AMD (AMD) SWOT Analysis / TOWS Matrix / MBA Resources
Semiconductors
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for AMD (Germany)
Based on various researches at Oak Spring University , AMD is operating in a macro-environment that has been destablized by – cloud computing is disrupting traditional business models, wage bills are increasing, increasing transportation and logistics costs, central banks are concerned over increasing inflation, increasing government debt because of Covid-19 spendings, increasing commodity prices, digital marketing is dominated by two big players Facebook and Google,
banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing energy prices, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that AMD can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the AMD, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which AMD 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 AMD can be done for the following purposes –
1. Strategic planning of AMD
2. Improving business portfolio management of AMD
3. Assessing feasibility of the new initiative in Germany
4. Making a Semiconductors sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of AMD
Strengths of AMD | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of AMD are -
High switching costs
– The high switching costs that AMD 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.
Digital Transformation in Semiconductors industry
- digital transformation varies from industry to industry. For AMD digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. AMD 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.
Learning organization
- AMD 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 AMD is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at AMD emphasize – knowledge, initiative, and innovation.
Diverse revenue streams
– AMD is present in almost all the verticals within the Semiconductors industry. This has provided AMD 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
– AMD has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled AMD to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Successful track record of launching new products
– AMD has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. AMD 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.
Organizational Resilience of AMD
– The covid-19 pandemic has put organizational resilience at the centre of everthing AMD does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Ability to lead change in Semiconductors
– AMD is one of the leading players in the Semiconductors industry in Germany. Over the years it has not only transformed the business landscape in the Semiconductors industry in Germany but also across the existing markets. The ability to lead change has enabled AMD in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Training and development
– AMD 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.
Operational resilience
– The operational resilience strategy of AMD 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.
Cross disciplinary teams
– Horizontal connected teams at the AMD 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.
Superior customer experience
– The customer experience strategy of AMD in Semiconductors industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Weaknesses of AMD | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of AMD are -
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 AMD supply chain. Even after few cautionary changes, AMD is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left AMD vulnerable to further global disruptions in South East Asia.
High operating costs
– Compare to the competitors, AMD has high operating costs in the Semiconductors industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract AMD lucrative customers.
Products dominated business model
– Even though AMD 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. AMD should strive to include more intangible value offerings along with its core products and services.
Slow to strategic competitive environment developments
– As AMD 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.
Slow decision making process
– As mentioned earlier in the report, AMD has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Semiconductors industry over the last five years. AMD even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Ability to respond to the competition
– As the decision making is very deliberative at AMD, in the dynamic environment of Semiconductors industry it has struggled to respond to the nimble upstart competition. AMD has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
No frontier risks strategy
– From the 10K / annual statement of AMD, it seems that company is thinking out the frontier risks that can impact Semiconductors industry. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
High cash cycle compare to competitors
AMD has a high cash cycle compare to other players in the Semiconductors industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Employees’ less understanding of AMD strategy
– From the outside it seems that the employees of AMD 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.
Compensation and incentives
– The revenue per employee of AMD is just above the Semiconductors industry average. It 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.
Low market penetration in new markets
– Outside its home market of Germany, AMD needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
AMD Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of AMD are -
Buying journey improvements
– AMD 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, AMD 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
– AMD 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 AMD to build a competitive advantage using analytics. The analytics driven competitive advantage can help AMD to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Leveraging digital technologies
– AMD can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Lowering marketing communication costs
– 5G expansion will open new opportunities for AMD 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, AMD is facing challenges because of the dominance of functional experts in the organization. AMD 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.
Developing new processes and practices
– AMD 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.
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 AMD 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, AMD can use these opportunities to build new business models that can help the communities that AMD operates in. Secondly it can use opportunities from government spending in Semiconductors sector.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, AMD 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 AMD to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Learning at scale
– Online learning technologies has now opened space for AMD 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects AMD can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Building a culture of innovation
– managers at AMD 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 Semiconductors industry.
Threats AMD External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of AMD are -
Environmental challenges
– AMD 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. AMD can take advantage of this fund but it will also bring new competitors in the Semiconductors industry.
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 AMD in the Semiconductors sector and impact the bottomline of the organization.
Stagnating economy with rate increase
– AMD 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.
Shortening product life cycle
– it is one of the major threat that AMD is facing in Semiconductors sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Increasing wage structure of AMD
– 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 AMD.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for AMD in Semiconductors industry. The Semiconductors 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.
High dependence on third party suppliers
– AMD 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, AMD 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Semiconductors industry are lowering. It can presents AMD with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Semiconductors sector.
Technology acceleration in Forth Industrial Revolution
– AMD has witnessed rapid integration of technology during Covid-19 in the Semiconductors industry. As one of the leading players in the industry, AMD 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.
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. AMD can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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 AMD business can come under increasing regulations regarding data privacy, data security, etc.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, AMD 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 AMD prominent markets.
Weighted SWOT Analysis of AMD Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at AMD 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 AMD 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 AMD 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 AMD 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 AMD needs to make to build a sustainable competitive advantage.