Intel Case Study Essay
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Exhibit 6 shows the comparative intellectual property consideration. 2. DRAM was standard, and all competitors faced the same fixed cost, chip price depended on the learning curve and how aggressively competitors expanded capacity, thus manufacturing was not the Intel’s strength at that time, the Japanese companies were ahead of US companies in many different ways, such as mass production which reduced the cost, the high yield percentage 70%-80% in their fabs compared to 50%-60% for US, and that’s because they had disciplined approach to manufacturing, and they concerned with defects and control methods, and down in the learning curve.
Through integration in different industries Japanese companies built its competitive advantage, their DRAMs were used heavily by industries like, electronics, computers and telecommunications. Besides, these companies supported the Japanese equipment manufacturers to improve the DRAM manufacturing machinery to increase yields, which in return decrease cost of the DRAM, and better quality for their products, which were also competing the US. As a conclusion, Intel focus was toward building better design, better performance and capacity for the DRAM, and did not concentrate on building the competitive advantage.
PC industry and added value (Q2-3-4-6) IBM had the largest added value, and this is because they adopted an open standard that made the IBM-PC nonproprietary, which catalyzed a massive structural shift in the computer industry, where it became horizontal. By adopting this strategy, IBM hoped that software developers to write new programs for the IBM PC, and one of the key contributor to the growth of the PC industry is the availability of packaged software and that the market being less fragmented. Intel initiated “project crush”- in 1980 – where it secured the 8088 to go into IBM’s first PC. Market less fragmented.
IBM success in the market in 1983- 1985 catpulated Intel to the market lead in microprocessors. Intel built the reliability of this product. Intel created its value: Intel initiated sales campaign called “checkmate” after cutting the number of licensees to four, this step reinforced Intel’s position as the industry standard. By second source strategy, Intel recognized that they are giving away their technology to other companies, and they are losing a lot of profit, so they made the bold decision to be the sole-source manufacturer, and cut with AMD, and became the sole producers of CPUs and kept full control of the pricing.
That is when they produced the 386 that was adopted by Compaq, users were willing to pay for the premium for additional performance. Intel protected its intellectual property rights; it was well ahead of its competition in intellectual property. It had trade secrets in design and production as well as patent, these resulted in substantial negotiating power in its cross-licensing agreements. See exhibit 6 Intel captured value Awareness campaign were conducted to target end users through “Red X” and then by “Intel Inside” campaigns, and co-op fund advertisement. They used the OEM to advertise for their products.
At this point Intel built its brand and became widely adopted. Intel achieved its added value as a profit, by adopting the strategy of new products in short supply, where it was able to sell at the premium price, as production capacity increased and cost declined, the price would quickly scaled down to stimulate consumption in the mass market, as exhibit 7 shows for the 3 generation Pentium processors, the prices declined with time, and within less than a year, Intel was able to produce new generation with premium price, and decline the price for the previous generation.
Another way of achieving the profit of the added value is investment in software development to leverage the advantage of the high performance processors. And that was achieved by development of complementors, although Intel had a relationship with Microsoft, but it was enough, since it required Microsoft years to develop the software, were Intel is moving faster, by adopting the strategy of complementors, Intel build its capital. Intel strategy was to invest in companies that fit strategically into Intel’s business strategy as well as offered a financial return.
Threats and Actions PC computing was the center of computing during the 1990s, but the internet took over the next decade. Cellphones are sold more than PCs, and that is because they can access the Net. Network and communication became more important to people, whether it is in the home, small business or enterprise. Intel response to the changes in the environment by investing a lot of money in four areas, client platforms, server platforms, cellular and wireless, and communication and networking.
Despite the fact that Intel took several steps toward making a position for it in the mobile and internet market, the threat of being behind the competitors in technology is high. Intel used to sell performance, but now it should innovate at the architectural level, to be the building supplier for to the worldwide internet and communication technology. One of the steps that may put Intel on the map is to start joint ventures to secure the position in the whole world economy. Investing in other communication industry to integrate Intel products.