Business Policy 3rd Individual Assignment Student: Huyen Thi Pham PGDM Marketing - Roll number: 061 Please

se find out answer for 6 questions on this case: Question 1: Using the relevant strategic framework & diagrams, outline the competitive context, resource endowments, capabilities & core competencies of Intel as of 1996. Explain your strategic rationale. In the competitive context, lets look at Porter five force analyses. Intel Corp is an American multinational semiconductor chip maker corporation headquartered in Santa Clara, California. The company is making semiconductor chips, microprocessors, network interface controllers, flash memories, graphic chips and other components found in many computers and mobile phones. The company is valued at more than US$ 54 billion and employs more than 100,000 people (Intel Corp., 2012). The porters Five Forces Model is a suitable method of analyzing Intel Corps competitive context as the model helps us understand and evaluate the structure of an industrys business environment and the threats of competition to a specific company.

The first of the five forces affecting Intel Corps business is bargaining power of suppliers. Suppliers of Intel corporation has few alternatives to sell due to the material is abundant in nature.

Besides that, Intel has thousand suppliers to work with, hence the supplier has little negotiating power.

The competition rivalry is another force that affects businesses. Intel Corp continues to enjoy large market shares with minimal competition. Intel faces with very few competitors in the market of microprocessors such as AMD, Toshiba, Samsung, so on. These companies products come up with lower prices and conduct aggressive marketing. Therefore, competition is one of Intel Corps biggest challenges in their quest to retain and increase their market share. In present, the company still stands in a positive position as leader of industry with very strong based customers. Bargaining power of buyers is the third force that impacts on businesses. Buyers of Intel Corps products include computer and mobile phones manufacturing companies such as HP, Dell, Samsung, Acers, Nokia, and Alcatel among others. The diversity of its buyers is advantageous to Intel Corp because it makes it hard for them to set or demand for their own prices. However, several of these companies such as Samsung and Toshiba are now having its in-house production to reduce dependents on Intel. The fourth force affecting businesses is the threat from substitutions. Currently, computers and other technological devices are principally reliant on processors to function meaning that the threat of substitutions to Intel Corps business is minimal. However, the advancements in technology are changing vastly in recently years could usher into the electronics market other improved devices that may become threats to the current processors. The last force affecting Intel Corp is the threat of new entry products. Computer manufacturers are loyal with Intel brand as its quality and strong commitment. Enter to this market, it require companies has to invest high capital and high risk in terms of learning curve. The biggest threat comes from counterfeit processors that damage the reputation and business function of Intel Corp. Intel is being the market leader suffers the risk of being attractive to counterfeits who introduce new and ineffective products to the detriment of Intel Corp. The five force model analysis showed us about the competitive context expressed both negative and positive positions where Intel is. There are favorable positions for Intel in competitive environment; however, there are always existing attackers from industry in nonstop changing in

technology in this era. Those requires Intel always ready for change or build a robust corporate strategy that can help company gain competitive advantage and sustainability over the time. Resource Endowment Resource endowment is about represents an upper limit on the availability of terrestrial resources. Tangible: According to 2012 annual report, Intel has 104,700 employees worldwide, 2012 net revenue: $53.3 billion, 2012 earnings per share: $2.13. Intangible: Brand value of Intel is $US 39,385 million [source: Interbrand]. Intel brand response has been push consumer understanding about Intel inside.

Capabilities The main capabilities of Intel are quality and reliability. Functional analysis of products such as microprocessors and chipsets is a key element of Intel's quality management system. During technology development, product development, and for customer support, the goal of functional analysis is to provide root cause information in a timely manner. This is enabled through the use of highly advanced analytical capabilities that are located in a network of twelve product functional analysis laboratories and customer support centers. The labs are geographically dispersed throughout the US, Latin America, Europe, Middle East, and Asia regions.[Intel website]. Core Competencies of Intel: Innovation, collaboration, and strong stakeholder engagement.

Question 2. Using the relevant strategic models, frameworks & diagrams develop a strategic evaluation of Intel's decision to shift its focus on communications chips industry from its then focus on microprocessors for personal computer industry. Please address the following frameworks. a) Tests for a company's horizontal scope b) Basic Grand Strategies (as applicable) c) Product-Mission matrix & matrix for establishing competency agenda. Explain your strategic rationale In the past 1980s, Intel focused most of its attention and resources on business of making microprocessors for personal computer. However, as realizing changes in environment as PC

industry will get saturation soon and the growing use of the internet, the company decided to shift its focus on communications chips industry. a. Tests for a companys horizontal scope The following is models of corporation management increasing horizontal scope. We can define that Intel followed Related-Business Corporations as it is using its existing competencies to build a new business. PC industry and communications chips industry are different one. However, they are related business industry then Intel could obtain a competitive advantage by transferring its leading edge PC microprocessor technology, as well as its manufacturing and marketing capabilities to new industry. Related business corporations of Intel will meet the Bestalternative test through transfers of specialized resources or skills to new lines of business which is communication chip industry. b. Basis Grand Strategies When Intel shifted to communication chips industry as it considered its increasing horizontal scope to related business. The following is Grand Strategy Selection Matrix, this strategy action of Intel stands in 4th quadrant where the company will maximize its external acquisitions and maximize its strengths. Its strengths are its competencies in PC industry. External acquisition as companys manager decided to buy the required technology, fabrication facilities, and sales force. It then could improve the performance of the acquired businesses. Intel made 18 major acquisitions of companies in the communications chip industry then the results are Intel became the 4th largest global company in the communication chips industry in mid-2001.

c. Product-Mission matrix & matrix for establishing competency agenda

Ansoff Matrix shows us a diversification strategy stands apart from the other three strategies. The first three strategies are usually pursued with the same technical, financial, and merchandising resources used for the original product line, whereas diversification usually

requires a company to acquire new skills, new techniques and new facilities. Intel used its competencies to transfer skills and capabilities to new industry. This is new industry for Intel business. It therefore will be high risk when the company wants to enter to this market. Besides that, Company wants to get big enough and fast enough to gain economic of scales to capture faster opportunities in this market. The companys manager therefore decided to implement external acquisition. That would be reduce risk and time to capture this market.

Question 3. NEC of Japan had in 1970 predicted the increasing convergence among computing (IT), communications (Telecom) & components and had focused on semiconductors as its core product (Please refer to the article by C.K. Prahalad & Gary Hamel-Core Competence of the Corporation- HBR May / June 1990). What is NEC's horizontal scope today? Why? Trace the strategic journey of NEC since its inception in 1899 in terms of its resource endowments, resource commitments, major strategic decisions leading to lock in and lock out and its scope choices. Explain your strategic rationale. As the reading Core Competence of Corporation mentioned about changing in industry position of NEC when compared with its competitor GTE, realizing the importance of developing core competencies of corporation that will decide whether your business can be existed in the industry for long time or not. NECs horizontal scope today is related businesses corporation as its provider of information technology (IT) services and products Company resource endowment can be considered as the following: Tangible: A net sales of company are 3,036 billions of yen in 2012 and total assets are 2,557.6 billions of yen in 2012. Total number of employees is 109,102. Intangible: NEC brand value is $3,868 million

Resource Commitment: Let following the history to see how NEC choose it strategy to utilize its resource endowment over the time

1898 to 1919: The company was formed as joint stock company. First start its export to China. In 1905, the company replaced its inefficiency in the system by new system where managers and employees were all direct employees of the company. The same time the company applied new accounting and cost controls. This step helped company increase in sales and enter to Korean market after that.

1919 to 1938: NEC started its first association with Sumitomo to manufacture cables. As huge lost from earthquake in 1923, business of company was interrupted. NEC started its radio communications business in 1924 as Japans first radio broadcaster. It remarked new business for the company.

1938 to 1945: NEC experienced its being the blackest days of its story. In the end of war, NECs production had been substantially reduced by damage to its facilitites and by material and personnel shortages

1945 to 1980: After the war, NEC re-opened its major plants and started its transitor R&D in 1950. Increasing R&D activities, the company enable its business into crossbar switching system, and started its journey in IT industry after that.

1980 to 2000: NEC created the first digital signal processor and established NEC semiconductors ltd in UK step into computers industry. In 1990, joint venture with LSIs in China to manufacture and market digital electronic switching systems.

2000 to present: NEC Electronics Corporation was separated from NEC in 2002 as a new semiconductor company. In 2007, NEC and Nissan Co. Corp. started evaluating a joint venture to produce lithium ion batteries for hybrid and electric cars. On January 27, 2011, NEC formed a PC joint venture with Chinese PC maker Lenovo, the fourth largest PC maker in the world. In 2012, the company cut 10,000 jobs due to big loss from economic crisis in Europe and lagged in the development of smart phones in the domestic market compare to Apple and Samsung.

For overall, the company used its resource endowment to transfer its into profit for the company. Changing in business with changing of environment the company is flexible enough in its strategy. However, Its not easy to fix your strategy in one for long period of time as NEC has been succeed in related business diversification, it is also suffering a lot

from economic crisis. Lock-in and lock-out will help the company to know where they should cut off and where they should concentrate on. Question 4. What is Intel's strategic profile today in terms of its scope choices, countries covered and its market positions for its various product groups? Develop a comparison of Intel's and NEC's corporate, business, functional & country strategies and their competitive context today. Explain your rationale. As Intel today business, it is still pursuing its horizontal diversification scopes into related business and expanding its business to emerging market in Asia as it opened manufacturing in those countries in recently year. Intel is the most advanced semiconductor manufacturer on the planet. The company believes its leading-edge capacity is its single greatest asset it can leverage against the competition. In the coming years, process nodes and transistors will continue shrinking, and investors are hoping that Intel's cutting-edge technology will let it gain considerable traction against ARM Holdings designs. If successful, Intel has tremendous opportunities in both smart phones and tablets, which could translate to billions in new revenue streams for the company. However, the profitability of these endeavors remain unclear since Intel will have to compete more on price than its accustomed to in PC computing. However, if compare with Chinese marker in chip industry, Intel isnt have cost advantage. Intels strategy required to become more robust to deal with vastly in technology as PC computing may be dead in the future. Intel and NEC Intel is a world leader in computing innovation. The company designs and builds the essential technologies that serve as the foundation for the worlds computing devices. The company presence is worldwide. It has offices in 62 countries. Intels products are Bluetooth chipsets, flash memory, microprocessors, motherboard chipsets, network interface cards. NEC Corporation is a leader in the integration of IT and network technologies that benefit businesses and people around the world. By providing a combination of products and solutions that cross utilize the companys experience and global resources, NECs advanced technologies meet the complex and ever-changing needs of its customers. NEC brings more than 100 years of

expertise in technological innovation to empower people, businesses and society. The company presence is worldwide. Its products range in telecommunications equipment, servers, consumer electronics, domestic appliances, lighting industry. Its always huge challenges for both company in competitive environment, even both companies are in favorable positioning of its businesses. Question 5. Outline separately for Intel & NEC the major strategic issues they face today and your strategic recommendation for each of these companies. Explain your strategic rationale. Intel The major strategic issues Low cost chip product from Taiwan makers: In present, Intel earns a higher gross profit margin than Taiwan markers. However, Designing and manufacturing doesnt come cheap. Intel should leverage its manufacturing advantage against TSMC by opening its foundries to all chip makers. Intel is not doing well in the smart phone and tablet markets. Intel is late to the smart phone market and we believe high-end smart phone sales are starting to roll over. Intel is far behind its competitors in terms of cost and integration in smart phones. The problem for Intel and other semiconductor vendors is that service providers are becoming increasingly concentrated into firms such as Amazon, Facebook, Google, Apple and even Microsoft. Those firms do not build their own bespoke servers can order directly from the chip vendor and demand significant discounts, so while the number of chips being sold grows, revenues are unlikely to grow proportionately as buying power continues to increase. NEC - The major strategic issues In developed and developing countries alike, market saturation in telecoms is limiting customer acquisitions and value added services have not been able to generate the same revenue as voice services. Huge impacted from economic crisis in 2012.

Question 6. Outline briefly your learning from this case. Explain your strategic rationale. The case gave me overview about how Intel shifted its core business into related industry by using its skills and acquiring other companies when it developed its product to communication chips. The case also gave me chance to understand about Intel and NEC current strategic, scope of business, choice of countries and what challenges they are facing today. In short, to understand corporate strategy we should look at into its historical of business. So that we can understand how the company deals with problems/issues arise over time. How the company will choose its own strategy such as diversification, or restructuring its operation, so on.