Agilent Technologies Company Activities Case Study

Introduction of the organization

Agilent Technologies is among the pioneer companies that offer a wide range of measurement solutions to engineers, service providers, researchers and scientists. Scientists use the company’s products to test the safety of foodstuffs.

Investigators use them in their inspection of crime-scene evidence. Researchers us them to study various diseases and come up with new drugs and engineers use them to develop and test a variety of devices such as satellites and surveillance systems (Agilent Technologies, 2012).

Agilent Technologies has a wide global reach with its headquarters in Santa Clara, California, USA. The company was founded in 1999 as a spin-off from Hewlett-Packard (HP) with a strategic plan of developing an independent measurement organization. The company is composed of four business groups. These are: Chemical Analysis, Life Sciences, Diagnostics and Genomics and Electronic Measurement.

Agilent’s mission is to offer products and services to customers that make a positive impact in their lives (Agilent Technologies, 2012).

Their vision is to maintain their position as the premier measurement company in the world while building on their capacity to offer better services and attract new markets. Apart from being a measurement company, Agilent Technologies also generates sales from the computing sector by incorporating HP’s computing, printing and imaging businesses.

The industry and competitors

One of the functions which the company performs is electronic test and measurement. In this industry, the companies involved manufacture equipment that is used in the testing and measurement of electric signals. They do so by use of tools such as circuit testers, ohm meters and signal generators (Hoovers, 2012a).

The company’s main competitors are: Danaher Corporation (Techtronix), PerkinElmer, Inc., Teradyne and Thermo Fisher Scientific. According to Hoovers (2012b), Agilent Technologies seems to lag behind in terms of annual revenues generated in comparison to some of its competitors. For instance, the company’s revenue for the 2011 fiscal year was $6,615 million with a total net income of $1,012 million.

These were found to be quite low figures compared with one of its main competitors, Danaher Corporation, whose revenue for 2011 was $16,090 million and a total net income of $2,172 million.

However, the company enjoys an incredible lead among its competitors in terms of better performance in the industry. This is according to the Hoovers list of the top five companies in the industry (Hoovers, 2012a) where the company is ranked number one.

The company was also awarded with the 2012 Europe Frost & Sullivan Customer Services Leadership award (Frost & Sullivan, 2012). This company received this award because they have a highly incorporated team of hardworking professionals. The company also shows great effort in delivering top-notch service to its customers.

Potential profitability of the industry

The Porter’s Five Forces model is mostly used to determine the potential profitability of an industry (Parnell, 2009). This model examines profitability by analyzing threats of new competition, threats of substitute products and services, bargaining power of customers and buyers, bargaining power of suppliers and the intensity of competitive rivalry (Hill & Jones, 2009).

According to the financial reports for Agilent Technologies and Danaher Corporation, both companies seem to have a steady increase in profits in the last three financial years. From the company’s financial report, Agilent Technologies had a net profit margin of 15.3% in 2011, up from 12.6% in 2010 (Hoovers, 2012a).

The company’s gross profit for 2011 was $3,529 million, up from $2,930 recorded in 2010. Basing the company’s success using Porter’s Five Forces model, it’s important to note that the company’s profitability is greatly influenced by intense rivalry and competition from similar companies.

One major competitor in the Electronic Test & Measurement industry, Danaher Corporation, has appeared to have higher profits than Agilent Technologies: their financial statement put their gross profit at $8,167 million for 2011 and $6,626 million for 2010.

Though Danaher Corporation has higher profits and income than Agilent Technologies, the combined profits generated from both companies prove that the Test & Measurement industry which both companies operate in is a highly profitable one.

Critical success factors

As in most industries, there exist winners and losers; those that are at the top of their game and those that trail behind. The Electronic Test & Measurement industry is no different. Among the major companies that appear to have consistently succeeded in the industry for a number of years are Danaher Corporation and Agilent Technologies.

These two companies have experienced increased levels of profits and revenues in their current years of operation. One factor that might have led to Agilent’s success is that it was formed as a spin-off from HP in 1999. HP was already a well established company then so Agilent might have enjoyed financial support for it to reach the level that it is now.

Another success factor attributed to Agilent Technologies is the fact that it offers calibrations that are accredited (Frost & Sullivan, 2012). These accreditations are done by various international bodies such as UKAS (United Kingdom Accreditation Service) and standard calibrations courtesy of its UK Center of Expertise.

The company has also shown outstanding performance in other areas of operation such as leadership, innovation and product development. These success factors were obtained through thorough investigations and intense methods of collecting data.

Other companies in the industry that don’t seem to do very well are Teradyne Inc., and PerkinElmer. These companies have been experiencing low incomes in recent years compared to other companies in the industry. For instance, Teradyne’s revenue for the year ended December 2011 was $1,429 million, down from $1,608 million in 2010 (Teradyne, 2012).

This is a subpar result compared to Danaher’s revenues of $16,000 million for 2011. Failure to partner with other organizations and lack of adequate strategies could be the reason for Teradyne’s recent decline in profits.

Another critical success factor that has enabled the well established companies in the industry to experience high levels of performance is the ability to have a wide global reach. Danaher Corporation, for example, has manufacturing, sales and distribution facilities in more than 50 countries (Danaher Corporation, 2012b). According to Kose et al. (2008), one of the advantages of financial globalization is risk sharing.

A company branch in a certain country might enjoy financial support from the main headquarters especially in the case of fluctuations in the local economy. This strategy appears to be critical for Danaher’s success. When an organization operates on a global scale, innovation in production and purchasing strategies will also be enhanced (Gitman & McDaniel, 2008).

Agilent Technologies also has facilities in over 100 countries worldwide. In addition, the company has an interactive website where online customers and partners can view Agilent Technologies’ financial statements online, a move that promotes transparency in the company and instills trust in the company’s customers.

The organization has also incorporated social media as part of its marketing strategies. Anyone seeking to find more information about the company can view their profile on social networking sites such as LinkedIn. This strategy also makes communication with potential customers and business partners much easier.

Both Agilent Technologies and Danaher Corporation attribute most of their sales to international markets. Their management teams seek to maintain and possibly expand their international presence so as to increase their market reach. This just goes to show how this strategy is effective and a critical factor to their profound success.

Factors affecting the industry

Political/legal factors

There are a few legal forces that affect the Test & Measurement industry. An example is the European Union Restriction of Hazardous Substances (RoHs) directive (European Commission, 2012). This directive restricts the use of harmful substances such as Lead, Mercury and Polybrominated diphenyl ethers (PBDEs) in electrical and electronic products.

The test & measurement and analytical products of Agilent Technologies fall under the Industrial Monitoring and Control Equipment category which is out of the directive’s scope until 2017 when they will be enforced (Agilent Technologies, 2012).

As a strategy to comply with the Union’s directive, the company is working closely with partners in the supply chain who also play their part in ensuring that the requirements of all products and materials are met (Agilent Technologies, 2012).

The company also strives to meet Environmental, Health and Safety (EHS) legal requirements set by the International Financial Corporation in 1998. Sometimes minor incidents that do not conform to EHS standards do occur despite the many safeguards implemented by the company (Agilent Technologies, 2012).

However, Agilent Technologies’ management always tries its best to report them if and when they occur. The company also keeps a close watch on these violations so that they can initiate new policies of preventing similar scenarios in the future.

Economic factors

Economic slowdown: A period of recession leads to a significant decline in the economic activities of any stable company. Agilent Technologies faced this hard-hitting period between 2002 and 2003 where bankruptcy saw other companies close down. Agilent Technologies, being highly diversified in terms of the range of products being offered, survived although financial reports during this period indicated an economic downturn. Antenna / RCS testing, for instance, faced an economic imbalance as the cost of showcasing the finished product became expensive as well as the amount of money required to market.

Though the recession faced by many companies in the industry in the 2003 period had a massive hit on Agilent Technologies and resulted in a string of losses, the company was able to overcome this downturn and a few years later, the company is reaping the fruits of this resilience. This proves that Agilent Technologies, as well as other successful companies in the Test & Measurement industry, have what it takes to withstand future tough economic times.

Social factors

Loyalty and trust to the customer: Satisfaction to a customer requires continuous manufacture of products that win their trust and loyalty to the company. This is achieved through production of high quality test and measurement tools.

Forums to communicate with the customer on the quality and efficiency of the products are vital in clearing doubts. It is commendable that the company has a way of exchanging ideas with its customers like being on social sites such as Facebook and LinkedIn.

Pollution: The materials that are used in the manufacturing and packaging of products from Agilent Technologies lead to environmental degradation. The different forms of energy used and released by the machines applied in the different fields lead to air pollution. Energy conservation is vital to the company.

Although the company has managed to track down up to 15.9%, it did not achieve its 5% annual target on consumption of energy (Agilent Technologies, 2012). The company also produces greenhouse gas which has a negative impact on the environment as well as the health of human beings.

Water is yet another resource that is used in the daily operations of Agilent manufacturing sites for building, irrigation and other projects. The company should therefore come up with ways of averting processes that hinder the development and growth of the natural biodiversity.

Technical factors

Space: The Test & Measuring industry is faced by a major challenge of creating an area or space for putting up the manufacturing sites especially with the increased demand of its products by customers across the globe. Installation of power quality equipment is limited by space creating a reduced amount of other power supplies for commercial and industrial firms.

A decline or cut-off in the amount of power being supplied to inhabited or business areas can lead to damage. The same case is also evident in the antenna/RCS measurement tests. Before the 1980s, there was usage of microwave receivers.

The transmission speed was by far low and had no reliability due to its inaccuracy. Nowadays, though, there has been new development by hi-tech engineers who have gathered resources and made innovations such as network analyzers that are positively improving the performance of antennas (Frost & Sullivan, 2012).

The challenge of manufacturing products with high proficiency also faces many companies. Customers of Agilent Technologies insist on buying antennas that are more complex and have greater performance at the same time. This requires more time and resources to experiment before delivering the finished product.

Current strategies

Firm-level strategy

The company strives to provide the best environment for their employees to work in. In 2003, the company underwent one of the worst economic times in their history (Agilent Technologies, 2012). The company’s profits were at record lows and as a result, several employees left the company in search of greener pastures. Others left as a result of an inevitable retrenchment.

This workforce reduction program went on for some time and the executives had to come up with firm-level strategies to strengthen support mechanisms for those who remained with the company. The strategy is to provide numerous employee incentives and treat each one of them, regardless of position he or she is entitled to work in, with mutual respect.

Several initiatives have also been implemented that ensure the environments in which the employees work in are improved. The success of these initiatives have been noted and commended and despite the harsh economic conditions, the company still continues to win “best place to work” awards from different organizations across the globe (Agilent Technologies, 2012).

Business-level strategy

The company has drafted an environment policy dubbed Agilent’s Environment Policy as a business-level strategy (Agilent Technologies, 2012). This policy ensures customers and business partners that the company is operating under compliance of local and international standards regarding how they manage and distribute their products.

In the implementation of this policy, Agilent Technologies has developed a strict program that ensures the elimination of potentially hazardous materials and substances in its products. The company’s electronic test and measurement products are also labeled to comply with China’s Management Methods for Control of Pollution from Electronic Information Products (Agilent Technologies, 2012).

This move initiated in 2007 assures international customers, especially those of Asian dissent that the company’s products are safe to purchase and use. Acting in compliance with international regulations will ensure the company maintains an advantageous international recognition. This, in turn, will be both a safety measure on their part and instill trust in the company’s customers and business partners.

Business-level strategies of competitors

Unlike Agilent Technologies, Danaher Corporation operates through five business groups. These are: Life Sciences and Diagnostics, Test and Measurement, Industrial Technologies, Environmental, and Dental (Danaher Corporation, 2012a).

Having a broad business scope and an additional portfolio goes a long way in widening customer reach which often translates to increased sales and revenue. Danaher Corporation also has a partnership venture with Cooper Industries through which it manufactures power and mechanics hand tools (Hoovers, 2012b).

Marketing strategy

The executives of Agilent Technologies have employed a number of marketing strategies to ensure a steady flow of income and increase the company’s revenue. A major strategy which the company has implemented is globalization. The company has tapped into the international market on a wide scale having branches in almost every region in the world.

As a result of this strategic planning, 64% of the company’s net revenue in the 2003 fiscal year came from the international market (Agilent Technologies, 2012). One of the reasons that have led to this boom in international sales is the company’s commitment to ensuring its products conform to international standards such as RoHS. Another critical factor to this success is their interactive website and social media integration.

Financial position and financial strategy

Since the major blow suffered by the company at the end of the 2003 fiscal year, Agilent Technologies has tried its best to dust off the major losses incurred and rise to its current financial glory. From the company’s financial statements, it’s clear that the organization’s officials have succeeded in maintaining a high level of income.

This is evident from the figures discussed previously whereby the company had a gross profit of $3,529 million for the 2011 fiscal year, up from $2,930 in 2010. The company has also been recording high revenues, the figure for 2011 standing at $6,615 million (Hoovers, 2012b).

The major strategy for this recent financial boom seems to stem from cutting of business costs. After the periods of losses, the company executives saw it best to perform company downsizing and cutting down of other costs in order to prevent the company from collapsing.

Since the company is a spin-off from HP, it suffices to say that it has enjoyed financial support from that company up to the level of operating as an independent company.

Production and purchasing strategies

To be able to remain competitive in any industry, an organization must evolve and change with technology. Agilent Technologies has taken note of this important aspect of sustainability by employing production and purchasing strategies. A notable strategy is in antenna measurements.

Prior to the 1980s, antenna test engineers used dedicated microwave receivers for applications that involved antenna testing (Agilent Technologies, 2012). A few years on, Agilent Technologies and other organizations in the Test & Measurement industry have implemented a strategy of adapting to the new technology that replaces microwave receivers with network analyzers.

This move has resulted in improved stability, accuracy and reliability in instrumentation and taking measurements. The strategy has also enabled Agilent Technologies to achieve productivity improvements, especially by the utilization of the company’s new PNA series of network analyzers in several antenna/RCS measurement applications (Agilent Technologies, 2012).

Other strategies

A statement from the company’s HR in 2003 read that Agilent’s values draw attention to every activity undertaken by the company. The company’s strategies in the human resource department are to create an environment where all employees practice teamwork in their assigned task. The company also conducts an employee health and safety training program (Agilent Technologies, 2012).

This is where employees are equipped with the knowledge of fulfilling compliance requirements. They are also made aware of how to practice and abide by company-wide policies. This helps in making sure the employees stay informed on matters to do with the current issues of maintaining a safety work environment.

This training program forms a part of a web-based learning management system which is a part of the Agilent Technologies information system (Agilent Technologies, 2012). This system helps keep track of particular employee training and development. The employee progress is monitored and improvements made where necessary. This strategy also motivates the employees to perform better in their designated tasks.

SWOT analysis for Agilent Technologies

Strengths

  • Diversified geographical presence: Agilent Technologies has facilities in more than 100 countries and it’s providing its unique services through more than 29,000 employees (Agilent Technologies, 2012). Having its headquarters in Palo Alto, California, it has spread its manufacturing sites to many countries like China, US among others. This gives the company a strong base to perform well.
  • Strong performance in the Electronic Test & Measurement industry: Agilent Technologies is rated as the leading company in this industry, beating the likes of its competitors such as: AMETEK Inc., Hexagon AB, Itron Inc. and HORIBA Ltd. (Hoovers, 2012a).
  • Strong reputation: Agilent Technologies has for a number of years been recognized as one of the best workplaces for employees. This was made public by several organizations like Best Employer in Asia. It was also included in Fortune magazine “100 Best Companies to Work For” as well as CAREERS & the disABLED magazine’s “Top 50 Companies for People with Disabilities”. It is also through the tackling of emerging issues that arise during the implementation of environmental programs that the company can proudly enjoy its earned reputation (Agilent Technologies, 2012).

Weaknesses

  • Decline in financial resources: It is notable that there was a decline in the amount of net revenue in 2003 as compared to previous years. This can be attributed to the violations alleged to have happened in the labeling of dangerous waste as well as the issuance of waste paper permit by the administration that was in charge (Agilent Technologies, 2012). Though the company suffered a big blow in terms of losses incurred during this time, the management has made giant strides to prevent a similar occurrence in the future.

Opportunities

  • New market inventions: Agilent Technologies has provided yet another chance for its customers to witness the showcasing of its latest innovation. The wideband radar generation and analysis will enable the users to effect communication using pulse building software among other innovative devices (Agilent Technologies, 2012). Many more products have been lined up for their esteemed customers. This move will ensure continuous growth for the company.
  • Growing market demand for electronic tools: Every research institution, scientist and government institution requires electronic tools that are suited to the advancing technology. Agilent Technologies has a wide range of products that meet their customer’s expectations with great satisfaction (Agilent Technologies, 2012). This has seen its expansion to several countries across the globe.

Threats

  • Stiff competition: As companies in the Test & Measurement Industry continue to flourish in terms of amounts of revenue generated and world-wide reach, new companies are starting to emerge that aim to give the already established companies a run for their money. Though most of these new enterprises are small vendors, they do pose a potential threat to the existing companies. Agilent Technologies should hence employ strategies that help them maintain their position as a global leader in the Test & Measurement industry.

Strategic alternatives

The strategies employed by Agilent Technologies have seen the company rise to the top of its league in relation to the Electronic Test & Measurement industry.

Bother firm-level and market-level strategies have made the organization win awards and be branded among the global leaders in the industry. However, in order to build on the strengths and try to minimize the weaknesses, the company needs to employ a few strategies to add on to the existing ones.

One strategy the company can implement is partnership with other companies. This seems to be a method used by other successful companies in the industry. An example is Danaher Corporation which has partnered with Cooper Industries’ Apex Tool Group (Hoovers, 2012b).

According to Radosavljevic & Bennett (2012), such partnerships are highly beneficial to firms in terms of increasing revenues and generation of new ideas. Danaher can claim that this 50/50 joint venture has proven to be beneficial and has played a huge part in the organization’s success.

Another strategy available for the organization is expanding its area of operation. Currently, the company operates in four business groups as previously mentioned. Addition of another business group to cater for the expanding Test & Measurement industry could prove beneficial to the company in terms of increased customer base.

The company has a strong command on the international market due to its world-wide presence. This move would ensure a wider reach and greater customer target.

Pros and cons of these alternatives

As previously mentioned, one benefit of collaborating with other organizations is generation of new ideas. The company can gain new ideas from the company it wishes to partner or associate itself with.

This will ensure continuous flow of new information and new trends and entries in the market. Increase in the business groups which the company operates in will also widen the scope of customer reach on a global perspective.

One disadvantage of business partnerships is that some terms and conditions agreed upon during the partnership signing may appear to favor one organization better than the other (Radosavljevic & Bennett, 2012).

To solve this issue, the two parties may have to agree on different ways of working together on different aspects of the business operations. A downside of having an additional area of operation may arise when the target customers fail to welcome the new business group in the positive way which the company had hoped for.

Alternatives to pursue

The strategic alternative that should be pursued is that of acquiring new business partners and strengthening financial ties with other organizations.

Though expansion of the organization’s portfolio may increase the product reach of its global customers and increase the company’s revenues, the negative impact it might impose on the company is too much a risk to take. If the online customers of the company fail to accept the additional product, they might decide not to purchase the company’s products and services at all and this might result in damaging of the company’s brand.

Partnership with other companies will also ensure the company’s brand is kept in the limelight, especially if the organization they choose to associate with enjoys a positive international appraisal. Agilent Technologies may also increase its online presence by placing adverts on partner company’s websites.

Implementing the alternatives

Agilent’s vision is to have strategies that have a positive impact on the environment. To ensure this aspect of being environmental-conscious is maintained, the company has gone ahead and enrolled for membership in a number of organizations. These include the American Standards Institute and Business for Social responsibility (Agilent Technologies, 2012).

The steps followed in joining these organizations should be the same ones followed in seeking joint ventures with other global brands. The company has for a long time ensured that the products and services it produces conform to the set standards and applicable safety guidelines. When implementing the said strategy, the company should carry on with this positive attribute.

Feedback from customers and partners should also be encouraged so that the company will have up-to-date information regarding the partner agreement process. In addition to the Agilent Customer Satisfaction (ACS) program, other programs should be initiated that enable the company get a comprehensive outlook on what customers and partners are saying about their products.

The company should also work on corrective action plans with proposed business partners so that they can both work on the areas that need improvement. This will in turn ensure a healthy and beneficial relationship with the company’s business partners.

Controlling the alternatives

With over 100 facilities worldwide, Agilent Technologies should take precaution in whom and how they wish to partner with. To maintain a fruitful cooperation with other organizations and agencies as well as expand its customer base, the company should device means of controlling this strategy.

As a way of performing this activity, the company’s executives should carry out a comprehensive analysis of the organization which the company wishes to be a member of or associate Agilent Technologies with.

The organization should also approach the government and other legal authorities that regulate the nature of how business is conducted within their area of jurisdiction. By doing so, the company will ensure that they work within legal standards in their course of approaching other organizations for partnership purposes.

Future prospects of the company

In 2003, Agilent Technologies suffered one of the worst financial crises in the company’s lifetime. It experienced massive losses compared to previous financial years. The company suffered a colossal loss of over $3 billion in revenue (Frost & Sullivan, 2012). However, the company executives did rise to the occasion and implemented strategies that have seen it rake in huge amounts of profits in recent years.

That being said, the company should continue learning from its past mistakes and leverage on its present success so as not to fall back to the situation it was in nine years ago. Judging by the high growth in profits by the company and its major competitors in the Test & Measurement industry, Agilent should anticipate stiffer competition as more companies try to have a bite of this growing pie.

These companies which are mostly start-up or smaller vendors are slowly making their presence known and threatening the market dominance of established companies like Agilent Technologies and Danaher Corporation by creating market or product niches.

By riding on its strengths in research and development, the company has for a long time focused on emerging markets such as wireless and semiconductor testing (Frost & Sullivan, 2012). This strategy has ensured that the company is always ahead of its competitors, which has made it the number one target for test and measurement solutions.

References

Agilent Technologies. (2012, September 24). Retrieved from http://www.agilent.com/

Danaher Corporation. (2012a, September 24). Retrieved from http://www.danaher.com/about-us

Danaher Corporation. (2012b, September 24). The New York Times. Retrieved from http://topics.nytimes.com/top/news/business/companies/danaher_corporation/index.html

European Commission. (2012, September 24). European standards: Restriction of the use of certain hazardous substances (RoHs). Retrieved from http://ec.europa.eu/enterprise/policies/european-standards/harmonised-standards/restriction-of-hazardous-substances/index_en.htm

Frost & Sullivan. (2012, September 24). Retrieved from http://www.frost.com/

Gitman, L.J., & McDaniel, C. (2008). The Future of Business: The Essentials. Mason, OH: Cengage Learning.

Hill, C., & Jones, G. (2009). Strategic Management Theory: An Integrated Approach. Mason, OH: Cengage Learning.

Hoovers. (2012a, September 24). Electronic Test & Measurement instruments manufacturing. Retrieved from http://www.hoovers.com/industry/electronic-test-measurement-instruments-manufacturing/1242-1.html

Hoovers. (2012b, September 24). Danaher Corporation. Retrieved from http://www.hoovers.com/company/Danaher_Corporation/rfcyci-1.html

Kose, M.A., Giovanni, J.D., Faria, A., Schindler, M., Dell’Ariccia, G, Mauro, P., Ostry, J.D., & Terrones, M. (2008). Reaping the Benefits of Financial Globalization. Washington D.C.: International Monetary Fund.

Parnell, J. (2009). Strategic Management: Theory and Practice (3rd ed.). Mason, OH: Cengage Learning.

Radosavljevic, M., & Bennett, J. (2012). Construction Management Strategies: A Theory of Construction Management. Hoboken, NJ: John Wiley & Sons.

Teradyne. (2012, September 24). Retrieved from http://www.teradyne.com/

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