South Korea and Business Other (not Listed Above)

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Fab Five is to provide a strategic plan for the U.S. based computer hardware designer Hewlett-Packard (HP) in its analysis of the internet technology (IT) hardware industry in South Korea, Russia, India, and China. The Fab Five will determine which country is best suited for HP, as well as, the internet hardware manufacturer in that country that HP should engage in a joint venture to align with HP's strategy for global expansion. This paper has three parts: Part 1 consists of an overall industry analysis looking at the market size and growth potential in each of these countries and comparing this analysis to that of the IT hardware industry in the U.S. Part 2 will examine the risks associated with this venture and any opportunities, taking into account the market potential and structure of the industry in each country, as well as, the overall business climate in these countries. Part 3 will examine multinational and local South Korean IT hardware manufacturers to determine a target company to enter into a joint venture. The main tool that will be utilized for comparison of the industry in each country is Porter's Five Forces analysis and PESTEL. In 1980, Michael Porter identified the five competitive forces that shape every industry. These competitive forces will assist us in analyzing an industry's strengths and weaknesses. The five forces Porter identified are: the competition in the industry, the potential of new entrants into the industry, the power of suppliers, the power of customers, and the threat of substitute products.

To determine HP's growth the Fab Five team needs to tie HP's vision and global strategy to an understanding of the market environment and HP's ideal growth style. From HP's most recent 10k filing, HP's global vision: "Our products and services are available worldwide. We believe this geographic diversity allows us to meet demand on a worldwide basis for both consumer and enterprise customers, draws on business and technical expertise from a worldwide workforce, provides stability to our operations, provides revenue streams that may offset geographic economic trends and offers us an opportunity to access new markets for maturing products. In addition, we believe that future growth is dependent in part on our ability to develop products and sales models that target developing countries. In this regard, we believe that our broad geographic presence gives us a solid base on which to build such future growth."

From HP's most recent 10k filing, HP's strategic focus is explained as follows: "Our strategy is focused on leveraging our existing portfolio of products, services and solutions to meet the demands of a continually changing technological landscape and to offset certain areas of industry decline. To successfully execute this strategy, we must emphasize the aspects of our core business where demand remains strong, identify and capitalize on natural areas of growth, and innovate and develop new products and services that will enable us to expand beyond our existing technology categories. Any failure to successfully execute this strategy, including any failure to invest sufficiently in strategic growth areas, could adversely affect our business, results of operations and financial condition."

To determine the strategic growth needs of HP, it is vital to understand the business environment in which HP currently operates. We will use Porters Five Forces Framework to analyze the business environment.

New Entry Threats -- Low: There is low risk of new entrants threatening the market due to barriers to entry from high capital and resource needs.

Power of Suppliers -- Moderate/High depending on the component: The power of suppliers is high as there are few suppliers for specialized, high quality components. However, for some components that are easy to manufacture at a high quality, the suppliers have lower power as there are many more suppliers of these items.

Power of Buyers -- High: The market is flooded with numerous choices from which buyers can choose products and services, and this gives buyers high power.

Threats of Substitutes -- High: There are a lot of comparable products in the market and this means a high risk of substitutes.

Existing Rivalries -- High: Rivalry is very high as market players have all made large global investments to establish themselves. Product margins are kept low by competition and there is intense rivalry for expansion into additional products and global markets.

Having gotten a high-level understanding of HP's business environment we will now determine the strategic style that would be beneficial for HP, using the BCG strategy style matrix. Once the strategic style required is identified via the matrix, we can know figure out what kinds of growth needs suit HP's strategic style, and what the specific growth needs are. The specific growth needs should tie with HP's business vision and market strategy focus, identified earlier.

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Please see the BCG matrix chart in Appendix 1. HP's primary business is Computers and Peripherals. This business model falls in the top left quadrant of the matrix -- "Adaptive." HP needs adaptive approach to meeting growth goals as the market offerings change extremely fast so HP needs to be able to shift and adapt quickly to remain competitive. This means that instead of having 5-year goals and plans, HP need shorter term goals and plans as technological advances happen often throughout the year and many of these technological advancements are unpredictable and require operations and manufacturing to be very quick to change, as products can become obsolete overnight.

To be adaptive, and meet HP's global vision and strategic focus, strategic growth needs are to:

• Be quick at testing and rolling out new products globally, including in developing countries. This could be done with having the right global partners for R&D and local market sales.

• Develop strong relationships with local suppliers in global markets in order to fulfill orders quickly and ramp up or shut down production when needed. Also, by having close cooperation less time and resources are sacrificed seeking new suppliers or renegotiating contracts every few months as product enhancements are made.

• Acquire or partner with companies globally that increase HP's growth flexibility and adaptability, where product investments and divestitures can happen quickly. This also means that countries where these partner firms are based need to have regulations to support this model of quick change and not be slowed-down and restricted by the government.

• Tie global strategy very closely to global operations so that as soon as the market environment changes, the company can react, strategy can adapt, and necessary production changes can be made as soon as possible.

• Develop a global corporate culture relying less on long-term corporate planning cycles and more on short-term tactics.

While it is clear that there exists promising potential for growth in the hardware IT industry there are significant risks in expanding the client's operation into these countries. The structure and market situation in each of the 4 countries is unique and it has a resounding impact on the prospects of our client.

The Russian market is perhaps most troublesome for the HP to expand into for a variety of economic, social, and political reasons. The Russian economy is suffering from a number of issues such as currency stagnation, political sanctions, demographic decline, and relatively low purchasing power of the consumers. During the last year the revenues for hardware have dropped 10-30% for producers as the Russian Ruble has lost value against all major currencies in the wake of major economic sanctions and an overall poor performance of the economy. Many domestic and foreign producers have suspended sales or pulled out of the market entirely making potential niches for new entrants. Yet this drop in competition has initiated numerous consolidations and rapid expansions of the most durable players that have capitalized on the opening of the market in order to seize market share. Given the overall drop in demand, with no foreseeable rise in the short run, the consumers can dictate the market leading to very cut throat price wars between suppliers. This situation has been further deteriorated by the readily available supply of substitutes in the form of gray/black market imports and counterfeits. (Atradius 2015) This makes it an especially troublesome prospect for HP to expand its production and marketing into such a market. The prospects for long-term growth are decent as the expected revenue growth will remain in the double digits until 2020 but given the poor state of development in Russia's economy this does not necessarily mean huge gains for potential partner firms. The hardware industry generates barely 2 billion in revenue which places it at the bottom of the industrial nations. (Statista 2016) The problem is compounded by the government actions to boost the production of domestic electronics and become less reliant on foreign imports and capital. Due to special programs the government is giving preferential tax and financial incentives to domestically owned producers putting a handicap for HP's expansion plans. (Kouzbit 2015)

The Indian hardware industry has been a dynamic machine for many years growing in size and….....

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