ARM, Intel and Microprocessor Industry in 2014 - Coursework Example

ARM, Intel and microprocessor industry in Executive summary The emergence of microprocessor technology has revolutionized computing and mobile technology across the globe as faster and more efficient devices can be manufactured based on the microprocessor chip. A number of companies have entered the microprocessor market and this has increased competition in this sector and led to the introduction of more refined microprocessor chips. Intel, ARM and apple are some of the few companies based in the United States and the United Kingdom who have continued to compete for the local and global market (Kachmarek, McDonnell & Ossello, 2010). With advances in technology and the emergence of other companies, competition in the microprocessor industry has increased in the global environment and this has threatened the grip that Intel had on the market. An evaluation of the market structures and the environment that impacts on the nature of the competition and the dominance of Intel will thus be conducted to evaluate its position relative to the competition. Table of Contents Executive summary 1 Table of Contents 2 1.Introduction 3 2.Intel business environment 3 3.Intel’s organizational strategy 5 4.Appraisal of Intel’s strategy 8 References 9 1. Introduction Intel was established in Santa Clara, California in 1968 as a semiconductor chip manufacturer and has grown to increase its impacts beyond the boundaries of the United States. The company focuses in the manufacture of motherboards, chipsets for mobile phones, tablets and computers and integrated circuit among other devices based on the semi-conductor technology. Though a pioneer in this sector and a major contributor to the development of integrated circuits, Intel today faces competition from other new market entrants who have grown to assert their influence and authority over the dominance enjoyed by Intel (Montgomery & Collis, 2008). 2. Intel business environment With the entry of other firms into the industry, the market dynamics have changed completely as compared to the previously Intel dominated microchip sector. A number of companies have entered the market and this has affected the control of Intel and resulted into the manufacture of substitute products targeting computer and mobile phone manufacturers. To demonstrate the nature of the current industry dynamics within the microprocessor market, this paper will provide a PESTLE and porter five forces analysis and demonstrate how these factors have continued to expose the company to external forces (Hensley, Muthusami & Quah, 2012). PESTLE analysis provides an evaluation of an organization relationship with its immediate external environment and how entry of new players affects its performance and success. From inception in the 60s, Intel has grown into a major company that targets foreign markets and multinationals operating in other parts of the world. This exposes it to a number of political forces which are present within the foreign markets including unfavourable government policies and taxations (Hensley, Muthusami & Quah, 2012). With the introduction of the Intel mobile phone, the company has set its eyes on foreign markets to increase its influence and dominance. The current high labour cost in the United States, which has forced a number of multinationals in the country to move their production to emerging economies with cheap labour cost, has also affected the operations of Intel. With the high costs of labour in the United States as a result of economic factors, the company incurs a significant cost on its production and marketing processes (Montgomery & Collis, 2008). The entry into foreign economies in Asia, the Caribbean and Africa has also exposed the company to socio-cultural factors such as disparities in the literacy levees, customs and religious radicalism. This forced Intel to invest a significant amount of money to promote literacy in Vietnam and china as a way of training its foreign workforce. As a technology company, external technological changes affects its market dominance and control as other companies continue to invest heavily in their research and development to develop new technologies. The emergence of green computing and the need to control the overall carbon emission according to the protocols signed by the country has also forced the company to invest enormously in its research and development department (Grant & Jordan, 2012). Legal matters relating to patent and intellectual property ownership has also affected the growth of Intel as the industry is currently globalized with a significant number of players. Intel has suffered losses due to charges relating to its use of anti-competitive methods against AMD, an event that has also damaged the public reputation of the organization (Hitt, Ireland & Hoskisson, 2008). With the globalization of the microprocessor industry and the entry of new companies like AMD, Intel has continued to face significant competition that has forced it to invest in marketing and advertisement. Due to the current competition and static nature of the market, the company has invested heavily in its R&D and this has led to the introduction of other products like digital cameras, mobile phones and Intel computers. With the entry of new market players, the bargaining power of the buyers has increased significantly as they continue to demand for more competitive prices and quality products. This was never the case during the 90s when Intel was the major industry player and therefore has dominance over the market as consumers had no substitutes (Haberberg & Rieple, 2008). Price fluctuations in the industry have also increased the bargaining power of suppliers and this has increased the cost of semiconductor manufacturing materials in the globe. However, the current growth witnessed in the sector has continued to diminish the bargaining power of the suppliers and reduced the prices of the raw materials. The reputation that Intel and AMD have enjoyed due to the creation of great brands has made it difficult for new companies to enter the market. This has led to the creation of an oligopoly kind of market structure where two companies continue to outsmart each other in the development of products. However, this has not reduced the threat of the development of substitute products as brands like the sun Microsoft system has offered a viable for option for consumers (Grant & Jordan, 2012). 3. Intel’s organizational strategy Strategic management at Intel has been attributed to its massive growth and success despite the current competition and market volatility due to the development of substitute products. Investment in both capital and human resource has enhanced the capabilities of the company to grow despite the challenges created by the strong competition from its rivals (Hydamack & Johnson, 2008). The development of heterogeneous resources has strengthened the capability of Intel to compete favourably with ADM as any losses arising from this are cushioned by such resources (Hensley, Muthusami & Quah, 2012). One of the major resources used by the organization to stamp its authority in the market is the Intel brand that has been in the microprocessor market for over 50 years. Within the United States and other major economies, microprocessor technology and microchip products have been associated with Intel despite the presence of strong competition. The company has significantly used this in an effort to prevent the development of ADM as a competing brand despite offering substitute products to the market (Rumelt, 2011). As competition grows and other companies seek to enter markets previously dominated by Intel, the company has relied on its in-house technology and a pool of experienced and train microchip engineers to emerge top. With a strong and reliable research and development unit in Hillsboro, Oregon, Intel has continued to stamp its authority in the market by producing technologically advanced chips and motherboards. This has continued to grant Intel competitive advantage over other market players and companies who have continued to produce and market substitute products (Hitt, Ireland & Hoskisson, 2008). Developed in the 60s, Intel has amassed a large pool of resources that has conferred upon the company competitive advantage not enjoyed by other competitors. Based in Santa Clara California, Intel has massive physical asset investments that range from equipment and buildings. These have been used by the company for backup whenever faced with challenges in the market especially due to the actions of the competitors. Other intangible assets and resources controlled by the company include a globally known brand name, a constant market share in the United States and beyond (Ulph, 2011). Intel is a trademark and a patented product that is widely known as a microchip in computers, phones and tablets. The phrase ‘Intel inside’ is common in a number of Intel products and other products manufactured by other companies using Intel technology. This has given the company massive following and a constant market share buoyed by its technological knowhow. According to a report released by Intel, the company has over the years aligned its goals and future plans with the strategic approaches developed within all the departments. Based on their strategic planning approach, the company focuses on streamlining its activities and plans to ensure that resource fluctuations are eliminated and responsiveness improved massively (Montgomery & Collis, 2008). Value chain is the path or processes that products made by organisations follow before they reach the market or final consumers. Value chain is essential in the success of an organization as it determines the time taken, value added and the quality of a product before reaching the final consumers. Intel has used value chain to increase its dominance and reputation in the microprocessor market by increasing the value of its products and reducing the cost. This has been achieved with minimal impacts on the organisation’s revenue due to the adoption of proper value chain participants across the globe (Ulph, 2011). Faced with a market that requires an increase in product mixes, decreased delivery times and increased responsiveness to changes, Intel has developed approaches that has enhanced its growth and success. By strengthening its information technology departments and processes, Intel has been able to meet the supply chain demands of the customers. Through its IT department, Intel has redesigned its processes to increase the efficiency of its value chain and increase the quality to the customers. The overall planning in the company has been re-engineered and this has affected the forecasting and production process of the company (Rumelt, 2011). The overall result of these processes is increase efficiency in the operations of the warehouse logistics, improvement of their master planning schedule and a reduction of the time taken for a new product to reach the market. The company has also developed a centralized workflow data staging system, which has led to the integration of the entire process into a single central processing unit that manages the chipset production processes (Haberberg & Rieple, 2008). The success of Intel in the microprocessor industry despite the growing competition and changing market dynamics can therefore be attributed to the strategic management of the company. As other companies compete to enter the market and establish their brands, Intel continues to rely on its strong brand and market share to advance and market its products. To further increase its dominance in the market, the company has focused on partnership with other major electronic companies in the world like Chinese computer maker Lenovo. This has further increased the global presence of the trademark and brand, a development that has only worked to increase its international reputation and control in the microprocessor industry (Burt, 2014). 4. Appraisal of Intel’s strategy One of the strategic advantages that have been enjoyed by Intel is its faster manufacturing ability, which has been associated with its efficiency and technological advancement. To serve the massive market, the company has opened a number of manufacturing units across the globe, which is developed to enable them handle, the massive needs of the market. Despite the competition and influence of the competitors as demonstrated by this paper, the process prowess of the company has contributed to its dominance. Despite giving an illusion that is focused on microchip processors for laptops and personal computers, Intel has a wide and effective future plan that will see its dominance grow beyond that of the competitors (Ulph, 2011). All observers are lost to the fact that Intel has not been able to control and cut the dominance of ARM, a small microchip company based in the United Kingdom that has ventured into the smartphone market with success. However, this evaluation of Intel has demonstrated a strategic approach that Intel has employed and one which has the potential to push it beyond the competitive powers of other market players. The microprocessor abilities of the company has remained relatively above that of the competitors as it has remained as a semiconductor manufacturer first followed by its specialization in microprocessor technology. With its ability to make far more useable chips per wafer as compared to the competitors, entry into the microprocessor market may not affect the dominance of Intel in the near future (Burt, 2014). The market dominance of ARM especially in Europe will significantly reduce with the current strategic approaches adopted by Intel that has seen it adopt Atom like chip for its PCs and laptops. References Books. Ulph, C 2011, Marketing strategies used by Intel to create a sustainable market position, München: Grin Verlag. Burt, J. 2014, ARMs New Cortex Targets Midrange Smartphones, Tablets, Eweek, p. 1 Grant, R. M., & Jordan, J. J 2012, Foundations of strategy, New Jersey: Wiley. Haberberg, A., & Rieple, A 2008, Strategic management: Theory and application, Oxford: Oxford University Press. Hensley, R., Muthusami, K. & Quah, K 2012, Transforming Intel’s supply chain to meet market challenges, IT Intel white paper. Hitt, M., Ireland, R. D., & Hoskisson, R 2008, Strategic management: Competitiveness and globalization, concepts, Stamford, CT: Cengage Learning. Hydamack, G. & Johnson, S 2008, Aligning IT with business goals through strategic planning, White paper, Intel information technology. Kachmarek, M., McDonnell, M. & Ossello, J 2010, Optimizing the value of technology investment with IT strategic planning, IT Intel white paper. Montgomery, C. & Collis, D 2008, Competing on resources, Available at: http://hbr.org/2008/07/competing-on-resources/ar/1 Rumelt, R 2011, Good Strategy/Bad strategy: The difference and why it matters, London: Profile. Read More