MARKETING STRATEGIES AUDIT ON HEWLETT

PACKARD (HP)

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Table of Content

Table of Content....................................................................................................................................ii
PART 1....................................................................................................................................................1
1.0 Executive Summary......................................................................................................................1
2.0 Introduction.................................................................................................................................1
3.0 HP Environment Analysis.............................................................................................................2
3.1 Political:.......................................................................................................................................2
3.2 Economic:....................................................................................................................................2
3.3 Social:..........................................................................................................................................3
3.4 Technological:..............................................................................................................................3
3.5 Environmental:............................................................................................................................3
3.6 Legal:............................................................................................................................................4
4.0 Evaluation of HP Current Marketing Strategy..............................................................................4
4.1 Market Orientation Strategy........................................................................................................4
4.2 Partner Engagement Strategy......................................................................................................4
4.3 Product Segmentation Strategy...................................................................................................5
4.4 Social Media Platform Strategy....................................................................................................5
5.0 Analysis of HP Competitive Advantage........................................................................................5
PART 2..................................................................................................................................................11
6.0 Segmentation Targeting and Positioning of HP Laptop Computers............................................11
6.1 Market Segmentation................................................................................................................11
6.2 Customers Target.......................................................................................................................12
6.3 Laptop Computers Positioning...................................................................................................13
7.0 HP Laptop Computers Marketing Objectives and Goals.............................................................13
8.0 HP Marketing Mix Strategies......................................................................................................14
8.1 Product Strategy........................................................................................................................14
8.2 Place/Distribution Strategy........................................................................................................14
8.3 Pricing Strategy..........................................................................................................................14
8.4 Promotion Strategy....................................................................................................................14
9.0 Conclusion.................................................................................................................................15
References.......................................................................................................................................16

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PART 1

1.0 Executive Summary

The key objective of this marketing audit report is to layout the overall marketing strategy of

Hewlett Packard (HP). The results this report is based on a comprehensive marketing audit of

the company. The marketing audit is undertaken by evaluating the firm’s environment

analysis using data obtained from their website as well as other published data about the

company. The current marketing strategies are also evaluated in this report (Graham, 2008).

Additionally, the firm’s competitive advantage is analysed using SWOT analysis. Further,

laptop computers as a single brand of the firm is also evaluated including its STP as well as

their product mix which are analysed using the organization 4 P’s.

2.0 Introduction

Hewlett Packard (HP) is an American firm specializing in providing information technology

(IT) products, software, solutions and services. Laptop computers are the most common

products produces by HP company (Nagali ET.AL, 2008). HP customer portfolio extends in

almost every country in the world and ranges from individuals to small, medium and large

enterprises. The company also offers a set of managed services by providing a section of

broader infrastructure services for smaller discrete engagements. HP conducts its business

operations in more than 170 countries in America, Europe, Asia, Africa and Latin America

regions. HP headquarters are situated in Palo Alto, California, USA. Therefore, this report

provides a comprehensive audit of HP current marketing strategies including its

environmental analysis as well as its market position. The focus of this audit report will entail

analysing the company’s environment using PASTEL analysis, evaluation of the company’s

current marketing strategies and analysing HP competitive advantage using SWOT analysis.

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3.0 HP Environment Analysis

The environmental analysis of HP can be analysed using PESTEL analysis. In this case,

PESTEL stands for - Political, Economic, Social, Technological, Environmental & Legal

factors that impact the macro environment of HP (Yüksel, 2012). Changes in the macro-

environment factors can have a direct impact on not only the HP Inc. but also can impact

other players in the Diversified Computer Systems.

3.1 Political:

Hewlett-Packard operate in more than 170 countries. The political environment throughout

the various nations and globally has some deep effect on HP laptop business. One of the

notable political factor likely to affect HP operation is the likelihood that political forces will

cause drastic changes in a country's business environment which may in turn affect HP

operations greatly. Additionally, HP as a multinational firm is very likely to be affected by

various regulations imposed by government of the countries in which they operate (Vogel,

008). Such legislations which are likely to impact HP operations is changes in taxation laws,

changes in import laws as well as changes in various legislations regarding protection and

maintenance of the environment.

3.2 Economic:

Economic factors are always an important force affecting businesses globally (Dunning,

2013). Economic uncertainty and fluctuations are the most notable economic factors likely to

affect the operations of HP in the global market. HP’s exposure to such uncertainty gives rise

to potential risks. Moreover, demand volatility and currency variations also result in losses

from hedging activities. HP operates in a highly competitive industry and the intense level of

competition can result in financial losses. Apart from these, HP’s business also faces

significant macroeconomic challenges.

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3.3 Social:

The impact of the social factors is both direct and indirect for businesses in the international

market. The social trends also have the ability to impact the sales of particular laptops

products. Apart from sales in terms of marketing too the effect of the socio-cultural forces is

very deep. Brands have to localize their marketing campaigns to sell in various cultures

(Ellis, 2011). The same strategy does not work in all the societies or cultures. Apart from

quality and technological efficiency design is also important. These factors make it important

to consider the changing preferences of the consumers before designing or releasing new

products.

3.4 Technological:

HP is a technology company and nothing is possible for it without technological innovation.

Innovation also becomes important because of the heavy competition. The technology

industry is competition intense and no brand would exist against the intense competition

without innovating (Dunning, 2013). HP also invests a lot in Research and development. In

this era of continuous change, new technology arrives and grows outdated over a fortnight.

HP has focused on bringing high performance computing machines and printers. Apart from

general computing machines, it also makes gaming machines.

3.5 Environmental:

Sustainability has become an important focus area for businesses in the twenty first century

and even for those which have low environmental impact. HP has also made efforts to

eliminate waste and to manage the environmental impact of its supply chains. It provides its

suppliers with guidance for improving water management. In 2016, HP collected and

recycled more than 720 tonnes of end of service of product that its manufacturing partner in

Brazil generated.

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3.6 Legal:

HP’s business is subject to several federal states, local as well as foreign laws. Becoming

liable under any of these laws in any of the markets can give rise to large fines that can cause

huge financial losses for the technology company (Cavusgil, et.al, 2014). Apart from the

common laws related to businesses, taxation, intellectual property laws, labour laws and

environmental laws also affect HP. Being unable to comply with any of these laws can be

costly. Thus, legal risks are also a major factor in HP’s business environment and cause some

major liabilities and expenses for the company.

4.0 Evaluation of HP Current Marketing Strategy

Hewlett-Packard (HP) operates in an extremely competitive industry against the likes of Dell,

IBM, Salesforce, Cisco and Oracle. The marketing strategies adopted by HP are Market

Strategy Orientation, Partner Engagement, Product Segmentation, and Social Media

Platforms (Lee, & Bradlow, 2011).

4.1 Market Orientation Strategy

According to the HP corporate website as of June 2017, marketing its products as well as

their applications is one key marketing strategy employed by the technological firm.

According to Mike Spanbauer, who is a senior analyst for enterprise networking and data

centre technology, HP employs the strategy to ensure that it competes favourably with other

competitors in the market providing similar technological hardware’s and software’s. This

strategy entails that, HP is providing low-cost solutions for various ICT needs of their

customers from every corner of the globe (Naidoo, 2010).

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4.2 Partner Engagement Strategy

As a marketing strategy, HP ensures that it engages various parties across the globe to

facilitate distribution, and reselling of its products. This strategy has seen HP sign strategic

alliance agreements with more than 145,000 partners across the globe. The partners enroll in

the Partner One program, which is a system designed to reward reseller and channel partners

according to their levels of participation in the company’s chain of marketing activities.

According to the senior analyst Spanbauer, the level of participation between HP and its

partners ranges from technical and sales training to funding of co-marketing activities for

upper level participants.

4.3 Product Segmentation Strategy

Product segmentation is a strategy where HP segments various markets of its products and

sells them in different segmented market. HP acknowledges it draws much of its competitive

edge from product and technological innovations. Such products and technologies include

server systems, personal computers and tablets, and software services (Fisher, & Miller,

2011). These products are organized into four major business segments comprising printing

and personal systems, enterprise group, enterprise systems and software application.

4.4 Social Media Platform Strategy

A look at HPs website shows the company has integrated into it several social media channels

as a key marketing strategy of its products. In an article published on the Marketing Week

website in 2013, Lara O’Reilly notes that HP has a social strategy that seeks to engage

customers through the creation of relevant content. O’Reilly wrote that the social strategy

enables HP to relate its content to issues that are already trending in the social media

platforms (Fisher, & Miller, 2011).

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5.0 Analysis of HP Competitive Advantage

HP is able to achieve and sustain competitive advantage over its competitors in the market in

various ways. First of all, HP is dedicated to simplifying technology experiences for all its

customers (Thompson, et.al, 2008). This is very important since it assists in making virtually

all the HP products usable by the intended users by putting the customers first. Another way

by which the competitive advantage of HP Company is sought over its competitors is through

the firm’s concept of developing cross functional individuals. Unlike other companies that

just hire staffs and train them for a specific job requirement to be assigned to such staffs

throughout their stay in the organization, HP makes sure that all her employees move more

than 4 to six functional areas within the company to allow them to work in more than one

departments of the company and thereby effectively managing the organizational knowledge

through effective sharing among her staffs. The quest for developing employee has always

been the strength of HP company in attaining competitive advantage since this makes the

company to achieve effective organizational change considering the rampant changes in the

business organizations. This makes the company to be able to sustain her competitive

advantage since the employees always continue to be relevant and compliant with the new

trend organizational need and employee are considered important in the performance of every

organization. Another important factor is making HP to have a competitive advantage against

its market rivals is early powered by the real time communication facility. This means that the

company has achieved a lot through effective communication. All these account for achieving

sustainable competitive advantage (Sirmon, et.al,2008).

HP strategic planning and modelling (SPaM) is another factor making the company to have a

competitive advantage over its competitors. The strategic plan sets out more efficient

approach which combines the optimization ability of OR and scenario analysis of the expert

knowledge to arrive at an effective supply chain approach capable of solving complex supply

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chain decision problem for HP's imaging and printing group of company. the earlier the

customers can get the required service the more satisfied they are, the efficient supply chain

of HP has been of the secretes of the company's sustainable competitive advantage (Sirmon,

et.al,2008).

According to (Thompson, et.al, (2008), the ability to predict and manage various market risks

is another factor making HP enjoy an upper hand over its arch rivals in the market. The

procurement management group is formed in HP and they develop and implement

mathematical models, business process and software to estimate and manage risks associated

with international markets. This has brought a lot of benefits. This really maximizes the

company's profits and contributes to the sustainable competitive advantage of the company.

Finally, HP is able to have a competitive advantage over its competitors due to its quality

products than those of its competitors. HP ensures that its products are regularly refined and

rebranded to meet the changing technological needs of the customers. The competitive

advantage HP has over its competitors is illustrated using the following market performance

data for the last few trading years:

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Growth Profitability and Financial Ratios for HP

For the Last Ten Operating Years

10 10 10 10 10 10 10
Revenue USD Mil 118,364 114,552 126,033 127,245 120,357 112,298 56,651 51,463 48,238 52,056 53,889
Gross Margin % 24.2 23.6 23.9 23.4 23.2 23.1 19.8 19.3 18.7 18.4 18.4
Operating Income USD Mil 10,473 10,136 11,479 9,677 -11,057 7,131 4,256 3,920 3,549 3,519 3,636
Operating Margin % 8.8 8.8 9.1 7.6 -9.2 6.4 7.5 7.6 7.4 6.8 6.7
Net Income USD Mil 8,329 7,660 8,761 7,074 -12,650 5,113 5,013 4,554 2,496 2,526 3,853
Earnings Per Share USD 3.25 3.14 3.69 3.32 -6.41 2.62 2.62 2.48 1.43 1.48 2.28
Dividends USD 0.32 0.32 0.32 0.4 0.5 0.55 0.61 0.67 0.49 0.53 0.54
Pay-out Ratio % * 9.8 10.7 8.9 12 22.4 26.9 21.8 37.6 23.6
Shares Mil 2,567 2,437 2,372 2,128 1,974 1,950 1,912 1,836 1,743 1,702 1,689
Book Value Per Share * USD 16.13 17.56 19.29 19.4 11.43 12.89 15.5 14.99 -2.29 -2.63 -1.67
Operating Cash Flow USD Mil 14,591 13,379 11,922 12,639 10,571 11,608 12,333 6,490 3,230 3,677 3,906
Cap Spending USD Mil -2,990 -3,695 -4,133 -4,539 -3,706 -3,199 -3,853 -3,603 -433 -402 -430
Free Cash Flow USD Mil 11,601 9,684 7,789 8,100 6,865 8,409 8,480 2,887 2,797 3,275 3,476
Free Cash Flow Per Share * 4.52 3.83 3.48 3.81 3.48 4.96 4.49 1.61 2.2 1.93

USD
Working Capital USD Mil -1,211 9,536 4,781 579 3,971 4,843 6,410 9,596 -340 -94

Profitability Ratios 2008-10 2009-10 2010- 2011-10 2012- 2013- 2014- 2015- 2016- 2017- TTM

10 10 10 10 10 10 10
Revenue 100 100 100 100 100 100 100 100 100 100 100

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COGS 75.78 76.41 76.05 76.56 76.76 76.92 80.19 80.69 81.35 81.6 81.61
Gross Margin 24.22 23.59 23.95 23.44 23.24 23.08 19.81 19.31 18.65 18.4 18.39
SG&A 11.26 10.14 10.17 10.67 11.22 11.81 9.46 9.06 8.32 8.42 8.41
R&D 2.99 2.46 2.35 2.56 2.82 2.79 2.29 2.31 2.51 2.29 2.3
Other 1.12 2.15 2.32 2.61 18.39 2.12 0.54 0.32 0.47 0.94 0.93
Operating Margin 8.85 8.85 9.11 7.61 -9.19 6.35 7.51 7.62 7.36 6.76 6.75
Net Int Inc & Other -0.63 -0.4 -0.55 -0.73 -0.55 -0.69 -0.75 0.44 -0.47 -0.43
EBT Margin 8.85 8.22 8.71 7.06 -9.91 5.8 6.82 6.86 7.8 6.29 6.32

Liquidity Ratios 2008-10 2009-10 2010- 2011-10 2012- 2013- 2014- 2015- 2016- 2017- Latest Qtr

10 10 10 10 10 10 10
Current Ratio 0.98 1.22 1.1 1.01 1.09 1.11 1.15 1.23 0.98 1 0.91
Quick Ratio 0.67 0.76 0.78 0.58 0.79 0.69 0.83 0.92 0.69 0.68 0.62
Financial Leverage 2.91 2.83 3.07 3.35 4.85 3.88 3.86 3.85
Debt/Equity 0.2 0.34 0.38 0.58 0.97 0.6 0.6 0.78

Efficiency Ratios 2008-10 2009-10 2010- 2011-10 2012- 2013- 2014- 2015- 2016- 2017- TTM

10 10 10 10 10 10 10
Days Sales Outstanding 46.79 53.32 50.71 52.64 52.51 52.46 48.65 48.02 66.12 29.9 26.67
Days Inventory 32.46 29.21 23.92 26.11 27.27 26.12 26.81 29.95 51.02 44.12 42.37
Payables Period 52.89 60.36 55.41 54.48 55.51 57.82 64.37 73.98 125.85 104.75 98.76
Cash Conversion Cycle 26.36 22.16 19.22 24.28 24.28 20.76 11.08 3.99 -8.71 -30.73 -29.73
Receivables Turnover 7.8 6.85 7.2 6.93 6.95 6.96 7.5 7.6 5.52 12.21 13.69
Inventory Turnover 11.24 12.5 15.26 13.98 13.38 13.97 13.62 12.19 7.15 8.27 8.61
Fixed Assets Turnover 12.7 10.37 10.95 10.58 9.93 9.59 9.78 9.22 7.52 28.8 28.69
Asset Turnover 1.17 1 1.05 1 1.01 1.05 1.07 0.98 0.71 1.68 1.7

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10
PART 2

HP has a wide variety of brand portfolio ranging from printers, software products, digital

cameras, scanners, tablet computers, mobile phones, pocket computers, desktop calculators

and computers, business desktops, personal desktops, business notebooks among others. All

these products are specifically designed to suite specific market segment. Therefore, in this

case I am going to discuss and analyse laptop computers which are among the most sought-

after HP products. HP laptop computers mostly target transactional customers who are mainly

college students. The company ensures that they develop cheap but high-quality laptop

machines to meet the needs of these transactional customers who are extremely sensitive to

price matters (Li, & Ellis, 2012).

6.0 Segmentation Targeting and Positioning of HP Laptop Computers.

The formula of segmentation, targeting and positioning is the base for strategic marketing.

Therefore, segmentation targeting and positioning of HP tablet computers consist of three key

steps. These steps are segmenting tablet computer market, targeting potential customers and

positioning of tablet computer. Through STP model, HP is able to identify the most valuable

group of customers for their tablet computers, thus, enabling them to develop laptop

computers and establishing marketing strategies that ideally suits their target customers. This

allows HP to engage their target customers better, thus, enabling them to sell more tablet

computers.

6.1 Market Segmentation

HP products or brand portfolio cannot appeal to all its customers. Therefore, HP uses market

segmentation where it divides its customers into different groups with common

characteristics and needs. This approach allows HP to meet each group need’s cost-effectively

and this gives them a huge advantage against its competitors who employs on size fits all

approach. Normally, HP uses customer segmentation in its market strategy along with the

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product segmentation where it is targeting several market segments and designing separate

products or offers for them. HP usually segments its market based on demographic,

geographic and behavioural segments. Geographically, HP has segmented its market into the

USA, Europe, Asia, Africa, Australia and Latin America market segments where each region

has different pricing and marketing strategies (Dibb, 2010). Demographically, HP ensures

that there is no age, gender, or race bias in marketing their products, but there is a slight bias

in income, occupation and education of customers as these factors play a key role in deciding

the type of products these customers are likely to buy. Additionally, on behavioural aspect,

HP focuses on the benefits sought by consumers when purchasing such as low price and good

quality and service. It also carefully selects customers with relatively predictable purchasing

patterns and low service costs, allowing itself an opportunity to develop a core competence in

targeting and keeping a specific database for target customers.

6.2 Customers Target

HP usually target two classes of customers for their laptop computers brands i.e. relationship

and transactional customer. HP relationship customers for laptop computers include large

organizations, education institutions and government sectors. These relationship customers

provide the largest portion of profit and are therefore supported by dedicated sales

representatives or account managers across all their marketing regions. On the other hand,

transactional customers are those customers who are usually price sensitive who are seek

cheap, reliable and high-quality laptop machines. This customer group mainly consist of

individual customers and especially college students who mostly buys their laptops online. To

obtain stable demand in this segment, HP develops low cost and high reliable laptop

computers tailormade to meet the customer’s needs (Dibb, 2010).

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6.3 Laptop Computers Positioning

HP value proposition to offer equivalent cheap and high-quality laptop computers. As many

large corporations do, HP had to alter its positioning so as to maintain its competitive

advantage as well as its main value proposition than its competitors. Therefore, HP has

positioned itself as a premium laptop computer manufacturer through an easy and convenient

internet-based sales medium and outstanding service (Dibb, 2010). This further growth and

increased advertising has managed to establish HP position in customers' minds and

presented it as an aggressive, value-oriented laptop computers manufacturer. It is clear that

HP flexibility in extending its product segments while maintaining its brand image and

positioning towards its targeted customer segments have enabled the company to maintain

revenue and market share growth.

7.0 HP Laptop Computers Marketing Objectives and Goals

Based on HP SWOT analysis, the following marketing objectives and goals in regards to the

sale of HP laptop computers will be recommended so as to increase the brand awareness,

market share as well as growth in their overall sales volume and profitability. The

recommended marketing objectives and goals for HP in regards to laptop computers include;

to increase the overall market share of laptop computers on the basis of market development;

to focus on more promotional activities in regards to laptop computers; to focus on constant

and positive sales growth each year as opposed to focusing on more laptop sales in a

particular fixed year; to determine the appropriate market through various advertising

campaigns; to increase customer awareness on laptop machines via print media as well as

through electronic media; to enter new laptop market both locally and internationally; and

finally to enhance their customers relationship.

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8.0 HP Marketing Mix Strategies

The appropriate marketing strategies of HP in regards to development and sale of laptop

computers can be understood by analysing its 4 P’s marketing mix strategies.

8.1 Product Strategy

HP's product strategy is aimed at focusing around solving problems, from consumers to

enterprises in regards to their laptop computers (Armstrong, et.al, 2015). Through their laptop

computers products, they help customer's complete tasks, and they make their lives easier.

8.2 Place/Distribution Strategy

HP is the leading company, which sells its laptop computers in markets where similar

products of other rival companies are also sold. Therefore, HP has established various

franchises and outlets to provide their laptop computers. The online sale of their laptop

computers enabling customers to purchase various laptop varieties online.

8.3 Pricing Strategy

HP is the excellent brand name, which has good images among its clients. The price of their

laptop computers sometimes might be little bit higher than other companies, but HP has

maintained good pricing policy and strategy, so that they can provide its laptop computers to

the customers at the reasonable price (Armstrong, et.al, 2015). Such pricing policy can be

benefitted for the customers to meet their demands.

8.4 Promotion Strategy

HP maintains its effective and impressive advertisement policy for the promotion of its laptop

computers (Armstrong, et.al, 2015). It also uses the websites with all necessary information

about its laptop computers. Customers are always advised to visit the HP website to get the

details of every laptop products mentioned there and they can place order of their favourite

laptops.

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9.0 Conclusion

In conclusion, therefore, the aim of this paper was to provides a comprehensive audit of HP

current marketing strategies including as well as its market position. Over the years, HP has

successfully managed to maintain its integrity and brand equity as a provider of quality laptop

computers products reasonable prices. Their strategy of low cost and direct customer

relationship has been and remains the main reason for their continuous success. Therefore, it

will be wise for HP to continue using the same strategies for as long as they are

successful. However, the increasing challenges from competitors such as Dell, Apple and

Samsung brands among others combined with various global changes at international markets

especially the recent economic recession should be an incentive for HP to explore new

horizons on the global market. This can be achieved through expansion of their online sales

channels as well as focusing on new high-tech product segments which has the highest

market demand and which provides more opportunities for revenue growth and continued

market leadership. Maintaining and providing environmental friendly products while

maintaining the core brand value of quality at lower prices should be HP’s priority.

Total Word Count 3,703

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