Strategic Audit Nvidia Corporation STUDENT .docx

Strategic Audit:
Nvidia Corporation
STUDENT NAMES HERE
NAME OF COURSE AND PROFESSOR
DATE
Team 4 – CEO Project
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Table of Contents
I. Current

Situation.................................................................................
............................................................ 3
Current Performance
...............................................................................................
....................................... 3
Strategic Posture
...............................................................................................
............................................. 5
II. Strategic Managers
...............................................................................................
......................................... 8
Board of Directors
...............................................................................................
............................................ 8
Top Management
...............................................................................................
.......................................... 10
III. External Environment
...............................................................................................
.................................. 10
Natural Environment
...............................................................................................
..................................... 10
Societal Environment
...............................................................................................
..................................... 11
Task Environment

...............................................................................................
.......................................... 15
IV. Internal Environment
...............................................................................................
.................................. 17
Corporate Structure
...............................................................................................
....................................... 17
Corporate Culture
...............................................................................................
.......................................... 19
Corporate Resources
...............................................................................................
..................................... 20
V. Analysis of Strategic Factors
...............................................................................................
........................ 25
Situational Analysis
...............................................................................................
........................................ 25
VI. Strategic Alternatives and Recommended Strategy
................................................................................. 29
Strategic Alternatives
.................................................................................... ...........
.................................... 29
Recommended Strategy
...............................................................................................

................................ 33
VII. Implementation
...............................................................................................
.......................................... 34
VIII. Evaluation and Control
...............................................................................................
.............................. 34
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Strategic Audit: Nvidia Corporation
Current Situation
Current Performance
Nvidia’s revenue for fiscal year 2017 grew by 38% to $6.91
billion, compared to $5.01 billion in
fiscal year (FY) 2016; this enormous growth in our revenues
was equally matched by large

increases in net income and return on equity over the same
period. From FY 2016 to FY 2017, net
income increased from 14.9% to 28.0% with an increase in
return on equity from 13.7% to 28.9%
over the same period. Our common stock value has appreciated
sharply by 1812% from January,
2013 to January, 2018, creating value for long-time Nvidia
shareholders (January, 2013: $12.66;
January, 2018: $242.00). Truly, FY 2017 was a landmark year
for our firm, with 2018 continuing
the trend. The long-term stability that Nvidia continues to
experience has brought great satisfaction
to our shareholders, our customers, and our employees (Nvidia
Annual Report, 2017, p. 50).
(Sources: Nvidia Annual Report, 2017, p. 50; Nvidia Annual
Report, 2015, p.51)
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Nvidia has created robust value for shareholders, with EPS
increasing by 238%, from 2013 to 2017.
Report, 2015, p.51)
The most pleasing news for shareholders is the phenomenal
increase in stock value of 1812%, from
2013-2018.
Report, 2015, p.51)
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The pronounced increase in revenue was attributed to strong
growth in most aspects of our
company’s product offerings. Among our firm’s strongest

growth areas, year-over-year, for 20
years, has been the production and sales of our graphics
processing units (GPU); this year has seen
similar robust growth in our GPUs sales, with revenue in our
GPU product line growing by 39%
from $4.2 billion in FY 2016 to $5.8 billion through FY 2018.
The GPU growth was stimulated by
an abundance of new gaming titles appearing on the market; this
in turn has led to gaming
enthusiasts upgrading their computer hardware with Nvidia’s
GPU’s to heighten their gaming
experience. Additionally, heavy demand for Nvidia GPU’s has
occurred in response to the rapidly
developing interest in the cryptocurrency mining industry
(Nvidia Annual Report, 2017, p. 89).
Strong sales of our Tegra CPU have also contributed to the
robust growth in annual revenue, with
sales of Tegra increasing by 47% from FY 2016 to FY 2017,
and totaling $824 million for FY 2017
(Nvidia Annual Report, 2017, p. 89).
Strategic Posture
Mission – Our corporate mission at Nvidia is based on our five

core values. The first of these values
is the willingness to take risks. The second is to strive for
excellence. The next core values are
intellectual honesty followed by directness. The final core value
is making a contribution. Nvidia
upholds all of these core values, while striving to maintain our
position as the world’s foremost
supplier of quality graphics processing units and other
innovative products (Nvidia Sustainability
Report, 2017, p. 11).
Objectives - Nvidia’s main objective is to advance the GPU
computing platform while seeking to
advance GPUs as the leading technological chip architecture.
The massive parallel processing
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power of GPU chips can be used to solve very complex
problems. Nvidia will integrate new
processing technology with legacy methods whenever possible

to aid in the compatibility of older
hardware with newer hardware. The target markets are gaming,
visualization, datacenters, and the
automotive industry (U.S. SEC, Form 10-K, Q4- 2018, p. 7).
Our second objective is of nearly equal importance as our
primary objective: to extend our
technology and platform leadership in the research and
applications of artificial intelligence (AI)
(U.S. SEC, Form 10-K, Q4-2018, p. 8). Nvidia seeks to capture
the competitive advantage in the AI
sector by offering a complete end-to-end GPU computing
platform; these offerings include Nvidia’s
GPU’s, the CUDA programming language, algorithms, and
system software. Nvidia will continue
to specialize its GPU chips for AI usage as it will help maintain
its leadership position in this sector
(U.S. SEC, Form 10-K, Q4-2018, p. 7).
Our third object is “extending our technology and platform
leadership in visual computing” (U.S.
SEC, Form 10-K, Q4-2018, p. 8). Nvidia seeks to continue to
increase our role in visual computing.
Nvidia views visual computing as a very important evolutionary

step in the computing world. We
are always expanding our research capabilities, while furthering
development within visual
computing, in an effort to bring life-like immersive computing
experiences to our constituent
markets (U.S. SEC, Form 10-K, Q4-2018, p. 8).
The final objective is “advancing the leading autonomous
vehicle platform” (U.S. SEC, Form 10-K,
Q4-2018, p. 8). Nvidia sees advances in autonomous vehicles
(AV) as the next revolution in
transportation technology. As the global leader in AI research
and applications, Nvidia seeks to
apply this growing technology to the AV segment in order to
seek a first-to-market competitive
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advantage. Nvidia has created the DRIVE brand to integrate the
best of our AI hardware and
software solutions for the automotive market. With an all-

inclusive objectivity toward the
development of AV technologies, Nvidia seeks to poise our
company as the market leader in AV
applications (U.S. SEC, Form 10-K, Q4-2018, p. 7).
Strategies - Nvidia believes that the continued success of our
company is incumbent upon our long-
term commitment to the exploration and innovation of new
computer-based technologies. To
accomplish this goal, Nvidia invests heavily in research and
development (R&D) and our firm is
focused on creating a unified software and hardware
architecture. Currently, research and
development is involved with the creation and improvement of
support software, CUDA platform
development, GPU engineering, Tegra process, very large-scale
design engineering, and algorithms.
The research and development department employs 8,191 full-
time employees. Current R&D
expense for fiscal 2018 is $1.80 billion (U.S. SEC, Form 10-K,
Q4-2018, p. 9). To help reach
Nvidia’s goal, our company is committed to maintaining a
strong supply chain to meet consumer

demand. As Nvidia does not manufacture our own silicon wafers
used in the manufacturing of GPU
units or Tegra processor chips, our firm is very dependent on
industry-leading chip manufactures.
The main two suppliers of these critical inputs are Taiwan
Semiconductor Manufacturing Company
Limited and Samsung Electronics Co. Ltd., with both companies
supplying Nvidia presently with
semiconductor wafers. At the present time, Nvidia does not
have long term contracts with either of
these manufacturers and must secure long term contracts to
ensure continuity within the supply
chain. Also, Nvidia is seeking alternative procurement
strategies in order to limit dependence on
outside suppliers of critical semiconductor wafers (U.S. SEC,
Form 10-K, Q4-2018, p. 13).
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Nvidia’s successful implementation of our strategies also

involves attracting, retaining and
motivating our key employees, managers, and executives.
Highly skilled workers are integrally
important at Nvidia in order to successfully implement our
long-term strategies and maintain our
competitive advantage. Our goal is to maintain an effective,
knowledge-based workforce by
utilizing successful recruiting efforts, as well as offering
generous compensation packages. Nvidia
must additionally safe guard against changes in immigration and
work permit laws which could
impair its ability to attract and retain highly qualified
employees (U.S. SEC, Form 10-K, Q4-2018,
p. 16).
Policies – Nvidia will continue its commitment to providing
substantial resources toward continued
R&D, particularly in maintaining or gaining market share within
the GPU and CPU markets.
Substantial R&D funding will be allocated toward maintaining
rapid advances in development of AI
and AV technologies with the goal of capturing a first-to-market
position within these potential
markets. Employment development will always be a primary

focal point for our organization.
Strategic Managers
Board of Directors
Nvidia has eleven board directors and maintains three board
committees: Audit, Compensation, and
Nominating and Corporate Governance. Ten of the eleven
directors are independent with the
exception of CEO and president, Jensen Huang (Nvidia
Sustainability Report, 2017, p. 9). Our
board of directors is committed to strong corporate governance;
moreover, the purpose of our board
is to review the management performance on behalf of our
shareholders and to ensure that the long-
term interests of shareholders are being served.
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The three board committees are overseen by the board of
directors. The audit committee consists of
at least three directors, none of which can be an employee. The
purpose of the audit committee is to
act on behalf of the board to oversee Nvidia’s corporate
accounting practices, financial statements,
and performance and practices (Nvidia Annual report, 2017, p.
22).
The second committee is the compensation committee which
ensures that proper compensation
procedures are followed; this committee is comprised of at least
two members of the board. The
compensation committee does allow for employees to be on the
committee, thereby facilitating
objectivity and freedom from any relationship that would
interfere with the exercise of independent
judgement. The purpose of the committee is to act behalf of the
board to review and approve
compensation for the company’s top management and the
independent directors (Nvidia Annual
report, 2017, p. 22).
The third committee is the nominating and corporate governance

committee. The committee
consists of at least two members of the board; committee
members must meet the same
requirements that are in place for the other two committees. The
purpose of this committee is to
identify, review, evaluate, and recommend candidates to serve
as directors on behalf of the
company (Nvidia Annual report, 2017, p. 22). Nvidia boasts a
very high level of board member
engagement. In fiscal year 2017, all directors of the board
attended at least 75 percent of board and
committee meetings (Nvidia Sustainability Report, 2017, p. 9).
Moreover, to foster board flexibility,
Nvidia’s bylaws and corporate governance policies allow the
roles of chairperson of the board and
CEO to be filled by the same or different individuals (Nvidia
Annual report, 2017, p. 22).
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Top Management
Nvidia’s Executive Team consists of 18 members (Bloomberg,
April 18, 2018). The CEO of Nvidia
is Jensen Huang, a Taiwan-born American entrepreneur and
businessman. Mr. Huang co-founded
Nvidia and has served as its president, chief executive officer,
and a member of the board of
directors since 1993. Mr. Huang has been the principle
protagonist in the company’s rise to
international success. Because of Mr. Huang’s profound insight
and breadth of vision, Nvidia has
been able to dominate the GPU and AI Markets. In 2017, Jensen
Huang was recognized as the 3rd
best performing CEO in the world by Harvard Business Review
(Nvidia Sustainability Report,
2017, p. 7). Through his strategic management, Nvidia made
great strides in sales, revenue,
earnings, and stocks in 2017. Moreover, CEO Jensen Huang’s
fiscal year 2017 total compensation
increased to $12.2 million from $10 million in fiscal year 2016
(Reuters, April 7, 2017).
Nvidia’s significant growth has been made possible by its solid

management structure. The
compensation committee conducts an annual evaluation of the
performance of all executive officers,
including the CEO. The purpose of the evaluation is to ensure
that the executive officers improve
their performance and reduce risk (Nvidia Sustainability Report,
2017, p. 9).
External Environment
Natural Environment
According to Nvidia’s Sustainability Report 2017, “we use a
comprehensive Environmental
Management System (EMS) to identify and control
environmental impacts and continuously
improve our performance. A dedicated Environmental, Health,
and Safety team, along with
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employees in all offices around the globe, execute the system’s
policies and practices, which are
made tangible through solid goals and metrics.” This
proclamation underscores Nvidia’s
commitment to the external environment by virtue of the
establishment of this system of checks and
balances.
Nvidia has clearly stated objectives concerning the company’s
stance as a good steward toward the
natural environment. In accordance with Nvidia’s commitment
to protecting the natural
environment, our firm has taken a stance to increase energy
efficiency within our offices and data
centers; additionally, we encourage a reduction in water usage
within drought-stricken regions.
Nvidia promotes, and helps to provide, transportation
alternatives for our employees at the Silicon
Valley headquarters while also decreasing greenhouse gas
emissions through landfill reductions.
According to Nvidia’s Sustainability Report, 2017, Nvidia has
maintained a commitment to a 15%
reduction in greenhouse gas by 2020, which is a goal that was
originally set in 2014. Another goal,
set in 2013, is to maintain a landfill diversion rate by 80% or

higher each year. Also, the company
has been following a plan since 2010 to reduce annual
electricity usage per employee from 20.4
kWh to 17.4 kWh (Nvidia’s Sustainability Report, 2017, p. 12).
Societal Environment
Economic - According to the Nvidia’s Sustainability Report
2017, Nvidia’s revenue for the fiscal
year 2017 was $6.9 billion, up from $5 billion for the fiscal
year 2016. The reported total operating
expenses for fiscal 2017 was $2.1 billion, an increase from $2
billion dollars in fiscal 2016. Most
importantly, the company reported a massive increase in net
income of over $1 billion from FY
2016 to FY 2017; the reported net income of $1.6 billion in
2017 far exceeded the reported net
income of $614 million for fiscal year 2016.
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Looking at Nvidia’s revenues in the automotive industry,
“Nvidia's automotive revenue rose 52% in
fiscal 2017. Also, Citigroup has estimated that Nvidia's auto
revenue will hit $1 billion in 2018,
owing largely to a partnership with Germany's Audi” (Krause,
2017, p. 10). Being a giant in the
computer chip industry, Nvidia has used its vast resources to
venture into the automotive industry
with the use of artificial intelligence (AI) and driverless
technologies.
Overall, Nvidia has experienced strong economic prosperity
from FY 2016 to FY 2017, with net
income increasing from 14.9% to 28.0% during that time, and
an increase in return on equity from
13.7% to 28.9% over the same period.
Technological - Nvidia has established itself as a technology
leader in the computer component
industry since its inception in 1993. Among the many landmark
innovations and technological
advances that Nvidia has brought to market in recent years are:
Nvidia GeForce GTX, Nvidia
Shield Android TV, Nvidia GeForce Now, Nvidia Drive, Nvidia
Tesla, Nvidia Quadro, Nvidia

GRID, and Nvidia Jetson.
Nvidia has been a forerunner in AI and driverless car (AV)
technologies, with one consumer
reporter stating,“Nvidia's powerful processors are well-suited
for the AI artificial intelligence
software that enables ADAS systems. Self-driving cars map and
monitor their surroundings to
detect hazards” (Krause, 2017, p. 10). Nvidia and Bosch are in
fact collaborating to develop cars
that can sense when drivers are falling asleep or texting on
phones. Nvidia is known for expanding
into different technologies that are derived from our products
and innovations. With the usage of
artificial intelligence technology, there are many endless
possibilities and opportunities.
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Political-Legal – As with many technology-based companies in
the Silicon Valley, Nvidia has also
faced some political issues due to policy changes from the
Trump administration. One restriction
places limits on hiring foreign, skilled technology workers.
Also, with the constant threat of new
entrants by way of expanding global competition, Nvidia must
be diligent in its efforts to scan the
external environment for changes that can affect the company.
Presently, Broadcom is proposing to
buy its rival Qualcomm for $70 per share in a cash and stock
deal valued at $130 billion. If
completed, it would be the biggest ever takeover in the
technology sector and would create a
company with a combined market capitalization of more than
$200 billion.
A potential partnership between long-time rivals, Intel and
AMD, is possibly in the making; the
firms have announced a plan to jointly produce motherboards
which will combine an Intel processor
with an AMD graphics unit in order to counter the competition
from Nvidia (Ruehl, Munshi, &
Nuttall, 2017). Nvidia has held the dominant position in the
GPU market since bringing the original

GeForce 256 GPU to market in 1999. Even with formidable
competition in GPU manufacturing by
other technology giants, such as AMD’s Radeon GPU product
line, Nvidia has been able to
maintain the majority market share in the industry.
Sociocultural – Nvidia has been on the forefront of new
technologies that have brought benefits to
societies throughout the world; the introduction by Nvidia of
the GPU in 1999, for example, has
sped-up graphics rendering times and has provided enhanced
graphics capabilities, creating value
and convenience for millions of users worldwide. As expressed
by Nvidia, “Self-driving cars will
dramatically change the future of transportation, making driving
safer, reducing carbon emissions,
and transforming how cities are designed. At the heart of
autonomous driving, the technology used
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is artificial intelligence, which enables vehicles to learn to
anticipate and respond to, the huge range
of fast-changing conditions on the road” (Nvidia Sustainability
Report, 2107, p. 44).
Nvidia technology is being used in sustainable projects to
support life on land and underwater, and
to benefit inner-city life through various sustainability projects.
As stated in the Nvidia
Sustainability Report, 2017, “Our partners’ efforts align with
the 17 sustainable development goals
developed by the United Nations to address the world's most
pressing problems” (p.44). “Nvidia
technology has opened up new horizons in entertainment, health
care, transportation, space
exploration, and many other social and scientific arenas”
(Nvidia Citizenship Report, 2014, p. 5).
With the powerful capabilities of AI, computer graphics, and
the invention of external GPUs,
Nvidia can seek cures and treat disease, predict and model
tsunamis, and deal with many other
sociological concerns. Additionally, Nvidia provides funding to
other researchers to explore many

environmental issues to further support the sustainability of
Earth’s resources (Citizenship Report,
2014, p.5).
Support for charities is wide-ranging at Nvidia. In 2016 alone,
Nvidia provided funding of $3
million and provided 17,000 volunteer hours to support.
Compute the Cure is a charitable initiative
to provide cancer researchers with funding and computing
resources in order for these researchers
to have access to the latest advances in technology; Nvidia’s
ultimate goal is to play in integral role
in finding a cure for cancer by providing these resources. One
other noteworthy cause is Nvidia’s
educational initiative that provides funding for K-12 grade
students for training and supplies.
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Through these charitable causes around the world, Nvidia has

been able to support community
development through volunteering, corporate giving,
educational initiatives, health-focused
programs, and innovations (Nvidia Sustainability Report, 2017,
p. 45).
Task Environment
Nvidia is the leader in the graphics processing unit market;
growth of the GPU market has been
vigorous as well. The GPU industry has experienced rapid
advances in technology, short product
lives, fluctuating demand and supply, and price competition.
Nvidia is a leading supplier of graphic
processing units for vehicles, virtual reality, and high
performance computing. These blue oceans
have significant demand in the marketplace and are expected to
help grow Nvidia’s business.
Our company faces significant competition from competitors,
such as Intel, Qualcomm, AMD, and
Apple, which design and/or manufacture graphics processing
units or mobile chips as well.
To stay competitive, Nvidia must continue to invest heavily in
research and development. Our

reliance on third party foundries to supply critical inputs for our
products is a weakness for our firm.
Also, relying on outside firms to assemble and package our
products is an additional weakness.
Competitive Rivalry is High (T) - Competition from Intel and
AMD threaten Nvidia’s share of the
GPU market. Rivalry also exists with Nvidia’s other products:
smart televisions, cell phones,
tablets; among the many competitors supplying these products
are Apple, Qualcomm, and Samsung.
A comparison of Nvidia’s select rivals:
1. Intel – Reported revenue of $17.1 billion in Q4FY2017
(Business Insider, 2018).
2. Qualcomm – Reported revenue of $6 billion in Q1FY2018
(Business Insider, 2018).
3. Nvidia – Reported revenue of $2.6 billion for Q4FY2018.
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Since the revenue stream of Nvidia’s largest competitors is up

to 7 times larger than Nvidia’s
revenues, these competitors have significantly greater access to
funding for research and
development. Also, in comparison with its competitors, Nvidia
lacks economies of scale. According
to MarketLine’s SWOT analysis, the biggest challenge ahead
for Nvidia is the partnering of Intel
and AMD to sell solutions jointly (MarketLine, 2017, p. 8).
This joint approach would entail
integrating a CPU and GPU on the same chip. Nvidia may not
be able to compete with this
approach and this may lead to intense pricing competition,
decreased profitability, and a reduction
in market share.
Entry Barriers are High (S) - In order to compete effectively
with Nvidia, rivals require
significant capital resource investment into research and
development. For example, Nvidia
recorded the following expenditures for R&D in corresponding
years (MarketLine, 2017, p. 5):
FY2014, $11.5 billion; FY2015, $12.1 billion; FY2016, $12.7
billion.

During its 2017 fiscal year, Nvidia earmarked nearly $1.5
billion for research and development
expenditures (Nvidia Annual Report, 2017, p. 50). Based on this
information, we can conclude that
significant financial and human capital resources are required to
invest into research and
development in order to supply competitive products to the
marketplace. These examples of costs
demonstrate a high barrier for startups. Additionally, brand
identity and customer loyalty with
Nvidia and other competitors create entry barriers for new
companies.
Buyer’s Power is High (T) - Nvidia operates in a competitive
environment with rapid changes in
technology, product lines, and retail pricing. Rivals are
increasingly competing for market share.
Rapid advancements in technology have resulted in declining
selling prices. The aforementioned
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competitive environment has provided buyers the power to
demand low prices for quality products.
(T)
Supplier’s Power is High (W) - Since Nvidia does not produce
its own products, suppliers can
command more bargaining power and cause a deterioration of
Nvidia’s profits. Due to fluctuations
in the supply and demand for raw materials, supply issues can
raise prices and extract profits from
Nvidia.
Threat of Substitutes is High (W) - Larger competitors such as
Intel can influence computer
manufacturers to utilize their products as substitute inputs,
thereby competing directly with Nvidia’s
components. Since Nvidia has relatively smaller economies of
scale, it must ensure that the supply
of its products matches closely with consumer demand to
minimize excess production and excess
inventories. If demand surpasses supply, it would be difficult
for Nvidia to escalate production
quickly as its suppliers may not have the capabilities or
resources to meet the hastened production

schedule; should this occur, consumers can easily find
substitute GPUs from rivals, such as AMD’s
Radeon line of GPU’s, and switch to …
Create a console application using Visual Studio.
• Name the
Solution
and Project Program07.
• Output appropriate communication messages to the user.
• Output appropriate results. In other words, all requirements
should be
output and identified by number.
Requirements (remember to identify the requirements by
number):
1. Output a header in the console: “This is Program07”
2. Use try-catch-finally statements with classes that implement
the IDisposable
interface.
3. Provide user the opportunity to create multiple directories.
4. Check if directories exist before creating.
5. Provide user the opportunity to create multiple files.
6. Check if files exist before creating.
7. User can enter data into the files.

8. Read data back from the files.
9. Use the FileAttributes enumeration to report status on your
choice of two
attributes (not Directory or Hidden).
10. Output a thank you message: “Thank you for running
Program07.”
TEST – TEST – TEST your application to ensure the specific
program
requirements are met.
• Use the list above and the common requirements as a
confirmation
checklist.
· Not meeting all requirements = No ‘’0” points for the
assignment.
Flowchart
Include a flowchart of your program.
Construct your flowchart using draw.io. Use appropriate
symbols. Use vertical/horizontal connections (NOT
slanted/angled connections).
Export your flowchart to the SVG format (File | Export as... |
SVG)

Submit the SVG file with your assignment

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Strategic Audit Nvidia Corporation STUDENT .docx