Intel Presentation

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


The “Intel Inside” marketing campaign

(Issues to addressed)

The question is:

“Should we continue with the campaign, and if yes, in what

way”


Agenda

• Current status • Review of our competitive

environment• Objectives• Intel Inside • Corporate strategy• Strategy Plan • Implementation


The „Intel Inside“ Campaign

„Intel Inside“Brand building with the

consumer

Consumer


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


Industry Drivers

TQM,

“0 fault level”.

Price,for products of equal technological level.

R&D,–Time to market

–Costs

–Compatibility–Technological

innovation


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


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


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

?


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


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.


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)


The „Intel Inside“ Campaign

„Intel Inside“Brand building with the

consumer

Pull effectPush effect

Consumer


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)


Continuation of Marketing Campaign?

1) No, abort marketing campaign immediately, focus on R&D.

2) Yes, expand on R&D and existing marketing campaign.


Continuation of Marketing Campaign?

• Yes, why?

– The campaign is too young to be judged objectively

– High investment– Sign to stakeholders– We believe in it


Competitive Advantage of INTEL

0

50

100

150

200

1987

1995

Financial

Leverage

Service

Technological

Level

Brand Name


(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


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


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


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?


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


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


•We Thank you for your

attention

Documents

Intel Presentation