intel jaspreet

Running head: Case Study Intel Corporation








Case Study: Intel Corporation
ORM 680: Capstone in Strategic Management
Spring Arbor University
Jaspreet Kaur (Jas)
Terry A. O’Connor, Ph.D.
August 22, 2010


Abstract
This paper will discuss the history and development of the Intel Corporation, the characteristics of the microchip industry, the business level strategies including target market and competition; and finally the Intel’s acquisition with McAfee and the recommendations for the company.













Intel Corporation
Introduction
The purpose of this document is to analyze the existence of Intel Corporation. This document will define the history and development of the company. In addition, the paper will analyze the business strategies including target market and competition. And finally, the document will discuss the Intel’s acquisition with McAfee and recommendations for the company.
Intel Corporation is the world’s largest semiconductor makers with $10.8 billion of revenue, $4.0 billion of operating income, and $2.9 billion of net income. Today, the company designs and manufactures computing and communications components such as chipsets, hubs, switches, motherboards, microprocessors, wireless and wired connectivity products, laser printers, flash memory, imaging devices, products for Ethernet networks, storage media, and routers.
History and Development
Intel Corporation began its journey in 1968. The company was founded by two executives from Fairchild Semiconductor (later known as Silicon Valley), Robert Noyce and Gordon Moore. Noyce was the general manager at Fairchild, while Moore was the head of research and development team. During the 1980’s, a young Hungarian immigrant named Andy Grove was hired to run the Intel Corporations. Noyce, Moore, and Grove; were the first three members of the Intel family. At first, Robert Noyce and Gordon Moore decided to name the company “Moore Noyce”, but later it was named “NM Electronics”. Shortly after a year, the company experienced a name changed “Integrated Electronics”, “INTEL” for short.
To startup the new venture in the world of technology, Noyce and Moore approached a venture capitalist Arthur Rock; with a one page business plan. When asked about the business plan both Noyce and Moore replied that they were going to manufacture silicon memory chips for computers and calculators. They knew that if they could build a silicon-based integrated circuit that could function as a memory device, they could speed up computers, making them more powerful. These memory chips were known as DRAM (Hill and Jones, 2010, p. C93).
The Invention of 1103 Memory Chip and ROM
In October of 1970, the 1103 Memory Chip was manufactured. The 1103 memory chip was the revolutionary invention for the computer makers around the globe. This memory chip gave the startup boost to the company. By the end of 1971, 14 out of the world’s 18 leading mainframe computer makers were using the 1103 technology (Hill and Jones, 2010, p. C94).
The Read Only Memory (ROM) was the accidental discovery from 1103 memory chip. While manufacturing the 1103 memory chips, engineers at Intel were running into a problem for example, if an engineer made a mistake in programming the chip, he or she would have to burn another chip, which was a painstaking and time-consuming process (Hill and Jones, 2010, p. C95). Dov Froham, another ex-Fairchild researcher at Intel explored the problem and realized that there could be a potential to design an erasable and rewritten chip out of the 1103 flawless chip by shinning an ultra violet light on them. Fortunately, the idea worked and the ROM was discovered. The discovery of the ROM was a huge success for Intel Corporation. While the other competitors were struggling with the manufacturing problem of 1103, Intel was able to make profit on both the memory chips and had monopoly over ROM for two years.

The Birth of Microprocessor
In the November of 1971, the Intel Corporation invented its third most revolutionary product in the history called 4004 Microprocessor. The microprocessor was born out of an inquiry from a Japanese company. The company asked Intel if it could build a set of eight logic chips to perform arithmetic functions in a calculator it was planning to produce (Hill and Jones, 2010, p. C95). Although Japanese company decided not to build the calculator but Ted Hoff and Federico Faggin still went ahead and finished the project. As per an article in the Electronic News, 4004 microprocessor was the computer on a chip. Later that year, Intel management produced 8008 microprocessor which was the higher version of 4004 microprocessor.
From Personal Computer Revolution to the DRAM Debacle
The mid 1970’s was the era of new personal computer industry. The company named MITS produced the first personal computer and used an Intel 8080 microprocessor which was priced at $360.00 (Hill and Jones, 2010, p. C96). About the same time IBM also offered to purchase Intel’s 8088 microprocessor chip and by 1982, IBM agreed to buy 80286 microprocessor chips for their new PC named AT. Due to the high demand of AT, Intel’s microprocessor’s growth was also rising. By this time 70% of the microprocessors sold to PC manufactures were made by Intel (Hill and Jones, 2010, p. C97). This deal helped tremendously with Intel’s revenue growth.
The 1980’s was the era of disaster for the Intel’s DRAM business. Due to the new entrants from Japan, Intel started to lose DRAM business nationally as well as internationally. Although Intel’s microprocessor business was growing but company was taking a huge hit in the DRAM market. Due to the low DRAM market share, the Intel management had to decide whether to compete in this line or not? Finally, the unfortunate decision was made – Andy Grove and Gordon Moore decided to dissolve the DRAM business market.
The Microprocessor Business from 1985- present
This is the era of Intel’s growth, moving from Chip design to Computer design, acquisitions, new product lines, job cuts, product exited, and last but not the least; the very powerful invention of ATOM.
Research shows that from 1980’s to mid 2000’s, Intel Corporation has spent ample amount of money on designing newer, smaller, and faster chips. As per the data, by the mid 2000’s, the company was spending over $5.5 billion a year on R&D, or 15% of Sales. This spending was divided between chip design and improving manufacturing process (Hill and Jones, 2010, p. C99). In order to be competitive in the industry, Intel Corporation holds hundreds of patents on their products and the processes of manufacturing semiconductors. From the invention of i386 to Pentium, Intel has gained a huge market share.
The Intel Inside campaign of 1991 opened many doors for the company. The main goal of this campaign was to inform the customer that the Intel chip inside the computer would guarantee advanced technology and compatibility of the prior software. The spectacular success of the campaign helped company raised its sales from 60% to 80%. By 1994, some 1200 computer companies had signed on the campaign, adhering “Intel Inside” logo on their products. Because of this success, the Intel Corporation was listed as the third most valuable company on the planet.
Today, in order to quench customer’s thirst and be competitive in the industry, Intel Corporation is continuing developing new technological and advanced products. Company’s success lies in the ability to exceed the expectations of their customers, employees, and stockholders. Intel’s goal is “We are Intel Sponsors of Tomorrow™, not only through our technical innovation, but through our endless efforts in education, environmental sustainability, healthcare, and much, much more. We believe that technology makes life more exciting and can help improve the lives of people around the world. Therein lies the endless opportunity”, (intel.com).
The role of Andy Grove at Intel and his Management Style
Grove was one of the three original Intel family members. He was recruited from Fairchild semiconductors by Noyce and Moore. At Intel, he was appointed as a director of operations with the responsibility of getting products designed and manufactured at lower cost. In 1987, he became the CEO of the company.
Grove was considered to be one of the most effective managers of the late twentieth century. His management style was known for a confrontational “in your face” management style. He was very demanding, detail oriented, and autocratic leader who set high expectations for everyone, including himself. At Intel, he earned himself a nick name “Mr. Clean”. Grove was always looking for ways to drive down the cost and speed up the manufacturing process. He would control managers through a regular budgeting process that required them to make detailed revenue and cost projections. In addition, he would have monthly managers meeting in which the management from various parts of the company was required to do presentation on SWOT analysis. The goal was to get managers to step back and look at bigger picture, and to encourage them to help each other solve problems. During his management role, he pushed HR to institute a standard system of ranking and rating the employees that had four performance categories: “superior”, “exceed expectations”, “meet expectations”, or “does not meet expectations” (Hill and Jones, 2010, p. C94).
The Barrett Era
Craig Barrett started his career with Intel in 1993; he was appointed as the chief operating officer and later in 1998 became the CEO of the company. Barrett era is considered to be the embarrassing and failing era in Intel’s history. Barrett’s tenure as CEO was marked by an aggressive push into new markets (Hill and Jones, 2010, p. C101). By the 1990’s internet started to take center place in the computing industry. Barrett saw the opportunities and decided to push for product diversification in the areas of internet and wireless handsets. Unfortunately, the company had to face several failures and was unable to compete with strong companies such as Texas Instruments and Qualcomm.
During the management of Barrett, the company was experiencing management issues and product delays, which drove some customers to AMD. Because of the poor leadership skills, the company’s sales dropped tremendously. The early 2000’s was reported to be the worse years in the history of Intel.
Paul Otellini’s Platform Strategy
In 2005, Paul Otellini took over the responsibility of Intel Corporation and became the CEO. He came up with the idea of reserving the Pentium brand for higher end chips and creating a new brand, Celeron, for lower performance chips aimed at low-cost PCs. Introduced in 2003, the Centrino was a huge hit and helped to pull Intel out of its sales slump. By 2008, Intel was dominating the market for laptop chips with its chipset offerings (Hill and Jones, 2010, p. C102).
Otellini’s platform strategy played a huge role in Intel’s profit margin. His idea of designing separate “platform” for each product made a big difference in company’s growth rate. Otellini announced a sweeping reorganization of Intel, creating separate market focused divisions for mobile computing, corporate computing, home computing, and health care computing. Each division has its own engineering, software, and marketing personnel, and is charged with developing a platform for its target market (Hill and Jones, 2010, p. C102).
The Characteristics of the Microchip Industry
The microchip can be characterized as a small semiconductor which is used to carry out electronic functions in an integrated circuit. The microchip was first invented in 1958, but was commercially made available in1961. The original IC (integrated circuit) had only one transistor, three resistors and one capacitor and was the size of an adult's pinkie finger. Today, an IC is smaller than a penny which can hold 125 million transistors (inventorsabout.com). In early days, the microchip was only used in electronic gadgets such as computers and calculators but today microchip has become part of our daily lives. In today’s advanced world of technology, microchips are being used in cell phones, microwaves, printers, toys, automobiles, and last but not the least in living organisms.
The Business Level Strategies including Competition and Target Market
An organization's core competencies should be focused on satisfying customer needs or preferences in order to achieve above average returns. This is done through Business-level strategies. Business level strategies detail actions taken to provide value to customers and gain a competitive advantage by exploiting core competencies in specific, individual product or service markets. Business-level strategy is concerned with a firm's position in an industry (Albany.edu). There are four types of business level strategies: Cost Leadership, Focused Cost Leadership, Differentiation, and Focused Differentiation.
Today, Intel Corporation is the world’s largest semiconductor chip makers by revenue (intel.com). The company did not acquire this position by luck, the Intel’s management and executives had to work hard in order to achieve this title. For a company to be successful in the industry they have to differentiate themselves from their competitors.
Intel Corporation’s strategy of providing new innovative products, worldwide acquisitions and mergers, offering great customer service, and focus on their target market allows them to differentiate themselves from the other competitors such as AMD, Texas Instruments, Hitachi Ltd., Nikon Corporations, and Samsung Electronics. As per the yahoo finance report in 2010, Intel Corporation has had the highest revenue growth as compare to the competitors in the industry.
Intel Corporation’s major customers are: Original equipment manufacturers (OEMs) and original design manufacturers (ODMs) who make computer systems, cellular handsets and handheld computing devices, and telecommunications and networking communications equipment; PC and network communications products users (including individuals, large and small businesses, and service providers) who buy PC components and board-level products, as well as Intel’s networking and communications products, through distributor, reseller, retail, and OEM channels throughout the world (intel.com).


Differentiation business strategy
A company pursuing a differentiation business model pursues business-level strategies that allow it to create a unique product, one that customers perceive as different or distinct in some important way (Hill and Jones, 2010, p. 161).
Intel Corporation was born with a goal to create innovative products in the industry of computing and communications. The founders of Intel, Robert Noyce and Gordon Moore; had a mission to design a semiconductor chip and create a revolution in the world of technology. With that said, the company was able to produce a miraculous discovery that no one had imagined before. From the invention of DRAM to the birth of microprocessor, the Intel Corporation was able to monopolize the market.
Today, the Intel Corporation’s goal is to be the preeminent provider of semiconductor chips and platforms for the worldwide digital economy (intel.com). The management is continuously and precisely working hard to accomplish this goal. The company’s focus of producing innovative products by investing large amount of money in research and development, continuously looking ways to improve the manufacturing process, providing technical and educational seminars around the globe, prompt customer service in several languages, and finally, software development resources sets them apart from other competitors in the market. With all these qualities, Intel Corporation is able to gain competitive advantage and customer confidence, which helps the company increase profit revenues.
Intel’s acquisition with McAfee
Recently, Intel Corporation has agreed to acquire McAfee; the antivirus software company. The merger will help bring both the leaders in the technological world together as one power. This acquisition cost Intel Corporation $7 billion dollars. This deal could be a great opportunity for both the companies but would be a huge threat for the competitors. Intel Corporation did not buy McAfee just so they could have in house security built PCs but the main reason is growing industry of wireless network around the globe.
Today, almost every electronic gadget such as computers, calculators, blue ray technology, printers, kitchen appliances, and many more are equipped with wireless network technology. As the network connected industry is growing rapidly, there is a huge security risk as well. With that said, this merger will open up many doors for Intel Corporation as they will be able to provide vast variety of their products with security software integrated in it to the customers.
Moreover, this acquisition will benefit Intel Corporation with a great deal. The company will have a competitive advantage over other competitors in the industry. In addition, this merger will help gain the market share and revenue growth.
Recommendations for Intel
Although, Intel Corporation is doing remarkably good in the area of technology but it is my recommendation that the company should focus on two major aspects first, lowering the price of their products and second, invent products for the medical industry.
First, due to the globalization; today customers have the opportunity to buy their products from anywhere around the globe. For Intel to stay in the business, the company should find ways to lower the price of their products. In order to compete with other businesses in the market, Intel Corporation must develop products that are just not reliable but are also cost effective. Second, today the medical industry is growing rapidly. For companies to survive in the industry, they must come up with a product that can be served in the medical industry. I would advice Intel to design a microchip that could be used in the medical industry to serve the patients with their needs.
Conclusion
All in all, Intel Corporation is the leading semiconductor company in the universe of technology. The company strives to optimize the overall performance improvements of their products by balancing increased performance capabilities with improved energy efficiency. In addition, Intel offers products at various levels of integration, to allow their customers flexibility in creating computing and communications systems (intel.com). The $10.8 billion company was born with a focus to invent microchips but today the company has several product lines such as: microprocessors, chipsets, motherboards, and wireless and wired Ethernet network. Intel Corporation’s business level strategy of designing and manufacturing innovative products helps the company differentiate themselves from the competitors in the industry. And finally, Intel Corporation’s approach to acquire other scientific businesses helps increase the company growth and revenues.






References

Albany.edu. Retrieve August 21, 2010 from http://www.albany.edu/faculty/ja0754/bmgt481/lecture4.html
Hill, C., Jones, G. (2010). Strategic Management an Integrated Approach (9th ed.). Printed in
the United States of America: South-Western, Cengage Learning.
Intel.com. Retrieve August 21, from http://www.intc.com/corpInfo.cfm
Inventors.com. Retrieve August 21, 2010 from http://inventors.about.com/od/istartinventions/a/intergrated_circuit.htm
Yahoo.com. Retrieve August 21, 2010 from www.yahoo.finance.com