Class 2 PPT: Intel Case Study

NBC1 2008, (c) 2008 Jay A. Smith

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Class 2

Industry, Strategy, Business Model (continued)

Intel Case Study


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Announcements

Attendance listEmail accountsRegistration confirmations

Today: review, Intel case Next classes:

5/13 Sales & Marketing5/27 Dell Online Case Study6/3 Regional Goods Marketing Project


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4 C’s & 2 S’s Review

___ CompanySuppliers

Competitors

Substitutes

Channel Customers

Collaborators協力者 / 協業者 “5th C”


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Channel

How customer gets your product/service Direct – company’s own network

Sales Force, Mail, Telemarketing, Vending, Some Internet/Catalog, Company Store

Indirect – via one or more other companiesSales Agents, VAR (value added resellers),

Stores (department, convenience, supermarkets, Some Internet/Catalog (e.g. Askul)


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Collaborators

Partners, helpers, advisors, experts Directly or indirectly help the company Examples

Industry experts, user groups, educators, advisors Industry or trade groups Government, NPOs, universities Complementary product/service providers

Software makers for hardware Computer magazines, manuals, websites


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In Class Exercise

___ CompanySuppliers

Competitors

Substitutes

Channel Customers

Collaborators


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5 Forces Affect Industry Profitability

CompanySupplier

Power

New Competitor

Entry

Substitutes

Buyer PowerChannel / Customer

CurrentCompetitor

Rivalry

Profit = Price – Cost

cost

price

price

price


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Today’s Drucker

A business has 2 basic functions:

marketing

and

innovation.Peter Drucker


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Intel Case Study Technology Innovation

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

Marketing Innovation Intel Inside

Company is more than its products “Platform” (product series, same technology base)

Strategic Choices

Sustainable Competitive Advantage


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Intel 1968-1977 Case

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

Gordon Moore (creator of “Moore’s Law) Andy Grove joined, took personal “risk” First 2 DRAM products not successes 3rd product 1103 became world leader,

90% of Intel revenues (concentrated)


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Intel DRAM Strategy Strategy: push product design, be first to market

Design & process technology leader Investment in plant & equipment Costs drop over production volume (scale) growth Prices drop with competitive capacity DRAM generally not protectable with patents Japanese started introducing products more rapidly

Invested more heavily in production (44% vs. 22%) 1986 Intel decided to exit DRAM business

1/3 of R&D, but only 5% of Revs, was small player in market Japanese beat Intel on process technology (of commodity)


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Intel and Microprocessor 1970 CPU chipset order for Busicom calculator

Technology development “paid by customer” Bought rights for “non-calculator” use

Hard to see future even for Gordon Moore “…never gave it another thought” – Moore “We didn’t take it (PCs) seriously” – Grove

Non-sequential forecasting Sometimes easier for outsider to see

Exit: By 1984 mid-level managers shifting technology Hard to leave business that began company Especially for long time senior managers Mid-level managers closer to daily business realities


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Intel

IntelSuppliers

Competitors

Substitutes

Channel CustomersKyocera, etc

Motorola

AMD, TI, Cyrix

RISC

日本の DRAM

END

USER

Licensees-IBM-Others

DirectIBM

CompaqDell

Packard Bell

CHANNEL

SoftwareProviders• OS• Application

Equipment (sole/dual)

collaborators


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Apple/Motorola vs. IBM/Intel

First to Market Closed architecture Sole-provider

Exclusivity Proprietary

Big, famous name Standardized, open

architecture Components Software Scale economies

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

INTERDEPENDENCE OF COMPANIES (p.30, 22)

“Value Chain”

1994 Apple/IBM-Motorola PowerPC chip2006 Apple/Intel


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Intel Microprocessor ProgressionChip(bits)

Transistors

Year Introduced

Initial

Price

Licensees Intel-Chip Market Share

8086(8-bit)

29,000

1978 $360 12 30%

80286(16-bit)

134,000

1982 $360 4 75%

80386(32-bit)

275,000

1985 $299 1 (IBM) 100%-IBM

80486(64-bit)

1,200,000

1989 $950 ? ?


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386 Changes Everything (1985)

Intel 386 Investments$200 million for design$800 million for production facilitiesDecides not to license, except IBM

IBM choice allows Compaq entry and Win IBM delays selling, to create more closed

architectureCompaq enters Desktop market with Intel 386


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486 and Wintel Collaboration

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

de Emerging collaboration between MS & Intel

WINdows + INTEL = “WINTEL” platform Software + Brain

Software investments (past and future) Increasing switching costs


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“Intel Inside” – Marketing Innovation

Ingredient （材料） /Component （成分） Marketing 　 Another example?

Intel is “superior to other chips” Market maturity, education higher (2nd, 3rd PC) Buyer Intel preference moved from 60% to 80% AMD: “it shouldn’t matter which chip” but it DOES

IBM, Compaq resisted, but then gave in Couldn’t fight Intel Better to have branded “Intel Inside” “premium” chip 6% rebate for use in partner marketing

Fight competitors with technology, marketing, lawyers and money power (all pointed to same goal) 1997 spent $750 million More valuable than patent


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Ending Question

Is the internet good or bad

for Intel?


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Some Important Strategic Ideas Where is the most “value” in a computer? Success attracts competition, company must protect

against 2005 Intel has 82% of PC processor market

Technology moved so rapidly that patents became obsolete protect by know-how, branding, scale, luck

Small stuff that goes inside other stuff Allows focus, expertise, scale, “piggy-backing”

Thrived on derived demand driven growth and rapid change


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Typical Market Positions & Strategies

Position Goal Strategy

LeaderMost

Sales

-Grow Market

-Grow Share

ChallengerChallenge Leader

-Target Leader

-Target Small

FollowerGrow Carefully

-Maintain Base

-Grow Quietly

NicheFind Safe Space

Specialize

Toyota

Nissan

Mazda

Daihatsu


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Fragmented Industries (fragment= 破片） Market divided over many

companies No dominant leader Largest competitor may only

have a few percent market share Examples:

Restaurants Book stores Repair shops Publishing Pet shops Hair Salons Hotels

第一ラーメン

第二ラーメン

第三ラーメン

第四ラーメン

第五ラーメン

第六ラーメン

第七ラーメン

第八ラーメン

第九ラーメン

第十ラーメン

第十ーラーメン第十にラーメンSlice 13

Slice 14

Slice 15

Slice 16

Slice 17

Slice 18

Slice 19

Slice 20

Slice 3999

ラーメン


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Fragmented Industry Strategies

Construct formula facility Expand geographically Increase vertical integration Become low-cost producer Specialize by product/service Specialize by customer type Build brand


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Company

Who are we? Why are we here? What are our goals? What are our strengths? What are our weaknesses? What are our key competitive advantages? What is our market position? What is our strategy? What is our business model?


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Homework Assignment

Design your own personal “life” meishi

わしのめいし

1. Your Name (as you want it)- Nickname (optional)

2. Title (life position)3. Purpose statement4. Ideal living place(s)5. Identifying email address6. Anything else important

- Logo- Website- Business Name- Cool Phone Number

Print 15枚 copies pleaseSend me a file by 5/12

Email: [email protected] (any languages that fit)


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Homework Assignment

Design your own personal“life meishi”

Jay Andrew SmithInternational Educator

Promoting GrowthAnd UnderstandingAround the World

New York + San Francisco + Kagoshima + [email protected]

SAMPLE

name

“title”

Purpose/goal

Cool place(s)

Meaningful email/HP address

logo

www.vistaprint.jp, ppt, Paint, illustrator, etc. by hand all OK


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4 Cs + 2s – The Players Company (us)

Mission, Goals, People, Structure, Strategy, Model

Customer (goal) Who? How many, How strong, How important, Wants & Needs

Channel (path) Sales Team, Distributors, Service, Support, Partners

Competition (them) Who, Current, Future, Advantages, Position

Substitutes (other choices for customer) What, Advantages, Costs, New Technologies

Suppliers (inputs) Who, How many, How strong, How important to us,


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5 Forces Buyer Power (Customer /Channel)

How many, how big, how valuable, how sensitive Supplier Power

How many, how big, how important to us, to them Current Competitor Rivalry

How many, cost structure, capacity, positioning, exit costs New Competitor Entry

Ease of entry, cost of switching, Substitute Products/Services

Advantages/disadvantages, cost of switching

Documents

Class 2 PPT: Intel Case Study