Texas Instruments and Hewlett-Packard Case Study

•Presented By: Avani Parekh(NR 11094)

Nitu Rajput(NR 11119)Sangeet Nair(NR 11088)

Nanadan Darji(NR 11038)Jenil Choksi(NR 11030)Palak Shah(NR 11138)

Case Context

•Texas Instrument (TI) and Hewlett Packard (HP) are two companies famous for introducing electric and electronic products.

•Although competing in similar industries, their strategies and management control are very different.

Problem Definition

•Given the differences in strategy between the two firms, what would you expect would be the differences between TI and HP in their planning and control systems: strategic planning systems; budgeting systems; reporting systems; performance evaluation systems; and incentive compensation systems?

Framework For Analysis

• Identify and contrast the business and functional strategies of each firm

• Identify and discuss each firm’s “tendencies” in terms of:

Planning and control systemsStrategic planning systems Budgeting systemsReporting systems Performance evaluation systems andIncentive compensation systems

Framework For Analysis

•Compare the expected “tendencies” to the actual control used by each firm during the time period 1980-1985

•Formulate conclusion and Recommendation

Analysis

•Texas Instruments - Harvest Low Cost

•Hewlett-Packard – Build differentiation

Contrasting Strategies of TI and HP

Business strategy

•Texas Instruments Competitive advantage for large,

standard markets based on long-run cost position

•Hewlett-Packard Competitive advantage for selected small

markets based on unique, high-value/high-features products

Functional StrategyTexas Instruments Hewlett-Packard

Marketing: • High volume/low price • Rapid growth • Standard products

Marketing: • High value/high price• Controlled growth• Custom features

…Functional StrategyTexas Instruments Hewlett-Packard

Manufacturing:• Scale economies and

learning curve• Vertical integration• Large, low-cost locations

Manufacturing:• Delivery and quality

driven• Limited vertical

integration• Small, attractive locations

…Functional StrategyTexas Instruments Hewlett-Packard

R&D:• Process and product• Cost driven• Design to cost

R&D:• Product only• Features and quality

driven• Design to performance

…Functional StrategyTexas Instruments Hewlett-Packard

Financial: • Aggressive• Higher debt• light ship

Financial: • Conservative• No debt• Margin of safety (slack)

Harvest(TI) Vs Build(HP)

•TI tended to enter early in a product’s life cycle, and stayed through maturity.

•HP tended to create a new product and then replaced it when it matured.

Harvest(TI) Vs Build(HP)

•TI sought a balanced portfolio of businesses where mature, large businesses provide resources for young, high-growth businesses.

•HP sought all high-growth, high-margin

businesses that met their own resource needs, largely on an individual basis.

Low-cost(TI) Vs Differentiation(HP)

•TI emphasized aggressive cost improvements, with equally aggressive price cuts.

•HP desired cost improvements, but sought higher margins and held prices longer.

Low-cost(TI) Vs Differentiation(HP)

•TI concentrated on more capital-intensive, cost-effective production processes to match high-volume standard product needs.

•HP concentrated on flexible production processes to match low-volume, more custom product needs.

Conclusion

•The HP(“build”) has a more flexible but higher risk strategy. They require constant innovations to lead the market and these new products demand a premium price.

•Budget flexible and there is a greater dependent in constant updates in reporting.

•Management performance is measured on long term, non-financial parameters and they are motivated by higher, but less-frequent, special compensations.

• The TI(“harvest”) has a more structured , lower risk strategy. They require efficiency and productivity to keep maintain low cost and sell at low price.

• Budgets are very important forms of control and actual performance are expected to adhere to the budget.

• Management performance is measured on short term, financial parameter and they are motivated by more frequent but, relatively lower, special compensations.

Thank You