I. EXECUTIVE SUMMARY
Texas Instruments, widely known as TI, is an American company based in Dallas, Texas. Texas Instruments is well-known for developing and commercializing semiconductor and computer technology. Texas Instruments is the number four manufacturer of semiconductors worldwide after leading these leading companies; Intel, Samsung and Toshiba. Texas Instruments is the number two supplier of chips for cellular handsets after Qualcomm, they are also the number one producer of digital signal processors and analog semiconductors along with a list of other semiconductor products.
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Texas Instruments has changes the way we use technology over the past 75 years and do not plan on stopping now. They plan to make the next 75 years just as successful, if not more than what they have already become. Just seven years after Jack Kilby introduced the world to his invention, the integrated circuit, he stated that “It won’t be that big of a deal In the long run.” No fifty short years later his invention changes the way the world looks at the Internet, laptops, Pc’s, and cell phones.
Texas Instruments employs approximately 30,000 employs with more than half of that being located in the Unites States. The company is made up of 34 percent of minorities and 25 percent of them are women. Over the last year they had a decrease in job growth. Over the years Texas Instruments has been on the Fortune List for Best Company to Work For, and also on the list for Best Employers and Healthy Lifestyles.
II. ENVIRONMENTAL ANALYSIS
Texas Instruments was founded in 1930 as GSI Geophysical Service Inc… During the time period when the United States joined World War II the company started making submarine detection devices for the U.S. Navy. Shortly after the company started producing and became a defense system supplier. In 1951 the company Changed its name to Texas Instruments and in 1952 started its business in semiconductors. Texas Instruments was founded by the four GSI managers; Cecil H. Green, J. Erik Jonsson, Eugene McDermott, and Patrick E. Haggerty. “From its earliest days to the present, TI’s leaders have possessed remarkable vision, focus and a commitment to the highest standards of business conduct. They have taken risks, encouraged creativity and transformed ideas into innovations that shape our world.”
A. The Marketing Environment
1. Competitive Forces: There are ten major companies that are in the semiconductor industry from six different countries. Out of these ten companies in the past years Texas Instruments has been ranked in the top four for their products.
2. Economic Forces: Texas Instruments has many different products and they have to advertise these things in many different ways. With the products that are available to average everyday customers they change the time period that their ads to show up on television later in the night, and have radio advertising during the mornings and evenings while people are in route to and from work.
3. Political forces: There are many things that can impact the production on these products. There are many different tariffs on the importing and exporting of the materials needed for the production of these products. They also have to be aware and subject to change for environmental procedures for disposal of products and waste.
4. Legal and Regulatory forces: The Semiconductor Chip Protection Act of 1984 was put in place to help protect the illegal copying of the microchips. The act was put in place to protect the chip and its actual layout. The company must also follow all EEOC, ADA, Federal and State minimum wages, Fair Labor Act and OSHA regulations within the company.
5. Technological Forces: With the advancement of today’s ever changing technology field, Texas Instruments has to be ready and able for every change in the system. Technology is updating and expanding every day with new advancements.
6. Sociocultural Forces: Texas Instruments believes that maintain the highest level of ethical standards requires a partnership between employees and employers, Texas Instruments staff is made up of 34 percent minority and 25 percent women. Texas Instruments is also very concerned with then environment, safety and Health. Texas Instruments staff is made up of 34 percent minority and 25 percent women. Texas Instruments is also very concerned with then environment, safety and Health. They are part of a program called “Sony Green Partner” where they supply components, devices and materials to ensure the production of environmentally friendly products. They also manufacture a “green” chip in Texas. Texas Instruments is very aware and cautious of the fact they need to help keep our planet healthy.
B. Target Markets.
Texas Instruments has a few different target markets. With the products that they produce they are trying to bring in customers any age, gender, race or culture. They range from average citizens purchasing televisions, laptops, computers, cell phones, alarm clocks to tracking devices, medical devices and so much more. Texas Instruments targets a range of people from 18 and older. Many of their products can be of some expense so anyone under the age of 18 lacks the resources necessary to purchase these products. They also target all of the military and their special forces.
C. Current Marketing Objectives and Performance.
Texas Instruments is on the greener side of the pasture when it comes to its business being its own producers. Decisions to stay away from third party factories have helped keep the company stay afloat. While there was recently a chip shortage other companies had to turn to their competitors to buy products due to their lack of inventory, Texas Instruments on the other hand did not because they are their own producers, with their own factories.
Even though Texas Instruments was making a living with producing and distributing their own, semiconductors, the company has come to a slight financial fall over the past couple of years. The company may be having difficulties managing production costs with their orders, the price of their stock continues to increase and remain on the positive side.
III. SWOT ANALYSIS
A.Strengths
1. Texas Instruments has developed a strong position in the industry as a leader and innovator. TI was the pioneer of semiconductors in the 1950’s, actually inventing the semiconductor (http://www.ti.com/corp/docs/company/factsheet.shtm 1995-2010).
2. TI has manufacturing sites throughout the world in, North America, Asia, and Europe. This gives TI a strong advantage with the ability to serve the worldwide market with easy access and high production yields. These strengths have helped to lead to another of one their strengths which is their brand (http://www.ti.com/corp/docs/company/factsheet.shtm 1995-2010).
3. Texas Instruments has its place; TI has manufacturing sites throughout the world in, North America, Asia, and Europe. This gives TI a strong advantage with the ability to serve the worldwide market with easy ( http://www.ti.com/corp/docs/company/factsheet.shtm 1995-2010).
4. TI brand recognition. TI is recognized worldwide for their innovation and quality customer service. (http://www.ti.com/corp/docs/company/factsheet.shtm 1995-2010).
B.Weaknesses
1. They are not known for being a skilled marketing power, a reason for losing market share after the 1980’s. It is through their strong position in the industry and outside distributors, which continue to their market share strong. (http://www.fastmr.com/prod/40491_texas_instruments_incorporated_swot_analysis.aspx ( Datamonitor) October 15, 2009)
2. TI is very dependent on their distributors. Distributors, such as Arrow, handle half the medium and all of the small businesses. (http://www.fastmr.com/prod/40491_texas_instruments_incorporated_swot_analysis.aspx (Datamonitor) October 15, 2009).
C.Opportunities
1. TI has to reorganize themselves to get ready for the changing market. With major companies like Motorola complying with the global pricing system, TI has the opportunity to establish better customer service with existing customers. Options could be price matching or discounts with referrals.(http:www.wikipedia.com/Texas instruments.)
2. They have taken a leadership role in the industry. The semiconductor market is about prices at the moment because of the fact that a semiconductor is a commodity product. This means the manufacturer with the best price gets the sale. So, if TI were to change this by differentiating their product through research and development of newer and better products, this would give them an advantage. They then could compete on quality and innovation, reacting in higher profits. With the current financial position of TI, they have the opportunity and ability to execute the research and development needed to differentiate. (http:www.wikipedia.com/Texas instruments.)
D.Threats
1. Global pricing systems and competitors conforming to distributors pricing pressures are TI’s threats. (http://www.fastmr.com/prod/40491_texas_instruments_incorporated_swot_analysis.aspx Datamonitor) October 15, 2009).
2. They are faced with the fact that if they do not comply with this, they could lose their major distributors.(http://www.fastmr.com/prod/40491_texas_instruments_incorporated_swot_analysis.aspx ( Datamonitor) October 15, 2009)
3. Distributors are a major part of TI’s business and losing them may mean losing major market share.(http://www.fastmr.com/prod/40491_texas_instruments_incorporated_swot_analysis.aspx ( Datamonitor) October 15, 2009)
4. Another threat is other companies beating TI in innovation. Differentiation in other organizations’ semiconductor divisions could place competition with a large advantage in the industry. This could lead to a larger market share in the semiconductor industry for competitors. (http://www.fastmr.com/prod/40491_texas_instruments_incorporated_swot_analysis.aspx (Datamonitor) October 15, 2009)
Matching Strengths to Opportunities/Converting Weaknesses and Threats.
1. Our first alternative is to create a global pricing system. The second alternative is to maintain the current pricing system and do not conform to the pressures of the distributors such as Arrow. Finally, the third alternative is to differentiate Texas Instruments while servicing the small and medium businesses.
2. Texas Instruments has a few options to maintain market share and be profitable, one being to create a global pricing system. This would allow Texas Instruments to maintain their market share and maintain the current distribution system for their semiconductor market. This would also make distributors such as Arrow pleased because they will not have to pay higher prices depending upon region, all prices would be identical, whether the semiconductors are purchased from TI’s North American, European, or Asian manufacturing centers. Arrow is currently Texas Instrument’s largest distributor. Texas Instruments semiconductors make up 14% of the semiconductors carried by Arrow. Promotion for TI is currently very simple in that the name brand of Texas Instruments is the main strategy. The fact that TI is such a popular name brand and that they are such a large company with negotiation ability, makes promotion rather simple. There are cons to the formation of a global pricing system. By creating a global pricing system, Texas Instruments would lose the ability to negotiate prices and have one set price that all distributors would have the ability to access. Since Texas Instruments has semiconductor manufacturing all over the world, the costs of production vary with each region. The problem of producing semiconductors in Singapore and The United States, for example, is that the production costs vary and to sell at the same price all over the world would cause a loss in profits and would hurt Texas Instrument. Negotiation would also be lost. For example, TI has the ability to talk one-on-one with clients about other prices that competitors are offering. Negotiations provide Texas Instruments the ability to make up 10% of its sales. Though a global pricing system would save money on the negotiation team salaries, Texas Instruments would lose money on the loss of potential higher priced sales. For example, a global pricing system would make for inelastic prices. Selling semiconductors without a global pricing system when semiconductors may be in high demand will bring in a potential higher price, thus leading to higher profits. Texas Instruments gains visibility in the market through the communications they have with clients with approximately 150,000 calls received each year to the negotiations team. By creating a global pricing system, the promotion strategy of negotiations would be lost. One of the keys to Texas Instrument’s success is the ability to meet clients’ needs with prices. By having one price for all, Texas Instruments does not have the ability within its own company to change prices unique to each client’s needs. Since the semiconductor is a commodity, negotiations of price is one way Texas Instruments distinguishes itself in the industry. Szczsponik, Director of North American Distribution for Semiconductor Group says, “If we set global prices, we will no longer continue our price adjustment negotiations with the distributors. This may save us the cost of staffing our negotiations team, but it will also take away from us as a powerful tool for gathering information on our customers’ prices and our product performance. As soon as we stop negotiation price adjustments, we lose our visibility in the market.” (www.wikipedia.com/Texasinstruments)
IV. MARKETING OBJECTIVES
Maintain pricing and do not conform to distributors pressures is the second alternative that Texas Instrument could consider. Maintaining the current pricing system for the semiconductor market, Texas Instruments will sustain the unit profit level. Each unit sold will earn the same profits as before. Also, by maintaining this system, changes throughout the company will not have to be implemented. For example, the negotiations team as discussed in the previous alternative would remain in place, thus the communications with clients would remain intact. Texas Instruments would be able to negotiate with clients and try to meet specific needs of each client. TI would be able to maintain their visibility in the market. While these may be all positive, there are the cons to this choice. For example, while Texas Instruments is maintaining original prices, they will be suffering the consequences of loss in the distribution market. Distributors such as Arrow will not purchase as many semiconductors from Texas Instruments and start to purchase more semiconductors from companies such as Motorola and Intel. Realizing a potentially high risk of distributor loss will force Texas Instruments to have to reevaluate their promotion strategy. Currently the promotion strategy is to use brand awareness. TI would need to seek alternatives such as more advertising to medium sized businesses that have the option to deal with TI directly. With TI only planning to maintain prices and nothing else, will force the reevaluation to be reactive and waste time for Texas Instruments causing loss in profits. Motorola and Intel are just two companies that are beginning to meet the pressures of distributors and conform to global pricing systems. This would by default cause Texas Instruments to lose market share. Since the semiconductor is a commodity, price is the key determinant in what company the product is purchased from. Should Texas Instruments not conform to global pricing, they will lose presence in the market and lose market share.
To maintain independence from distributors and remain in control of the semiconductor division of Texas Instruments, an alternative is to differentiate the company while servicing small and medium sized businesses. Texas Instruments needs to be active in this industry and not lose control to middle men such as distributors like Arrow. While Texas Instruments is interested in keeping their relationship alive and healthy with Arrow, they are more interested in not losing money due to global pricing systems and remaining in control of their own company. While this may be a choice that involves a high level of risk, all of the alternatives that could be presented to Texas Instruments involve risk. It is proposed that Texas Instruments widen its own distribution center to begin the servicing of medium and small business while trying to differentiate the company with more products. For example, in 1958, Texas Instrument’s Jack Kilby developed the first semiconductor to be made of one single material so that the once need to solder components together to complete the semiconductor was irrelevant. This led to an incredibly high demand in the semiconductor market at low costs and in small sizes. This was an innovation in the electronics industry and is why Texas Instruments is considered a pioneer in the semiconductor industry. This is something that Texas Instruments should be looking to do yet again. With the positive financial position that they are in, TI should see this as an opportunity and utilize the money in the research and development fields. Should Texas Instruments be able to create another product, they would be the sole producer of the product and be able to dominant the market or sell the rights to production to other companies such as Intel or Motorola. Texas Instruments needs to regain control of the semiconductor division and not allow middle men to have such influence over distribution. Should Texas Instruments be able to expand its distribution to all medium and small businesses that use the Texas Instrument semiconductor, then they would not have to rely so heavily on distributors such as Arrow. This will obviously be cause for a restructure of company promotion. Promotion will have to be increased and focus on direct selling and price negotiations. An example of a price negotiation and promotional tool is to show the medium/small business buyer the price it costs to produce one semiconductor, the selling price to a distributor, and the percentage it is marked up prior to being purchased by the medium/small business. With the drastic savings that TI could offer the medium and small businesses, TI could offer lower prices and compete with the distributors. It is the goal of this alternative to create brand loyalty to the semiconductor division of Texas Instruments. Through communications, price negotiations, and the elimination of middlemen, TI will become known for caring about smaller businesses and offering negotiations to smaller businesses as well as medium to larger businesses. With the current distribution set up of Texas Instruments, TI does not distribute to small businesses. They only distribute to large and some medium sized businesses. “The semiconductor market can be divided up into three tiers. Fifty percent of our sales in semiconductors go to the top tier of perhaps 100 large electronics manufacturers who deal with us directly. The next 46 percent of sales come from 1,400 medium-sized companies at the next level, half of whom deal directly with us and half of whom buy through distributors. The remaining 4% of sales are to 150,000 smaller companies at the bottom tier in the market, who deal only through distributors.” (Szczsponik pg. 500)
There is risk involved with expanding the distribution of Texas Instruments. However, should Texas Instruments take the risk of losing distributors such as Arrow, they will be able to remain visible within the industry. Texas Instruments will also be able to say that they remain in control of their company’s production and prices. If Texas Instruments would take the risk of not complying with global pricing systems pressured by middlemen, then they could reach out to smaller companies to do their own form of distribution. For example, Texas Instruments can maintain the negotiation team that is in place and further expand this team to deal with smaller businesses. While this may require more man power and more shipping costs, they will be able to offer deals to the smaller businesses that the distributors cannot and eventually create a strong enough small business clientele, that the loss of distributors such as Arrow will not hurt the market share or the profitability of Texas Instruments.
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Recommendation:
It is our recommendation that Texas Instruments try to differentiate its semiconductor product line through research and development while expanding its distribution system to serve not only large businesses, but also more medium and small businesses. At the moment, TI is only serving approximately 100 large businesses, 700 medium businesses, and zero small businesses. It is anticipated that this may cause TI to incur costs in shipping and expansion of the distribution and negotiations teams, but that in the long run, it will provide a greater return. By reaching out to smaller businesses that are at the mercy of distributors and offering to work with them one-on-one, TI will be showing that they care about the smaller businesses and provide them with lower costs that not even the distributors can offer. By differentiating the Texas Instrument semiconductor division, TI will once again be able to take the title of pioneers within the industry. While it may not be possible at this time to name what this new, innovative product may be, it is important that TI be researching to remain in the lead of the industry where it has been accustomed to being since the 1950s. This alternative will provide a wider clientele, a wider product line and further networking for TI. It is not expected that TI will be able to service all 150,000 smaller businesses, but even a small fraction would keep TI’s market share competitive with others in the industry while remaining in constant control. By reaching out to medium and smaller businesses, TI can build brand awareness in customers and build the semiconductor division of TI to be less of a commodity and more of an importance. It is the goal to turn TI’s semiconductors into a product that is preferred based on quality and brand rather than strictly price. TI would still be able to deal with distributors should distributors be willing to accept the prices being offered while remaining in complete control of the company
(http://www.ti.com/corp/docs/company/factsheet.shtm 1995-2010).
V. Marketing Strategies
A. Target Market:
Texas instruments targets customers, businesses, students and anyone who believes in their technology. Texas instruments design things from mobile phones that connect families together or to classroom projectors that help students learn in the classroom. Texas Instruments builds instruments to help better everyone’s life not just students.
* Texas Instruments are accountable for social, environmental, and economic impact around the world.
*Mission Statement: Sustainability, social responsibility, philanthropy – no matter what you call it – Texas Instruments is proud of our long legacy of outstanding corporate citizenship. It is our commitment to accountability for our social, environmental and economic impact around the world.
*TI has been innovating and creating things for society for over 80 years
B. Marketing mix
*Products: TI has innovated and created so many things that have to do with technology. We all the main ones such as calculators and projectors but here are some others
* Cell phones
* Clocks and timers
* Temperature sensors and monitors
* Data converters
*Energy etc.
*Price: The price for TI instruments or innovation could range from 5 or 10 dollars to millions or billions of dollars. There are so many products that TI offers that contributes to society and helps out that whatever the price may be its well worth it.
*Distribution: TI thrives itself on direct marketing and always has information and help for you to purchase anything. The best way to learn about all of their products would be through the internet to really get a background on what you are looking for. You can find TI instruments online or even in the grocery store. TI ships from the US to Japan. They distribute throughout the world and internationally.
*Promotion: TI has a promotion online were you can sample and buy. They also have online stores to show the product and the prices and availability. Most of the promotion comes from advertisements such as commercials and books and students and schools. TI has parts in all sorts of companies and businesses around the world.
VI. Marketing Implementation
A. Marketing Organization:
TI serves Businesses, Students, Hospitals, Military, and most all types of customers. The target market of TI is so broad that they would have to separate the customers or production business into section by the product they want to purchase. You have the main customers who want to buy the most commonly known product calculators. Then you have hospitals, Military, Production businesses and so forth that you serve. TI believes in their Venture Capital Program which deals with partnering their business with others and works with other companies to merge technology.
B. Activities, Responsibility, and timetables for completion:
TI has great corporate citizenship. They are responsible for all sorts of things to benefit the environment and our world. TI provides products for hospital that heal our people and delivers our babies. TI also believes in the environment by doing everything’s possible to keep a clean environment and protect nature. They have come out with a green calculator built on recycled plastics. TI believes in coming up with solutions to reduce energy in whatever they do.
VII. Evaluation and Control
A. Performance Standard and Financial Control
Texas Instruments introduces between 800 and 1,000 new analog chips a year and has a portfolio of over 30,000 products. Unlike in the computer industry, where chips quickly are made obsolete, some analog chips have been selling for 20 years, saidGregg Lowe, who heads the company’s analog unit. Lowe said the size of his sales force means the company can serve small clients that wouldn’t be attractive to competitors. The rising demand for chips that require very little power and run for years without new batteries will also spur growth in the analog business. (http://newscenter.ti.com/Blogs/tinews/archive/2009/10/02/texas-instruments-says-analog-chip-sales-can-grow-20-a-year-99481214.aspx).
Texas Instruments, forecast profit and sales that beat analysts’ estimates, fueled by demand for consumer electronics and industrial equipment. They also predicted that First-quarter profits for 2010 will be 44 cents to 52 cents a share, but Analysts in a Bloomberg survey predicted earnings of 44 cents. The company also forecast sales of $2.95 billion to $3.19 billion, compared with the average of $2.83 billion predicted by analysts. Fourth-quarter net income surged to $655 million, or 52 cents a share, from $107 million, or 8 cents, a year earlier. Sales jumped 21 percent to $3.01 billion. Analysts had predicted profit of 50 cents and revenue of $2.98 billion (http://www.bloomberg.com/apps/news?pid=20601110&sid=amRFrwFwTq1k).
Texas Instruments’ analog-chip sales jumped 27 percent to $1.29 billion last quarter. Revenue from embedded processors — chips used inside equipment such as ATMs — grew 21 percent to $412 million. Wireless-chip sales rose to $732 million. The Gross margin, the percentage of sales remaining after deducting the cost of production, was 52.9 percent in the quarter, wider than the 44 percent it reported a year earlier. The margin was 51.4 percent in the third quarter. Texas Instruments, which ranks second to Intel Corp. among U.S. chipmakers, predicted that revenue would grow in the first quarter from the previous three months. (http://www.bloomberg.com/apps/news?pid=20601110&sid=amRFrwFwTq1k).
B. Monitoring Procedures
Texas Instruments realigned its marketing strategy as the result of this benchmark and positioning study. The center of Texas Instruments new marketing efforts included military equipment design engineers, engineering management, systems engineers, and component engineers within original equipment manufacturers (OEMs) in North America and Europe, as well as the OEM corporate management. The secondary — but critical — target became financial and market analysts, field sales personnel, and editors of trade publications. Texas Instruments provided timely information through the media, its sales force, and directly to the industry with technical releases. The primary means of marketing now comes from news releases and product briefs, advertisements directed at management, engineering, and purchasing people, and tools that the field sales force can use with impact and utility. Texas Instruments continues to execute news releases of advanced technology products which describe ASIC/VHDL, programmable logic, DSP/GSP, advanced linear, advanced logic, and high-density memory.
Work Cited
1. http://www.fastmr.com/prod/40491_texas_instruments_incorporated_swot_analysis.aspx (Datamonitor) October 15, 2009
2. http://www.ti.com/corp/docs/company/factsheet.shtm 1995-2010
3. http:www.wikipedia.com/Texas instruments
4. http:www.ti.com/corp/docs/csr/index.shtml?DCMP=TIFooterTracking&HQS=Other+OT+ footer_csr
5. http://www.bloomberg.com/apps/news?pid=20601110&sid=amRFrwFwTq1k
6. http://www.bmpcoe.org/bestpractices/internal/tisem/tisem_16.html
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