Apply the tetra threat framework in analyzing Intel’s strategy to sustain competitive advantage in microprocessors
Threat of Imitation:
* Intel used economies of scale to counter imitation. Project Crush helped it to gain IBM’s contract for the 8088 microprocessor. * By entering into a long term relationship with Microsoft, which was its complementor. * R&D also resulted in Intel coming up with upgrades and new generation of chips at a rapid rate. * Intel like many other microprocessors didn’t believe in patents and copyrights as the life cycle of the microprocessor was very low and the patents would become obsolete In the late 1980s Intel moved towards IPR protection for its technology and products.
* Relationships with suppliers were also strong as its procurement strategy was best in breed technology. It also allowed dual-sourcing of critical pieces of production equipment. * Intel always overcame threats of retaliation by producing the next generation microprocessor of equivalent or better quality. This also comes true when it has entered the RISC market also. * Decision not to license the 386 to any manufacturer other than IBM helped Intel to position itself as the leading horizontal niche player in the computer chip segment.
Threat of Substitution:
* When companies and technologies evolved with CISC technology, Intel after little of straddling decide to stick over RISC technology and not respond to its competitors. * Intel has produced x386 processor before Microsoft came out with MS Dos 5.0 version, thus Intel always leapfrogged before the competitors could and making it difficult for the competitors to achieve similar high degrees of compatibility features. * Intel defended itself through Project Checkmate to win contracts.
* The ‘Intel inside’ campaign, created a brand for the previously unknown and ambiguous interior of a PC. This created a first mover advantage for Intel as they were the first to brand it. Branding thus proved a recombining technique as everything was getting branded in the consumer market. * It also competed rigorously with Motorola in RISC keeping its CISC microprocessors. * It has also made itself compatible for better usage for Internet also thus building its competitive advantage continuously. * Intel also lessened its substitution problem by reducing the licensing companies to produce its chips and thus its revenue increased from 30% to 75%.
Threat of hold-up:
* Intel outsourced its 8086 chip manufacturing to 12 other companies in order to meet the high demands * Intel during its x386 launch had a major problem as IBM disagreed to buy the new microprocessors. Intel entered into a relationship with Compaq launched it in Deskpro 386 which became a huge hit. This built mutually dependence. The introduction of x386 transformed the industry which became more horizontal in nature which was more cost effective. * Intel also forward integrated and developed its own products through its systems business. It had been in the business of designing, manufacturing and selling electronic subsystems and even complete system products. * Also Intel tried to maintain a trust and build a relationship with all complementors and suppliers. * Intel increased its bargaining power by developing complementary products e.g. Microsoft OS is only compatible with Intel processors.