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Performance and market share

With competition and price erosion considerably going up during the second half of the year 2005, HP withstood the challenge by making use of the dual-brand strategy in order to maintain sales and revenue. This more was apparent during March 2005 when HP reduced the Average Selling Price — ASP of its Compaq branded systems to $1016 that was more than $200 less compared to the ASP of the entire industry in order to compete against brands such as Gateway and Acer offering lower prices. In the meantime, HP placed its Tier 1 HP brand aimed at the mid-tier consumer.

While its Compaq brand shielding the entry-level market, HP was capable of maintaining high ASPs with its Pavilion brand. This move lend HP a balanced approach to target the market in second half of 2005 and permitted HP to realize year-to-year unit sales and revenue growth of 44% and 20% respectively as revealed in Exhibit –I. (Notebook Price Erosion Challenges Leading Manufacturers in U. S. Retail Market) While HPs product strategy aimed at the mid-tier segment, Toshiba’s market strategy was focused on the high and low end of the market.

During November, Toshiba presented two smashing hits with the below $500 systems

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that permitted Toshiba to corner a bigger percentage of entry-level sales. On the other hand Sony which is well-known for offering premium price, cut its ASP by 14% in the second half of 2005. But, the overall retail notebook ASPs across the industry went down by 20% during the same period. Whereas Sony’s Notebook have all along commanded a price premium compared to other systems, the retail forces does not permit any more.

Because of the severe price erosion in this channel, Sony’s premium target market base is getting tighter. (Notebook Price Erosion Challenges Leading Manufacturers in U. S. Retail Market) The result is evident in its result for the second half of 2005 which shows it went up by 8% as against the same period last year and its revenue sales eroded by 7% year-to-year. The outcome was that Acer crossed Sony to occupy the fourth place in the Notebook manufacturers in the U. S. retail for the month of November.

Among the three manufacturers, HP, Toshiba and Sony’s, HP’s second half results for 2005 recorded the highest establishing that its balanced product mix strategy could successfully defend against the value players even maintaining a strong growth in revenue. During the second half of 2005, the market share of HP was 39%, while the corresponding figures for Toshiba was 27% and Sony 9%. Nevertheless it is important to note that HP did not only better its performance over Toshiba and Sony, it also recorded the highest year-to-year growth in sales revenue and unit share.

The graph of US Retail Notebook market share by price band for the second half 2005 is shown in Exhibit –I. (Notebook Price Erosion Challenges Leading Manufacturers in U. S. Retail Market) In keeping with enhancing its image, HP has included its popular collection of electronic services e-center into its new Pavilion Notebook PC models. Through e-Center, one can get easy access to an important set of links with customized e-services, giving users with a broad array of business-productivity and service support solutions.

Through the e-Center people are able to take advantage of useful services such as file backup, remote printing and duplication, the capability to send and receive faxes through the Internet, free downloadable music tracks, and immediate connectivity to the HP SMB support site. (HP Pavilion Notebook PCs post 150 percent increase in market share and 203 percent unit sales since October – Product Information) The brand image of HP with which everybody associated is its innovation. This is backed by two-thirds of the respondents.

Just half of the respondents view it as a company which accords value to customer’s time and an identical number say that HP responds promptly. However HP’s performance on the front of customer orientation is not as high particularly as compared to other parameters. A considerable portion can be attributed to the advertisement blitzkrieg which keeps HP racing ahead. (DataQuest–IDC India Report: CSA 2004) The objective of HP is to be the largest vendor in Europe, the Middle East and Africa based on revenues. HP sells more PCs compared to Dell and IBM taken together.

According to Vice President of IDC’s European Systems Group, HP maintained a considerable gap between itself and its competitors and a clear leadership. Everything is happening as per the plans based on a three-year integration roadmap in spite of the predictions that the merger of the two big companies i. e. HP and Compaq would involve a very large risk. (HP in Europe: Number One and Then Some) HP’s weaknesses seem to be on the screen display front where Lenovo soars over. Lenovo offers a widescreen on its 15. 4” T60.

Lenovo has in a manner been compelled to offer their flagship T-series with the choice of widescreen, there are fundamentally three business reasons for the company favoring to offer widescreen on the T-series. However this year Dell and HP shifted almost all of their business line laptops to widescreen. Due to this Lenovo appeared like the odd man out and probably old-fashioned for not having a widescreen offering in their T series. (Lenovo ThinkPad T60 Widescreen Review) HP’s advantages over the competition in the Notebook segment lies both in function as well as in form.

HP offers a good, appropriately documented and frequently updated online support from the manufacturers as regards firmware releases, bug fixes, new drivers and other information concerning the Notebook. For instance IBM’s notebook lacks FireWire Connector or a media card reader that is both a dire necessity for latest applications. HP Notebooks have certain differentiating features like integrated memory card reader, DVDRW drive with dual-layer capability, 15” screen, molded laminate construction for wear and tear resistance. It has a serial port which is very uncommon nowadays.

The most attractive feature is that it is priced less compared to the competition. The overall design is sleek, light and compact as also functional and performance is great for all normal office work. (HP’s nc6120 Notebook means business) Exhibit – I.

References

Baxter, Andrew. Lenovo ThinkPad T60 Widescreen Review. 28 November, 2006. <http://www. notebookreview. com/default. asp? newsID=3368&review=ThinkPad+T60+Widescreen> Chhabra, Mohit. DataQuest–IDC India Report: CSA 2004. <http://www. dqindia. com/content/top_stories/104021101. asp>

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