Intel Inside: Anders Vest Christensen, Christopher Plantener Benjamin Esser, Michael Sönderby, Niklas Holck

Intel Inside
Anders Vest Christensen, Christopher Plantener

Benjamin Esser, Michael Sönderby, Niklas Holck
4th
4th of
ofApril
April2001
2001 Course: Business
Course:
Strategy
Business Strategy Case: Case: INSEAD/Intel
INSEAT/Intel
4th of April 2001 Course: Business Strategy Case: INSEAD/Intel
The “Intel Inside” marketing
campaign
(Issues to addressed)
The question is:

“Should we continue with the
campaign, and if yes, in what
way”
4th of April 2001 Course: Business Strategy Case: INSEAT/Intel

Agenda
• Current status
• Review of our competitive
environment
• Objectives
• Intel Inside
• Corporate strategy
• Strategy Plan
• Implementation

The „Intel Inside“ Campaign
Consumer
„Intel Inside“
Brand building with the
consumer

Industry Overview
Substitutes: High
Entry barriers: High –Clones
-High capital investment
-High R&D cost
-Economies of scale, learning
curve
-Short product life cycle (3 years)
-Patents
Rivalry in the
industry: Strong
– Favorable Growth Trend
– Multiple players like AMD
(clones) trying to catch
up with Intel
– High pressure to innovate
Supplier Power: low Buyer Power: Low

–Buyers: OEM like IBM, HP and
–Supplier of raw material
Compaq
fragmented
–Some degree of backward
–Conventional materials used integration
–OEM’s fairly fragmented

Industry Drivers
R&D,
–Compatibility –Time to market
–Technological –Costs
innovation
Price, TQM,
for products of equal
“0 fault level”.
technological level.

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
50
Stock prise in $
40
30
Intel
20
10
AMD
0
r r
be be ary ry h l
ve m
e m nu bru
a
a rc pri ay ne
o z a M A M ly t
N De J Fe Ju Ju gus ber r r
u m obe be
A t e c t m
p O ve
Se No
Overview of 1991

Financial overview Chart
4 000 $
3 000 $
Net Revenue
2 000 $ R&D
Net Income
1 000 $
0$
82 83 84 85 86 87 88 89 90 91
286 Proce s s or
Cash Cow
386 Proce s s or
Star
486 Proce s s or
586
?
686
786
79 84 89 94
Intel Corporation
(Internal Analysis)
Strengths Weaknesses
• R&D: Technology • Lacking patents

leader:
protection
• R&D
investment
between 11 and • Patent Cross
14% of Licensing
Revenues Agreement with
• Strong capital base AMD until 1995
• current assets
app. $ 4,1billion • Extreme
• 80% of the market dependence on
(economy of scale) R&D

Intel Corporation
(External Analysis)
Opportunities Threats
• Exploding market • Anti-trust regulations

• Setting industry •Increased competition
standards
•Cloning
• Control over
•OEM’s have forced
product life cycle
Intel to sell technology
to AMD
• OEM’s may enter the
industry.

Objectives
(80 % market share)
Present Short Run Long Run

(Nov 1991) (Jan 1993) (1995)
Technology 486 SX DX DX4

586 686
Leadership
Public
40%
40% 90%
Recognition
Big 3 COMPAQ HP COMPAQ HP

Participation
in Intel Inside IBM IBM
Legal
Strategy Lawsuits Patents
The „Intel Inside“ Campaign
Push effect Pull effect
Consumer
„Intel Inside“
Brand building with the
consumer

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 Aspects
–Positive response from
PC manufacturers having
agreed.
• Negative Aspects
–Big
- 3not signed up yet.
–Press: “Why brand
processors?”.
–Positive in the short run but
minimal effect in the long run
(see IBM)
Negative aspects

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
200 Financial
Leverage
150
Service
100
50 Technological
Level
0
Brand Name
1995
1987

(2)Corporate Strategy
Marketing
R&D strategy
Support: Legal Strategy
Alternatives to chosen corporate strategy

• Cost leader; production optimization
• Focus strategy; focus on core products

Marketing Strategy-Plan &
Execution
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
1) Product 2) Price
• Continuous
introduction of new Marketing • Premium pricing
improved processors on new processors
(see graph) Strategy
• Competitive pricing
• Keep the competition on older processors
struggling

R&D Strategy-Plan &
Execution
Develop product portfolio:
1992 1 year 2 years
Dept. Of
innovation
786 Processor 886 Processor
Dept. Of
Improvement
Improved sub product lines for 486/586
R&D spending 1991: $618 million

Realistic R&D spending 1993: 2 x $618 million

Tracking initiatives
R&D
Marketing
• Technological
leadership • Brand Recognition
– Frequent sreening of the „cloning – Consumer surveys
market“
– Feedback from OEMs
– Benchmarking against
competitors • Big 3 sign up
– 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


Intel Inside: Anders Vest Christensen, Christopher Plantener Benjamin Esser, Michael Sönderby, Niklas Holck

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Intel Inside

Anders Vest Christensen, Christopher Plantener

The question is:

4th of April 2001 Course: Business Strategy Case: INSEAT/Intel

4th of April 2001 Course: Business Strategy Case: INSEAT/Intel

4th of April 2001 Course: Business Strategy Case: INSEAT/Intel

Supplier Power: low Buyer Power: Low

4th of April 2001 Course: Business Strategy Case: INSEAT/Intel

4th of April 2001 Course: Business Strategy Case: INSEAT/Intel

• Intel holds 80% market share in

4th of April 2001 Course: Business Strategy Case: INSEAT/Intel

4th of April 2001 Course: Business Strategy Case: INSEAT/Intel

• R&D: Technology • Lacking patents

4th of April 2001 Course: Business Strategy Case: INSEAT/Intel

• Exploding market • Anti-trust regulations

4th of April 2001 Course: Business Strategy Case: INSEAT/Intel

Present Short Run Long Run

Technology 486 SX DX DX4

Big 3 COMPAQ HP COMPAQ HP

Push effect Pull effect

4th of April 2001 Course: Business Strategy Case: INSEAT/Intel

– Reimbursement of OEM‘s advertising cost up to 50%

4th of April 2001 Course: Business Strategy Case: INSEAT/Intel

1) No, abort marketing campaign

2) Yes, expand on R&D and existing

4th of April 2001 Course: Business Strategy Case: INSEAT/Intel

– The campaign is too young to be

4th of April 2001 Course: Business Strategy Case: INSEAT/Intel

4th of April 2001 Course: Business Strategy Case: INSEAT/Intel

Support: Legal Strategy

Alternatives to chosen corporate strategy

4th of April 2001 Course: Business Strategy Case: INSEAT/Intel

• Push Strategy (Big 3 directed)

4th of April 2001 Course: Business Strategy Case: INSEAT/Intel

R&D spending 1991: $618 million

4th of April 2001 Course: Business Strategy Case: INSEAT/Intel

• Cloning is the biggest threat to our

• The marketing campaign will help

• Together with our R&D strategy the

- Intel pursued an aggressive

4th of April 2001 Course: Business Strategy Case: INSEAT/Intel

4th of April 2001 Course: Business Strategy Case: INSEAT/Intel

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