Hewlett-Packard (HP) is one of the leading hardware and business solutions companies operating globally. Presently, the market capitalization of HP stands at $38.07 Billion making it the 463rd most valuable company in the world(HP (HPQ) - Market capitalization, 2022).
Moving forward, this article will present a detailed PESTLE analysis of HP probing the external business factors that directly or indirectly affect the industry. To elaborate, PESTLE analysis presents an overview of the Political. Economic, Social, Technological, Legal, and Environmental factors influencing the macro-environment.
To continue, external analysis can help HP to determine the opportunities available in the external environment as well as the risks that need to be mitigated. This explains why PESTLE analysis is a widely applied strategic planning tool.
Table of Contents
Furthermore, an in-depth understanding of PESTLE Analysis will give you a detailed overview of the most important factors in the macro business environment that directly or indirectly impact the operations and growth prospects of a company in a specific industry. As for now, let us get started with the PESTLE Analysis of HP.
Hewlett-Packard PESTLE Analysis
Political factors affecting HP
The US has a stable political and stabilized political environment. It sources 90% of the grade neon supplies used in the semiconductor chips, an important component for manufacturing laptops and PCs from Ukraine and the ongoing war between Russia and Ukraine can disrupt the businesses, therefore leading to a shortage of semiconductor chips. This can impact the production capacity of laptop companies (Chakravorti, 2022). Further, the federal government has launched a Federal Communications Commission program wherein the residents would be provided with a $100 subsidy for purchasing a laptop, desktop computer, or tablet. This financial assistance can lead to an increase in the purchasing power of the people, thus having a positive impact on the sales of laptops and other IT hardware companies. Also, the sales tax in the US for computer hardware components varies across states with a few states such as Alaska, Delaware, Montana, New Hampshire, and Oregon having zero sales tax while in other states it varies from 5.5% to 10% (Cole, 2020). The huge variation in taxes can create confusion in establishing the pricing structure for the companies, thereby impacting the profitability of the computer hardware companies.
Economic factors affecting HP
The growth rate of the US for the year ending 2021 was 5.7%, the highest since 1984 as per Wiseman. It is further predicted to decline to 4% in 2022 and 2.6% in 2023 respectively (Shalal & Lawder, 2022). The decrease in growth rate means a decline in real income of the people which can negatively impact the sales of the computer hardware manufacturing companies. Further, the inflation in the US is at a 40 year high of 7.5% and the higher inflation rate would reduce the affordability of the products for many people, thus leading to a reduction in sales for computer hardware companies. The illustration below sheds further light on the key economic trends in the US.
In addition, the per capita income in 2021 was $63, 416 while it is expected to lower to $55000 in 2022 and $57000 in 2023. The high reduction in per capita income can lower the purchasing power of the consumers, thereby leading to a reduction in sales for the computer hardware companies.
The computer hardware industry in the US generated sales of over $47 billion in 2020 with laptops contributing to over $22 billion in revenues (Statista, 2021). The US market has a significant amount of share in the global computer hardware industry accounting for 43% of overall sales. The industry is expected to grow at a CAGR of 6.6% over the period of 5 years from 2022-to 2026 as per The Business Research Company.
Social factors affecting HP
The working style in the corporate sector is witnessing a huge change and the employees. Over 22% of the American workforce is expected to work from home by the end of 2022 and it is expected to rise to 26% by 2023 which is expected to rise to 73% by the end of 2028 (Steward, 2022). The increase in the work from home trend would lead to an increase in the demand for computers and laptops, thereby signifying a positive outlook for the computer hardware companies. Further, the literacy level among the youth population is US 79%. The high literacy rate means more awareness about operating the computer hardware, thereby signifying an increase in the interest and sales of computer-related products.
Technological factors affecting HP
The US government is promoting research and development on a huge scale wherein the government spent $157 billion on R&D in 2021 and the proposed investment for 2022 is pegged to be $171 billion as per Connolly. Various new technologies have emerged in the computer hardware industry including 3D printing for manufacturing computers and laptops (Gaget, 2018). Other technologies include exascale computers wherein the information can be processed in quintillion floating operations per second. This technology would hugely benefit various industries in forecasting and storing even 100 years old data (Rangan, 2021).
Legal factors affecting HP
The US has strict antitrust laws that restrict the companies from engaging in mergers with an intention to reduce competition in the market and the company found violating the laws can face up to $100 million in fines and executives can be imprisoned for a period of 10 years. Further, it is illegal under The Sherman Act to fix prices, divide markets, or rig bids (Federal Trade Commission, 2022). This clearly impacts the industry as it forbids the creation of monopoly or price exploitation by a single player or cartel. Further, the increase in the minimum wage in 24 states would lead to an increase in the cost of operations for the companies as they would have to incur more on wages and salaries of the employees (Soergel & Clarke, 2021).
Environmental factors affecting HP
The US is a signatory to the International Paris Agreement and as a result aims to cut down the carbon emissions by 50% by 2030 (White House, 2021). The computer hardware industry in the US contributes more than 200 megatons of the total greenhouse gas emissions through manufacturing and operating data centers. Further, the computer hardware produces lots of electronic waste in the form of mercury, lead, arsenic, cadmium, selenium, chromium, and flame retardants. The e-waste regulations in 25 statesz require companies to recycle and reuse the waste generated. Hence, the requirement for reduction in emissions would lead to an increase in cost for the companies as they would have to research innovative ways of manufacturing the components, operating data centers, and recycling the e-waste.
To conclude, the ongoing supply chain disruptions further hit by the Ukraine-Russia conflict can negatively impact the entire industry and hence, HP. Also, in the wake of the conflict, there can be major economic repercussions for the global economy as various sanctions have been placed. However, it is a positive sign that the economy is coming out of the impacts of COVID-19 and the economic indicators are gradually improving. Speaking of environmental norms, there are strict e-waste regulations that the industry needs to comply with. Besides, the industry also needs to incorporate measures for reducing the carbon footprint and greenhouse gam emissions. Also, to learn about the internal strengths and weaknesses of the company, you can go through our diligent SWOT analysis of Hewlett-Packard
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White House. (2021). FACT SHEET: President Biden Sets 2030 Greenhouse Gas Pollution Reduction Target Aimed at Creating Good-Paying Union Jobs and Securing U.S. Leadership on Clean Energy Technologies. www.whitehouse.gov. Retrieved 11 March 2022, from https://www.whitehouse.gov/briefing-room/statements-releases/2021/04/22/fact-sheet-president-biden-sets-2030-greenhouse-gas-pollution-reduction-target-aimed-at-creating-good-paying-union-jobs-and-securing-u-s-leadership-on-clean-energy-technologies/