Another segment of the general environment that cannot be ignored is the economy. In the current downturn, sales will be negatively affected by the decreased disposable income by customers and tight cash flows of companies. Plans for expansion may have to be rescheduled or downscaled and it is an opportune time for management to consider restructuring in order to better meet customer demand when the economy recovers.
When considering the attractiveness of an industry or how it should strategise its approach and organise its defence, HP has to keep the following factors in mind:
Threat of new entrants
Intensity of rivalry
Consumer markets contain numerous players and since suppliers tend to be the same for certain components, products can seem homogeneous if not for cosmetic differences and co-branding initiatives. Costly actions like price cuts and inflated selling expenses may have to be added to strategic decisions. The next section on competitor analysis shows how strategy will be influenced by rivalry.
Total understanding of the general and industry environments alone is insufficient. Since HP is fighting with other industry players for market share, a more complete understanding of its rivals will allow it to anticipate its competitors moves and plan better responses.
In the PC market, HP faces strong opposition from Dell which uses efficient business processes to create cost-savings which are then passed on to customers. Hence, Dells strength lies in producing computers with slightly higher specifications than competitors in the same price range. However, its research capabilities are minimal and it is set on being a market follower, albeit an excellent one. As such, HP has to formulate strategies allowing it to incorporate its brilliant innovatio View More »