Marketing analysis of texas instruments inc

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20/04/17 Marketing Reference this

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The company was founded in 1930 and adopted the name of Texas Instrument Incorporated in 1951. It entered the market of semiconductor in 1954 and was the first company to go global. Texas Instrument (TI) is famous for inventing the integrated circuit in 1958, thanks to Jack Killby who won the Physic Nobel Prize in 2000, and the handheld calculator in 1967. TI has always been among the Top 10 of the semiconductor sales leaders. In 2010, TI had revenue of 13.97 billions of dollars (see table below):

TI has a 1.20 billion of dollars capital expenditures and cumulates worldwide about 38,000 patents. The company got a global presence in manufacturing, design or sales operations in 30 countries, which represents more than 80,000 customers worldwide for about 28,400 employees. The headquarters are based in Dallas, Texas in the United States. Rich Templeton is the chairman, President and CEO of Texas Instruments. The main products of the company are Semiconductors (Amplifiers & Linear, Audio, Automotive, Clocks & Timers, Data Converters, Interface, Micro-Electro-Mechanical Systems (MEMS), Processors), DLP® – TV, Projectors, & Cinema and Calculators & Education Technology.

TI has always been among the Top 10 of the semiconductor sales leaders. In 2010 TI is ranking 4 behind Intel Corporation, Samsung Electronics and Toshiba Semiconductors. Its other main competitors are Microchip Technology, Cypress Semiconductor, Integrated Device Technology and Xilinx. TI has the largest market share (14%) in the semiconductor industry which has an estimated market of 37 billions of dollar according to latest reports from Gartner. (See table below).

This report will represent the main marketing activities of Texas Instruments Incorporated. The report has three parts: firstly, the organisation’s orientation, secondly, the audit (external and internal) of the organization and thirdly, the impact of the organisation’s marketing mix (positive and negative).

TI orientation

CONCEPT

(Rajshekhar Raj 2006)

To reach the goals of TI orientation, it has to be a relationship between the customer relationship management and the international service marketing research like it shows in the figure above.

In order to make profits and increase the market share of a company, organisations have to develop marketing strategies. The idea is to reach the customer by meeting his needs and expectations. By understanding the market (surveys and researches), the company can make marketing decisions and implement a long term relationship strategies.

Kotler said “Today’s successful companies have one thing in common: their success comes from a strong customer focus and heavy commitment to marketing.” (Kotler.et.al. 2005)

” The modern marketing concept can be expressed as: The achievement of corporate goals through meeting and exceeding customer needs and expectations better than the competition.”(Jobber. 2010:4)

Marketing Concept

The meeting of customer needs better than the expectations and the competition

Integrated effort

All staff accepts the responsibility for creating customer satisfaction

Goal achievement

The belief that corporate goals can be achieved through customer satisfaction

Customer Orientation

Corporate activities are focused

On providing customer satisfaction

(Jobber: 2010:4)

All companies, and so on Texas Instruments that interest us, have the choice between 4 main marketing orientations:

Product orientation Products that have good innovative characteristics and also the best quality that might match the customer’s needs and their satisfactions criteria; this is considered as an investment for the business in order to continue their sales strategies. (Kotler.et.al.2005)

Sales orientation The Company constructs a large-scale of selling, promotion, and advertising without any concerns about customer satisfaction. (Kotler.et.al.2005)

Production orientation To focus on minimized production cost in order to attract more customers, to attain economies of scales by having a limited range of products. (Jobber.2010:4); the company takes into account the competitions and market segments to focus on the cost of the product and its production range.

(Jobber: 2010:5)

Production capabilities: Focus of the production orientation.

Manufacture product: the production line or cycle from the suppliers to the customer.

Aggressive sales effort: Effort to sell and develop the marketing of the products.

Customers: Customers who are demanding the products.

Marketing orientation The Company must stay close to their customer and understand their need and problems. (Jobber. 2010:5)

Figure 6: Marketing Orientation (Jobber 2010:5)

This figure shows the approach to follow to reach the customers by understanding the potential market opportunities and the marketing products and services and by responding to the demanded requirements. (Jobber 2010:5-6)

TI ORIENTATION

THE COMPETITVE ADVANTAGE OF TI

According to Michael Porter, “the Competitive Advantage grows out of value a firm is able to create for their buyer that is exceeds the firm’s cost of creating it. Value is what buyer are willing to pay, and superior value stems from offering lower prices than competitor for equivalent benefit or providing unique benefits that more than offset a higher price. There are two basics type of competitive advantage: cost leadership and differentiation.” (Porter, M. 1985:3)

With other words, “the competitive advantage can be achieved by creating a differential advantage or achieving the lower cost position” (Johnson, 8th edition, 2009). There are two different competitive strategies to have an advantage on the competitors’: the differentiation of the product and the cost of the product. The main analysis of competitive advantage is the Generic Strategy of Porter. The company has a relative position within an industry is given by its choice of competitive advantage: Cost Leadership versus Differentiation and its choice of competitive scope: firm targets broad industry segment or focuses on a narrow segment. (Jobber, 2010:714) The business makes a choice about the type and scope of its competitive advantages.

(Porter, 1985, 12)

We need now to take care of the external analysis and the internal analysis of TI marketing activities that will help TI to develop their own strategies. The internal view is based on industry structure and more precisely on decision of the Business. The (external) analysis of competitor is crucial to create a successful marketing strategy. (Porter, 1985)

Audit of TI

1) PESTEL analysis

When contemplated for the audit of Texas Instruments Inc., it is very much cognizance to utilize the “PESTEL” analysis for showcasing the frame work of macro-environmental factors.

Texas instruments Incorporated are prominent in designing, manufacturing and selling of semi-conductors. It has four main segments involved that include Analog, Embedded Processing, Wireless and Other in which Analog and Embedded Processing is considered being the protuberant of primary growth eventually focusing its resources on the two segments.

Political factors

Initially excogitating the “Political” factors that lays high stake on the company takes to intervenes i.e.., its degree of intervene, effects of the interpose on the political stability of the company. In 2005, while positioning the portfolios, it has been judged that by the end of this decade, Texas Instruments Inc. will have an increase in the earning potential. Considering this, it has been noted that TXN has long term earning power and clearly witnessed at the present stage.

(S.Parker2005: 01, Zipper.1992)

Economic factors

It is difficult to delineate dimensions and duration of the semi-conductor cycle. Earlier it was considered that if the situation strikingly disintegrates, or if the economy weakens, TXN is likely to outperform its rival and competitor, Intel. As contrary in direction, if the condition continues to improve, it will be highly difficult to judge the future performance of the company with respect to its benchmarked market position. (The Associated Guide.2011)

In the earlier stages, TXN was pertained to the anticipation of cellular handset sales, especially from its then leading customer, Nokia. Due to some negative flow of news, the handsets where likely to under-perform during a short term (S.Parker.2005).

Notable past event that accounts to the overall economic status of TXN:

In order to justify the fact that TXN tried to cut short its dull portfolios and concentrate more on the growing markets with its R&D, contemplating the earlier activities of TXN such as terminating a decades-long striving effort and endurance to survive in the computer line market, Texas instruments sold its business computer line to its then competitor, Hewlett-Packard.

The above table and grapgh illustrates the distribution of revenue among TXN’s four main segements

As mentioned earlier, TXN focusses its resources mainly on Analog and Embedded Processing.The financial consequences of deficient or excess inventory levels in Texas Instruments Inc. i.e., the demand which varies with the past visualizations constitue to the economic factors that held stake over the company. Another issue added to it was the prejudice of Ti’s non-financial assests.

Social factors

Whilst sorting out the various factors that affects or holds stakes towards the company, social factors which includes cultural aspects, distribution ratios, change in social trends that has its own effects on the company, etc., are also considered to be imporatant as analysing these will help the company gain better knowledge over the industrial needs and the consumer’s perspective towards the company.

Texas Instruments Incorporation has three main objectives towards increasing its revenue with respect to social factors.

First objective being the growing of revenue at a much faster rate than that of the current market.

The second being the growing of earnings per share at a higher pace that the obtained and obtaining revenue.

The third main general objective towards its financial terms being the efficient usage of the captital.

The countries where Ti’s suppliers and customers are located or operated has an varrying constituting level based on the social conditions of the countries which includes health conditions, security risks, varrying trasnportation facilities, fluctuation in the exchange rates of different currencies (Kurtz, Mac Kenzie, Snow209: 2011)

The Corporate Responsibility magazine has announced Texas Instruments Inc. as one among the top corporate citizens for the ninth time with respect to the human rights, employee relations, governance, philanthrophy, environment, climatic changes and financial weightings (www.thecro.com. 2011)

Ti(India) is the first multinational company setting its one of the largest R&D centres for the first time time outside the USA. (www.ebonline.com c.2011)

Technological factors

Analysing the various factors influencing Ti, it becomes apparent that Ti focusses heavily on R&D as it helps Ti to navigate through the competettive market. Innovation in technology plays a major role in making its products markettable. To levitate its products, one of the latest innovation was usage of Power Line Communication(PLC) which offers a cost effective mode of communication media for a broader magnitutde of applications.

The above figure depicts that Texas Instruments( Ti) developers can optimize their applications based on their need and can modify to the new standards,

(Olivier Monnier2010: 2) TI Delivers Flexible Power Line Communications Solutions

The main components for its current top positioning appear to be flexible but Ti follows varying procedures to survive. One such is the procedure of periodically implementing new manufacturing technologies, equipments, testing methods and even with the subcontract services (Scarisbrick: 1996).

The company along with its competitors strives with the best possible innovative products. However it is advisable for Ti to reduce its level of inventory except for the range of Analog (S.Parker2005: 15).

Bringing out innovative products alone does not state a company in the top ranking list. Considering this, Ti also concentrates on the product life cycle developments.

As it is well known that Ti does not concentrates much on the end users, it is important to get regular feedbacks regarding the product life cycle and its reliability. It arranges separate programs to carry on with these processes.

(www.ti.com c. 2011, www.prnewswire.com c. 2010)

Environmental factors

Whilst analysing the environmental factors of Texas Instruments Incorporation, at present it is highly importunate to follow up the recent tragedy that happened in Japan causing a substantial loss of lives and materials including the manufacturing site of TXN bases on the cities of Miho and Aizu-wakamatsuthat, Japan.

From the reports of the company, it is clear that TXN will reinstate its manufacturing site, initiating with many different line in the unit. TXN has set up alternate manufacturing sites for about 60% of the wafer production from the Miho plant.

Some of the substantial damage at the Miho due to the earthquake:

The delivery channels which includes its infrastructure systems were damaged but resetting those damages are in progress and expected to be over in a few weeks of time.

The seems to be an unclear state in the manufacturing equipments due to the highly interepted power supply.

On an over view it has been clearly noted that the Miho building has a very obtuse damage apparently making the main struture to be certified usable.

TXN keenly recognizes the following important factors that might cause discernible results that differ from the expectation of the company such as:

The change or revolutionize the market environment of semi-conductors especially in the principal markets like consumer electronics and consumer.

At the present stage, the improvement in technology environment in the present stage has made Texas Instruments Inc. raise its ability to develop, manufacture and market its products.

Considering the sour fact that the marketing strategies of Texas Instruments are considered to be unsatisfactory when compared with its counter parts, TXN competed in the highly competitive market with its innovative product and challenging prices (L.Shanklin1998: 10).

Natural happenstances like drastic weather changes, floods, earthquakes and other calamities constitute to the environmental factors are overcome by the company’s pre-stated strategies.

Taking into account for the usage of eco-friendly products, Ti moves towards lead free products (www.ti.com c. 2011, www.prnewswire.com c. 2010).

Legal factors

For any multinational Plc, it is very much certain that there are many awaiting varying legal factors in different countries in which the other units are located. Now this becomes apparent for TXN to face such legal issues which might have greater effects on the company (www.prnewswire.com c. 2010).

Legal factors recognized by TXN as major issues for the company:

The license agreements between Ti and its stake holders tend to be different in different countries.

The expiry of patent licenses and agreement might lead the other companies to capitalize over TXN, which follows by the risk of any apertures in the agreements due to the country’s laws.

The changes in tax that are brought about by governments of various countries, the change in jurisdictions could cause outcomes such as instability in the tax audits.

The product liability and warrantee differs from place to place depending upon the law prevalent.

2) SWOT Analysis

Strengths:

Obviously, Texas Instruments has been considered as pioneer and the leader in technology and innovations of semiconductor products ranging from defence, metallurgical and digital products. Its reputation and track record as an institution build TI’s credibility and integrity in the market. The existing manpower and connoisseurship of the company and its technology used will always provide TI the leverage to significantly cut the production costs without compromising the quality of their products. The strategic global locations of the TI’s expanded operations in North America, Asia and in Europe, paved the way for TI to widen its reach in the industry. The expanded operation in some parts of the world strengthens the brand recognition of TI being well known for its product innovation and diversification. TI is also aware of social and environment issues by continuous improvement on production safety improvement, community involvement and sustainability as it has been being awarded from The World’s Most Ethical Companies Ranking since 2007 (Eethisphere 2011). All of these factors can be valuable resources to advance TI’s market presence and increase its share in the industry.

Weaknesses:

Texas Instruments being a leader and one of America’s pioneers in electronic industry was far more focused on product development, innovation and diversification to the extent that it overlooked the marketing side of the business. Its concentration is on the technological development created the loophole of lacking the skilled and strategic marketing power of the company. This has been evidenced by the fact that the entire marketing arm of the company is heavily reliant on its distributors. Its dependency on the distributors weakens the company’s capacity to saturate the market despite its prominent brands and quality products sold.

Opportunities:

The recent changes in market dynamics for electronics offered an opportunity for TI to evolve as an organization. This calls for the company to reorganise itself to cope with the demands in the changing market. This means that the existing organisational set up or structure has to be change to suit the existing market dynamics. It is therefore a chance for TI to grow and develop as an organisation at pace with time. Its recent innovations in the market also provided the platform for the company to establish an improved customer services. With the existing technologies and leadership in the industry, TI can afford to compete in the market through price matching and discount referral to its patrons. Also, its expertise and technological advancement being the trusted name in the industry can provide greater opportunity for TI to create product differentiation through intensive research and development schemes. This therefore changes the image of the company’s products as commodities but rather can create an image as a technology and a brand. In this case, TI can therefore increase its market share through branding.

Threats:

The emergence of new competitors, introduction of global prising system that conforms the prices of distributors threatens the survival of Texas Instruments in the market. The emergence of new and innovative companies produces stiff competition in the market. TI’s tendencies to lost share in the market are higher along with its loss of distributors who adopted global pricing system. TI’s non-conformance to the latest trend of global pricing system threatens its business relationship with distributors who happened to be the company’s backbone in and perhaps life blood in marketing. If it has to survive in the market, corresponding measures should be carried to address these existing threats.

Alternatives/options:

Based on the herein stated SWOT Analysis of TI there are options that needs to be considered in order for TI to survive in the market and increase its profitability. These alternatives are based on the principle of utilising its existing organisational strengths and opportunities to overcome its weakness and prevent the perceived and existing adverse effects of threats. The following alternatives are as follows:

a. TI shall implement reorganisation/ restructuring

This means that an organisational overhaul should be done. Its existing structure and set-up which was established to address the dynamics and development of the market several years back are no longer relevant or responsive to the existing market dynamics. Also, this allows TI to set up a new breed of leaders in the company who can understand and cope with the existing dynamics. Traditional knowledge in the industry should blend with the new trend of innovative market.

It is very vital for TI to evolve as an organisation and operate according to the recent market developments. Its structure should be responsive to the prevailing market demands and procedural process. Once the organisational set up has been updated it is now ready to implement the succeeding changes in terms of marketing and financial strategies.

b. Product Differentiation

TI being a popular and well known for quality products in the market was the only advantage it has in the market. However, its technological advancement and continuing product innovation was not being utilised to differentiate its product from the normal commodities in the market. Thus, it is a best alternative for the company to emphasise its research and development capacities as an institution in the development of new and quality products. Thus, its research and development capacities and expertise as an organisation will be magnified in the market in order to create product differentiation of the TI’s production.

c. Direct Selling/Servicing to Small and Medium Businesses

The untapped market segment of TI was the growing small and medium businesses. This happened due to TI’s heavy reliance on distributors. It is one of the best marketing option that TI should engage direct business with the small and medium scale businesses in order to widen its scope and reach in the market. Though this sector is not so lucrative when it comes to profit but its number is continually growing and most of them are locally operating. Therefore, this will minimise reliance on distributors and will promote market survival.

e. Competitive Pricing

Consistent with the product differentiation strategy, it is not advisable for TI to conform the global pricing system. What is appropriate with its existing market status is to develop a competitive pricing system. Since its credibility and track has been well established and with the advancement of its technology used in production methods, it is certain that TI can produce quality product at a competitive price. Its expertise in the production side can be leverage for TI to reduce its operational and producti0n cost through mechanisation.

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