This paper deals with the analysis of the marketing functions of the new company Hewlett Packard Enterprise headquartered in Palo Alto, California. The Company became an independent market player in November 2015 after the split of Hewlett-Packard Company (HP) into two separate business entities, HP Inc. (HPQ) and Hewlett Packard Enterprise (HPE). The present research proves that HPE has a good reputation on the global market of information technologies (IT). The Company focuses on corporate hardware products and solutions and covers a broad range of high-tech applications. HPE maintains leadership positions in the server equipment segment and offers reliable and high-performance servers and related products, including server-based solutions for the Internet of things (IoT). The paper explores the HPE’s marketing mix and SWOT. It shows some deficiencies in the Company’s product development strategies. The Company currently focuses too much on short-term financial goals.
On November 2, 2015, one of the key players on the domestic and international IT market Hewlett-Packard split into two publicly traded companies: HP Inc. (HPQ) headed by CEO Dion Weisler and Hewlett Packard Enterprise (HPE) with Meg Whitman appointed as CEO. The split followed a long period of troubles in HP business: the price of the Company’s shares fell by about 30 percent in 2015 alone (Tanner, 2015). In the course of the split, HP had to cut over 80,000 jobs, and HPE planned to lay off further 30,000 employees in the near future (Tanner, 2015).
Both companies work mostly on the IT hardware market, although HPE also markets some software solutions and services. HPQ specializes in printing and personal systems, while HPE focuses on data center and IT infrastructure equipment. In the opinion of the HP management, the enterprise business needed breaking the ties with the personal computer part of the corporation that had suffered the most in the recent years (Tanner, 2015).
However, when the HP split occurred, some market analysts believed that HPQ would perform better than HPE and the latter would probably become an acquisition target for other market players. At the same time, Meg Whitman, the chief executive officer of HPE, was optimistic about HPE’s prospects and she denied the possibility of the Company’s acquisition by any other business (Tanner, 2015).
The recent developments have shown that Meg Whitman had had good reasons for her opinion. Since the split of HP, Hewlett Packard Enterprise has demonstrated good financial results. It appears that HPE’s extensive experience in various IT segments and its marketing strategies based on innovative and cost-efficient solutions constitute a sound foundation for the Company’s future commercial success.
This paper deals with the analysis of the HPE’s marketing functions and demonstrates the key factors that determine favorable prospects for the Company on the highly competitive markets of IT solutions despite some weaknesses and threats related to the Company’s business. The first section of this paper contains a short overview of the results of HPE’s business activities. The second section analyses the marketing mix of the Company. The third section presents the relevant SWOT analysis. The conclusion summarizes the results of the case study and outlines the questions for future research.
HPE’s Recent Successes and Setbacks on the Market
Since November 2015, the Company’s general performance has been mostly good. HPE achieved significant success in its hardware business. At the same time, it faced serious issues in the enterprise service area.
In May 2016, most financial analysts made a favorable assessment of the prospects of Hewlett Packard Enterprise Company. In the first quarter of this year, the Company outperformed the earnings forecast of USD 0.4 per share: the actual earnings amounted to USD 0.41 per share, or 2.5% above expectations (Holdsworth, 2016). According to the announced results of the first quarter, Hewlett Packard Enterprise had the revenue of USD 12.7 billion, which meant a 4% year-over-year increase on a constant currency basis (Rogers, 2016). In March 2016, HPE delivered strong financial results and outperformed the peer companies in the sector of communications equipment, including Cisco, Ericsson, and Juniper (Rogers, 2016).
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HPE managed to win several large deals and gain new large strategic customers. All the hardware business units of the Company showed a good performance. HPE also continued to invest in research and development projects. In the fiscal first quarter of 2016, the Company’s revenues grew three times higher than the average market rate and HPE returned about USD 1.3 billion to stockholders (Rogers, 2016). In this connection, Meg Whitman said, “Networking revenue grew 62 percent year-over-year in constant currency… revenue grew double-digits, driven by record China revenue as well as good performance in other regions” (Hewlett Packard Enterprise, 2016).
HPE’s profit for the first quarter of this year amounted to USD 320 million. The profit increased by 5% as compared with the same period of the previous year (Bailey, 2016). The Company’s sales grew mostly due to the growth of the computer hardware division (Bailey, 2016).
In the fiscal first quarter of 2016, the revenue from Enterprise Services business of HPE dropped by 6% to USD 4.7 billion on the year-over-year basis (Rogers, 2016). The revenue decreased for the same period in the segment of infrastructure technology outsourcing amounted to 8% year-over-year and in the segment of application and business Services – to 3% (Rogers, 2016).
In this connection, Hewlett Packard Enterprise decided to sell its enterprise services division dealing with the technology outsourcing and management services to Computer Sciences Corporation and concentrate its business activities in the segments of data center hardware, software, and other technical infrastructure items offered to large organizations. Enterprise services division was a substantial part of HPE. It had about 100,000 employees and accounted for more than a third of the Company’s revenue (Bailey, 2016). However, that business unit had shown a weak growth and low profits and, according to some analysts, it had issues with its technological base. Investors regarded this news very positively: the HPE stock price increased by over 10% within hours after the announcement of the deal, and the price of shares in Computer Sciences Corporation increased by more than 27% (Bailey, 2016).
Despite such a positive reaction of the market, the sale of the services division may be an early signal indicating the existence of some issues that can affect HPE’s long-term development prospects. First, instead of growing, the Company becomes smaller and, therefore, its overall financial capabilities decrease. Second, the deal in question shows that the Company management is currently unable to ensure a steady development of the business.
There is also an opinion, according to which, the spinoff of a large division may worsen customer relations and raise doubts concerning the possible sale of other business units (Poletti, 2016). Corporate customers need the stability on the market of IT infrastructure solutions, and two subsequent splits of a former large supplier divided by several months may cause some distrust (Poletti, 2016).
As Poletti (2016) claims, the favorable investors’ reaction to the deal is caused by a short-term rise in dividend payouts resulting from the terms of the deal based on a tax-free combination. At the same time, the spinoff of an underperforming division may help HPE to focus on its most competitive solutions and pursue the more flexible marketing strategies.
The Characteristics of the Marketing Mix (“4P’s”) of HPE
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HPE’s product range includes servers, data storage equipment, cloud technologies, networking product solutions, software products, and various IT services (Tanner, 2015). Hewlett Packard Enterprise specializes in IT solutions for businesses and public sector organizations. Before the spinoff of its enterprise services divisions, the Company worked in the following four segments: Enterprise Group, Enterprise Services, Software, and Financial Services (Holdsworth, 2016).
The Enterprise Group segment includes servers, data storage, and networking equipment. Besides the relevant hardware and software, HPE provided related consulting and technical support services. The products of the Software segment allowed performing data management and the protection of information. The Enterprise Services segment included the technological consulting, support, and outsourcing services enabling large customers to manage their information assets and applications. The Company’s role in the Financial Services segment was to provide financing, leasing services, and asset management services (Holdsworth, 2016).
Recently, Hewlett Packard Enterprise took the following actions to optimize its product range. First, HPE sold Tipping Point, a network security company owned by HPE to Trend Micro Security. Second, HPE closed its cloud company because of the intense competition on the market, in particular, from Amazon Web Services, and started the cooperation with Microsoft and several other market players in the area of cloud technologies (Tanner, 2015).
According to the deal, which HPE and Microsoft entered in December 2015, HPE started to market Microsoft Azure as the preferred cloud-computing platform. HPE will also use Azure for its own private and hybrid cloud solutions and certify Azure and the related Microsoft services on HPE’s servers. It will enable the existing customers of HPE to switch to Microsoft cloud products (Rogers, 2016).
HPE continues to introduce new up-to-date products. In the recent months, the Company has launched many networking equipment items. Now, it plans to use a brand new technology called Persistent Memory in servers that will complement HPE’s server product line (Rogers, 2016). Thus, Hewlett Packard Enterprise offers its corporate customers a broad range of innovative value-added high-tech products, solutions, and services critical for the development of contemporary business. Effective data management and security systems make companies dependent on their IT equipment suppliers. It helps HPE to build stable and long-term relationships with large customers.
Besides the deal with the Canadian Rogers company, such strategic relationships include recent multiyear agreements with one of the leading international food producers JBS, the Swiss telecom service provider Swisscom, and other big corporations. HPE continues to be the largest provider of infrastructure solutions for SAP business analytic systems (Rogers, 2016). Analysts believe that HPE’s product portfolio is excellent, and the Company is one of the most innovative players in the data center industry (Rogers, 2016; Moorhead, 2016).
Working on the highly competitive markets, Hewlett Packard Enterprise should focus on the cost-efficient pricing strategies. For this reason, the Company makes all the possible efforts to lower production and servicing costs including spinoffs of the low-margin businesses and massive workforce reduction. Such policy allows maintaining a flexible pricing structure and offering the customers affordable IT solutions.
HPE Renew program is an example of the flexible approach to the price and cost management. The Company offers the program’s price benefits to the customers with limited IT budgets in the European, the Middle East, and African countries. This program allows purchasing completely remanufactured HPE products at prices that may be at least 15% lower than the prices of similar new items (Hewlett Packard Enterprise, n.d.). The products marketed within the framework of HPE Renew program undergo all the necessary testing procedures and meet all HPE standards. The Company fully guarantees their reliability and quality (Hewlett Packard Enterprise, n.d.).
According to the CEO Meg Whitman, the strategic goal of HPE is to ensure a competitive cost structure and maintain a sustainable operating profit margin within the range between 7% and 9% (Rogers, 2016). The Company’s recent financial results prove the effectiveness of its pricing policies.
For the sales of its products, HPE uses various channels such as original equipment manufacturers, distributors, resellers, system integrators, consulting companies, and independent vendors of software (Holdsworth, 2016). At the time of HP splitting, the split of the channel program also took place. The HP’s previous program Partner One split into Partner First for HPQ and Partner Ready for HPE (Tanner, 2015).
The Partner Ready program set strict requirements for the prospective business partners of Hewlett Packard Enterprise. First, a company wishing to apply for the Business Partner membership should meet certain revenue thresholds over 12 consecutive months preceding the deal. The applicant should obtain the certification and undergo the training required by HPE. The partners take the obligation to fully comply with the HPE Code of Conduct and share their business information with HPE. The participants of the Partner Ready program must conduct their business fairly and ethically and ensure full compliance with applicable laws according to the compliance rules of HPE. The partners’ compliance programs should include their responsibility for the conduct of their executive, employees, and agents (Hewlett Packard Enterprise, 2015). The terms of the Partner Ready program contribute to the successful distribution of the Company’s products and help to maintain its high business reputation.
The advertisement campaigns of HPE include the use of television, print, online, and other resources. Since the beginning of its independent existence, Hewlett Packard Enterprise launched an international brand campaign aimed at creating a new customers’ perception of the Company as an entity separate from the old Hewlett-Packard and HP Inc. The campaign slogan “Accelerating Next” expresses the new Company’s identity that emphasizes the speed and agility of the contemporary business and positions HPE as a unique market player helping to accelerate the development of its customers. The brand campaign opened with TV spots running on national channels, in particular, on CNBC and CNN. Print ads and the Company-related case studies appeared in The New York Times, The Wall Street Journal, and other newspapers. The campaign materials promoted the new HPE’s website that offers customer-oriented content (Maddox, 2015).
In 2016 in the USA, Hewlett Packard Enterprise maintains nationwide TV advertising campaigns with hundreds of national airings. The Company also uses social media channels, including Facebook, YouTube, and Twitter to promote its brand. Brand promotion is also part of the HPE Partner Ready program. The Company’s business partners have to place the designated HPE Partner Ready insignia and taglines on their websites and marketing materials (Hewlett Packard Enterprise, 2015).
Another promotion channel, which helps Hewlett Packard Enterprise to communicate with the market, is its annual North American event called HPE Discover conference. The previous one, HPE Discover 2016, gathered about 10,000 customers and partners and attracted more than 175,000 online views (Greiner, 2016).
The SWOT Analysis of Hewlett-Packard Enterprise (HPE)
HPE inherited strong technological capabilities from the old Hewlett-Packard that had a comprehensive portfolio of technical solutions in all its business units. That portfolio was the result of HP’s impressive achievements in the area of research and development. Historically, Hewlett-Packard’s spending on R&D was relatively high as compared with other large IT companies. By the end of 2011, Hewlett-Packard owned more than 36,000 patents (Hewlett Packard, 2014).
Another HP’s legacy is a flexible system of manufacturing based on the international outsourcing of production processes. Now, it enables Hewlett Packard Enterprise to maintain the cost-efficiency of its operations (Blauvelt, Ciasullo, & Hawkins, 2012).
The cooperation and business relationship with several IT market leaders, such as Microsoft, SAP, and others, strengthened HP’s competitiveness in the product development area and contributed to its successes in technological innovation (Blauvelt, Ciasullo, & Hawkins, 2012). HPE continues to apply the same policies regarding its relations with the industry leaders.
Hewlett-Packard could not penetrate the growing market of mobile devices and it did not make significant progress in the field of product miniaturization (Hewlett Packard, 2014). Hewlett Packard Enterprise also has not yet made any noticeable achievements in these crucial areas.
Since the time preceding the HP split, the Company is strongly dependent on Microsoft and Intel that are single-source suppliers for some key products and solutions. It tended to decrease the competitive power of HP (Blauvelt, Ciasullo, & Hawkins, 2012).
According to some analysts, Hewlett Packard Enterprise needs to expand its current product range (Tanner, 2015). Therefore, the Company might consider making some new acquisitions in the future (Tanner, 2015).
A major opportunity for Hewlett Packard Enterprise is the fast growth of the relatively new segment of the IT industry, and namely, the so-called ‘Internet of things’ (IoT). The Internet of things includes the technologies of remote management of the data automatically gathered by various technical appliances (‘end devices’). Now, the development of IoT technologies faces the issues related to the technical and financial limitations on the efficient use of IoT applications.
In several years, there will be billions of IoT devices. If all of them simultaneously send and receive data, it will be untenable for the existing Internet infrastructure. In addition, the data traffic generated in such a situation will be costly for customers. However, not all IoT end devices need a constant data flow. The solution is to move data management and computing infrastructure closer to the end devices. It is also necessary to use a flexible approach to the control of the Internet access from those devices. Therefore, there is an increasing demand for local server-based IoT solutions (Krell, 2016). Hewlett Packard Enterprise is a well-positioned company for working successfully in this new and growing segment. It has already created two server products specially designed for IoT systems (Krell, 2016).
The lack of organic growth and the exit from some key IT market segments constitute a long-term threat that outweighs the immediate benefits for the shareholders resulting from discontinuing underperforming operations. Several market analysts argue that HPE should spend the money received from the sale of businesses on closing the product gaps rather than on increasing dividend payouts (Shaw, 2016). Therefore, the Company needs an improvement of its long-term product strategy (Shaw, 2016).
The analysis shows that Hewlett Packard Enterprise has become a large and influential player in the global IT industry working in the fast-growing segments. The Company has a strong potential of development that it mostly inherited from the old Hewlett-Packard. HPE’s key capabilities in the marketing area include cost-efficient diversified pricing solutions, excellent customer relationship management, elaborated promotional strategies, the successful building of the brand awareness, and the effective management of distribution channels through the Partner Ready program. These advantages have significantly contributed to HPE’s impressive financial success achieved during the first months of its independent development and have led to the substantial increase in the Company’s stock quotations.
Hewlett Packard Enterprise offers to its customers a broad range of high-value and innovative products. It is one of the strongest players in the server equipment and IT infrastructure segments, which enabled it to gain hundreds of large deals worldwide. Since its foundation, HPE has released innovative products, services, and solutions for corporate customers working in different industries. The Company has recently managed to gain from the new developments in the IoT segment, to which it offered new server-based solutions.
The above facts prove that Hewlett Packard Enterprise can maintain a sustainable growth and achieve good long-term financial results. At the same time, HPE faces several major marketing issues related mostly to its product development strategies. Setting ambitious short-term financial goals, the Company gradually exits from some key IT market segments that may underperform now while having a strategic importance in the future. Such areas include enterprise services, cloud computing, and others. For instance, HPE is not active in the crucial market of mobile devices.
Finding possible ways to improve the current situation requires an in-depth analysis of the product development and market positioning functions of Hewlett Packard Enterprise. Therefore, some future research may suggest the necessary steps needed to overcome the current deficiencies.