Inside Intel Inside

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inside

inside

By,Dr. Daman Walia (13/09)

Ashank Dayal Mathur (29/09)Abhinaw Shrivastava (67/09)

Evenpreet Singh (131/09)

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About Intel• Intel was founded in 1968 by Gordon E. Moore and Robert

Noyce.

• Intel's third employee was Andy Grove who ran the company through much of the 1980s and the high-growth 1990s.

• In September 2009 , Intel had nearly 100,000 employees and 200 facilities worldwide.

• Fortune 500 ranking - 49.

• Stock symbol - INTC.

• Worldwide offices and facilities – 249.

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About Intel cont…

• Intel is the world's largest semiconductor chip maker.

• The company is the inventor of the x86 series of microprocessors, the processors found in most personal computers during the 1980s.

• Earlier processors like 4004, 8080 & 8086 were also developed by Intel.

• Intel was an early developer of SRAM and DRAM memory chips.

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Facilities across the Globe

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Building Brand Intel – Through Technological and Marketing Innovation

• Intel (1968-77) - “Trying to do things nobody else could” – Robert Noyce (co-inventor integrated circuit IC)

• First 2 DRAM products not successes• 3rd product 1103 became world leader,

– 90% of Intel revenues (concentrated)

• Andy Grove joined, took personal “risk”• Technology Innovation

– Big idea, new technology/business area: (semiconductors, IC chips)

• First microprocessor - 1974 – The Intel 8080 microprocessor.

• 1981 – Intel wins the IBM PC Account

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Intel/IBM Advantage over Apple/Motorola

Apple/Motorola

• First to Market• Closed architecture• Sole-provider

– Exclusivity– Proprietary

Intel/IBM

• Big, famous name• Standardized, open

architecture– Components– Software– Scale economies

• Intel gets benefit of IBM marketing and strategy (derived demand)

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Intel Microprocessor Progression

Source: NBC1 2008

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X86 Processors Change Everything • Intel 386 (1985) • Investments

– $200 million for design– $800 million for production facilities– Decides not to license, except to IBM– Compaq enters Desktop market with Intel 386

• 486 and WINTEL Collaboration: Emerging collaboration between MS & Intel– WINdows + INTEL = “WINTEL” platform

• Hardware advance precedes software advance– Microsoft Operating System (new DOS) not ready for 386– Need large installed base of hardware for software upgrade

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Building Brand Intel- “Intel Inside”

• Intel got lucky with “Red X” Marketing Experiment being a success.

• Dennis Carter felt the need to create an umbrella brand.• 1991 – “Intel Inside” logo was introduced and the

company’s co-op program with its OEM partners was officially launched.

• Initial reluctance gave way to whole-hearted acceptance within a year. 300 odd OEMs signed up by the end of the year.

• Intel’s Co-op or Ingredient Branding – Innovative Marketing Strategy

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Ingredient Branding• An ingredient is a component of a product which has its own

brand.

• Ingredient/Co-op branding at its best is a symbiotic relationship between the host and the ingredient brands.

• Important strategic considerations before opting for ingredient branding:-Is the ingredient core to functionality and tenders significantly different benefits than competitive offerings, simultaneously.

-Does the ingredient brand leverage the perceived value of the host brand and final product.

-Is the technology (C.A) sustainable over long term.

-Growth opportunities outside the alliance.

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Some Ingredient Brands

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Characteristics of an Ingredient Brand

• A clear differentiating functional attribute -e.g.

1. Teflon® = non-stick

2. Dolby® = ultimate sound reproduction

3. Intel® = microprocessor speed

4. Lycra® = recoverable stretch

• Associations of quality & performance.

• High target audience awareness, relevance and preference.

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The Ingredient’s Perspective

• A natural progression of branding the ingredient.• – Involves extending the brand franchise beyond the• direct customer, ultimately to the final consumer.

– Part of competitive marketing strategy.

– Industrial trade-names can evolve to become consumer• brands over time - e.g. Teflon®, ABS

• A leadership characteristic.• – once you “own” the attribute, difficult to be substituted.

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The Ingredient’s Trade-off

+• Builds sustainable

advantage through preference and specification.

• Supports price premium.• Secures business versus

competition.• Potential to transfer

positive equity fromhost brand.

-• Can limit future strategic

options - e.g. Intel in consumer electronics.

• Adds cost and complexity to business.

• Branding is rarely an ingredient supplier’s core competence.

• Risk of transfer of negative image from host brand.

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The Host’s Perspective

• Ingredient brands provide reassurance of content & product performance.

• Allows host brand to concentrate on building “lifestyle” image, unencumbered by need to communicate physical attributes & benefits.

• Relative ingredient brand strength, positioning and life-cycle all factors in decision.

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The Host’s Trade-off

+• Leverage ingredient brand to

increase perceived value, quality and performance.

• Gain market acceptance where ingredient brand profile is stronger than host’s.

• Increased distribution• channel acceptance.• Preferential access to

technology & marketing support from supplier.

• + Potential for higher margins & faster inventory turns.

-• Higher costs (ingredient price

and/or license fee).• Risk of negative image transfer

from ingredient -e.g. Teflon®.• Ingredient’s image dominates

host’s - e.g.Intel.• Lack of control

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Co-branding strategies Existing Market New Market

Target Market

Com

plimentary

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Ingredient Branding Dilemma

• Exclusivity• Supplier choice• Brand pre-eminence

• Ubiquity• Specification• Category relevance

“Ingredient branding hurts the top-end players just as often as it helps the bottom-end players”. -David Aaker.

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Exclusivity vs Ubiquity

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The problem faced by Intel

• Court rulings that chip labels with just numbers cannot be trademarked.

• Essentially meant that Intel’s product clones could flood the market.

• Consumers left baffled for choice and often left guessing about the authenticity.

• Intel had to help the consumers recognize its product through the brand Intel itself that connoted reliability and superior performance.

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Intel Focus on Ingredient/Co-op branding

• Intel Co-op Program marked the birth of brand Intel.• The “Intel Inside” campaign aimed to "educate both the

retail sales associates and the consumers about the value of Intel microprocessors, and to explain to them the differences between the microprocessors" - without the technical jargon.

• Many consumers were uncertain about the quality and reliability of microprocessors.

• Intel found a way of taking away the mystery of the product, gaining the confidence of the end consumer that "Intel Inside" represented quality and reliability.

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The Strategic Solution

The program intended to levitate Intel as a brand through 3 strategic steps:

1.Developing and using a brand logo in advertisements of OEMs.

2.Engaging tier 2 and 3 OEMs in the program via profitable propositions.

3.Prolific advertisement to create awareness about importance and superiority of Intel chips.

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Co-op Program Implementation

• Designing a unique logo.• Convincing tier 2 and 3 OEMs initially of the short term

and long term benefits of alliance and engaging them.• Launched “Intel Inside®” in 1991 with 200 OEMs,

including premium brands IBM & Compaq.• Direct advertisement aimed at organizational rather

product communication thus enabling a ‘brand consumer connect.’

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Assessment of Intel’s Co-op Program

• From 200 OEM licenses in 1991 to over 1000 OEM licenses today.

• Awareness of Intel logos prior to IB strategy was a meagre 24% in European PC market.That, within 2 years of its launch soared wildly to 94%

• From 200 OEM licenses in 1991 to over 1000 OEM licenses today.

• Worldwide sales within a year of launch of IB strategy rose by63%.

• By 2002 Intel broke into the list of top 10 most valuable brands.

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Brand Equity of Intel

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Intel breaks into top 10 brands

Year Brand Equity Interbrand Rank

• 2008: $31,261 mln 7• 2007: $ 30,954 mln 7• 2006: $ 32,319 mln 5• 2005: $ 35,588 mln 5• 2004: $ 33,499 mln 5• 2003: $ 31,112 mln 5• 2002: $ 30,860 mln 5• 2001: $ 34,670 mln 5

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“Intel Inside” – The Flip side of Ingredient Branding

• Failed with planned extension into consumer electronics.• “Over-association” with microprocessor category a

limitation.

• Launched sub-brands in core microprocessor market.

• More sub-brands expected for new bundled products or “platforms”.

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Major Customers of Intel

• Hewlett-Packard

• Dell

• Philips medical

• MUSICMATCH Inc.

• University of Oxford

• Microsoft Corporation

• Yahoo

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Major Competitors

• AMD• Motorola• Texas Instruments• Cyris• Chinese firms

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Five Forces Model for Intel

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Centrino Technology

Wireless LAN

Chip sets

Pentium M

Intel Centrino

Intel Centrino marketing campaign is the most important revision to Intel’s marketing strategy since “Intel inside”.

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Intel Jingle– A Success Story

“Only about 9% of all companies make use of sound to make their brands more distinct, recognizable and memorable…” - Brand Sense by Martin Lindstorm…and Intel with its unique trademark sound has been doing just that for years now.

• The Intel 3 second, 5 melodies jingle is played after every advertisement of the computer OEM’s since 1995. Has contributed exponentially in making Intel a household name.

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Important Strategic Steps for maintaining leadership position

• Stress upon where the most “value” is inside a computer. • Technology moves so rapidly that patents frequently

become obsolete– protect by know-how, branding, and scale

• Ingredient Branding– Allows focus, expertise, scale, “piggy-backing”

• Derived demand drives growth and rapid change. Intel

Position Goal Strategy

Leader Most Sales, High brand equity

Technological Innovation. Marketing Innovation

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THANK YOU