Microprocessor Industry - Essay Example

 Microprocessor industry Table of Contents Executive summary 3 Introduction 3 Analysis of Industry business environment 4 Porter’s five-force analysis 4 Analysis of business strategy 6 Resources and capabilities 6 Value chain analysis 7 Critical appraisal 9 Reference list 10 1.0 Executive summary The semi-conductor industry lives and perishes- by a simple creed: smaller, cheaper and faster. The advantage of being tiny is simple: finer lines insinuate more transistors can be fixed onto the same chip. The more the number of transistors on the chip the more efficient it is. Thanks in large chunk to the competition and to new technologies that reduce the cost of production per chip, in just months; the price of a new chip can fall to 50%. Intel has a competitive advantage creating its brand image, a point that effects from numerous competitive advantages indulging technological, distribution marketing as well as the ownership of Intel manufactures PCs. However, to improve on their value Intel, is trying to keep their clients as their priority and promote dynamics on a regular basis to meet the demand of the employers. Product penetration and market penetration is very instrumental as they center on the existing markets. Moreover, relevant diversification for Intel will be a huge triumph especially as they have centered on broadband and portion In conclusion, Intel has been very instrumental in the microprocessor industry and might have had some lapses last year that it is never too late to correct. I think the company should put the customer’s interests at heart to make more sales and avoid what had happened last year when the world was going tablets 2.0 Introduction This report is mainly into semi-conductor industry and its latest updates in terms of development. The report is divided into three sections; section one will evaluate the industry business environment and its various success factors. Section 2 will analyze the business strategy of Intel Company looking into details at its resources and capabilities. The section three will look into the Critical appraisal where I compare the Intel’s business strategy to the success factors in this industry. 3.1 Analysis of Industry business environment The semi-conductor industry lives and perishes- by a simple creed: smaller, cheaper and faster. The advantage of being tiny is simple: finer lines insinuate more transistors can be fixed onto the same chip. The more the number of transistors on the chip the more efficient it is. Thanks in large chunk to the competition and to new technologies that reduce the cost of production per chip, in just months; the price of a new chip can fall to 50%. As a result, there is a constant pressure exerted on the chipmakers, to improve their chips and come up with something better and more pocket-friendly than what redefined state-of –the –art a few months ago (Hionis, 2000; p23) . Chipmakers must continuously go back to the drawing board to develop better and superior products. Whether there is a down market, weak sales perceptions or views are no excuses for not developing better products to wet the consumer’s appetites that later need to upgrade their electronic or computing devices. Traditionally, semiconductor firms regulated the whole production procedure, from design to manufacturing. Most chip developers are now delegating more and more manufacturing to the others in the industry. Foundry firms, whose main business is production, have currently come to fore, giving attractive outsourcing options (Carbone, 2003; p82). Moreover, to foundries, the ranks of increasingly chip testers and specialized designers are beginning to swell. Chip firms are emerging leaner and more effectual. Chip production now looks like a gourmet restaurant kitchen, where cooks queue to add the right spices to their meals. I will further analyze the business environment employing the 1Porter’s five-force analysis and the pest analysis below. 3.1.1Porter’s five-force analysis Threat of New Entrants: back in the days when semiconductor industry was just getting started, design engineers with great ideas would usually leave one firm to start up another. As the industry grew to maturity, nevertheless, putting up a chip fabrication firm required billions of dollars put into it. The price of the entry makes it impossible and painful for all except for the biggest players to put up with the state-of-art –operations. There was nothing surprising then, which already established player had an upper hand. Regardless there are projections that there could be some dynamics in the coming future (Williams, 2005; p61). Semiconductor firms are merging or forming alliances to cost-share the costs of manufacturing. In the meantime, the appearances and triumphs of the fables chip developers indicate that it is just a matter of time before factory ownership last as an obstacle to entry. Power of suppliers: for big semiconductor firms, suppliers have very little power- most semiconductor firms have hundreds in the name of suppliers. This diffusion of jeopardy over most companies allows the chip giant to uphold the bargaining prowess of any supplier to a minimum. Nevertheless, with production growing huge and expensive, smaller chip developers are gradually becoming independent on a handful of big foundries. As the suppliers of production, skills and cutting-edge, the merchant foundries enjoy the privilege of considerable industry bargaining power. The biggest US based foundry belongs to the great IBM that is also a top chip developer in its own right (Williams, 2005; p61). Power of buyers: most of the industry’s main segments are cover by a dismal number of big players. It shows that the buyer has little bargain power. Availability of substitutes: the threats of substitutes in this industry depend on the segment. When intellectual property protection could terminate the threat of new substitute chips for a while within no time firms start to develop similar goods at lower prices. Copycat and counterfeit suppliers are issues: a firm spends millions maybe billions on the development of faster, more effective chip will struggle to recoup the R&D costs. However, then emerges a player that reverse engineers the operation and markets the same good at a cheaper price. Competitive rivalry: the industry is known for intense rivalries between subjective firms. There is always tenacity on the chip developers to create something better faster and pocket-friendly than what redefined the same product some months back. That tenacity extends to chip developers, design labs, foundries and distributors- everyone is linked to the business 0of transforming the chip from R&D into high-tech equipments. In PEST analysis, politically with the laws existing to fight the counterfeit good will help curb the porter’s force of Copycat and counterfeit suppliers that allow the consumers to get cheaper chips at expense of the patented company. With the growing economy and the rise in the number of those getting jobs, this will control the power of the buyer to purchase the good at a given price and will further kill the bargaining power. Socially, with a growing population the industry will have to be very competitive and produce more goods hence promoting new entrants: the new entrants will provide job opportunities that will improve the livelihood of the people (Nelson, 2013; p56). Lastly, the technology of the chips keeps getting better in months, and this promotes competitive rivalry that in turn leads to better products. 3.2 Analysis of business strategy. 3.2.1. Resources and capabilities The company’s competitive advantage changes from the resources available to the company. Evaluating a company’s resources is a vital step for a company when developing and implementing the strategy. Strong resources must endorse a triumph strategy, and when the strategy changes, it goes with dynamics in competitive advantages; thus, resources are normally essential. When developing a strategy, company has to decide what resources are essential for a company strategy and how to get these resources overtime (Nelson, 2013; p56). An example of competitive advantage (competitive) is Intel’s creation of its brand image, a point that effects from numerous competitive advantages indulging technological, distribution marketing as well as the ownership of Intel manufactures PCs. Something that gives perpetual advantages competitively is a sustainable competitive advantage. For instance, depiction of sustainable competitive advantage in Intel Company is in the company’s perpetual capability, to upgrade its goods technically and have it sold faster than the rivals (Pintilie 2013, p89). This capability to stay continuously ahead of your competitors is one of the pros that a company can have. Usually, sustainable competitive advantages grow into major competencies in a firm. Major competencies are capabilities and competitive advantages that come up overtime as being essential to a company’s overall strategy, and there are those upon which the company’s strategy is based overtime. For instance, Intel’s main competency is the capability to produce the fastest chip the world has ever known. Intel has developed its strategy around this main competency for the last 10 years. More presently, it has started to pressure efficiency in manufacturing since they discovered this would become a vital strategic factor in the coming days this industry continues to grow (Blout 1996, p7). 3.2.2 Value chain analysis A vital approach to discovering competitive advantages and capabilities in a company is via value-chain analysis. A value-chain is described as the path upon which services and products move along as value is added before reaching the end client. Companies attempt to gain competitive advantage by appreciating the value to consumers in one or more practices relative to rivals. Description of value is improving the worth of the service or product’s characteristics companies must focus on appreciating the value of the customer while trying to diminish the costs to the company- this maximizes profits to the company. Intel has the lion's share in terms of market share in the globe with a prominent brand value attached to it. It was the first firm to make a microprocessor, and it has perpetuated that legacy by making advance dynamics in it with time. Moreover, it has the largest amount of global technology corporation (Wesley, 2010; p 46). It has some loose ends, at times, the company comes up with technical reaction to their rivals that is not easily understood. Intel's position had troubles in the early 2000 due to the emergence of AMD. Intel registered a loss in 2008 financial year. It has been a brand leader, by not making gains from economies of scale and giving low-cost items to the clients. Moreover, it has not concentrated on the mobile market that is considered the internet’s future. However, to improve on their value Intel, is trying to keep their clients as their priority and promote dynamics on a regular basis to meet the demand of the employers. Product penetration and market penetration is very instrumental as they center on the existing markets. Moreover, relevant diversification for Intel will be a huge triumph especially as they have centered on broadband and portion. They have diminished their production cost by deciding for forward and backward incorporation. It will not only diminish cost but also affect the quality (William 2005, p5).Since technology appreciates rapidly, the current manufacturing might just go to waste. On this account Intel has adopted a way to produce enough goods that can fit the current demand. Moreover, the clients taste might change, and their desires will drift to other competitive goods if they do not get what they want. Intel has worked on retaining its customers by producing what the customer wants e.g going tablet as other firms. 4.0 Critical appraisals Intel as a company as proved that it is valuable since it can influence manufacturing capability. It shows it can appreciate the production to bring its goods to market in large volumes. Appreciating volume and getting the good onto the market as fast as possible are vital elements in creating and upholding a competitive advantage (Carbone, 2003; p82). The industry is capital intensive to get into as a company or individual: this has helped this company to thrive well. One has to be or give rare products, for a good competitor in this market. Intel incorporates R&D and all fields of manufacturing all working to similar schedules. The best part is, it is the only company that can optimize and combine manufacturing procedure technology, leading-edge capacity, product design, design tools, packaging-in house and masks. Thus, it has always promoted diversity in this industry, which is one of its success factors. This factor makes it difficult for the copycats to imitate their products since imitation is an enemy to competitive advantage. Moreover, another functional resource is no substitutes; it has a regular rhythm to the creation of new products and improving the existing ones (Williams, 2005; p61). The industry has been thriving based on innovation and improvements on their existing products. In conclusion, Intel has been very instrumental in the microprocessor industry and might have had some lapses last year that it is never too late to correct. I think the company should put the customer’s interests at heart to make more sales and avoid what had happened last year when the world was going tablets. Reference List ABI Research: Intel Ends 2013 with a Bang. (2013, December 23). Entertainment Close-up , 5, 4. ABI Research: x86 and MIPS Applications Processors to Challenge ARM's Smartphone Market Share. (2011, January 19). Entertainment Close-up , 8, 3. ABI Research: x86 and MIPS Applications Processors to Challenge ARM's Smartphone Market Share. (2011, January 19). Entertainment Close-up, 6, 4. 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