Description
red inks are still for revision
HEWLETT-PACKARD COMPANY IN VIETNAM
Case Prepared by Dr. Geok Theng Lau
BUSINESS PROFILE
In September 1995, John Peter, a Marketing Manager of Hewlett-Packard Asia
Pacific (HPAP) was evaluating HPAP’s long term strategic investment options for doing
business in Vietnam. HPAP was a subsidiary of Hewlett-Packard (HP) Company and its
headquarters is located in Singapore. The United States had lifted its embargo on the
country in February 1994, and the country had adopted an open-door policy and
normalized relationships with many other countries, including China.
HP had established its presence in countries like Hong Kong, Singapore, Japan,
Taiwan, and Korea for more than 25 years. It had extensive experience entering into
emerging Asian markets such as China, Indonesia, and the Philippines. Though a
subsidiary of an American company, HP Southeast Asia had a largely Asian management
team. They shared similar norms, practices, beliefs, customs, and languages with many
local markets.
I. CURRENT SITUATION
A. Current Performance
In 1995, HP was a sprawling corporate giant with annual sales in excess of US$
25 billion and about 90,000 employees worldwide. It was involved principally in the
manufacture, supply, marketing, and distribution of computer-based products, test and
measurement products, medical and analytical products, electronic components and
Information Technology related service support. In 1985, HP was ranked by a Fortune
magazine survey as one of the two most admired companies in America. In 1995, the
bulk of the company’s business, a good 76.6% of the net revenue, came from
computational products and services.
HP had established its presence in countries like Hong Kong, Singapore, Japan,
Taiwan, and Korea for more than 25 years. It had extensive experience in entering into
emerging Asian markets such as China, Indonesia, and the Philippines. Though a
subsidiary of an American Company, HP Southeast Asia had a largely Asian
management team. They shared similar norms, practices, beliefs, customs, and
languages with many local markets.
HP had, over the years, built up many major customer accounts, some of which
were multinational corporations with offices worldwide. It had developed a strong
reputation and brand identity. The HP name was often synonymous with quality products
and high technology, although it be at a premium price. HP could not be aggressive in
product pricing due to its higher cost structure and overhead. HP had, for many years,
come up tops in many independent customer satisfaction surveys conducted by
organizations such as Datapro and IDC.
HP was the industry leader in open systems technology and solutions and it had
a specialized knowledge and extensive experience in this area. HP moved into RISC
Technology long before DEC, IBM, and other rivals and was now collecting the dividends.
HP was strong in client/server computing involving PCs, workstations, and large systems
and servers. HP opened up its proprietary HP 3000 systems and it had become a
whirlwind of success.
HP Southeast Asia had its headquarters in Singapore with fully owned
subsidiaries in Singapore, Malaysia, and Thailand. In Indonesia, Philippines, and Brunei,
HP appointed distributors. In addition, HP had a joint venture in Indonesia with its
distributor, Berca, called HPSI which was primarily an IT services company.
The annual revenue and net income for year 1994 was USD 24,991,000 and
USD 1,599,000, respectively.
B. Strategic Posture
Mission
To provide customers with devices superior to any competitive offering in
performance, quality, and overall value.
Vision
None mentioned
Goals
None mentioned
Objectives – “The HP Way”
i.
Profit – To achieve sufficient profit to finance our growth and to achieve
ii.
corporate objectives through self-generated resources.
Customers – To provide products and services of the highest quality and the
greatest possible value to customers, thereby gaining and holding their respect
iii.
and loyalty.
Fields of interest – To participate in those fields of interest that build upon our
technology and customer base, that offer opportunities for continuing growth,
iv.
and that enable us to make a needed and profitable contribution.
Growth – To let growth be limited only by our profits and ability to develop and
v.
produce innovative products that satisfy real customer needs.
People – To help HP people share in the company’s success which they make
possible; to provide employment security based on their performance; to ensure
them a safe and pleasant work environment; to recognize their individual
achievements; and to help them gain a sense of satisfaction and
accomplishment from their work.
vi.
Management – To foster initiative and creativity by allowing the individual great
vii.
freedom of action in attaining well-defined objectives.
Citizenship – To honor our obligations to society by being an economic,
intellectual, and social asset to each nation and each community in which we
compare.
Strategies
i.
Majority Joint Venture with Local Partner
HP could use the joint venture strategy to enter the Vietnam market. In
Southeast Asia, a HP joint venture existed in Indonesia where an agreement
was entered into with Berca, a distributor, to set up a company, HPSI. Berca
retained the primary-responsibility for the sale of HP products, while HPSI was
charged with providing HP services to the marketplace. This option required less
initial investment, compared to the direct presence strategy, thus reducing the
risk involved. A local joint-venture partner could be a valuable resource where
“guanxi” was vital for doing business.
ii.
Distribution (Independent Partner)
HP could appoint one or more independent organizations as distributors,
as well as service and support providers. In the initial years, it was likely that
products from each business unit would be sold only through one distributor,
although the same distributor might be chosen for the products of more than
one business unit.
The strategy offered a quick start-up for HP and was especially suited for
the off-the-shelf, mass-market, plug-and-play type of products offered by CPO.
To be successful, HP commit resources to train and develop the distributor to
build up their service capability.
iii.
Distribution (Ex-HP Employee Start-Up)
A modified form of the entry strategy was to appoint a start-up company
founded by ex-HP employees as its distributor. These ex-HP employees could
be trusted to deliver quality service. In the future, this company would probably
be more obliged to pay off the goodwill shown by HP in giving it the opportunity
to be HP’s service provider in Vietnam. When HP decided to establish a direct
presence in Vietnam, the former employees could also be rehired as key
managers in the new subsidiary.
iv.
Cooperative Venture/Franchising
Investment in form of a cooperative venture was also viable. HP could
initially franchise the support services and provide advisory services to a partner
on how to establish and manage a support business. HP could act as a supplier
of spares to its Vietnamese partner. HP would not have to take risks incurred in
direct investment, and trade ties could still be forged because of the special
relationship with a local firm. At present, Singapore firms like Rothmans of Pall
Mall and Cold Storage had established such ventures with Vietnam firms Agrex
Saigon and Saigon-Intershop, respectively.
v.
Direct Presence
HP could have a direct presence in Vietnam by setting up a subsidiary
or representative office to provide marketing, sales support, and management
services. This strategy required the largest investment and commitment of
resources. It also offered maximum control and flexibility and the best payoff.
HP’s direct presence in the market would allow it to keep in touch with
customers. HP would gain invaluable access to markets and customers. To
reduce the risk, uncertainty, and investment requirement, it was possible to start
off with limited staff on a smaller scale and increase staffing as required.
Policies
i. Getting the highest return out of the company’s most important asset, its people.
ii. Getting the best output from a given technology.
iii. Giving the customer the best performance for price paid.
C. PROBLEM OF THE CASE STUDY
? Small market
? Market growth was uncertain
? Computer industry was in its infancy – distribution channels for the industry was
not fully developed.
II. STRATEGIC MANAGERS
a. Board of Directors
Bill Hewlett – Founder
Dave Packard – Founder
Lew Platt – President, Chief Executive Officer, member of the board
b. Top Management
Each business unit was represented at HP’s top management and was
more or less run as an independent entity within HP.
i.
ii.
iii.
iv.
v.
vi.
vii.
Computer Systems Organization
Computer Products Organization
Tests and Measurements Organization
Analytical Products Group
Medical Products Group
Components Group
Worldwide Customer Support Organization
III. EXTERNAL ENVIRONMENT
A. Societal Environment
a. Economical
? Vietnam economy opening up/U.S. embargo lifted in February 1994
? Vietnam under-urbanized
? Not a fully convertible currency
? Reduced corporate income tax rate
? Bad banking system
? Lowest average wages in Southeast Asia
? High inflation rate
b. Technological
? Industries are inefficient
c. Political-Legal
? Political instability
d. Sociocultural
? Young population
? Well-educated workforce
? Guanxi
B. Task Environment
? IT System in Vietnam has potential
? Bad Telecommunications System
? IT 2000 program
? Financial Services Market
? High Competition
? Dropping computer prices.
III. INTERNAL ENVIRONMENT
A. Corporate Structure
None mentioned
B. Corporate Culture
i.
Focus on capable, innovative, well-trained, and enthusiastic people
ii.
Gaining customer respect
iii.
Employees should share in HP’s success
iv.
Pleasant work environment
v.
Satisfaction and sense of accomplishment from work
vi.
Recognize individual achievements
C. Corporate Resources
? Marketing
Strong reputation and brand identity
Product diversification
Good relationship with multinational companies
? Finance
USD 24,991,000 revenue in 1994
USD 1,599,000 net income in 1994
76.6% of net revenue came from computational products and services
Higher cost structure and overhead
? Research and Development
Reinvested 10% of revenue in past 5 years for the products and services
?
Operation
Formed relationships with Vietnamese distributors
Industry leader in open systems technology and solutions
Ranked first in customer satisfaction
Strong in client/server computing
Joint venture in Indonesia with its distributor, Berca
?
Human Resources
90,000 employees worldwide
Commitment to employees
?
Information Systems
None Mentioned
IV. ANALYSIS OF STRATEGIC FACTORS
A. Situational Analysis (SWOT)
a. Strengths
Best performer among computer hardware and service vendors
Recognized as leader in open-systems client-server computing
Ranked first in customer satisfaction
Ranked first in UNIX Computing
Worldwide support and service infrastructure
Strong network management offering
b. Weaknesses
Difficulty to provide support to end-users
Increasing cost of sales
c. Opportunities
Potential growth is high
IT-2000 plan by the Vietnam government
Financial services market
Education of Vietnamese
Vietnamese workforce
d. Threats
Lack of normalized ties between the US and Vietnam
Distribution channels and customer loyalty are low
Skilled local expertise in IT is limited
Computer products are less differentiated, for that buyers are sensitive to quality,
technology, and price
B. Review of Current Mission and Vision
As to mission, HP accomplished it which is to provide customers with devices
superior to any competitive offering in performance, quality, and overall value. I said that
they accomplished it because their net income increased by USD 422,000, that means
the consumers were patronizing their products/services.
As to vision, since HP doesn’t have a vision, I commend to use this vision. “To
produce innovative products, services and solutions that satisfy emerging customer
needs.”
V. STRATEGIC ALTERNATIVES AND RECOMMENDED STRATEGY
A. Strategic Alternatives
i.
Advertise variety of products and services to provinces.
ii.
Tie up with multinational corporations.
iii.
Expand business in different countries in Asia.
B. Recommended Strategies
Expand business in different countries in Asia to take the advantage of booming
market in Southeast Asia, and to have more market share and profitability.
VI. IMPLEMENTATION (Action/Steps to Implement the Recommendation)
?
IT 2000 – Establish relationship with MOSTE to be implemented by the head of
?
Computer Products Organization
Financial Position – Maintain the good financial position to be implemented by
?
the Finance Department.
Experience with emerging markets – Sustain and utilize experience to be
?
?
implemented by John Peters.
Quality Brand – Maintain the quality identity to be implemented by John Peters.
Guanxi – Develop and maintain local contacts to be implemented by John
?
Peters.
Diversified Products and Services – Respond to market fluctuations to be
?
implemented by John Peters.
Good relationships with multinational – Maintain and seek new relationships to
be implemented by John Peters.
?
IT 2000 – Government commitment should be the factor reviewed monthly by
?
John Peters
Financial Position – Revenue and net income should be the factor reviewed
?
monthly by the top management.
Experience with emerging markets – Business relationships should be the factor
?
reviewed monthly by the top management.
Quality Brand – Customer ratings should be the factor reviewed monthly by the
?
top management.
Guanxi – Good relationships with business partners should be the factor
?
reviewed monthly by the top management.
Diversified Products and Services – Sales should be the factor reviewed by the
?
top management monthly.
Good relationships with multinational – Number of contracts and relationships
should be the factor reviewed monthly by the top management.
doc_785092997.docx
red inks are still for revision
HEWLETT-PACKARD COMPANY IN VIETNAM
Case Prepared by Dr. Geok Theng Lau
BUSINESS PROFILE
In September 1995, John Peter, a Marketing Manager of Hewlett-Packard Asia
Pacific (HPAP) was evaluating HPAP’s long term strategic investment options for doing
business in Vietnam. HPAP was a subsidiary of Hewlett-Packard (HP) Company and its
headquarters is located in Singapore. The United States had lifted its embargo on the
country in February 1994, and the country had adopted an open-door policy and
normalized relationships with many other countries, including China.
HP had established its presence in countries like Hong Kong, Singapore, Japan,
Taiwan, and Korea for more than 25 years. It had extensive experience entering into
emerging Asian markets such as China, Indonesia, and the Philippines. Though a
subsidiary of an American company, HP Southeast Asia had a largely Asian management
team. They shared similar norms, practices, beliefs, customs, and languages with many
local markets.
I. CURRENT SITUATION
A. Current Performance
In 1995, HP was a sprawling corporate giant with annual sales in excess of US$
25 billion and about 90,000 employees worldwide. It was involved principally in the
manufacture, supply, marketing, and distribution of computer-based products, test and
measurement products, medical and analytical products, electronic components and
Information Technology related service support. In 1985, HP was ranked by a Fortune
magazine survey as one of the two most admired companies in America. In 1995, the
bulk of the company’s business, a good 76.6% of the net revenue, came from
computational products and services.
HP had established its presence in countries like Hong Kong, Singapore, Japan,
Taiwan, and Korea for more than 25 years. It had extensive experience in entering into
emerging Asian markets such as China, Indonesia, and the Philippines. Though a
subsidiary of an American Company, HP Southeast Asia had a largely Asian
management team. They shared similar norms, practices, beliefs, customs, and
languages with many local markets.
HP had, over the years, built up many major customer accounts, some of which
were multinational corporations with offices worldwide. It had developed a strong
reputation and brand identity. The HP name was often synonymous with quality products
and high technology, although it be at a premium price. HP could not be aggressive in
product pricing due to its higher cost structure and overhead. HP had, for many years,
come up tops in many independent customer satisfaction surveys conducted by
organizations such as Datapro and IDC.
HP was the industry leader in open systems technology and solutions and it had
a specialized knowledge and extensive experience in this area. HP moved into RISC
Technology long before DEC, IBM, and other rivals and was now collecting the dividends.
HP was strong in client/server computing involving PCs, workstations, and large systems
and servers. HP opened up its proprietary HP 3000 systems and it had become a
whirlwind of success.
HP Southeast Asia had its headquarters in Singapore with fully owned
subsidiaries in Singapore, Malaysia, and Thailand. In Indonesia, Philippines, and Brunei,
HP appointed distributors. In addition, HP had a joint venture in Indonesia with its
distributor, Berca, called HPSI which was primarily an IT services company.
The annual revenue and net income for year 1994 was USD 24,991,000 and
USD 1,599,000, respectively.
B. Strategic Posture
Mission
To provide customers with devices superior to any competitive offering in
performance, quality, and overall value.
Vision
None mentioned
Goals
None mentioned
Objectives – “The HP Way”
i.
Profit – To achieve sufficient profit to finance our growth and to achieve
ii.
corporate objectives through self-generated resources.
Customers – To provide products and services of the highest quality and the
greatest possible value to customers, thereby gaining and holding their respect
iii.
and loyalty.
Fields of interest – To participate in those fields of interest that build upon our
technology and customer base, that offer opportunities for continuing growth,
iv.
and that enable us to make a needed and profitable contribution.
Growth – To let growth be limited only by our profits and ability to develop and
v.
produce innovative products that satisfy real customer needs.
People – To help HP people share in the company’s success which they make
possible; to provide employment security based on their performance; to ensure
them a safe and pleasant work environment; to recognize their individual
achievements; and to help them gain a sense of satisfaction and
accomplishment from their work.
vi.
Management – To foster initiative and creativity by allowing the individual great
vii.
freedom of action in attaining well-defined objectives.
Citizenship – To honor our obligations to society by being an economic,
intellectual, and social asset to each nation and each community in which we
compare.
Strategies
i.
Majority Joint Venture with Local Partner
HP could use the joint venture strategy to enter the Vietnam market. In
Southeast Asia, a HP joint venture existed in Indonesia where an agreement
was entered into with Berca, a distributor, to set up a company, HPSI. Berca
retained the primary-responsibility for the sale of HP products, while HPSI was
charged with providing HP services to the marketplace. This option required less
initial investment, compared to the direct presence strategy, thus reducing the
risk involved. A local joint-venture partner could be a valuable resource where
“guanxi” was vital for doing business.
ii.
Distribution (Independent Partner)
HP could appoint one or more independent organizations as distributors,
as well as service and support providers. In the initial years, it was likely that
products from each business unit would be sold only through one distributor,
although the same distributor might be chosen for the products of more than
one business unit.
The strategy offered a quick start-up for HP and was especially suited for
the off-the-shelf, mass-market, plug-and-play type of products offered by CPO.
To be successful, HP commit resources to train and develop the distributor to
build up their service capability.
iii.
Distribution (Ex-HP Employee Start-Up)
A modified form of the entry strategy was to appoint a start-up company
founded by ex-HP employees as its distributor. These ex-HP employees could
be trusted to deliver quality service. In the future, this company would probably
be more obliged to pay off the goodwill shown by HP in giving it the opportunity
to be HP’s service provider in Vietnam. When HP decided to establish a direct
presence in Vietnam, the former employees could also be rehired as key
managers in the new subsidiary.
iv.
Cooperative Venture/Franchising
Investment in form of a cooperative venture was also viable. HP could
initially franchise the support services and provide advisory services to a partner
on how to establish and manage a support business. HP could act as a supplier
of spares to its Vietnamese partner. HP would not have to take risks incurred in
direct investment, and trade ties could still be forged because of the special
relationship with a local firm. At present, Singapore firms like Rothmans of Pall
Mall and Cold Storage had established such ventures with Vietnam firms Agrex
Saigon and Saigon-Intershop, respectively.
v.
Direct Presence
HP could have a direct presence in Vietnam by setting up a subsidiary
or representative office to provide marketing, sales support, and management
services. This strategy required the largest investment and commitment of
resources. It also offered maximum control and flexibility and the best payoff.
HP’s direct presence in the market would allow it to keep in touch with
customers. HP would gain invaluable access to markets and customers. To
reduce the risk, uncertainty, and investment requirement, it was possible to start
off with limited staff on a smaller scale and increase staffing as required.
Policies
i. Getting the highest return out of the company’s most important asset, its people.
ii. Getting the best output from a given technology.
iii. Giving the customer the best performance for price paid.
C. PROBLEM OF THE CASE STUDY
? Small market
? Market growth was uncertain
? Computer industry was in its infancy – distribution channels for the industry was
not fully developed.
II. STRATEGIC MANAGERS
a. Board of Directors
Bill Hewlett – Founder
Dave Packard – Founder
Lew Platt – President, Chief Executive Officer, member of the board
b. Top Management
Each business unit was represented at HP’s top management and was
more or less run as an independent entity within HP.
i.
ii.
iii.
iv.
v.
vi.
vii.
Computer Systems Organization
Computer Products Organization
Tests and Measurements Organization
Analytical Products Group
Medical Products Group
Components Group
Worldwide Customer Support Organization
III. EXTERNAL ENVIRONMENT
A. Societal Environment
a. Economical
? Vietnam economy opening up/U.S. embargo lifted in February 1994
? Vietnam under-urbanized
? Not a fully convertible currency
? Reduced corporate income tax rate
? Bad banking system
? Lowest average wages in Southeast Asia
? High inflation rate
b. Technological
? Industries are inefficient
c. Political-Legal
? Political instability
d. Sociocultural
? Young population
? Well-educated workforce
? Guanxi
B. Task Environment
? IT System in Vietnam has potential
? Bad Telecommunications System
? IT 2000 program
? Financial Services Market
? High Competition
? Dropping computer prices.
III. INTERNAL ENVIRONMENT
A. Corporate Structure
None mentioned
B. Corporate Culture
i.
Focus on capable, innovative, well-trained, and enthusiastic people
ii.
Gaining customer respect
iii.
Employees should share in HP’s success
iv.
Pleasant work environment
v.
Satisfaction and sense of accomplishment from work
vi.
Recognize individual achievements
C. Corporate Resources
? Marketing
Strong reputation and brand identity
Product diversification
Good relationship with multinational companies
? Finance
USD 24,991,000 revenue in 1994
USD 1,599,000 net income in 1994
76.6% of net revenue came from computational products and services
Higher cost structure and overhead
? Research and Development
Reinvested 10% of revenue in past 5 years for the products and services
?
Operation
Formed relationships with Vietnamese distributors
Industry leader in open systems technology and solutions
Ranked first in customer satisfaction
Strong in client/server computing
Joint venture in Indonesia with its distributor, Berca
?
Human Resources
90,000 employees worldwide
Commitment to employees
?
Information Systems
None Mentioned
IV. ANALYSIS OF STRATEGIC FACTORS
A. Situational Analysis (SWOT)
a. Strengths
Best performer among computer hardware and service vendors
Recognized as leader in open-systems client-server computing
Ranked first in customer satisfaction
Ranked first in UNIX Computing
Worldwide support and service infrastructure
Strong network management offering
b. Weaknesses
Difficulty to provide support to end-users
Increasing cost of sales
c. Opportunities
Potential growth is high
IT-2000 plan by the Vietnam government
Financial services market
Education of Vietnamese
Vietnamese workforce
d. Threats
Lack of normalized ties between the US and Vietnam
Distribution channels and customer loyalty are low
Skilled local expertise in IT is limited
Computer products are less differentiated, for that buyers are sensitive to quality,
technology, and price
B. Review of Current Mission and Vision
As to mission, HP accomplished it which is to provide customers with devices
superior to any competitive offering in performance, quality, and overall value. I said that
they accomplished it because their net income increased by USD 422,000, that means
the consumers were patronizing their products/services.
As to vision, since HP doesn’t have a vision, I commend to use this vision. “To
produce innovative products, services and solutions that satisfy emerging customer
needs.”
V. STRATEGIC ALTERNATIVES AND RECOMMENDED STRATEGY
A. Strategic Alternatives
i.
Advertise variety of products and services to provinces.
ii.
Tie up with multinational corporations.
iii.
Expand business in different countries in Asia.
B. Recommended Strategies
Expand business in different countries in Asia to take the advantage of booming
market in Southeast Asia, and to have more market share and profitability.
VI. IMPLEMENTATION (Action/Steps to Implement the Recommendation)
?
IT 2000 – Establish relationship with MOSTE to be implemented by the head of
?
Computer Products Organization
Financial Position – Maintain the good financial position to be implemented by
?
the Finance Department.
Experience with emerging markets – Sustain and utilize experience to be
?
?
implemented by John Peters.
Quality Brand – Maintain the quality identity to be implemented by John Peters.
Guanxi – Develop and maintain local contacts to be implemented by John
?
Peters.
Diversified Products and Services – Respond to market fluctuations to be
?
implemented by John Peters.
Good relationships with multinational – Maintain and seek new relationships to
be implemented by John Peters.
?
IT 2000 – Government commitment should be the factor reviewed monthly by
?
John Peters
Financial Position – Revenue and net income should be the factor reviewed
?
monthly by the top management.
Experience with emerging markets – Business relationships should be the factor
?
reviewed monthly by the top management.
Quality Brand – Customer ratings should be the factor reviewed monthly by the
?
top management.
Guanxi – Good relationships with business partners should be the factor
?
reviewed monthly by the top management.
Diversified Products and Services – Sales should be the factor reviewed by the
?
top management monthly.
Good relationships with multinational – Number of contracts and relationships
should be the factor reviewed monthly by the top management.
doc_785092997.docx