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HP Notebooks-Market/Submarket Analysis

HP is a global leader in the notebook PC market. The company sees a continuing change in the structure of production networks as more production is outsourced and moved overseas. As competition in the computing market intensifies, HP notebooks are designed to assist PC market by providing timely and critical market intelligence necessary to aid in strategic and tactical planning for the fastest growing market in the world. Emerging Submarkets The notebooks market consists of several product groups or submarkets. Traditional submarkets include individual and corporate consumers.

Also, it is possible to identify such market segments as small and middle size businesses and enterprise customers. Emerging submarkets involve (1) thin and light notebooks (equipped with a 12-15’ screen and weighing over 4lbs) and (2) “transportables computers (screens above 17’ and marketed as desktop replacements) and tablets (pen-based portable PCs)” (Consumer Notebook Market Eclipses, 2006). Accessories for these types of products is the major submarket in the electronics industry. Actual and Potential Market and Submarket Size

The notebooks market is marked by increasing capital activity over the past 5 years. It is estimated that average annual returns are anticipated to exceed 135 over the next 10 years, with investment alternatives performing at single

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digit growth rates (approximately 7 percent to 9 percent). According to recent financial data, HP notebooks capture 15. 6% market share and revenue totaled $81. 8 billion. This market involves two broad segments: small and middle size businesses (68% market share), and enterprise customers (32 % market share). The main submarkets are individual and corporate consumers.

The former captures about 47% and the latter is about 53% of all sales. Thin notebooks captures 85% of the market, and tablets – 15% (Consumer Notebook Market Eclipses, 2006). More and more consumers will want their everyday appliances to be Internet-ready and able to think for themselves. These areas are where PC and notebooks can find and exploit opportunities. It’s always hard to say how long any given technology will stick around, but given PC and notebooks company all the applications and infrastructure HP is going be around for a while (Moltzen, n. d. ).

Market and Submarket Growth and Profitability “HP’s unit shipments for the notebook segment worldwide grew nearly 21 percent quarter over quarter, almost 1. 4 times the industry growth rate, according to the analyst firm’s fourth quarter analysis” (HP Reclaims No. 1 Notebook Market, 2005). Financial forecast suggests that 45. 6% of revenue will come from notebooks and 43. 1% from desktops in 2007. In a year, notebooks will capture 50% of revenue (Ferguson 2006). Submarkets growth (2005-2010) suggests that consumers notebooks will capture 20% CAGR versus 15% for corporate submarket.

It is expected that the market will grow with transportables and tablets “of 31% and 54% from 2005 through 2010, respectively (increasing from an aggregate 8% of the mix today to over 17% in 2010)” (Consumer Notebook Market Eclipses 2006). For instance, in 2005, “the adjustments included a $788 million tax charge” (). Distribution System HP on-line purchases help connect customers with producers directly, thus potentially reducing the importance of intermediaries. In so doing, HP increases profits by dealing directly with the customer and saving on distributor spending.

However, HP now has to assume some functions which were previously performed by distributors including communications, warehousing, bulk breaking, providing assortment, physical delivery, financing and after-sales service. HP distributed notebooks through the national distributors and electronic retail stores (www. hp. com). Trends and Developments As any company, HP looks for new trends in business development. Better compression technologies have existed for some time now, but notebooks success is due to the relatively open nature of the format.

There appears to be a mismatch between the users’ technology incorporation cycle and the technology introduction cycle. The main technological innovations include “multicore processors, wide-screen options, smaller interfaces, longer battery life” (Consumer Notebook Market Eclipses 2006). Just when the customer feels comfortable with a given technology that they have acquired, a new version comes along making the earlier one obsolete. However, there are compensating gains in software and IT services jobs, and U. S. consumers and businesses enjoy the benefits of cheaper computers (Steep Discounts Usher 2005).

Key Success Factors The main success factor is innovative solutions and low price proposed by HP to its consumers. The company looks for ways to deliver notebooks at a lower cost, smaller size, and higher speed. The main strategies integrate technology refresh provisions early in the design process of major systems and components which allow upgrades during development, production and system operation. Such initiatives would eventually replace extraordinary actions required to maintain suppliers of obsolete parts and components (www. hp. com).

HP follows the principles: focus on the user, use standardized technology, or complement existing technologies. HP notebooks market is based on differentiation strategy. This allows HP to shift its focus to brand image and price reduction measures. Appendix 1. Current Market http://www. currentanalysis. com/h/2006/IntelNotebookLead-6223. asp 2. Market and Submarket Growth 2004 (23%) 2005 (27%) 2006 (36%) 3. In 2007, 45. 6% of revenue will come from notebooks and 43. 1% from desktops

References

1. Consumer Notebook Market Eclipses Corporate For First Time — Positive for HP, Apple, Gateway.2006. <http://ce. seekingalpha. com/article/8956> 2. Ferguson, S. Will the Notebook Market Hit a Tipping Point in ’07? December 19, 2006. <http://www. eweek. com/article2/0,1895,2074603,00. asp> 3. HP Reclaims No. 1 Notebook Market Share Worldwide. Business wire, 2005 March 1. <http://www. findarticles. com/p/articles/mi_m0EIN/is_2005_March_1/ai_n11835002> 4. Moltzen, E. The Chart. N. d. <http://www. crn. com/weblogs/thechart/blog. jhtml? id=196702377> 5. Steep Discounts Usher in Holiday Shopping. Manila Bulletin, November 28, 2005:   www.hp.com

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