Case Study On Analog Devices Inc. (A)

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Case Study on Analog Devices Inc. (A)

Submitted By: Manish Kumar Jain 1528910 3rd Semester MBA Executive

Summary of the case:

Analog Devices Inc was established 1965 in Cambridge, Massachusetts. It was started by Ray Stata & Mathew Lorber. There were a leading manufacturer of integrated circuits that were used to convert analog and digital data form.

ADI had experienced times of growth and stagnation, they had noticed dip in sales and surge in profits which were a record. The company had divided its products in 4 classifications which were as below:
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Identify the conflicts that exist between the QIP measures and the measures reported by the financial system. Which numbers should we believe? Can they be reconciled?

- The conflicts are listed as below:
 Measures of QIP had the least preference given as the major importance was given to achieve greater results.
 QIP measures were used for evaluation of results of cost centres and hubs whereas financial measures had the opportunity to provide financial standing of the company.
 ADI’s incentive & performance had based their evaluation criteria on financial information.
 Financial measures are based on revenue optimization and QIP emphasis on cost reduction.

4. Critically assess the usefulness of the information contained in the corporate scorecard in Exhibit 3 as a way to implement Analog Devices ' strategy. What role does each set of measures play in strategy execution? What should be the relative importance of financial versus nonfinancial measures? What additional information would you like to see included in the scorecard?

- Scorecard is a blend of two factors, which are financial and non-financial affairs.
- Scorecard measures the performance of the business based on:
 Financial
 New Products
 QIP
Benefits of Non-financial measures
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 Emphasis shifted from reduction of cost to creation of wealth during the period of 1995.

6. Do you agree with the compensation philosophy of Analog Devices?

There have been quite a few factors that have not been right for Analog Devices:

- Stock price performance compensation was introduced for senior management.
- Payments for all other employees were based on revenue and operating profit.
- Performance measures changed very often which made it difficult to link it to the scorecard.
- The performance of individuals was not considered/rewarded or appreciated as it was never considered.
Hence we would not recommend the use of this strategy/philosophy to compensate employees.

7. Describe Analog Devices ' strategy as of 1996. How should the corporate scorecard and other management systems change in 1996 to best fit the strategic needs of the company?

- The strategies of Analog devices in 1996 were as follows:
 They wanted to be leaders in technology.
 They wanted to be the first ones to introduce new products in the market.
 They wanted to balance the well settled SLIC business with the growth for SPLIC’s and DSP IC.
 Increase growth aspects for system level IC’s that are used for

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