Strategic management of Micron technology

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Micron Technology, Inc. (Micron) is a company that manufactures integrated semiconductor systems. “Memory technologies, including dynamic random-access memory (DRAM), DRAM modules, controlled NAND, NAND Flash, NOR Flash, multichip sets, solid-state drives, and memory cards,” according to the company's portfolio. Japan, China, Malaysia, Singapore, South Korea, France, Italy, Taiwan, and Germany are among the countries in which the organization works. Micron's offices are in Boise, Idaho, in the United States. In the fiscal year ended September 2016, the company posted sales of US$12,399 million, a 23.4 percent decline from the previous year. In FY2015, the operating margin was 18.2 percent, while it was 1.3 percent in FY2016. The firm made a loss of US$276 million in FY 2016 compared to a net profit of US$2,899 million in FY 2015 (Micron Technology, Inc. SWOT Analysis, 2017, p. 3).

Company Vision, Mission and Objectives

Vision: “To be the world’s most significant technology advancements, delivering optimal memory and storage systems for a broad range of applications” (Micron, 2017).

Mission Statement: "Be the most efficient and innovative global provider of semiconductor solutions" (Micron, 2017).

The principal objective of Micron Ventures is to “assist Micron in supporting the long-term needs of its customers” (Micron, 2017).

This research shall conduct a strategic management analysis for Micron Technology. It shall assess the firm’s internal environmental analysis as well as the strategy and strategy selection. The internal analysis shall include a corporate level, business unit level, and functional level strategies. The study shall also analyze the corporation’s financial position and compare it with the industry. The strategic analysis shall identify the company’s strengths and weaknesses, what it needs to do to perform successfully in the industry, capitalize on strengths, and improve major weaknesses. The research will employ various technique analysis models to aid in the analysis and selection of the best solution.

Internal Environmental Analysis

The internal environmental analysis seeks to establish whether the company has the ability to execute its strategic objectives of growth and expansion.

Corporate Level Strategy

Growth Strategy

Growth is a telltale sign of a thriving organization. Micron Technology is forming strategic alliances, partnerships, and acquisitions in a bid to expand its market share and lower the cost of production. The company has greatly benefited from the manufacturing capabilities, knowledge, and expertise provided by partnerships such as Micron-Intel, which designed developed and manufactured NAND Flash products (Micron Technology, 2017, p. 18-19). In addition, Micron sells “NAND Flash products to Intel through IMFT at long-term negotiated prices approximating cost.” The firm forged a joint venture with Photronics to produce photo-masks for top-notch advanced net generation semiconductor through MP Mask Technology Center. Other partnerships include Nanya and Tera Probe (Micron Technology, Inc. SWOT Analysis, 2017, p. 21).

The strategy is also playing a supporting role in the firm’s product diversification strategy and manufacturing scale upgrades and lower costs of operation that it could otherwise achieve through internal investments alone (Micron Technology, Inc. SWOT Analysis, 2017, p. 21).

Company Performance

In 2016, Micron Technology made a loss of US$276 million (Micron Technology Investor Relations, 2016). Therefore, the top leadership is concerned about the organization’s overall profitability. For that reason, the company is determined to diversify its product line to meet the needs of consumers and counter competition. For instance, the demand in the smartphone market is expected to rise in the coming years so the firm is determined to tap into this market. In addition, a potential surge in wireless technology will surge the demand for Micron’s products and this means profitability to the organization. Furthermore, the global NAND Flash memory market is expected to reach US$39 billion by 2022. The SSDs and portable PCs are also expected to portray the same growth trend. Micron is the leading player in NAND Flash, which contributed 37%, in 2016, 33%, in 2015 and 27% in 2014 of the company’s overall revenues (Micron Technology, Inc. SWOT Analysis, 2017, Pp. 18-23).

Market Definition

Micron covers a large geographical sphere, operating in five continents and is determined to expand its current network. A wider market will enable the company maintain a balanced revenue streams from different geographical locations. Further, the corporation will be able to tackle country specific risks to streamline overall operations (Micron Technology, Inc. SWOT Analysis, 2017, p. 19).

Business Unit Level Strategy

Micron Technology is investing heavily in R&D to design and develop unique, high quality products. In FY2016, 2015, and 2014, the company spent US$1.6 billion, US$1.5 billion, and US$1.4 billion respectively (Micron Technology, Inc., 2017, p. 17). Due to large investments in R&D, the company has registered over 20,000 patents most of which have terms expiring in 2036. Micron has research centers in Japan, China, Italy, Singapore and different parts in the U.S. Innovation and new product launches are the major benefits of R&D (Micron Technology, Inc. SWOT Analysis, 2017, p. 4). For instance, in August 2016, the company announced the 3D NAND memory technology for mobile device products based on based on UFS 2.1 standard. In July 2016, it introduced the embedded SLC NAND for IoT and automotive applications (Micron Technology, Inc. SWOT Analysis, 2017, p. 5).

Functional Level Strategy

The Organizational Structure for Micron Technology

CEO

Chairperson of the Board

Director

Director

Director

Director

R&D

Emerging Memory Engineering

Business

CIO

CFO

Non-Volatile Engineering

Legal and Secretary

Development

Human Resources

Sales & Marketing

International Tax

Embedded Solutions

Planning & Process

Strategy

Storage Business

Storage Business Unit

R&D Manufacturing

Package Development

Embedded Solutions Marketing

Memory Development

Singapore

Process R&D

Mobile Business Unit

Manufacturing

Memory System Development

Board

N-1

N-2

Figure 1: Micron Technology Organizational Structure (Source: The Official Board)

The company’s organization structure shows three levels of management. The top leadership, the middle leadership, and the functional-level management that is entirely answerable to the CEO. The leadership also aids in interacting with stakeholders. The company communicates with consumers through its websites, R&D center tours, social media platforms, and focus groups. The community is kept in the loop through sponsorships and university lectures. The company also appreciates its employees through constant company-employee communication and senior executive updates regarding the business. Governments and regulatory entities have access to financial statements and the firm has a foreign investment advisory board (Micron Technology Investor Relations, 2016).

The IFE (Internal Factor Evaluation) matrix is used to perform an internal audit of an organization. This includes areas such as the human resources, finance, R&D, marketing and sales, and information technology infrastructure. The table below describes Micron Technology IFE.

Key Internal Factors

Weight

Rating

Weighted Score

Strengths

 

 

 

1

Strong Management Team

0.11

4

0.44

2

Corporate Culture

0.09

4

0.36

3

Strategic Alliances, Partnerships, and Acquisitions

0.10

4

0.40

4

High brand recognition

0.09

4

0.36

5

Global Presence

0.11

4

0.44

6

Higher revenues from international markets

0.08

3

0.24

7

Highly-skilled human resources

0.09

4

0.36

8

Research and Development

0.11

4

0.44

9

Production

0.06

3

0.18

Weaknesses

 

 

1

Declining profits and Margins

0.05

1

0.05

2

Interest on Long-Term Debt

0.03

2

0.06

3

Lack of Scale

0.05

3

0.15

4

Poor diversification compared to Competitors

0.03

2

0.06

TOTAL

1.00

 

3.54

Table 1: Internal Factor Evaluation (Source: Author)

According to the table, the company has a strong management team, a flexible corporate culture, high brand recognition, global presence, skilled human resources, adequate R&D investments, and better strategic alliances and partnerships. However, the company needs to improve its production capacity and scale to increase its market share. Furthermore, the Micron has registered reduced profits and poor product diversification in comparison to peers, which can negatively affect its profitability.

Financial Analysis for the Last Reported Fiscal Year

Description

Company Ratio

Industry Ratio

Factor

1

Current Ratio

1.964

1.80

Strength

2

Debt-to Equity Ratio

1.082

0.72

Weak

3

Quick Ratio

1.337

1.33

Strength

4

Net Margin

0.022

0.190

Weak

5

Return on Sales

0.014

0.190

Neutral

6

Return-on-Investment

0.013

0.206

Neutral

7

Inventory Turnover

3.425

12. 48

Weak

8

Average Payment Period

0.092

0.341

Weak

9

Return-on-Assets

0.006

0.119

Weak

10

Sales-to-Assets

0.450

1.59

Weak

Table 2: Ratio Analysis for Micron (Source: Author)

The study used the September 2016 financial statements to calculate the financial ratios (Micron Technology Investor Relations, 2016, p. n.p). Micron depicts a strong liquidity and this indicates that it is in a position to meet its short-term objectives when the fall due. The ratio is resembles the industry’s. However, the company depicted weaknesses in terms of profitability and market value ratios, which need to be enhanced for the sake of stability.

Strategic Analysis and Strategic Selection

Micron Technology Strengths

Micron has invested heavily in research and development (R&D). Currently, the firm’s R&D is developing smaller line-width process technologies and a new line of different memory structures, materials and packages. Some of its new products include the DDR4 and DDR5 DRAM, mobile 3D NAND Flash memory, SSDs, specialty memory, NOR Flash memory and other sophisticated memory technologies. The company’s major research center is based Boise, Idaho. The R&D expenses have been increasing over the years and in the company set aside US$1.6 billion for the FY2016, US$1.5 billion for the FY2015 and US$1.4 billion for the FY2014 respectively. By 2016, the company had registered 16,100 patents in the US and 4,300 in foreign nations. The large investment in R&D has constantly borne fruits. For instance, in August 2016, the corporation launched the 3D NAND memory technology for mobile devices products (Micron Technology, Inc., 2017, p. 4).

Micron also boasts of a global presence in the Americas, Asia, Europe, Middle East and Africa. A global presence has enabled the company maintain a balanced revenue stream per geographic region. In 2016, China accounted for 42.8% of the organization’s total revenues, the U.S. contributed 15.5%, Taiwan 12.3%, Europe, 7.6%, Japan, 6.7% and Asia Pacific and other regions, 15.2%. Therefore, the company is able to mitigate risk (Micron Technology, Inc., 2017, p. 21).

Micron has forged strategic joint ventures and partnerships to enhance the design and production of quality products. The company partners with Intel to design, develop, and manufacture the NAND Flash products. Micron also partners with Nanya to manufacture the DRAM memories my Inotera. The company has “40% stake in Tera Probe, the organization that provides semiconductor probe and test services. The strategic partnerships and joint ventures spread the costs of developing memory products and process technologies” (Micron Technology, Inc., 2017, p. 18).

Micron Technology Weaknesses

The company has depicted a decline in profit margins over the last few years. In FY2014, it registered US$16,358 and this decreased to US$12,399 million in 2016. This represents a 13% CARC for the two-year period. Further, the operating profits declined from US$3,087 million in FY2014 to US$168 million in FY2016, a 77% CARC. A decline in profits and margins shows inefficient management of cost structure, which may bring a long-term negative effect on the firm’s financial position (Micron Technology, Inc. SWOT Analysis, 2017, p. 4).

Micron lacks scale and product diversification in comparison to its competitors. Samsung Electronics and Toshiba depict stronger financial, marketing and technological capabilities due to their large sizes and extensive product portfolios. For instance, one of the company’s major competitors Samsung recorded US$181.8 billion in revenues in the FY2016. On the other hand, Toshiba registered US$47,220.2 million in the same financial year. Besides offering the same products like Micron, Samsung delivers electronics, IT business products, telecommunication equipment, cell phones, televisions, and Blu-Ray players. Toshiba applies the same strategy. Thus, Micron has limited product offering in comparison to competitors and this limits its ability to compete effectively (Micron Technology, Inc. SWOT Analysis, 2017, p. 7).

The Company’s Success Factors

Strategies the Company Should Utilize to Capitalize on its Major Strengths

The company should constantly enhance its R&D budget to continue designing and developing high quality products. Micron competes with large entities like Toshiba and Samsung, so it should focus heavily on innovation to stay competitive. Further, the company can recover some of its investments through sales and licenses of intellectual property rights to its partners and joint ventures (Mastering Strategic Management, n.d, Pp. 65-85).

Strategies the Company Should Utilize to Improve on its Major Weaknesses

Strategic acquisitions can play a vital role in growing Micron’s manufacturing scale and product diversity. In addition, partnerships, joint ventures and acquisitions significantly lower the company’s costs of operation and this improve its overall income and profitability in years to come (Mastering Strategic Management, n.d, P. 57).

Three Alternative Strategies for the Company

The study shall use the Grand Strategy Matrix to formulate the alternative strategies that Micron can implement to enhance its competitive position and market growth.

Weak Competitive Position

Rapid market Growth

Strong Competitive Position

Quadrant 2

Horizontal/vertical integration

New product launches

Quadrant 1

Concentric Diversification

Product and market development

Quadrant 3

Retrenchment

Concentric diversification

Corporation diversification

Quadrant 4

Conglomerate Diversification

Partnerships, joint ventures and acquisitions

Slow Market Growth

Table 3: Source: Author

Cultural Factors to Aid in the Analysis and Choice of Appropriate Alternative Strategies

“Culture is a set of common beliefs, customs, attitudes, personalities, and values that describe a company.” Culture plays an important role in strategy implementation. For instance, Steve Jobs embraced a culture of innovation and creativity in Apple; thus its continued success. Conversely, Southwest airline has suffered a reputation for mediocre services and indifferent staff but the company enjoys strong loyalty and sense of teamwork among employees (Mastering Strategic Management, n.d, P. 102). Therefore, the level of flexibility of the given strategy is a major factor. This means that culture can support of fail a strategy. Flexibility means employees can easily adjust to new standard operating procedures at any given time.

Further, the level of proactivity of managers should be analyzed since they have the power implement changes swiftly and easily (Mastering Strategic Management, n.d, p. 14). Lastly, the effect of the strategy on culture should be determined. A strategy that calls for fewer cultural adjustments sounds appealing because extensive changes take time and effort and end up unsuccessful (Mastering Strategic Management, n.d, p. 216).

An explanation for the selection of alternative strategies

The following BCG Matrix shows an explanation for the selection of alternative strategies.

Annual real rate of market growth (%)

High

Question Marks

Market development

Stars

Product development

Concentric diversification

Market penetration

Low

Poor Dogs

Retrenchment to reduce operational costs

Cash Cows

Selling and licensing intellectual property rights to partners and third parties

Low

High

Relative market share

Table 4: BCG Matrix (Source: Author)

Product development calls for constant innovation in the company. Micron will be required to invest in R&D to come up with new and unique designs for it to counter competition and to create niche for itself. Further, the firm faces intense competition because of few product offerings. Some of its competitors such as Samsung Electronics, Toshiba, SK Hynix, and Western Digital offer a broad range of products ranging from electronic devices, Blu-Ray recorders, multi-function peripherals, cell phones, televisions, and telecommunication products. Micron on the other hand only provides semiconductor solutions (DRAM, NAND Flash, and NOR Flash memory products). Therefore, concentric diversification will enable the company reach a broad network of consumers and hence attain its market penetration goals.

Recommendation for the best Alternative Strategies

The following Quantitative Strategic Planning Matrix (QSPM) ranks the strategies in order of priority to determine the attractiveness of each alternative action.

key Factors

 

Alternative 1: Product Development

Alternative 2: Market Penetration

Alternative3: Concentric Diversification

 

Weights

AS

TAS

AS

TAS

AS

TAS

Strengths

 

 

 

 

 

 

 

Large Geographical Coverage

0.16

0

0.00

4

0.64

2

0.32

Strong Focus on R&D

0.23

4

0.92

3

0.69

4

0.92

Strategic Joint Ventures and Partnerships

0.16

4

0.64

2

0.32

4

0.64

Weaknesses

 

 

0.00

 

0.00

 

0.00

Decline in Profit Margins

0.13

3

0.39

0

0.00

2

0.26

Lack of Product Diversification in Comparison to Competitors

0.20

4

0.80

2

0.40

4

0.80

Lack of Scale

0.12

3

0.36

1

0.12

2

0.24

 

 

 

 

 

 

 

 

 

1.00

 

 

 

 

 

 

Opportunities

 

 

 

 

 

 

 

Positive Outlook for the Smartphone Market

0.16

4

0.64

3

0.48

4

0.64

Positive trend in NAND Market

0.23

4

0.92

4

0.92

4

0.92

Threats

 

 

0.00

 

0.00

 

0.00

Foreign Exchange Currency Fluctuations

0.12

0

0.00

1

0.12

3

0.36

Intense Competition

0.20

4

0.80

4

0.80

4

0.80

Declining Demand for Personal Computers

0.12

3

0.36

1

0.12

4

0.48

Decline in Selling Price for Semi-conductor Products

0.17

4

0.68

3

0.51

4

0.68

Sum Total Attractiveness Score

1.00

 

6.51

 

5.12

 

7.06

Table 5: Quantitative Strategic Planning Matrix (Source: Author).

The Sum Total Attractiveness Score for alternative 1, 2, and 3 is 6.51, 5.12, and 7.07 respectively. Therefore, Micron should implement new product developments and concentric diversification since they have higher scores and are more attractive.

Summary Paragraph

The study focused on internal and external environmental analysis of Micron Technology. The research also analyzed the company’s strategies as well as strengths & weaknesses. The researcher used various analytical models to assess the firm and proposed the best alternative to enhance the growth and expansion of the organization. The primary goal of the top management is to make more profits for the shareholders through product development, concentric diversification and market growth. For that reason, the company has strived to streamline its internal operations through strategic alliances and partnership to ensure it attains its objectives. Using the QSPM, the study settled for the best alternatives, which are product development and concentric diversification. The two strategies will be attained by investing in R&D to create unique, high quality products and more partnerships and acquisitions to spread the cost of design, development, and production of goods.

References

Mastering Strategic Management.(n.d). Saylor Foundation. Retrieved from https://www.saylor.org/site/textbooks/Mastering%20Strategic%20Management.pdf, September 28, 2017.

Micron Technology Investor Relations. (2016). Micron Technology, Inc., Reports Results for the Fourth Quarter and 2016 Fiscal Year. Retrieved from http://investors.micron.com/releasedetail.cfm?ReleaseID=992110

Micron Technology, Inc. (2017). 1-30. Retrieved from: Business Source Premier, Ipswich, MA. September 29, 2017.

Micron Technology, Inc. SWOT Analysis. (2017). Micron Technology, Inc. SWOT Analysis, 1-8

Micron.(2017). Micron Ventures. Retrieved from https://www.micron.com/about/our-company/ventures 28th September, 2017

November 09, 2022
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