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Strategic Management Report

Name

Intel Incorporation

Lecturer

University

Date

Intel Corporation; Strategic Plan

Executive Summary

This report aims at conducting a strategic analysis of Intel incorporation and identifying strategic plan that would increase the company’s market share ans influence in the industry. The industry in which Intel operates is quite saturated due to the countless firms producing semiconductor-related products. The industry has over 30 firms dealing in the production of semiconductors. Almost a half of the company’s sales revenues originate from its overseas markets. Competition within this industry is not restricted to specific geographical locations, rather, companies compete for a share of the global market. The size of Intel company has been useful when it comes to competition. Intel can take advantage of disruptive technologies like  multi-cloud and artificial intelligence (AI),  edge-to-cloud, 5G, (Waters, 2020). The company should cut its expenses elsewhere and increase its investment in areas such as process technology development. Process technology is one of the most critical areas of research that the company should invest in.  Engaging in intensive research and development will enable the company to initiate development activities to enhance its manufacturing capacity. Engaging in intensive research and development will enable the company to initiate development activities to enhance its manufacturing capacity.

CONTENTS

Executive Summary    2

1.0 Introduction    4

2.0 Discussion and analysis    4

2.1 Internal Rivalry    4

2.2 Entry into the market    7

2.3 Substitutes and Complements    8

3.0 Strategic Options    9

3.1Research and Development    9

3.2Investment in process and security technologies    11

3.3Vertical Integration    12

4.0 Conclusion and Recommendations;    12

4.0Strategy implementation    13

References    17

1.0 Introduction

The surrounding market for Intel is quite saturated due to the countless firms producing semiconductor-related products. The industry has over 30 firms dealing in the production of semiconductors. However, just a few actually presents a legitimate competitive threat to the Intel incorporation. The company that poses a competitive threat to the Intel company include; firms, most notably AMD, IBM, and VIA, these are the major players in the industry (The Economist, 2019). The market for semiconductors has increased significantly owing to the technological revolution. The need for semiconductors has hit a global scale with every country seeking to revolutionize their technology. The need for semiconductors has hit a global scale with every country seeking to revolutionize their technology.

2.0 Discussion and analysis

2.1 Internal Rivalry

Almost a half of the company’s sales revenues originate from its overseas markets. Competition within this industry is not restricted to given geographical locations, rather, companies compete for a share of the global market. Internal rivalry is a challenge facing most established firms (The Economist, 2019). Previously Intel assumed that it’s unlikely that internal rivalry may threaten its position in the chip and microprocessor market. One of the most conspicuous technical problems evident in the Intel Incorporation is the loss of leadership in advanced chip making to TSMC, “the Taiwanese foundry company that manufactures chips for many of Intel’s competitors” (The Economist, 2019). As a result, some of Intel’s rivals have taken advantage of TSMC’s position in the market to leap in with new designs that have better performance relative to Intel’s chips. A major blow to the company in the recent past has been the loss of its contract to make chips for Apple’s Macs. The Apple company has begun self-designing of its processors.

The size of  the company has been useful when it comes to competition. Its economies of scale act as an insulation against competitive shocks (The Economist, 2019). Intel has been able to make up for high fixed costs through increased volume in the past and this has given the ability to maintain a lower per-unit production cost.” Most companies have had difficulty in accomplishing this. This has left Intel in a very favorable position, giving it a comparative advantage over its competitors both in price and non-price competition (The Economist, 2019).

In the semiconductor industry, growth has been below the overall market (Waters, 2020). In the past years, the industry has recorded negative growth and this is a potential worry for Intel company. As the market approach maturity, companies focus on poaching market share instead of expanding the market (Waters, 2020). As a means of protecting itself against falling market share, Intel company has continuously invested in research and development, however, these efforts have been overtaken by some of its key competitors such as TSMC (Ferguson, 2017). Previously, the company spent much on research and development compared to its competitors.

“This industry consist of other sub-markets specializing in other technologies. The technologies include media processing, micro-controllers and flash memories. Although all of them are categorized under the semiconductor group, there market segments can be a potential market growth to the company uncharacteristic of the saturated semiconductor industry (Ferguson, 2017). The company has a significant market share in most of the aforementioned segments and in order to secure a competitive position in the peripheral markets, the company will have to capitalize on the first-mover advantages. Besides, Intel will need to exploit any economics of scope present at any given time. Presently, the economics of scope in the industry are a much important in the semiconductor industry and are not less significant than the peripheral sectors. The competition in these industries is intense, however, Intel has a head start.  The competition in these industries is intense, however, Intel has a head start.  

“Although the company competes in a mature market, it is hardly affected by internal rivalry in the market. Internal rivalry is not a major problem to the chip giant in the processor market. Rather, its  main competitive concerns arises in the sub-markets for peripheral technologies such as media processing, and  flash memory, (Ferguson, 2017). Based on its long existence in the market, the company has already created dominance in certain regions and continue to establish competitive insulation.”Based on its long existence in the market, the company has already created dominance in certain regions and continue to establish competitive insulation.”

2.2 Entry into the market

Intel company is hardly threatened by entry of new firms into the market. The microprocessor industry does not experience much threats on the entry of other firms. In the recent past, Intel has maintained the top position in the industry until recently when it was overtaken . Intel’s products have a worldwide recognition and any new firm in the industry would be hard pressed to compete the technological giant.. Based on Ferguson’s analysis, as a result of the massive semiconductor contracts by Intel company, it is less threatened by new companies in the industry (Ferguson, 2017). A new company would find it hard to corner sufficient market share to compete and survive in the industry.”

The company’s  long ascendance in the chip industry has been thwarted by certain technical problems facing it. Recently, the company recruited a new chief executive officer with impeccable abilities (The Economist, 2019). Despite the competence of the company’s new boss and the strong backing of the move on Silicon Valley and Wall Street, the boss faces one of the toughest challenges in tech history (The Economist, 2019). Further, the company named its new finance executive, Mr. Gelsinger to replace Bob Sam who has been in the company since 2019. During this period, a US chip analyst states that  Mr. Swan “was dealt a difficult hand” but still “accomplished a lot” (The Economist, 2019). His honing strategy saw Intel out of markets such as NAND flash memory and communication where the company was underperforming. He made the company establish a strong financial performance. Despite this achievement, Mr. Sam could not solve the technical problems facing Intel, clouding its future product plans (The Economist, 2019). Despite this achievement, Mr. Sam could not solve the technical problems facing Intel, clouding its future product plans (The Economist, 2019).

2.3 Substitutes and Complements

Putting Intel back into its position is countered by three challenges that are interlinked. The first challenge involves proving that the company can have a mastery of improved ways of doing business while expanding into the chip markets beyond the traditional stronghold of making microprocessors for PCs and servers (Zimmerman, 2010). Alan Priestly, chip analysts, points out that the new chips in the market are produced by other companies and not Intel. Further, he states that Intel has already shown it can adapt to this design-only, or ‘fabless’ model, which is used by many of its competitors. But moving beyond its core markets — and the vertically integrated business model that was long the source of its success — has left it fighting on unfamiliar territory.

Another deeply rooted technical challenge facing the company is the slip in its internal manufacturing. In the previous years, Intel had dominance in the manufacturing of the chips, this was associated with the fact that Intel was always the first to perfect each new generation of process technologically (Waters, 2021). According to Waters (2021), Intel was the first to perfect the manufacturing recipe used to make its processors as chipmakers crammed more and more transistors into the same space. The manufacturing crisis in Intel resonates beyond the financial world and according to Waters (2021), it potentially leaving the US without a company on the leading edge of semiconductor manufacturing — the high ground of tech. The company also faces the challenge of mastering a new modular approach to designing chips. The company also faces the challenge of mastering a new modular approach to designing chips.

Recently The Economist reported that Intel lost the title of most valuable American chipmaker. The crown was seized by Nvidia, which was thought of until recently as little more than a specialized producer of chips for high-end video gaming systems (The Economist, 2019). Intel is not alone in failing to understand the role that GPUs would come to play in AI. But it has failed in its own alternative plan to develop specialized chips known as accelerators to handle the most data-intensive part of machine learning calculations. But it has failed in its own alternative plan to develop specialized chips known as accelerators to handle the most data-intensive part of machine learning calculations.

3.0 Strategic option

3.1.  Research and Development

One of the most consistent patterns in the leading companies is their inability to stay at the top of their industries when there is a technological revolution (Root et al., 2013). Technology evolves based on performance indicators evaluated by key customers in the mainstream market. A disruptive innovation results from an evolution of a ‘disruptive technology, which has lower performance compared to the conventional technology but has excellent characteristics in new value standards (Coccia, 2017).

Through Research and Development, Intel can take advantage of disruptive technologies like artificial intelligence (Waters, 2020). With this, the company’s products will be highly integrated and intelligent, thus promoting higher complexities and increased transformation programs. The IT departments should see this as an opportunity for driving the company’s product innovation and initiate a fundamental change in the way they do their business (Waters, 2020). The company must begin embracing new technologies and adopt differentiated hyperscale computing to realize a doubled performance computing capacity (Coccia, 2017). This will help them stimulate new complex product architectures in the company’s data centers. For instance, Intel uses Artificial Intelligence to enhance automation and promote their product validation capabilities. Besides, the technology helps them in creating more intelligent products that have higher performance and battery life.

Pratap, (2019), argues that organizations must be aware technologies that do not seem relevant in their current operations and production just because they don’t meet the needs of their mainstream customers. One of the greatest challenges that cost Intel its position is the inability to forecast future technological changes and remain within the needs of its mainstream customers. Based on the rational, analytical investment processes used by most higher performing organizations, it is almost impossible for a company to establish a solid reason for diverting resources from  meeting their obvious customer needs to other segments that are uncertain and seem insignificant. In most cases, focusing the needs of the mainstream  market and dealing with competitors accounts for much the company’s resources (Pratap, 2019). Therefore, most companies disregard the need to dive into the future and forecast possible changes and technological disruptions.  Waters (2020) explains that companies should use processes and incentives that works so well without taking their focus away from their mainstream customers. Besides, these processes should not blind the companies of the emerging markets and the new technologies in the industry.   

The company should cut its expenses elsewhere and increase its investment in areas such as process technology development. Besides, the company should increase its data-centric business investments and profit-dependent expenses. Apart from making the semiconductors, Intel company should increase its investments in areas such as Artificial Intelligence,  end to end solutions and autonomous driving (Root et al., 2013). The company should increase its investments in research and development to improve its competitive abilities and to enhance production of  new brands and technological solutions. Further, they should strengthen their R&D initiatives by increasing their investments  in other organizations and through acquisition of companies. Also, they may need to enter into research and development partnerships, or by acquiring licensing technologies directly. Although Intel has always prioritized research and development, there is a need to focus on key priority areas. It’s however notable that the company has been operating in its non-core businesses (Root et al., 2013). It’s however notable that the company has been operating in its non-core businesses (Root et al., 2013).

3.2 Investment in process and security technologies

Process technology is among the most critical areas of research that Intel should invest in. Although the company has been pro innovations, The company should increase its pursuit of innovation in packaging technologies to make new methods of designing chips. As the company continues to pursue innovation, there is a need to invest in security technologies. Intel should invest in built-in security features that are integrated into its road map and  its process of design. In the recent past there has been a revolution in the computational needs of clients , therefore, there is a need for improved security. In the year 2018,  Intel developed a Product Assurance and Security Group to oversee the security needs in their production.

3.3 Vertical Integration

Vertical Integration has been the  largest contributor of Intel’s influence in the technology industry. It is has a vertically integration with over 80% of its brands manufactured in-house (Semmler, 2010). This is approach is different from  those of its competitors who outsource . Intel company should therefore invest more in vertical integration since manufacturing their products facilitates monitoring and the refining their production techniques and minimizes costs. The resources and skills necessary for establishing a fabrication facility are quite demanding, and often prohibitive (Semmler, 2010). Its unfortunate that the company’s integration only applies to their microprocessor production and not to the communication Group which does not manage its production (Semmler, 2010). The company outsources much of its production and  as a result, it loses its competitive advantage in the production of the microprocessor.

This approach will lower the costs through economies of scale and increase the company’s competitiveness. It can be useful in solving problems associated with internal manufacturing but may not handle complexities caused by disruptive technologies. On the other hand, research and development strategy can help the company catch up with the market standards and produce products that are superior to their competitors. Besides, Research and development have a broad impact on the company’s revenues since it shapes its marketing strategies. Therefore the most viable option is an investment in research and development.

4.0 Conclusion and Recommendations

4.1 Strategy implementation; Investment and Implementation of  R&D program

Research and development (R&D) is the part of  Intel’s operations that  helps in obtaining knowledge for the development, designing, and enhancing its products, services, processes”  as well as its technologies. R&D strategies enable Intel to develop highly effective marketing strategies and to release new brands or an existing brands with improved capabilities. Further, this strategy enables the company to develop innovative marketing campaigns(Bozeman et al., 2013). Besides, the company can come with Innovative brands or features that may improve its market share by offering its clients unique products. Research and Development can enable the organization to follow or stay ahead of market trends while giving it relevance.

Research and Development is a function of the company’s internal department, however, the responsibility can be outsourced to a specialist or a university Pandit et al., (2011). Some companies especially multinational corporations prefer doing all three. Some of the outsourced projects can be conducted in other countries to enable the company leverage both the skills and talents and the knowledge of the local market.

According to Pandit et al., (2011),  Small companies are appealed with outsourcing, the concept is suitable for small firms with a new product concept but do not have the engineering or design personnel to test and create the product. This might not be appropriate for the Intel company since they have a solid engineering department and talented personnel. Therefore, the company will need to conduct their research and development internally to protect the patents of their innovation.Due to the rapid technological revolution and the impact of disruptive technologies, Intel will need to develop a body of knowledge about existing processes and technologies, or create an entirely new brand.

Besides engaging in the research, the company will initiate development activities to enhance its manufacturing capacity. According to (Miles, 2007) “development is when findings of a research are utilized for the production of specific products including materials, systems, and methods.” This process will involve designing and developing prototypes and processes  (Bozeman et al., 2013). There will be an integration of development and engineering to ensure that the research conducted creates the desired impact and meets its objectives. Pandit et al., (2011) describe development as “research that generates requisite knowledge and designs for production and converts these into prototypes.” On the other hand, engineering involves utilizing the established plans and research to produce products for sale.

The organization will begin by assessing customer needs and the trends in the market. This will require regular scanning and assessment of the market and determine whether Intel is offering or does well or if there is any trouble. If the assessment shows that the company is successful, they would need to encourage its staff to identify reasons for success. The outcome could act as a good source of benchmark for best practices within the company. If the company’s brand is not doing well, then the company must initiate brainstorming among its teams to identify the causal factors (Bozeman et al., 2013). It could be that a competitor is offers a better solution or its brand cannot meet the customer’s needs effectively.

Further, the company will need to identify objectives of the research and development strategy. They would need to allow their employees to see what the company’s objectives are and make them part of them. The major objective of any commercial institution is to increase revenues. If this is the case, It implies that the  Research and Development measures should aim at meeting this goal while delivering their customers’ expectations (Doorn, 2012). After defining the objectives, the company will need to define and design the research and development processes. Finally, the company will need to create a team to implement the program. This will be necessary especially if the project is within the agenda. The formation of the team must be cross-functional and can work towards a specific goal in a systematically. The company should ensure that its surrounding has a research mindset, this way, they will be in a good position to assist the core team where necessary. The company should ensure that its surrounding has a research mindset, this way, they will be in a good position to assist the core team where necessary.

The implementation of this project will take 1 year and will be evaluated based on the impact it creates on the company’s market share. The implementation of the project will require financial resources and human capital. The company will need to establish a team of skilled and talented individuals to implement the program (Bigliardi et al., 2011). Some of the challenges that may affect the program include economic disruptions, the rapid pace of technological change, and technical shortages in skilled staffing (Bigliardi et al., 2011). Besides, problems of funding may also pose a challenge to the implementation of the project.

References

Bozeman, B. and Melkers, J. eds., 2013. Evaluating R&D impacts: Methods and practice. Springer Science & Business Media.

Bigliardi, B., Galati, F. and Petroni, G., 2011. Collaborative modes of R&D: the new challenges for personnel management. International Journal of Business, Management and Social Sciences, 2(3), pp.66-74.

Coccia, M., 2017. Disruptive technologies and competitive advantage of firms in dynamic markets. CNR-IRCRES, Working Paper, (4).

Doorn, N., 2012. Exploring responsibility rationales in research and development (R&D). Science, Technology, & Human Values, 37(3), pp.180-209.\

Ferguson E. (April 10, 2017) Intel Corporation Five Forces Analysis (Porter’s) & Recommendations. Retrieved from http://panmore.com/intel-corporation-five-forces-analysis-porters-recommendations

Miles, I., 2007. Research and development (R&D) beyond manufacturing: the strange case of services R&D. R&D Management, 37(3), pp.249-268.

Pandit, S., Wasley, C.E. and Zach, T., 2011. The effect of research and development (R&D) inputs and outputs on the relation between the uncertainty of future operating performance and R&D expenditures. Journal of Accounting, Auditing & Finance, 26(1), pp.121-144.

Prataop A. (June 11, 2019). Research and development at Intel: Key Focus areas, Retrieved from https://notesmatic.com/research-and-development-at-intel-key-focus-areas/

Root, Andrew, Simona Jankowski, and Seogju Lee, (2013). “Intel Corp. (INTC) Technology: Semiconductors.” Strategic Review. Goldman Sachs Global Equity Research.

Semmler, A., 2010. Competition in the microprocessor market: intel, AMD and beyond. University of Teier, pp.1-7.

TechPolicy@Intel (March 23, 2021). Intel’s commitment to U.S Innovation and Supply Chain Security, Retrieved from https://blogs.intel.com/policy/2021/03/23/intels-commitment-to-u-s-innovation-and-supply-chain-security/

The Economist (May 11, 2019),Intel’s new boss wants to teach the chipmaker new tricks. Retrieved from https://www.economist.com/business/2019/05/09/intels-new-boss-wants-to-teach-the-chipmaker-new-tricks

Waters R. (January 4, 2021), Intel looks to new chief’s technical skills to plot rebound. Retrieved from https://markets.businessinsider.com/news/stocks/intel-looks-to-new-chiefs-technical-skills-to-plot-rebound-9693878

Waters R. (July 9, 2020),Where did it all go wrong for Intel? Retrieved from https://www.pcgamer.com/what-went-wrong-intel/

Waters R.(July 24, 2020). Intel shares punished after delay to next-gen microchips. Retrieved from https://markets.businessinsider.com/news/stocks/intel-shares-punished-after-delay-to-next-gen-microchips-9109507

Zimmerman, J., 2010. Corporate entrepreneurship at GE and Intel. Journal of Business Case Studies (JBCS), 6(5).

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