HP PESTEL ANALYSIS

Abhijeet Pratap
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In this Pestel/pestle analysis of HP, we will evaluate how the six macroenvironmental (Pestel) factors affect HP’s business. HP is a leading name in the world of computing and printing.

However, first let’s take a brief look at HP’s business.

HP (Hewlett-Packard)

Overview:

  • Name: HP Inc.
  • Founded: January 1, 1939
  • Founders: Bill Hewlett and Dave Packard
  • Headquarters: Palo Alto, California, United States

Business Segments:

  1. Personal Systems: Includes PCs, workstations, thin clients, and other related products.
  2. Printing: Encompasses a wide range of printing devices, supplies, and solutions.
  3. Corporate Investments: Includes HP Labs and other initiatives focused on innovation.

Mission:

HP’s mission is to create technology that makes life better for everyone, everywhere. The company aims to engineer experiences that amaze and create technology with a purpose.

Core Values:

  1. Invent: Continuously innovate and lead in technology solutions.
  2. Reinvent: Embrace change and adapt to the evolving needs of customers.
  3. Integrity: Act with integrity and take responsibility for all actions.
  4. Teamwork: Foster a diverse and inclusive work environment that values collaboration.

Products and Services:

  • Computing Devices: Laptops, desktops, workstations, and thin clients.
  • Printers and Imaging Solutions: Inkjet and laser printers, 3D printing solutions.
  • Accessories and Peripherals: Monitors, keyboards, mice, and other accessories.
  • Services: Managed services, support, and consulting for businesses.

Key Achievements:

  1. Innovation: HP has a history of innovation, from the development of the first audio oscillator in a garage to breakthroughs in computing and printing technologies.
  2. Sustainability: HP has been a leader in promoting sustainability in the tech industry. The company focuses on environmental responsibility and reducing its carbon footprint.
  3. Market Leadership: HP is a prominent player in the global PC and printing markets, consistently ranking among the top companies in these sectors.

SUGGESTED READING:

HP SWOT ANALYSIS
HP FIVE FORCES ANALYSIS

Pestel Analysis of HP (Hewlett Packard)

This pestel analysis of HP, highlights the impact of macroenvironmental factors including political, economic, social, and technological as well as environmental and legal factors on HP’s business operations and profitability. We will evaluate the opportunities and challenges presented by these factors and their impact on HP’s operations and financial success.

Political

Political factors and changes in the political environment of a market can significantly impact the operations and profitability of PC businesses there. The impact of political factors on PC businesses in significant PC markets can be complex. There are several factors related to government and politics that affect PC businesses including tariffs, policies related to taxation and international trade, government approach to R&D, as well as several more areas including incentives and subsidies that can drive faster growth of this sector.

Government and the political situation do not affect PC businesses only through policies, taxation and subsidies but government agencies are also among major consumers of PC brands. Government changes can affect the policies related to procurement as well as subsidies and support for the PC sector. Government can incentivize the growth of the PC sector and brands like HP through financial support and other incentives that encourage innovation. However, if the government imposes higher corporate taxes on PC businesses like HP then it will hurt the company’s profitability. The tax structure including local taxes and sales taxes in various regions in the US also affect the demand for PCs in those areas. Similarly, the US government’s public policy related to digital infrastructure also affects PC businesses like HP.

Overall, governments including local and federal government as well as political changes and geopolitical events can affect the business operations of HP. HP and other US based PC manufacturers have halted their operations in Russia since the Russian invasion of Ukraine. Moreover, the trade tensions between US and China have continued to add to operating costs of HP including the supply chain related expenses. In this way, political factors can have both positive and negative impact on HP’s operations. HP has managed a strong image as a highly innovative PC maker, which may act as an advantage since the US government would consider mainly local PC brands when purchasing for its own needs.

Economic

Economic factors are also a prominent force affecting the PC sector. The performance of the PC businesses like HP is tied closely to the overall economic environment in any market. There are several economic factors that can affect demand and supply. For example, the demand for PCs to a certain extent depends on consumer spending which is higher during robust economic conditions. However, during the times of economic downturns, consumer spending on electronics products including PCs is low which causes reduced demand and overall lower profitability for PC businesses like HP.

It is not just the individual consumers but the corporate consumers are also inclined to spend more on PCs during times of economic growth rather than during downturns. Strong economic growth often leads to businesses spending more on IT including PCs and other digital infrastructure. The condition of the global economy can also affect HP’s business and profitability to a significant extent. The global economic conditions affect international sales of HP as well as supply chain dynamics.

Fluctuations in currency exchange rates also affect HP’s profitability. Currency fluctuations impact the cost of components, manufacturing, and international sales. A currency appreciation or depreciation will have an impact on profit margins and pricing strategies. Other economic factors like interest rates, inflation rates and monetary and fiscal policies also affect HP’s business and profitability.

Social

Sociocultural factors and social changes may also have expected and unexpected impact on the business and profitability of HP. Some trends may have a profitable or positive impact on the business of HP including PC and printing businesses, whereas some may impact them negatively. Consumer preferences have been changing around the world. Some of these changes have happened due to changing demographic composition of the global population. The focus has now shifted towards the millennials and gen Z consumers. Companies like HP are investing in marketing a modern and innovative image that aligns with the values of these generations.

Maintaining a strong social image is also critical for PC businesses like HP since brand reputation and social image influence demand and sales. HP has been investing in social responsibility and giving back to communities across the world in various regions where it operates. While it is the responsibility of large businesses like HP to invest in the society and help the poor and the marginalized, social responsibility efforts also benefit the image of the company. HP has spent millions in the US to promote small businesses owned by the minority and women. The company has maintained a special focus on human rights and made it a part of its CSR strategy. HP has also made impressive progress in the area of advancing digital equity across several societies worldwide. Its efforts in partnership with Girl Rising have equipped students and teachers with digital technology and tools in countries including the US, India and Nigeria.

Giving back to the society is the responsibility of large businesses. Ignoring the criticality of sociocultural factors in terms of business and market dynamics can hurt business image and profitability. However, HP has become a global leader in the PC sector. It has established a consumer friendly and strong social image which have helped it overcome the social and cultural barriers across various geographical regions. HP has also localized its brand and business practices in various key markets to overcome such barriers.

Social trends and changing consumer preferences across various regions have a critical influence on business. However, HP being a highly adaptable business, has responded to changing consumer preferences and social dynamics efficiently. Companies in the PC sector that do not consider the influence of sociocultural factors may receive unexpected setbacks.

Technological

Technology is the core driver of growth in the PC sector and the leading factor that influences everything from operational efficiency to demand and popularity. HP is among the globally renowned PC businesses that has maintained a strong focus on innovation in both its PC and printing divisions. Technological change is happening at a very fast pace in the industry. However, HP has been investing in innovation to produce advanced PC models equipped with best in class technology for various consumer segments including students, developers, professionals and for the corporate consumers.

Each year, the company makes a heavy investment in research and development to introduce new and more efficient PC and printer models as well as improve the performance of its existing models. Technology is a double edged sword that has brought both opportunities and challenges for HP. The company has been able to explore new avenues like 3d printing, AI, and edge computing. Digitalization and automation have helped HP improve operational efficiency. Yet, increased pace of innovation has introduced heavy competition into the market, requiring a substantial investment into R&D each year to maintain the firm’s competitiveness. Undoubtedly, HP can provide a superior customer experience through AI tools. However, technological advancement has also driven shifts in consumer expectations related to personalization, sustainability and seamless experiences which require HP to be able to constantly innovate and adapt. In this way, while technology is a leading driver of growth for HP, it is also an area full of challenges.

Environmental

Sustainability and environment have become increasingly crucial for businesses across several industries including the PC industry. It is important for PC businesses like HP to consider their environmental impact. The manufacturing of PCs and printers involves raw material extraction, energy intensive production processes, and electronic waste generation. So, large businesses like HP must adapt sustainable practices since it can help reduce their environmental impact by reducing resource consumption, minimizing waste, and adopting eco-friendly production methods.

HP has remained a leader in the area of sustainability and has been recognized by several organizations for its sustainable impact efforts related to the environment and climate. The company focuses on climate action as well as recycling to manage its environmental impact and to reduce wastage. It has also planted nearly 2 million trees in partnership with organizations like the Arbor Day Foundation, WWF, and Conservation International. HP is also investing in making customers aware of recycling of end of life products.

Across various regions and countries, the governments have implemented sustainability laws related to environment standards and electronic waste management. While legally, it is important for HP to adhere to the environment laws, compliance also helps the PC giant manage a positive image and avoid potential fines. Worldwide, consumers are also growing more environmentally conscious and prefer to purchase from the PC companies that have a strong record in the area of sustainability. HP has shown a lot of dedication to sustainability and environment friendly business practices over the past several years. This has helped the company improve its brand reputation and attract the environmentally conscious consumers.

Legal compliance is crucial for businesses across diverse industry sectors and particularly the technology sector. The technology businesses tend to attract more legal and political scrutiny in the US and other leading markets across the Americas, EU and Asia Pacific regions. HP is a leading PC brand and a notable tech business operating at a global scale. There are several laws related to product safety, data security and privacy as well as labor and other areas of business operations HP must comply with. Large companies like HP have dedicated teams to manage compliance and adherence to local laws and regulations across specific geographic regions.

However, legal compliance is a rather complex area and infact one of the most complex challenges that technology businesses deal with apart from competition. The legal framework differs from market to market and HP needs to comply with all the local applicable laws and regulations to avoid hefty fines by the governments. However, HP has also seen its fare share of legal challenges. It is currently dealing with an antitrust challenge associated with its printing business.

There are other areas too including data security and privacy as well as product safety that technology businesses have to remain compliant with. Any tech company including HP that collects and uses consumer data is required to be compliant with CCPA in the US and GDPR, which was implemented by the EU in 2018. Noncompliance attracts hefty fines and business operations related challenges in the respective areas.

While compliance has grown into a very complex area, it is also a critical area for HP. Legal compliance affects brand image and companies that stay compliant avoid hefty fines and maintain a strong reputation. Overall, HP has been doing well in terms of compliance.