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Shifting Your Business Strategy – 6 September 28, 2009

Posted by David Dirks in business strategy.
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David DirksThere are plenty of times when changes within your industry justify a shift in your core business strategy.  Industry changes like new product or service innovation, pricing, manufacturing processes, delivery mechanisms and such can create an opportunity for the business that is able to detect and executive on such changes.

Hewlett-Packard is just such a company that has recognized some major changes within the personal computer industry and is striking hard to take advantage of them.  In the September 9, 2009 issue of the Wall Street Journal,  writer Justin Scheck wrote that, “Hewlett-Packard Co. is using the dismal technology market to  bolster its position as the world’s largest personal-computer maker.  How it’s doing so is evident from a $298 laptop it sold at Wal-Mart Store Inc. in July.”

H-P has long been a big player in mid-and upper priced personal computers.  You could call it a ‘premium player’ in the non-Apple world if you compare it to the low-priced gang of Dell and Acer in particular.  Like Apple, H-P has positioned it’s brand as a higher quality, premium priced PC maker.  The folks that I  know who own H-P sound very similar in their praise and brand loyalty to people like me who are just nuts about iMacs and Macbooks.

So let’s review the changes in the PC market that led H-P to make a shift in its core strategy of positioning itself as a premium PC brand (still much less in price than Apple but higher than Dell or Acer) and shifting some emphasis on low-cost PC’s.

1.  H-P demanded cheaper rates from both suppliers and contract manufacturers using the leverage from its huge sales volume to drive prices down.

2.  According to the Wall Street Journal, it has “taken advantage of an improved supply chain to quickly design and deliver new, less expensive PC’s.”  H-P is working closer with retailers like Wal-Mart to improve sales forecasting for PC demand.  They are focused on maintaining a competitive edge based on large efficiencies in their entire design-to-ship process.

3.  H-P is also taking advantage of a weaker competitor in Dell.  With Dell not willing to match H-P with discounting of its own, H-P has been able to increase market share by almost 20% in the second quarter of 2009 (global shipments of PC’s).

While H-P has lowered it’s margins on PC’s, it is faring better than it’s other competitors and the additional marketing share (meaning more volume!) helps to keep the profit margins moving in the right direction.

What does the H-P experience mean for you?  Here are just a few top-line points to consider for your own business:

1.  H-P has demonstrated that it can take in the changes going on around it and move quickly with a strategy to take advantage of it and trounce competitors.  Lot’s of businesses note changes in their industry, the economy, global shifts, competition, and consumer preferences but how many are willing to act on those changes?  Are you prepared to take in the changes in your business & industry and create ways to take advantage of them for your business?

2.  H-P is willing to make a shift from its core strategy in order to increase market share and keep profits moving in the right direction…up.  Many businesses, comfortable with strategies that have worked very well in the past (or recent past), are reluctant to change or shift strategy and risk ‘killing the golden goose’.

3.  Outside of external changes, H-P continues to find ways to make their PC’s cheaper by constantly improving its own internal operations.  H-P demonstrates that sometimes it takes a two-pronged approach to get the results you need instead of relying on one factor alone to help you grow your business.  In their case, the combination of leveraging a changing PC industry landscape and creating greater operations efficiencies from within is the perfect duo for increasing market share and keep profits stable.

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