HP Five Forces Analysis

HP Five Forces Analysis

In this post, we are going to conduct a five forces analysis of HP. Porter’s five forces analysis is an analytical model designed by Harvard Professor Michael E Porter that helps analyze a firm’s competitive position in an industry sector. These five forces are a part of every industry sector and can help improve a company’s position through planning and strategy.

However, first let’s take a look at the business of HP (Hewlett Packard):

Company Overview: Hewlett Packard (HP) is a multinational information technology company that has established itself as a leading player in the global technology industry. Founded in a garage in Palo Alto, California, in 1939 by Bill Hewlett and Dave Packard, HP has evolved into a diversified technology corporation with a wide range of products and services.

Key Offerings: HP provides a comprehensive portfolio of hardware, software, and services to individuals, businesses, and government entities. The company’s offerings span several categories:

  1. Personal Systems:
    • HP is a prominent manufacturer of personal computers, laptops, workstations, and other related devices. The company’s consumer and business-focused systems incorporate innovative designs, cutting-edge technology, and robust performance.
  2. Print and Imaging Solutions:
    • HP is a global leader in printing and imaging solutions. The company offers a diverse range of printers, scanners, and multifunction devices for both personal and business use. HP’s printing technologies include inkjet, laser, and 3D printing.
  3. 3D Printing and Digital Manufacturing:
    • HP has ventured into 3D printing and digital manufacturing, providing solutions for prototyping and production. The company’s Multi Jet Fusion technology is at the forefront of the 3D printing industry, catering to various sectors, including healthcare, automotive, and aerospace.
  4. Services:
    • HP delivers a range of services, including IT consulting, support, and managed services. The company’s services are designed to help clients optimize their IT infrastructure, enhance security, and achieve business objectives.
  5. Software and Solutions:
    • HP offers software solutions for various purposes, including data analytics, security, and device management. The company’s software portfolio complements its hardware offerings, providing comprehensive solutions for diverse customer needs.

Porter’s Five Forces Analysis of Hewlett Packard

Bargaining Power of Suppliers:

The bargaining power of suppliers of HP and in the overall PC sector is generally low. Apart from a few leading players like Intel and other microchips suppliers, most of the suppliers are smaller firms. These smaller suppliers firms generally do not pose a strong threat of forward integration to HP.

The suppliers are also not concentrated in a sector but scattered over various sectors and geographical areas. Another leading player that is a key supplier for not just HP but the entire PC sector is Microsoft. However, it affects the entire industry and not just HP. HP also sources some products from Korean companies like Samsung and LG.

Apart from a handful of well known companies, there are very few other players that hold any significant bargaining power. There are several factors that restrict the bargaining power of suppliers in the PC sector. HP is a large and well known tech brand with a strong presence globally across various geographic regions. The smaller suppliers depend heavily on HP for business and revenue.

HP’s brand image and financial strength also give it strong bargaining power over its suppliers. The company selects suppliers that can offer quality products matching HP’s guidelines. The company can always switch to new suppliers for a large segment of products it sources every year. These factors also give its higher bargaining power compared to the supplier firms.

Bargaining Power of Buyers:

Buyers are an important force in any industry sector and there satisfaction is critical to business growth and competitiveness. Across most industry sectors including the PC sector, the bargaining power of buyers has grown driven by factors like increased competition, and higher number of substitutes in the market.

Increased availability of information and increased focus on innovation have also increased the bargaining power of buyers. Companies invest in quality and innovation to maintain their market share and customer loyalty. Pricing is also an important factor that affects the competitive position of a firm with respect to its competitors in the PC sector. It also affects customer loyalty and demand in the market.

While the bargaining power of customers across industry sectors including the PC sector has increased over time, there are also some factors that help companies moderate the bargaining power of customers. HP’s brand image is an important factor that helps moderate the bargaining power of customers. HP has always maintained a strong focus on quality, innovation and customer experience.

These factors have helped the company build a unique identity and achieve a leadership position in the PC sector. Its focus on product quality, technological innovation and product variety as well as customer experience have helped it strengthen its competitive edge. The products made by HP enjoy strong demand across the globe. HP enjoys strong brand awareness throughout the world. The overall bargaining power of its customers is moderate as HP is a customer focussed and innovative company.

Threat of substitute products:

The threat of substitute products for HP mainly comes from the products made by the rival brands. However, the range of products that act as substitutes for HP’s products is quite big. HP’s customers can switch to other brands that make similar products including PCs, laptops, gaming products and printers. There are several brands in the market that deal in a similar range of products including Lenovo, Dell, Apple, Acer, Asus, MSI, Razer and others.

These are some of the leading rivals of HP that deal in a similar range of PCs and laptops. In the printing industry also, there are several brands that make similar products including Canon, Epson and others. Overall, there is a large range of products in the market that can substitute HP products.

While the availability of a high number of substitutes means higher competitive pressure on HP, the threat gets moderated to some extent by factors like HP’s brand image, product quality, innovation and large product range. HP also maintains a strong focus on customer experience and satisfaction. It is a well known and leading brand in the PC and printing sector which moderates the threat from substitute products to some extent. The company also focuses on making unique, high quality and technologically advanced products that can beat the competitive pressure in the market. As a result, the overall threat from substitute products for HP remains moderate.

Threat of New Entrants:

The threat of new entrants in the PC and printing sector is low. One major factor that affects demand and sales in this sector is customers’ trust. Customers will buy laptops, PCs or printing products only from their trusted brands.

HP is a market leader and has built strong trust among its customers worldwide through a strong focus on product quality, innovation and customer experience.

Some factors that moderate the threat from new entrants include the large capital investment, technological know how, and the need for skilled HR to develop a strong PC brand. There are also legal and regulatory barriers that prevent new brands form entering the market. The incumbent players are quite aggressive about their market share and maintaining their customer base. They invest heavily in innovation, marketing and customer experience. The strong level of competition in the PC and printing sector is also an important factor that deters new players from entering the market.

The overall threat of new entrants for HP is low.

Intensity of competitive rivalry in the industry sector:

The PC sector experiences strong competitive rivalry. There are several brands in the market including industry leading brands like Apple, HP, Lenovo, and Dell. Microsoft has also released a nice range of PCs. The presence of several global brands intensifies the level of competitive rivalry. Moreover, the fast pace of technological innovation has also added to the competitive rivalry in the industry sector.

Lenovo is currently the largest player in the PC sector and HP is the second largest. However, HP also holds a significant market share in the PC sector. According to Canalys, the overall number of shipments by HP in 2023 were 52.9 million units. Dell is the third largest player in the PC sector based on the number of shipments in an year followed by Apple.

The high level of competitive rivalry among the leading players in the PC sector has resulted in strong focus on technological innovation, marketing and customer experience. The leading companies like Lenovo, HP, Dell and Apple focus strongly on customer experience apart from product quality and innovation.

In the printing sector also, HP faces strong competition from other market leading brands like Epson and Canon. These brands also enjoy a strong competitive position in the printing market and strong brand awareness in most corners of the globe.

While the overall level of competitive rivalry in the PC and printing sectors is high, there are also some factors that moderate the overall level of competitive threat for HP. The company enjoys strong brand awareness in most corners of the globe. It also invests heavily in innovation, marketing and product quality to maintain its strong competitive edge. The company is in a leadership position in both the PC and printing sectors but still the overall intensity of competitive rivalry faced by HP is very high.