The Hewlett-Packard and Compaq Merger - Case Study Example

Project Review Report Focus of Study With every organization wanting to expand their reach and make an imprint in various markets, there will be enough opportunities for it, to make that impression. So, when the organization has enough opportunities, it can set targets and formulate various strategies to achieve those targets and thereby beat off the competitors. When two competing organizations has the same number of good opportunities and has equal standing, these organizations could explore the possibility of merger. Although, in most cases, the two competing organizations will try to go one up, in some cases the rivals could come together in the form of merger for the benefit of both the parties. This is what happened during the merger of Compaq and Hewlett Packard, which is part of the study. Both Compaq and HP are long time rivals in the field of computer hardware and components. However, looking at the benefits of their merger, both the companies as part of each others’ strategic management initiated the merger drive. So, in the initial phases, a lot of issues regarding the merger was analysed in an overview kind of manner. That is, in the initial phases, key strategic management issues that preceded the merger on both sides were first focused and discussed. Then as a continuation of that discussion, the key management changes that took place as well as that were initiated by both the companies in the post-merger period were discussed. Initial Designs and Analysis From the research that was done about both the companies in the pre-merger period it is clear that it was not smooth sailing because descendants of HP and Compaq founders opposed the merger. Although key stakeholders in HP particularly the scions of the founders opposed the merger deal, the merger was actualized by the narrowest of margins. The merger was expected to yield savings projected to reach $2.5 billion annually by 2004. (Hoopes 2004). The next important issue that was focused in the initial phase is how both the companies became ‘congruent’ on certain issues. That is, instead of creating a challenge and competition between the two major but different corporations, the HP-Compaq merger suggested that the cooperation will give much better results for the both of two corporations. By sharing experiences and Trade Marks, the merger (but of course based on the long term results) was expected to aid both the companies or the combined entity to reach the required targets In the initial phase, as part of the designs and synthesis of ideas, research and analysis was done on both the companies including the focus and strategy leading to the merger. Compaq Computer Corporation, American PC Company, was founded in 1982 by Rod Canion, Jim Harris and Bill Murto. It existed as an independent corporation for 20 years exhibiting good growth until 2002, when it merged with HP. Although Compaq was growing at a good rate as an independent corporation in the server market and retail PCs, as part of strategic management policy it wanted to expand its reach, particularly in the consulting arena. This is the main crux of the merger initiative of Compaq. Consulting the Corporates regarding the IT structures was a growing field and so Compaq bought Digital Equipment in 1998 to actualize that goal. Then as an important step towards its transition as a consulting power providing corporate solutions Compaq and its CEO Michael Cappellas utilized the offer put forward by Carly Fiorina of HP to actualize the merger. This part of the merger plan was cornered by doing extensive research in the web. With little information about the company’s process particularly in the merger period in any primary sources or the official press releases of the company, external research was done to corner in on the motives. Also, as part of designs and synthesis of ideas, research on HP was also done. HP was already a world leader in printer and print-cartridge products, however its strategic management policy was to enter the PC segment, thereby become a full-service technology company. A full service technology company who can do all the IT related works and thereby take on the leaders Dell and IBM. “Fiorina argued, the merger would create a full-service technology firm capable of doing everything from selling PCs and printers to setting up complex networks.” (Hoopes 2004). It would also improve HP’s market share across the hardware line and double the size of HP’s service unit—both essential steps in being able to compete with industry-giant IBM. (icmrindia.org). This motive of HP was grasped from the interviews of the key HP authorities, who were more than willing to merge with Compaq. Thus, in the initial phase, both the companies motives to merge was clearly focused as part of the research, thereby giving the paper a good head start. Options Analysis The next part of the research and analyse, that was carried out in the initial phase, was mainly on the common factors that brought both the companies together. That is, both the companies focused on some common options and that accentuated the merger. That is, although both the companies had certain specific strategic management policies respectively, there was a key value adding common opportunity for both the companies in the consulting arena. This is the key part of the initial phase work because; it only gave a clear picture about the merger initiative. Consulting space or enterprise space consists of big businesses who sign multimillion-dollar computing contracts to set up complete IT structures. Server sales will mainly open the door to consulting contracts, which then can be extended to database management, sales and software licenses. With the merger and Compaq under its wing, the new HP manufactures the highest number of servers in the world. This important value adding opportunity in the consulting arena was effectively actualized because both HP and Compaq had already started initiatives in that direction. That is, like Compaq, HP also had plans to enter the consulting arena focusing on the corporates and Compaq’s initiatives and acquisitions in that front, pushed HP for the merger plans. Thus, it is clear from this research and focus that both the companies were on the path of merging, which gave a fit case for study. Recommendations for future work and project implementation The important part of the study is that how the merger is functioning and what aspect need to be focused by the merger entity to actualize a better case scenario. That is, the current working of the merged entity needs to be analysed, so that the study can corner in on the areas, where the merged entity is not working well. This will lead to formulation of certain strategies, which can be implemented to correct the wrongs and optimize the functioning of the merged entity. So, the future work can mainly focus on the current functioning of the merged entity and how certain faults can be corrected. That is, HP and Compaq merger resulted in the consolidation of both the companies’ separate product lines into four major operating groups. The four groups which the merged entity focused and dealt are services, imaging and printing, access devices, and information technology infrastructure. These areas needs better analysis, so that faulty areas can be cornered in and ironed out for better functioning of the merged entity. References Hoopes, CL 2004, The Hewlett-Packard and Compaq Merger: A Case Study in Business Communication, viewed on January 11, 2010 http://www.awpagesociety.com/images/uploads/HP-Compaq-case.pdf icmrindia.org, HP’s Compaq Acquisition (B), viewed on January 11, 2010 http://www.icmrindia.org/casestudies/catalogue/Business%20Strategy3/HP %20Compaq%20Acquisition%20B.htm Read More