Hp Vs Dell Case

MCCOMBS SCHOOL OF BUSINESS

MANAGEMENT INFORMATION SYSTEMS

LUZ SALAZAR VILLANUEVA

RODRIGO ROSADO PABST

HP CASE

1) The case mentions several times HP’s desire to be more customer focused. In your view, what does it mean to be customer focused in the PC business? According to the case, what has HP done in its PC business to become more customer focused? Have they achieved this objective? Justify your response.

Simply stated, to be customer focused is to "know the facts" about the client. By doing so, you will not only see the client's needs and business objectives from their point of view, but you will also learn about their unexpressed and/or future needs. In particular, in the PC business is to know what features are more important for them: price, brand, speed, mobility, reliability, and so on; and then make your product fit those characteristics.

According to the case, some steps that HP has done to become more customer focused are:

• Create the Customer Solutions Group, a sales force empowered to sell the entire portfolio of HP products and services.

• The creation of “Operation OneVoice” (2002) in order to align the company to customer focused metrics: loyalty measures, brand awareness and changes in market share.

• Creating 3 mainly customer segments with different marketing strategies: (a) Enterprise, (b) Small Business and (c) Consumer.

• Centralized marketing strategy with certain decision making power at lower structural levels.

• The conception of special programs to enhance the customer focus of HP’s employees, such as “Total Customer Experience and Quality” (2004). The key features were: Employee Training, Listening to the Customer, Metrics and Rewards. All of them aligned to help the customers have a better experience with HP products and services.

• Focus on satisfaction levels, given customer’s desire about price and branding.

• Voice of customer program , and “Carly Hotline”

We believe that the actions taken by HP helped them to become a more customer focused company than they were before. They managed to relate to their customers in different ways depending on the business sector they are located. Bottom line, these actions gave them in 2004 a number one ranking in customer satisfaction index for Intel servers and IT services.

2) Ms. Carly Fiorina wanted HP to be a unique combination of high tech, low price, and superior customer experience. Visit the HP website as well as of one of its key competitors and configure a custom PC. Based on your visits, do you agree that HP has achieved the above combination in its online PC business? Please justify your response

HP Strategies Comments

High Tech It is a commodity; there is no big differentiation between the two brands.

Low Price Dell is 16% cheaper than HP in the desktop configuration shown below.

Customer Experience The buying experience in Dell’s website is better than HP’s one since it is much easier, clear and in less clicks. Also provides the customer more information about warranties, product specifications and add-ons.

Based on the comments above we reach the conclusion that HP has not yet achieved the perfect combination on their three main objectives, as Dell has done. If HP wants to be the leader in the PC’s market, they still need to improve their prices since for the same technology Dell is charging less. Also, they have to improve the website’s layout to make the access easier to customers, so they have a more pleasant buying experience.

3) If HP’s business could operate with the same efficiency in inventory, payables and receivables management as its closest competitor, what would be the $ impact on its bottom line? That is, how much money could it save by being as efficient as is closest competitor, everything else being equal? Has HP improved its efficiency during the last three years?

M USD M USD

HP Dell

2005 2006 2007 2005 2006 2007

Revenue $87 $92 $104 $49 $56 $57

COGS $66 $69 $78 $40 $46 $48

GP $21 $23 $26 $9 $10 $9

GP (%) 24.14% 25.00% 25.00% 18.37% 17.86% 15.79%

Inventory $7 $8 $8 $1 $1 $1

Receivables $21 $23 $26 $4 $5 $6

Payables $28 $26 $26 $14 $11 $12

Inventory Period 38.71 42.32 37.44 4.56 4.76 5.32

Receivables Period 88.10 91.25 91.25 29.80 32.59 38.42

Payables Period 154.85 137.54 121.67 127.75 87.28 91.25

YTY Revenue Growth 5.75% 13.04% 14.29% 1.79%

EPS 0.83 2.23 2.76

*Disclaimer on the Financial Statements*

1) HP also sells other products than PC’s, but for the exercise we consider all HP products financial numbers to calculate the different periods ratios ,and financial ratios.- since it’s very hard to get each financial account for the PC’s business, we decide not to prorated by a factor because all the financial account must be moved in the same way, and we think this can bias the results.

2) Financial statements information was obtained at Yahoo Finance.

Inventory:

If we match HP’s inventory levels to Dell’s (1.23% - inventory/sales), we get the new HP inventory value of $1.28M. Assuming an inventory holding cost of 30%, we get a $2.02M reduction in COGS, so the same increase in GP

Accounts

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