Intel Corporation | EssayIvy.com

Running head: INTEL CORPORATION

Intel Corporation

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INTEL CORPORATION 2

Internal and External Environment

There are external and internal environmental factors that affect how organizations

operate which in turn affect strategy formulation and organizational performance. The difference

between internal and external environmental factor is the organization's ability to control them

that is, those that are within the control of the organization are internal factors while those

outside controls are external factors. Internal factors include organizational leadership, employee

strength, innovation, strategic, employee and financial risks, and internal communication. On the

other hand, external factors include strategic partners, regulators, customers, suppliers, and

competition. Intel Corporation is one of the largest players in the technology and communication

industry that manufacture computer and other appliances chips whose internal and external

environment has contributed significantly to its success.

The company has a complex leadership structure comprising of the executive

management, corporate and appointed vice presidents and lower management positions. Majority

of the organizational leaders were recruited through headhunting and internal promotions, for

instance, the case of the board chairman (Intel Corporation, 2018). For this reason, the company

has highly qualified and committed management team that continues to steer the organization

through successes. Furthermore, the leaders play a crucial role in the growth of employee

strengths and mitigation of the various internal risks faced by the organization. The recruitment

strategy employed by the leadership has enabled it to achieve workforce diversity and

recruitment of specialized leaders some of whom are expatriates, has instilled the culture of

innovation in the organization.

Intel Corporation has made efforts to adjust to the external environment through putting

in place measures such as abiding by all the legal requirements and transparency for the

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regulators and strategic partners respectively. Furthermore, the company fosters investor

relations through the creation of value by engaging in practices such as corporate social

responsibility, promotion of good governance and provision of high-quality products and

services to the market (Intel Corporation, 2018). The company also provides systems that allow

for easier dissemination of information to relevant stakeholders and collection of feedback

necessary for decision making. The external communication factor is very crucial to the

organization as for instance, the collection of feedback is necessary to facilitate product and

service innovation without forgetting optimal formulation of solutions for disputes that may

arise.

Five Forces of Competition

According to Porter, there are five forces that shape the structure of competition in a

particular industry, these include; bargaining power of suppliers, competitive rivalry, bargaining

power of the organization's customers, and the threat of entry of new competitors and threat of

substitute services and products in the market. Of these five, Intel Corporation is significantly

affected by two forces namely presence of a large number of substitute products and services and

the high bargaining power of the customers. It is important that these factors have significantly

affected the structure and focus of the organizational business strategies as the company tries to

adjust to the prevailing condition in the market.

Firstly, the presence of a large number of substitute products in the market increases the

number of threats arising from the substitute products. It should be noted that competitors in the

market have an extensive financial base which can allow them to low product and service prices

while maintaining quality without affecting their short-term and long-term performance (Dobbs,

2014). For instance, competitors such as Microsoft and AMD also produce high-quality similar

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products and have a large financial base that can enable them to maintain price flexibility in the

long-term. Basing on the fact that Intel Corporation is almost at par with its competitors,

customers can easily shift to substitute products available in the market since the switching costs

are significantly lower. Here, customers require less time and effort to change suppliers based on

their preferences. Furthermore, the presence of these competitors denies Intel Corporate the

competitive advantage and the power to control prices, in the end, giving bringing all the players

in the industry at a level (Dobbs, 2014).

Intel Corporation's customers have high bargaining power arising from a large number of

substitute products and services in the market and rivalry among the existing competitors such as

Microsoft, Motorola, AMD, and IBM. Rivalry from other players in the market is beneficial to

the customers as those companies tend to focus on satisfying customers’ needs such as

improvement in quality and lowering of prices (Dobbs, 2014). It is a common phenomenon to

find that customers would switch to using competitors’ products or service when they lower

prices but maintains quality. In such a scenario, the rivaling competitors tend to outsmart each

other by engaging in research and development to come up with innovative products that are not

only cost-effective but also of high quality. The higher number of substitute products and

services is further facilitated by the presence of many sellers in the market (Dobbs, 2014). It

should be noted that, with economic development in other regions of the world such as Asia, the

threat of entry by new competitors is imminent and it is likely to increase the bargaining power

of customers in determining quality and prices of products and services.

Addressing the Forces

Intel Corporation can increase the switching costs associated with the use of its products

and services so as to limit the customers’ flexibility in switching between different substitutes in

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the market. Several strategies can be employed to trap customers by increasing the switching

cost such as; Base product, data, learning curve, industry standards and servitization traps. The

company can create a consumable trap by selling the Intel microchips to the market at a cost for

its customers but customize the microchips to be compatible only with other secondary products

produced by the company. Here, the customers would be locked from switching to other

substitutes in the market where they can install the microchips and therefore, they would be

forced to use only the company’s products. Such a strategy is not only beneficial in terms of

boosting the company’s revenues but also helps it is maintaining a large and loyal customer base.

The company can also encourage customers to store their data on the company’s cloud

storage especially personal and usage data that is important to the individual customers which

they can only access when using products of the company. In such as case, customers who wish

to switch to other substitutes in the market will be left with two choices that are letting off their

important data or choosing to stay with the company. For this reason, it is justifiable to argue that

switching cost is both financial and psychological where the company would have increased the

psychological cost of switching. Other examples of data that can be used to trap customers are

access to important information where customer losses access when they switch to other

substitutes. However, care should be taken when employing this strategy since it may discourage

potential customers from using the company’s products and services due to the fear of losing

their flexibility of choosing preferred sellers.

Complementation of products offered with services is another strategy of increasing

switching costs. In such as case, the company can offer products to customers and provide them

with additional services to improve their experience but only for those customers using the

company’s products. An example of a servitization trap is selling products with warranties where

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customers are given free repairs and checkups in case the products they purchased develops a

fault, however, only if the product has not been interfered with. The company can only charge

for repair if the warranty period has expired or when the customer tampered with the product.

Here, the customers are locked from shifting to other substitutes to avoid losing the warranty and

free checkups in case of faults on the product. It is worthy to note that this strategy is more or

less similar to the industry standards traps as almost all companies give warranties to their

products. However, in order to achieve effeteness of the strategy, Intel Corporation shall have to

make the services unique from those of competitors.

Managing the threat posed by a large number of products and services shall call for

extensive product research and development. The move is essential since the research shall

provide information relating to customer tastes and preferences and facilitated innovation of new

products and services while boosting organizational performance. For Intel Corporation the

major focus of research and development should be on improving the power and speeds of its

microprocessors since speed is becoming a crucial issue in the technology and communication

industry. Research and development provide knowledge and information which directly

influence company decisions concerning their business roads and facilitate the development of

high quality of products and services. Furthermore, it can give the company a competitive edge

over other players in the industry thus allowing it to utilize this position for its growth.

Threats and Opportunities

Changes in customer preferences and increased competition from other players in the

industry are the biggest threat to Intel Corporation (Valentin, 2005). Customers are rapidly

shifting to mobile computing as the number of roles mobile phones can perform has significantly

increased. The company is a market leader in the manufacture of PC microprocessors and there a

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shift to mobile computing means that the company is products and gradually becoming obsolete.

The threat is further worsened by the fact that the Intel Corporation failed to capture the mobile

processor market. On the other hand, stiff competition from other players in the market is eating

into the company’s microprocessor market. Significant competitors such as ARM Holdings are

riding on their advantage in the manufacture of both PC and mobile microprocessors which are

being used by many mobile market players. Furthermore, other competitors in the market such as

AMD and ARM Holdings have the potential to acquire a larger share in the PC market.

The key opportunities for Intel Corporation are diversification of the business and

formation of partnerships with other players in the industry (Valentin, 2005). There is an

opportunity for the company to diversify into other sectors such as home appliances to boost its

performance. Another area that provides opportunities for diversification is the acquisition of

other companies engaged in other businesses apart from the manufacture of microprocessors.

Formation of partnerships is crucial especially for the emerging sectors of the industry such as

mobile computing. This would enable the company to utilize existing infrastructure in the

partnering company to setting-off its entry and therefore, enable it to establish itself in the

market. The assertion is based on the fact that the company would have saved in terms of cost

and time required to establish which otherwise would trigger reactions from the competitors and

limit the effectiveness of the entry.

Strength and Weaknesses

Economies of scale and research and development are the most significant strengths of

Intel Corporation. The economies of is attributed to an extensive financial base that allows the

company to manufacture and distribute products to equipment manufacturers. Furthermore, the

company able to engage in economies of scale due to its advanced fabrication processes which

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give it a competitive advantage. Microsoft Corporation a major strategic partner for the market

has contributed significantly to the company’s success since it is the largest buyer of its

microprocessors and also the largest software company. Research and development is another

strength of the company as it has enabled it to regularly upgrade the performance and speed of its

microprocessors since its inception in 1968 to date. Development of innovative and high-quality

products has enabled the company to maintain a large and loyal customer base. It should also be

noted that research and development in the company are facilitated by an extensive financial

muscle of the company.

The major weaknesses for Intel Corporation are high vulnerability to changes in the

market and limited product diversification. The company heavily relies on Microsoft Corporation

as the main buyer for its microprocessors and its lacks presence in the mobile market and

therefore a shift in customer preferences to mobile computing is hurting the company’s

performance. In such a case, any shift in relations with Microsoft Corporation will significantly

affect its performance and even its survival in the market. The company is specialized only in the

manufacture of microprocessors, this limits its revenue performance and denies it the opportunity

to benefit from trends in the market. For instance, customer preferences are rapidly shifting in

favor of mobile computing and the current position of the company cannot allow it to effectively

take advantage of the trends.

In order or optimally take advantages of its strengths, Intel Corporation should diversify

its product range since it already has the financial backing to support diversification ventures.

Furthermore, it would allow it to take advantage of its large and loyal customer base in providing

them with new products and services. Other benefits the company can draw from diversification

is reduced market risks and provision of new opportunities for growth. When putting together

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with the company's core competencies such high performance and speed microprocessors, huge

investment in research and development and highly qualified personnel, the company will be

able to achieve improved performance. Intel Corporation also has the capability to engage in

acquisitions of other companies based on its financial and information resources.

Value Chain

Intel Corporation's supply chain comprised of four distinct stages which define the

functioning of the company. The first stage is sourcing on inbound materials used in the

manufacturer of the microprocessors or other electronic parts. The second stage entails the

design of electronic part functions and other logical processes which is then followed by the

manufacture of the various parts. The last stage is the transportation of finished goods to the

financial consumer and supporting them where necessary (Brown, 2018). However, it should be

noted that this supply chain focuses on the company products and not services. The supply chain

for services involves research and development followed by aligning of the services to specific

products manufactured in the company.

On an analysis of the supply chain, value can be created through diversification of the

company products whereby the company can also become an end consumer of its products by

engaging in the in PC assembling. By doing this, the company will be able to directly engage

with the market which in turn would facilitate not only collection of feedback but also a new

revenue generation venture. The assertion is based on the fact that the company has a large

financial muscle that would enable it to venture into PC assembly market and also its large

information base resulting from massive investment in research and development. With the

information, the company will be able to develop high-quality final products tailored to meet its

customer preferences while maintaining its strategic alliances.

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References

Brown, D. (2018). Intel Corporation: Managing Risk End-to-End in Intel’s Supply Chain (pp. 3-

14). National Institute of Standards and Technology. Retrieved from

https://www.nist.gov/sites/default/files/documents/itl/csd/NIST_USRP-Intel-Case-

Study.pdf

E. Dobbs, M. (2014). Guidelines for applying Porter's five forces framework: a set of industry

analysis templates. Competitiveness Review, 24(1), 32-45.

Intel Corporation. (2018). Executive Management | Intel Newsroom. Intel Newsroom. Retrieved

20 January 2018, from https://newsroom.intel.com/biographies/executive-management/

Intel Corporation. (2018). Intel Corporation - Investor Relations. Intc.com. Retrieved 20 January

2018, from https://www.intc.com/investor-relations/default.aspx

Valentin, E. K. (2005). Away with SWOT analysis: use defensive/offensive evaluation

instead. The Journal of Applied Business Research, 21(2), 91-105.

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