Concerned over the fact that HP’s market share does not reflect company’s comparative advantages or consumers’ awareness and preferences of its products, HP’s management is considering entering the fast growing online retail market for computer hardware [Exhibit-1]. As HP is evaluating the right online strategy for its printer business, it is confronted with challenges such as potential channel disruption, first-mover risks, and uncertain returns on future investments. Nevertheless, customers growing information needs, e-commerce sales forecasts and customer research data suggested e-commerce was the future of business and therefore, the passive wait and see strategy is not an option.
E-Consumer/Segments/Target: HP’s success with both the customer segments, At-Home and Home Office, is critical for its overall success. HP’s customers and revenues are evenly distributed across both these segments. Moreover, both these segments are fast growing, are technology savvy and their buying decisions are sensitive to availability of product information and the product itself. HP should target growth within both segments through acquiring new customers and acquiring competitor customers who are keen to switch to the online channel. Within the existing customers, HP can expect repeat buyers (25-30%, 3 year replacement cycle) to extensively use the online channel.
Distribution Channel Analysis: Distribution channels each have different value propositions for printer buyers. While the “brick-and-mortar” retail channels enable shoppers to experience the product prior to purchase, the internet distribution channel provide shopping convenience, accessibility to all the products and specifications, ability to run product comparisons and check product’s store availability.
Evaluating the Strategic Choices While the option to go online with HP Direct appears lucrative, I recommend HP initially go with the online retailers. Online store are not intended to completely...