Hp External Analysis Essay Example for Free

Hp External Analysis Essay Hewlett Packard External Environment Analysis Hewlett Packard External Environment Analysis In today’s constantly evolving business world, it is essential for organizations to fully master and incorporate strategic management theory into decision making processes. As the world’s largest technology company, HP brings together a portfolio that spans printing, personal computing, software, services, and IT infrastructure to solve customer problems (Hewlett Packard, 2010). HP is well positioned to outperform the market. The strength of HP’s portfolio is leaner cost structure and accelerating market momentum that gives the confidence to raise the full year outlook (Hurd, 2010)†. One of the most important aspects of Hewlett Packard’s strategy building is an analysis of the external business environment that they operate in. As pointed out in the text Strategic Management. Concepts and Cases Competitiveness and Globalization, â€Å"The firm’s understanding of the external environment is matched with knowledge about its internal environment to form its vision, to develop its mission, and to identify and implement actions that result in strategic competitiveness and above-average returns. (Hitt, Ireland, and Hoskisson, 2009) In this paper, there will be an analysis of Hewlett Packard’s external business environment and its impact on the firm’s strategic business continuity plan, including examination of the three components of the external environment, the general environment, the industry environment, and the competitor environment. External Environmental Analysis Before analyzing Hewlett Packard’s external influences, it is important to highlight the specific processes in an external environmental analysis. This analysis is performed so that firms can correctly identify potential opportunities and threats in their external environment, and involves continually scanning, monitoring, forecasting, and assessing segments of the general environment. Scanning is the process of studying each segment of the general environment to identify upcoming or ongoing changes that can impact the firm. Monitoring refers to observing the changes identified in the scanning process to determine if a particular trend can be singled out which would have significant consequences for the firm. Trend identification is an important aspect of monitoring, as well as recognizing the trend’s effect on the firm’s stakeholders. Forecasting takes the changes and trends that scanning and monitoring produced, and attempts to formulate useful predictions based on those changes and trends. One important factor in forecasting is identifying the time frame and rate of change for trends, so that the firm does not miss an opportunity or get caught off guard by a threat. The final step in external environmental analysis is assessing. The objective of assessing is to determine the timing and significance of the effects of environmental changes and trends on the strategic management of the firm. † (Hitt, Ireland, and Hoskisson, 2009) The prime focus of assessing is determining the impact of forecasted trends on strategic direction of the firm. Assessing decides if an opportunity or threat requires a change in plans, or the firm to take a new direction. General Environment The first component of the external environment is the general environment. â€Å"The general environment is composed of dimensions in the broader society that influence an industry and the firms within it. (Hitt, Ireland, and Hoskisson, 2009) These dimensions of broader society are further classified into six categories. The six categories of the general environment are demographic, economic, political and legal, socio-cultural, technological, and global. A large, global firm like Hewlett-Packard will find opportunities and threats in each aspect of the general environment. The demographic category of the general environment includes factors such as population size, age structure, ethnic mix, income distribution, and geographic distribution. Hewlett-Packard’s market position as the world’s largest technology company requires careful consideration of demographic factors. Hewlett-Packard’s strategic continuity is impacted by this factor because it must identify markets with the correct demographic to provide an opportunity to sell its computer products. Markets with an unfavorable income distribution or an older age structure may need to be avoided until more favorable conditions arise. The economic category of the general environment includes factors such as interest rates, gross domestic product, and business savings rates. Hewlett-Packard’s continuity strategy is impacted by economic factors in a similar fashion as it is impacted by demographics. Markets located in a strong economy represent opportunities for the firm. Additionally, developing economies may provide lower interest rates, or favorable business savings rates. Economies in decline can represent a threat to Hewlett-Packard, as expensive computer purchases may not be a consumer’s focus. The political and legal category of the general environment includes factors such as antitrust laws, taxation laws, and labor laws. Hewlett-Packard can face huge opportunities and threats with changes and trends in legislation. Hewlett-Packard produces a wide range of computer products, and if it is challenged by an antitrust law, it could face a very large threat. However, favorable changes in tax law can represent just as large an opportunity for the firm to save money. The socio-cultural category of the general environment includes factors such as workforce diversity, shifts in work and career preferences, and shifts in product and service preferences. Hewlett-Packard’s business continuity is very concerned with monitoring and planning for preference trends in the computer technology industry. Proper assessment and integration of a new product preference can represent an important opportunity, while missing this preference could end up a threat. The technological category of the general environment includes factors such as product innovations, new communications technologies, and government supported research and development expenditures. Obviously this category caries great significance for a computer based firm like Hewlett-Packard. Product innovations can represent an opportunity for strategic continuity if Hewlett-Packard can incorporate them, a threat to strategic continuity if they cannot. New communications technologies can be utilized to assist in streamlining operations, and represent an opportunity to lower long term costs. The final category of the general environment is global. The global category includes factors such as critical global markets, new industrialized countries, and cultural and institutional attributes. Hewlett-Packard is a global firm, and changes or trends in the global markets must be planned for to ensure strategic continuity.