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SWOT analysis of HP

Ovidijus Jurevicius | 16.02.2013

This is Hewlett-Packard Company SWOT analysis in 2013. For more information on how to do a SWOT analysis please refer to our article.

Company Background

Name Hewlett-Packard Company
Logo Hewlett-Packard Company logo
Industries served Computer hardware and software, IT services and consulting
Geographic areas served Worldwide
Headquarters U.S.
Current CEO Meg Whitman
Revenue $ 120.357 billion (2012)
Profit $ -12.650 billion (2012)
Employees 331,800 (2012)
Main Competitors Apple Inc., Cisco Systems, Inc., Dell Inc., Fujitsu Limited, International Business Machines Corporation, Lenovo Group Limited, Microsoft Corporation, Oracle Corporation, Samsung Electronics Co., Sony Corporation and many others.

You can find more information about the business in its official website or Wikipedia’s article.

SWOT

HP SWOT analysis 2013

Strengths

Weaknesses

  1. Strong presence in China
  2. Brand reputation
  3. Diversified product portfolio

Weaknesses

  1. Poor competency in acquisitions
  2. 29% of income comes from personal systems division
  3. Poor presence in tablet market

Opportunities

Threats

  1. Expand services and enterprise solutions divisions
  2. Increasing demand of cloud based services
  3. Acquisition of more technology related patents

Threats

  1. Retaliation by incumbent firms in software services
  2. Slowing growth rate of the PC market
  3. Rapid technological change

Strengths

  1. Strong presence in China. The economy of China has been growing at a steady more than 8% rate every year. The growing economy accelerates corporate spending and HP is well positioned to benefit from it. The company has increased its investments in the market and expanded product and service offerings, especially its enterprise business and services divisions. These divisions offer the most profitable HP’s products, including cloud computing services and enterprise solutions. Strategic expansion into Chinese market may result in a strong competitive advantage for the business in the near future.
  2. Brand reputation. HP is the world’s leading PC vendor with more than 15% market share. It is also one of the major providers of service network products. The company has a significant market reach all over the world in nearly all of the markets it operates. This has resulted in a strong brand reputation. According to Interbrand, HP’s brand was value at $26 billion in 2012 and was among top 15 most valuable brands in the world.
  3. Diversified product portfolio. Although slowly, HP has been diversifying its product portfolio and moving from its main Personal Systems business to more profitable and lucrative enterprise solutions and services business. The company now offers thousands of different products and services. In addition, its product portfolio is more diversified than competitors’ portfolios, which make HP less susceptible to changes in the different industries and markets.

Weaknesses

  1. Poor competency in acquisitions. Over the last 10 years, HP has acquired at least 50 technology companies. Some of the acquisitions added new skills, products and increased business’ revenues but the rest acquisitions were either of no value or even detrimental to the company. Most notably, Autonomy Corporation, which was acquired for $11 billion and was a complete failure. HP bought a highly overvalued company and had to write down $8.8 billion value of its books. This acquisition has revealed how incompetent HP was when acquiring the company. No other HP competitor has experienced such an acquisition failure in the decade.
  2. 29% of income comes from personal systems division. HP still heavily depends on sales from PC, especially laptops. The market for PC has matured and is expected to grow very slowly or even decline after a few years. Combining this with ever decreasing margins on computer hardware products, HP’s largest Personal Systems division becomes a weakness for the company.
  3. Poor presence in the tablet market. The tablet market has been growing and is expected to grow in double digits over the next few years. Most of other technology businesses have successfully introduced their products in the tablet market and have enjoyed huge income and profit growth. Although HP had its TouchPad tablet model and later introduced its Slate series tablets into the market, the company has failed to offer an attractive product for consumers. As a result, the business experiences losses and is unable to compete successfully in this lucrative market with companies like Samsung and Apple.

Opportunities

  1. Expand services and enterprise solutions divisions. HP provides various services (cloud, security and infrastructure) and enterprise solutions (servers, networking and storage), which are the most profitable HP’s businesses at the moment. The company should focus on growing these divisions as they promise better growth opportunities and higher profit margins.
  2. Increasing demand of cloud based services. The cloud computing market is expected to grow by an average of 22% each year from 2011 to 2020. By 2020, the market is expected to reach $240 billion value. Currently, HP is offering many services related with cloud computing and is well positioned to benefit from the growing market.
  3. Acquisition of more technology related patents. R&D is expensive to engage in and the best alternative to that is to acquire patents from other companies in the market. HP has a lot of free cash that could be used to acquire companies holding the necessary technology patents. With strengthened patent portfolio, HP would be able to compete with the rival firms in the table market.

Threats

  1. Retaliation by incumbent firms in software services. Profit margins are high in the market of enterprise software solutions and HP might face stronger than expected competition from incumbent firms such as Oracle or IBM.
  2. Slowing growth rate of the laptop market. Growth rate of the computer market is slowing down and in the near future the markets will become saturated. The company faces intense competition from rivals like Acers, Apple, Dell, Lenovo or Samsung in terms of price, quality, brand, technology, distribution channels and range of products. Besides, customer needs are changing and now customers are keener to buy tablets or smartphones than new laptops. Therefore, it will prove hard for HP to compete in personal computers market and continue to grow its market share.
  3. Rapid technological change. The serious threat that HP and the other tech companies are facing is a rapid technological change. Companies are under the pressure to release the new products faster and faster. The one that cannot keep up with the competition soon fails. This is especially threatening for HP as the company is already behind its rivals in terms of quality, price and technological advancement of some of the products.