Hp Compaq Merge Analysis

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Five Forces model Effects of rivalry HP and Compaq were rivals in the computer industry. Competition would have been weaker than it was until the merge, because there will be one less companies. Besides that, it’s designated that hp Compaq could be second, if not first largest company in the world, because, hp holds second position and Compaq holds third position. Combined company can rival IBM and Dell in size and revenue. HP’s total revenue was 47 billion, assets 32.4 billion, and operating earnings 2.1 billion. Compaq’s total revenue- 40.4 billon, assets-23.9 billion, operating earnings-1.9 billion. So, Pro forma combined total revenue will be 87.4 billion, while IBM’s total revenue is 88 billion. These two figures are almost the same, which means HP Compaq could compete against its main competitor successfully. Threat of entry Both companies have big stake in the computer industry, but troubled future. So new entrants, can damage their positions. Merged company can rival new entrants and maintain existing market share. Supplier Power Separately hp and Compaq have a lot of suppliers. So choice among them would increase, and optimal solution could be made in terms of price, quality, etc. Buyer power Brand awareness of both Hp and Compaq are high, and number of loyal customers is high too. So in the case of merge, and becoming one larger company, number of buyers would have been increased too. Threat of substitutes There are almost no substitutes for computers, except the fact that, one can substitute desktop computer for notebook computer. There is no alternative to satisfy the same demand in that industry. This will enable hp Compaq to strengthen its position. Industry life cycle Before the merge both Compaq and HP were in the maturity level. Because, product was more familiar to the majority of customers, information about it was
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