Intel
Final Paper
MGMT 480- Frankforter
Executive Summary
As the world’s “foremost semiconductor maker,” Intel Corporation has a reputation to uphold and a future to build. Founded in 1968, Intel has grown to a company of over 90,000 employees who operate Intel’s facilities in nearly fifty countries. Intel produces processors, motherboards, chipsets, network adapters, flash memory, software, storage devices, and wireless products. Many of us are the end-users of a wide variety of Intel’s products, but the Intel’s numerous other customers are primarily OEM manufacturers who utilize Intel’s components, end-user consumers (which includes individuals, large and small businesses, and service providers), and “other manufacturers, including makers of a wide range of industrial and communications equipment.”
Intel has capitalized on its ability to lead the semiconductor industry by continuous innovation. Gordon Moore, one of Intel’s founders, introduced a principle that continues to guide Intel which states that “the number of transistors on a chip roughly doubles every two years.” In keeping with Moore’s Law, Intel’s key to success in the semiconductor industry has been constant innovation. Such a strategy has allowed Intel to remain a leader among competitors such as Texas Instruments, Advanced Micro Devices, International Business Machines, and Freescale Semiconductor, among others.
The semiconductor industry is extremely competitive, but Intel seems to have the most sure-footing of all the major competitors. By offering a diverse product lineup that calls upon nearly fifty years of expertise and continuous innovation, Intel has become and will continue to be a leader in its field. No competitor has come close to replicating the competitive advantages possessed by Intel Corporation.
Analyze the Company Mission
According the company website, Intel Corporation’s mission statement is as follows: “Delight our customers, employees, and shareholders by relentlessly delivering the platform and technology advancements that become essential to the way we work and live.” As the world’s foremost manufacturer of technology-related products, Intel has continuously delivered on this mission. In the following paragraphs, the reasons why Intel has enjoyed such success with its mission statement will be delineated.
The first goal contained in Intel Corporation’s mission statement focuses on not only serving customers, but “delighting” them. In order to understand how Intel achieves such a goal, we must establish who constitutes Intel’s customer base. Intel’s customers include “original equipment manufacturers (OEMs) and original design manufacturers (ODMs) who make computer systems, cellular handsets and handheld computing devices, and telecommunications and networking communications equipment; PC and network communications products users (including individuals, large and small businesses, and service providers) who buy PC components and board-level products, as well as our networking and communications products, through distributor, reseller, retail and OEM channels throughout the world;and other manufacturers, including makers of a wide range of industrial and communications equipment.” A focus geared toward customers “causes managers to realize the importance of providing quality customer service.” By placing customers first—whether major manufacturers or PC users—Intel has been able to build a positive reputation with those who utilize Intel’s products.
Strong employee relations are important to the ultimate success of any company. Intel presently employs over 90,000 people in numerous countries, so the potential difficulties in “delighting” employees are quite plain to see. Intel overcomes the odds, however, and has been named one of the “100 Best Companies to Work for in America” by the Great Place to Work Institute for eight of the past nine years. In addition, Intel has been recognized internationally as an exceptional place to work.
Delighting shareholders is an essential element in raising capital to pursue growth in the technology industry. Over the past 20 years, Intel has delivered on its mission to delight shareholders by splitting its stock six times and increasing stock price nearly 5000%. Comparatively, Advanced Micro Devices has not split its stock during the past two decades and has seen only relatively moderate gains in its price per share. “Intel's approach to investors appears to rest on a principle of transparency and trust. Intel ensures that investor queries are answered, whether the answer comes from the investor relations department; the public relations department; the environmental, health, and safety department; or the corporate responsibility department.” Intel takes great pride in the relationship that it has built with its investors, and as a result shareholder loyalty to the company seems to have remained strong.
“Relentlessly delivering the platform and technology advancements” that Intel offers is the way that the company fulfills the aforementioned goals of its mission. Intel’s customers, employees, and shareholders reap the most benefits from Intel through its ability to produce, expand, and market its cutting edge technology. As Intel continues to broaden the capabilities of existing products while entering new markets with fresh, innovative products, the potential for the company to “delight” anyone who has a vested interest in the company becomes more feasible.
Intel’s mission statement has been finely tuned over the past 35 years to become a fitting compass for the company’s future. The appropriateness of Intel’s mission statement lies in its congruence with company values and objectives. According to the company’s website, Intel’s values include “customer orientation, results orientation, risk taking, [being a] great place to work, quality, and discipline.” In addition, Intel’s stated objectives are to “extend leadership in platform and silicon manufacturing, deliver architechtural innovation for market-driving platforms,” and to “drive worldwide growth.” The effectiveness of a company’s mission statement can be measured by the extent with which the company adopts the mission. It is clear to see that Intel’s mission statement has permeated the core values and objectives to the point that all three serve as guiding elements of the company’s philosophy.
Assess the External Environment
In assessing Intel’s external environment, there are four related sectors – economic, social, technological, and ecological.
In terms of the economic environment, Intel must understand and consider the economic trends in the segments that affect its industry. The book gives examples such as the general availability of credit, the level of disposable income, and the propensity of people to spend.
Intel abides by something known as “Moore’s Law.” Moore’s Law says that the number of transistors on a chip doubles about every two years. The company strives to make this law a reality by working day in and day out to increase the level of technology offered to their consumers. Intel feels that their expertise in the field of silicon gives them an edge in developing platforms that will continue to fuel economic growth. By paying attention to the economy and what is needed from technology, Intel can secure their already protected position at the top of the food chain in the chip industry.
Social forces are dynamic, with constant change resulting from the efforts of individuals to satisfy their desires and needs by controlling and adapting to environmental factors. Intel understands the need to assess the social factors that are influencing the environment. The company employs anthropologists, psychologists, and other social scientists alike to study people in their natural environments. Intel believes that this will aid the company in finding ways for technology to enhance the consumer’s everyday lives.
By keeping close tabs on the social forces that are driving the industry, again, it seems to be a positive for Intel. As long as the company is knowledgeable of their consumer’s desires and needs, and strives to fulfill those wants and needs, there is no threat to the firm of losing customers.
The book states that creative technological adaptations can suggest possibilities for new products, for improvements in existing products, or in manufacturing and marketing techniques. Intel employs more than 7,000 technologists and thought leaders to discover breakthroughs in five core technological areas: silicon technology and manufacturing, micro architecture, computing platforms, communication and networking, and software technologies. The company is ahead of the game with their technological advancements in the products that they currently offer and the products that they are introducing to the market. Their “next generation micro architecture” will reduce space and electricity burdens for IT managers as sever data centers grow.
Concentration in technology, being Intel is a technologically based firm, poses serious opportunities for the company. Intel is already the leader in the chip industry; further research and development can only bring positive outcomes for the company. Intel has an exploratory research group that focuses solely on long range emerging and disruptive technologies. The company understands that in order to have a competitive advantage over other firms, they must get new and/or improved/innovative products on the market before other companies have an opportunity.
Ecological factors are very important to any organization, as they can be the rise or fall of the company. Ecology refers to the relationships between people and the environment, specifically other living things, soil, water, and air.
Intel “strives to provide a safe and healthy workplace, to conserve natural resources, and to minimize the impact of manufacturing operations have on the environment and neighboring communities.” Ebay has joined with several companies, including Intel, Apple, HP, IBM, and more, to create its “Rethink Initiative.” The purpose of this program is to educate consumers and businesses about options for disposing unwanted computers. The Rethink Initiative is a website that includes information on how to safely sell, recycle, or donate used computers. Intel is Ebay’s primary ally in the campaign.
Intel attempts to conduct its business in a manner that is suitable for the environment. By realizing and controlling the effects the business operations have on the environment is one more competitive advantage that they can have over their competitors. Ecological factors do not look to be a threat to the firm anytime soon.
Analyze the Industry Environment:
Intel primarily competes in the microprocessor industry. Defining the scope and boundaries of the industry is important in evaluating Intel’s competitive position. If boundaries are not defined well enough, then firms may be considered competitors when they actually should not be. Inversely, if an industry is too narrowly defined, then forces affecting the industry may not be used for consideration in strategy development.
Once an industry is defined, competitive advantages of firms in the industry can be assessed using the “five forces model” developed by Michael Porter. The five forces consist of entry barriers, extent of rivalry, supplier power, buyer power, and substitute products. Industries vary on forces that hold greater importance. Capital intensive industries naturally have entry barriers, while other industries may have a focus on cost reduction and operational efficiency as a basis to decrease competition.
Intel is the beneficiary of numerous entry barriers in the microprocessor industry. The first major benefit is economies of scale. Since the production of microchips necessitates high quality equipment, Intel can produce chips at a lower cost per unit if fixed assets produce a greater number of chips. Capital requirements also prevent other firms from entering the industry. Companies in the microprocessor industry have to stay alert of trends, so large amounts of capital are used in research and development cost. Small companies cannot compete in the industry because they cannot match the cost advantages established by the larger firms. Although product differentiation is difficult to establish since quality is measured by performance and capability of chips, Intel has developed a brand image of perceived quality.
The second most important force is the threat of substitutable goods. Since microchips are used as a component in finished goods and the chips have no significant physical differences, product differentiation is difficult to manage. For example, Pepsi has tried to differentiate its product from Coke on the notion of superior taste. Intel has had to differentiate its chips through capability and through marketing channels. Intel chips are given names such as “Celeron” or “Pentium” to establish a brand and establish perceived quality in the end user. AMD, a primary competitor of Intel, could produce the same processor, but the typical mainstream consumer may still choose Intel products because of effective marketing. The same perceived quality is seen in name brand drugs over generic drugs.
Having entry barriers and substitution threat as industry driving forces has helped to shape Intel’s operating environment. The industry has forced technology companies to be more adaptable to change. Technology products generally have shorter life cycles than most consumer goods. As a result, implementation of strategy is as important as the strategy itself. Intel and other firms have to be efficient in operations with a concentration on speed in production and release into the market. Once a product is distributed, usually to another computer manufacturing company, it has a limited time period before prices must be reduced. Product life cycles can be short as six months to a year. Obsolescence is a concern for customers of Intel because they must be able to sell items in the market at high prices in order to rapidly recover costs.
Power of buyers and suppliers is not as important in the microprocessor industry because there is competition at both levels. Intel cannot be an overwhelmingly powerful buyer, even with massive capital, because new technology must be developed every few months. There are also numerous suppliers to the industry because raw materials are readily available and there are multiple uses for supplied goods. Buyers in the industry may pay more for higher quality of raw materials because that usually translates into better quality in the end product.
Rivalry in the industry is not extremely intense since Intel is one of three major firms in the industry. AMD and Texas Instruments are the two other major firms. Small firms do exist in the industry, but they usually compete in a niche environment. The small firms tend to specialize in one specific product or compete in a small area.
The growth of the industry starting in the early 1990s has also helped shape the industry. Intel and AMD are known primarily for producing semiconductors and processors, while Texas Instruments has a more diversified product line. Texas Instruments is known mainly for their “TI” line of calculators and have some recognition in developing “DLP technology” for high definition television. Although AMD is a smaller company, it is known to produce higher quality processors. Intel is known for being more marketable to mainstream computer companies such as Dell and Hewlett-Packard. AMD has sold processors in lower quantities, partially due to manufacturing capability, to lesser known companies such as E-Machines. E-Machines has been acquired by Gateway.
Develop a Company Profile/Value Chain Analysis
The book describes the value chain analysis as an “attempt to understand how a business creates customer value by examining the contributions of different activities within the business to that value.” The book goes further to say that customer value is derived from three sources: activities that differentiate the product, activities that lower its cost, and activities that meet the customer’s needs quickly. VCA looks at all activities and determines the ways that each activity that occurs between purchasing inputs and after sales service, helps differentiate the firm’s products and services.
The initial step in conducting a value chain analysis is to break down the company’s activities into primary and support activities. Primary activities, also called line activities, are those that are involved with the physical creation of the product, marketing and transfer to the buyer, and after sale support. Intel’s key primary activities are their solutions and services, their resource centers, and their technical support and download centers. All of the above resources can be found on the company’s website. The programs are in place to offer the customer assistance in business solutions, decision making in terms of technology, as well as new and updated downloads for their products.
Support activities, sometimes called staff functions, are those activities that “assist the firm as a whole by providing the infrastructure or the inputs that allow the primary activities to take place on an ongoing basis.” Intel’s most noted support activity is the company’s extensive research in areas such as technology. The firm operates with more than 100 standards and industry groups worldwide including: networking and telecommunications, general, software and web, silicon and semiconductors, and computing platforms. Intel’s affiliation with these standards and groups worldwide give way for the company’s primary activities to occur on a continuous basis.