Essay About Hpmarket Leader And Hp-Compaq Merger Strategy

Hp and Compaq Case Study
HP-Compaq CaseCase QuestionsWhat would a SWOT analysis reveal?Strengths        The merged company should have the strengths from both the two companies. From HPMarket leader in imaging and printing, and high-end serversTop supplier in UNIX marketFrom CompaqMarket leader in PC’s and storage systemsSignificant player in enterprise systemsMarket leader in fault-tolerant computingNew StrengthSharing costs to be an industry cost leaderPotential to become dominant leader in serversPositioning to exploit “storage area networks”Good Brand Recognition WeaknessesHPWeak in computing and IT servicesNo presence in fault-tolerant computingCompaqLow market shares in some productsLack of some high-end printer and products/servicesAfter the merger, some of the weaknesses may disappeared, and some other weaknesses may affect the new company. New Weaknessesfocusing on low margin, fierce competition PC industry and marketSome product lines may not fit (e.g. HP had high-end printers)OpportunitiesIncreased Operating Margins through economies of scaleProvide more products/services for customers supply the whole needs for customersProvide products from entry level to high-endBetter Distribution Channels Larger Custom BaseThreatsCultures don’t match, the merger may not be successful as expectedRevenue risk offsets cost of synergiesAnti-merger sentiment sways market to view merger as negativeWas the merger strategy sound?On the surface, the HP-Compaq merger strategy is strong.  While HP and Compaq are direct competitors, their strengths in various areas seemed to complement each other.  For instance, HP is weak in fault tolerant computing, and Compaq is an industry leader; HP is an industry leader in UNIX whereas Compaq is weak.  In addition, both companies are struggling in the personal computing market.  While Compaq is a market leader in the PC market space, it is having issues maintaining positive operating margins.  HP on the other hand is lagging the competition in the PC market space.  By combining forces, there might be some economies of scale that can be achieved. However, what HP and Compaq are not factoring in is that the PC market space is in the midst of a price war and the competition is fierce and the margins are low.  The PC market space is becoming more and more commoditized and there is a rough road ahead for a leader in the PC market space.  Conversely, customers in the computing market are asking for their vendors to provide more, as they don’t want to have to work with as many vendors for their needs.  In other words, customers want a one stop shop for their computing needs, and the HP-Compaq merger could allow the firm to provide that service.