Science Technology Company

CASE ANALYSIS

Executive Summary:

Science Technology Company was considered the leading manufacturer of a computer controlled automated test equipment that was used to monitor and manage quality over the life cycle of electronic products. Having 31% market share, the company was a dominant player was a dominant firm in the design and manufacture of testers and software for printed circuit boards. Its second largest business was its semiconductor test was used to test very large scale integrated circuits.  STC’s primary objective was to be recognized in providing integrated quality management systems to manufacture of electronic devices and equipment. To be financially viable, the company sought to spread the cost of its research across a large number of sales.

The rapid change of technology has refrain from following the traditional development process of designing, testing, redesigning and building a prototype. Likewise, it would be cost prohibitive to put each design iteration of a complex circuit on a silicon chip. Getting a highly competitive product to market on time, with high quality and within budget, depended on speed with which a new design was moved to manufacturing.  ATE firms helped the steady increase in labor rates which pushed electronic manufacturers to automate their testing.

Problem:

   Institutional:

The growth for automated test equipment (ATE) and very large scale integration (VLSI) increased dramatically from 1978 to 1984.  However, the growth for these equipment(s) is being outpaced by new entrants and competitors.   Global competition results to excess supply thus in relation that price rapidly falls. Science Technology (STC) is in danger and under obsolescence risk due to many industry plays.  In relation, is the company well-positioned to finance the rapid sales growth that was anticipated to compete with its competitors?

   Operational:

The current status of STC lags behind on a number of financial metrics including earnings growth, return on equity and return of assets.  In view of the uneven growth in sales, inventories and receivables and earnings in the past were Mr. Finson’s 5- year forecast useful to continue with operational plan to compete head on with its competitors?

Corporate Objective:

• STC’s primary objective was to be recognized as international leader in providing integrated quality management system to manufacturers of electronic devices and equipment including creating new test technologies and new products for all segments of the design and test market.

Areas of Consideration:

SWOT Analysis

The following outline summarizes the Strength, Weaknesses, Opportunities and Threats of STC.

Strength:

• With 31% Market Share, the company was dominant firm in design and manufacturer of testers and test software.
• STC has an extensive computer software and good credit rating.

Weaknesses:

• Poor forecasting track records with inconsistent financial results every year
• Fail to keep pace with competition
• Broad product lines
• Multiple or delayed projects which impacts profitability

Opportunities:

• Opportunity for electronic market which is expected to grow over the next 5-10 years.
• There is a good opportunity to collaborate with Asian or European companies to expand its geographical area
• There is a potential for constant innovation in this industry ( smaller but power chips , lower power utilization but faster memory)
•  Many consumer products such as toys and calculators are being developed thus testing equipment are in demand.

Threats:

• Fierce Competition from same industry.
• Low prices but with high quality products from competitors

Environmental Opportunities and Threats

        Macro-Economic Indicator

                Political

•         The company has been selected by the U.S. Department of Defense for a major program due to its strength having large customer base, extensive software , a broad line of testers , a dominant share of the printed circuit board test market and fair position in VLSI testing

                Economic

• There is a technological breakthrough due to rapid technical evolution inspired by the development of new products that consumers and users are eager to acquire.
• Electronic manufacturers move away from the design and manufacture of their own test equipment due to complexity and costliness of building their own testers

                Demographic

• Firms helped the steady increase in labor rates, which pushed electronic manufacturers to automate their testing.  Hence there is an increase in the number of employees due to anticipation of stronger sales at par with its competitors.

                Socio-Cultural

• Due to erratic improvement of testing technology and competitive pressures from research and development, there is a socio cultural behavior for consumers to demand high quality having low price electronic products.

Market Profile and Outlook

STC had a number of strength that would help it during intensified competition; it had a large number of customer base, extensive software, broad line of testers, a dominant share of the printed circuit board test market and fair position in VLSI testing.  The development of new circuit tester that was expected to be a mainstay product over the next few years can be the key to prevent decline of STC’s share. 

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