Strategic Development of Intel

A Case Study on the Strategic Development of Intel

 

This paper is a study on the development strategies implemented by Intel that enabled the company to maintain its competitive position in the market over the years.

Introduction

Integrated Electronics (Intel) is an international corporation that fosters innovation and revolutionizes technology. It commits itself into pushing boundaries of innovation for the purpose of making the lives of people easier and manageable. As a company in constant motion to the pursuit of innovation, Intel inspires its partners to develop products that drive the standards of the industry. Moreover, its end goal is not solely focused on making a faster technology but about the impact of such technologies in improving the lives of the people (2007). To achieve its mission, the company has to implement and adopt development strategies that will foster its competitive advantage in the market. This encompasses the ability to utilize internal resources in accordance with the external factors of the market. Additionally, the responsiveness to changes is a value that must be adhered. As the market changes, demands increase and thus the need for more innovations.

Over the years, Intel has proved to adopt strategic approaches in order to maintain its position in the market by utilizing the most of its core competencies. This initiative is not focused on the product alone but on the entire concept of its management. Moreover, the corporate ventures of the company have become increasingly beneficial to it. This entailed the access to emerging technologies which gave Intel a somewhat monopolistic position in the market since it is the world’s largest corporate venture in technology.

Internal/External Environment

Since Intel was established in 1985, it has created its position in the market as a pioneer in circuit memory products. During its early years, the company was ahead of the silicon technology. Its strengths in terms of technological excellence were partnered with the goals set by the senior management. The culture it has established on its internal environment was a top down approach which is balanced with the recognition of knowledge and technical excellence. The strategic planning was informal with potential ideas from engineers and marketers assessed and supported by the top management

(2005).

Alongside with its early success, Intel was faced with the decision of distancing its product development areas. Additionally, technical areas to excel were one of the choices it has to create. Among its weaknesses are the internal rivalries on the technological expertise of some products. However, Intel with its new approach to technology was able to rethink its idea by shifting from being product based. Marketing developments and middle management priorities are eventually adopted by the company. Formal strategic planning was introduced but apparently resulted to repetitive business plans.

Moreover, the company is faced with the challenge of broadening its horizons. The competition in the market has prompted the company to maintain its competencies and thus adopt new strategies. With the advancement of the digital age, the company remained driven by innovation to gain competitive advantage while considering its past mistakes towards becoming more market savvy.

Porter’s Five Forces Model

Market Competitors – horizontal collaboration with major competitor such as the Advanced Micro Devices (AMD)

Suppliers – vertical collaboration with suppliers of services

Buyers – partnering arrangements with lead customers such as Microsoft and Apple

Substitutes – alliances with companies of digital appliances that complement and substitute PC

New Entrants – collaboration with the communication, entertainment and the wireless companies such as BridgeCo, Entropic and Musicmatch.

Value Chain Analysis

This value chain analyzes the development to the competitive advantage of Intel. It consists of the series of activities that culminate in the total value delivered by the company to its customers.

Inbound Logistics

• Independent  manufacturing process

Operations

• Technical excellence incorporated with the senior management. New business groups formed from the top management to propose new business plans

Outbound Logistics

• Alliances and partnerships with lead customers of products such as Microsoft and Apple

Marketing and Sales

• The flourish of activities and ventures provide more venues for sales. The future for all kinds of  semiconductors other than that of  PC’s

Service

• Creation of customer relationships with the avoidance of designing products that is not desirable to them.

Support Activities

Procurement

• The low/high price strategy is employed to set a competitive price for a new product and at the same time offering sales on other products.

Technology Development

• With the advancement of the digital age, the company’s efforts were directed to wireless technology development

Human Resource Management

• Recruitment process focused on the hiring staff suitable for the culture. High performances are associated with rewards.

Firm infrastructure

• The culture it has established on its internal environment was a top down approach which is balanced with the recognition of knowledge and technical excellence. The strategic planning was informal with potential ideas from engineers and marketers assessed and supported by the top management

PEST Analysis

The following is an analysis of the external macro-environment in which the Intel operates. It involves the four relevant factors including the political, economical, social and technological factors respectively.

Political Factors

• Industrial Espionage and Anti Trust Laws

Economic Factors

• Alliances and Acquisitions


• Slowing of PC demand and rise of low cost PC

Social Factors

• Trust and Brand loyalty of consumers


• High Spending power


• Boost in Consumer Confidence

Technologic            al Factors

• Technological advancements prompted by Digital Age


• Wireless technology development

SWOT Analysis

This analysis presents the internal and the external factors that affect the business strategy of Intel. It includes the internal assessment of the functional processes of the company by identifying its key strengths and opportunities. With the identification of these key factors for success, external factors are assessed with the weaknesses and the threats that are faced by the company.

Strengths

• Company Name Recognition in Computer Brands


• Product Specialization


• Outstanding Financial Performance


• Flourishing Company/Corporate Ventures


• Value to Employees’ Diversity and Competence

Weaknesses

• Technical problems on products


• Internal Rivalries on the products’ technological competence


• Informal strategic planning


• Lack of  innovation and the repetition of strategic planning

Opportunities

• Increasing Demand for Computer Products in the Market


• New technologies for business innovation

Threats

• Presence of major competitors such as Advanced Micro Devices (AMD)


• Lack of technical areas to excel


• Threat of Infringement and Espionage

Strategic Drift and Strategic Fit

As the market continues to change and the demands increase, Intel was compelled to become more flexible to cope up with the competition. Part of flexibilities is defined by its past strategic approaches and those that it has chosen to do repeatedly. Over the years, idea system of the company is focused on the ideas that are born out of their marketers and engineers. The tough competition though has necessitated the company to adopt changes and make decisions on what particular technical areas it is likely to excel. Thus, distancing the development of product areas was ensued. Fundamentally, the technical excellence was the core principle at Intel. Strategic freedom is left on the corporate managers that in turn incited internal competition in terms of technical competence of products.

The strategic fit of Intel indicates how its mission and strategies fit its internal capabilities as well as its external environment. At the time when internal rivalries were experienced within the company on the issue of DRAM, it adopted new ideas focusing on the development of marketing and setting priorities on the middle management. At this same time, the potential of microprocessors was seen as a strategic direction for the company. The potential of PC though escaped the attention of managers. The corporation upon its expansion makes the informal strategy development difficult. Thus, business units established their sub committees that developed business plans submitted to the corporate.

(2005)

            The performance on the microprocessor industry earned the company financial gains. However, with the advent of the Internet era, more challenges are faced by Intel and thus changes are again introduced to fit the market. Given this need, internal business ventures were started. New business groups and the entire company work collaborated in proposing businesses that are externally strategic but are also deemed to foster development of internal competencies

(2005). Indeed, the changes undergone by Intel since its establishment pave the way for the shaping of the marketing strategy of the company. While being driven to innovation, it continuously adopted strategies that will fit its internal abilities as well as external factors.

          Additionally, Intel has found its place in the corporate venture being considered as the world’s largest. This initiative was out of the need to form alliances that will enable the company to gain insights on the latest technological developments. Clearly, it has adopted this strategy in the effort to keep up with external factors and the changing market as a whole. 

Strategic Value of Intel’s Core Competencies

Collaborative arrangements aimed at multiplying internal resources enable the company to gain core competencies. With the particular market it caters, the corporate core competence was focused on introducing innovative products while at the same time strengthening the internal management. As such, the coordination becomes simplified and the technologies throughout the corporation are consolidated. These processes enable a fast adaptation to changing conditions of the market while maintaining the competence to produce competitive and innovative products by the Intel.

The microprocessors are determined as the core product of the company. As such, the ability to champion microprocessors is essential. After the adherence to the microprocessor, the company regained its entrepreneurial flourish. The creation of new business groups was encouraged among the top management. Thus, new businesses and ventures are created. Interface between these new business and the entire company were created for the development of internal competence and externally strategic business proposals. Managers understood the rationale for having alliances. The strategic intent of the corporate ventures was to promote technology development especially in the era of internet. Ultimately the ability of the management to combine corporate wide technologies and production skills to achieve competencies are the sources of advantage. The alliances and ventures add to the competencies of the company in terms of competing in the market.

Strategic Value of Corporate Ventures

Investing in ventures is an essential element for the company especially in this area wherein the new technologies entail the adoption of many players. A corporation with the enormity of Intel is able to gain insights on emerging technologies from start ups. Considering this, Intel has become the largest corporate venture in technology. Fundamentally, ventures are aimed on monitoring new technologies and finding acquisition targets. Such fosters growth and blocks other products that may compete with that of the company. Indeed, strategic reasons are behind the corporate venture program. At this, access is gained by the investing company to the technology portfolio of the company. Hence, making the investment is more of a research and development expense.

Through the Intel Capital, investments and acquisitions are made for the growth of the internet economy that supports the interests of the company. Parts of the investments are hardware, software and services companies in different segments of the market such computing, investment, networking and wireless communications (2007). Intel continues to seek out and invest on companies worldwide both on established and new technologies. Part of the undertaking is the evaluation of prospective investments and guidance on business and technology to their portfolio companies (2007).

Strategic Benefits of Corporate Ventures

• Development of business relationships


• Insights to emerging technologies in the market


• Reduction of potential risks on missing technological developments


• Blocking products that may compete with Intel’s


• Supplements to the research and development investments


• Adoption by many players of the company’s technologies

New activities and ventures has enabled Intel the acquisition of access and rights for dozen of new products. Moreover, it has put its efforts in promoting wireless technologies through investments. The digital age even increased the propensity to invest in other companies from those designing chips that link devices at home to those used for networking. Companies that sell software recording and organizing music are also invested upon (2005)

With the strategy of having corporate venture, Intel is indeed capable of leading the industry of designing, marketing and selling chips.

 

 

 

 

 

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