It's not the squad.
If the players are struggling with being played out of position in crude formations with tactics that every opposition in the league figured out years ago, then replacing the players really isn't going to help.
This squad is capable of challenging for the top four. We saw it two seasons ago and even last season (yes, last season was pretty dire, but even then we were talking about top four, never about relegation!).
Of course the squad can be improved, but we need to be getting the most out of the squad we've got before new signings will help.
The bottom line is: Hodgson needs to go.