This case shows 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. We can apply Tetra threat analysis to Intels progress for diagnosing sustainability of superior within industry.

Responses to IMITATION Building barriers Private information Switching costs/relationships Size economies Threat of retaliation Imitation lags Upgrading ADDED VALUE APPROPRIATED VALUE

Responses to SUBSTITUTION Not responding Migrating/Harvesting Defending Stradding Switching Recombining Leapfrogging

Responses to SLACK Generating information Monitoring behaviour Offering performance incentive Shaping norms Bonding resources Changing governance Mobilizing for change

Response to HOLD-UP Contracting Integrating Increasing bargaining power Building mutual dependence Developing thrust

Responses to Imitation
Intel relied on innovation and product design for sustainability. Due to attractiveness lots of competitors entered and this is how it overcame threat of imitation. 1. While producing DRAM memories, it used economies of scale by its capacity power and also by licensing and contracts to other people for producing DRAM for mass market. Also this statement can be supported from the fact stated in case that initially when they came into market, they took many parts and supplies from outside vendors since from starting they were targeting a huge market. 2. Intel initiated project CRUSH, a sales effort intended to secure 2000 design wins in 1980. It showed scope economies and was a form of retaliation because of fierce battle between Intel and Motorola. 3. When AMD and Cyrix imitated Intels microprocessor, Intel responded with intellectual property protection, build barrier by creating private information. It also launched Intel Inside Campaign, which not only was aimed at creating brand awareness but it also included software vendors to tell people that software runs better on a Intel Microprocessor. 4. As there was an increase in market size, which also saw a shift towards to Cyrix and AMD, Intel tried to increase capacity of the microprocessor and produce even cheaper microprocessor using economies. 5. As the product life cycle of microprocessor was shrinking, Intel believed in continuous up gradation and innovation, which helped the company to charge higher price and generate profits in the early life cycle of the new product. 6. Maintained healthy relationship with suppliers, it relied on best in breed sole supplier. Intel was the largest purchaser of semiconductor, so to achieve standardization had high dependency on supplier. Later shifted to dual sourcing to mitigate the risk.

7. Maintained very good relationship with its complementors, Microsoft due to which the ultimate end consumers of its product found it difficult to switch over and thus it created high switching costs for its product.

Responses to Substitution
It was difficult for Intel to survive turbulent market environment. Whenever it tried to introduce any product, competitors were always ready with similar product with more value addition and a lower price which acted as substitutes for Intels products. The top management continued to consider Intel a memory company even though the market share in memory was in steep decline. But, Innovative Culture empowered middle management to invest in innovative product and finally persuaded top management to exit from DRAMs. At all times, Intel tried to respond to this threat of substitution with the best possible response through its various defense strategies. 1. During 1980s, the pace at which Japanese firm were producing new products with better capacity and higher volume gave them cost advantage. They also invested heavily in new plant and equipment as compared to Intel, which did not respond to this pace of Japanese firm and finally had to lose significant market share. 2. To deal with, Sun Microsystems motto The network is the computer, Intel responded to it by partnering with OEMs to promote processors as well as PCs through Intel Inside Campaign 3. The biggest thread that Intel faced was the presence of alternative architecture, especially RISC, which was having speed and cost advantage over the CISC architecture of Intel. Intel was not sure of the future of RISC and the usability regarding its compatibility. Intel decided to hedge against adoption of RISC by releasing i860. It also introduced Pentium (the improved version of x86). 4. When Microsoft moved to operating system that were not tied to x86 architecture, Intel responded by backing operating software other than windows, like Linux. 5. Initially Intel was reluctant to exit memory business even after declining revenue from this business. It continued with both microprocessor and DRAM because it was difficult for top management to believe that it is no longer a memory company. It was only after the independence shown by middle management that it switched entirely to microprocessor technology and took exit from DRAM. Responses to SLACK: Slack is an internal threat rather than external to appropriation of added value, but also not easy to control. Scope of slack is highest in companies that enjoy considerable economic success. It is amplified by difficulties of gathering information, offering high powered incentives & directing organization towards value creation and capture instead of value dissipation. Slack reflects persistent sub optimization over period and inverse of organizational effectiveness. Despite of economic success Intel has to be always on toes to fight competition so internal slack was almost absent.

Responses to Hold-Up
1. Contracting Intel tried to enter in the market with scale economies due to which it had many contracts with its suppliers to provide the parts for mass production. 2. Decreased the bargaining power of buyer by building a motherboard through forward integration, and sold to a number of OEMs, including Dell, HP, Gateway, and Zeos. 3. When buyers were more inclined towards RICS architecture, Intel hedged against adoption of RISC by releasing i-860. It tried to reduce the bargaining power through Intel Inside campaign, which made the industry more dependent upon CISC architecture. 4. Decreased the bargaining power of Microsoft by investing in its complementors and partnerships with apple, Linux-red hat. 5. Intel also tried to focus on long term contract but also on standard solution, rather than custom solution. 6. Intel tried to maintain a trust and build a relationship with all complementors and suppliers, i.e. the whole value chain. All the complementors were quite dependent on the other for their production.