Microchip (MCHP) SWOT Analysis / TOWS Matrix / MBA Resources
Semiconductors
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Microchip (United States)
Based on various researches at Oak Spring University , Microchip is operating in a macro-environment that has been destablized by – increasing energy prices, competitive advantages are harder to sustain because of technology dispersion, increasing commodity prices, there is backlash against globalization, banking and financial system is disrupted by Bitcoin and other crypto currencies, cloud computing is disrupting traditional business models, technology disruption,
increasing transportation and logistics costs, talent flight as more people leaving formal jobs, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Microchip can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Microchip, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Microchip 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 Microchip can be done for the following purposes –
1. Strategic planning of Microchip
2. Improving business portfolio management of Microchip
3. Assessing feasibility of the new initiative in United States
4. Making a Semiconductors sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Microchip
Strengths of Microchip | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Microchip are -
Ability to lead change in Semiconductors
– Microchip is one of the leading players in the Semiconductors industry in United States. Over the years it has not only transformed the business landscape in the Semiconductors industry in United States but also across the existing markets. The ability to lead change has enabled Microchip in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Operational resilience
– The operational resilience strategy of Microchip comprises – understanding the underlying the factors in the Semiconductors 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.
Learning organization
- Microchip 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 Microchip is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Microchip emphasize – knowledge, initiative, and innovation.
Digital Transformation in Semiconductors industry
- digital transformation varies from industry to industry. For Microchip digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Microchip 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 brand equity
– Microchip has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Microchip to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Innovation driven organization
– Microchip is one of the most innovative firm in Semiconductors sector.
Effective Research and Development (R&D)
– Microchip has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Microchip staying ahead in the Semiconductors industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Training and development
– Microchip has one of the best training and development program in Technology industry. The effectiveness of the training programs can be measured in – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Low bargaining power of suppliers
– Suppliers of Microchip in the Technology sector have low bargaining power. Microchip has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Microchip to manage not only supply disruptions but also source products at highly competitive prices.
Highly skilled collaborators
– Microchip has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Semiconductors industry. Secondly the value chain collaborators of Microchip have helped the firm to develop new products and bring them quickly to the marketplace.
High switching costs
– The high switching costs that Microchip 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.
Strong track record of project management in the Semiconductors industry
– Microchip is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Weaknesses of Microchip | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Microchip are -
Lack of clear differentiation of Microchip products
– To increase the profitability and margins on the products, Microchip 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, Microchip is slow explore the new channels of communication. These new channels of communication can help Microchip to provide better information regarding Semiconductors products and services. It can also build an online community to further reach out to potential customers.
Slow to strategic competitive environment developments
– As Microchip is one of the leading players in the Semiconductors industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Semiconductors industry in last five years.
Need for greater diversity
– Microchip 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 United States, Microchip needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Aligning sales with marketing
– From the outside it seems that Microchip needs to have more collaboration between its sales team and marketing team. Sales professionals in the Semiconductors industry have deep experience in developing customer relationships. Marketing department at Microchip can leverage the sales team experience to cultivate customer relationships as Microchip is planning to shift buying processes online.
Products dominated business model
– Even though Microchip has some of the most successful models in the Semiconductors industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Microchip should strive to include more intangible value offerings along with its core products and services.
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 Microchip supply chain. Even after few cautionary changes, Microchip is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Microchip vulnerable to further global disruptions in South East Asia.
Ability to respond to the competition
– As the decision making is very deliberative at Microchip, in the dynamic environment of Semiconductors industry it has struggled to respond to the nimble upstart competition. Microchip has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Skills based hiring in Semiconductors industry
– The stress on hiring functional specialists at Microchip 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.
Workers concerns about automation
– As automation is fast increasing in the Semiconductors industry, Microchip 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.
Microchip Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Microchip are -
Buying journey improvements
– Microchip can improve the customer journey of consumers in the Semiconductors industry by using analytics and artificial intelligence. It 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Microchip can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Using analytics as competitive advantage
– Microchip has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Semiconductors sector. This continuous investment in analytics has enabled Microchip to build a competitive advantage using analytics. The analytics driven competitive advantage can help Microchip to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Microchip is facing challenges because of the dominance of functional experts in the organization. Microchip can utilize new technology in the field of Semiconductors industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Microchip in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Semiconductors industry, 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, Microchip can use these opportunities to build new business models that can help the communities that Microchip operates in. Secondly it can use opportunities from government spending in Semiconductors sector.
Better consumer reach
– The expansion of the 5G network will help Microchip to increase its market reach. Microchip 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Semiconductors industry, but it has also influenced the consumer preferences. Microchip can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Developing new processes and practices
– Microchip can develop new processes and procedures in Semiconductors 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Microchip 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.
Loyalty marketing
– Microchip 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.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Semiconductors industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Microchip 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. Microchip 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.
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 Microchip 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.
Threats Microchip External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Microchip are -
Easy access to finance
– Easy access to finance in Semiconductors industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Microchip can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Technology acceleration in Forth Industrial Revolution
– Microchip has witnessed rapid integration of technology during Covid-19 in the Semiconductors industry. As one of the leading players in the industry, Microchip needs to keep up with the evolution of technology in the Semiconductors 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.
Environmental challenges
– Microchip 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. Microchip can take advantage of this fund but it will also bring new competitors in the Semiconductors industry.
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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Microchip may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Semiconductors sector.
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. Microchip needs to understand the core reasons impacting the Semiconductors industry. This will help it in building a better workplace.
High dependence on third party suppliers
– Microchip 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 Microchip
– 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 Microchip.
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 Microchip.
Consumer confidence and its impact on Microchip 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 Semiconductors 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Semiconductors industry are lowering. It can presents Microchip with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Semiconductors sector.
Stagnating economy with rate increase
– Microchip 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 Semiconductors industry.
Weighted SWOT Analysis of Microchip Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Microchip 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 Microchip 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 Microchip 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 Microchip 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 Microchip needs to make to build a sustainable competitive advantage.
