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.