Transcript Intel Case Study

Industry, Strategy, Business
Model (continued)
Intel Case Study
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4 C’s & 2 S’s Review
Competitors
Suppliers
___ Company
Substitutes
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Channel
Customers
Collaborators
th
協力者/協業者 “5 C”
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Channel
How customer gets your product/service
 Direct – company’s own network

 Sales
Force, Mail, Telemarketing, Vending,
Some Internet/Catalog, Company Store

Indirect – via one or more other companies
 Sales Agents,
VAR (value added resellers),
Stores (department, convenience, supermarkets,
Some Internet/Catalog (e.g. Askul)
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Collaborators



Partners, helpers, advisors, experts
Directly or indirectly help the company
Examples
 Industry
experts, user groups, educators, advisors
 Industry or trade groups
 Government, NPOs, universities
 Complementary product/service providers


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Software makers for hardware
Computer magazines, manuals, websites
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In Class Exercise
Competitors
Suppliers
___ Company
Channel
Customers
Substitutes
Collaborators
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5 Forces Affect Industry Profitability
Profit = Price – Cost
cost
Supplier
Power
New
Current
Competitor Competitor
Entry
Rivalry
price
Buyer Power
Channel / Customer
Company
price
Substitutes
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price
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Today’s Drucker
A business has 2 basic functions:
marketing
and
innovation.
Peter Drucker
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Intel Case Study

Technology Innovation

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Marketing Innovation

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Big idea, new technology/business area: (semiconductors, IC chips)
Intel Inside
Company is more than its products

“Platform” (product series, same technology base)

Strategic Choices

Sustainable Competitive Advantage
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Intel 1968-1977 Case

“Trying to do things nobody else could”
– Robert Noyce (co-inventor integrated circuit IC)
Gordon Moore (creator of “Moore’s Law)
 Andy Grove joined, took personal “risk”
 First 2 DRAM products not successes
 3rd product 1103 became world leader,

 90%
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of Intel revenues (concentrated)
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Intel DRAM Strategy

Strategy: push product design, be first to market
 Design
& process technology leader
 Investment in plant & equipment
 Costs drop over production volume (scale) growth
 Prices drop with competitive capacity
 DRAM generally not protectable with patents
 Japanese started introducing products more rapidly

Invested more heavily in production (44% vs. 22%)
 1986 Intel decided to exit DRAM business
 1/3 of R&D, but only 5% of Revs, was small player in market
 Japanese beat Intel on process technology (of commodity)
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Intel and Microprocessor

1970 CPU chipset order for Busicom calculator
 Technology
development “paid by customer”
 Bought rights for “non-calculator” use
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Hard to see future even for Gordon Moore

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“…never gave it another thought” – Moore
“We didn’t take it (PCs) seriously” – Grove
Non-sequential forecasting
Sometimes easier for outsider to see
 Exit: By 1984 mid-level managers shifting technology
 Hard to leave business that began company
 Especially for long time senior managers
 Mid-level managers closer to daily business realities
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Intel
AMD, TI, Cyrix
Motorola
Competitors
日本のDRAM
IBM
Direct
Equipment (sole/dual)
Kyocera, etc
Suppliers
Intel
Channel
Customers
Licensees
-IBM
-Others
Compaq
Dell
Packard Bell
C
H
A
N
N
E
L
E
N
D
U
S
E
R
RISC
Substitutes
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Software
collaborators
Providers
• OS
• Application
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Apple/Motorola vs. IBM/Intel
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First to Market
Closed architecture
Sole-provider
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 Exclusivity

 Proprietary
INTERDEPENDENCE
OF COMPANIES (p.30, 22)
“Value Chain”
1994 Apple/IBM-Motorola PowerPC chip
2006 Apple/Intel
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Big, famous name
Standardized, open
architecture


Components
Software
Scale economies
Intel gets benefit of IBM
marketing and strategy
(derived demand)
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Intel Microprocessor Progression
Chip
(bits)
Year
Introduced
Initial
Price
Licensees
Intel-Chip
Market Share
1978
$360
12
30%
1982
$360
4
75%
1985
$299
1 (IBM)
100%-IBM
1989
$950
?
?
Transistors
8086
(8-bit)
29,000
80286
(16-bit)
134,000
80386
(32-bit)
275,000
80486
(64-bit)
1,200,000
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386 Changes Everything (1985)

Intel 386 Investments
 $200
million for design
 $800 million for production facilities
 Decides not to license, except IBM

IBM choice allows Compaq entry and Win
 IBM
delays selling, to create more closed
architecture
 Compaq enters Desktop market with Intel 386
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486 and Wintel Collaboration

Hardware advance precedes software advance
 Microsoft
Operating System (new DOS) not ready for
386
 Need large installed base of hardware for software
upgrade

Emerging collaboration between MS & Intel
 WINdows
+ INTEL = “WINTEL” platform
 Software + Brain

Software investments (past and future)
 Increasing
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switching costs
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“Intel Inside” – Marketing Innovation

Ingredient（材料）/Component（成分） Marketing
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Intel is “superior to other chips”
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Market maturity, education higher (2nd, 3rd PC)
Buyer Intel preference moved from 60% to 80%
AMD: “it shouldn’t matter which chip” but it DOES
IBM, Compaq resisted, but then gave in


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Another example?
Couldn’t fight Intel
Better to have branded “Intel Inside” “premium” chip
6% rebate for use in partner marketing
Fight competitors with technology, marketing, lawyers
and money power (all pointed to same goal)


1997 spent $750 million
More valuable than patent
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Ending Question
Is the internet
good or bad
for Intel?
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Some Important Strategic Ideas

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Where is the most “value” in a computer?
Success attracts competition, company must protect
against


Technology moved so rapidly that patents became
obsolete


protect by know-how, branding, scale, luck
Small stuff that goes inside other stuff


2005 Intel has 82% of PC processor market
Allows focus, expertise, scale, “piggy-backing”
Thrived on derived demand driven growth and rapid
change
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Typical Market Positions & Strategies
Position
Goal
Strategy
Leader
Most
Sales
-Grow Market
-Grow Share
Nissan
Challenger
Challenge
Leader
-Target Leader
-Target Small
Mazda
Follower
Grow
Carefully
-Maintain Base
-Grow Quietly
Daihatsu
Niche
Find Safe
Space
Specialize
Toyota
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Fragmented Industries
(fragment=破片）
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Market divided over many
companies
No dominant leader
Largest competitor may only
have a few percent market
share
Examples:

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Restaurants
Book stores
Repair shops
Publishing
Pet shops
Hair Salons
Hotels
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ラーメン
第一ラーメン
第二ラーメン
第三ラーメン
第四ラーメン
第五ラーメン
第六ラーメン
第七ラーメン
第八ラーメン
第九ラーメン
第十ラーメン
第十ーラーメ
ン
第十にラーメ
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Fragmented Industry Strategies
Construct formula facility
 Expand geographically
 Increase vertical integration
 Become low-cost producer
 Specialize by product/service
 Specialize by customer type
 Build brand
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Company
Who are we? Why are we here?
 What are our goals?
 What are our strengths?
 What are our weaknesses?
 What are our key competitive advantages?
 What is our market position?
 What is our strategy?
 What is our business model?

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Homework Assignment

Design your own personal “life” meishi
わし
の
めいし
Print 15枚copies please
Send me a file by 5/12
Email: [email protected]
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1. Your Name (as you want it)
- Nickname (optional)
2. Title (life position)
3. Purpose statement
4. Ideal living place(s)
5. Identifying email address
6. Anything else important
- Logo
- Website
- Business Name
- Cool Phone Number
(any languages that fit)
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Homework Assignment

Design your own
personal“life meishi”
name
“title”
Purpose/goal
SAMPLE
logo
Jay Andrew Smith
International Educator
Promoting Growth
And Understanding
Around the World
Cool place(s)
New York + San Francisco + Kagoshima + Brugge
[email protected]
Meaningful email/HP address
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www.vistaprint.jp, ppt, Paint, illustrator, etc. by hand all
OK
4 Cs + 2s – The Players

Company (us)


Customer (goal)


Who, Current, Future, Advantages, Position
Substitutes (other choices for customer)

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Sales Team, Distributors, Service, Support, Partners
Competition (them)


Who? How many, How strong, How important, Wants & Needs
Channel (path)

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Mission, Goals, People, Structure, Strategy, Model
What, Advantages, Costs, New Technologies
Suppliers (inputs)

Who, How many, How strong, How important to us,
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5 Forces

Buyer Power (Customer /Channel)
 How
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Supplier Power
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many, how big, how valuable, how sensitive
How many, how big, how important to us, to them
Current Competitor Rivalry
 How
many, cost structure, capacity, positioning, exit
costs
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New Competitor Entry
 Ease

of entry, cost of switching,
Substitute Products/Services
 Advantages/disadvantages,
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cost of switching
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