TEACHING NOTE: SM-125A TN
DATE: 07/14/05
TEACHING NOTE FOR
THE NEW NEW HP IN 2004 (A): LEADING STRATEGIC
INTEGRATION
AND
THE NEW NEW HP IN 2004 (B): WINNING IN THE CORE
BUSINESS
INTRODUCTION
Position in the Book
These two cases conclude the part of the book entitled “Convergence or Collision – Take I:
Computing Meets Cellular Phone and Consumer Electronics.” Both cases look at Hewlett
Packard in 2004 after the company had spent over two years integrating its acquisition of
Compaq. In early 2004, with the organizational integration of the Compaq acquisition mostly
completed, the top management of the new Hewlett Packard was looking toward capitalizing on
the potential competitive advantages of strategic integration to achieve CEO Fiorina’s goal of
becoming the leading technology company in the world. Prior to its merger with Compaq, HP
depended upon profits from its highly successful imaging and printing business to support the
company’s far less successful computer businesses. Two years after the merger, HP still relied
on its printing business (albeit a little less heavily) for most of the company’s profits. But beyond
2004, top management had to make sure that HP would achieve superior profitable growth with
its presumably strengthened portfolio strategy. Fiorina said that HP was a “systems business,”
not just an imaging and printing company, and she thought the merger helped HP become more
competitive in the elements of that system, including imaging and printing, the PC, enterprise
computing and services businesses. Achieving superior profitable growth would require high
performance from its individual businesses in increasingly competitive environments, the
development of new strategic leadership skills to capitalize on opportunities for strategic
integration across the individual businesses, and continued significant innovation to develop
entirely new businesses.
In mid 2004, however, each of HP’s individual core businesses faced significant competitive
challenges in their own external environments, which required intense focus and attention on the
This note was prepared by Professor Robert A. Burgelman for the sole purpose of aiding classroom instructors in the use of The
New New HP in 2004 (A): Leading Strategic Integration, GSB No. SM-125A and The New New HP in 2004 (B): Winning in the
Core Businesses, SM-125B. It provides analysis and questions that are intended to present alternative approaches to deepening
students’ comprehension of the business issues presented in the case and to energize classroom discussion.
Teaching Note for The New New HP (A) and (B) SM-125ATN and SM-125B TN
p. 2
part of the strategic leadership of each of these businesses. Hence, HP’s top management faced
the issue of balancing horizontal (cross-business) and vertical (individual business) strategic
considerations.
Taken together, the two cases offer a comprehensive look at the issues that HP faced in what
turned out to be the final six months of Carly Fiorina’s tenure at Chairman and CEO of HP.
While the (A) case addresses the question how HP can grow profitable and offers the opportunity
to provide a general framework for answering that question, it focuses the discussion primarily
internally on Fiorina’s strategic vision and on how to get HP’s businesses to collaborate. In terms
of the three key themes, the (A) case provides an example of efforts to achieve P-controlled
change; it shows the importance of formulating a clear corporate strategy to align strategic action
throughout the organization; and it raises additional issues about leading corporate
transformation in the face of major industry changes, especially about how to pursue the vertical
and horizontal dimensions of the corporate strategy simultaneously and effectively.
The (B) case, in contrast, focuses on the competitive challenges that the different individual
businesses face in their respective industries. As a result of digitization, however, several of
these industries – e.g., imaging, computing, wireless communications, consumer electronics and
entertainment - are converging (or colliding) and HP, with its broad business portfolio, needs to
be quick to spot and exploit opportunities created by the convergence. Hence, this case offers the
opportunity to relate back to the Intel, Nokia, and Samsung cases discussed earlier in this part of
the book. It offers a lens through which instructors can take a closer look at the strategic
dynamics facing each business, and the three key themes could also be discussed at the level of
each of the businesses. For instance, the Printing and Imaging business has enjoyed a situation of
P-controlled change, but faces new competitive pressures that may drive toward a situation of
limited change. The discussion of the (B) case also allows the instructor to get squarely back into
the issues of “convergence or collision” that that are the central focus of this part of the book.
Overview of the Cases
“The New, New HP in 2004 (A): Leading Strategic Integration” examines the challenges and
opportunities facing HP subsequent to completing and integrating its merger with Compaq, and
the new ways in which HP intends to utilize its post-merger asset base to better compete in the
converging computing, communications, and consumer electronics industries. The case describes
HP’s new “leadership framework” and “operating model” to help the company capitalize on its
scale and scope, to improve its marketing strengths, achieve focused innovation, and a high level
of strategic integration among the core businesses. It also describes Fiorina’s new view on the
role of innovation at HP, which is quite different from the traditional HP way of innovating.
“The New, New HP in 2004 (B): Winning in the Core Business” discusses the competitive
challenges and opportunities HP faces in each of its core businesses: imaging and printing,
computers (consumer and enterprise), and IT services. For each of the businesses, the case
describes in some detail both the competitive strategy of the business and the competitive
strategies of each of its major rivals. This provides some insight in the fairly daunting challenges
each of the businesses faces.
Teaching Note for The New New HP (A) and (B) SM-125ATN and SM-125B TN
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The two cases are written in such a way that they can be used independent of each other.
Instructors who wish to discuss both cases in depth will need to reserve two class sessions to do
so. Instructors who wish to use only one class session can use one or the other case as
background reading. If so, instructors who want to focus on the strategic integration issues can
ask the students to read the (B) case as background and focus the class discussion on the (A)
case. Alternatively, instructors who want to focus on the individual core businesses and the
strategic dynamics of the industry in which they compete may ask students to read the (A) case
as background and focus the class discussion on the (B) case.
MAJOR THEMES
For the (A) Case:
1.
2.
3.
4.
5.
Strategic leadership issues in the corporate transformation process
Corporate-level strategic logic (elements of a multi-business strategy)
Growth vectors for a multi-business corporation
Achieving strategic integration
Managing strategy content and strategy strategy.
For the (B) Case:
1.
2.
3.
4.
Business-level strategic logic (elements of a single business strategy)
How to win in imaging and printing; PCs; enterprise computing, and global services
Competing and collaborating in the new, converged consumer electronics industry
The role of corporate management
ANALYSIS
Preparation Questions for the (A) Case:
1. By 2004, how would you evaluate Fiorina’s performance as HP’s CEO? Why?
2. What was the strategic logic for HP’s acquisition of Compaq? By 2004, how well has the
organizational integration worked?
3. What are the implications of the Compaq acquisition for HP’s corporate strategy and
structure?
4. Beyond 2004, how can HP grow profitably? What are the strategic leadership challenges
associated with the different growth vectors?
5. Going forward in 2004, what is Fiorina’s vision and corporate strategy for HP? How does
the corporate strategy differentiate the company from its major competitors? What will it
take to make it work?
Teaching Note for The New New HP (A) and (B) SM-125ATN and SM-125B TN
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Preparation Questions for the (B) Case:
1. What are the key characteristics of the competitive environment facing HP in 2004?
2. In 2004, what are the strategic challenges that HP’s Imaging and Printing Group (IPG)
faces? How can the business continue to be the industry leader?
3. In 2004, what are the strategic challenges that HP’s Personal Systems Group (PSG)
faces? How can it improve its profitable growth performance?
4. In 2004, what are the strategic challenges facing the HP Services Group (HPS)? How can
it improve its profitable growth performance?
5. In 2004, what are the strategic challenges facing HP’s Enterprise Systems Group (ESG)?
How can it improve its profitable growth performance?
6. Given the diverse strategic challenges facing its different businesses, how can corporate
management help them meet these challenges effectively, and how can the company
create shareholder value that will be higher than the sum of the values of the different
businesses?
(A) Case Discussion
1. By 2004, how would you evaluate Fiorina’s performance as HP’s CEO? Why?
At the beginning of class, the instructor can point out that by 2004, Fiorina has been in the CEO
position for almost 5 years, and her move to acquire and integrate Compaq has been in progress
for about two years. The instructor can ask the students to grade her performance (scale of 1 =
poor to 10 = outstanding). The instructor can then call on a few students (e.g., the ones that gave
the highest and the lowest grades) to discuss why they graded her in the way they did. This is
helpful in getting some of the key strategic issues on the board. It also leads to listing and
describing the specific changes that Fiorina made during her tenure, which sets the stage for
asking why she made these changes.
On the positive side, some of Fiorina’s strengths that students will identify are:
-
-
Communicating easily and competently, especially to the outside world
Bringing a sense of urgency to a fairly slow moving organization
Getting the company back in touch with its core values: “Consensus,” for
instance, had deteriorated into becoming a pretext for avoiding difficult decisions
Forcing a corporate strategic perspective on a fragmented organization with
numerous “silos:” The previous CEO had basically abdicated corporate strategic
responsibilities
Providing incentives for the top team to pursue strategic integration
Bringing a stronger marketing orientation and revitalizing the HP brand
Bringing a broader customer focus - “one face” - to an engineering and productoriented organization
Requiring stronger accountability for performance
…
Teaching Note for The New New HP (A) and (B) SM-125ATN and SM-125B TN
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On the negative side, some of Firorina’s weaknesses that students will identify are:
-
-
Lack of performance as reflected in the stock price of the company
Computer businesses still weakly performing
Failing to understand the deep egalitarian (but still meritocratic) HP culture and
trying to impose on it what might look to many employees as a “personality cult”
Failing to understand that HP is fundamentally a technology/engineering
company and failing to capitalize on that
A lack of understanding of the technological innovation process
Too much emphasis on “marketing:” Form/style dominates substance
Introducing organizational changes as a substitute for providing strategic direction
Floundering: Failing to come up with a clear corporate strategy and moving from
one failed strategic move (attempt to acquire Price Waterhouse Cooper consulting
arm) to another (Compaq acquisition)
…
Note: Sophisticated audiences will raise the question of how deep in the organization Fiorina has
been able to engage the employees. It looks like she has been fairly effective in bringing top and
senior management along, but it is unclear whether she has really been able to connect with and
engage the middle and lower management ranks.
This discussion will also bring out that by 2001, HP had not made much progress and Fiorina then two years into her tenure as CEO - must have been looking for ways to turbo-charge the
change process that she had set in motion in 1999. This leads to the next question.
2. What was the strategic logic for HP’s acquisition of Compaq? By 2004, how well has the
organizational integration worked?
- Strategic logic of the Compaq acquisition.
While the (A) case does not discuss the strategic logic that led to HP deciding to acquire Compaq
(for that discussion, see the Stanford Business School case “HP and Compaq Combined: In
Search of Scale and Scope,” SM-130), it is useful for the instructor to ask the class to articulate
what the strategic logic might have been. Students will probably be divided between those who
believe there was no reasonable strategic logic to justify the Compaq acquisition and some others
who do. Students in the first category will probably argue that HP should have spun off the PC
business instead and focus on its highly profitable printing and imaging business. Those who
believe there was a strategic logic will probably point out that the acquisition was a way to
achieve greater consolidation in the personal system, enterprise system, and IT services market
segments of the computer industry. The framework of Dynamic Forces Driving Company
Evolution can be useful here to indicate how the Compaq acquisition presumably served to
strengthen HP’s product-market position in PCs, servers, and services, as well as how it
presumably strengthened the company’s distinctive competence to leverage these strengthened
product-market positions.
Teaching Note for The New New HP (A) and (B) SM-125ATN and SM-125B TN
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Note: It seems likely, however, that this discussion will not produce a consensus about the
validity of the strategic logic, or lack thereof. So the instructor can leave that discussion for the
time being and ask the class how well HP has managed the organizational integration of the
Compaq acquisition. Here it is likely that the discussion will produce more or less a broad
consensus.
- Effectiveness of organizational integration: Internal perspective.
Most internal participants agree that the organizational integration of the acquisition went very
smoothly. Fiorina worked very hard to put in place a highly capable and respected team of senior
executives and decided to “overgun it.” Overgunning meant spending well over $100 million and
pulling up to 2,500 of HP’s and Compaq’s employees away from their jobs to plan every detail
involved in executing the integration.
Note: Instructors interested in the details of the acquisition integration process may ask the
students to read the Stanford Business School case “HP and Compaq Combined: In Search of
Scale and Scope,” SM-130. Also see the Supplementary Readings at the end of this teaching note
for an article analyzing the strategic dynamics of the HP-Compaq acquisition integration process.
- Effectiveness of organizational integration: External perspective.
Many outsiders also agreed that the integration process had worked smoothly and effectively.
The (A) case, however, also reports that some customers pointed out that organizational
integration was not enough. They worried more about the strategic integration issues and how
the acquisition would affect HP as an innovator and trendsetter in the computer industry.
The preceding discussion sets the stage for asking about the implications for HP’s corporate
strategy (and structure).
3. What are the implications of the Compaq acquisition for HP’s corporate strategy and
structure?
- Implications for corporate strategy.
Examining the four elements that are important for a multi-business strategy helps to illuminate
the implications of the acquisition for HP’s corporate strategy:




Portfolio: Which businesses to be in?
Core competencies: Which ones apply across the businesses in the portfolio?
Strategic integration: How pursue opportunities that involve multiple portfolio
businesses?
Growth engine: How allocate resources to different portfolio businesses to maximize
profitable growth?
Fiorina clearly has opted for a broad portfolio strategy, encompassing imaging and printing, PCs,
enterprise computing, and IT services. The premise on which this portfolio strategy is base is that
HP is a “systems” business.
Teaching Note for The New New HP (A) and (B) SM-125ATN and SM-125B TN
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HP is developing new core competencies for the back-end operations as well as for the front-end
operations in order to exploit the scale and scope of the corporate portfolio. Comments by Jeff
Clarke on the strengthening of corporate management of HP’s various supply chains and of its
vendor relations speak to this. So do Mike Winkler’s comments on the strengthening of HP’s
corporate marketing competencies, especially those focused on the HP corporate brand.
Robison’s comments on moving HP toward “focused” innovation and the need to manage
initiatives that span the business groups also hint at developing core competencies at the
corporate level.
Regarding strategic integration, Fiorina counts on capitalizing on the broad business portfolio,
but how to achieve this remains still somewhat murky, even though she has begun to articulate a
corporate strategy that might motivate and guide the required collaborative efforts (see below).
Fiorina has established a new “operating model” to manage the “vertical” (business-level) and
“horizontal” (cross-business) strategy considerations (see below for more detail). She has also
introduced the principle of “Managing on Behalf of HP” (MOBO): top executives had to
carefully balance the imperatives of their business-level strategies – in part determined by what
their direct competitors were doing – against the imperatives of the corporate-level strategy and
the associated responsibilities of MOBO. She sees her role as CEO as deciding which of the two
“syllables” – horizontal or vertical – to emphasize at any given time. In 2003, she said the major
emphasis was on the horizontal syllable.
The case has little to say about HP’ resource allocation process in 2004, except perhaps in terms
of what type of R&D projects will get priority in the future. Comments by Bob Wayman (see
“HP and Compaq Combines: In Search of Scale and Scope”) suggest that HP’s corporate
management has traditionally not actively engaged in moving resources between businesses to
maximize profitable growth. For instance, HP did not seem to apply the logic of the growth/share
matrix. While it seems likely that Fiorina will move toward a more active role of corporate
management to create a “growth engine,” so far there is not much evidence that it is actually
happening.
- Implications for corporate structure.
Fiorina’s early efforts to create a more integrated and customer-focused HP had not been
successful. In the (A) case she points out the major lessons learned from that effort: (i) not
managing the change with enough rigor, (ii) the product-focused parts of the organization
became disconnected from customers and lost a sense of accountability, and (iii) the importance
of acknowledging that HP is a “systems” business. (Note: Trying to impose the concept of a
“systems” business on HP may have required a much broader and deeper cultural change than
Firorina realized.) In order to capitalize on the lessons learned, Fiorina introduced a new
“Leadership Framework” encompassing four key elements: strategy (including corporate
objectives, value propositions and the new “operating model” (see below)); structure and
processes (e.g., effectively managing the vertical and horizontal dimensions of the operating
model), metrics, results, and rewards (e.g., balanced score card); and culture (shared values and
standards of conduct). All employees in all positions had to examine their decisions and actions
against all four elements.
Teaching Note for The New New HP (A) and (B) SM-125ATN and SM-125B TN
p. 8
During the time of writing the (A) case, HP’s new corporate structure and corresponding
“operating model” (see above) continued to evolve. Initially it encompassed four lines of
business (IPG, PSG, ESG, HPS) - represented as vertical stacks -, each run by an executive vice
president responsible for its profitable growth and cost structure. Running across these four
verticals at the front end were responsibilities for different customer segments and channels
(consumer, small and medium enterprise, and large enterprise), each run by one of executive vice
presidents in charge of a vertical (to be managed “on behalf of HP”). Sometimes, however, there
was shared responsibility along this dimension. By December 2004, ESG and HPS were
reconfigured. ESG was folded into the Technology Solutions Group, formerly HPS, and led by
Ann Livermore. The Customer Solutions Group was newly formed to seell the entire portfolio to
enterprise, public sector and small/medium business customers and was led by Peter blackmore
(who previously ran ESG).
This discussion will probably lead the students to observe that HP continues to flounder, with
organizational changes substituting for clear strategic direction. To examine this further, the
instructor can get the class to focus on the concrete ways in which HP can grow profitably
beyond 2004 and what the strategic leadership requirements are for these “growth vectors” to be
effectively pursued.
4. Beyond 2004, how can HP grow profitably? What are the strategic leadership challenges
associated with the different growth vectors?
Instructors can point out that, in general, there are three growth vectors for a multi-business
corporation:
 Grow the core businesses profitably
 Capitalize on the portfolio through synergies (exploiting complementarities)
 New business creation (through internal corporate venturing)
Each of these growth vectors poses different strategic leadership challenges.
- Grow the core businesses profitably.
The instructor should ask here what HP’s core businesses are and then get the lass to do a quick
analysis of the profitable growth challenges each of the faces.


Imaging and printing. Still growing fast and highly profitable. HP has been the industry
leader for many years. HP as competed effectively with a generic strategy based on
differentiation and product leadership. Beyond 2004, HP will have to beat players such as
Canon, Lexmark, Epson, Xerox and, since recently, Dell in order to continue to grow
profitably.
Personal computer systems. PCs have become a commodity. Average sales prices have
dropped precipitously over the years and continue to do so. HP has tried to compete with
a generic strategy of operational excellence but is hampered in part by its complex
relationships with distribution channels. HP has lost money on and off in the PC market
and is still struggling to gain a decent profit margin. Beyond 2004, HP will have to try to
beat Dell, Lenovo and other players in order to grow profitably. Dell, in particular, poses
Teaching Note for The New New HP (A) and (B) SM-125ATN and SM-125B TN


p. 9
an enormous competitive challenge and continues to gain market segment share and to
establish itself in overseas markets (China).
Enterprise computing systems. On the low end, HP is a key player in Intel Architecturebased servers, which it sources both from Intel and more recently also from AMD, but is
encountering increasingly fierce competition from Dell. At the high end, HP has
traditionally competed with a generic strategy based on differentiation and product
leadership. HP has made an early bet on Intel’s IA-64 architecture (Itanium), which has
not gained the anticipated traction in the market. It also continues to compete with its
own PA-RISC architecture. At the high end, HP faces daunting competition, especially
from IBM and Sun Microsystems.
HP Services. Through the merger with Compaq, HP has strengthened its product-market
position and its distinctive competencies in IT services. It has won some high-profile
long-term contracts, most notably with Procter and Gamble. To compete in this market
segment requires a generic strategy based on customer intimacy. HP faces enormous
competition from IBM, which is generally viewed as the world leader in complex,
sophisticated IT and business consulting. Other major competitors are EDS, CSC, and
potentially players such as Accenture, which, however, also can be partners on some
deals.
This analysis shows that each business faces formidable competitive challenges, which will
require very strong business-level strategic leadership. Yet, at the same time, these business
leaders are expected to give attention to the second growth vector: capitalizing on synergies.
Note: The (B) case offers the opportunity to do a deeper analysis of the competitive challenges
facing each business. But for the purposes of the (A) case this level of discussion should suffice.
- Capitalizing on synergies.
To make the discussion of the second growth vector vivid, the instructor can ask the students to
state in simple terms what pursuing of synergies actually means. The short answer: Individual
businesses must work together to pursue opportunities in the “white spaces” between them, and
they must leverage each others’ products and services to create more value for the customer than
each business could do on its own. Having solicited such an answer, the instructor can ask how
that looks, for instance, to the people in the imaging and printing business at HP. Dividing the
class in half - one half representing printing and imaging; the other half representing PCs – and
asking each group for its views on “collaborating” will elicit some good-humored laughs. Clearly
this is not going to be the most natural thing to do for the individual businesses.
So what kind of strategic leadership is required to pull it off? Here the instructor can engage in a
short discussion of the strategic logic of different types of companies. To do so the instructor can
draw a continuum with at one extreme highly diversified companies – GE under Jack Welch is
the best example -, and highly focused ones – here Intel under Andy Grove is a good example.
The instructor can then ask the class several questions to highlight the differences.

GE under Welch. Welch did not have a substantive strategy for the whole of GE (too
many different businesses), but he had a clear portfolio strategy. The criterion to be in the
portfolio was to be #1 or #2 in the industry. The business leaders set the strategies for
Teaching Note for The New New HP (A) and (B) SM-125ATN and SM-125B TN

p. 10
their businesses. Hence, Welch had to be a master of selecting, developing, evaluating,
and rewarding business leaders. To maintain a GE perspective and to get corporate
management to add value to the businesses, Welch mandated that all businesses adhere to
and/or introduce a limited number of “themes” or “imperatives.” Examples over the years
were: “boundary-less organization,” “workout,” “best practice sharing,” “six sigma,” and
“adopting the Internet.” Welch thus concerned himself primarily with managing the
process of strategy making rather than with the specific content of the business strategies.
Intel under Andy Grove. Grove clearly set the content of Intel’s strategy (“let me tell you
what the strategy is”). He could do so because Intel’s business was extremely narrow
during his tenure as CEO, focused almost exclusively on microprocessors for the PC
market segment. In fact, Grove liked to use “the PC is it” as a rallying cry. As a function
of this strategy, most of Intel’s research, development and manufacturing expertise were
directed toward achieving profitable growth in PC microprocessors. The main role of
senior management was to execute on Grove’s strategy. (Note: Craig Barrett, Grove’s
successor as CEO, moved Intel toward a broadening of its business portfolio, and thus
had to pay more attention to developing the strategic leadership skills of the different
business leaders. This continues somewhat under current CEO Paul Otellini.)
Figure 1 shows the continuum.
Focused
(Intel under Grove)
Diversified
(GE under Welch)
-------------------------------------------------------------------------------------------------


Lew Platt at HP. The instructor can then ask where HP was situated when Lew Platt (the
previous CEO) was in charge. The class will likely situate HP under Platt toward the
diversified end of the spectrum. (Note: The instructor can then ask whether the class
believes Welch would have spun off HP’s instruments businesses (now called Agilent),
which Platt did right before resigning as CEO. Most likely the class will answer no,
because all of the instrument businesses were #1 or #2, and the instructor can draw some
inferences from that regarding HP’s corporate strategic leadership capability compared to
that of GE.
Fiorina at HP. This sets the stage for asking in which direction Fiorina is driving HP. The
answer here is: In the direction of focus. This of course implies that there is increasingly
a need for a substantive corporate strategy to provide a framework within which the
different businesses can see that collaborating will be a win/win for the businesses
involved as well as for HP as a whole.
- New business creation (through internal corporate venturing)
The preceding discussion is likely to have been thorough and fairly exciting, and getting to the
third growth vector may seem a bit of an anti-climax. So, the instructor can keep this discussion
fairly short. The key here is to get the class to discuss how well Fiorina understands the HP
innovation culture. She clearly states in the (A) case that innovation at HP will be “different” in
the future. She believes that HP must move from inventing standalone products to what she calls
Teaching Note for The New New HP (A) and (B) SM-125ATN and SM-125B TN
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“fabric innovations” and “system-level” innovations. But the question is whether the HP culture
is actually ready and able to do this. And if not, how long will it take to actually make such a
major cultural change?
Note: Some will perhaps observe that HP has not come up with a breakthrough innovation since
it invented the inkjet printer and transformed itself into an imaging and printing company (early
1980s). This is a valid point, and the instructor can turn it into a potentially interesting question. I
sometimes ask the class under what conditions Walter Hewlett might have won the proxy fight
against Fiorina and HP’s board of directors. My answer to that question is that if Hewlett could
have pointed to major new innovation in the making in the imaging and printing business, which
would have put HP on a radically new growth trajectory, he might have won. Given that he did
not point to such a breakthrough innovation it probably simply was not there.
Again, this discussion will probably remain somewhat superficial at this point in the class, but it
is important to raise the corporate innovation issue because it has implications for the next and
final question.
5. Going forward in 2004, what is HP’s vision and corporate strategy? How does the
corporate strategy differentiate the company from its major competitors? What will it take
to make it work?
- Vision: Becoming the leading technology company in the world
Fiorina’s vision for HP is a highly ambitious one: Becoming the leading technology company in
the world. Capitalizing on its new scale and scope, HP wants to become the leader in the various
businesses that it is in, which include major product-oriented businesses as well as the large
information technology services business. For some it will not be clear how HP can be the world
leader in both product-oriented and service-oriented businesses. For instance, this vision implies
that HP needs to simultaneously win against Dell, the undisputed leader in the PC business and a
strong contender in the low-to-mid-end server business, and against IBM, the undisputed leader
in global IT services and consulting. These are daunting challenges.
Note: The instructor can ask here where HP’s cultural center of gravity traditionally has been,
with technologies and products or with services. Fiorina seems to be driving HP in the direction
of services, but this seems to involve major re-orientation for HP, which has traditionally been a
technology and products company.
This leads naturally to the question of what the corporate strategy is that will make it possible for
HP to realize its ambitious vision.
- Corporate strategy: High tech at low cost.
Instructors can ask the class to summarize how Fiorina and other executives describe HP’s
corporate strategy for going forward. This will take some digging, but eventually some students
will put together the statements of Fiorina and other executives, who point to a new strategy of
“high tech at low cost” that they believe HP should be able to execute with the scale and scope of
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p. 12
the combination of assets the company possesses following its acquisition of Compaq, and with
the new emphasis on “system-level, focused innovation.” Using a two-by-two framework, with
technology and cost on the axes, the instructor can situate HP’s strategy in relation to that of
IBM and Dell. This framework helps visualize how the new corporate strategy differentiates HP
from Dell and IBM, the company’s main competitors. This is shown in Figure 2.
Figure 2: HP’s Stated Corporate Strategy in 2004
Technology
High
Low
High
IBM
Unviable
Low
HP
Dell
Cost
Whether this strategy is feasible and what its implementation implications are can stimulate an
interesting discussion.
Many students will probably question the feasibility of the strategy. The instructor can try to get
students to bring up Fiorina’s claim that HP will achieve high tech at low cost by substituting
relatively cheap technology (e.g., software) for expensive people (in a company’s IT department
and/or outside consultants). For instance, end-to-end automated technological solutions in the
enterprise computing market segment may reduce both the personnel cost of maintaining the
system and the need for expensive outside consultants.
Some students will probably want to argue that HP is “stuck in the middle.” The instructor can
then ask what HP’s top management’s arguments might be to deny that HP is stuck in the
middle. Some will refer to the importance of the “total customer experience” factor that Fiorina
articulates for the different market segments, which implies that HP needs to understand current
and future customer needs better and faster than its customers (and rivals), and meet them or
even surpass them. “Surpassing” implies that HP can generate innovations that drive customer
needs rather than simply respond to existing needs. (Note: Bernard Arnault, CEO of luxury good
conglomerate LVMH, asserts that companies can only get a premium price for products that
were beyond the expectations of the customers at the time they are brought to market.) At the end
of this discussion, the problem of HP as technology/product company versus HP as a services
company will most likely still be unresolved.
Debrief and update. At this point, the instructor may refer to statements that Mark Hurd, Carly
Fiorina’s successor as HP’s CEO, made to a senior executive program audience at Stanford
Business School in late July 2005. Mr. Hurd seemed to have come to the conclusion that HP was
fundamentally a technology and product company and that, while very important, the services
business needed to be in support of HP’s technology and products businesses. The implication
seemed to be that HP would probably compete most vigorously with Dell in the future and
perhaps less so with IBM’s global services.
Teaching Note for The New New HP (A) and (B) SM-125ATN and SM-125B TN
p. 13
(A) CASE SUMMARY
1. Major acquisitions within the same industry serve the strategic purpose of “consolidation,”
which offers the acquiring company the potential benefits of (i) achieving scale and scope
advantages, (ii) significantly strengthening its product-market position in different businesses,
and (iii) augmenting its distinctive (core) competencies.
2. Successfully achieving the potential benefits of a consolidating acquisition depends on the
effectiveness of the organizational and strategic integration of the two companies.
3. Effective organizational integration poses difficult challenges with respect to achieving an
improved cost structure and effectively managing the strengthened supply chain.
4. Ultimately, however, the success of the consolidating acquisition depends on the effectiveness
of the strategic integration.
5. To achieve strategic integration, top management needs to develop a corporate strategy that
can add value over and beyond the value created by the business-level strategies of the
consolidated individual businesses.
6. The key elements of a multi-business corporate strategy are: (i) the portfolio, that is, deciding
which businesses to be in or not, (ii) corporate-level core competencies that support the
individual businesses, (iii) strategic integration, that is, motivating the pursuit of cross-business
opportunities, and (iv) the growth engine, that is, resource allocation among the individual
businesses to maximize corporate-level profitable growth.
7. To grow profitably, a multi-business corporation can pursue three growth vectors: (i)
profitably growing the individual businesses, which depends on the quality of the business-level
strategies, (ii) pursuing profitable growth opportunities through strategic integration (crossbusiness synergies), and (iii) new business development through corporate innovation.
8. Top management of multi-business companies must manage the strategy-making process,
rather than deciding on the strategy content for the business-level strategies. However, the more
top management wants to pursue strategic integration, which depends on cross-business
cooperation, the clearer the content of the corporate-level strategy has to be so that leaders of the
individual businesses can see why they should collaborate for the best of the corporation.
Measurement and incentive systems need to be commensurate with the corporate strategy.
9. Others?
Supplementary Reading
Burgelman, R.A. and Doz, Y.L., “The Power of Strategic Integration,” MIT Sloan Management
Review, Spring 2001, Vol. 42, No. 3, pp. 28–38.
Burgelman, R.A. and McKinney, W., with the collaboration of Meza, P.E., “Managing the
Strategic Dynamics of Acquisition Integration: Lessons from HP and Compaq, Working Paper,
Stanford Business School, 2005
Teaching Note for The New New HP (A) and (B) SM-125ATN and SM-125B TN
p. 14
(B) Case Discussion
As noted in the introduction, the (B) case is more externally focused that the (A) case and offers
the opportunity to examine in greater depth the competitive challenges faced by each of HP’s
businesses. To set the stage for the discussion of the different businesses, the case first briefly
describes the strategic situation in the computer industry and in the “new” consumer electronics
industry.
1. What are the key characteristics of the competitive environment facing HP in 2004?
The introduction to the (B) case offers the instructor to get the class to provide a quick overview
of some of the major developments in the various industries that HP competes in.
- Structural industry change.
The information technology industry is still recuperating from a prolonged downturn and may
have changed for good, with customers expecting more for less from their vendors.
-Convergence (or collision) of industries.
Digitization has triggered the convergence (or collision) between the computing, consumer
electronics, telecommunications, imaging, and entertainment industries. Future convergences are
on the horizon (e.g., with the life sciences).
- Computer industry.
IBM, Sun Microsystems, Dell, and Legend are key HP competitors in the computer industry. The
case provides information on each of these companies as well as the views of Carly Fiorina and
Jeff Clarke on these competitors and the competitive advantages that HP presumably has against
these companies. The instructor can ask the class to briefly summarize the information provided.

IBM. Clearly, Fiorina’s drive to make HP a major player in the global IT services
business has put the company in direct competition with IBM. Fiorina views IBM as
HP’s major competitor in terms of scale and scope. But she views IBM as a more
vertically integrated strategy than HP, which requires them to compete against strong
players in each of the layers of the vertical stack. (HP in contrast is more oriented toward
working with partners in some of the layers). She says that IBM doesn’t have a consumer
business, whereas HP has growth opportunities in the consumer space. Having sold off
Lexmark, she points out that IBM has no presence in the printer space, which makes it
difficult for them to address the document management market. Beyond Fiorina’s views,
the case describes IBM’s strategy in some detail, quoting IBM’s CEO Sam Palmisano
and other senior executives. The case also presents data that the instructor can use to get
the class to compare HP and IBM in terms of capabilities. The conclusion will be that in
2004 IBM is HP’s most dangerous competitor at the high-end of the computer industry
and an extremely strong one.
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
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p. 15
Sun Microsystems. Having transformed itself from a workstation computer company to a
networking computing company during the 1990s, Sun has suffered strongly from the
Internet bust. Sun faces increased competition from the lower-priced server systems that
use Intel microprocessors and Microsoft’s NT operating system. In the face of these
setbacks and challenges, Sun adopted a new business model in 2003 whereby it bundles
together various infrastructure software components in sets of “suites,” upgrades them
once a quarter and sells them for an annual per employee license fee. Here, the instructor
can ask the class what kind of company Sun is: Hardware? Software? Services? All of the
above? What would the answer be if one asked different Sun executives? It seems that
Sun is still looking for a new strategic focus. This does not mean, however, that HP
should underestimate Sun, because Scott McNealy, Sun’s CEO, has successfully brought
Sun back from the brink in the past.
Dell. Dell is HP’s most dangerous competitor at the low-to-mid end of the computer
industry, and posing a growing challenge in the printer business. Dell has defined itself as
a “distributor” able to exert low-price leadership while maintaining high margins because
of superior operational excellence based on an extremely efficient build-to-order system
and world-class supply chain management. Dell has benefited tremendously from the
growth of the Internet to leverage its build-to-order model (more than half of Dell’s
orders were placed over the Internet). Dell’s system allows it to learn extremely fast. As
Dell’s market segment share (and its brand) has grown, so has its bargaining power with
its suppliers. Nevertheless, Jeff Clarke provides some detailed analytical comments in the
case about what he views as Dell’s potential weaknesses and HP’s newly gained
strengths to compete against the Dell model, especially in fast growing and attractive
notebook computers market segment. While recognizing the issue of channel conflict that
HP faces, he also argues that HP’s multi-channel (and multi-supply chain) strategy is
becoming an advantage from the perspective of offering customers more choices. Clarke
also seems to believe that Dell’s capacity to efficiently execute on “configurability” does
no longer have the same importance as it once did, so Dell’s advantage is declining. Dell
has also entered into the printer business (see below).
Legend. Legend, a government-sponsored local OEM, dominates the fast-growing
Chinese market for PCs with 27.7 percent market segment share. China is rapidly
becoming the world’s second largest market for PCs after the US. While HP, Dell and
other foreign companies were trying to grow in China, Legend was looking overseas for
growth. (Note: The instructor can point to Legend’s subsequent purchase of the IBM
consumer PC product line, including its well-known laptop brand, and its adoption of a
new corporate name: Lenovo). HP’s share of the Chinese market has fallen from 10
percent tin 1999 to around 4 percent in 2003. The case points out that HP’s Webb
McKinney feels strongly that HP needs a better integrated China strategy.
- New consumer electronics industry.
Computer makers are new entrants into the consumer electronics industry. This is happening
because consumer electronics need more and more “intelligence” (computing power), which is
provided by microprocessors. With Moore’s Law - and the resulting extremely fast decline in
price/performance for microprocessors - still “on the march,” the horizontalization that shaped
the personal computer industry is now coming to the consumer electronics industry, and bringing
the PC makers with it. Sony, which makes both consumer electronics devices and personal
Teaching Note for The New New HP (A) and (B) SM-125ATN and SM-125B TN
p. 16
computers, probably experiences internally the tension generated by this convergence (or
collision).
- Imaging and printing industry.
HP’s printer business has been its big money maker and growth engine. Dell has recently entered
this business through partnerships with Lexmark, Samsung, Fuji Xerox, and Kodak. The printer
industry is converging (colliding?) with the consumer electronics industry, in particular the
digital photography market segment, which offers potentially enormous growth opportunity
(over 50 billion digital photos were taken in 2003!). HP dominated the market for inkjet photo
printers, with two-thirds of the US market.
Note: The instructor can ask how likely Dell’s decision to enter into the printer business was
triggered by HP’s acquisition of Compaq. Students will have different views of this. The
instructor can ask whether Dell would have done this eventually anyway? The answer is
probably yes, because Dell was not going to let its strategy be determined by HP’s strategy, and
the move into printers is consistent with Dell’s business model and offers it a new avenue for
growth. According to Michael dell, “A better business model… will beat a better technology…
The days of engineering-led technology companies are coming to an end.” Here Clarke,
however, argues that HP’s scale in printers will remain very important (HP’s 50 million printers
versus Dell’s 2, at the time of the case).
While the case does not here address the issue, the instructor could nevertheless ask to what
extent the enterprise (corporate) printing market also offered potential growth opportunities as
digital printers begin to replace traditional reprographic technologies, and potentially could even
threaten the large-scale industrial printing market still dominated by highly specialized and
expensive electro-mechanical printing presses (“big-iron”).
This overview sets the stage for analyzing each of HP’s business-level strategiesl.
2. In 2004, what are the strategic challenges that HP’s Imaging and Printing Group (IPG)
faces? How can the business continue to be the industry leader?
Imaging and printing is still growing fast and highly profitable. In fiscal year 2003, IPG
accounted for $22.6 billion out of HP’s total revenue of $73.7 billion (31 percent) and 79 percent
of its profits. (In 2002, before the merger, the group accounted for 28 percent of HP’s revenues
and 105 percent of its profits.)
HP has been the industry leader for many years. HP as competed effectively with a generic
strategy based on differentiation and product leadership. Beyond 2004, HP will have to beat
players such as Canon, Lexmark, Epson, Xerox and, since recently, Dell in order to continue to
grow profitably.
To try to do so, VJ Joshi, who runs IPG, had already started a quiet revolution at IPG before the
merger with Compaq was announced. The Instructor can ask what the “Big bang1” and Big bang
2” phases of this revolution were about.
Teaching Note for The New New HP (A) and (B) SM-125ATN and SM-125B TN
p. 17
- Big bang 1.
Creating a market-focused organization. Turning the “waterfall” model upside down: designing
for the low end through innovation and then going up to the high end. This has required $1
billion in investment to create platform-based strategy to leverage IPG’s innovation, and to think
in terms of imaging “systems.” This has forced conversations between the inkjet and laser jet
printing groups to determine how to build a personal printing business. Through the Indigo
acquisition, HP is also looking for new growth in the high-rend digital printing (corporate)
business.
- Big bang 2.
Using HP’s entire portfolio as a weapon against competitors. This involved leveraging HP’s
huge installed base in printers along with HP’s other assets to “enable customers to enjoy more
of life by delivering simple and rewarding experiences.” To achieve this Joshi teamed up with
Duane Zitzner, who ran the Personal systems Group (PSG), to create innovations across IPG and
PSG. HP then attempts to use its retailer clout to bring these innovations to the consumer. Joshi
pointed out the need for better performance measurement systems in light of the cross-business
collaboration in relation to serving the consumer (and the consumer P&L).
Note: The instructor can point to this as examples of the new “operating model” in action and
refer the class to comments from Nigro, Peery, and Morgan in the case. The channel discussion
again stimulates a comparison with Dell’s strategy: do consumers want to see and touch some of
these products before buying them (HP) or are they happy to buy them without doing so (Dell).
3. In 2004, what are the strategic challenges that HP’s Personal Systems Group (PSG)
faces? How can it improve its profitable growth performance?
In fiscal year 2003, PCs accounted for $21.2 billion out of HP’s total revenues of $73.7 (29
percent) and had only a .1 percent profit margin.
- PCs have become a commodity.
Average sales prices have dropped precipitously over the years and continue to do so. HP has
tried to compete with a generic strategy of operational excellence but is hampered in part by its
complex relationships with distribution channels. HP has lost money on and off in the PC market
and was still struggling to gain a decent profit margin. Beyond 2004, HP will have to try to beat
Dell, Lenovo and other players in order to grow profitably. Dell, in particular, poses an
enormous competitive challenge and continued to gain market segment share.
- Four-part strategy.
Duane Zitzner, who runs PSG, has a four-part strategy (world-class cost structure, innovative
products, reach and breadth of channels, and leveraging the strength of HP) to compete, which
draws on the collaboration with other groups in HP an on the management of the supply chains,
described earlier in this note. For instance “big bang 2” depended on collaboration with IPG, and
Ziztner thought HP’s multi-channel strategy important for reaching the consumer with new
consumer electronics products originated from that collaboration. He also saw collaboration with
the HP Services group as important to offer an all-HP solution to corporate customers.
Teaching Note for The New New HP (A) and (B) SM-125ATN and SM-125B TN
p. 18
Note: The instructor can probe here to see whether the students believe Zitzner’s strategy for
PSG sufficiently addresses the problems HP is still experiencing with its direct model in
comparison with Dell’s direct model, and whether the multi-channel strategy that he sees as a
strength can indeed be effective against this ferocious and very fast moving competitor. Getting
the students to say how this might work will add depth to the analysis.
5. In 2004, what are the strategic challenges facing the HP Services Group (HPS)? How can
it improve its profitable growth performance?
In fiscal year 2003, HPS accounted for $12.3 billion out of HP’s total revenues of $73.7 billion
(approximately 17 percent).
- Strengthened IT services capability.
Through the merger with Compaq, HP has significantly strengthened its product-market position
and its distinctive competencies in IT services. The merger has increased HP’s services group to
65,000 professionals - 40,000 in customer support and the rest in consulting. HPS has won some
high-profile long-term contracts, most notably with Procter and Gamble. To compete in this
market segment requires a generic strategy based on customer intimacy. HP faces enormous
competition from IBM, which is generally viewed as the world leader in complex, sophisticated
IT and business consulting. Other major competitors are EDS, CSC, and potentially players such
as Accenture, which, however, also can be HP partners on some deals.
Note: The instructor can ask here how HP’s capability compares to that of IBM (the case
mentions that IBM had 100,000 people in higher-end professional consulting in 2001 and has
added some 30,000 with the acquisition of PriceWaterhouseCoopers in 2002).
- HP strategy different from IBM strategy.
Ann Livermore, who runs HPS, points out that HP’s strategic positioning is different from that of
IBM. HP wants to focus on “managed services:” IT infrastructure services and only selected
applications services and systems integration consulting. This requires HP to work with partners
who operate in different levels of the software and solutions “stack,” and that in turn implies a
second major difference between HP and IBM: HP depended much more on partners to provide
services that it decided not to deliver itself, whereas IBM was much more of a one-stop shop.
Key HP partners include Microsoft, Oracle, SAP, BEA, Accenture and Deloitte. She believes
that partnering is a distinctive HP competence and that customers prefer the partnering approach.
She seems to suggest that it allows HP to better help customers with the high heterogeneity of IT
systems that they face. She also explains that HP has learned to manage the situations that
unavoidable occur from time to time when the company competes with its partners. Livermore
indicates that this external partnering competence mirrors the competence for internal partnering
that the new “operating model” requires.
- Growth strategy.
Nevertheless, in order to grow HPS wants to “move up the stack” and not stay just at the
infrastructure level. Livermore wants HPS to move further into the applications space and the
business process outsourcing space and claims to be adding capabilities to do so. Livermore also
Teaching Note for The New New HP (A) and (B) SM-125ATN and SM-125B TN
p. 19
points out that she wants HPS to grow by expanding the business it does with its very large and
sophisticated major accounts, rather than just winning new accounts.
Note: Here the instructor can ask how HPS will be able to “move up the stack” without running
into its partners. Instructors who previously discussed the Netscape case with their class can
attempt to draw parallels; if they have discussed the BEA and/or MySQL cases they can refer to
the strategies of the various players in the different layers of the stack discussed in those cases.
- Making sure the big deals are profitable.
An issue facing the major players in the global services market segment concerns the ultimate
profitability of these very large multi-year deals. The competition is intense, and competitors are
tempted to offer customers conditions that are “too good” to be able to make a decent profit (sort
of a “winners curse” situation). (The instructor can here refer to the situation faced by EDS,
which is stuck with a multi-year multi-billion contract on which it is losing badly.) Livermore
points out that HP has a disciplined and structured process to decide which deals to take (and not
to take).
5. In 2004, what are the strategic challenges facing HP’s Enterprise Systems Group (ESG)?
How can it improve its profitable growth performance?
In fiscal year 2003, ESG accounted for $15.4 billion of HP’s total revenues of $73.7 billion (21
percent). It was perhaps the most troubled of the four business groups, with a negative 1.9
percent operating margin and losing $70 million during the second quarter of 2003. However, the
group had been able to maintain market share during the acquisition integration process and met
its goal of achieving profitability by the fourth quarter of fiscal 2004, reporting operating profit
of $109 million on revenues of $4.07 for the quarter. At the time of the case, ESG was run by
Peter Blackmore.
- Low end of the enterprise market segment.
On the low end of the enterprise computing systems market, HP is a key player in Intel
Architecture-based servers running on Microsoft’s NT operating system, which it sources both
from Intel and more recently also from AMD, but is encountering increasingly fierce competition
from Dell. The winning generic strategy for this part of the market is operational excellence.
Note: An interesting issue here is the growth of open source software, in particular Linux, and
the potential tensions it creates with Microsoft. The instructor can ask the class to reflect on
Blackmore’s comments, who argues that Linux is attacking Unix rather than Windows (p. 361 in
the book).
- High end of the enterprise market segment.
At the high end, HP has traditionally competed with a generic strategy based on differentiation
and product leadership. HP has made an early bet on Intel’s IA-64 architecture (Itanium), which
has not gained the anticipated traction in the market. It also continues to maintain its own old
PA-RISC architecture-based product line. At the high end, HP faces daunting competition,
especially from IBM but also still from Sun Microsystems.
Teaching Note for The New New HP (A) and (B) SM-125ATN and SM-125B TN
p. 20
Note: An interesting issue here is to raise the question of how HP can make high margins if its
products are increasingly based on industry standards that it does not own. This question relates
to some extent to the point made a major HP customer in the (A) case (p.331 in the book), who
claimed that HP faced a difficult situation because it has no “control points.” The instructor can
ask the students to reflect on Blackmore’s comments regarding this issue and his example of
HP’s Superdome product.
- Working with other HP groups.
Blackmore’s comments on pricing in deals that involve multiple HP groups are useful to further
examine the working of the new “operating model.” The instructor can raise interesting issues
about performance measurement that these comments imply.
- Another reorganization in 2004.
In December 2003, ESG was folded into a new entity called Technology Solutions Group (TSG),
led by Ann Livermore. A new group called Customer Solutions Group (CSG) was formed to sell
the entire HP portfolio to enterprise, public sector and small/medium businesses. Peter
Blackmore ran the new group. As Run Chandra points out, CSG was created as a horizontal
group at the top of the operating model to sharpen HP’s customer focus and to make sure that no
growth opportunities would be overlooked.
Note: The instructor can ask here to what extent this reorganization reflects a sharpening of the
strategy – with structure following strategy -, or whether it is another structural bootstrap to
compensate for a lack of clear strategy.
6. Given the diverse strategic challenges facing its different businesses, how can corporate
management help them meet these challenges effectively, and how can the company create
shareholder value that will be higher than the sum of the values of the different businesses?
This question brings the discussion back to the role of corporate strategy in a multi-business
company, and how corporate strategy can add value over and above the sum of the business-level
strategies. For this part of the discussion the instructor can use the analysis provided for question
5 of the (A) case discussion. The analysis provided for questions 3 and 4 of the (A) case
discussion serve as backup for points that will be raised in the discussion here.
The more comprehensive analysis of the various business-level strategies performed in the (B)
case discussion, allows the instructor to raise additional issues. Some of these are discussed
below.
- Pursuing multiple generic strategies simultaneously.
The instructor can ask here what the challenges are of simultaneously pursuing different generic
strategies, especially if the corporate strategy also wants to pursue business opportunities that
span more than one business. To provide some material to discuss this issue, the instructor can
refer back to Arun Chandra’s comments in the (A) case (p. 334 in the book), or alternatively (if
the (A) case has not been discussed) summarize Chandra’s argument in class. Aware of the
tensions that naturally exist in a portfolio of businesses that had traditionally [pursued strategies
based on different market disciplines (generic strategies), Chandra felt that the new “operating
Teaching Note for The New New HP (A) and (B) SM-125ATN and SM-125B TN
p. 21
model” would allow HP to drive against each of these disciplines. He felt that the bottom (backend) part of the model, focused on cost structures and supply chain management, would help
determine what needs to be done once and centrally versus what needs to be done individually
and decentralized by the businesses – this balances operational excellence and innovation
(product leadership). Chandra also suggests that the formation of the Customer Solutions Group
in the model and the focus on customer segment-based marketing serve to increase customer
intimacy.
Note: The instructor can use these comments to role play some interactions between HP’s four
business groups to test Chandra’s thesis.
- Importance of synergies in the new (“converged”) consumer electronics industry.
Taking into account the convergence of computing and consumer electronics, the instructor
could ask how HP might be able to pursue synergies between the printing and imaging and PC
businesses in the context of this convergence. This could lead, for instance, to a discussion
focused on the new “horizontal” consumer electronics companies (such as HP, Gateway, and
perhaps Samsung) and the old “vertical” consumer electronics companies (such as Sony, Philips,
Hitachi, and others), and on the question of whether there will be a central hub (PC-like)
controlling all electronic devices in the “digital home” of the future, or whether the connectivity
capacity will be distributed and embodied in all devices being able to communicate with each
other.
Note: The instructor can get the students to determine what HP’s strategic positi0oniung in the
new consumer electronics industry is likely to be. The class will probably view HP as positioning
itself as a horizontal player and a supporter of the central hub concept. This leads to the question
of what sorts of products jointly created by IPG and PSG would fit with this strategic position. It
can also lead to a discussion of who HP’s key partners will be in this and what the relative
bargaining power of HP can be in relation to key partners such as Microsoft and Intel.
SUMMARY
1. Business-level strategies must clearly define what the game is that must be won and what the
business’s competitive advantage will be. Business-level leaders must also define clear metrics
and qualitative indicators to determine whether they are wining their game or not.
2. Pursuing businesses with different generic strategies simultaneously poses difficult corporate
strategy challenges, especially if the corporate strategy requires cross-business collaboration.
3. Simultaneously competing against strong players at the high end of a market and strong
players at the low end of the market also poses difficult corporate strategy challenges. How to
avoid getting “stuck in the middle” is a major issue.
4. Simultaneously competing in technology/product businesses and services businesses also
poses difficult corporate strategy challenges because the strategic logics are different.
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p. 22
5. Resolving the strategic issues associated with so many different - sometimes opposing strategic logics is extremely demanding and may be beyond the strategic leadership skills of
most, if not all top managers.
6. Others?