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Fostering Growth Amidst a Field of Consolidation

In 2015, the semiconductor industry experienced an unprecedented wave of merger and acquisition (M&A) agreements, worth $103.8 billion. While 2016 statistics aren’t quite finalized (as of this writing), it has already claimed its spot on the podium for the second largest year in total deal value.

 

Perhaps the record-setting M&A activity of the past two years is a result of the industry seeking to maximize economies of scale benefits or increasing difficulty for manufacturers to differentiate their offerings. Either way, company consolidation is ushering in an era of market uncertainty that’s having a significant impact on the high-tech industry.

As the market continues to consolidate and the largest players get even larger, semiconductor and electronic component manufacturing companies are finding it increasingly difficult to compete, forcing business leaders to look for new ways to stay competitive and profitable over the long term.

In the remainder of this article, I outline three steps companies can take to address some of the unique challenges of today’s marketplace.

Stay focused on expanding globally  

As the industry consolidates, chip makers must stay focused on global pipelines if they hope to reach wider audiences with their products. While globalization can make it difficult to gain insight into demand, it can create new revenue streams that are vital to continued growth. In that same vein, chip makers need to respond to market forces impacting global operations quickly and easily so they can maximize the revenue from each deal. This also provides the company with an opportunity to develop new designs that address emerging market needs.

Maximize your channel partner leverage

While high tech companies traditionally have relied heavily on direct sales as a source of revenue, many have found that channel partners can open the door for new opportunities globally. The challenge, however, is that this strategy often comes with a lack of control and visibility into the process, which can lead to a plethora of difficulties including inaccurate validation of rebates, additional compliance risks and price erosion.

To better leverage channels for revenue growth, high-tech companies need a solution and system that are purpose-built to support this strategy and enable them to more efficiently reap the benefits channel partners can deliver. In addition to facilitating the production and communication of timely and accurate information across channels, sales operations and executive management teams, the solution should help maintain price consistency in the market and improve visibility into direct and channel sales and pricing.

Also, with a larger and more diverse list of end customers to serve, who often represent initially smaller revenue streams, companies must change their often cynical view of channel partners. High tech companies should stop treating channel partners as fulfillment warehouses and make them an integral part of demand generation.

With these two improvements, manufacturers should be able to unlock the full potential of their channel to increase its effectiveness while reducing overpayments.

Gain a holistic approach to be more competitive

As the trend of consolidation continues, semiconductor companies need a holistic approach to managing the entire sales cycle. While customer relationship management (CRM) systems help companies manage customer relationships based on transactional moments, the technology by itself doesn’t provide insight into revenue management processes that can make or break a sale. As a result, sales teams are often flying blind when it comes to managing key data for pricing, quoting, contracting, and offering incentives and rebates.

By enhancing CRM systems with an end-to-end process that marries front and back office processes, high tech companies can gain a 360-degree view into their entire sales cycle. This includes integrating key steps like pricing, contract authoring and rebate and incentives management so sales teams can spend less time managing internal processes and more time converting relationships into actual sales.

Conclusion

While we can only hypothesize how the recent M&A activity will impact the high-tech market more broadly, one thing remains certain: organizations need to make their reach more extensible and drive profitability. By using technology to automate the steps discussed above, high tech companies will be better prepared to handle times of uncertainty and profitably while also expanding revenue streams.

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