Intel Corporation

IIM Calcutta

Strategic Management

INTEL CORPORATION
December 30th, 2009

Word Count: 499

Submitted By:

Group A5 – Section A

Gautam Adukia 022/46

Ajay Bansal 023/46
Alpesh Chaddha 026/46
Aman Deep 027/46
Amit Gupta 032/46
Amit Nagdewani 036/46
Amol Deherkar 040/46
Ankit Jain 048/46
Avinash Pandit 085/46
Ankit Kumar Singh 404/16

Group A5 Page 1
 Intel Corporation

What are the sources of competitive advantage in the microprocessor chip

industry?
The sources of competitive advantage in microprocessor industry are
New product innovation
Ability to ramp up process and production facilities
Marketing.
Microprocessor industry is a highly technical field with new chips commanding
higher demand and premium. Manufacturing processes determine the quality of chips
produced while ramping up production facilities means utilizing economies of scale to
gain cost advantage. These factors in combination with the ability to introduce new
chips mean an increase in the profit margins.
The other facet involves aggressive marketing. As Intel showed with project CRUSH
and project CHECKMATE and later with the “Intel Inside” campaign, aggressive
marketing and building brand recognition played a major role in gaining competitive
edge.
What strategy did Intel use to gain and sustain market leadership in
microprocessors for over two decades? .Why has Intel been able to sustain its
competitive advantage in microprocessors, but not in DRAMs?
Intel pursued the strategy of “Leadership at Product Development coupled with
Aggressive Marketing”. Intel’s microprocessor business faced the dual threats of
Clones and RISC architecture. Intel countered these threats by always being on
forefront of the product innovation. Intel kept on improving its products very fast
and launched new better products quickly which helped it commanded premium on its
latest offerings. Intel also launched massive campaigns like project CHECKMATE
and “Intel Inside” campaign which proved to be a critical factor in their success.

Intel started well in DRAMs business but couldn’t sustain its competitive advantage.
Intel’s strategy of ‘Leadership at Product development’ was severely tested by the
shrinkage in product life cycle of DRAMs. Japanese firms viz. Fujitsu and Hitachi
were quick to launch higher memory capacity DRAMs and they beat Intel on several
occasions. Intel also struggled with the development and ramp up of its production
facilities in mid 1980s. Japanese were pursuing the strategy of investing heavily in
manufacturing in addition to working closely with the production equipment
manufacturers. All these factors combined made Intel lose its competitive edge over
Japanese rivals.

Group A5 Page 2
 Intel Corporation

What effect has the growth of the internet had on Intel?

The immediate impact of growth in internet was the enhanced utility of personal
computer as a tool in many areas. This in turn led to an increased demand for
microprocessors which benefited Intel’s growth. Along with sharing information
internet had other usage like entertainment and information sharing which added a
new segment of home users to the PC customers list which further catapulted the
demand for microprocessors.
The threat however comes from the usage of internet wherein the data and
applications are stored in a remote location. Computation requirements can also be
met from remote servers. Thus the processing needs of a user are thus reduced
drastically and instead data communication takes precedence.
The mushrooming of these classes of applications if continued would thus reduce the
need of higher end processors for the PC owners, which has the potential of altering
Intel’s growth trajectory as it derives its margins from launch of newer faster
processors.
Intel is hedging this risk by investing over half a billion in various small companies
and start-ups which are involved in internet technologies. Intel’s strategy is to
simultaneously develop high end expensive chips and low cost chips to cater to two
different segments of customers i.e. Internet application providers and PC users
respectively.

Group A5 Page 3