Advanced Micro Devices SWOT Analysis / Matrix

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SWOT analysis is a strategic planning tool that can be used by Advanced Micro Devices managers to do a situational analysis of the firm . It is an important technique to analyze the present Strengths (S), Weakness (W), Opportunities (O) & Threats (T) Advanced Micro Devices is facing in its current business environment.

The Advanced Micro Devices is one of the leading firms in its industry. Advanced Micro Devices maintains its dominant position in market by carefully analyzing and reviewing the SWOT analysis.  SWOT analysis a highly interactive process and requires effective coordination among various departments within the company such as – marketing, finance, operations, management information systems and strategic planning.

The SWOT Analysis framework helps an organization to identify the internal strategic factors such as -strengths and weaknesses, & external strategic factors such as - opportunities and threats. It leads to a 2X2 matrix – also called SWOT Matrix.

The Strengths-Weaknesses-Opportunities-Threats (SWOT) Analysis / Matrix helps the managers of the Advanced Micro Devices to develop four types of strategies:

  • SO (strengths-opportunities) Strategies
  • WO (weaknesses-opportunities) Strategies
  • ST (strengths-threats) Strategies
  •  WT (weaknesses-threats) Strategies
Advanced Micro Devices swot analysis / matrix

SWOT Matrix Strategies Objective

The primary purpose of SWOT matrix is to identify the strategies that an organization can use to exploit external opportunities, counter threats, and build on & protect Advanced Micro Devices strengths, and eradicate its weaknesses.

Step by Step Guide to Advanced Micro Devices SWOT Analysis

Strengths of Advanced Micro Devices – Internal Strategic Factors

As one of the leading firms in its industry, Advanced Micro Devices has numerous strengths that help it to thrive in the market place. These strengths not only help it to protect the market share in existing markets but also help in penetrating new markets. Based on Fern Fort University extensive research – some of the strengths of Advanced Micro Devices are –

  • Reliable suppliers – It has a strong base of reliable supplier of raw material thus enabling the company to overcome any supply chain bottlenecks.
  • Successful track record of integrating complimentary firms through mergers & acquisition. It has successfully integrated number of technology companies in the past few years to streamline its operations and to build a reliable supply chain.
  • Strong Brand Portfolio – Over the years Advanced Micro Devices has invested in building a strong brand portfolio. The SWOT analysis of Advanced Micro Devices just underlines this fact. This brand portfolio can be extremely useful if the organization wants to expand into new product categories.
  • Superb Performance in New Markets – Advanced Micro Devices has built expertise at entering new markets and making success of them. The expansion has helped the organization to build new revenue stream and diversify the economic cycle risk in the markets it operates in.
  • Strong Free Cash Flow – Advanced Micro Devices has strong free cash flows that provide resources in the hand of the company to expand into new projects.
  • Successful track record of developing new products – product innovation.
  • Automation of activities brought consistency of quality to Advanced Micro Devices products and has enabled the company to scale up and scale down based on the demand conditions in the market.
  • Strong dealer community – It has built a culture among distributor & dealers where the dealers not only promote company’s products but also invest in training the sales team to explain to the customer how he/she can extract the maximum benefits out of the products.

Weakness of Advanced Micro Devices – Internal Strategic Factors

Weakness are the areas where Advanced Micro Devices can improve upon. Strategy is about making choices and weakness are the areas where a company can improve using SWOT analysis and build on its competitive advantage and strategic positioning.

  • The profitability ratio and Net Contribution % of Advanced Micro Devices are below the industry average.
  • Days inventory is high compare to the competitors – making the company raise more capital to invest in the channel. This can impact the long term growth of Advanced Micro Devices
  • Financial planning is not done properly and efficiently. The current asset ratio and liquid asset ratios suggest that the company can use the cash more efficiently than what it is doing at present.
  • Not very good at product demand forecasting leading to higher rate of missed opportunities compare to its competitors. One of the reason why the days inventory is high compare to its competitors is that Advanced Micro Devices is not very good at demand forecasting thus end up keeping higher inventory both in-house and in channel.
  • The company has not being able to tackle the challenges present by the new entrants in the segment and has lost small market share in the niche categories. Advanced Micro Devices has to build internal feedback mechanism directly from sales team on ground to counter these challenges.
  • High attrition rate in work force – compare to other organizations in the industry Advanced Micro Devices has a higher attrition rate and have to spend a lot more compare to its competitors on training and development of its employees.
  • Investment in Research and Development is below the fastest growing players in the industry. Even though Advanced Micro Devices is spending above the industry average on Research and Development, it has not been able to compete with the leading players in the industry in terms of innovation. It has come across as a mature firm looking forward to bring out products based on tested features in the market.

Opportunities for Advanced Micro Devices – External Strategic Factors

  • The market development will lead to dilution of competitor’s advantage and enable Advanced Micro Devices to increase its competitiveness compare to the other competitors.
  • Opening up of new markets because of government agreement – the adoption of new technology standard and government free trade agreement has provided Advanced Micro Devices an opportunity to enter a new emerging market.
  • New customers from online channel – Over the past few years the company has invested vast sum of money into the online platform. This investment has opened new sales channel for Advanced Micro Devices. In the next few years the company can leverage this opportunity by knowing its customer better and serving their needs using big data analytics.
  • The new taxation policy can significantly impact the way of doing business and can open new opportunity for established players such as Advanced Micro Devices to increase its profitability.
  • New trends in the consumer behavior can open up new market for the Advanced Micro Devices . It provides a great opportunity for the organization to build new revenue streams and diversify into new product categories too.
  • The new technology provides an opportunity to Advanced Micro Devices to practices differentiated pricing strategy in the new market. It will enable the firm to maintain its loyal customers with great service and lure new customers through other value oriented propositions.
  • Decreasing cost of transportation because of lower shipping prices can also bring down the cost of Advanced Micro Devices’s products thus providing an opportunity to the company - either to boost its profitability or pass on the benefits to the customers to gain market share.
  • Stable free cash flow provides opportunities to invest in adjacent product segments. With more cash in bank the company can invest in new technologies as well as in new products segments. This should open a window of opportunity for Advanced Micro Devices in other product categories.

Threats Advanced Micro Devices Facing - External Strategic Factors

  • Increasing trend toward isolationism in the American economy can lead to similar reaction from other government thus negatively impacting the international sales.
  • The company can face lawsuits in various markets given - different laws and continuous fluctuations regarding product standards in those markets.
  • Intense competition – Stable profitability has increased the number of players in the industry over last two years which has put downward pressure on not only profitability but also on overall sales.
  • Rising raw material can pose a threat to the Advanced Micro Devices profitability.
  • New environment regulations under Paris agreement (2016) could be a threat to certain existing product categories .
  • No regular supply of innovative products – Over the years the company has developed numerous products but those are often response to the development by other players. Secondly the supply of new products is not regular thus leading to high and low swings in the sales number over period of time.
  • Growing strengths of local distributors also presents a threat in some markets as the competition is paying higher margins to the local distributors.
  • Shortage of skilled workforce in certain global market represents a threat to steady growth of profits for Advanced Micro Devices   in those markets.

Limitations of SWOT Analysis for Advanced Micro Devices

Although the SWOT analysis is widely used as a strategic planning tool, the analysis does have its share of limitations.

  • Certain capabilities or factors of an organization can be both a strength and weakness at the same time. This is one of the major limitations of SWOT analysis . For example changing environmental regulations can be both a threat to company it can also be an opportunity in a sense that it will enable the company to be on a level playing field or at advantage to competitors if it able to develop the products faster than the competitors.
  • SWOT does not show how to achieve a competitive advantage, so it must not be an end in itself.
  • The matrix is only a starting point for a discussion on how proposed strategies could be implemented. It provided an evaluation window but not an implementation plan based on strategic competitiveness of Advanced Micro Devices
  • SWOT is a static assessment - analysis of status quo with few prospective changes. As circumstances, capabilities, threats, and strategies change, the dynamics of a competitive environment may not be revealed in a single matrix.
  • SWOT analysis may lead the firm to overemphasize a single internal or external factor in formulating strategies. There are interrelationships among the key internal and external factors that SWOT does not reveal that may be important in devising strategies.

Weighted SWOT Analysis of Advanced Micro Devices

In light of the above mentioned limitations of the SWOT analysis / matrix, corporate managers decided to provide weightage to each internal strength and weakness of the firm. Organizations also assess the likelihood of events taking place in the coming future and how strong their impact could be on company's performance.

This method is called Weighted SWOT analysis. It is better than doing simplistic SWOT analysis because with Weighted SWOT Analysis Advanced Micro Devices managers can focus on the most critical factors and discount the non-important one. It also solves the long list problem where organizations ends up making a long list but none of the factors deemed too critical.

Limitation of Weighted SWOT analysis of Advanced Micro Devices

This approach also suffers from one major drawback - it focus on individual importance of factor rather than how they are collectively important and impact the business holistically.

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SWOT Worksheet & Template

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References / Citations & Bibliography

  • M. E. Porter, Competitive Strategy(New York: Free Press, 1980)
  • A. D. Chandler, Strategy and Structure (Cambridge, Mass.: MIT Press, 1962)
  • O. E. Williamson, Markets and Hierarchies(New York: Free Press, 1975);
  • L. Wrigley, Divisional Autonomy and Diversification (PhD, Harvard Business School, 1970)
  • R. E. White, Generic Business Strategies, Organizational Context and Performance: An Empirical Investigation, Strategic Management Journal7 (1986)