Course Subject Assignment Due Date

: Master of Science (M.S.) in Management : Marketing Management : Group case 4 (Intel) : 15 April, 2011

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Contents
Introduction .... 3 SWOT analysis of Intel .. 5 PESTEL and five forces analysis of Intel ... 7

Competitive Analysis of Intel - A Competitive Solution .... 11 Choosing the best alternative .. 13 Discussion questions 1. What have been the key success factors for Intel? .. 2. Where is Intel vulnerable? What should it watch out for? . 3. What recommendations would you make to senior marketing executives going forward? What should the company be sure to do with its marketing? 17 15 16

Bibliography and References 18

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Introduction
Intel Corporation is the biggest semiconductor manufacturer in the world and has changed the global marketplace radically since it was founded in 1968. The first handheld calculators and PCs (Personal Computers) were developed through the innovation of Intels microprocessors. In the early 70s increased competition from Japanese semiconductor manufacturers had dramatically reduced the profitability of this market this made Intel to shift the company's focus to microprocessors.

From the late 80s until the late 90s Intel had a 10-year period of unprecedented growth as the primary hardware supplier to the PC industry, supplying microprocessor to IBM. Intels product line of Pentium processors had become a household name. Today at least 80% of Intels processors are used in PCs globally. Their product line consists of: chipsets, motherboards, flash memory used in wireless communications, networking devices, laser printers, industrial machinery, and cellular phone base stations.

In June 1994, Intel engineers discovered a flaw in the P5 Pentium microprocessor. This resulted in a $500 million loss in Intel's revenue. Ironically the media coverage regarding this flaw gave Intel public awareness and for the first time consumers realized the importance of microprocessors. Intel changed some of its business practices to be more end-user focused.

After 2000, growth in demand for high-end microprocessors slowed. AMD, Intel's largest competitor, gained significant market share and Intel's dominant position in the market was greatly reduced.

In the early 90s antitrust allegations against Intel were made after AMD claimed that Intel was monopolizing the market, but the lawsuit had no definite outcome. In 2004 and 2005, AMD filed another lawsuit against Intel but with all this negative publicity caused Intel great profit loss, the company announced a restructuring that resulted in 10 % workforce layoff which was around 10,500 employees.

Intel needed to regain the lost marketplace, with the launch of its new product development model the Core micro-architecture Intel regained the market lead. This new processor was considered to be an exceptional leap in processor performance.

Intel has become one of the world's most recognizable computer brands following its longrunning Intel Inside campaign. The campaign, which started in 1991, was created by Intel marketing manager Dennis Carter. The Intel Inside advertising campaign sought public brand loyalty and awareness of Intel processors in consumer computers. Page | 3

Intel brand logo 1968 - 2005 2005 - present

1991 - 2003

2003 - 2005

2006 - 2009

2009 - present

The original intel inside logo

Lowered "e" in intel and different face type Intel replace the intel inside logo to Leap ahead

The current intel logo with inside trademark

In 2006 Intel announced that the Pentium name from their processors would no longer be used and in 2008, Intel planned to shift the emphasis of its Intel Inside campaign from traditional media such as television and print to newer media such as the Internet. Intel marketing strategy became more focused on online marketing.

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SWOT Analysis of Intel

SWOT analysis is a commonly used technique through which managers form a quick overview of a companys strategic position. The technique is based on the assumption that an effective strategy derives from the state between a companys internal resources (strengths and weaknesses) and its external situation (opportunities and threats). A good state maximizes a companys strengths and opportunities and minimizes its weaknesses and threats.

Intel has a strong market position in the semiconductors industry, which enhances its brand image. However, intense competition in all its market segments could reduce the companys market share and profitability. The following SWOT analysis of Intel Corporation would indicate the state of Intels strategic position in the industry.

Strengths 1. Intel is a globally recognized brand name and has strong brand loyalty from its consumers. 2. Intel was the pioneer in microprocessors for PCs and memory devices. 3. Intel is a global technology corporation and the worlds largest producer of semiconductor chip, based on revenue. 4. Intel presently has around 80% of the microprocessor market share whereas AMD has roughly 17% of the market. 5. Intel distinguished itself from a commodity like position and established itself as the brains of the computer industry.

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Weaknesses 1. Intel has been accused of using divisive strategies in defense of its market position against its competitors. 2. Intel had uses its market dominance to unfairly stifle competition 3. Since 2000, Intel could not maintain the position as the dominant supplier of microprocessor in the industry. 4. By the end of the 2006, Intel restructured the company and resulted in the dismissal of 10,500 employees. 5. The company faced decreasing revenue in financial year 2008. 6. Retail prices are higher compared to competitors.

Opportunities 1. Product development and markets penetration in the existing markets is also a good opportunity. 2. Advancement in technology also provides the opportunity to offer new products. 3. Offering more diversification with their products in related and unrelated business such as: security devices, broadband and cellular industry. 4. Backward and forward integration may reduce the cost, improve the quality and service.

Threats 1. Advancement in technology obsoletes the manufacturing facilities and products. 2. The strong price war is going on between PC producers. 3. Many competent PC makers are using inferior performance ICS. 4. Changing customer taste and preferences along with the reduction in brand loyalty is a major threat. 5. Currency changeability in different countries create problem for the business of the company. 6. The company is facing strong competition to sustain its market share. 7. Intel Corporation is facing strong political instability, regulation and tariffs in different countries. 8. Product specialization of Intel can become a big threat. Having a limited product line Intel runs the risk of being forced out of the market by a better product. 9. The fast development of cell phones and other mobile gadgets can perform the same tasks as PCs and is having a major negative impact on the PCs market.

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PESTEL and Five Forces Analysis of Intel

Strategic analysis is related to the structuring of the relationship between a business and its environment. The business environment which is ever changing can offer both opportunities and threats for the company.

P - POLITICAL E - ECONOMIC S - SOCIO-CULTURAL T - TECHNOLOGY E - ENVIRONMENT L - LEGAL Political Forces

It is essential for Intel to study and understand their business environment by using the PESTEL framework.

Changes in these external forces affect the types of products produced, the position of them, market strategies, types of services offered and choice of business.

Intel is a multinational company and has to operate according to different policies set by government of those countries. Any political instability can influence the economic growth of the country. Even though third world countries can increase Intels profit the political instability prevents them from conducting business effectively. The policies of some countries can hinder investment deals and might cause valuable market share loss when trading licenses arent approved by bureaucrats.

Economic Forces Economic trends can affect the industry; the economic factors are divided into the following categories: GNP trends money supply inflation rate unemployment rate

Labor cost is the main reason for corporations to move their production plants to third world countries, even in an unstable economy the production cost is so low that it can increase the profit substantially compared to first world countries. For this reason Intel has invested millions in China and Vietnam.

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Social Cultural Social values like demographic factors such as population, age distribution, literacy levels, inter-state migration, rural-urban mobility or cultural factors like social attitudes, customs, beliefs, rituals influence business practices. Intel has invested heavily in China and Vietnam; both countries have a very high literacy rate and a large workforce. The high unemployment rate for educated worker offers Intel a cheap and reliable workforce.

Technology Technological factors offer great opportunities but also threats and must be taken into account when formulating strategies. Any technological breakthroughs can influence the companys products, services markets, suppliers, distributors, marketing practices and competitive position. It can also open up new markets, change the relative position of an industry and render existing products and services obsolete. Any technological changes can reduce cost barriers between businesses, create shorter production runs, create shortages in technical skills and result in changing values and expectations of customers and employees. This has major relevance to Intel as it can be the key survival point. The wireless industry is the new digital trends of this era. This has huge profit potential for Intel and for this reason they have shifted their focus to wireless devices such as mobile phones and electronic gadgets.

Environment With the focus on environment conservation major industries have the social responsibility to become more environmentally friendly especially with their wastage and CO2 emissions generated by their manufacturing plants. Intels goal is to reduce global computer CO2 emissions by 54 million tons per year, equivalent to the annual output of 11 million cars.

Legal The rules of competition, trade mark rights and patents, price controls and product quality laws have become important as industries became more globalized. This has caused antitrust charges against Intel for using anti-competitive methods to compete against its main rival AMD. This has affected Intels reputation and Intel had to pay hefty penalties.

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Porter Five Forces Porters five forces are based on the insight of corporate strategy that should bring the opportunities and threats back to the organizations business environment. These forces determine the intensity of competition, hence the profitability and attractiveness of a company. These include the following:

Porter Five Forces

1. The intensity of competitive rivalry

2. The bargaining power of buyers

3. The bargaining power of suppliers

4. The threat of the entry of new competitors

5. The threat of substitute products

1. The intensity of competitive rivalry Rivalry is the fierce competition among companies in an industry to gain a greater market share. In addition, customers demands have increased. Intels biggest rival is AMD and has been evenly matched in product quality. Intel has tried different markets such as digital cameras but has come face to face with industry giants that have a large percentage of the market. In order to compete in this market, Intel has to invest heavily not only in R&D but marketing as well, a very risky and expensive move to make.

2. The bargaining power of buyers A company needs to satisfy the customers in order to sell more products. If the price of the product is too high compared to its substitute products then it wont take long for the customers to switch. Moreover, the quality has become more important to the customers than the price. Consumers had no bargaining power in the past when Intel was the only producer of microprocessors but with the increase in competition has given consumers a choice and a more competitive price.

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3. The bargaining power of suppliers The lower the bargaining power of a supplier the better it is for business. For Intel being in a specialized market has always been affected by price fluctuations from suppliers but as the industry has grown suppliers has lost the power to monopolize the market for materials in the industry.

4. The threat of the entry of new competitors Some industries are harder to enter especially when a company has a trusted brand at a reasonable price, if there is more than one rival in such an industry it makes it near impossible for new competition to compete in the market. Intel faces no real threats from new emerging companies but only from existing ones such as AMD.

5. Threat of substitute products With a price increase consumers may switch to a substitute it may not offer the exact same features or performance but it can placate consumer enough with the price. Sun Microsoft Systems would be a good substitute for Intel and their consumer base has increased more with Intels price flux.

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Competitive Analysis of Intel - A Competitive Solution

Competitive analysis plays a vital role in a company, especially in the fast changing software industry. Usually, gathering competitive intelligence isnt done by only one department but in fact the ultimate responsibility for competitive analysis may be found in different departments at different companies. If your company doesn't have a good idea of the current and expected moves by the competition, it risks losing sales and market share.

Understand the end to understand the means Competitive analysis covers a huge range of information that could be gathered. Different types of information are useful for different purposes. It's important to clearly define why you want information on a competitor, so that you can determine what to look for.

Three major uses for competitive intelligence are: 1. to sell better against the competition 2. to determine how your product features compare to the market 3. to identify products and companies to purchase or be purchased by

Competitive analysis for sales When gathering information for sales to use against your competition, focus on each competitor's strengths and weaknesses this can relate to product features, scalability and performance, financial stability of the company, the management team, the customer base, and ability to deliver services. For every competitor, list each strength or weakness in order to determine to act against their strengths or take advantage of their weaknesses.

Competitive analysis for feature leadership A second common reason to analyze the competition is to determine how your product's features compare to competing products. You do this in order to select and prioritize features to add to the product so it will sell better against the competition.

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Three levels of information There are three levels of information gathered for competitive analysis: information, analysis, and predictions. 1. Information is the straightforward gathering of corresponding facts for each competitor so that you can make a simple comparison in annual sales, number of employees, product name, and strategic partners. 2. Analysis takes the information gathered and provides comparison, conclusions, and recommendations. For example, analysis will point out that a company is financially unstable and that your sales reps should exploit this vulnerability. 3. Predictions look at the information and analysis and make educated guesses about a competitor's next moves. Predictions are nothing more than educated guesses.

Predicting the next move When you are able to predict probable business moves of a competitor, the company can take action, or be ready to take action in order to reduce the risk of losing to competitors. A final piece of competitive analysis may be to provide specific recommendations to counter predicted moves.

Pre-emptive strike When your company faces potential moves by competitors which would be very harmful, it may be worth a pre-emptive move of your own. This could involve acquiring a company or product that is an acquisition candidate for the competitor. Or it may be simpler, such as a change to product positioning, sales messages, or product capabilities to counter a move when (or if) it occurs.

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Choosing the best alternative

Intels New Strategy Intel launched its new strategy based on identifying and creating new markets in 2006. The companys main focus use to be on microprocessors now Intel will play a key technological role in a range of fields including consumer electronics, wireless communications and healthcare. The problem with simply being a producer of processors is that other companies can move into your market. Once competitors produce similar products the only way you can differentiate is by offering lower prices, which can be a solution if the operation costs are optimal.

Intels new strategy is to create a variety of chips and software and then combine them together into platforms. These platforms provide people and businesses with improved communications and computing capabilities. It will also enable Intel to bring added value for consumers, win a larger share of consumer spending and increase revenue. Its objective is to continually satisfy customer requirements by producing a range of new and exciting products.

A key part of Intels more integrated platform strategy involves the development of better technologies. These improve processor efficiency and allow computer users to take better advantage of: multi-tasking security reliability manageability wireless computing capabilities

Intel is an ingredient brand that is part of the products that consumers purchase. Building key relationships with important electronic companies such as Sony and Philips is an important strategy. The objective is to provide the manufacturers of products such as laptops, mobile phones and personal computers with integrated packages of chips and software.

The health industry is an untapped market and the industry has been slow in adopting IT applications. However, health professionals have recognized the benefits of IT and more facilities have been integrating technology into hospitals.

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The new strategy continues the emphasis on producing excellent products. However, there is now a strong focus on marketing finding out what customers want and then meeting their requirements. Customers need to know what these new products can do for them. Clear communication is therefore essential. The company has been restructured from top to bottom affecting over 90,000 employees. The emphasis is on marketing and communicating with customers about what the new technologies can do for them.

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Discussion questions What have been the key success factors for Intel?
Management Intel placed top priority on their people, and encouraged openness, fairness, and responsibility, Intel was able to take full advantage of its workers.

Mistakes The most talented and brightest people that were employed were given leverage when mistakes were made so that they would be encouraged to develop breakthrough technologies.

Hard Work Moore and Noyce refused to shy away from their inexperience and being willing to do what work they needed. Also admitting their limitations, they were able to seek out qualified employees to help build the company.

Competition They learned that the key to entrepreneurial success was by being in a constant state of awareness and fear of your competitors, entrepreneurs can become proactive instead of reactive, seizing new opportunities as they present themselves instead of letting them pass them by.

Exclusivity By specializing and focusing on a niche market, Intel was able to not only stand out from the crowd, but to become market leader in the industry.

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Where is Intel vulnerable? What should it watch out for?

Internet As more consumers start going online via phones, tablets, e-readers and scaled- down laptops, Intel Corporations is losing its position as the gateway to the Internet.

Product compatibility ARM has always had an advantage over Intel as low-power architecture. ARM chips are smaller and produce less heat which makes them ideal for tiny devices such as cell phones.

Monopoly Intel will no longer have the monopoly on chips for PCs; Google announced that the new Chrome operating system will run on computers with either x86-based or ARM-based chips.

Customers become competitors Intel provides chips for Apples Mac computers but Apple is designing its own microprocessors for future products which can affect Intels profit on a large scale.

Low cost commodities Intel has a lot more profit to lose as it dives into the commodity fight for cell phones and tries to defend its turf in PCs. The ARM-based chips are low cost commodities and can seriously undercut Intels profit.

Security Threats Security vulnerabilities in Microsoft Windows drivers and applications for its Centrino-based Intel PRO/Wireless Network Connection hardware hold a great risk. Antivirus firms believe the possibility exists that the flaws could cause malicious wireless virus attacks on consumers operating systems.

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What recommendations would you make to senior marketing executives going forward? What should the company be sure to do with its marketing?
Content and Promotional Strategy Content strategy and content collaboration are growing challenges. In todays Web-orientated world, the number of marketing channels has exploded. Companies are faced with massive content marketing requirements today. Intel should invest more into these channels especially blog posts, Face book, Twitter and YouTube. If Intel uses a per hit system where bloggers can get a percentage based on web hits it could reach more people globally and far more important those blogs would be done in that countries native language. Video advertising could have a greater impact and more people could be reached through YouTube. Every aspect of the internet is a potential market for Intel.

Pricing strategy If Intel reduces the price on chipsets it might face a profit loss but putting a massive mark up on compatible upgrades may recoup the market share. Pricing seems to be the necessary measure, but unsold inventory that is forced on to the market may flood the retail market and cause a further plunge in prices. Reducing the price of Intels older generation products can boost sales dramatically.

Advertising strategy Joint advertising with corporate giants like Microsoft, Oracle, EA Games could benefit Intel and giving reimbursement on advertising done by companies using Intel products would motivate more exposure for Intel.

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Bibliography and References

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