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Case #6
“Hewlett Packard Consumer Products Business Organization:
Distributing Printers Via the Internet”
Harvard Business Case #9-500-021 (Rev. March 22, 2000)
Academic instructors who are registered with the publisher’s
website (http://www.hbsp.harvard.edu) may download the Teaching
Note #5-503-025 (August 20, 2002) for this case free of charge.
ABSTRACT
Hewlett Packard had been successfully selling 90 percent of
its printer product through retail partners such as Wal-Mart and
CompUSA. Because of the success achieved by Dell and Gateway in
TEACHING OBJECTIVES
The teaching objective of this case is to expose students to
the possible channel conflicts that can arise when technical
products are concurrently sold through multiple parallel channels.
SUGGESTED QUESTIONS FOR CLASSROOM DISCUSSION
1. Describe briefly the current distribution system employed by
Hewlett Packard to sell and distribute printers.
2. Talk about the possible advantages and disadvantages of using
the Internet to sell and distribute printers.
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ANALYSIS
1. Describe briefly the current distribution system employed by
Hewlett Packard to sell and distribute printers.
HP sells laser printers, ink-jet printers and supplies to
retailers at wholesale prices. Retailers sell these products to
customers at their respective retail prices.
About 90 percent of current HP printer sales have been
through existing retailers such as Wal-Mart, CompUSA, CopyMax and
The value of retailers to HP is easily recognized. For
example, for laser printers which are typically priced above
$1000, customers prefer to see and touch them before making a
Hewlett Packard must address the e-channel problem carefully
as any retaliation by these retailers could cause major harm to
their printer business.
2. Talk about the possible advantages and disadvantages of using
the Internet to sell and distribute printers.
There are advantages and disadvantages of HP going on-line.
The advantages are listed below:
First of all, going online confers competitive advantages for
HP due to (a) lower costs for inventory management; (b) a savings
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production planning) among supply chain partners and retailers.
HP will thus gain access to customer feedback (e.g., customer
profiling, customer relationship management, customer retention,
On the other hand, there are some disadvantages to HP if an
on-line marketing plan is implemented. At the top of the list is
the potential conflict with existing channel partners.
Some customers who need hand-holding will suffer, as there
will be no sales clerks available to offer advisement and no
equipment demonstration or sample prints for customers to witness.
HP may lose local advertising offered by retailers (e.g., flyers
in newspapers) to drum up customer traffic which has the
potential to create more in-store cross-sale opportunities.
3. What types of channel conflicts would an on-line sales and
distribution system create for the current HP channel partners?
When HP sells products via the Internet, they are likely to
charge a price which is lower than that charged by the retail
stores. This lower price is justified because HP needs to compete
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4. Which products should be sold via the internet and at what
price?
Laser printers are big-ticket items usually priced at over
$1000 or so. Customers tend to want to “kick the tires” before
they buy. Thus, such a high-price product may not be sold
5. How should HP implement their on-line sales and distribution
strategy to minimize the channel conflicts? Delineate and
substantiate the implementation strategies of your choice.
Global trends, marketplace expansion and competitive pressure
all will tend to motivate HP to quickly start its on-line
marketing program. HP needs, then, to come up with an on-line
plan which both minimizes conflicts and adds value to its
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The HP web-site should contain product information (e.g.,
types, pricing, performance, applicable supplies and accessories,
warranties, and product return policy), post Frequently Asked
Questions (FAQs), and specify customer support and services on a
24/7 basis. This web-site needs to be linked to proper databases
(e.g., demand forecasting, order processing, invoicing, customer
relationship management, and others). With such a web site, HP
will be able to reach customers not currently served by the
existing retail stores (again, those who live in rural areas of
the US and in global locations).
The on-line prices for printers are to be set at levels
(using market pricing) lower than those charged by the retail
stores in order to be competitive with respect to other brands.
The HP web-site should require first-time customers to
register (free-of-charge). The purpose is to establish consumer
profiles, purchase records, and zip codes. HP can then readily
solicit feedback, conduct marketing surveys if needed, and
proactively inform registered consumers of new product offerings
or special discounts.
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HP should also advertise on its web-site that products
purchased on-line may be returned to local retail stores. HP will
need to define a policy of reimbursing retail stores for the
extra effort needed to process returns.
The HP web-site should also offer: (1) all supplies (e.g.,
printer cables, ink cartridges, toner cartridges, and paper) to
customers as long as there are no local retail stores supplying
the same in the zip code area of the customer; (2) downloadable
printer drivers enabling customers to quickly connect and operate
HP printers with their PC computers; (3) refurbished printers; (4)
extended service plan; and (5) possibly also financing options
for major purchases.
This plan should bring about market share expansion, better
customer relations management, and expanded services. The