Intel Corporation is a manufacturer of semiconductor computer circuits whose headquarters is in Santa Clara, Calif in the US. The name Intel was coined from “integrated electronics.” It was founded in July 1968 by Gordon Moore and Robert Noyce, American engineers, after moving from Fairchild Semiconductor. They then immediately recruited an American businessman Andrew Grove plus other Fairchild employees. Noyce, Moore, and Grove then served as chairman and chief executive officers (CEO) of the company in succession in the first three decades (Intel Corporation, 1994 p.5).
Intel’s first product, the memory chips and the1101, did not have good sales. The 1103 which succeeded the 1101 however, had good sales. It was the first random-access memory (DRAM) chip to store a considerable amount of information though it was only one kilobyte. The 1103 memories became standard memory devices in computers worldwide because they were cheaper and used less power than core memory.
Intel became a public company in 1971 following the great success. It was in the same year that the erasable programmable read-only memory (EPROM) chip was introduced. This was Intel’s most successful product line until 1985. There was also an invention of the 4004 in the year 1971. Intel later shifted from the chips business to the manufacture of microprocessors. It produced the 8008 in the 1972 and in the 1974 it produced an 8080. This was an eight-bit central processing unit (CPU) that was ten times faster than the 8008. The 8086 was built in 1978. It was Intel’s first 16-bit microprocessor (Intel Corporation, 1994 p.15).
The 8088 was then widely used in the first mass produced personal computers produced by International Business Machines (IBM). This CPU was also used by other manufactures that built PC “clones” that were compatible with IBM’s product. These span the demand for desktop and portable computers positively. Of all the above chips, the most important one would probably be the 80386, a 32-bit chip produced, that was built in 1985. It motivated the company to make all future microprocessors backward-compatible with previous CPUs. (Intel Corporation, 1994 p. 25)
In 1993, Intel introduced the Pentium microprocessor. It was the first Intel chip for PCs to use superscalar, processing, which considerably increased its speed. The Pentium microprocessor had 3.1 million transistors, compared with the 1.2 million transistors of the 80486. To entice buyers to upgrade their PCs, Intel adopted a business strategy that relied on making newer microprocessors significantly faster than previous ones. At around the same time Intel was at the fore front in increasing its consumer brand awareness. The computer advertisements at this time included the company’s “Intel inside” label (Mampe, 1991).
Intel’s market share was rarely unmatched by its rivals. Consequently, the Wintel duo consistently faced accusations of being a monopoly. In 2009 for example, the European Union fined Intel $1.45 billion for its alleged monopolistic actions. In the same year, Intel also paid AMD $1.25 billion to settle the long legal dispute between them. AMD had accused Intel of pressuring PC makers not to use the former’s chips. Craig Barrett succeeded Grove as Intel CEO in 1998. In 2005, Paul Otellini succeeded Barrett as Intel’s CEO in 2005 (Miller, 2009 p. 43).
Intel Corporation’s Current Strategy
Intel over the past decade has had a shift from a PC chip company to a computing solution provider. In the year 2000, Intel was just a chip company, but over the years they added other things which include among others platforms, software, and services such as Wind River. As at 2009, the chip maker had made a number of software acquisitions, and at this point the software profession accounted for 22 percent of its payroll excluding manufacturing and IT. Intel is currently in a position to deliver software and services on top of its x86 silicon in every market segment ranging from mobiles to embedded and from servers to desktops. Intel has thus far had its MeeGo in mobile and embedded markets in particular. MeeGo is already an application in smart phones, TVs, and cars (Miller, 2009 p. 56).
Intel is also working on a system called Moblin that is optimized for mini-laptops. This is because the firm believes that in future the mini-laptop could become the first computer of a user. It also aims at improve the performance of its NAND flash memory production. It also plans to continue its integration efforts that started with the core Core i7 processors with a graphics controller included. It has also focused on integration rather than on the improvement of performance. In few years time, majority of Intel’s products and systems will be on chip. Intel also not only seeks to have voice recording in 32nm but also aim at reducing manufacturing costs (Matassa, 2011 p. 74).
Besides the above, Intel also aims at growing its global semiconductor market, expanding its PC market and making more partnerships and alliances. Key to Intel is also consistent upgrades of its processors speed and efficiency. This is necessary if it is to cope with the latest operating systems. This is because currently any computer that is more than three years old may not run Windows 7, which is the current dominant operating system. However, there is always a difficulty for implementing upgrades. The particular skills in IT departments in organizations are often based on long-term experiences.
Intel Corporation’s winning Business Level Strategies
A business level strategy involves developing and sustaining a competitive advantage for the products and services that a given company offers. The best business strategies must steer a course between the inevitable internal pressure for business continuity and the demands of a rapidly changing world. This article outlines some of the business strategies that have given Intel Corporation such a remarkable lead in the semi-conductor industry since its formation.
The first most important business level strategy adopted by Intel’s founders, when they decided to form Intel in 1968, was identifying future opportunities in the industry and taking advantage of them. This involved understanding the trends at that time, predicting future implications and then taking a position that would profit their business big time if things fell through as planned. Robert Noyce and Gordon Moore were able to envision that someday the then used standard magnetic core memories would be replaced by large-scale integrated (LSI) semiconductor memories of great speed and efficiency. This strong conviction made them to decide to invest their resources into it and to position their business to making semiconductors. When this came through, they unquestionably took over the industry and their leadership was established (Matassa, 2011 p. 99).
The other strategy adopted by Intel is developing and marketing their byproducts. These byproducts are derived from the process of creating the main product. They have somehow turned out to be great income earners. The 4004, for instance, was discovered from research into creating other products. It was introduced in 1971 and had a tremendous impact on the computer industry. It was the world’s first microprocessor. This and many of other Intel’s best selling products were byproducts. They were great income earners to Intel. Intel was also able to determine the size of its market.
Many other companies tend to have a narrower view regarding the size of their market. Actually, a market may be larger than thought. The only way to determine the real size of a market is by listing all the different possible ways the company’s product can be used. This usually helps in creating more products and being more innovative.
For instance, Intel’s initial product development strategy was mainly the making of microprocessors that were to enable users to boost their system’s memory. This however changed when they launched 8080, an 8-bit microprocessor, in 1974. It was a general purpose devise that could be used in various machines ranging from calculator, cash registers and traffic lights.
Also part of Intel’s business level strategy is the policy of constant creation of new products. Intel is in the fast paced hi-tech industry where innovations frequently take place. Though it is the major player in the industry, it still has competition. This arises from companies such as AMD. Intel also faces competition from the people’s demand. Thus it has to keep churning out products in order to remain leading in the market.
For example, Intel kept developing more advanced alternatives of the 8-bit microprocessors in order to fend off competitors. These alternatives included the 8085chip, the 32-bit 432 and the 16-bit 8086 that were faster and had greater functions.
Another business level strategy key to Intel, is finding better ways of solving poor financial situations other than firing their workers. To most companies, laying off staff always seems to be the only best alternative left to be used during difficult times. This however, does not always leave those left behind in good sprit to put their efforts in the business. In fact they will always have an eye outside for another job just to make sure they are not next in line to be fired.
The most appropriate solution to financial crisis is finding more innovative and humane ways of getting round the difficulty. Intel appreciated this especially after sacking 30 percent of its workers during the 1974 recession. It was in this period that the spirits of the remaining work force sharply deteriorated resulting in low performance and productivity of the business.
This forced Intel to adopt the much better approach when another financial crisis came knocking in 1981. This time Intel increased the rate on new product development with the “125 percent solution.”This prompted the excused workers to toil for extra hours without compensation for six months. In 1982, as the financial crisis Intel was facing soared, Intel imposed salary cut of up to 10 percent instead of firing the workers. In 1983 however, when business started to grow all these pay cuts were all restored and retroactive raises made (miller 2009 p. 67).
The other business level strategy central to Intel is being a leader in at least one product category. This strategy usually has a massive reward and is exceptionally important if a company is to be successful in a given industry. The giant sales from leading product could be used not only to sustain other products in their times of dwindling returns but it can also build these products to acme positions in the market. This strategy greatly helped Intel in the mid 1980%u201Fs in spite of the depression it faced. At this time its microprocessor business which was the market leader in its class was highly profitable. This helped picked the company up its feet in all areas (Botticelli, 1998 p. 100).
Corporate Level Strategy
The central focus of a corporate level strategy is the selection of businesses in which a company ought to compete in. It also includes the development and coordination of the portfolio of those businesses. It is first concerned with defining the corporate responsibilities. These might include identifying the overall vision, mission, and goals of the corporation and the manner in the businesses will be integrated and managed. Another concern would be, defining where the corporation competition is to be restricted. In addition to the above, there is management of activities and business interrelationships. This involves the management of synergies. The final concern of corporate strategy would be management practices. This involves making decisions how business units are to be governed. This could be either through direct corporate intervention or decentralization.
Intel’s corporate strategy is to be the unsurpassed provider of semiconductor chips and platforms for the worldwide digital economy. It uses its core competencies in the design and manufacture of integrated circuits, as well as its financial resources, brand recognition and global presence to compete in every applicable market segment. (Intel, “Corporate Information”)
There are also other examples of corporate strategies that have been adopted by Intel. One of these strategies is growth through diversification. Diversification is explicitly about acquiring or merging with other corporations or business units. There are two kinds of diversification. The first one being related diversification. This involves growth by merging with or acquiring firms in different, but related, industries. An example is when Intel acquired Dell. There is also the unrelated diversification. This is the growth by merging with or acquiring firms in different and unrelated industries. Other strategies include exit. For instance, Intel at some time discontinued the selling of PC%u201Fs to avoid competing with customers. Others include retrenchment and international expansion (Botticelli, 1998 p. 114).
Intel Corporation’s International Strategy
Intel is a global company with 80 percent of its business is in regions outside the US. Part of its global strategy, is to keep cash reserves ready always in order to take advantage of opportunities that might come up both in the US and outside. This has been exemplified in many occasions. For instance, sometime in 2009, it made an investment of $7 billion towards 32nm manufacturing improvement in the US. It also has a partnership with Chinese Ministry of Railways to create the data network for operating a new 217MPH railway with over 24,854 miles of high-speed track. The completion date for this project is set to 2020 but is to be launched in 2012
As at July 2009, part of Intel global strategy was to replace Intel’s product line with lots of new stuff. The intention was to migrate to second generation 32nm products, having noted the enormous amount of accumulated demand among businesses for replacement PCs in European and the US markets. Clarkdale and Arrandale, Intel’s first 32nm chips, were to be used for mainstream desktop and laptop computers. In fact, in early 2010, Intel had planned to ship 32nm chips for use in high-end desktops and servers. There is also a plan to increase its sales on system on chip (SOCs) and metal gate CPUs.
Another strategy is to expand its markets on its atom processor and the netbook as the mobile computing market grows. In addition to this, as the world is tending towards mobile data, Intel is looking to roll WiMAX in several countries. To Intel, India has always been the perfect place to implement WiMAX. The demand in India is high. There is willingness among consumers in government and business to spend more on higher -end mobile data equipments. However, WiMAX’s overall success rate has been low (Mampe, 1991 p. 33).
Challenges facing Intel Corporation
Intel Company is one of the most successful companies globally however; Intel faces many issues in the manufacture of computer processors. These issues include
Intel faces competition from major companies such as AMD –the second largest company in the processor industry .AMD conventionally seized the low-end market mainly for desktop processors however, AMD successfully forced itself into the high-end desktop and laptop processors after ATI one of the leading producers of GPU’s as a result of Intel’s threat on the lower-end market. This threatened to cut-away Intel’s market share since AMD could produce commodities at lower prices thus resulting to AMD taking the lead in the processor industry.
This had a result of changing people’s preferences with an inclination towards AMD. This resulted to loss of the market share as well as revenues .Another competitor popular in motherboard and processor production is Nvidia which is one for of the two major manufacturers of GPUs. Nvidia also manufactures popular motherboard chipsets. Since Nvidia is the most recognized company for processing hardware for small devices, it is the most prepared for entry into the processor market. This would pose a great threat to Intel since Nvidia enjoys strong brand name recognition in the computers market. This would result into loss of Intel’s share market (Mampe, 1991 p. 57).
Ubiquitous computing brings about a unique issue to the processor industry. The new technologies being developed are becoming more dissimilar from those in conventional computing technology. For example creation of ATMs has created a new market for computer apparatus even without supplanting existing markets, another example is the GPS navigator. Since these are not usual markets for Intel the production of processors for these ubiquitous computing devices may not provide any competitive edge since Intel would be viewed as a secondary supplier of components. The fact that this entry into the omnipresent computing devices does not contribute to the popularity of Intel Company does not warranty ignoring the new markets since, hand-held computer like devices and smart phones are becoming substitutes of the home computers.
For example, activities such as web surfing and emailing .These devices such could also prove to be important substitutes when logistically it is impossible to use computers. This may be an indicator showing what is to happen in the future since consumers are tending to move towards portable and yet capable computing devices. This predicts that the home computer may soon become a throwaway commodity.
However, this end day scenario has not come to pass despite numerous predictions. This has become possible since possibility of failure for the new innovations is high. This is shown by three major reasons: Many interacting components, make the possibility of failure higher than in a single prebuilt computer: The unwillingness of consumers to accept major changes in how they use computers in their homes and ; The swift change in technology makes it impractical to many consumers.
However, with the increasing processor performance and improvement of information storage such as RAM and hard drives cell phones may soon possess computing power. Failure to venture into ever-present computing technologies may result into the company losing on revenue due to unexploited opportunities left out to competitors such as Nvidia with the Tegra brand of products.
Over the resent past Intel researchers have began focusing on the needs of healthcare coming up with the view that the ageing population lost interest in some technological devices. Some of these devices are part of Intel’s production this has resulted to the loss of a large market share in countries with a large ageing populations. This has the consequence of lowering incomes despite Intel’s popularity achieved through production of quality commodities and massive advertisement. Healthcare has also resulted to an increase in expenses in research for technologies suiting the elderly within society.
The computer markets are gradually closing the gaps between what were formerly separate technologies that are cell phones and laptops. Simple hand-held devices are becoming more capable with devices such as laptops becoming smaller and cheaper. These are enabling many individuals to recognize and utilize Intel products hence creating markets for some of the latest inventions produced by Intel Company.
Intel Company can maintain the lead in production of processors by following recommendations which should follow the path that ensures Intel’s foothold on classical markets for processors, while avoiding the prospect of growing challenges from the growing number of ubiquitous computing of processor manufacturers. These recommendations include;
Maintain existing market model
The gradual move by consumers to substitute desktops or laptops for cheap computing devices requires Intel to act. This is necessary in order to maintain a high demand for high-end or high-priced processors. While the fact that processors is not in danger of fading away anytime soon the high revenue market could fuel research and development that can perpetuate improvements in high-priced computing while providing major insights into construction of cheaper processors. Previously, Intel had maintained their share in the market by belligerent brand-name advertising. The existing market is such that the average consumer can soon, operate within competing technologies.
Currently the middling consumer is also more informed and more price conscious in the current commodity market. Intel should maintain high demand for high-performance goals in the arena through increased innovations on the performance of processors. According to weaknesses and threats in Intel’s SWOT analysis better products from Intel will enable the company have a competing edge against companies such as AMD and Nvidia whose current strategies of diversifying into ubiquitous computing markets can result loss of a greater piece of Intel’s market share. Better products and ease of repair for example online upgrading of processor components should be considered to enhance consumer satisfaction in the existing market share as well as serve as a convincing tool for new entrants in the computing market. Intel Company should also venture into ubiquitous computing markets to avoid losing out on the available market niche (Intel Corporation, 2004 p. 124).
The reason for maintaining the current model is to avert any trial and error decisions which may plunge the company into a less competitive position due to effects of restructuring and re-organization of the operations at Intel. Maintaining the current model will also enable the company to utilize the following strengths shown in Intel’s SWOT analysis. These strengths include; Intel’s leading market share in computer processors. Intel’s massive research and development budget which enables the company to be better placed when it comes to developments resulting from research such as processors that are smaller, faster and energy efficient than those previously produced.
Limiting the number of new entrants
The processor manufacturers in the ubiquitous computing device industry are at this time acquiring knowledge that can be exploited force entry in the market of computer processing. Since Nvidia is the main threat in this area and the manufacturers are making processors for equipments that are becoming possible substitutes for many laptop and desktop computer uses. This is a major threat for the Intel Company since this would lead to loss of the market share as well as loss in brand popularity and revenue.
This un-desirable effects can however be mitigated by Intel company utilizing the large market share to maintain entry barriers. The large market share permits Intel to have a large research and development budget which is availed by massive profits. The massive budget allows Intel to frequently make improved processors which translate to achievements in new markets. For example, introduction of the Core 2 replacing Pentium 4 resulted into opening more markets in the world (Matassa, 2011 p. 88).
Intel’s main advantage of large research and development funds allows Intel to supplement development chips for ubiquitous devices with the available experience acquired from development of existing markets. Intel Company can assertively price its processors developed for ubiquitous computing devices. This would result to reducing the profits of other companies in the industry. Since Intel’s budget comes from a variety of market, Intel’s competitors would not have any chance competing in the same arena.
Intel should consider entering the graphics processor market to avoid cases where be prepared to reenter the market for graphics processors in case Nvidia decides to produce computer processors, to avoid being isolated by other GPU manufacturers (Miller, 2009 p. 91).
Intel Company should focus on producing processors to suit a wide variety of markets such as the markets comprising of both elderly and young consumers, markets in developed and developing nations and markets comprising of high income earners and low income earners. This will enable Intel to tap into new markets hence preventing occurrence of unethical practices such as price wars is a few saturated markets.
Diversification will also enable Intel to earn more sales revenue and the resultant higher profit values enabling the company to allocate more resources to research and development. This will translate to high quality commodities resulting from research. Diversification will also enable Intel price produced products at relatively lower than other producers enabling Intel to maintain the largest market share and cutting into the market share of its competitors.
Intel’s Corporation Action Plan
Intel’s plan of action should be one focusing on the following;
Maintaining the lead in market share for computer processor
Increased innovation through thorough and consultative research.
Diversification into untapped markets for example, ubiquitous computing markets.
Providing superior bargains for various commodities
Maintaining the lead in market share for computer processors
Intel Company should adopt some business strategies such as improved and competitive sales and customer care services among existing and newly created markets such as markets in developing economies. This will enable creating of reliable image among clients thus creating loyalty in consumers. Intel Company should also come up with consumer education to facilitate the old in utilizing some products from Intel Company. This will prevent loss of revenue due to the perception that some items have complex operational procedures.
Increased innovation through thorough and consultative research and development
Intel should engage its muscle in coming up with creations that will suit all available markets. For example Intel should research more on technologies that suit the aged since complex procedures force potential clients to choose other options thus resulting in loss of revenue and market share to natural reasons. To mitigate such problems Intel should produce equipped yet less complex products thus encouraging the old men and women of our society to use these products
Diversification into untapped markets
Intel Company should try to reach-out to developing economies which provide a large and high potential market for current and future products which would result to continued possession of the lead position in the processor chip manufacturing industry.
Diversification into various markets will enable Intel to enjoy economies of scale thus producing commodities at lower costs .This will later translate into lower prices for commodities to consumers. This will further enhance Intel’s lead in processer manufacturing. Diversification of products will also result to higher sales volumes resulting to higher profits to Intel Company
Providing superior bargains for various commodities
Intel Company should result in thorough research to enable the minimization of production costs so as to ensure clients get quality commodities at lower prices. This will brand Intel as a consumer considerate company. This will enhance loyalty among clients thus creating a pool of a permanent clientele base.
Intel Company should also enhance service delivery in terms of repairs and replacement of faulty products .this is to promote consumer confidence thus promoting sale of Intel products globally.