Reorganizing HP

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Case Details:

Case Code : HROB009
Case Length : 10 Pages
Period : 1990 - 2001
Organization : HP
Pub Date : 2001
Teaching Note : Available
Countries : USA
Industry : Computers and Technology

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Background Note

Stanford engineers Bill Hewlett and David Packard founded HP in California in 1938 as an electronic instruments company. Its first product was a resistance-capacity audio oscillator, an electronic instrument used to test sound equipment. During the 1940s, HP's products rapidly gained acceptance among engineers and scientists. HP's growth was aided by heavy purchases made by the US government during the Second World War. Till the 1950s, HP had a well-defined line of related products, designed and manufactured at one location and sold through an established network of sales representative firms.

The company had a highly centralized organizational structure with vice-presidents for marketing, manufacturing, R&D, and finance. HP had 90 engineers in product development. To have a clear demarcation of goals and responsibilities, and to promote individual responsibility and achievement, HP began to organize these engineers into smaller, more efficient groups by forming four product development groups...

The Fiorina Reorganization

Fiorina immediately introduced several changes, in an attempt to set things right at HP. She began by demanding regular updates on key units. She also injected the much-needed discipline into HP's computer sales force, which had reportedly developed a habit of lowering sales targets at the end of each quarter. Sales compensation was tied to performance and the bonus period was changed from once a year to every six months. HP Labs, the company's R&D center had only been making incremental improvements to existing products...

HP in Trouble

Apart from these structural problems, Fiorina's tenure reportedly did little to improve HP's business performance. The market share gains made in Fiorina's first year as CEO had begun to recede in late 2000. While HP continued to dominate the inkjet and laser printer business with a 41% market share, its PC share had fallen from 7.8% to 6.9% for the 12 months ended January 31, 2001...


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