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Case: INSEAT/IntelCourse: Business Strategy4th of April 20014th of April 2001 Course: Business Strategy Case: INSEAD/Intel
Intel Inside
4th of April 2001 Course: Business Strategy Case: INSEAD/Intel
Anders Vest Christensen, Christopher Plantener Benjamin Esser, Michael Sönderby, Niklas Holck
Case: INSEAT/IntelCourse: Business Strategy4th of April 20014th of April 2001 Course: Business Strategy Case: INSEAD/Intel
The “Intel Inside” marketing campaign
(Issues to addressed)
The question is:
“Should we continue with the campaign, and if yes, in what
way”
Case: INSEAT/IntelCourse: Business Strategy4th of April 20014th of April 2001 Course: Business Strategy Case: INSEAD/Intel
Agenda
• Current status • Review of our competitive
environment• Objectives• Intel Inside • Corporate strategy• Strategy Plan • Implementation
Case: INSEAT/IntelCourse: Business Strategy4th of April 20014th of April 2001 Course: Business Strategy Case: INSEAD/Intel
The „Intel Inside“ Campaign
„Intel Inside“Brand building with the
consumer
Consumer
Case: INSEAT/IntelCourse: Business Strategy4th of April 20014th of April 2001 Course: Business Strategy Case: INSEAD/Intel
Industry Overview
Rivalry in the industry: Strong
– Favorable Growth Trend– Multiple players like AMD
(clones) trying to catch up with Intel
– High pressure to innovate
Substitutes: High–ClonesEntry barriers: High
-High capital investment-High R&D cost-Economies of scale, learning curve-Short product life cycle (3 years)-Patents
Supplier Power: low–Supplier of raw material fragmented–Conventional materials used
Buyer Power: Low–Buyers: OEM like IBM, HP and Compaq–Some degree of backward integration–OEM’s fairly fragmented
Case: INSEAT/IntelCourse: Business Strategy4th of April 20014th of April 2001 Course: Business Strategy Case: INSEAD/Intel
Industry Drivers
TQM,
“0 fault level”.
Price,for products of equal technological level.
R&D,–Time to market
–Costs
–Compatibility–Technological
innovation
Case: INSEAT/IntelCourse: Business Strategy4th of April 20014th of April 2001 Course: Business Strategy Case: INSEAD/Intel
Facts and Figures
• Intel holds 80% market share in the microprocessor market (worth $1.5 bill.)
• Closest competitor AMD and clones• Exponential growth expected• Financials:
– Revenue: $ 4.8 billions– Net income: $ 0.8 billions– ROE of 18% in 1991
Case: INSEAT/IntelCourse: Business Strategy4th of April 20014th of April 2001 Course: Business Strategy Case: INSEAD/Intel
Stock Performance
November
Dezember
January
February
MarchApril
MayJune
July
August
September
October
November
0
10
20
30
40
50
Stoc
k pr
ise
in $
Overview of 1991
Intel
AMD
Case: INSEAT/IntelCourse: Business Strategy4th of April 20014th of April 2001 Course: Business Strategy Case: INSEAD/Intel
Financial overview Chart
79 84 89 94
286 Processor
386 Processor
486 Processor
586
686
786
0 $
1 000 $
2 000 $
3 000 $
4 000 $
82 83 84 85 86 87 88 89 90 91
Net RevenueR&DNet Income
Cash Cow
Star
?
Case: INSEAT/IntelCourse: Business Strategy4th of April 20014th of April 2001 Course: Business Strategy Case: INSEAD/Intel
Intel Corporation(Internal Analysis)
Strengths
• R&D: Technology leader:
• R&D investment between 11 and 14% of Revenues
• Strong capital base• current assets app. $ 4,1billion
• 80% of the market (economy of scale)
Weaknesses
• Lacking patents protection
• Patent Cross Licensing Agreement with AMD until 1995
• Extreme dependence on R&D
Case: INSEAT/IntelCourse: Business Strategy4th of April 20014th of April 2001 Course: Business Strategy Case: INSEAD/Intel
Intel Corporation(External Analysis)
Opportunities
• Exploding market
• Setting industry standards
• Control over product life cycle
Threats
• Anti-trust regulations
•Increased competition
•Cloning
•OEM’s have forced Intel to sell technology to AMD
• OEM’s may enter the industry.
Case: INSEAT/IntelCourse: Business Strategy4th of April 20014th of April 2001 Course: Business Strategy Case: INSEAD/Intel
Objectives
Technology Leadership
486 586 686SX DX DX4
90%40%PublicRecognition 40%
Big 3 Participationin Intel Inside IBM
HPCOMPAQ COMPAQ HP
IBM
LegalStrategy PatentsLawsuits
Short Run(Jan 1993)
Present(Nov 1991)
Long Run(1995)
(80 % market share)
Case: INSEAT/IntelCourse: Business Strategy4th of April 20014th of April 2001 Course: Business Strategy Case: INSEAD/Intel
The „Intel Inside“ Campaign
„Intel Inside“Brand building with the
consumer
Pull effectPush effect
Consumer
Case: INSEAT/IntelCourse: Business Strategy4th of April 20014th of April 2001 Course: Business Strategy Case: INSEAD/Intel
Negative aspects
Positive aspects
Assessment of current Marketing Campaign
•Facts:
– Reimbursement of OEM‘s advertising cost up to 50% – Costs of appr. $ 250 million– Logo sticker on certain products
• Positive Aspects–Positive response from PC manufacturers having agreed.
• Negative Aspects–Big- 3 not signed up yet.–Press: “Why brand processors?”.–Positive in the short run but minimal effect in the long run (see IBM)
Case: INSEAT/IntelCourse: Business Strategy4th of April 20014th of April 2001 Course: Business Strategy Case: INSEAD/Intel
Continuation of Marketing Campaign?
1) No, abort marketing campaign immediately, focus on R&D.
2) Yes, expand on R&D and existing marketing campaign.
Case: INSEAT/IntelCourse: Business Strategy4th of April 20014th of April 2001 Course: Business Strategy Case: INSEAD/Intel
Continuation of Marketing Campaign?
• Yes, why?
– The campaign is too young to be judged objectively
– High investment– Sign to stakeholders– We believe in it
Case: INSEAT/IntelCourse: Business Strategy4th of April 20014th of April 2001 Course: Business Strategy Case: INSEAD/Intel
Competitive Advantage of INTEL
0
50
100
150
200
1987
1995
Financial
Leverage
Service
Technological
Level
Brand Name
Case: INSEAT/IntelCourse: Business Strategy4th of April 20014th of April 2001 Course: Business Strategy Case: INSEAD/Intel
(2)Corporate Strategy
Alternatives to chosen corporate strategy• Cost leader; production optimization • Focus strategy; focus on core products
R&D strategy
Support: Legal Strategy
Marketing
Case: INSEAT/IntelCourse: Business Strategy4th of April 20014th of April 2001 Course: Business Strategy Case: INSEAD/Intel
Marketing Strategy-Plan & Execution
1) Product
• Continuous introduction of new improved processors (see graph)
• Keep the competition struggling
2) Price
• Premium pricingon new processors
• Competitive pricingon older processors
3) Promotion
• Push Strategy (Big 3 directed)– Image and end consumer pull effect– Joint Intel/OEM marketing campaign
incentive
• Pull strategy (end consumer directed)– Indirect through OEM/Intel campaign– Direct through media
Marketing
Strategy
Case: INSEAT/IntelCourse: Business Strategy4th of April 20014th of April 2001 Course: Business Strategy Case: INSEAD/Intel
R&D Strategy-Plan & Execution
Develop product portfolio:
1992 1 year 2 years
786 Processor 886 Processor
Improved sub product lines for 486/586
R&D spending 1991: $618 million
Realistic R&D spending 1993: 2 x $618 million
Dept. OfImprovement
Dept. Of innovation
Case: INSEAT/IntelCourse: Business Strategy4th of April 20014th of April 2001 Course: Business Strategy Case: INSEAD/Intel
Tracking initiatives
Marketing• Brand Recognition
– Consumer surveys
– Feedback from OEMs
• Big 3 sign up
R & D• Technological
leadership– Frequent sreening of the „cloning
market“
– Benchmarking against competitors
– Close cooperation with OEM‘s (are we staying ahead)
• Increase freaquency of Product Innovation
– Milestones: launch of products
– Introduction of project mgt. – How is the competitors market
share developing?
Case: INSEAT/IntelCourse: Business Strategy4th of April 20014th of April 2001 Course: Business Strategy Case: INSEAD/Intel
Conclusion
• Cloning is the biggest threat to our technological leadership
• The marketing campaign will help differentiate Intel from the clones
• Together with our R&D strategy the marketing campaign will help us reach our main goal of sustaining current market share of 80% in 1995
• Strategy review
Case: INSEAT/IntelCourse: Business Strategy4th of April 20014th of April 2001 Course: Business Strategy Case: INSEAD/Intel
What has really happened?
- Intel pursued an aggressive “outspend, out-manufacture, out-develop”-strategy
- Intel today the third biggest company in the world
- “Intel Inside” one of the most successful marketing campaigns in history
- Absolute market leadership until today
Case: INSEAT/IntelCourse: Business Strategy4th of April 20014th of April 2001 Course: Business Strategy Case: INSEAD/Intel
•We Thank you for your
attention