Strategic Symphony: Decoding the HP/Compaq Merger, Cultural Blends, and Triumphs - Paper Sample

Reasons Why It Occurred and When It Occurred

HP/ Compaq merged on September 3, 2001, when the companies announced a $ 25 billion agreement. HP was prospering, and its annual profits were increasing, with the net revenue rising to $ 42 billion in 1999. Compaq Company was also a company termed as the largest manufacturer of computing devices, and within the first year of operation, it generated $ 111 million (Dykman, Davis, & Lamb, 2013). Despite the progression of the two companies, they had the reasons for a merger.

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One of the reasons for the merger of the two companies was the advances in technology. Additionally, the companies experienced increased competition and changes in customer requirements (Dykman, Davis, & Lamb, 2013). Hewlett-Packard (HP) Company could no longer meet its targets both because of its failure and the industry's failure. HP has struggled to meet its targets by cutting down the payroll expenses, but there was a need for a more stern approach. The CEO of HP felt under threat of losing her job, hence why she was determined to the success of the merger to gain a competitive advantage. Despite the opposition from the stakeholders and investors, the two companies CEOs believed that they could fight competition through pricing after merging.

Size of Each Company Before the Merger

A year before the merger, the company made a revenue of approximately $ 48 million. In 1999, the company had net revenue of approximately $ 42 million, and $ 39 million in 1998 (Dykman, Davis, & Lamb, 2013). Compaq, on the other hand, had an approximate net revenue of $ 300 million. Compaq Company. Before the merger, HP had approximately 82,000 employees, while Compaq had approximately 62,000 employees. As of 2019, HP had approximately 56,000 employees.

The Organizational Challenges Faced

One of the organizational challenges faced during the merger was opposition from the investors and stakeholders (Dykman, Davis, & Lamb, 2013). The investors and the stakeholders were not confident about the decision of the management. At the beginning of the merger, the HP founders' families were opposed to the merger and indicated that they could combine their stockholding power to vote against the merger. In his lawsuit, Hewlett argued that the decision to oppose the merger was based on management misrepresentation and threats to Deutsche Bank, which was a big investor. The heirs of the company's founders later supported the merger, and the Board of Directors unanimously voted for the merger. There was a challenge of opposition from some of HP’s employees. However, the employee resistance to change was effectively handled by the management.

Was the Merger Successful or Not and Why

The HP/Compaq merger was a success, which has been a surprise to many due to the companies' organizational culture variance. Within 6 years after the merger, the shareholder returns increased by 46 percent. The company was also able to gain a competitive advantage over companies such as Dell and IBM. IBM was down by 23 percent, and Dell's profitability was up only by 2 percent (Dykman, Davis, & Lamb, 2013). The merger was thus successful in growing revenue and profits in the highly competitive market.

The State of the Company Now

In 2015, the company split in 2015 into two companies, namely HP Inc. and Hewlett Packard Enterprise. After the split, Hewlett Packard Inc. retained its stock price history and the stock ticker symbol while Hewlett Packard Enterprise traded its symbol. For the year ended October 31, 2019, HP Inc. And its subsidiaries had net revenue of $ 58,756 million while HP enterprise had a net revenue of $ 29,135 million for the same period (Fieler, 2020).

Cultural Elements of the Companies

HP Compaq

Cultural Differences Before The Merger

The HP Way. The culture emphasizes the value that employees bring to the company (Mullins, 2002). HP values its employees and the role employees play in the success of the company; hence it does not believe in hire and fire. The culture makes the company retain its employees by training them employees to have the skills the company requires. Compaq embraced the culture of hiring the most qualified employees as opposed to empowering employees through training to gain the required skills and expertise (Mullins, 2002). The culture is meant to ensure the company has the right employees to do the work all the time without incurring additional costs by training employees.

HP had a culture of adapting and embracing change in technologies (Mullins, 2002). Technologies keep on changing through improvement; the managers recognize the importance of an adaptable leadership style where new ideas that bring positive change are embraced to keep the company products competitive in the market. Compaq was conservative based on its business model of producing personal computers alone (Mullins, 2002). The culture makes it hard for the company to embrace new technologies because the company majors on personal computers as opposed to HP which produces different technological products (Kansal, 2020). Compaq also had a limited target market while HP focused on serving all the people.

HP also has a culture of self-financed growth, where some of the profits earned are reinvested back to the company (Mullins, 2002). Self-financing helps the company to plan how to use resources in financing the operations of the company. The culture of self-finance helps the company to use the resources effectively in a manner that benefits the company to earn returns from the investment. Compaq relies on resources from investors who invest their money with the anticipation of earning returns from the investment (Mullins, 2002). The source of funds limits the potential of the company to grow because the success of the company depends on the funding it gets. The funding model limits the growth of the company on the products that the company can be able to produce.

HP has a culture of diversification, where it produces many technologies the different serve purposes (Mullins, 2002). The culture of diversification helps the company have an expanded market base and increases the growth rate of the company. The diversification strategy helps the company to expand globally, reducing the costs of production and increases sales. Compaq as specialized in the production of computers and their accessories (Mullins, 2002). The culture is meant to ensure the company specializes in producing computer products to serve its customers. The culture limits Compaq from expanding and competing with other companies that produce different products at a lower cost of production.

New Culture After Acquisition

The merger between HP and Compaq led to the formation of a new culture that would enable the merger to achieve its goal. The new culture embraced after the merger included a culture of teamwork and innovation that was meant to ensure there is more interaction of all employees, which is key for the success of the company (Mullins, 2002). The culture helped to unify employees of the previous two different companies and make them work as one team. The culture is informed by the fact that all technologies and business strategies of Compaq were merged with HP business strategies (Kansal, 2020). The culture helped the employees to adapt to the new environment.

References

Dykman, C. A., Davis, C. K., & Lamb, A. J. (2013). A case of mergers: the HP experience. Journal of the International Academy for Case Studies, 19(1), 29. https://search.proquest.com/openview/be9eda7e4407f78b660b9966013cafcc/1?pq-origsite=gscholar&cbl=38869

Fieler, S. (2020). HP 2019 Financial Report. Annualreports.com. https://www.annualreports.com/HostedData/AnnualReports/PDF/NYSE_HPQ_2019_7fa1277a899040dbae9f7a5ee59451fe.pdf.

Kansal, S. (2020). Effective Management Of Change During Merger And Acquisition - Institute for Mergers, Acquisitions and Alliances (IMAA). Institute for Mergers, Acquisitions and Alliances (IMAA). https://imaa-institute.org/effective-management-change-merger-acquisition/.

Mullins, R. (2002). Next HP-Compaq merger battle: Cultures. Bizjournals.com. https://www.bizjournals.com/sanfrancisco/stories/2002/01/21/daily8.html.