The Homa Files

TakeAway: Maintaining profitable prices while growing market share requires a delicate balance that many companies struggle to find.

Not HP – through a series of cost savings and operational efficiency initiatives, HP is capturing market share while achieving superior profit margins.

Taking notes, Mr. Dell ?.

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Excerpted from WSJ, “H-P Wields Its Clout to Undercut PC Rivals,” By Justin Scheck, September 25, 2009

Hewlett-Packard is using the dismal technology market to bolster its position as the world’s largest personal-computer maker.

For example: a $298 laptop to be sold at Wal-Mart …

Since the economy slumped last fall, H-P has gained market share by lowering prices of its consumer PCs to undercut rivals … And while the profit margin in H-P’s PC business has fallen, it hasn’t suffered as much as rivals.

H-P has used its enormous sales volume to demand cheaper prices from suppliers and contract manufacturers. It’s also taken advantage of an improved supply chain to quickly design and deliver new, less expensive PCs …

The price cutting has pushed H-P’s PC division operating-profit margins to 4.6% in late July from 5.7% a year ago. But it’s still better than Dell’s estimated 4.3% margin  …

Dell is ceding market share rather than drastically lowering prices to match H-P. “If we don’t think there is going to be profitable growth, there are some situations where we won’t take part,” said a Dell spokesman. H-P’s market share jumped to nearly 20% of global PC shipments in the second quarter, up from 18.5% a year earlier, according to IDC. In the same period, Dell’s share fell by about two percentage points to 13.7% …

Edit by TJS

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Full Article
http://online.wsj.com/article/SB125374794515235743.html

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This entry was posted on October 29, 2009 at 7:16 am and is filed under Mktg - Pricing. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.