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Wingtech Acquires Nexperia Will The New Company Fly Case Solution

Solution Id Length Case Author Case Publisher
2004 2311 Words (7 Pages) Ming-Jer Chen, Yi Ping Chan, Mary Summers Whittle Darden Business Publishing : UVA-S-0329
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In 2019, Wingtech, one of the largest contract manufacturers of mobile phones, acquired one of the top makers of semi-conductor manufacturer, Nexperia. It was an important decision for Wingtech to acquire Nexperia. Although the geo-political and geo-economic factors were not conducing for an appropriate business environment, as the two companies came from two very different backgrounds; Wingtech from China and Nexperia from Europe. Strategically, this merger has opened several avenues for both of the organizations. It provided Nexperia the opportunity to enter the Chinese market, and Wingtech got the opportunity to benefit from the operational framework of the former’s organization. It is important to look at the various aspects of the corporate strategy adopted by Wingtech, to ascertain the direction that the company wants to go for achieving its different business goals and objectives. 

Following questions are answered in this case study solution

  1. Evaluate WingTech’s corporate strategy in terms of strategic directions?

  2. Critically evaluate Wingtech’s choice of strategy method of acquisition and potential synergies in the deal.

  3. With reference to the post-acquisition integration matrix, consider how wing tech might best integrate Nexperia? Can you foresee any problems with the integration?

Case Analysis for Wingtech Acquires Nexperia Will The New Company Fly Case Solution

1.1. Vertical Integration

This acquisition can be described as an example of vertical integration. Previously, Wingtech was a customer of semi-conductor manufacturing company. Vertical integration is the strategy that guides an organization to take control of its suppliers, and thereby the supplies of essential components. This eventually leads to increasing control of the organization over its supply chain and helping the business in reducing costs for the business. After this acquisition, Wingtech has availed the advantage of getting direct access to one of the most important components of mobile manufacturing. Furthermore, it is also important to know that Nexperia has been experiencing high growth in its financial fortune. This would help Wingtech in developing a strong business strategy that could help achieve its ambitions. Vertical integration can help Wingtech in optimizing it's potential pertaining to the product portfolio that it is producing. The demand for smartphones has been increasing over a period of time, and it is essential for Wingtech to manufacture at a much larger scale; at the same time, ensuring that the cost remains to a minimal level, and making sure that the business progress in a suitable manner. However, after the acquisition, it has provided Wingtech the opportunity not only to mitigate the cost but also to expand the product portfolio currently manufactured in the organization.

1.2. Strategy in the Context of Ansoff Matrix

The strategy of Wingtech can also be looked in the perspective of the Ansoff Matrix. The matrix entails characterizing the different growth strategies that are used by various businesses for growth. Businesses grow by entering new markets, introducing new products, or a combination of both. The four main strategies part of the matrix is Market Penetration, Product Development, Market Development, and Diversification. Market penetration focuses on enhancing the level of sales of existing products; product development pertains to introducing new products to an existing market; market development pertains to entering new markets with existing products; and diversification, which emphasizes entering new markets with new products. Wingtech was already providing services products and services to different countries around the world before the acquisition of Nexperia.

Considering the Ansoff Matrix, it can be gauged that Wingtech was following a product development strategy; at the same time, moving towards diversification with regards to some products. Wingtech was already venturing into smarter devices and the internet of things (IoT) product categories. The technological devices industry has a very dynamic and fast-paced environment, and this merger would ensure that both of the organizations could progress towards continuous product development and innovation. 

2. Critically evaluate Wingtech’s choice of strategy method of acquisition and potential synergies in the deal.

Wingtech purchased a 79.98% stake in the Nexperia group. Wingtech partnered with a number of different companies, including Wuxi Guolian Integrated Circuit Ltd, Gee Electrical Appliances, Yunnan Metropolitan Construction Investment Co, and others, for the purpose of getting the required financing for such an acquisition. It was in the interest of these companies to provide financing, as imported chips are an important component used in the manufacturing of a variety of electrical appliances. However, it decreased Zhang’s share in Wingtech. All the companies were concerned about the imported chips, as the international trade and business environment was not conducive to that particular arrangement. Nonetheless, it is important to consider that there was some resistance in Nexperia’s senior management related to the acquisition of the company by a china-based organization. Contingency leadership plan was also a matter of concern for the acquired organization. It was the largest semi-conductor related acquisition in China’s history. Considering the technological products produced by Nexperia, Wingtech would be able to benefit from the vast potential offered by the booming automotive electronics sector. It would also help Wingtech achieve its ambition of reaching a market capitalization of RMB 100 billion. 

Although this acquisition can result in massive wealth for Wingtech, it is also important to consider that in case of an unsuccessful integration, results could be disastrous for the organization. There was a considerable difference between the working culture of both China and Europe, and this could lead to an incompatible relationship between the two merged organizations, leading to undesired results for both of the organization’s brand identities. At the same time, it is also important to note that the political scene might not last that much longer, and the international business environment can improve over a period of time. This indicates that the current situation is not likely to worsen. 

2.1. Possible Synergies of the Merger

It is important for different organizations to develop a synergy in their operational frameworks, so as to reap the greater and combined working effect of their collaboration. In the context of this case study, it is important to consider that the global demand for complex consumer electronics was progressively growing, and this provided opportunity for both of the organizations to benefit from. A notable aspect of synergy was the factor of rapid growth in the business of the organizations. This merger allowed both companies to develop an important landmark in the technology industry, allowing the merger organization to become an organizational entity that is the largest semiconductor manufacturing company, with an A-share listing in China. Furthermore, it also provided the opportunity for Wingtech to benefit from the automotive electronic section of Nexperi, in order to diversify its product range, and so grow more progressively in the domain of complex consumer electronics. Nexperia, on the other hand, would also be benefited by vastly innovative consumer electronics, particularly those related to IOT. Similarly, in the case of Wingtech, the organization can benefit from expanding its product portfolio by venturing into automotive electronics sector. This would make the organization more diverse in nature, and it may later become a major conglomerate in the technology industry.

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