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 government debt because of Covid-19 spendings, customer relationship management is fast transforming because of increasing concerns over data privacy, there is increasing trade war between United States & China, technology disruption, wage bills are increasing, increasing commodity prices, talent flight as more people leaving formal jobs,
there is backlash against globalization, geopolitical disruptions, 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 -
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.
Cross disciplinary teams
– Horizontal connected teams at the Chips Avago 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.
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.
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.
Training and development
– Chips Avago has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Chips on the Side (A): The Buy-Out of Avago Technologies 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.
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.
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.
Superior customer experience
– The customer experience strategy of Chips Avago in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
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.
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.
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.
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.
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 -
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 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.
Skills based hiring
– The stress on hiring functional specialists at Chips Avago 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.
Capital Spending Reduction
– Even during the low interest decade, Chips Avago has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
High operating costs
– Compare to the competitors, firm in the HBR case study Chips on the Side (A): The Buy-Out of Avago Technologies has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Chips Avago 's lucrative 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.
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.
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.
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.
Interest costs
– Compare to the competition, Chips Avago 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.
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.
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 -
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.
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.
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. Chips Avago can explore opportunities that can attract volunteers and are consistent with its mission and vision.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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 -
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.
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 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Chips Avago in the Leadership & Managing People industry. The Leadership & Managing People 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.
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.
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.
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 .
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.
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.
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.
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.
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.