Case Study Description of Taiwan's United Microelectronics Corp. (UMC)
Taiwan's United Microelectronics Corp. (UMC), one of the world's leading semiconductor foundries, has grown dramatically in 16 years. UMC pursued a strategy of vertical disintegration as part of the chairman's vision of turning UMC into a "pure-play" foundry. This case discusses the major technological and competitive forces affecting the industry and looks at UMC's restructuring through the eyes of the chairman. Provides enough detail to engage the class in a discussion of the merits of UMC's vertical disintegration strategy and the possible pitfalls of this approach going forward.
Authors :: Anthony S. Frost, Terence Tsai, Borshiuan Cheng, Changhui Zhou
Swot Analysis of "Taiwan's United Microelectronics Corp. (UMC)" written by Anthony S. Frost, Terence Tsai, Borshiuan Cheng, Changhui Zhou includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Umc Umc's facing as an external strategic factors. Some of the topics covered in Taiwan's United Microelectronics Corp. (UMC) case study are - Strategic Management Strategies, Mergers & acquisitions and Strategy & Execution.
Some of the macro environment factors that can be used to understand the Taiwan's United Microelectronics Corp. (UMC) casestudy better are - – banking and financial system is disrupted by Bitcoin and other crypto currencies, technology disruption, there is increasing trade war between United States & China, talent flight as more people leaving formal jobs, central banks are concerned over increasing inflation, supply chains are disrupted by pandemic , increasing commodity prices,
challanges to central banks by blockchain based private currencies, increasing household debt because of falling income levels, etc
Introduction to SWOT Analysis of Taiwan's United Microelectronics Corp. (UMC)
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Taiwan's United Microelectronics Corp. (UMC) case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Umc Umc's, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Umc Umc's operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Taiwan's United Microelectronics Corp. (UMC) can be done for the following purposes –
1. Strategic planning using facts provided in Taiwan's United Microelectronics Corp. (UMC) case study
2. Improving business portfolio management of Umc Umc's
3. Assessing feasibility of the new initiative in Strategy & Execution field.
4. Making a Strategy & Execution topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Umc Umc's
Strengths Taiwan's United Microelectronics Corp. (UMC) | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Umc Umc's in Taiwan's United Microelectronics Corp. (UMC) Harvard Business Review case study are -
Analytics focus
– Umc Umc's is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Anthony S. Frost, Terence Tsai, Borshiuan Cheng, Changhui Zhou can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Cross disciplinary teams
– Horizontal connected teams at the Umc Umc's are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Ability to lead change in Strategy & Execution field
– Umc Umc's is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Umc Umc's in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Highly skilled collaborators
– Umc Umc's has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in Taiwan's United Microelectronics Corp. (UMC) HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Learning organization
- Umc Umc's is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Umc Umc's is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Taiwan's United Microelectronics Corp. (UMC) Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Innovation driven organization
– Umc Umc's is one of the most innovative firm in sector. Manager in Taiwan's United Microelectronics Corp. (UMC) Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Ability to recruit top talent
– Umc Umc's is one of the leading recruiters in the industry. Managers in the Taiwan's United Microelectronics Corp. (UMC) are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Effective Research and Development (R&D)
– Umc Umc's has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Taiwan's United Microelectronics Corp. (UMC) - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Training and development
– Umc Umc's has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Taiwan's United Microelectronics Corp. (UMC) Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Low bargaining power of suppliers
– Suppliers of Umc Umc's in the sector have low bargaining power. Taiwan's United Microelectronics Corp. (UMC) has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Umc Umc's to manage not only supply disruptions but also source products at highly competitive prices.
Operational resilience
– The operational resilience strategy in the Taiwan's United Microelectronics Corp. (UMC) Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Strong track record of project management
– Umc Umc's is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Weaknesses Taiwan's United Microelectronics Corp. (UMC) | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Taiwan's United Microelectronics Corp. (UMC) are -
Increasing silos among functional specialists
– The organizational structure of Umc Umc's is dominated by functional specialists. It is not different from other players in the Strategy & Execution segment. Umc Umc's needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Umc Umc's to focus more on services rather than just following the product oriented approach.
Skills based hiring
– The stress on hiring functional specialists at Umc Umc's has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Products dominated business model
– Even though Umc Umc's has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - Taiwan's United Microelectronics Corp. (UMC) should strive to include more intangible value offerings along with its core products and services.
Interest costs
– Compare to the competition, Umc Umc's has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Taiwan's United Microelectronics Corp. (UMC) HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Umc Umc's has relatively successful track record of launching new products.
Workers concerns about automation
– As automation is fast increasing in the segment, Umc Umc's needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
High cash cycle compare to competitors
Umc Umc's has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Slow to strategic competitive environment developments
– As Taiwan's United Microelectronics Corp. (UMC) HBR case study mentions - Umc Umc's takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
Need for greater diversity
– Umc Umc's has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Taiwan's United Microelectronics Corp. (UMC), is just above the industry average. Umc Umc's needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
Aligning sales with marketing
– It come across in the case study Taiwan's United Microelectronics Corp. (UMC) that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case Taiwan's United Microelectronics Corp. (UMC) can leverage the sales team experience to cultivate customer relationships as Umc Umc's is planning to shift buying processes online.
Opportunities Taiwan's United Microelectronics Corp. (UMC) | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Taiwan's United Microelectronics Corp. (UMC) are -
Creating value in data economy
– The success of analytics program of Umc Umc's has opened avenues for new revenue streams for the organization in the industry. This can help Umc Umc's to build a more holistic ecosystem as suggested in the Taiwan's United Microelectronics Corp. (UMC) case study. Umc Umc's can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Developing new processes and practices
– Umc Umc's can develop new processes and procedures in Strategy & Execution industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Umc Umc's can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Manufacturing automation
– Umc Umc's can use the latest technology developments to improve its manufacturing and designing process in Strategy & Execution segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Loyalty marketing
– Umc Umc's has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Learning at scale
– Online learning technologies has now opened space for Umc Umc's to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Low interest rates
– Even though inflation is raising its head in most developed economies, Umc Umc's can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Strategy & Execution industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Umc Umc's can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Umc Umc's can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Building a culture of innovation
– managers at Umc Umc's can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Strategy & Execution segment.
Buying journey improvements
– Umc Umc's can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Taiwan's United Microelectronics Corp. (UMC) suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Umc Umc's can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, Taiwan's United Microelectronics Corp. (UMC), to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Strategy & Execution industry, but it has also influenced the consumer preferences. Umc Umc's can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Umc Umc's can use these opportunities to build new business models that can help the communities that Umc Umc's operates in. Secondly it can use opportunities from government spending in Strategy & Execution sector.
Threats Taiwan's United Microelectronics Corp. (UMC) External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Taiwan's United Microelectronics Corp. (UMC) are -
Consumer confidence and its impact on Umc Umc's demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
Regulatory challenges
– Umc Umc's needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Strategy & Execution industry regulations.
Easy access to finance
– Easy access to finance in Strategy & Execution field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Umc Umc's can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Taiwan's United Microelectronics Corp. (UMC), Umc Umc's may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Strategy & Execution .
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Umc Umc's needs to understand the core reasons impacting the Strategy & Execution industry. This will help it in building a better workplace.
Technology acceleration in Forth Industrial Revolution
– Umc Umc's has witnessed rapid integration of technology during Covid-19 in the Strategy & Execution industry. As one of the leading players in the industry, Umc Umc's needs to keep up with the evolution of technology in the Strategy & Execution sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Umc Umc's business can come under increasing regulations regarding data privacy, data security, etc.
Stagnating economy with rate increase
– Umc Umc's can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Umc Umc's in the Strategy & Execution sector and impact the bottomline of the organization.
Increasing wage structure of Umc Umc's
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Umc Umc's.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Umc Umc's will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Umc Umc's in the Strategy & Execution industry. The Strategy & Execution industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Weighted SWOT Analysis of Taiwan's United Microelectronics Corp. (UMC) Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Taiwan's United Microelectronics Corp. (UMC) needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Taiwan's United Microelectronics Corp. (UMC) is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Taiwan's United Microelectronics Corp. (UMC) is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Taiwan's United Microelectronics Corp. (UMC) is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Umc Umc's needs to make to build a sustainable competitive advantage.