man, selling their products without a retail store, and were able to offer an industry leading low price. The other large competitors, such as HP, could not match this low price incentive, given their higher fixed costs involved in their sales. Hewlett- Packard's only way to compete with industry leaders is to keep a low variable cost. To even begin competing in this industry, one must not only have the technology needed but also the economy of scale. In this modern world, a company in this area need not worry about excess capacity, due to the high level of demand for such sophisticated products. This also covers the problem of exit barriers, since at this time technology is only rising.
There is obviously a high degree of rivalry among existing firms in the technology industry. With new ideas and cost cutting initiatives being thought of everyday, those competing in this industry must keep up with these changes. This involves creating brand loyalty, diversifying your company, being able to create new ideas and being able to match your competitor's advances. Implementing these ideas allows a chance to keep up with the technology industry leaders.
Competitive Force 2: Threat of New Entrants
Having new entrants into the technology industry may seem impossible, but when you think about the different areas they could enter into, it is not as hard as it seems. Yes, it may be difficult for a new technology company to come about, but there is also the angle of existing companies to creating new technological products. With this idea comes the threat of new entrants.
In order for a company to enter this industry it would require large economies of scale. To compete in this industry, a large amount of capital is required. New companies trying to make a foothold in the technology industry will suffer from economies of scale in research and development, brand advertising, and possibly physical plant and equipment.3 It takes a lot of research and development before a product can initially be launched, which is a large problem for new companies without sound financial backing. In order to keep up with competitors, most companies need to begin to generate revenue in the early stages of the company's life, rather than having to spend excess amounts of money. The companies which are currently competing in the industry have already established themselves among the consumers as reputable producers of technological products. Not only have they put in capital, but also the time to gain their brand recognition. A new company cannot automatically buy brand recognition; it involves being set in the marketplace to gain consumer confidence.
If a company was attempting to enter into the industry it would be beneficial for them to have a new innovative product. This would allow them to gain a first mover advantage over the existing competition. For example, Apple has gained an advantage over the rest of the technology industry with their addition of iPod and iTunes in 2004. Since it was the first, iPod is now the benchmark mp3 player, making it difficult to rival their ever-changing technology. This is where the idea of already existing companies bringing in new products comes into play. For example, recently there has been the development of a portable USB port. This allows a PC user to insert a device (the USB) into their computer and save their work in the USB. They can then insert the USB into any other computer and have their work uploaded, quickly and simply. This has become a large industry, and many companies have begun producing these products.
Another barrier to entry is the already established distribution channels and relationships among suppliers. It is common in an industry which uses many different suppliers, for exclusive relationships to be developed. In cases such as this, many times it becomes difficult for new competition to gain such advantages. In the technology industry many of the components are produced overseas. These foreign barriers also create another problem for new entrants.
Seeing that the computer systems industry is so research-intensive, there are many patents and copyrights already in existence. This creates legal barriers for the companies trying to gain a new market share. With such high barriers of entry into the technology industry, it is apparent why we haven't seen a new company come into the market. Although, it is unlikely for a new company to gain market share in this industry, you still have to be aware of the possibility of new products entering the industry. This is the main threat of new entrants.
Competitive Force 3: Threat of Substitute Products
In this modern technology era that we live in today, technology companies service the everyday and practical needs of the consumer. In most businesses and homes today, people use some form of computers, software, printers, networks, cameras and televisions. There is currently no substitution for these sophisticated devices unless you resort to the old technology. The problem is that we rely upon the technologies of these new devices in our everyday day lives.
Before the invention of the computer, the most commonly used mechanical device in the business world was the typewriter. Many people do not use this substitution to the computer in this day and age. The computer took over the typewriter long ago and will continue to be the most popular tool for consumers in the future. The invention of the digital camera has paved the way for a whole new line of home accessories for home photography. Digital cameras have replaced the old 35 mm cameras that were used by every family just ten year ago. There is currently no substitution for the quality and the convenience of the cameras produced today.
Overall, you could say there are limited threats of substitute products currently in this industry. While new products are invented regularly, it is hard to think of something that has the possibility of replacing the computer all together. It also seems that a digital camera is a technologically advanced as it is going to get for a good amount of time. For this reason, there is a limited threat of substitute products.
Competitive Force 4: Bargaining Power of Buyers
Factors that affect the bargaining power of buyers are price sensitivity and relative bargaining power. The computer industry is comprised of several other companies such as Apple, Dell, Hewlett Packard, and Gateway. Some of these companies specialize only in producing computers; while others produce computers along with other electronic products such as printers, cameras, and other hardware. Each company needs to be aware of their buyers through their price sensitivity and the bargaining power of buyers.
Price sensitivity determines the extent buyers choose to bargain on price. Buyers are typically less-price sensitive because of the amount of differentiated products. The buyers' price sensitivity also depends on the importance of the product to the buyer. For example, computers are used every day in people's lives. This makes the computer industry very valuable to customers. In return the buyers are going to be sensitive to the price of the product due to the importance of the product in their lives. This causes the buyer to shop around more for a similar product at a better price. The shows that buyers are price sensitive, which encourages other companies to compete for a lower price and better quality. Some computer companies such as Hewlett Packard already compete on quality. The importance of the product quality to the buyers determines whether or not price becomes an important determinant in the buying decision.
Buyers have a relatively strong bargaining power in the computer industry. A buyers' relative bargaining power depends on volume of purchases bought by a single buyer, number of alternative product available to the buyer, and buyer's cost of switching from one product to another. First, there are several major electronic stores, such as Best Buy and Circuit City, which carry a large quantity and variety of computers. This makes stores product cost of computers cheaper because they can purchase a large inventory at one time. Buyers also have strong bargaining power because there are several computer companies in the industry, all with a similar product that performs similar functions. This allows the buyer to "shop around" for the best deal on a computer. The switching cost is relatively low because most software programs can run on any computer. Also, other electronic items such as cameras and printers are compatible to be set up on any brand of computer.
Buyers relative bargaining power depends on volume of purchases buy a single buyer, number of alternative product available to the buyer, and buyer's cost of switching from one product to another. Buyer's bargaining power also increases due to the number of alternative products available. Local electronic stores have high competition from products that offer the same hardware but at a cheaper price. Buyers benefit from the number of alternative products available and the competitiveness of the companies. Overall in the computer industry buyers have a relatively strong bargaining power.
Competitive Force 5: Bargaining Power of Suppliers
Suppliers are powerful when there are few substitutes, the product is critical for buyer's business, and when they pose a credible threat of forward integration. Suppliers are most powerful when there are only a few companies and few substitutes available to their customers. The computer industry has several companies that all produce similar products that are needed by the customers for their daily business.
Suppliers are powerful when there are only a few companies and few substitutes available to their customers. In this industry, suppliers show a low bargaining power due to the amount of substitutes available. Several companies such as Apple, Dell, Hewlett Packard, and Gateway all produce computers that compete with each other.
Each computer company is very powerful over their suppliers of hardware for the computer. There are several companies and several substitutes available to the customers which make the supplier's bargaining power low. Suppliers also have power over buyers when the suppliers' product or services is critical to buyers' business. Suppliers realize that technology is leading the world today.
From calculators to personal computers, the human population is relying more on technology for everyday use. This lets suppliers control the industry price. Even though there is intense competition in the computer industry, suppliers realize how important computers are to everyday business and can maintain a sustainable price to meet the demand. There is very little threat from the suppliers to forward integrate. The threat is minimal because Intel, AMD, and Microsoft can not sell directly to customers because they do not make personal computers, imaging devices, or servers. For the competitors to advance in this area it would cost too much and there are too many disadvantages due to barriers of entry.
Suppliers have high bargaining power when there are few substitutes, the product is critical for buyer's business, and when they pose a credible threat of forward integration. Suppliers have a low bargaining power when it comes to substitutes products, but are able to maintain an overall high bargaining power because computers are critical to everyday business. Although suppliers possess little integrations and high competition, they still maintain a high bargaining power through the high demand for technology.
Knowledge Management (KN) allows organizations to share knowledge and experience among their managers and employees.
Hewlett-Packard is a leading or dominant player in various technology markets worldwide. The knowledge it generates in serving these markets is one of its most important assets and, like most forward-looking companies, Hewlett-Packard is intent on putting that asset to use in all parts of the organization. In the Professional Services Organization (PSO), Hewlett-Packards fast growing consultancy practice, we see Knowledge Management as adding to our capabilities in various different ways, from improving efficiency in current processes to leading the company as a whole into new business areas. Improving efficiency is the everyday pre-occupation of all managers and knowledge management is certainly a powerful tool to help in this process. But we believe it is also fundamental in addressing that other, much more difficult problem, of creating new sources of value for our customers, and therefore for HP.
Many companies are beginning to feel that the knowledge of their employees is their most valuable asset. They may be right, but few firms have actually begun to actively manage their knowledge assets on a broad scale. Knowledge management has thus far been addressed at either a philosophical or a technological level, with little pragmatic discussion on how knowledge can be managed and used more effectively on a daily basis. At this early stage of knowledge management in business, the most appropriate form of dialogue is not detailed tactics, but rather high-level principles. When an organization decides what principles it agrees upon with respect to knowledge management, it can then create detailed approaches and plans based upon the principles.
Planet of the engineers.
Every company working out how to manage knowledge has to shape its strategy within the context of its own history and culture. Among the factors that have most influenced our approach at HP are decentralization, a focus on process and a substantial internal infrastructure.
Hewlett-Packard is a true multinational, with operations spread all around the world. The degree of local control over operations is extremely high; anyone sufficiently at home in Hewlett-Packard's culture to be able to rise to a position of significant independence is presumed to be likely to get things right without head office breathing down his neck. To rely on culture this strongly means being certain that the culture is robust; Hewlett-Packard has that certainty. The company is often cited as the leading exemplar of the shirt-sleeves engineering ethic, well suited to team work and naturally directed towards problem solving.
One aspect of this culture is a relentless focus on process; at Hewlett-Packard there is a process for everything. This is one of the factors that allowed the company quickly and successfully to adapt to the new emphasis on quality, which came in the 1980s. The problem-solving power of Hewlett-Packard's culture and its concomitant concentration on process help to explain how the company has managed to grow from a turnover of $6.4 billion to $40 billion in 13 years while increasing employment from 92,000 to 112,000 only.
Almost every one of those workers is attached to the best established and largest corporate intranets in the world. HP's intranet experience goes back 15 years or more - by the end of 1996 there were 750 internal servers all offering a variety of web based servers. Initially each server was installed just to make things easier for one department or another, but as the system grew it became apparent that it was taking on a different character - it had become a company-wide knowledge management tool spanning the entire business.
The way in which this intranet has grown clearly reflects the advantages of the company's decentralized structure; groups everywhere got enthused and turned the web into a way of helping themselves work better. Guidance at various levels helped turn these enthusiasms into something all-encompassing, and global decisions supported the change. Any knowledge management strategy in Hewlett-Packard will naturally make use of this intranet, and reflect the culture that it grew from. Ours is not an organization where change comes only from the top - it also grows from the bottom as we see ways to make our work and our lives better.
Knowledge flows easily in a decentralized organization but harnessing these separate flows and creating new, more powerful, insights out of this combination is one of the continued challenges of knowledge management at Hewlett-Packard.
Solving problems repeatedly.
Hewlett-Packard's consultancy practice, the Professional Services Organisation, has quickly grown from being an instrument of technology sales to a more ambitious and independent role as a provider and enabler of business solutions (which may or may not include HP hardware). The idea is not to recreate the capabilities and coverage of the leading management consultancies, but to focus on particular sectors and particular types of technology; the PSO aims to become a market leader in the provision of solutions based on easy-to-use client/server computing. In the past four years the UK PSO has quadrupled turnover to $100m and doubled its workforce to around 400, of whom 130 are subcontractors.
This success has underscored the need for knowledge management as a way of avoiding undue stress and burnout. HP is in general a hard working organisation, but the PSO staff works harder than most. Since consultants are knowledge workers, better knowledge management is a key to increasing their productivity, and would be worth a considerable investment in terms of management effort just on the basis of the reduction in workload that productivity improvements could bring about. A knowledge management regime which people associate with a more effective use of their time is much more likely to succeed than one which is perceived as an added reporting layer or documentation requirement with no benefit to the worker - an addition to the workload, not a reduction.
The nature of PSO's consultancy business has influenced our approach to the knowledge management task in two ways. First, the business's relatively restricted and specialised range has allowed a focus on repeatability as a realistic goal. The consultancy sees quite similar - though clearly not identical - problems on a fairly regular basis, and so has ample opportunity to test ways of repeating its successes. Like the problems, the solutions are never exactly the same twice; but the processes which bring them about can be very much alike. The second specific aspect of the business which influences our approach is its expansion into new territory. We see knowledge management as a tool for opening up new markets in the 'knowledge space' adjacent to the consultancy's current business, new markets where we can add ever more value.
The key link between these two demands on knowledge management in PSO is the way in which knowledge management helps the consultants. The consultants are both the primary generators and primary users of the knowledge in the organisation. Every attempt to manage knowledge needs to reflect the fact that however much it may help elsewhere, the flow of knowledge begins with these people when they develop it and ends with them when they use it. It shapes their work and their lives, and that means that they need to see knowledge management as an enabler for their own personal goals.
Given the culture of HP, there is a problem here; engineers, and those suffused in an engineering culture, hate solving the same problem the same way twice. It might seem that the purpose of our knowledge management programs is to enforce them to do exactly that, setting out cookie cutter solutions from pre-defined components. And as long as the implementation of knowledge management procedures such as detailed proposal breakdowns and diagnostic processes seem to be doing that, there will be a barrier to their acceptance.
One of our greatest successes in knowledge management has been to overcome this view by creating an approach to work that encourages the consultants to see the knowledge management tools that offer repeatable solutions as aids to their own development. All our consultants want careers that progress, and knowledge management allows them the ability to move beyond their previous experience with greater speed and effectiveness than has previously been possible.
Navigating the Knowledge Space.
This is where the image of the 'knowledge space' comes into its own. How you define it doesn't really matter; all that matters is that it is big and getting bigger, thanks to the efforts of the people working at its edges. How do those people get to the edges? From the middle; most people come to PSO with a smaller set of skills than the one they end up with, and often start off with more nuts-and-bolts technical knowledge. That puts them at the centre of the knowledge space, in its most well-travelled, smooth-trodden precincts.
The organisation benefits most from work at the edges of the knowledge space, both in terms of the value it adds and the new potential business it opens up. So the need is to get people from the centre to the periphery quickly and easily - in practical terms, to go from UNIX skills to networking skills to network systems management expertise to IT management. This progression fits nicely with the consultants' own goals of improving their skills and their competence. And it offers them the opportunity to solve new problems, which is their main non-financial motivator.
I see knowledge management in the PSO as the art of keeping the knowledge space smooth, well mapped, and easily travelled. This means realising that it is not enough just to know things; we must also know what we know and know how we know it. If knowledge is well managed in these ways it is easier for the consultants to travel from the centre outwards and to reach the edges where they can make the most useful contributions. The idea of constant movement has appeal on many levels and makes people more willing to document and transmit knowledge. If someone's career is static, then getting him to document his processes closely can make him feel as if he's just preparing the ground for his replacement. If people accept that they are constantly moving on, the feeling that they are helping their replacement is no bad thing. The idea is to move from what you know, to what other people know, to what nobody knows - yet.
We pave the well travelled parts of the knowledge space with well understood processes. Among the principle paving stones are assignment summaries and the detailed comparison of proposals with proposals already implemented. This last was an idea developed in the PSO's German practice, a nice example of how the centralised structure of the company allows good ideas to develop in one place and then migrate horizontally to others. Imitation with improvement is one of the aims of the knowledge management process - it's only fair that some of the knowledge management techniques should be developed in exactly the same way.
Facilitating the sideways movement of the consultants towards new areas of knowledge is helped by disaggregating the management tasks that apply to the staff. Our workers have project managers, skills managers and community managers. The project manager's task is obvious. The skills manager is a sort of guru, the deepest part of a pool of knowledge. The community manager pays you, feeds you and helps you develop your career. The community manager encourages staff to areas where there is likely to be growth. Breaking up the direct relationship between our consultants and their specific assigned accounts so that we can grow specialists in various knowledge disciplines has the effect of allowing leading-edge skills learned in one particular account to be spread throughout the knowledge space. Again, the idea is to make it easy to move towards the frontiers, rather than being tied to one task structure or skill set forever.
Exploring the already scouted but not thoroughly mapped parts of the knowledge space is something that requires the transmission of knowledge in ways for which a precise formula cannot be found. One technique for this is the creation of a relationship between a more junior staff member and a more senior one with relevant experience but no direct authority for the project in question - someone who can advise disinterestedly, and who can be approached without the fears that go with showing ignorance or even ineptitude to the boss. Mistakes generate knowledge but not career advancement, so separating the process that detects them from line management can be helpful. It can make people more risk tolerant than they might otherwise be, providing a safety net that encourages novelty without unduly risking business.
Out at the edges of the knowledge space is where things get most exciting. One of our aims at PSO is to find ways to bring the business needs of our clients - particularly anticipated needs - together with the extraordinary reserves of knowledge throughout the rest of Hewlett-Packard, especially in its laboratories. It is here, we think, that we can make the biggest difference, moving from business solutions to business transformations and the creation of new markets. By bringing new types of solution into being and leading the market in their implementation we increase both the market as a whole and our own share of it. For example, using this process we have pioneered the development of highly secure environments on the Internet, without which true electronic commerce would not be possible, and we are currently in detailed discussions with major clients regarding ideas which will essentially re-define their entire market for the next decade or so. With the market engagement that comes from the nature of consultancy, a little innovation and a great deal of replicability we can homestead more and more knowledge space while also continuing to grow along the frontiers. And what applies to PSO today will, I hope, become embedded in the culture of all Hewlett-Packard tomorrow.
Sharing or managing?
In the past dozen years, as Knowledge Management (KM) has gained ground as a business discipline, there has been a natural evolution in the way it's understood by KM practitioners. Since the beginning, though, there has been a recurring argument about the name itself. Since it is such an intangible, is "knowledge" really something that can be "managed?"
It is a good question which can enter into a considerable quantity of interesting minor questions about the nature of an innovation and value of ideas. Patents, for example, are only documents. We can manage accessible library. But we can manage process by which ideas behind those patents have been developed?
It may also be that in a business context, managing knowledge is missing the point. The goal should be finding a way to tap into the collective minds of the worker population. Capturing and codifying that knowledge seems an excellent idea at first, but leads to other problems. The more aggressive knowledge capturing programs are the more daunting and un-navigable the resulting knowledge base becomes.
The knowledge is unique, in which you can give it and keep it at the same time. However, it is well registered, that some people resist to idea to tell that they know to other people or (even more so) to corporate repositories of knowledge. It - "knowledge is the power" a problem.
Some companies have therefore taken various prospects on a problem, lowering the concept of a collection and codification in favor of knowledge "sharing". It is simple change, but one that has an important philosophical implication. When a person shares something, there is no transfer of ownership implied.
FOUNDATIONS FOR KNOWLEDGE MANAGEMENT AT HP.
Lew Platt, former HP CEO, generally gets credit for one of the most widely quoted catch phrases in Knowledge Management: "If only HP knew what HP knows." That nugget of insight alone would earn the company a place in KM history; its belief in the value of collaboration has very deep roots. HP's KM practices have been the inspiration for many articles and books, and the company has made serious investments in both tools and techniques to promote knowledge sharing. Its work in this area includes traditional repository-style knowledge bases, but also features elements such as open-plan offices that eliminate eye-level partitions in order to increase human interaction and knowledge sharing.1
HP has a long-standing cultural commitment to intelligent risk-taking, and credits this culture with the speed with which it's able to bring products to market.2
Even so, it is not immune to the "asking problem:" whatever the culture, people can be reluctant to ask questions for fear of revealing their own ignorance. In recent years, this has led HP's KM efforts to focus more on "connection than collection," since people are more likely to ask questions of those with whom they have an established relationship.3
As might be expected, HP's KM program is both broad and deep. Its fundamental view is non-controversial, suggesting that successful KM relies on three supporting concepts: People, Process and Technology. Each of these is considered a domain within the area of Knowledge Management, and HP has a leader assigned to oversee developments in each area.
KNOWLEDGE MANAGEMENT PHILOSOPHY IN HP.
Since KM became an explicit part of the business scene in the mid 1990s, HP has looked for ways to support its local, often informal sharing tradition with programs that would allow for a broader reach. The company considers its knowledge according to four "types," based on where the knowledge is found and how it is represented. These types are:
- Institutionalized Knowledge - which includes methods and procedures, reusable templates, standard sales and/or delivery materials and formal knowledge repositories.
- Proven Practice - which includes "Knowledge Briefs" (background documents on various topics prepared by Subject Matter Experts), as well as reusable code and sample documents.
- Community Knowledge - which includes distribution lists, informal on-line discussion forums and web-based presentations.
- Personal Knowledge - which describes what is generally referred to as "tacit" knowledge, the information that is held by individual employees and Subject Matter Experts.
HP ultimately sees the value of KM in the company's increased ability to deliver value for its clients, by the intelligent application of the company's collective understanding. It refers to this as the "Engagement KM Initiative," a concept that's illustrated in Figure 2. This model is intended to increase the company's win rates, drive down sales and delivery costs and increase engagement quality. The goals are to increase revenue, profitability, quality and customer satisfaction by:
- Promoting the reuse of both materials and expertise, and leveraging existing knowledge and experience.
- Avoiding redundant work efforts (as well as "making the same mistakes twice").
- Promoting standard, repeatable service offerings by providing methods, tools, templates, examples and information which can streamline both sales and delivery.
- Communicating important information quickly, so as to stimulate innovation and growth.
The HP program includes specific initiatives to support project teams (by promoting collaborative workspaces), create Knowledge Briefs (by encouraging their development and supporting repositories for their storage and retrieval), sponsor Communities of Practice, manage general project repositories and document libraries and otherwise provide a platform for effective KM.
As the saying goes, you could write a book about how KM works at HP; the goal of this paper is only to address a single element of the knowledge portfolio. It will describe the company's Knowledge Advisor program, which has been designed to provide a human interface for its other KM tools.
KNOWLEDGE ADVISOR RESPONSIBILITIES.
The function of a Knowledge Advisor is interpreted with some variations in different geographies, as shown by the job descriptions that are included as an attachment to this report. In summary, though, the advisors are responsible for four activities:
- Helping users search for information, especially when the requester is outside the HP firewall.
- Maintaining awareness of all types of collateral, such as proposals, references, information about HP solutions and partners, new product developments, project information, etc.
- Making people and community connections, so that experts can be leveraged for maximum effect.
- Training general users in the use of KM tools, including installation, artifact submission, search techniques and general maintenance.
In a typical day, the advisors will be involved in monitoring the shared K-Advisor mailbox, logging calls and queries at the K-Advisor website, answering new queries and conferring with their colleagues on open queries. If an individual K-Advisor is overloaded, he or she will call upon other K-Advisors for support, primarily within his or her own region. The mix of tasks varies depending on the seniority of the individual advisor. Junior advisors tend to be more reactive, and focus on responding to incoming queries. Senior advisors are more proactive, and will reach out to project teams, perform training and conduct surveys to monitor the satisfaction of their internal "customers." Senior advisors are also responsible for monitoring the quality of submissions to knowledge repositories, and will check on the usability and completeness of project profiles. (Their assessments in this area feed an overall KM program metric, based on the number of project profiles created.)
Advisors field questions from end-users (who are typically field workers and consultants), and questions are generally asked via email or telephone. Email is the most popular vehicle, since it's the technology that most easily transcends time zone issues. For K-Advisors who reside in HP offices, there's also a certain degree of walk-in business.
The advisors have a secure, dedicated website (called, simply enough, K-Advisor) which provides its own mechanism for submitting a query via email. All queries are routed to a common K-Advisor mailbox, and those submitted via the website are tagged with the end user's country or region.4
Each submitter receives an automated reply, which promises a response (although not necessarily an answer) within 24 hours. Messages marked urgent are given priority and handled as quickly as possible. There is no formal mechanism for marking a request urgent, but users generally indicate urgency either in their subject line or in the body of the message itself.
The program operates within normal business hours in each geography. However, since the K-Advisors are distributed around the world, they can theoretically respond around the clock. Advisors are primarily responsible for answering queries within their own geographies, but are encouraged to respond to anything, especially if an urgent query is received after business hours in its home region.
Depending on the type of question, responses are most commonly provided via email or telephone. For things that are more involved, NetMeeting may be used to establish the return connection. Queries of this type are referred to as "consultancies" and are not counted in the normal call metrics. The same is true for requests to assist in developing a CoP or selecting a collaboration technology. The Knowledge Advisors have regular, informal calls to keep in touch. As already mentioned, if a query cannot be addressed locally, a "peer check" is initiated, and the query is forwarded to other regions.
The K-Advisors use standard communications tools for keeping the rest of HP aware of their existence. This includes posters, regular emails and the promotion of the service at local business meetings. The advisors also look for coverage in HP newsletters, both local and global. Former Knowledge Advisor Marko Kiiski feels the in-person experience of local meetings goes a long way toward building trust and gaining recognition, by "connecting the name to a face."5
The leaders of the program have recently realized that taking it to a broader audience will require some more aggressive sales work. The "customers" of the K-Advisor service are generally more than satisfied, but there are also a lot of "non-customers" to be converted and new markets to open.
With that in mind, the advisors sent out 8,700 mailers in December 2005, each of which included a laptop sticker advertising the program, providing the intranet address and including a place for people to add the phone number of their local advisor. After the stickers were distributed, there was a significant increase in the number of Knowledge Advisor calls received. In January, calls in the Americas were up 240%, while APJ calls were up 58%, and EMEA calls were up 53%, for a worldwide increase of 73% overall.
Other than this recent effort, the advisors get the word out through multiple channels. The program is mentioned in general KM training (used by all consultants). A Knowledge Advisor is generally present during new project kick-off calls. The advisors also conduct ad-hoc and scheduled employee surveys; the latter are targeted at 300 people several times a year, with a new population selected each time.
METRICS AND MEASUREMENT.
HP has begun the incorporation of an explicit KM component in employee performance reviews, but this has not yet been implemented consistently. However, the regional VPs have set specific KM goals for their regions.
HP has also begun experimenting with a pilot recognition program based on points, rather than cash rewards. The point system recognizes employees who display KM behaviors (sharing, re-use, etc.), and recognition takes the form of posting the employees' names and ranks (according to points) on an intranet site. The by-product is that within this context, people can also be asked to rate any explicit materials that were involved, which helps the KM team determine the value of existing materials.
For the K-Advisor program specifically, the metrics are what would be expected given its Help Desk antecedents: number of queries logged, time to resolution, number of outstanding queries, etc.
Supply Chain Management in HP.
Introduction to Supply chain management.
Supply chain management integrates the supplier, distributor, and customer logistics requirements into one cohesive process. The supply chain is a collection of physical entities such as manufacturing plants, distribution centers, conveyances, retail outlets, people, and information, which are linked through consumption. Supply chain management has been recognized as an important business element due to the fact that decreased time, as well as cost to the customer, will greatly contribute to their competitiveness within their perspective industry.
Supply chain management reduces product costs through the elimination of unnecessary steps and adds value to the customer service function by more closely managing the coordination among logistics providers and customers. It is primarily concerned with managing the company's integration with transportation and information providers as it defines and drives the requirements for both.
The ultimate purpose of supply chain management is to increase customer value while maintaining competitive prices. It is mostly concentrated on material and product sourcing, vendor evaluation, and purchasing.
- Garfield, Stan. Interview, 17 Nov 2005.
- Garfield, Stan. On-Line Discussion, AOK Star Series, January - February 2006.
- Haghi, Gita. Interview, 12 Jan 2006.
- Kiiski, Marko. Interview, 21 Dec 2005.
- Skyrme, David, Knowledge Management: Making Sense of an Oxymoron, 2003
- Sveiby, Karl-Erik, What is Knowledge Management? April 2001