Case Study Description of Applied Materials: Managing Product Costs
SigmaX is the latest generation of manufacturing equipment for integrated circuits (semiconductor chips). SigmaX is used to perform one of the manufacturing steps called etching. As it usually happens at Applied Materials and because of the time pressure and the complexity of the technology involved, any other considerations--including product cost--are eclipsed during its development. But when SigmaX reaches the manufacturing stage (Worldwide Manufacturing Operations), product cost management becomes key to ensure adequate profits. At this point, Bill Finday and his team are in charge of managing product costs down. To achieve their objective, first they need to understand why actual costs are above expected costs. Next, they need to explore the various alternatives open to them to manage costs down initially to the planned level and then below it in an effort to maintain margins as competition drives prices down. Furthermore, a new generation of etching equipment will be developed soon and Bill and his team have to make recommendations regarding how to change the product development process to enhance the visibility of cost considerations.
Swot Analysis of "Applied Materials: Managing Product Costs" written by Antonio Davila, Marc Wouters includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Sigmax Etching facing as an external strategic factors. Some of the topics covered in Applied Materials: Managing Product Costs case study are - Strategic Management Strategies, Manufacturing, Product development and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Applied Materials: Managing Product Costs casestudy better are - – banking and financial system is disrupted by Bitcoin and other crypto currencies, central banks are concerned over increasing inflation, competitive advantages are harder to sustain because of technology dispersion, technology disruption, increasing commodity prices, increasing transportation and logistics costs, cloud computing is disrupting traditional business models,
supply chains are disrupted by pandemic , increasing energy prices, etc
Introduction to SWOT Analysis of Applied Materials: Managing Product Costs
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Applied Materials: Managing Product Costs case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Sigmax Etching, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Sigmax Etching 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 Applied Materials: Managing Product Costs can be done for the following purposes –
1. Strategic planning using facts provided in Applied Materials: Managing Product Costs case study
2. Improving business portfolio management of Sigmax Etching
3. Assessing feasibility of the new initiative in Finance & Accounting field.
4. Making a Finance & Accounting topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Sigmax Etching
Strengths Applied Materials: Managing Product Costs | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Sigmax Etching in Applied Materials: Managing Product Costs Harvard Business Review case study are -
Low bargaining power of suppliers
– Suppliers of Sigmax Etching in the sector have low bargaining power. Applied Materials: Managing Product Costs has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Sigmax Etching to manage not only supply disruptions but also source products at highly competitive prices.
Sustainable margins compare to other players in Finance & Accounting industry
– Applied Materials: Managing Product Costs firm has clearly differentiated products in the market place. This has enabled Sigmax Etching to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Sigmax Etching to invest into research and development (R&D) and innovation.
Training and development
– Sigmax Etching has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Applied Materials: Managing Product Costs 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.
Effective Research and Development (R&D)
– Sigmax Etching 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 Applied Materials: Managing Product Costs - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Innovation driven organization
– Sigmax Etching is one of the most innovative firm in sector. Manager in Applied Materials: Managing Product Costs Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Learning organization
- Sigmax Etching 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 Sigmax Etching is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Applied Materials: Managing Product Costs Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Superior customer experience
– The customer experience strategy of Sigmax Etching in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Ability to recruit top talent
– Sigmax Etching is one of the leading recruiters in the industry. Managers in the Applied Materials: Managing Product Costs are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
High brand equity
– Sigmax Etching has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Sigmax Etching to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Strong track record of project management
– Sigmax Etching is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Analytics focus
– Sigmax Etching 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 Antonio Davila, Marc Wouters 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.
Ability to lead change in Finance & Accounting field
– Sigmax Etching 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 Sigmax Etching in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Weaknesses Applied Materials: Managing Product Costs | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Applied Materials: Managing Product Costs are -
Need for greater diversity
– Sigmax Etching 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.
Low market penetration in new markets
– Outside its home market of Sigmax Etching, firm in the HBR case study Applied Materials: Managing Product Costs needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Sigmax Etching supply chain. Even after few cautionary changes mentioned in the HBR case study - Applied Materials: Managing Product Costs, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Sigmax Etching vulnerable to further global disruptions in South East Asia.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Applied Materials: Managing Product Costs, is just above the industry average. Sigmax Etching 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.
Slow decision making process
– As mentioned earlier in the report, Sigmax Etching has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Sigmax Etching even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Applied Materials: Managing Product Costs, in the dynamic environment Sigmax Etching has struggled to respond to the nimble upstart competition. Sigmax Etching has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Aligning sales with marketing
– It come across in the case study Applied Materials: Managing Product Costs 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 Applied Materials: Managing Product Costs can leverage the sales team experience to cultivate customer relationships as Sigmax Etching is planning to shift buying processes online.
Interest costs
– Compare to the competition, Sigmax Etching 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 bargaining power of channel partners
– Because of the regulatory requirements, Antonio Davila, Marc Wouters suggests that, Sigmax Etching is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
Increasing silos among functional specialists
– The organizational structure of Sigmax Etching is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Sigmax Etching needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Sigmax Etching to focus more on services rather than just following the product oriented approach.
Skills based hiring
– The stress on hiring functional specialists at Sigmax Etching 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.
Opportunities Applied Materials: Managing Product Costs | 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 Applied Materials: Managing Product Costs are -
Developing new processes and practices
– Sigmax Etching can develop new processes and procedures in Finance & Accounting 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Finance & Accounting industry, but it has also influenced the consumer preferences. Sigmax Etching can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Manufacturing automation
– Sigmax Etching can use the latest technology developments to improve its manufacturing and designing process in Finance & Accounting 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.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Sigmax Etching can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Using analytics as competitive advantage
– Sigmax Etching has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study Applied Materials: Managing Product Costs - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Sigmax Etching to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Sigmax Etching can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Sigmax Etching in the consumer business. Now Sigmax Etching can target international markets with far fewer capital restrictions requirements than the existing system.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Sigmax Etching to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Sigmax Etching to hire the very best people irrespective of their geographical location.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Sigmax Etching to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Leveraging digital technologies
– Sigmax Etching can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Finance & Accounting industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Sigmax Etching 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. Sigmax Etching 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.
Learning at scale
– Online learning technologies has now opened space for Sigmax Etching 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, Sigmax Etching 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.
Threats Applied Materials: Managing Product Costs External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Applied Materials: Managing Product Costs are -
Regulatory challenges
– Sigmax Etching 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 Finance & Accounting industry regulations.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Sigmax Etching can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study Applied Materials: Managing Product Costs .
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. Sigmax Etching needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Sigmax Etching with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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 Sigmax Etching business can come under increasing regulations regarding data privacy, data security, etc.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Sigmax Etching.
High dependence on third party suppliers
– Sigmax Etching high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Environmental challenges
– Sigmax Etching needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Sigmax Etching can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
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. Sigmax Etching 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.
Shortening product life cycle
– it is one of the major threat that Sigmax Etching is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Technology acceleration in Forth Industrial Revolution
– Sigmax Etching has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Sigmax Etching needs to keep up with the evolution of technology in the Finance & Accounting 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.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Consumer confidence and its impact on Sigmax Etching 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.
Weighted SWOT Analysis of Applied Materials: Managing Product Costs 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 Applied Materials: Managing Product Costs 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 Applied Materials: Managing Product Costs 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 Applied Materials: Managing Product Costs 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 Applied Materials: Managing Product Costs 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 Sigmax Etching needs to make to build a sustainable competitive advantage.
