Intel Corporation, 1968-1997

Intel Corporation, 1968-1997

Synopsis:

This case traces the strategic decisions of Intel Corporation which defined its evolution from being a start-up developer of semiconductor memory chips in 1968 to being the industry leader of microprocessors in 1997 when it ranked amongst the top five American companies and had stock market valuation of USD 113 billion.

Intel in DRAM business:

The strategies employed by Intel for DRAM business focussed on:

1. Pushing the envelope of product design

2. Being first to market with newest devices

3. Premium pricing and skim marketing. No emphasis on mass production

Initially, Intel had a successful run in this business as they:

1. Had no immediate competition

2. The demand for memory chips was insatiated. All products had successful launch and carried premium pricing.

3. The time lag between product launch was spaced conveniently to allow for new product development.

However, the entry of Japanese companies posed a threat to the market share of Intel.

1. Product Life Cycle shortened as more companies had product launches which propelled product development at a higher frequency

2. Larger market share enjoyed by Japs translated into higher cumulative volumes, which gave them a manufacturing cost advantage.

3. Japs invested more on plant & equipment in comparison to Intel Corp.

4. Japs had technological advantage in photolithography

5. Japs were quicker to introduce new products of higher configuration

Intel and the Microprocessor and the Battle to Set a PC Standard:

In 1970, Intel got into the microprocessor business with Busicom, a Jap firm, as collaborators. During late 70s, Apple collaborated with Motorola for microprocessor purchases against Intel who had sim...

... middle of paper ...

...market share, Intel progressively reduced licensee and developed process and manufacturing infrastructure to manufacture chips by itself. Thus, it contained the “profit pool” in its value chain. Thereafter, successful tie-ups with ‘horizontal’ complementors like Compaq 7 Microsoft led to wrecking of IBM’s hegemony. With established leadership in microprocessor industry, Intel strategically started ‘Intel Inside’ and ‘Runs better on Pentium processor’ programs to improve brand recognition. As more and more end-customers identified Intel and microprocessor as the most important component in a PC, Intel could now command higher power and bargaining position with OEM and software manufacturers. This ensures demand-side control.

Thereafter, Intel ensured supply-side power by multi-sourcing of supplies.

By 1997, Intel was the custodian of the value chain of PC industry.