Strategic Analysis of Intel Corporation - Case Study Example

Strategic Analysis of Intel Corporation Executive Summary Intel Corporation is one of the largest organizations today in the world. It is the largest semiconductor manufacturer and has grown from a small firm to a very large one that many of the companies across the world would like to emulate. The strategy that the company has adopted was not evolved after rigorous analysis by experts in the field instead by practical managers. The system that was evolved by the people in the company was analyzed for fitment into the theoretical study and was found to be so. This only reinforced the idea that theoretical solutions are the really conducive practical solutions that are taken by professionals in the field. The report makes five forces analysis to judge the extent of market study done in the company. A SWOT analysis of the company as it stands today after its highs and lows and the strengths of the competition are all analyzed. In addition to this, the BCG matrix is prepared to study the extent to which the products have been capitalized by the company. And in what manner the company could further capitalize on their products. Further to the analysis, the extent to which all the stake holders in the company have been taken into account in every one of their decisions is also verified. It has been found that though most of the requirements have been taken care of in the strategy that has been adopted by the company, there are certain inadequacies too. These have been identified and are also listed in the report given below. The major conclusions drawn in the course of this study indicates that strategy does work and that there should be an objective even if a certain amount of vagueness comes into fore during execution and might necessitate changes in the course of the work. 2. Table of Contents 3. Company Description 3.1 Mission Delight our customers, employees, and shareholders by relentlessly delivering the platform and technology advancements that become essential to the way we work and live. - Intel Corporation, Mission Statement (Intel, 2007). Intel says, delight is higher than satisfaction. Their customers are satisfied and what is needed is to move beyond that and provide customers, their employees and their shareholders, delight. True to the statement, the company has heralded some of the best and the latest products for the world to live with. 3.2 Business Objectives The company's business objectives can be listed as below (Intel 2007): Extend our silicon technology and manufacturing leadership Deliver unrivaled microprocessors and platforms Grow profitability worldwide Excel in customer orientation The company has extended the use of silicon technology by creating microprocessors that are trendsetters. They have kept with their business objectives worldwide and have profitability too. Customer orientation is another major area that they are working on. 3.3 Analysis The structure of operation in Intel is not very rigid. It is a structure that gives liberty to the people's innovation. This is more like what is common with small companies. However, as Andrew Groove (1999), its CMD, says, "The Company can literally turn on its heels". This is made possibly only if the involvement of the people in innovation is matched with the large extent of understanding of the operational requirements of the company. One, the structure supports innovation; two, the Company because of its need to match customer requirements, has ensured that the innovative structure would help in positioning itself as customer centric. Both these factors have added to the profitability of the company as well. 3.4 Product and market Share The major products of Intel and their market share is given in table 1. S No Products Intel Competitor 1 Microprocessors 80.2% 11.1% (AMD) 2 Chipsets 57% 15% (Via Tech) 3 Motherboards 30% 22% (ATI) 4 Desktop NA 5 Laptop NA * (Tom Krizot 2006, Anton Shilov 2006) Figure 1: Products by the company Though as a product Intel's laptops and desktops might not be doing brisk business, their microprocessor is the core to all of the desktop and laptop products worldwide cornering a share of 80.2%. The company's major product is the microprocessor and it continues to dominate the world market by sheer innovation. 4. Business Environment Analysis 4.1 Macro Factors Political and Legal Issues Economical issues 1. The company has been growing into a giant organization leading to major legal and political consciousness. The size needs to be managed. 2. Legal restrictions primarily on Monopoly practices come into fore. 1. The product has to be made economical and cheap. The microprocessor survives because it provides cheaper alternative and a higher technology platform. 2. Large size of the company leads to larger performance expectations and can also cause larger economical responsibility towards share holders. Social And Cultural Issues Technological and Supplier Issues 1. Large organizations have diverse cultural requirements. 2. Societies that are served when they work across cultures also need to be considered. 3. Responsibility of the company towards society at large in terms of environmental and other issues needs to be addressed. 1. Technological superiority has been driving Intel. If they fall from the pedestal they might not be the leaders. Innovation has to be continuous and ongoing. 2. There are no major supplier related issues that the company faces. Figure 2: PESTEL Analysis (Rogers 1999, Havergal & Edmonstone 1999). 4.2 Global Structure The main product of the company is the microprocessor and this is a product that the company leads the rest of the world. The worldwide structure in this is built around innovation and is bound for rapid growth. Major and small players abound across the world that plays a role in the shaping up of the industry segment. However, the amount of impact that these companies have on the market is very limited. Whereas, the companies in other business lines of the company, typically, the motherboard, chip set etc., are more dominating in these areas. Intel is the number one in chip set manufacturing but not so in the motherboard and in the other product segments. It has to understand the client requirements better to break through in these segments. Competition can not be under estimated at any point in time. 4.3 Porter's Five Forces Suppliers: The impact of the suppliers in this industry is very limited. Largely there is no impact because of them. Potential Entrants: The company faces tough competition from potential entrants. On most occasions, this factor is unknown. However, being a seeded player, the company gets a fair share of the market. Competition: Rivalry within the industry is very high. Competition can alter the way they compete. There could be products that are different in terms of speed, size and parallel processing and many other parameters. Substitutes: Substitutes are being offered in terms of change in the material technology, in the manufacturing technology and as an option to the customers. However, the nature of stance that the microprocessors have taken continues to stay. Buyers: Buyers have always been the major supporters for the company. They have taken every new product and technology advancement in the right direction. However, the change in the economic scene of the country could result in a change in the support the company might get. Figure 3: Porter's Five Forces (Michael E Porter 2004) 4.4 Company's Strategies to counter these Suppliers have been cultivated very well and this has resulted in almost zero problems due to suppliers. The company has a vendor policy that is in support of them and has been cultivating long standing relationships with these companies. Potential entrants are unforeseen and the company has to be watchful on this aspect. Competition has been building up. The company has faced stiff competition in its core sector from AMD. There was a mild reduction in the market share of the company due to this. However, the company has caught up on this count. Substitution is being attempted at all times by technological innovation in other spheres of work. This could create a surprise at any point in time. The company needs to be weary of it. The company has been and continues to be an OEM supplier since its inception. Therefore, the buyers are large companies and the interaction of the company with the end user is limited. It is therefore, important that the company maintains its supremacy in their product line failing which; the companies would just migrate to whoever is the best. 5. Internal Analysis 5.1 List of Resources A strong Research and Development team is the major resource that the company has. Financially it has become more dominant in the market and it can invoke its financial powers whenever there is a need for it. Technological superiority is the other major resource that the company could make use of. 5.2 Financial Analysis The company has made major economical breakthroughs during the last decade. It has grown into a multi billion dollar company and has been the largest semiconductor manufacturer in the world for more than a decade. This has led to a profit centric business where every one of the divisions across the world is making a profit. The aim of the company now is to increase the profitability of the company across all regions. 5.3 Strengths and Weaknesses Major strengths (Bobette Kyle 2006): 1. The company enjoys a strong research and development capability, innovative spirit and an entrepreneurial quality that is taking it further heights in their business. 2. Financial power house, that it is, is a major advantage for their future plans and investments. Major weaknesses: 1. The company is not connected to the end user. This could result in a major problem if the company did not have good direct customer relationship. 2. The company's products cater to a market that is wide spread culturally where as it is made in the west. Their products need to address this weakness and become a product for the entire world. 5.4 Threats and Opportunities Major Threats (Harvard Business School Press 2006): 1. The company is facing consistent threat from competition. It has to be weary of their growth and should work with an eye on the rear view mirror. 2. Buyers could hold the company to ransom by reducing the margins of the company by making it to offer special prices. Major Opportunities: 1. There is a major growth in computing business across the world in all the countries. The company has to cash in on it, being the world leader in the business. 2. The technology growth in the sector is powering its way into every sphere of human life. The company should bring in new technologies by harnessing it at the right time. 6. Positioning and Stake Holder Analysis 6.1 Stakeholders Major stakeholders of the company are: 1. The shareholders of the company 2. Employees of the company 3. The customers of the company. 4. The public 6.2 Key Success Factors The key success factors as identified are: 1. Innovation: This is the key success factor because in the technology industry, one step ahead of the competition decides on whether one company gets the order or the other. It is therefore, important for the company to keep its innovative spirit well oiled and running smoothly. Innovation has been the one that has separated Intel from the crowd and pushed into the realm of large multi nationals. In the words of Andrew Groove, innovation has taken it from a small company to the level of companies like IBM. The companies which they were viewing with awe and for inspiration were now looking at them for the same purpose. This could be made possible only because of the innovative spirit the company had. Their innovation brought microprocessors that revolutionized the world of semiconductors. The same innovative spirit is required if they need to continue dominating the market and be a world leader. 2. Swift time to market scenario for any innovation: It is not just the innovation which would keep it afloat. It is also the factor, which puts that innovation swiftly into the market and capitalizes on it. This is as much important as the innovation itself. Market capitalization depends on the manufacturing capability and the prowess of the manufacturing engineers who could turn that innovation into a mass produced product. It is not just inventing a product that counts. It is also the way the product is produced in its manufacturing wing and the swiftness with which they and their suppliers could respond to the requirements, that would decide whether the product is going to be a success or not. It is important that every product that the company produces is produced at the minimum cost and to the maximum advantage of the customer who is also a shareholder. 3. Customer sensitivity: The entire innovation should position itself in association with the customer requirement. Any product which is not sensitive to customer needs might not be a success in the market. Therefore, it is essential that the product innovation is customer sensitive and customer sensitivity and understanding is in the root of the entire exercise. The company has to identify the needs of the customers before moving on to produce a product. There is always a possibility for the company to produce a product that might not have any significance at all. However, so far, the products launched by the company have been great successes in the market. If the failure of Pentium during its launch were to be considered, the major issue happened because of the math co-processor failure. The degree of accuracy that was required was well beyond the normal usage. But still, the failure was identified and this led to a major loss amounting to over 50 million US dollars. The product would have performed better even without that feature. This was proven when the product was re-launched without that capability. Understanding the customer needs and being sensitive to their needs would ensure the success of their products and reduce the failure rates too. 6.3 BCG Matrix STAR: The company would capitalize on its innovation by creating niche products. This is the second phase of any product lifecycle. But in the Technology industry, this period is very short and the company can be having a star product for a short while. Questions: The company has an innovation. Unless, the company could turn this into a star product and move the product from questions to star, it might not be able to realize the importance of the innovation. Innovation creates questions. Time-to-market decides on moving to the STAR square. Cash Cow: A product that has lived through the STAR would eventually move to the Cash Cow when the competition also moves in. Being a company that was already STAR with this product, the company has a head start and will be able to reap its cash cow as long as it lasts. DOGS: Last stage of the product. Many products are thrown out of the cycle because of the new inventions even from the same company. This has to be done because if they do not do it, the competition will. Figure 4: BCG matrix The BCG matrix indicates that the company has a product lifecycle that is short and the product moves over to the dog stage easily and quickly. If the product life cycle is short and snappy, it is important for the company to be innovative to survive in the market (Stern & Stalk Feb 1998). Otherwise, the competition would bring in newer products that could beat it out of the market. The matrix also indicates that the Cash Cow stage is also swiftly reached. Therefore, if the company wants to be in the Star stage for a longer duration, then they should reduce the time-to-market. 6.4 Stake holder's analysis Strategy 1 Strategy 2 Strategy 3 Shareholders XXX XXX XX Customers X X XXX Employees XXX Public XXX These strategies would help every one of the stake holders. There is a large scale support to the customer by providing them with the latest products and in bringing in these products that are customer sensitive too. This would result in larger returns to the share holders and to the employees. This is a situation where every one of the people in the company and involved in the company wins. It is a win-win situation for every one concerned. 7. Strategic Development 7.1 Theory behind the Strategy There are a number of strategies that evolve when problems crop up. Over a period of time, these strategies are seen to adapt to one or the other forms of theoretical aspects. The strategy adopted by the company thus far fits into identifying the key factors and in preparing the company to perform better on the key factors. In one of the major launches, (Pentium) the company identified that the key factor of customer sensitivity is very critical and they soon came out with the Intel Inside campaign to educate the users. The analysis based on the Porter's Five Forces analysis also points out that the weakness could be the buyers. This is so because, buyers could decide on the price of their product which could cause a reduction in the overall profitability of the company. In order to set right this, the company launched its own motherboards, its own PCs and laptops. Intel Corp. from being a microprocessor only company became a PC company. All these fit into the BCG matrix too as indicated above. The product lifecycle in the semiconductor industry is short and would require setting a number of products to DOGS in quick succession. This means that the innovation should also be in the same speed if the company has to succeed. Hence, the company has been pursuing the first strategy to be a leader in the field. 7.2 Gaps in the Strategy However, the following gaps are noticed in the strategy adopted thus far by the company. 1. The company has not adopted any major strategy for reducing the time to the market of every product that is invented by the Research and Development group. It is important for the company to ensure that the time is reduced resulting in a better earnings all through. However, this gap is not fully sorted out by the company. This is possibly the reason, coupled with slackness in innovation sometimes, helps the competition, read AMD, to get the better of Intel during certain lean periods. Though the company by its sheer size and technological superiority tends to make the market its own, it is not always possible for the company to get the better of the competition this way. 2. Innovation in other areas like fluids and the material sciences have to be harnessed by the company to keep abreast with the innovation that is happening. This has to be taken care of by the company's research wing. This is a part of the research that the company is undertaking and the same has to be applied in order to raise the performance of the company. 7.3 Useful-ness of the theory and strategy The company has adopted a strategy under many conditions without realizing that they are adopting to the theoretical strategies. Every good manager might think almost alike. The solution that they reach might be pretty similar. Even if the company and its managers might not have employed the theory knowingly, they might have hit at the idea which is right for them (Andrew Groove 2003). And this happens to be in line with the strategy that is theoretically recommended. This is another proof of the fact that the theory is in line with the practical needs of the industry. Useful-ness of theory cannot be negotiated. The theoretical aspects of the strategy and the conclusions that has been obtained by applying the theoretical principles is similar to the decisions and conclusions people took under practical conditions. Moreover, the practical needs in the company has ensured that the company adopt strategies closer to the theoretical studies and recommendations as well. Similarly, strategies formed for a company are very critical and the company needs to proceed with a specific direction. This would decide on the nature of moves that the company would priority in. For instance, to what extent the company would mark its importance for research and to what extent it might mark its budget for hastening production processes would all depend on the strategy. The same way, the company's strategy will be the one that would decide on whether the company would have ten customer support centres or will it have twenty in UK. This would happen only if the company is keen in increasing its customer centric activities. Only if the company wants to understand the needs of the customers would it look forward to conducting a survey and tries to build a product that meets its customers' requirements rather than make a product and then look for customers. 8. Conclusion Intel Corporation has been taken up as the company that is to be analysed. In the course of the analysis it was found that the company has taken decisions and adopted a strategy that is close to the theoretical suggestions. This goes on to substantiate the fact that the practice is not far off from the theory that is being studied. This also goes to say that the strategy is very essential for the growth of the company and this would also decide on long term objectives which the company needs to adopt. This would also imply that the strategy the company adopts will make the rest of the stake holders understand the target the company has set to itself and to move on to the next level. This would also put at rest any anxiety on the part of the stake holders by creating clear targets and to reach them appropriately. 9. Appendix 10. References 1. Andrew Groove (1999) Only the Paranoid Survive: How to exploit the Crisis Points that Challenge Every Company. 1st Currency Paperback. 2. Anton Shilov (2006) Intel Still has the largest Chipset market share. X-bit Laboratories. Available at: http://www.xbitlabs.com/news/chipsets/display/20060425141244.html 3. Bobette Kyle (2006) SWOT Analysis: Strengths, Weaknesses, Opportunities and Threats. Available online at: http://www.powerhomebiz.com/vol94/swot.htm 4. Havergal M & Edmonstone J. (1999) The Facilitators Toolkit. Gower Publishing. UK. 5. Harvard Business School Press (2006) SWOT Analysis I: Looking Outside for threats and Opportunities. Available with http://www.amazon.com/SWOT-Analysis-Looking-Outside-Opportunities/dp/B000M5KRKQ visited on April 28, 2007. 6. Intel (2007) Mission Statement. Intel Corporation, available at: http://www.intel.com/intel/company/corp1.htm 7. Michael E Porter (2004) Competitive Strategy. Free Press. 8. Roger J. (1999) Facilitating Groups. Management Futures Ltd. London. 9. Stern C W & Stalk G (Jr). (Feb 1998) Perspectives on Strategy from the Boston Consulting Group. Wiley. 10. Tom Krazit (18 Jan 2006) Intel loses market share in own backyard. CNET news.com available at: http://news.com.com/AMD+market+share+soars+in+PCs/2100-1003_3-6028349.html 11. Read More