A Three-Year Marketing Plan for HP in the Printer Market

Executive summary
This report aims to make a mid-term (3-year) marketing plan for HP in the printer market. HP has already been the market leader in the printer industry and is attempting to sustainably maintain its leading position. The current printer market is monopolized and takes on three trends such as the increasing demands of multi-function printer, color printer and green printer. Three major market leaders in the printer industry such as HP, Canon and Epson have their own strengths, weaknesses, opportunities and threats. Based on the market trend, a new product idea of Paper Saver is proposed. Then, marketing objectives and strategies are formulated for the marketing of the new product. Finally, it is predicted the sales, profits and costs in the following three years.

Table of Contents Executive summary............................................................................................2 References........................................................................................................ 13 Appendices....................................................................................................... 15 Appendix 1: Brand Value of Top Ten Companies in 2010...........................15 Appendix 2: Printer Market Share in the 2nd Quarter of 2010..................16 Appendix 3: Printer Market Share in the 3rd Quarter of 2010...................17

1.0 Introduction Marketing plan is almost one of core plans for all the organizations and a right marketing plan always makes the most fundamental contributions to the success of an organization (Ferrell & Hartline, 2010). Based on this, the importance of a marketing plan for an organization is selfevident. The purpose of this report is to make a marketing plan for HP in the next three years. The report will firstly analyze the company situation. Secondly, it will analyze the market situation. Thirdly, it will carry out SWOT analysis of HP. Fourthly, it will analyze the major competitors of HP. Fifthly, it will provide a new product idea for HP. Sixthly, it will set marketing objectives and marketing strategies. Seventhly, it will conduct financial forecast including profits, sales and costs. At last, it will make a conclusion in a few sentences.

2.0 Company analysis HP was established in Palo Alto of California Silicon Valley in 1939, which now is the worlds second largest PC and office facilities manufacturer next to IBM. Every day, more than 1 billion people are using the technology of HP. (Malone, 2007) According to the brand value ranking list published by Interbrand in 2010, the brand value of HP reached to 26.8 billion dollars ranking in the 10th place (Appendix 1). As a global technical solution provider for personal user, all types of businesses and research institutions, HPs products cover IT infrastructure, personal computing and access devices, global service image and printing equipment, including desk computer and working station, laptop and tablet PC, multi-function printer, pocket computer, scanner, projector, digital video, storage device, server, network devices, consumables, and accessories and so on. In particular, HP is the world first-class printer supplier and formulates technology, performance and reliability standard for printer, including HP LaserJet and DeskJet printer, DesignJet large format printer, ScanJet scanner, OfficeJet, and CopyJet. (Malone, 2007)

According to IDC, HP further expanded its market share in the American and even the global printer market. The appendix 2 is the market share of top five printer manufacturers in the second quarter of 2010. According to the statistics, the world market share of HP has increased to 44% in the third quarter of 2010 with the sales of 13,422,936 (Appendix 3). Based on these, it can know that the

most major competitors for HP in the printer market are Canon and Epson, following by Samsung, Lexmark and Brother. IPG (Interpublic Group) as a member of HP has made great contributions to the revenues of the company for a long time, but it was meeting some challenges after following IBMs approach and had to carry out a new round of adjustment. Seeing from the promotion of HP ePrint in 2010, it can see that IPG is putting more energy on the development of solutions. (Huang, 2011) That is to say, the development trend of HP is to become a software and service supplier from a hardware supplier.

At present, HP has already led the world printer market. However, the goal of HP is to long-term place in the dominant position in the Chinese printer market as the most important market in the Asian-Pacific region. 4Ps (product, price, place and promotion) strategy of HP has the following characteristics. From the perspective of product, HP has correspondingly products in allusion to each consumer group and the product quality is high. From the perspective of price, low price is not the price strategy of HP. Therefore, HP is always weak in attracting those consumers sensitive to price and paying little attention to brand. (Marketing Teacher.com, 2011) This is also one problem of restricting the sales of HP. From the perspective of place, HP is famous for its distribution management while Dell eliminates middleman with all its strength (Zell, 2001). From the perspective of promotion, HP adopts advertising strategy and appeals to giving HP with more connotations. (Marketing Teacher.com, 2011)

3.0 Market analysis Based on Appendix 2 and Appendix 3, the top five printer manufacturers have already occupied more than 80% of the market share while HP takes up almost 50% of the market share. Moreover, a handful of international multinational companies have formulated special business model for the printing industry. They sell printers with high technical content and high manufacturing difficulty at a low price and then make profits by selling printing supplies at a high price. Meanwhile, they have applied thousands of technical patents about printers and supplies so that printer and supplies industry become an industry with high technology, high risk, high investment and high patent protection. (Tsuji, 2001) It can see that the printer technology and market is highly monopolized.

Fuji Xerox predicted that the global printer market would have about 7% of compound growth in the future next years and the overall market size would increase to 36 million units in 2014 from 28 million units in 2010. Moreover, it is mainly attributed to the quantity purchasing and using of multi-function printer (MFP) and the growing demands from China and other emerging markets. (The Edge Financial Daily, 2010) According to this, one trend in the printer market is the promotion of MFP. So far, the MFP in the market not only promotes the overall operating efficiency but also improves the reliability of the device. It is reported that the sales amounts of MFP in the laser printer market of the European and American developed countries has being grown at a rate of approximately 30% in recent years. (Anonymous, 2011)

Secondly, the demands on color printing are expanding with the development of modern office (Anonymous, 2011). However, data capacity that needs to be dealt with will increase for improving color gradation and image solution, which will ultimately result in the decreasing of print speed. Owing to this, manufacturers provide different solutions. Among them, AcuLaser Technology used by Epson in color laser printing is one of relatively successful solutions. Based on this trend, the era of low-end color laser printer has already come. Meanwhile, the inkjet printer market is gradually shrinking. In particular, due to the limitation of function and print effect of the lowest-end inkjet printer will be more and more unpopular in the public. (Tsuji, 2001)

Finally, green office is an irresistible trend of designing and manufacturing office automatic component module. At present, the nonmagnetic one-component imaging system laser printer produced by many manufacturers is basically able to achieve environmental protection, energy conservation, energy reducing and miniaturization (Anonymous, 2011). With the mature of the technology and the decreasing of ink powder, and the expansion of application, the nonmagnetic one-component imaging system laser printer will become the mainstream product in the future market.

4.0 SWOT analysis 4.1 Strengths Technology leadership: Printer market different from PC market needs a mass of R&D

investment. Competitors have better had their own technology for achieving victory. In this regard, HP has a clear advantage. HP has already had 17-year R&D experience and owned over 6000 patents (Malone, 2007).

Brand advantage: HP is the market leader in the printer industry all the time. The brand has been deeply rooted among the people. When consumers want to buy a printer, they will firstly think of HP. Speaking of HP, they will initially think of its printer.

Excellent distribution management and technology support: HP employs second level distribution channel so as to avoid the cutthroat competition in price and stock and so on. In addition, HP implements information sharing, and helps distributors serve customers by repair service network and training. (Zell, 2001)

4.2 Weaknesses High R&D investment and high cost: Every year, HP inputs 1 billion dollars in R&D as a result of high cost (Malone, 2007). Consequently, it is difficult for HP to reduce product price like some other competitors so as to lose some market shares in the low end market.

4.3 Opportunities Brand promotion: The brand promotion strength in the market is very great. For example, HP cost 40 million dollars to develop a large-scale advertising campaign in North America, Europe, Asia and Latin America (Alex, 2010).

Cost control: HP will not lose the market share by controlling the cost of products in the low end market and counterattacking competitors by reducing price.

Technological opportunity: HP can win the market and consolidate its market position by making full use of its technology in high end market.

4.4 Threats

Low end market: The low end market is encroached by some new entrants such as Dell. As a result, some customers are sensitive to price and insensitive to brand turn to its competitors. (Marketing Teacher.com, 2011)

5.0 Competitor analysis The competitor analysis mainly aims at Epson and Canon. Epson is the market leader of stylus printer and inkjet printer while HP is dominant in inkjet printer and especially laser printer market. Canon has achieved good performance in laser printer and especially inkjet printer market. (Tsuji, Y. S. 2001) In addition to business area, Canon has already put more and more efforts in household printer domain. Moreover, Canon promotes printer by utilizing its advantage in image. Different from the marketing strategy of Canon, Epson and HP are looking for differentiated competition. For example, Epson launched black and white inkjet printer under the prevalence of color printer. (Global Data, 2011) The following table summarizes the strengths, weaknesses, opportunities and threats of HPs major competitors.

Table 1: Competitor SWOT Competitors Strength Epson (Global Data, 2011) 1. High cost performance 2. Deep enterprise background 3. Relative high printer technology Weakness 1. Insufficient product integration without fully utilizing brand resource Opportunity 2. Lacking high-density advertisement 1. The popularization of PC and network 2. The application of advanced technology Threat 3. Great market capacity and potential 1. Price competition 2. Market trend: the elimination of inkjet printer 3. Pressures from competitors 1. Market trend: the elimination of inkjet printer 2. Exchange risk: High dependence on overseas market 1. The transformation of HP 2. The market trend: the prevalence of color printing Canon (Matsumoto, 2002) 1. Color advantage 2. Improved brand image by means of its other brands advantages 1. Immature ink technology 2. High dependence on HP

6.0 A new product idea for HP According to the section 3.0, the current printer market is mainly presenting three tendencies, that is, the increasing demands on MFP, color printing, as well as green printing. In order to accommodate to the market trend, the new product idea will cover these three aspects. The following sentences will describe the idea in details. The new product will be named as HP Paper Saver. It will consist of four major functions such as scrapping paper, reproducing, printing, and photocopying. Seeing from the function of printing, HP will use color laser printing technology while keeping high speed at the same time. In addition to printing and photocopying, the most distinct feature is that the paper saver can reproduce a brand-new paper after scrapping paper. In this way, it can help users save a lot of costs in purchasing new papers. Whats more, the function of paper reproduction is favorable for protecting the environment and fully utilizing resources so as to reduce resource wastes. Based on the functions of the new product, the product positioning is environmental protection, energy saving (e.g. electric power) and regeneration.

The paper saver will have two versions. One version is facing high-end customers and the other version is for normal users. Moreover, it will target at companies, schools, families and all the users who need to use paper. In the past, the sales of printer mainly targeted at business market. However, it is found that students especially university students are usually asked to hand in a paper with printing format. At that time, the print shops surrounding the schools are very busy. The profit is considerable though each paper may only earn a few cents. It can see that student market is a market with huge potential. For this reason, this new product will pay particularly attention to such a segment market, which is major reason for creating two versions.

7.0 Marketing objectives and strategies 7.1 Objectives SMART is the acronym of specific, measurable, achievable, realistic and time-bound, which is usually used to set goals (Dibb, et al. 2005). Next, the marketing objectives will be established from the following three aspects based on the SMART criteria.

1. To increase revenue by 20% in 12 months. 2. To increase the market share by 6% within a year. 3. To reduce customer cost by 50% within three years.

7.2 Product strategy Product strategy mainly refers to product utility, quality, appearance, brand, package, specification, and service and so on (Ferrell & Hartline, 2010). The new product is used to scrap paper, reproduce, print and photocopy. It will continue to use HPs high quality and excellent service as product strategy. In addition, the product will be small sized for meeting current customer demands by saving space.

7.3 Pricing strategy Price strategy mainly includes basic price, discount price, time of payment, terms of loan, and etc. (Ferrell & Hartline, 2010). HP will not employ unified price for the new product. For high-end users, it will adopt high price strategy. For normal users, it will employ low price strategy. The funds used for researching, manufacturing and marketing will be sourced from risk investment, bank loan, and HP.

7.4 Place strategy Place strategy means all kinds of activities implemented by the company for making its products enter and arrives at target market (Ferrell & Hartline, 2010). The new product will be sold primarily by store and then by Internet. For controlling cost, TV will be the least major channel.

7.5 Promotion strategy Promotion strategy usually contain advertising, personal selling, sales promotion, and public relation (Ferrell & Hartline, 2010). Advertising and personal selling are two promotion strategies for this new product. Because the product idea is quite new, it is necessary for our employees to introduce the functions of the product. And this strategy is mainly provided for enterprises and schools. Then, the advertisement is mainly used to attract families and individual customers.

8.0 Financial forecast Financial forecast plays a significant role in improve organizational business management level and economic benefit, and thus is quite necessary (Dibb, et al. 2005). The financial forecast for HPs new product is a middle-term forecast and will be from the aspects of sales, profit and cost.

It is predicted to sell 300,000 units in the first year and each unit is 1000 for high-end market (200,000 units) and 700 for low-end market (100,000 units). Therefore, the expected sales income for the first year will be 200,000 X 1000 + 100,000 X 700= 270,000,000. It is predicted that the variable cost of each unit in low end market and high end market is 900 and 600 respectively. The large investments in product R&D, promotion and other aspects may bring about the loss of 185,000,000. The break even analysis can reveal that HP will begin to make profit after the sales amount reaching 500,000 units in the second half year of 2013.

The following is the break even analysis for HP Paper Saver. Unit price: 1000 / 700 Variable cost: 900 / 600 First-year fixed cost: 50,000,000 (including product R&D and design, production facility, daily expenditure, marketing, and etc.)

Based on the above assumptions, the formula about break even analysis should be: 50,000,000 / (1000 900) or (700-600) = 500,000 units

The following chart is the budgets for HP Paper Saver in the next three years.

Table 2: The Budgets in the Next Three Years Item Revenue Profit margin 10% Costs Advertising Manufacture Material 2012 270,000,000 2013 324,000,000 2014 388,800,000 Total 982,800,000 98,280,000

7,000 3,000 10,000

7,000 3,000 10,000

7,000 3,000 10,000

21,000 9,000 30,000

Staff salary Total

3,000

3,000

3,000

3,000 63,000

9.0 Conclusion HP, Canon and Epson occupy most of market share in the printer industry, but each of them has advantages and disadvantages. The new product idea is based on the market trend of MFP, color printing and green printing. The product strategy focuses on function, quality, service and size. The price strategy is different to customers at different levels. Store is the most major distribution channel for the sales of new product, following by internet and TV in sequence. Finally, the promotion strategy includes advertising for families and individual customers while personal selling for companies and schools. In a conclusion, HP will make profit from the sales point of 500,000 units based on the break even analysis.

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Appendices

Appendix 1: Brand Value of Top Ten Companies in 2010

Rankings 1 2 3 4 5 6 7 8 9 10 Brand Coca-Cola IBM Microsoft Google GE MacDonald Intel Nokia Disney HP Industry Beverage Business service Computer software Internet service Multiple business Restaurants Electronics Electronics Media Electronics (Marinescu, 2010) Brand Value (million dollar) 70,450 64,727 60,895 43,557 42,808 33,578 29,495 29,495 28,731 26,867 Amplitude of Variation 2% 7% 7% 36% 10% 4% 4% 15 1 12

Appendix 2: Printer Market Share in the 2nd Quarter of 2010

(Source: Dignan, 2010b)

Appendix 3: Printer Market Share in the 3rd Quarter of 2010

(Source: Dignan, 2010a)