Chips on the Side (A): The Buy-Out of Avago Technologies SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Leadership & Managing People
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Chips on the Side (A): The Buy-Out of Avago Technologies
A consortium of private equity firms (KKR and Silver Lake Partners) is in the process of acquiring the semi-conductor division of Agilent. To prepare for the signing of the acquisition agreement and the subsequent transfer of ownership, the deal team is revisiting their investment thesis with respect to upsides and risks. Please visit the dedicated case website http://cases.insead.edu/chips-on-the-side/ (copy and paste the url into a browser).
Authors :: Michael Prahl, Claudia Zeisberger, Vikas A. Aggarwal, Swati Sawjiany
Swot Analysis of "Chips on the Side (A): The Buy-Out of Avago Technologies" written by Michael Prahl, Claudia Zeisberger, Vikas A. Aggarwal, Swati Sawjiany includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Chips Avago facing as an external strategic factors. Some of the topics covered in Chips on the Side (A): The Buy-Out of Avago Technologies case study are - Strategic Management Strategies, Mergers & acquisitions, Risk management and Leadership & Managing People.
Some of the macro environment factors that can be used to understand the Chips on the Side (A): The Buy-Out of Avago Technologies casestudy better are - – increasing transportation and logistics costs, geopolitical disruptions, digital marketing is dominated by two big players Facebook and Google, supply chains are disrupted by pandemic , increasing energy prices, increasing government debt because of Covid-19 spendings, increasing commodity prices,
wage bills are increasing, customer relationship management is fast transforming because of increasing concerns over data privacy, etc
Introduction to SWOT Analysis of Chips on the Side (A): The Buy-Out of Avago Technologies
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Chips on the Side (A): The Buy-Out of Avago Technologies case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Chips Avago, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Chips Avago 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 Chips on the Side (A): The Buy-Out of Avago Technologies can be done for the following purposes –
1. Strategic planning using facts provided in Chips on the Side (A): The Buy-Out of Avago Technologies case study
2. Improving business portfolio management of Chips Avago
3. Assessing feasibility of the new initiative in Leadership & Managing People field.
4. Making a Leadership & Managing People topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Chips Avago
Strengths Chips on the Side (A): The Buy-Out of Avago Technologies | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Chips Avago in Chips on the Side (A): The Buy-Out of Avago Technologies Harvard Business Review case study are -
Diverse revenue streams
– Chips Avago is present in almost all the verticals within the industry. This has provided firm in Chips on the Side (A): The Buy-Out of Avago Technologies case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
High brand equity
– Chips Avago has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Chips Avago to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Effective Research and Development (R&D)
– Chips Avago 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 Chips on the Side (A): The Buy-Out of Avago Technologies - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Ability to recruit top talent
– Chips Avago is one of the leading recruiters in the industry. Managers in the Chips on the Side (A): The Buy-Out of Avago Technologies are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Highly skilled collaborators
– Chips Avago 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 Chips on the Side (A): The Buy-Out of Avago Technologies HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
High switching costs
– The high switching costs that Chips Avago has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Organizational Resilience of Chips Avago
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Chips Avago does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Strong track record of project management
– Chips Avago 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
– Chips Avago 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 Michael Prahl, Claudia Zeisberger, Vikas A. Aggarwal, Swati Sawjiany 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 Leadership & Managing People field
– Chips Avago 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 Chips Avago in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Successful track record of launching new products
– Chips Avago has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Chips Avago has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Sustainable margins compare to other players in Leadership & Managing People industry
– Chips on the Side (A): The Buy-Out of Avago Technologies firm has clearly differentiated products in the market place. This has enabled Chips Avago to fetch slight price premium compare to the competitors in the Leadership & Managing People industry. The sustainable margins have also helped Chips Avago to invest into research and development (R&D) and innovation.
Weaknesses Chips on the Side (A): The Buy-Out of Avago Technologies | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Chips on the Side (A): The Buy-Out of Avago Technologies are -
Increasing silos among functional specialists
– The organizational structure of Chips Avago is dominated by functional specialists. It is not different from other players in the Leadership & Managing People segment. Chips Avago needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Chips Avago to focus more on services rather than just following the product oriented approach.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Chips on the Side (A): The Buy-Out of Avago Technologies, is just above the industry average. Chips Avago 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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Chips on the Side (A): The Buy-Out of Avago Technologies, it seems that the employees of Chips Avago don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
High cash cycle compare to competitors
Chips Avago 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.
Low market penetration in new markets
– Outside its home market of Chips Avago, firm in the HBR case study Chips on the Side (A): The Buy-Out of Avago Technologies needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Chips Avago is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Chips on the Side (A): The Buy-Out of Avago Technologies can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Lack of clear differentiation of Chips Avago products
– To increase the profitability and margins on the products, Chips Avago needs to provide more differentiated products than what it is currently offering in the marketplace.
Aligning sales with marketing
– It come across in the case study Chips on the Side (A): The Buy-Out of Avago Technologies 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 Chips on the Side (A): The Buy-Out of Avago Technologies can leverage the sales team experience to cultivate customer relationships as Chips Avago is planning to shift buying processes online.
Need for greater diversity
– Chips Avago 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.
Slow decision making process
– As mentioned earlier in the report, Chips Avago 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. Chips Avago 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.
High bargaining power of channel partners
– Because of the regulatory requirements, Michael Prahl, Claudia Zeisberger, Vikas A. Aggarwal, Swati Sawjiany suggests that, Chips Avago 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.
Opportunities Chips on the Side (A): The Buy-Out of Avago Technologies | 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 Chips on the Side (A): The Buy-Out of Avago Technologies are -
Low interest rates
– Even though inflation is raising its head in most developed economies, Chips Avago 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.
Buying journey improvements
– Chips Avago can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Chips on the Side (A): The Buy-Out of Avago Technologies 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.
Better consumer reach
– The expansion of the 5G network will help Chips Avago to increase its market reach. Chips Avago will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Manufacturing automation
– Chips Avago can use the latest technology developments to improve its manufacturing and designing process in Leadership & Managing People 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.
Learning at scale
– Online learning technologies has now opened space for Chips Avago 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Leadership & Managing People industry, but it has also influenced the consumer preferences. Chips Avago can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Building a culture of innovation
– managers at Chips Avago 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 Leadership & Managing People segment.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Chips Avago 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, Chips on the Side (A): The Buy-Out of Avago Technologies, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Chips Avago can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Chips Avago in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Leadership & Managing People segment, and it will provide faster access to the consumers.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Chips Avago can use these opportunities to build new business models that can help the communities that Chips Avago operates in. Secondly it can use opportunities from government spending in Leadership & Managing People sector.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Chips Avago 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 Chips Avago to hire the very best people irrespective of their geographical location.
Using analytics as competitive advantage
– Chips Avago 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 Chips on the Side (A): The Buy-Out of Avago Technologies - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Chips Avago to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Threats Chips on the Side (A): The Buy-Out of Avago Technologies External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Chips on the Side (A): The Buy-Out of Avago Technologies are -
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 Chips Avago.
High dependence on third party suppliers
– Chips Avago 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Chips Avago 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 Chips on the Side (A): The Buy-Out of Avago Technologies .
Environmental challenges
– Chips Avago 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. Chips Avago can take advantage of this fund but it will also bring new competitors in the Leadership & Managing People industry.
Technology acceleration in Forth Industrial Revolution
– Chips Avago has witnessed rapid integration of technology during Covid-19 in the Leadership & Managing People industry. As one of the leading players in the industry, Chips Avago needs to keep up with the evolution of technology in the Leadership & Managing People 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.
Stagnating economy with rate increase
– Chips Avago 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.
Consumer confidence and its impact on Chips Avago 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.
Increasing wage structure of Chips Avago
– 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 Chips Avago.
Regulatory challenges
– Chips Avago 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 Leadership & Managing People industry regulations.
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.
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. Chips Avago needs to understand the core reasons impacting the Leadership & Managing People industry. This will help it in building a better workplace.
Shortening product life cycle
– it is one of the major threat that Chips Avago is facing in Leadership & Managing People sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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. Chips Avago 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.
Weighted SWOT Analysis of Chips on the Side (A): The Buy-Out of Avago Technologies 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 Chips on the Side (A): The Buy-Out of Avago Technologies 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 Chips on the Side (A): The Buy-Out of Avago Technologies 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 Chips on the Side (A): The Buy-Out of Avago Technologies 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 Chips on the Side (A): The Buy-Out of Avago Technologies 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 Chips Avago needs to make to build a sustainable competitive advantage.