Intel's Business Environment - Case Study Example

Strategic Management Executive Summary Intel is a multinational giant software corporation, occupying the largest market share in PC component manufacturing industry. Being the market leader brings a lot of challenges for Intel. However these are the effective strategies of Intel that has helped the firm in maintaining the top most position. The effective marketing strategies of Intel include product diversification, market penetration and most importantly offering qualitative products and services at competitive prices. Intel being the market leader is also exposed to many threats that does affect the performance of Intel to a certain extent, however effective strategies and team work allows Intel to occupy more market share and remain ahead in the competition. Content Page Introduction ----------------------------------------------------------------------------------- 4 Intels business environment ---------------------------------------------------------------- 5 Five Forces and PESTLE analysis of Intel --------------------------------------- 5 Political Factor -------------------------------------------------------------- 5 Economic Factor ------------------------------------------------------------ 6 Social Factor ----------------------------------------------------------------- 6 Technological Factor --------------------------------------------------------6 Legal Factor ------------------------------------------------------------------ 6 Environmental Factor ------------------------------------------------------- 6 Porter’s Five Forces ------------------------------------------------------------------ 6 Analysis of the strategies of Intel ------------------------------------------------------------ 8 Critical Appraisal of Strategy ---------------------------------------------------------------- 9 Conclusion -------------------------------------------------------------------------------------- 10 References -------------------------------------------------------------------------------------- 12 Introduction Intel is considered to be one of the top manufacturers of the semi-conductor chips. Around 80 percent of the computers present all over the world have Intel microprocessors embedded in them. The company during all this while has succeeded to develop modern incorporated digital technology components, as well as platforms, and majorly the integrated circuits in order to help the communication and the computing industries. The company has been able to acquire a very strong market positioning in the semiconductor markets, which has resulted in enhancing its brand image. However, currently the high level of competition in the semiconductor industry is affecting the profitability and the market share of Intel. Intel currently needs to come up with a strategy that would help it to maintain its current market position and increase its share in the semiconductor industry (Anon., 2013). The industry manufacturing computer components is actually considered to be the part of a much larger industry called the semi-conductor industry. When we refer to this industry particularly as the semi-conductor industry, we are actually referring to its broader aspect as there are many specific industries present inside this massive giant industry, such as the microprocessor industry and the memory device industry. The term semi-conductor industry is therefore considered to be a bit narrow while referring to such massive giant and also for the purpose of analyzing the business environment of Intel. The business environment of Intel consists of companies (including Intel), which have worked hard to make their industry a booming one in the present environment for quite many reasons. In the modern world the organizations as well as the users are getting more and more associated with technology because of the increase in the users of Internet. Technology is being used by companies to increase their competitiveness in specific operating industries, which in the long run helps them to achieve high level of effectiveness and efficiency, gain a competitive edge and allows them to offer products with the costs lower than the market offerings without any compromise on the quality (Anon., 2013). Intels Business Environment  Five Forces and PESTLE analysis of Intel The PESTLE analysis is considered to be essential for Intel as well as for the computer component manufacturing industry for analyzing its external business environment. Changes that occur in the external forces affect the production of the products, their positioning and also the market strategies being designed by the firm operating in a particular industry. It also affects the type of services being offered by the firm and also their choice of business (Anon., 2013). Political Force Intel is a one giant multinational company operating in the computer component industry according to the set of standards imposed by the government of different countries. Any kind of political instability that may occur in the country may also affect the economic growth of that country. Third world countries may increase the profit of the computer component manufacturing industry drastically but it is the political instability of these areas that restricts firms from doing business there. Similarly the strict policies of some countries may affect the investment deals of Intel and results in causing heavy loss in market share of Intel (Anon., 2013). Social Culture Social values for e.g. the demographic factors such as the age distribution, population, literacy rate in the country, etc., or the culture factors such as the customs, rituals, beliefs, social attitudes, influence the business practices to a great extent. The reason behind the computer component manufacturing industry investing in China is their high population and literacy rate. The countries with large population and high unemployment rate may serve as a source of cheap labor for the industry. Technology Technological factors are a source of offering great opportunities to the workers but computer component manufacturing industry must also keep on mind the related threats while operating in their particular industry. Any technological innovation may have an influence on the marketing practices, products, services, distributors, suppliers and also on its competitive position. It may also serve as a source of opening the door to several new markets and change the relative position of the PC component manufacturing industry, rendering the products and services existing in the market. Technological changes may help in reducing the cost, creating the shortage in the technical skills and creating shorter production runs, which may help in changing the expectations and values of the customers as well as the employees. These aspects may be very important for Intel as they might serve as major survival points for the firm. Porter’s Five Forces Buyers (Medium threat): the PC component manufacturing industry is somewhat vulnerable when it comes to the bargaining power of the customers. In the recent years the customers have been exposed to a number of alternatives for personal computers. There are smart phones, tablets, etc. present as a substitution for PC. Suppliers (Low threat): the bargaining power of the suppliers in the PC manufacturing industry is low as the buyers have a number of options and a larger market of suppliers offering products at competitive prices. The suppliers operating in the PC component industry are focusing more on the relational as well as operational performance for increasing the level of satisfaction of the customers. Entry Barriers or threats of new entrants: the cost of entering the computer component industry is very high; therefore the established firm in this experience low threat in this industry. Currently there are five major companies acquiring nearly all the market share of the computer component industry, which discourages the new entrants from entering into this market. Threats of Substitutes: although it is difficult for new entrants to enter the computer component industry; however there are emerging industries such as tablets and smartphones industries that do affect the sales of the computers. As the popularity of tablets and smartphones increases among the public; the sales of computer is likely to decline, as the customers view these products as an alternatives for computers. Rivalry: fierce competition exists between the top firms operating in the computer component industry. All of these firms are trying to provide customers with high quality machines at competitive prices. However some of these companies are focusing on innovation, in order to provide new technological experience to the customers. Analysis of the strategies of Intel The strategic analysis of Intel can be drawn by studying the relationship of the company with its external environment. The dynamic business environment of Intel offers several threats as well as opportunities at the same time. Value Chain of Intel The elements which comprise of the of the Value chain in the computer manufacturing industry include: inbound and outbound logistics, operations, sales and marketing and services. Intel believes in adding valuable activities in its supply chain while eliminating the ones that no longer adds value to the operations of the firm. Intel has many suppliers from which it acquires many of its component parts (Inbound logistics). Intel has successfully launched a resource planning system for improving its inventory control operations. This system allows Intel to make the delivery of products much faster (Operations). Intel is working hard to keep its storage and inventory cost to minimum allowing its inventory stock to be available whenever there is a need (Outbound logistics). “Intel inside” is one of the most successful marketing campaign of Intel; which eventually boosted the sale of Intel’s central processing units (Marketing and sales). Intel encourages e-commerce and is moving online for the sales of its products. It is easy for the customers to place their order online rather than placing their orders through fax or phone (service) (Anon., 2013). Business Model of Intel The business model of Intel comprises of different strategies; which may take into account product, performance and sales. The product strategy may take into account the standard product offered by the computer component manufacturing industry and how Intel’s offering is distinctive from that of its competitors. Performance is considered to be an integral part of Intel’s strategy; for they offer high performance product to its customers. The market and customer strategy of Intel includes offering products as per the demand of its customers. The products are manufactured at the manufacturing plants of Intel as they don’t believe in outsourcing the manufacturing operations. While carrying out its sale operation Intel takes the help of intermediaries for reaching the customers. Strategic analysis may play a significant role in the success of a company, especially the ones belonging to the dynamic software industry. Intel definitely occupies a strong place in the semi-conductor industry, which contributes in enhancing the brand image of the corporation. The competition in the software industry is very intense which usually leads to decreasing the profitability and market share of the companies. Analyzing the strengths, weakness and several other aspects may help in determining the strategic position of Intel in the software industry. Intel has a globally recognized brand name and since many years it has been enjoying the loyalty of its customers. The direct customers of Intel include the original designs and equipment manufacturers. They also sell their products to other manufacturers; especially the ones manufacturing a wide range of communications and industrial equipment. Their customers also include the PC users and also the product retailers, distributors and resellers. Intel is the creator of microprocessors for computer and memory devices. Based on sales, Intel is considered to be the largest producer of the semi-conductor chips. However at various stages Intel has been accused of using divisive strategies for the defense of its market position in the industry. In order to stay ahead in the competition Intel offers some distinctive features that are not usually offered by their competitors. The unique selling point of Intel is its best value, lowest prices and its most modern technology. A very successful strategy of Intel was when it launched its “Intel inside” campaign. Intel asked the dealers and manufacturers of dealers to include the “Intel inside” logo on their product. Intel in return rewarded them with compensation. This is also considered as one of the USPs of Intel. Considering the current market conditions, market penetration and product development can be effective strategies for Intel. The advancement in the existing technology may also provide new opportunity for Intel to offer new products in computer component manufacturing industry. Critical Appraisal of Strategy Intel’s future strategies focus on the fact that environmental sustainability and technological advancements should go hand in hand. The philosophy of Intel is prominent from its energy efficient products. Intel believes that only innovation is considered to be the key for sustainability. Intel plans to decrease the price of its chipset there are more chances that it may end up facing a huge loss, but putting mark up on upgrades can be a mean of increasing the market share. Joint advertising with corporate giants like Microsoft, EA games and Oracle can be beneficial for Intel as it may succeed in getting more exposure. It will also motivate the potential buyers to give priority to the Intel processors while purchase any gadget. Conclusion According to statistics, in the last few years the PC component industry is not performing well due to which they have been suffering from loss in revenue, sales and as well as productivity. Lately the performance of the industry has shown improvement. At the time when most of the PC component manufacturing companies were suffering, Intel was still able to hold its lead. There is no doubt about the fact that Intel has the entire competency to maintain its place as a market leader; however timely threat can be a bit critical for the company’s condition. Intel may succeed in increasing its market share by availing the opportunities present in the external environment. References Anon., 2013. Corporate Strategy. [Online] Available at: http://www.intc.com/strategy.cfm [Accessed 13 March 2014]. Anon., 2013. Industry Analysis. [Online] Available at: http://www.bidnessetc.com/business/intel/industry-analysis/ [Accessed 13 March 2014]. Anon., 2013. PESTLE Analysis. [Online] Available at: http://pestleanalysis.com/ [Accessed 13 Mmarch 2014]. Anon., 2013. PESTLE Analysis. [Online] Available at: http://www.businessballs.com/pestanalysisfreetemplate.htm [Accessed 13 March 2014]. Anon., 2013. The Industry Handbook: The Semiconductor Industry. [Online] Available at: http://www.investopedia.com/features/industryhandbook/semiconductor.asp [Accessed 13 March 2014]. Read More