Management, Organization, Teamwork and Communication - Hewlett Packard Company

Management, Organization, Teamwork and Communicaiton

Hewlett-Packard Company

Prepared by: Chris Gilbert

Due Date: December 17, 2011

Executive Summary

Hewlett-Packard Company is a one of the largest multination companies in the world today (11 in the Fortune 500 as of 2011) and operates in the computer hardware, software and information technology industry. The company is currently headquartered in Palo Alto, California the same town in which it was established by Bill Hewlett and Dave Packard in 1939, starting in a one car garage. Hewlett-Packard provides provides computer hardware, software, IT products, technoligies and services to a wide variety of consumer, business and government clientelle. The company's identity was defined during the first four decades by the "HP Way" a series of corporate objectives and values which shaped the management and organization strategies as a whole.

Industry Performance and Competition

The main competition for Hewlett-Packard Co. (HPQ) over the past twenty five years has Apple, Inc. (AAPL), IBM (International Business Machines) and the now defunct (and ironically part of HPQ) Digital Equipment Corporation in the computer industry. Reviewing a 25 year period from 1985 through the present day HPQ stock appears to have outperformed Apple, IBM, the Dow Jones Industrial Average, Nasdaq and the S&P 500 through April 2011 when Apple began bypassed HP.

In order to analyze the profits of HPQ to the competition it is necessary to calculate the Economic Value Added (EVA) to determine the competitive situation. Utilizing a Beta of 1.36 (Yahoo), a HPQ operating margin of 6.1% (10 year average from Morningstar) and an average stock exchange profit of 8% the following calculation is used:

EVA = 6.10% - 1.36 * 8% = -4.78%

An EVA of -4.78 % places HPQ in a perfect competition scenario with the competition. However a review of Apple and IBM's EVA's reveal a different situation.

Apple: EVA = 15.32% (Morningstar) - 0.82 (Yahoo) * 8% = 8.76%

IBM: EVA = 13.04% (Morningstar) - 0.41 (Yahoo) * 8% = 9.76%

These quick calculations show that both Apple and IBM are strong oligopolies which are creating stock value while HPQ is losing stock value. This proves that while HPQ may be profitable it is not as profitable as either Apple Inc. or IBM. Because Digital was acquired by Compaq in 1998 and Compaq merged with HPQ in 2002 EVA calculations on Digital would not provide any insight into their competitive standing.

HP's profitability during this time was affected by mergers and acquisitions (Compaq, 3Com, Palm and 3Par as examples) have diminished the company's profitability while making it one of the largest (and most profitable) corporations in the world today. HP has created more annual revenue than either Apple or IBM over the ten year average period.

Growth and Innovation

HPQ's average revenue growth for the past ten years calculates to 11.29%, which while very good and outgrowing IBM (1.41%) does not come close to Apple Inc's 36.51% during the same timeframe. The popularity of Apple's iPhone, iPad and iPod are closely tied to their increased growth over the past ten years. HPQ's growth has been tied closely to the mergers and acquisitions it has made during the ten year period rather than the innovative products introduced by Apple during this same time period.

Resources

HPQ has a ten year average Price/Book valuation of 2.8, slightly more than the S&P 500 average of 2.0. Based on this value it is inferred that while HPQ has a higher Intellectual Capital than the S&P 500, they have grown more through use of Physical Capital. Apple on the other hand has a Price/Book valuation of 6.2 and IBM's value is 6.8, showing more intellectual capital in both Apple and IBM.

Management and Organizational Strategies

The case study reviewed the first few years of Lew Platt's tenure as CEO. In 1992 when Mr. Platt was brought into the CEO position he was put into a position where the corporation had gotten away from the "HP Way" a well-defined set of corporate objectives and organizational values which had laid out the framework for the HP corporate structure. The HP Way had produced consistent growth and stability during the first forty years of the company's existence and was continuing to produce outstanding growth and profits into the early 1990's.

HP's corporate structure included a highly decentralized organizational structure, with numerous