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Combining Knowledge

Case Aims: To illustrate the processes associated with a merger aimed at combining knowledge capabilities.

In 2001, prior to deciding that ongoing performance could best be achieved through a merger with Compaq, the board of directors of Hewlett Packard (HP) defined four potential alternative strategic development pathways for the company (Burgelman and McKinney 2006):

  • 1. Continue along the current path: stick with the same businesses and improve performance without major acquisitions or spinouts
  • 2. Aggressively grow services capabilities, including outsourcing and business process consulting via acquisitions
  • 3. Put primary focus on becoming the leading printing and imaging company
  • 4. Become the leader in all current major business areas and become the largest IT supplier with major acquisitions

Having reviewed the options and deciding leadership through acquisition was the preferred strategy, the board decided to initiate a merger with Compaq. This decision was followed by an analysis to generate a new corporate strategy. This strategy determined how combining the two companies would improve the product and market positions of the new, larger entity, strengthen distinctive competencies and exploit strengthened competencies to defend and leverage an improved strategic position.

Once it became evident that Compaq would be a willing partner in the merger, the next action was to create an integration plan to define the new executive team and the basic organisational structure of the combined company. After the merger, the next phase involved implementing a plan to achieve operational integration. This process was aimed at retaining customers, achieving market and financial results, eliminating product duplication, achieving procurement synergies and ensuring operational processes



continue to work smoothly. This stage was followed by an attempt to achieve strategic integration. This involved completing the longer-term operational integration tasks and the multiyear strategic initiatives necessary to exploit the synergies believed to exist at the time the merger was first considered.

The selected strategy for the new entity was a 'high-tech, low-cost' corporate strategy. This required HP to develop some significantly different distinctive competencies in order to defeat its two largest competitors, Dell and IBM. Unfortunately for the next few years, HP encountered problems in achieving successful strategic integration. Eventually, it decided to appoint a new CEO, Mark Hurd. He decided to return to HP's original culture of leveraging internal competencies based upon the organisation being first and foremost a technology company (LaPlante 2007).

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