Intel Corporation

1 Introduction

Intel Corporation was founded in 1968 by Robert Noyce and Gordon Moore, their initial strategy was to develop semiconductor chips for mainframe computers and minicomputers. Through the years this strategy has been adapted to some changes in the environment. They started with producing DRAM, now almost 30 years later they developed, and produce the Intel Pentium Processor. Almost everybody is familiar with Intel because of their marketing campaign ÐŽ§Intel InsideЎЁ. They started this campaign for creating brand recognition among PC-users, after all this has been an enormous success (who doesnÐŽ¦t know the tune of Intel).

In this report we will discuss the case situation by concepts of strategy and we will use where possible some models for supporting our findings in the analysis. This information will lead to the definition of a central key issue. Furthermore we will elaborate on this by giving our recommendations to Intel, how we think they should operate in the coming years.

2 Analyze & identify key issues

2.1 direction

The direction is a guide or course of action into a future, a path from here to there, four different approaches are identified.

Clear path:

Defining a clear path which could be carved in stone. This strategic planning process is most suitable in a stable and predictable environment.

Vision:

The future goal is clear. It will pull the organization to this point in the future.

Mission:

This drives the company, comes from your stomach.

Crafting:

React on arising threats and opportunities, without clear goals.

Intel uses the Crafting direction

In the beginning IntelÐŽ¦s initial strategy was to push the envelope of product design and to be first to market with the newest devices.

When Japanese competitors began to introduce new products more rapidly Intel had to change her strategy. Between 1980 and 1984, Japanese firms invested 40% of their sales revenues in new plant and equipment, versus 22% for US firms. With this Japanese competitors became much faster at developing process technologies and ramping up production capacity. This is also the reason that Intel follows crafting direction, because it had to made very important decisions about producing a DRAM or not while a Japanese firm might be earlier and the costs which has to be made are very high. From 1986 Intel decided to focus resources only on microprocessors. While the development of microprocessors also went very quick Intel stayed in a crafting market.

IntelÐŽ¦s strategy for itÐŽ¦s fifth (Pentium) and sixth (Pentium Pro) generations of microprocessors was to achieve an overwhelming advantage in performance over competitive offerings.

In 1990 Intel introduced the ÐŽ§Intel InsideЎЁ advertising campaign to create brand recognition among PC users. This campaign was very successful to make end-users aware of the fact that they use an Intel computer and the market share of Intel rose from 60% to 80%.

Later on IntelÐŽ¦s policy was driven by the desire to standardize process equipment as much as possible across different disciplines. In 1990 Intel changed this policy again to allow dual-sourcing of critical pieces of production equipment. From al this information one can conclude that Intel stays in a crafting direction while she is operating in a turbulent environment and has to change her policy all the time. Furthermore it is very important that Intel makes more performance than her competitors do.

Concerning mission and vision from the annual year report:

The challenges of 1997 confirm that our long-term strategy for growth and success continues to serve us well. We will continue to drive new technology, serve global markets, increase consumer preference for the Intel brand and work to deliver excellent financial results to our stockholders. This strategy will serve as our road map into the next decade.

Measurable goals which Intel can use to compare her company with competitors:

„« Market share

„« Sales revenues per product

„« Investments of sales revenues

„« Development expenditures

„« Development time

„« Advertising cost

„« Gross Profit Margins

„« Costs of research and development

„« Marketing costs

2.2 long term

The long term of a strategy is based on the economic life of the investments in assets, in resources.

Over the years the lifetime of the Intel processors became shorter. In the early days of Intel the lifetime of its products was about four years. The lifetime became shorter and is at the end of 1997 approximately six months. In the lifetime of a product a company has to make cash flow projections during this period. By reducing the lifetime of a new product, the cash to cash cycle becomes shorter. This means that Intel has to re-earn its investments faster. By introducing a new product Intel is now facing a higher risk. Also because of all the competitors in the market who are continuously improving their products also. Intel constantly has to innovate its products to stay ahead of its competitors.

In the future it will probably be more risky for investors to invest in Intel, because of the short lifetime of its products and the competition in the market.

2.3 scope- scale- synergy

Market and products

Intel is a main player in the computing and communications industries by manufacturing chips, boards, systems, and software building blocks that are the "ingredients" of computers, servers and networking and communications products. These products are used by industry members to create advanced computing and