A PEST/PESTLE/PESTEL analysis of HP
HP is one of the largest PC brands in the world. However, the rise of cloud computing and mobile computing has imposed new demands on the PC industry. In light of the changing Market dynamics, the PC maker underwent a major restructuring and broke itself into two separate divisions- HP and HPE. This leaner structure is aimed to bring operational efficiency and help the enterprise react faster to the market situations. HP is the division that sells PCs and printers. Globally, the PC market took a major hit during the past few years. This sales decline has affected HP which has tried to respond through product ad design innovations. It is an era of mobility and technological efficiency. PC maker brands would have to focus on the new demands to stay competitive. However, there are several forces in the industry that affect the business of PC brands like HP. This is a PESTEL analysis evaluating how HP is affected by those various forces.
The political environment throughout the various nations and globally has some deep effect on businesses of PC brands like HP. For such companies which have their distribution systems and supply chain located globally, the political environment in various nations and its stability matters. The more stable the political environment the better it is for the supply chain and distribution system to operate. Political turmoil leads to disruption in the supply chain and distribution systems. The markets where political turmoil is regular, economic instability can lead to lower sales and profits. There are other political factors too like the unfair targeting of US businesses in Europe.
In the recent years several large US technology brands like Google and Amazon have been targeted unfairly by the EU which imposed large fines on them. Such unfair targeting does not just lead to financial losses but can also lead to a drop in the market share. In the Asian markets while the political situation is generally peaceful but the red tape in the main Asian markets like India and China is a potential cause for trouble. Moreover, due to the international nature of HP’s business any policies adopted by the various nations that favor the domestic brands over the foreign brands can be harmful for HP’s business health. Terrorist actions, conflicts, wars and other geopolitical uncertainties too have the potential to disrupt HP’s business and harm its revenue and stock price.
Economic factors are always an important force affecting businesses globally. In case of the big technology brands like HP that operate in the international market, these factors grow even important. The recession is past and since then the rate of employment and consumer spending has increased globally. However, that does not mean that the world has been past its economic troubles. Economic uncertainty and fluctuations still prevail in several of the markets globally. HP’s exposure to such uncertainty gives rise to potential risks. ‘Brexit’ gave rise to significant volatility in currency exchange rates. Strengthening of the dollar against any foreign currency gives rise to risks and leads to decline in revenue.
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. Its competitors continue to target it aggressively in several markets. HP also faces aggressive price competition and it could require it to continue lowering its prices in future in order to remain competitive. Apart from these, HP’s business also faces significant macroeconomic challenges. Economic weakness across several geographic regions in Europe and Asia is already creating difficulties. Thus, these economic factors have a very deep impact on HP’s business and financial performance. The impact doubles due to the international nature of its business.
The impact of the social factors is both direct and indirect for businesses. The effect of the socio-cultural factors is a very important factor due to which the companies have to formulate separate marketing strategies for separate markets. The social trends also have the ability to impact the sales of particular products. Mobile computing has caught on and more and more people are now using mobile devices like tablets and large screen smart phones which has led to a decline in the sales of the PC and laptops. 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. The same strategy does not work in all the societies or cultures. People are buying only the products that are great in quality and offer portability plus efficiency. Apart from quality and technological efficiency design is also important. It is why the sale of detachables and gaming laptops that are just as great in looks as in performance is on the rise. These factors make it important to consider the changing preferences of the consumers before designing or releasing new products.
HP is a technology company and nothing is possible for it without technological innovation. Innovation also becomes important because of the heavy competition. Innovation is a key element in HP’s culture and whether HP or HPE focus is on innovation to stay competitive. The technology industry is competition intense and no brand would exist against the intense competition without innovating. HP also invests a lot in Research and development. Since 2014 continuously it has invested more than a billion in just research and development. Its HP labs together with several of the research and development groups within its business segments, is responsible for research and development. In this era of continuous change, new technology arrives and grows outdated over a fortnight. Every company is focusing on aggressive innovation. HP has focused on bringing high performance computing machines and printers. Apart from general computing machines, it also makes gaming machines.
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. It is trying to shift its business model, towards a circular and low carbon economy and for this reason it continues to invest in diverse areas where it can better manage its environmental impact and contribute to environmental awareness. In 2016, HP collected and recycled more than 720 tonnes of end of service of product that its manufacturing partner in Brazil generated.
HP’s business is subject to several federal state, 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. Apart from the common laws related to businesses, taxation, intellectual property laws, labor laws and environmental laws also affect HP. Being unable to comply with any of these laws can be costly. Litigations are inherently unpredictable and so are the costs related to compliance. Thus, legal risks are also a major factor in HP’s business environment and cause some major liabilities and expenses for the company.
HP Form 10 K 2016