Scenario Analysis: Micron Technology - Case Study Example

Scenario Analysis-Micron Technology, Inc P.E.S.T FACTORS Political Factors The companies manufacturing units are in United States, Italy, Singapore, Israel, Puerto Rico, Malaysia, and China. It has retail outlets al over the world. This has resulted to political influence from different countries. The company hence faces risks of political instability, compliance with International regulations including export control laws and Foreign Corrupt Practices Act. Operation in different countries has however been of great significance to the company due to reduced production costs especially labor cost, in china, for example. Government regulations have been changing with time affecting the operations of international firms negatively. Economic Factors Micron Technology operates internationally. It is hence influenced by international factors including fluctuating interest rates in different countries affecting the debt levels, export and import duties which are always changing. Various government have different regulation, and this affect the operation of the company, the regulations also change with time and the firm should, therefore, incorporate this in their plans. The company supplies its products to developing countries that are easily affected by inflation; this negatively affects its returns. The company is also affected by exchange rates. It has to convert the different currencies it operates in, mainly the Singapore dollar, Yen, Euro and Shekel, to US dollar that is the company’s reporting currency. For example, the company lost $6 million from changes in exchange rates in 2012 and $23 million in 2010. The economy is faced by boom and recession which affect the firm’s operations. For example, the European financial crisis and the overall downturn has negatively affected the demand for the devices. The company operates in locations prone to natural occurrences like poor weather conditions and geological events like earthquakes and tsunamis. Occurrence of such events affecting the company’s operations will result to significant losses to the company. Most countries like China that were known as primary sources of cheap labor have started to develop minimum wage policies which have raised wage rates negatively affecting Micron. Social Factors There is increased the use of mobile devices especially by the young population which is the highest population. This has a positive effect to Micron Technology since there will be increased demand of their mobile storage devices. The youthful population is also a significant source of labor and innovation for the companies. Micron is well-known worldwide and is considered as a market leader in the semiconductor industry. Cultural and language differences and labor unrest in its international firms have been of the negative impact to the company. Advertisement has enabled the company to become famous and hence increased its popularity. Technological Factor Competition is stiff in the semiconductor memory industry; this has called for firms to produce devices that are cheaper and which meet the changing needs of their clients. Technology is hence a major factor in this industry. Technology has enabled continued research and development which has resulted in the production of new products that meet the consumer need especially on size quality and memory capacity. Advancement in technology has contributed to increased demand of their devices especially for mobile phone use, and this is contributing to the firm’s growth. Technology is however available to all individuals and especially Micron competitors, and this has made competition stiffer as the firms compete on the basis of innovation. Micron hence has to come continuously up with new products that will enable it compete favorably. This will only be possible if modern technology is put in place and thorough research carried out. COMPETITIVE RIVALRY WITHIN THE INDUSTRY The company faces stiff competition in its semiconductor memory market form other companies. Some of these competitors are large companies or conglomerates enjoying the advantage of having greater resources. The Competitors aim at improving their outputs, increasing the silicon capacity and reducing the size and mask level in the disks design. This has resulted to increased supply that has exerted a downward pressure on prices. Micron’s major disadvantage is the fact that all products in the industry have similar performance characteristics including power consumption, operating speed, compatibility, reliability and size. They, therefore, compete on the basis of prices and performance characteristics with the other firms in the industry. The competitors include companies like Samsung Electronics Co., Elpida Memory, Inc. SanDisk Corporation, Toshiba Corporation, Spansion Inc. and SK Hynix Inc. COMPANY STRATEGY Industrial Classification Micron Technology, Inc. is a global company dealing in the manufacture and marketing of semiconductor devices. Their primary products include; DRAM, NOR Flash and NAND Flash memory. They also produce and sell other memory technologies, semiconductor systems and packaging solutions used in networking, industrial, consumer, computing and mobile products. The company also produces semiconductor for CMOS image sensors and also for other semiconductor products. Marketing of their products is through their internal sales team, sales representatives or through their retailers who are located all over the world. The company has partnered with Intel, MP Mask Technology Center, LLC, Nanya Technology Corporation and Aptina who are its major customers and suppliers of resources, and this has greatly benefited the firm. The firm is listed on the NASDAQ global select Market; its ticker symbol is MU Battlefield The Semiconductor market is made up of many firms producing similar products, and this has been a primary source of stiff competition. Micron Technology is, therefore, always carrying out research on new technologies in production. Advancement in technology has led to devices that are smaller in size and with large memory capacities. It has also reduced the production cost and led to the introduction of new products. The companies are fighting to control the semiconductor market by coming up with new products that meet the customers need, and this has called for increase research and adoption of modern technology. The market is also expanding, and each firm is struggling to absorb the new customers. STRENGTHS, WEAKNESSES, OPPORTUNITIES AND THREATS Strengths The firm can carry out research and development, and this has worked to its advantage. Micron Technology Inc. is a big firm, and it hence enjoys the economies of scales making it more profitable as compared to other smaller firms in the industry. The company holds 28.7% of the market share and is hence considered as an industry leader who works to its advantage. Weaknesses The market is very competitive given the similarity of products and presence of many firms. The company receives its raw materials from different sources, and only a few of the suppliers can meet the set standards. They are also faced with transportation challenges and shortage of materials. The firm is located in areas that are prone to weather and geological events whose occurrence will negatively affect their returns. Opportunities There will be increased demand of their devices especially their mobile devices due to the increased used of mobile phones all over the world. The semiconductor market is also growing as a result of the increase in technology hence increased demand for their devices. China and other emerging markets like Taiwan and Malaysia are providing growth for the firm, for example in 2012 sales to China equaled $2.9 billion while total sales outside U.S equaled $7.0 billion. Improvement in technological is increasing the demand for their products which will be a great opportunity for the firm to capture the extending market. Threats The company faces price competition from its competitors some which are a big organization with massive capital base. The products have to meet set specifications, and this has resulted in the production of similar products in the industry and reduces innovation resulting in stiff competition. The firm is facing competition from low manufacturing countries especially the Asian countries. The US and Euro zone have been experiencing an economic slowdown that is negatively affecting the firms revenue; they, therefore, need to look for markets elsewhere in the world. The market is volatile making it risky for the firm since it is difficult to forecast future returns. KEY SUCCESS FACTOR Despite operating in a competitive industry, Micron Technology Inc has managed to be a leader in this industry. It has partnered with major companies like Intel. It has also acquired smaller companies like Numonyx Holdings B.V and also acquired non-controlling interests in Inotera and TECH Semiconductor Singapore Pte Ltd. These have enabled the company reduce its costs of operation and also increased its market base. The firm’s manufacturing units are situated in various countries, and it has its retail outlets located all over the world which has made the firm successful in supplying memory devices to the growing international market. The company is continuously investing in research and development to ensure it provides quality products that meet the changing consumer needs and interests. Advancement in technology has enabled the company make significant improvements on their devices including smaller line-width that are aimed at meeting the next generation’s technology. To compete in this industry, they have to develop technologically advanced products continuously. The market is also growing and hence the need to expand the semiconductor products to meet the expected demand. The firm has hence established Research and Development facilities in Boise, Idaho, which is an exceptional achievement. Work Cited Micron Technology, Inc.: 2012Annual Reports. Washington, DC: Micron Technology, Inc, 2012. Web. 6th October 2014. Read More