Vernica Irazuzta

INTEL
INTRODUCTION
Intel is an American multinational corporation in charge of making microprocessors. It is the
inventor of X86 microprocessors, which are the processors found in most personal computers. These
microprocessors are like the brain for any computer.
Mission: Delight our customers, employees, and shareholders by relentlessly delivering the platform
and technology advancements that become essential to the way we work and live.
Values

Customer orientation

Results orientation

Risk taking

Grate place to work

Quality

Discipline

Objectives

Extend our silicon technology and manufacturing leadership

Deliver unrivaled microprocessors and platforms

Grow profitability worldwide

Excel in customer orientation

HISTORY
In 1968 Robert N. Noyce and Gordon E. Moore left the company they were working on, taking
with them a chemical engineer called Andrew Grove, and formed a new company, which they called
Intel (short from Integrated Electronics). By this time the company made money by manufacturing
computer memory modules. And it was in 1971 when Intel produced the first microprocessor (also
called chip).
One of the companys first innovations was centralizing its manufacturing in giant chip
fabrication plants, which allowed them to make chips at lower costs than its competitors.

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The founders encouraged the corporate culture of disagree and commit in which engineers
were encouraged to constantly think of new ways of doing things faster, cheaper, and more reliably.
During the 70s and early 80s they faced bankruptcy because of Japanese competitors, who
made the prices of computer memory modules fall, so in 1985 they made the strategic decision of
abandoning the computer memory business to focus only on microprocessors.
In 1987 Andrew Groove replaced Moore as CEO. From this time, Intel became a global
corporation. Groove undertook a series of strategies that lead Intel to a dominant position in the market.

STRATEGIES

In the early 1990s, the board of directors voted for the proposal of developing the Pentium
microprocessor, which supposed a huge investment, 5 times bigger than the previous one ($5
billion), which ended up costing $10 billion, but resulted in Intels domination of the
microprocessor business and huge cash profits.

In 1994 users noticed a defect on the Pentium chip, and Intel took the decision of fixing the
problem by sending them new chips to replace the defective ones; even though the company
didnt have the obligation of dealing directly with the customers. But this decision, even though it
was expensive, made Intel receive high praise throughout the industry.

In 1994 Groove persuaded HPs CEO to form a joint venture, by combining HPs RISC
technology with Intels ability in product development. This action was necessary because Intel
didnt have RISC technology by the time, and it was needed for developing new chips.

In 1998 Craig Barrett replaced Groove as CEO. He decided to take a new strategic direction.

The company invested billions of dollars in business outside of the computer market, which
largely failed. In 2001 they exited the business because key customers (DELL and HP)
complained that Intel was competing against them.

In 2002 he persuaded the board to invest $28 billion in new manufacturing plants and
technology, this resulted in a production capacity of 1.25 million chips daily, while the rivals
could only produce 250,000 chips per day

In 2004, Barrett launched a new strategic move, which consisted in Intel Everywhere instead
of Intel Inside. The plan consisted in Intel offering chips that would be used in all kind of
applications, including PCs, phones, TVs, video players, medical equipment and so on. This
plan was based on the movement of multiple industries from analog to digital format.

Vernica Irazuzta
In 2004 Intel and HP released the chip they had jointly developed, but it resulted in failure. By that
time competitor companies had already begun selling better chips and taken an important share of the
market.
In 2005 Paul Otellini became the new CEO and continued Barretts strategic decision to push the
company into multiple fields with new chip platforms.

He thought Intel should make many types of chips, as well as software, and then combine them
in to what he called platforms. He reorganized the company by creating units for each product
area, and spread the processor experts among each unit.

Otellini put special emphasis on marketing because he thought that the only way Intel could
succeed in new markets was to communicate more clearly about what technology could do for
costumers.

Otellinis ultimate goal was to provide manufacturers of everything, from laptops and cell phones
to hospital gear, with complete packages of chips and software.

In May of 2013, Brian M. Krzanich became the new CEO of Intel. In this same year, Intel was rated
as one of the most innovative companies of the world. Only in that year they invested $10.1 billion in
R&D (research and development).
Nowadays Intel produces mainly microprocessors for PCs, tablets, phones and so on; and in the
first quarter of this year, Intel owned around 74% share of the market.

SWOT ANALYSIS
The SWOT analysis is used to evaluate the strengths, weaknesses, opportunities and threats
related to a certain company. It is often used when assessing a new strategy for the company. Below is
the SWOT analysis for Intel.
Strengths
A. Intel has the largest market share all over the world and has a very strong brand value
attached to it.
B. Most of the computers have x86 microprocessors (invention of Intel) and almost every brand
of PCs uses Intels chips.
C. Intel Corporation has loyal customers. People are not familiar with any other brand apart
from Intel.

Vernica Irazuzta
D. It has invested a huge amount in the Research and Development department, which has
played a very crucial role in the success of its brand value.
Weaknesses
E. Sometimes Intel comes up with a very technical strategy in response to its competitors,
which is not easily understood, by most of the people.
F. Intel position in the market saw a great steep earlier in 2000 because of the emergence of
AMD (competitor).
G. They do not take advantage on the benefits of economies of scale to provide cheaper items
to their consumers.
H. They have not focused on the mobile market, which is considered as the future of internet.
Opportunities
I.

Intel should keep customers as their first preference and make changes on regular basis to
meet the needs of their users.

J. Related diversification would prove to be a huge a success for Intel if they focus on cellular
or broadband portion.
K. They can reduce their production cost by opting for forward and backward integration. It will
not only reduce cost but will also result in better quality also.
L. They can make partnerships with some of the other brands to make sure they rule the
market in every possible way.
Threats
M. As the technology is increasing rapidly, the present manufacturing might just go to waste.
N. Customer taste might change and their preferences will shift to the other competitive
products if they do not get what they need.
O. Change in currency value makes it difficult for the company to come up with the perfect
pricing strategy.
P. Market share becomes very hard to maintain with emergence of new and cheap local
companies.

Vernica Irazuzta

15

M
L

N
L

O
L

P
L

10

10
35

Strengths Weaknesses = 0.08

Opportunities Threats = 0.16

7
26

0,22

38

0,32

19

0,16

11

11

TOTAL

0,30

118

0,70

In this case, Intel is in a position of strong opportunities. There involve pursuing opportunities
that are a good fit to a company strengths, in other words, use strengths to maximize opportunities.
Strategies:

Market development: use current investment in R&D for making and perfecting chips for phone
and tablets, to gain share in this sector of the market. Intel already makes huge investments for
R&D every year, plus they have loyal customers that besides making PCs make also tablets
and phones. So, if Intel were to develop good chips for these types of products, they could have
a big chance to enter this market sector taking an important portion of it.

Vernica Irazuzta

Joint Venture: join with AMD for developing cell chips, so they both would benefit of entering the
cell phone market.

Reduction: reduce current production of chips, since the technology is advancing too fast, and
the present manufacturing might go to waste.
STRATEGIES

Factor

Factor Weight
qi

Market Development
Influence bi

qi * bi

Joint Venture
Influence bi

Reduction
qi * bi

Influence bi

qi * bi

A-D (S)

0,3

1,5

0,3

0,3

E-H (W)

0,22

0,66

0,66

1,1

I-L (O)

0,32

2,24

2,24

0,96

M-P (T)

0,16

0,16

0,8

1,12

Sum I

3,74

2,54

1,26

Sum II

0,82

1,46

2,22

4,56

3,48

TOTAL

PEST ANALYSIS
PEST analysis is used to assess external factors in relation to a business. It helps to determine
how the factors will affect the performance and activities of your business in the long-term. Some of
these factors are pointed out in the table below.
n.

Factor

Importance

Impact

Hypothesis

Group

Important

Increase in expenses. Possible need to raise prices

Political

Important

Mid-term
Shortterm

Loss of resources and money

It is "more expensive" to produce in that country. New
pricing strategy

Political

Raise in tariffs
Political instability. Possibility of nationalizing
manufacturing plants
Raise in exchange rates (manufacturing-selling
countries)

Shortterm

Economic growth

Economic

Change in consumer needs

investment in new products

Social

decrease in birth rate

Mid-term
Longterm
Longterm

More sales

Important
nonimportant
nonimportant

decrease in the number of customers

Social

Need of new technology to make new microprocessors

Important

Mid-term

Investment (R&D)

Technological

Higher complexity of chips

Important

Mid-term

Need of more resources (money, knowledge, workers, etc.)

Technological

New (more strict) regulation regarding environment

10

Mid-term
Longterm

Investment in remodeling production plants

Environmental

11

Need to reduce GHG Emissions

Charges regarding anti-competitive methods against
AMD

Important
nonimportant
Important

Mid-term

Money penalty (sanction)

Legal

12

Raise in taxes

Important

Mid-term

Increase in expenses. Possible need to raise prices

Legal

1
2

Important

Economic

Environmental

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Investment in R&D
10.148 10.611

12.000
10.000

8.350

8.000
6.000

4.778 5.145

5.873 5.755 5.722 5.650

6.576

4.000
2.000
0
2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Years

PORTER
Barriers to entry: Developing and manufacturing microprocessors and chipsets will require the
immense capital investment, which is the biggest barrier to face for any company that wishes to enter
the market. Also, they would have to deal with the high existing loyalty to Intel products.
Customers: In 2013, Hewlett-Packard Company accounted for 17% of their net revenue (18% in
2012 and 19% in 2011), Dell Inc. accounted for 15% of the net revenue (14% in 2012 and 15% in
2011), and Lenovo Group Limited accounted for 12% of the net revenue (11% in 2012 and 9% in
2011). The majority of the revenue from these customers was from the sale of platforms and other
components by the PCCG and the DCG operating segments.
Suppliers: the three main suppliers for Intel are Daewon Semiconductor Packaging Industrial
Co., Ltd. (supplies plastic injected molded trays), DISCO Corporation (supplies cutting, grinding, and
polishing equipment and services), and Siliconware Precision Industries Co., Ltd. (supplies
semiconductor assembly and test services).
Substitutes: AMD makes microprocessor compatible with those of Intel, so AMD products can
be possible substitutes of Intels products.
Competitors: Currently there is only one significant competitor: AMD (developers of the Athlon,
Thunderbird, and Sledgehammer). There are other possible competitors, such as Texas Instruments,
but they do not suppose an important threat to Intel.

Vernica Irazuzta
Market Attractiveness: the microprocessor market is attractive, but the competition is too high,
and to get into the market it is necessary a huge investment.

MARKET SHARE - Microprocessors (2013)

1,4
1,9

7,4
Intel

6,4

Qualcomm
ARM

8,2

Samsung
AMD

9,4
65,3

NVIDIA
OTHERS

STRATEGY
After these three analysis (SWOT, PEST, and PORTER), I would recommend the strategy of
market development. This strategy consists in using current investment in R&D for making and
perfecting chips for phone and tablets, to gain share in this sector of the market. Intel already makes
huge investments for R&D every year, plus they have loyal customers that besides making PCs make
also tablets and phones. So, if Intel were to develop good chips for these types of products, they could
have a big chance to enter this market sector taking an important portion of it. With some effort and
research they would be able to develop good quality chips for phones and tablets, and with their good
reputation in PC microprocessors they could have customers really easily. This strategy focuses on
Intels strengths and opportunities, which we know its the right choice (SWOT analysis). Besides, they
already have the needed resources, the knowledge, and the know-how for entering this market; they
would not need to make such a huge investment for this purpose.