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Texas Instruments and HewlettPackard 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 firms tendencies in terms of: Planning and control systems Strategic planning systems Budgeting systems Reporting systems Performance evaluation systems and Incentive 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/highfeatures products

Functional Strategy
Texas Instruments Hewlett-Packard

Marketing: High volume/low price Rapid growth Standard products

Marketing: High value/high price Controlled growth Custom features

Functional Strategy
Texas 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 Strategy
Texas 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 Strategy
Texas 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 products 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, costeffective production processes to match highvolume 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