The External and Internal Environments Analysis of HP-Compaq Merger Integration
PEST Analysis
Political. The international IT and electronics industries have been characterized with intensive competition. Electronics and IT companies are constantly reviewing their achievements as well as the competitors’ in order to come up with better business strategies in an effort to best all other existing industry rivals. With the merger and acquisition strategy between HP and Compaq, members of the IT and electronics industry all over the world were threatened with the intensified effort that could result from the integration. Others were surprised because mergers and acquisition strategies may also result to negative implications on the part of the merging companies particularly when differences in the context of strategies, culture and goals fail to be fully integrated.
Economic. For HP and Compaq, the merger will increase the competitiveness of the previously independent companies in order to outdo the achievements of highly aggressive competitors. Both HP and Compaq sought means to add value to their existing products and services in order to increase the level of satisfaction among their clients and customers which were made possible through the merger. Once satisfaction levels among clients and customers are met, HP-Compaq expect better economic competitiveness within the international IT and electronics industry.
Social. The existing companies have been on guard when it comes to new market trends, new market opportunities, new customer bases, and technological infrastructure available for utilization. The merger between HP and Compaq will most likely result to better social activities as sponsored by the merged companies. Social and civic activities that were previously independently supported by HP and Compaq will be carried out in new perspective due mostly to the fact that the merger could expose unexpected factors that could make the new company unstable.
Technological. One of the primary reasons for the merger of HP and Compaq are the companies’ drive towards innovation and development in their products and services. The merger enabled relatively stronger research and development efforts for the benefit of the new company since it is now characterized with more intensive concerns to come up with IT products and services that will cater to existing as well as new clients and customers thereby increasing the companies’ consumer bases. At present the electronics products of HP have been observed to undergone evolution with the support facilities which were made available by Compaq.
Five Forces Analysis
Suppliers. The merger resulted to review and assessment of the existing suppliers of both HP and Compaq since the integration strategy implied the relatively fewer contracts between companies that provide similar services and raw materials to HP and Compaq. However, the integration likewise resulted to innovation in technology which necessitated new contracts with suppliers that can provide the new services and raw materials needed by HP-Compaq as a single corporation.
Buyers. With the promised added value on the products and services of the HP-Compaq merger, clients and customers of the company could expect new and better product lines and service offers as one of the primary objectives of the integration strategy. Buyer power will be intensified in this respect since the HP-Compaq will be offering new electronics products and services in order to set new market trends in the international IT and electronics industry. .
Competitors. Competitors of HP and Compaq were somehow divided when it comes to the overall implications of the merger to the international IT and electronics industry. There are those who believe that the merger will result to the continuous weakening of both companies compared to their other stronger competitors in the international IT and electronics industries. While some believe otherwise due to the increased capability of HP and Compaq as a single operating company to build up and strengthen the market positions in the future years that will come.
Substitutes. Substitute products and services are increasing within the international IT and electronics industry which contributed to the integration decision between HP and Compaq. With the conglomerate efforts between the new HP-Compaq corporation, it is expected the substitute products and services that competes with the provisions and offers of HP-Compaq will be lessen due to better production and manufacturing processes and technological infrastructures that can not be afforded by small rival companies.
New Entrants. New entrant in the electronics and IT industries are confronted with relatively more difficult entry to the international market due primarily to highly aggressive competition between and among large corporations. It is common knowledge that business operations and facilities that characterize both the international IT and Electronics industries are very expensive and sophisticated. Such factors serve as strong barriers of entry to the industries where HP-Compaq belongs.
SWOT Analysis
Strengths. The merger between HP and Compaq will increase the companies’ competitiveness when it comes to the possible new product lines and services that they will offer as a single company to the clients and customers. The integration strategy likewise resulted fewer market competition within the context of large international corporations that also belong to the international IT and electronics industry. Costs will be reduced as expenditures in business operations such as manufacturing and production are now handled and managed as a single proprietorship. The research and development arm of HP and Compaq can now work together as single company with similar technological and economic goals.
Weaknesses. The integration strategy between HP and Compaq, on the other hand, resulted to the need to lay off thousands of employees since their services will be no longer needed particularly those who have similar functions. Cultural integration within the workplace is also a serious issue since HP and Compaq are composed of different individuals and employees who are used to different working environments as well as career expectations. The Human resource department will be confronted with problems and issues regarding the new members of the company’s workforce. Technical operations will also experience drawbacks from the changes that will transpire within the business processes of the company.
Opportunities. The issues and problems that may result from the merger in terms of workforce differences can be perceived as an avenue fro improvement when it comes to workplace culture of the company. The management should be able to device means to exhaust diverse knowledge and skills that characterize the members of the company’s labor force. Operations should likewise be restructured and reengineered in order to come up with better manufacturing and production processes that take into account efficiency and product quality.
Threats. The failure of the merger strategy is also possible if HP and Compaq are not able to resolve issues caused by differing workplace cultures. The vulnerability of the merged company is likewise exposed since it is only a couple of years since the merger contract was signed. There is still so much to do for the full implementation of the merger strategy and existing competitors will aggressively take the opportunity of the changes that transpired within the new HP-Compaq company. Both internal and external factors may contribute to the challenges and difficulties that HP-Compaq will experience in the future in the effort to succeed in the international market competition.
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