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 - – talent flight as more people leaving formal jobs, increasing energy prices, cloud computing is disrupting traditional business models, increasing government debt because of Covid-19 spendings, there is increasing trade war between United States & China, increasing commodity prices, wage bills are increasing,
central banks are concerned over increasing inflation, increasing inequality as vast percentage of new income is going to the top 1%, 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 -
Digital Transformation in Leadership & Managing People segment
- digital transformation varies from industry to industry. For Chips Avago digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Chips Avago has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
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.
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.
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.
Innovation driven organization
– Chips Avago is one of the most innovative firm in sector. Manager in Chips on the Side (A): The Buy-Out of Avago Technologies Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Learning organization
- Chips Avago 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 Chips Avago is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Chips on the Side (A): The Buy-Out of Avago Technologies Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Operational resilience
– The operational resilience strategy in the Chips on the Side (A): The Buy-Out of Avago Technologies 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.
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.
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.
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.
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.
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 -
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.
Products dominated business model
– Even though Chips Avago 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 - Chips on the Side (A): The Buy-Out of Avago Technologies should strive to include more intangible value offerings along with its core products and services.
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.
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.
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 Chips Avago supply chain. Even after few cautionary changes mentioned in the HBR case study - Chips on the Side (A): The Buy-Out of Avago Technologies, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Chips Avago vulnerable to further global disruptions in South East Asia.
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.
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.
Workers concerns about automation
– As automation is fast increasing in the segment, Chips Avago 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.
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.
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.
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 -
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.
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.
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 Chips Avago 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.
Creating value in data economy
– The success of analytics program of Chips Avago has opened avenues for new revenue streams for the organization in the industry. This can help Chips Avago to build a more holistic ecosystem as suggested in the Chips on the Side (A): The Buy-Out of Avago Technologies case study. Chips Avago can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
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.
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.
Loyalty marketing
– Chips Avago 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.
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.
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 Chips Avago in the consumer business. Now Chips Avago can target international markets with far fewer capital restrictions requirements than the existing system.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Leadership & Managing People industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Chips Avago 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. Chips Avago 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.
Developing new processes and practices
– Chips Avago can develop new processes and procedures in Leadership & Managing People 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.
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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Chips Avago is facing challenges because of the dominance of functional experts in the organization. Chips on the Side (A): The Buy-Out of Avago Technologies case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
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 -
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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Chips Avago with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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.
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.
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 Chips Avago business can come under increasing regulations regarding data privacy, data security, etc.
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 Chips Avago in the Leadership & Managing People sector and impact the bottomline of the organization.
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.
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.
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.
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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Chips on the Side (A): The Buy-Out of Avago Technologies, Chips Avago may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Leadership & Managing People .
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.