Description
Comprehensive presentation on Intel and its journey.
? Intel
and its journey ? Intel as a memory chip company ? Intel as a microprocessor company ? Intel’s Strategy – Porter’s five forces
? ? ? ? ?
Competitive Rivalry within an industry Bargaining power of suppliers Bargaining power of customers Threat of substitute products Threat of new entrants
? Intel
– PEST Analysis ? Barrett and Otellini Era
?
Intel was able to establish an initial dominance in the area of DRAM’s because of its advances in the MOS process technology.
Intel was successful because when it developed the world’s first 1-kilobit DRAM ( called 1103) that could undercut the price of traditional memory. The 1103 was also more cost effective to build and boasted increased performance while being smaller. The DRAM industry was driven by the need to cross licence between established players. This concept helped Intel in more than one way. Intel benefited in the following ways:? Though Intel was new on the block it could be a part of the sharing network because of the presence of Robert Noyce (the co-inventor of integrated circuits). ? It acted as a peace treaty by forcing competitors to compete only on price/performance. ? It acted as a deterrent for new players to enter the market.
?
?
?
?
Intel strengthened its technical position when it led the industry’s transition to CMOS DRAMs and introduce its 256K product generation. No company was able to maintain leadership from one generation of DRAM’s to another. Intel faced strong competition from the Japanese because of the following reasons:? Some Japanese firms against whom Intel was competing were multibillion dollar firms. ? Japanese semiconductor firms were integrated into consumer electronics, computers and telecommunications heavily using their own products. ? They had access to abundant and cheap capital ? Japanese firms could channel funds through bank loans ? Japanese firms were also ahead because of manufacturing capabilities.
o
o
By early 80’s Japanese semiconductor firms had captured nearly half of the world memory market. By 1984 Intel’s share in DRAMs was only 1% and manufacturing was restricted to only one fab put of the eight plants. Because of the small percentage of revenue that DRAMs contributed the management was forced to confront the relevance of the DRAM business. ? Japanese production yields were as high as 7080% as compared to US cos. With 50-60% Companies like TI and Mostek raced ahead with better designs and low costs By 1978 Intel was a generation behind the Japanese
?
To gain 10% market share in DRAM, Intel would have to make $600 million in new fab. ? They were doomed to fail because there was industry overcapacity
?
? Intel
had other things in the form of microprocessors to take care of ? Intel initially dominated DRAM and then subsequently declined and finally exited ? They however continued with flash memory
?
?
?
?
There are a lot of factors that have contributed to the success of Intel in the arena of microprocessors The first of these was the invention of microprocessors by Intel in the year 1971. The second factor could be the presence of IBM and its market entry with the PC in the 80’s. IBM’s policies such as those of open standard catalyzed a shift in the computer industry from a vertical to a horizontal structure leading to specialization in each component layer. This also helped Intel. Marketing initiatives by Intel such as “Project Crush” and “Checkmate”
? Bypassing
second source manufacturing partners and doing the job themselves thereby keeping a control on the pricing. ? Striking the right settlements and deals which would be beneficial in the long term such as the one with AMD where AMD could ship the 486 with royalties but couldn’t copy Intel’s microcode for the future products. ? Focussing and backing up a particular technology (CISC)
Launching successful campaigns such as the “Red X” and the “Intel Inside” for attracting customers and as a brand building exercise. ? Having an understanding with the OEM in the form of reimbursing half of their advertising cost in exchange for the use of Intel logo in their advertisements. ? Strategy’s such as those of forward integration and allocation of new products in short supply. ? Strategy for fixing of flaws to save the reputation of the company. ? Tying up with suppliers and collaborating with complementors. Creating a market ecosystem and developing complementors. ? Overall being aggressive and innovative in bringing in new products.
?
A.
B. C. D. E.
Competitive Rivalry within an industry Bargaining power of suppliers Bargaining power of customers Threat of substitute products Threat of new entrants
?
Competition with Japanese memory chip makers - Heavy users of their own products and firms were integrated into consumer electronics, computers and telecom - Abundant and cheap capital; channeling funds through bank loans - Japanese were ahead in manufacturing
?
Battle drawn in the court over the issue of micro code
?
?
Intel has been ahead of competition in the area of intellectual property -NEC issue of copying Intel’s microcode – protecting its IP rights Issue with AMD over 386 processor
?
Long term competitive rivalry with AMD
AMD came up with Athlon microprocessor in 1999 ? AMD introduced 1 GHz Athlon microprocessor three days ahead of Intel in March 2000
?
Investing with suppliers for developing technology to have early access to cutting edge technologies. ? Formation of a consortium with competitors for funding technical work and gaining critical mass for industry acceptance and support. ? Seeking dual suppliers – strategy to secure quality and timeliness of equipment. ? Lack of selling power with suppliers because of presence of many manufactures for Intel’s raw materials of silicon and semiconductors. ? Lack for forward integration by the suppliers
?
?
Strategies for both immediate customers and end users Immediate Customer? ?
?
?
Reimbursing half of OEM’s advertising cost in return for putting Intel’s logo in their advertisements. Vertically integrating into design and manufacture of subsystems and end systems Strategy to allocate chips preferentially to best customers – building relationships and hence further business.
?
End Users?
?
?
Programs such as the “Red X” and the “Intel Inside” campaign Educating end user on importance of microprocessors through television advertisements. Honoring request from customers for chip replacement – loss of sales dollars, gain in trust of company
?
The threat of substitutes is low, as:
The price to shift from one semiconductor provider is relatively large. ? The buyer’s willingness to substitute is pretty low once they find that the provider is very suitable to their needs, as companies are often looking for ways to achieve competitive advantage through buying high-end semiconductors which would provide the highest efficiency ? The price and performance of the substitutes, coupled with the relatively high cost of switching to substitutes do not present a grave threat to the company under analysis
?
?
The threat of new entrants is low due, because:
? Economies ? Investment
of scale exist in the industry and capital required is sizeable
? Difficult
access to industry distribution channel
of highly specialised skills
? Requirement
A.
B. C. D.
Political Economic Social Technological Factors
?
Low regulation for Competition
? ?
? ?
The economic growth of target markets (memories, microprocessor and communication) were positive High demand for communication and networking in future provide large no. of possibilities for Intel to explore Increase in no. of Competitors and current recession had driven Intel towards more innovation Failure of some of Intel’s diversification strategies due to shift far from its core business
?
?
Need to constantly be sensitive to the change in market demands and preferences Even income distribution among target market is observed in this industry as main consumers are large companies(OEMs)
?
?
? ?
?
Very fast technological transfer and a very fast rate of technological obsolescence is a characteristic of the industry. Prices for products tend to decrease over time as broad applicability results in increase in demand Huge investment required for R&D and manufacturing Problems of technical miscalculations faced by Intel resulting in capacity shortages, product recalls, product delays etc. Intel wanted to establish its chips as industry standards for communication and networking industry
?
? ? ? ? ?
?
? ? ?
Large no. of patents for a single productrequired cross-licensing Deterred potential entrants Forced competitors to compete largely on price/performance Strong legal regulation for Intellectual property rights. Various acts applicablePatent protection Law Trade Secrets Copyrights Trademarks Chip Protection Acts
?
?
Aggressive strategy to build new businesses. Entered into new markets such as networks, wireless, communications and online services. Mission statement of the company has changed for the first time in 15 years
- Line with spread of internet - Importance of new business areas
?
Reorganization of the company into four units
Client platforms Server Platforms ? Cellular and Wireless and ? Communications and Networking
? ?
?
Covering the whole market with the price/performance range
? Gordon
Moore – Entrepreneur ? Bob Noyce – Inventor ? Andy Grove – Management guru ? Craig – Manufacturing guru ? Paul Otellini – Marketing guru ??
Interested in entering new markets ? Sees good opportunity in an upgrade cycle. Considers that in most organizations the fleet of PC’s is old now, and also Windows 7 is out ? Working closely with Microsoft around their architecture On setting up of a manufacturing facility in India ? Intel is very happy with the workforce in India and some of its important chips have been designed from its Bangalore based facility. ? Looks forward to replies from govt. on issues such as investment and subsidies, energy levels and water etc.
?
doc_473883097.pptx
Comprehensive presentation on Intel and its journey.
? Intel
and its journey ? Intel as a memory chip company ? Intel as a microprocessor company ? Intel’s Strategy – Porter’s five forces
? ? ? ? ?
Competitive Rivalry within an industry Bargaining power of suppliers Bargaining power of customers Threat of substitute products Threat of new entrants
? Intel
– PEST Analysis ? Barrett and Otellini Era
?
Intel was able to establish an initial dominance in the area of DRAM’s because of its advances in the MOS process technology.
Intel was successful because when it developed the world’s first 1-kilobit DRAM ( called 1103) that could undercut the price of traditional memory. The 1103 was also more cost effective to build and boasted increased performance while being smaller. The DRAM industry was driven by the need to cross licence between established players. This concept helped Intel in more than one way. Intel benefited in the following ways:? Though Intel was new on the block it could be a part of the sharing network because of the presence of Robert Noyce (the co-inventor of integrated circuits). ? It acted as a peace treaty by forcing competitors to compete only on price/performance. ? It acted as a deterrent for new players to enter the market.
?
?
?
?
Intel strengthened its technical position when it led the industry’s transition to CMOS DRAMs and introduce its 256K product generation. No company was able to maintain leadership from one generation of DRAM’s to another. Intel faced strong competition from the Japanese because of the following reasons:? Some Japanese firms against whom Intel was competing were multibillion dollar firms. ? Japanese semiconductor firms were integrated into consumer electronics, computers and telecommunications heavily using their own products. ? They had access to abundant and cheap capital ? Japanese firms could channel funds through bank loans ? Japanese firms were also ahead because of manufacturing capabilities.
o
o
By early 80’s Japanese semiconductor firms had captured nearly half of the world memory market. By 1984 Intel’s share in DRAMs was only 1% and manufacturing was restricted to only one fab put of the eight plants. Because of the small percentage of revenue that DRAMs contributed the management was forced to confront the relevance of the DRAM business. ? Japanese production yields were as high as 7080% as compared to US cos. With 50-60% Companies like TI and Mostek raced ahead with better designs and low costs By 1978 Intel was a generation behind the Japanese
?
To gain 10% market share in DRAM, Intel would have to make $600 million in new fab. ? They were doomed to fail because there was industry overcapacity
?
? Intel
had other things in the form of microprocessors to take care of ? Intel initially dominated DRAM and then subsequently declined and finally exited ? They however continued with flash memory
?
?
?
?
There are a lot of factors that have contributed to the success of Intel in the arena of microprocessors The first of these was the invention of microprocessors by Intel in the year 1971. The second factor could be the presence of IBM and its market entry with the PC in the 80’s. IBM’s policies such as those of open standard catalyzed a shift in the computer industry from a vertical to a horizontal structure leading to specialization in each component layer. This also helped Intel. Marketing initiatives by Intel such as “Project Crush” and “Checkmate”
? Bypassing
second source manufacturing partners and doing the job themselves thereby keeping a control on the pricing. ? Striking the right settlements and deals which would be beneficial in the long term such as the one with AMD where AMD could ship the 486 with royalties but couldn’t copy Intel’s microcode for the future products. ? Focussing and backing up a particular technology (CISC)
Launching successful campaigns such as the “Red X” and the “Intel Inside” for attracting customers and as a brand building exercise. ? Having an understanding with the OEM in the form of reimbursing half of their advertising cost in exchange for the use of Intel logo in their advertisements. ? Strategy’s such as those of forward integration and allocation of new products in short supply. ? Strategy for fixing of flaws to save the reputation of the company. ? Tying up with suppliers and collaborating with complementors. Creating a market ecosystem and developing complementors. ? Overall being aggressive and innovative in bringing in new products.
?
A.
B. C. D. E.
Competitive Rivalry within an industry Bargaining power of suppliers Bargaining power of customers Threat of substitute products Threat of new entrants
?
Competition with Japanese memory chip makers - Heavy users of their own products and firms were integrated into consumer electronics, computers and telecom - Abundant and cheap capital; channeling funds through bank loans - Japanese were ahead in manufacturing
?
Battle drawn in the court over the issue of micro code
?
?
Intel has been ahead of competition in the area of intellectual property -NEC issue of copying Intel’s microcode – protecting its IP rights Issue with AMD over 386 processor
?
Long term competitive rivalry with AMD
AMD came up with Athlon microprocessor in 1999 ? AMD introduced 1 GHz Athlon microprocessor three days ahead of Intel in March 2000
?
Investing with suppliers for developing technology to have early access to cutting edge technologies. ? Formation of a consortium with competitors for funding technical work and gaining critical mass for industry acceptance and support. ? Seeking dual suppliers – strategy to secure quality and timeliness of equipment. ? Lack of selling power with suppliers because of presence of many manufactures for Intel’s raw materials of silicon and semiconductors. ? Lack for forward integration by the suppliers
?
?
Strategies for both immediate customers and end users Immediate Customer? ?
?
?
Reimbursing half of OEM’s advertising cost in return for putting Intel’s logo in their advertisements. Vertically integrating into design and manufacture of subsystems and end systems Strategy to allocate chips preferentially to best customers – building relationships and hence further business.
?
End Users?
?
?
Programs such as the “Red X” and the “Intel Inside” campaign Educating end user on importance of microprocessors through television advertisements. Honoring request from customers for chip replacement – loss of sales dollars, gain in trust of company
?
The threat of substitutes is low, as:
The price to shift from one semiconductor provider is relatively large. ? The buyer’s willingness to substitute is pretty low once they find that the provider is very suitable to their needs, as companies are often looking for ways to achieve competitive advantage through buying high-end semiconductors which would provide the highest efficiency ? The price and performance of the substitutes, coupled with the relatively high cost of switching to substitutes do not present a grave threat to the company under analysis
?
?
The threat of new entrants is low due, because:
? Economies ? Investment
of scale exist in the industry and capital required is sizeable
? Difficult
access to industry distribution channel
of highly specialised skills
? Requirement
A.
B. C. D.
Political Economic Social Technological Factors
?
Low regulation for Competition
? ?
? ?
The economic growth of target markets (memories, microprocessor and communication) were positive High demand for communication and networking in future provide large no. of possibilities for Intel to explore Increase in no. of Competitors and current recession had driven Intel towards more innovation Failure of some of Intel’s diversification strategies due to shift far from its core business
?
?
Need to constantly be sensitive to the change in market demands and preferences Even income distribution among target market is observed in this industry as main consumers are large companies(OEMs)
?
?
? ?
?
Very fast technological transfer and a very fast rate of technological obsolescence is a characteristic of the industry. Prices for products tend to decrease over time as broad applicability results in increase in demand Huge investment required for R&D and manufacturing Problems of technical miscalculations faced by Intel resulting in capacity shortages, product recalls, product delays etc. Intel wanted to establish its chips as industry standards for communication and networking industry
?
? ? ? ? ?
?
? ? ?
Large no. of patents for a single productrequired cross-licensing Deterred potential entrants Forced competitors to compete largely on price/performance Strong legal regulation for Intellectual property rights. Various acts applicablePatent protection Law Trade Secrets Copyrights Trademarks Chip Protection Acts
?
?
Aggressive strategy to build new businesses. Entered into new markets such as networks, wireless, communications and online services. Mission statement of the company has changed for the first time in 15 years
- Line with spread of internet - Importance of new business areas
?
Reorganization of the company into four units
Client platforms Server Platforms ? Cellular and Wireless and ? Communications and Networking
? ?
?
Covering the whole market with the price/performance range
? Gordon
Moore – Entrepreneur ? Bob Noyce – Inventor ? Andy Grove – Management guru ? Craig – Manufacturing guru ? Paul Otellini – Marketing guru ??
Interested in entering new markets ? Sees good opportunity in an upgrade cycle. Considers that in most organizations the fleet of PC’s is old now, and also Windows 7 is out ? Working closely with Microsoft around their architecture On setting up of a manufacturing facility in India ? Intel is very happy with the workforce in India and some of its important chips have been designed from its Bangalore based facility. ? Looks forward to replies from govt. on issues such as investment and subsidies, energy levels and water etc.
?
doc_473883097.pptx