Intel is an American corporation that is engaged in semiconductor business and has its headquarters in Santa Clara, California. Its current mission is “This decade, we will create and extend computing technology to connect and enrich the lives of every person on earth”. Intel operates worldwide and in 2010 employed 85,500 employees (Intel Corporation, 2012). It was established in 1968 by Robert Noyce and Gordon Moore in the attempt to produce marketable semiconductor memory units. The company was originally focused on the development of DRAM and EPROM memory chips, however they had to divest from this business later on due to the low profitability and increasing competition. The first microprocessor was created by Intel in 1971. It was first accepted for the use in peripheral devices and then made its way into the PC business. The tenure of the current CEO Paul Otellini has been characterized by the increasing consumer focus and product differentiation based on customer segments. The development of specialized items, such as Intel Atom microprocessor for mobile Internet devices has proven to be highly successful as they target to the specific needs of the market. Today the company continues to lead in the semiconductor segment with 54 billion of reported net revenue for 2011.
The most important strength of the company is its market position that in 2007 was characterized by a nearly monopoly (77.46%) in the microprocessor segment for PCs and even a more significant leadership in the server market (84,73%).
Intel’s technological capabilities are also often quoted as one of the main strengths of the company. Innovation has been in the core of Intel’s vision from the very inception and it continues to play a significant role in the formation of the company’s competitive advantage.
Intellectual Property development has been another area of focus for Intel. Thus, it works closely with equipment vendors in order to develop technical solutions that are specifically tailored to the company’s needs. Such approach does not only ensure that Intel gets the most suitable products for its manufacturing facilities, but also helps the company to maintain a large number of patents and licenses, thus securing its position from the potential copycats. The only major IP dispute for Intel was the questionable decision to sign the technology-sharing agreement with AMD. However, in the long-run the sequence of court trials led to the losses on both sides and AMD did not manage to capture Intel’s market share and to maintain it for a long time.
One of the most commonly known weaknesses of Intel is the concentration of its customers. Despite the fact that Intel processors are inside the majority of personal computers, most of the demand comes from the major PC manufacturers such as HP and Dell. However, this approach disregards the rest of the PC producers, which are more fragmented but often occupy significant market niches.
Although the market for PCs is entering its maturity there is still quite a significant potential for growth. Hence, the dominant position of Intel is likely to remain lucrative in the future. Secondly, the development of specialized processors, such as Atom, which target to specific customer needs, offers wide opportunities for the company as it can capture a larger market share and better respond to customer demand. Moreover, the long-term partnership and agreements with major PC manufacturers, equipment developers and other counterparties make Intel’s position in the market rather strong.
Recent economic downturn has become one of the main threats that has hit nearly all industries in the world in 2008-2009. While global economy has been recovering since then the overall growth rates remain low, thus the demand for Intel products remains relatively low (Jelinek , 2012). Moreover, although today Intel enjoys nearly a monopoly in the market, the situation may change as new companies, in particular those from emerging markets, join the economy. The shift in consumption patterns towards developing world also creates a good environment for the development of local competitors (Advantage Business Media, 2011). It is further exacerbated by the nature of semiconductor industry, where the pace of research requires large investment in R&D, while it is relatively easy to copy new technology once it enters the market. Therefore, Intel should take steps to maintain its leadership not only in the current markets, but also in the emerging ones.
Another source of potential threats are the litigations against the company. Thus, the legal battle with AMD has not only cost a significant amount of money, but also distracts company’s attention and resources from further product development.
The success of Intel over its history and the dominating position that it has occupied in the semiconductor industry indicate that the company has chosen the right strategic orientation and remained focused on the right objectives. Therefore, the future leadership of Intel would depend on its ability to leverage its strengths and capture market opportunities in order to meet prospective challenges. Thus, the company should continue to maintain low production cost, while heavily investing in research and new technologies. The new strategy of creating products that cater to specific customer needs should also be continued, as the industry is approaching its maturity and diversification will be key to gaining the market share and to increasing customer loyalty. However, Intel should also consider expanding its outlook into new markets, thus diversifying its product and geographical portfolio. In particular, offering low cost processors for developing countries could allow capturing a significant portion of the markets that are not yet developed enough for traditional Intel products, but that promise to grow significantly over the next years. Moreover, such strategy is necessary to adjust to the new low-growth economic environment, as the traditional market for Intel does not offer as much growth as before, hence niche markets and new segments should be sought to remain competitive.
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