6 – I’m OK, Could Be Better

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MD: RAMESH D GROVER

So Hewlett-Packard India has arrived. In the Indian PC scenario. A growth of 50
percent in the number of desktops sold–from 9,860 Vectras in 1996-97 to 14,826 in
1997-98. Well above the market growth rate. Thus the company, which didn’t have any
clout in the PC market, is at last gaining fast recognition as a formidable player from
being a ME-TOO. Though the number is still small, it might just be the beginning of the HP
juggernaut in PCs. The company’s strategy of pricing its systems 5 percent lower than
arch rival Compaq seems to be paying off, with the Indian market embracing the HP brand
name, till now strongly associated only with printers.

How did it happen? Well, for one, the breakup of the JV
with HCL was a boon for Vectras. With that HCL started focusing on the distribution aspect
of the PCs more strongly than before. And the HP brand name came into being as a strong
independent brand for PCs, as opposed to the earlier weak push for Vectras by HCL HP. This
led to the second factor of clarity in channels. HP has long been a smart channel manager
in printers and the hp2.jpg (11894 bytes)JV was proving
to be a thorn for the growth of its PC business. The HCL HP breakup gave the much-needed
impetus to the PCs by clearly defining the role that HP India and its distributors would
play. The third factor, again owing its birth to the HCL HP breakup, was the enterprise
solutions group coming into existence, which focused on selling solutions to the corporate
market. As a strategy the Vectras were made to piggyback on the servers–a realization
that it is the corporate market which is the most important target for PCs.

S T R A T E G Y

  • Offer price advantage to retain old customers and attract
    new customers.
  • Offer technological edge to customers.
  • Replicating HP’s international status as the most
    admired company (Fortune) for HP India.
  • Strengthening channel distribution system.

T A C T I C S

  • Slashing prices to corner a large part of the pie in PCs,
    servers, and printers.
  • Technological leadership through the launch of new models
    in every product category.
  • Relationship management with employees, partners, channel
    members, and customer.
  • Leverage on HCL’s expertise in servicing corporate
    accounts.

O B J E C T I V E S

  • Become one of the largest PC vendors by the beginning of
    the next millennium.
  • Become # 1 in servers by the turn of the century.
  • Retain its leadership in the printer and scanner market.

P E R F O R M A N C E  H I G H L I G
H T S

  • Company grew by 44 percent, to clock a turnover of Rs 508
    crore.
  • Desktops grew by 50 percent.
  • Sold 1,52,800 units to romp home as the largest printer
    vendor in India.

PRODUCTS AND SERVICES:
Systems, Communication, Software
* START-UP YEAR: 1989 * ADDRESS: Chandiwala Estate, Maa Anandmai Marg, Kalkaji, New Delhi
110019
* TEL: 6826000 * FAX: 6826059 * WEB SITE: www.hp.com

Talk to any HP guy and he will tell you how their
PC servers are doing in the market. HP has already taken the # 1 slot for PC servers in
Asia-Pacific, and is on the road to replicating this performance in the Indian market. It
sold 1,734 PC servers at a value of Rs 58.35 crore, a unit growth of 26 percent and value
growth of 32 percent. And this in a year when non-Intel servers fell dramatically in unit
growth and also registered negative growth in value. With the parent company’s
partnership with Intel for the Merced microprocessor, the company is clearly betting a lot
on the Intel architecture. This was seen in the largest Indian order bagged by HP India
for Intel servers for running SAP R/3 from Mahindra & Mahindra.

The classic HP way of foraying into the market later
than others and steadily inching upward is what is being practiced in PCs. Though the
Indian PC market was the cause for much angst among the top HP brass in India as well as
the Asia-Pacific, the company was still debating the option of setting up a plant in India
as was indicated to DQ in September last year. Though the company is one up on price
against Compaq, however, it still has to reach the logistics efficiency and mindshare the
latter has.

Finally, early this fiscal, HP bit the bullet in
announcing its configure-to-order plant in Bangalore—a testimony to its seriousness
in going the full way as far as volume PC market in India is concerned. It remains to be
seen whether HP is able to replicate its printer success story in India.

But if you win some, you lose some. And the portable is
proving to be an eyesore for HP India. This could be attributed to the company’s lack
of aggression coupled with the growing popularity of IBM ThinkPads, Compaq Armadas,
Toshiba Satellites and Tecras, and AcerNotes which are clearly entrenched in the market.
The dilemma with HP OmniBooks is that they are neither a premium product like ThinkPads
nor a VFM product like AcerNote.

The printer story has already been written. Though the
company enjoys the numero uno position in lasers and inkjets, it is still hammering
into the market, with new products every quarter. Here the sad para of the story relates
to the OfficeJet products
(a combination of any three of scanner, printer, copier, and facsimile). These products
did not even create a ripple in the market. However, with printers last year, HP India
went retail, opening shops in Delhi and Mumbai. Not only that, the company roped in
glamor, and, with film stars inaugurating its retail outlets, it was able to increase its
reach into smaller pockets in metros and mini-metros.

Hp3.jpg (21952 bytes)The king of the printer market is the
inkjet. HP inkjets grew by 55 percent in 1997-98, to cross the one-lakh mark. HP India
sold 1,15,000 units of DeskJets last year, with ‘DeskJets’ becoming synonymous
with ‘inkjets’. Laser printers sold 37,800 units, a growth of 63 percent.
Lasers, long been the rich man’s stuff, are now being accepted in the mainstream,
courtesy HP’s focus on driving the prices down.

Similarly in scanners and plotters, where the same
strategy pushed 123 percent more scanners and 37 percent more plotters as compared to the
previous year. HP India through its strategy of bringing the prices down, and pushing the
products through a well-oiled channel, has reaped benefits in this area.

Overall, last year has been very eventful for HP India.
Not only in the sense of gaining share in the PC bazaar and literally making the
peripheral market its fiefdom, but also obtaining the CII-Exim Award for Excellence (HP
India is the first company to ever win the coveted felicitation). But the flip side is
that HP does not yet figure anywhere in the boom segments of Home and SOHO. And that will
be this year’s acid test.

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