HP Value Chain Analysis

 Value chain analysis of Hewlett Packard:

Value chain plays a critical role in the productivity of a business. Michael Porter’s value chain model helps managers understand the role of value chain and manage it at each and every stage. From product conception to final sales and after sales service, all the stages are a part of the value chain and managing it strategically helps create superior value. This analysis helps managers grasp how value chain can be optimised to create better value while minimising the costs of production. Moreover, value chain optimisation can also help you improve your supply chain management. This is a value chain analysis of HP. HP is market leading brand of laptops and Personal Computers. It is ahead of all the Personal Computer brands in the market in terms of market share and sales. Its market share in 2017 was 21 percent followed closely by Lenovo which happens to be its biggest competitor.

Primary Activities:

Inbound logistics: –

HP produces a small part of its branded product line and the rest of them are manufactured by outsourced manufacturers (OMs). In some cases, HP just resells the products manufactured by the third party suppliers. Its inventory management and distribution practices have helped HP reduce the inventory holding periods to the minimum.  HP notes in its annual report, “Like other participants in the information technology (“IT”) industry, we ordinarily acquire materials and components through a combination of blanket and scheduled purchase orders to support our demand requirements for periods averaging 90 to 120 days”. Since inventory holding times are small, HP does not keep materials shipped from its suppliers for long. They are shipped soon from its distribution centers to resellers and other customers.

Operation: –

HP is a global brand with operations around the world. Apart from United States, it is liable for income tax in 58 more nations. US is its biggest market. It has several offices worldwide from Africa to Americas, Asia Pacific, Europe and Middle East.

Outbound logistics: –

HP has its brand resellers all over the world and its distribution partners resell its products to its customers all over the globe. HP does not hold its inventory for long. It uses two different methods of fulfilling demand  that include building products to order and configuring products to order. This has helped it maximize manufacturing and logistics efficiencies by producing high volumes of basic product configurations. It takes the  delivery of its products shortly before distributing it to its customers worldwide through its distributors.

Marketing and sales: –

The computing industry has grown highly competitive and this has led to brands investing more in the marketing of their products. HP too invests a  lot in marketing and promotion of its products. It uses both digital and traditional channels for the marketing of its brand. In 2017, it spent 544 million dollars on advertising.

Support Activities:

Procurement:-

Procurement is an important function in the supply chain and HP has outsourced most of its manufacturing to the outside vendors. It has a procurement function to take care of all the procurement. The brand has also entered into procurement contracts with several outside vendors.

Technology:-

HP is a technology brand and deals in technology products as well as uses technology  heavily in its production, supply and marketing functions. It also invests heavily in research and development. For the last three years, its investment in Research & Development has been around 1.2 billion dollars. With growing competition, investment in technological innovation has become essential to remain head of the others.

HRM:-

Skilled human resources are an important requirement for any brand to grow fast in the technology industry. As of 2017, it employed 49000 people. It also spends a lot in the hiring, retention and training of the employees. Since HR management has become critical to the growth of a technology brand, HP has also adopted advanced training programmes for its employees.

Firm Infrastructure:-

Firm infrastructure too plays a critical role in the management of a business and a brand. HP has managed a culture of learning and innovation. HP was divided into two in 2015. HP now handles the computer and printing business. Its business is divided into three segments that include Personal Systems, Printing and Corporate Investments.

According to its 2017 annual report,

“The Personal Systems segment offers Commercial and Consumer personal computers (“PCs”), Workstations, thin clients, Commercial tablets and mobility devices, retail point-of-sale (“POS”) systems, displays and other related accessories, software, support and services for the commercial and consumer markets.

The Printing segment provides Consumer and Commercial printer hardware, Supplies, solutions and services, as well as scanning devices.

Corporate Investments includes HP Labs and certain business incubation projects”.

Sources:

HP Annual Report 2017.

Abhijeet Pratap

I am Abhijeet Pratap, editor of notesmatic. I am an MBA with marketing (major). Apart from writing on various topics in business management, marketing and English literature, I like to read and write about technology.