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Managing products P Ac E 4 I 5

change was occurring within lntel itse1f.A new chief execu-


TEL INSIDE OUT tive. Paul Otellini, was at the helm. A non-engineer, Otellini
joined lntel in 1974 straight out of business school at the
University of California at Berkeley. A close working
associate of Grove, who continued as chairman until 2005
after his departure as CEO in 1998, Otellini has a marketing
background. Among his successes is the Centrino brand.
When Otellini was head of product planning, he decided,
against the wishes of lntel engineers, that rather than
launch yet another fast processor, he would bundle it with
a relatively new wireless Internet technology called WiFi.
The combination enabled consumers to connect from their
laptop to the Internet from such places as airport lounges
k n t e l is one of the dost fahius business-to-business
nd names in the world, with a value 'of over $35 and coffee shops. Supported by a $300 million marketing
.With sales of wer $34 billion, profits of $7.5 billion campaign, Centrino laptops caught on, revitalizing the PC
profit margins of 55 per cent, it is also one of the most market while encouraging consumers to purchase higher-
cessfuLThe foundation for its success was the develop- margin products. Since launch, over $5 billion worth of
and marketing of microprocessors for PCs and Centrino chips have been sold.
lntel was also faced with an energetic competitor,
n. By investing billions in ever faster processors lntel
come the dominant force in this industry, with effi- Advanced Micro Devices, which had slowly been gaining
ground in the battle of the microchip. A major competitive
nt plants that can produce more prbcessors in a day
some rivals can in a year.The combination of low-cost weapon of AMD was price, which prompted lntel to develop
uction and ever faster chips was a powerful concoction the low-priced Celeron microprocessor. AMD stole a march
t none of its rivals could match.
on lntel by being the first to launch a W b i t chip, which
held the competitive advantages of have greater power and
Much of the credit for Intel's success goes to Andy
lower power consumption. By 2 0 5 AMD had increased its .
its former chief executive, who took the decision to
market share to 15 per cent of the PC microprocessor
he unprofitable memory chip business to focus on
-growing personal computer market, a move that market and held 26 per cent of the market for the micro-
led lntel to bury the competition. Intel's products were processors that drive sewers. Even more impressive was its
rted by powerhrl branding using the Pentium brand 48 per cent share of the growing multi-core processor
market, where two or more chips are put on to a single
and 'lntel Inside' strapline, bringingconsumer aware-
sliver of silicon. Such products consume less power,
of a product hidden from sight in the heart of a
enabling laptops to run longer ' before recharge, and
er. Intel's strategy was to work with Microsoft t o
enhance performance without generating more heat, which
to PC industry giants such as Dell, HP, iBM and
was a problem with single chips. Using less power is
q to be the first choice for microprocessors.
especially important for business-to-business customers.
nder Grove, engineers dominated and the culture at
was summarized by his motto: 'Only the paranoid For example, Google claimed that it tost more to run its
iw.' Managers often engaged in 'constmctlve confron- computers than to buy them. A landmark came in 2005
when Dell, hitherto an lntel strorighold, moved to AMD
', othewise known as shouting at each other. Under
chips for its servers. Its decision was influenced by the com-
's successor, Chig R Bartett, the company continued
petitive advantage its rivals HP, Toshiba and Gateway were
uccessful path t6 ever greater sales and profits.
getting by using the more powerfulAMD chips in their con-
sumer and business systems, particularly servers.
ings they am a' changin'
5 the market for microprocessors was changing.
In PC demand was slowingas markets became satu- A change of strategy
No longer could lntel rely on double-digit market The promotion of Otellini to chief executive has
h to fuel its sales and profit trajectory. Another heralded a Ehange in strategic direction for Intel The
. - P A ' GF 4 16 Marketing Mix Decisions
changing technological, competitive and market landscape Otellini is also hoping for breakthrough innovatio
is reflected in his desire to move the company away from healthcare. His vision is for digital technology to h
its dependence on single microprocessor chips for the PC healthcare professionals. Ethnographers are empl
market. First, lntel has developed new dual-core chips for understand the problems of the elderly and peo
laptops (using the Core brand name), which place two specific diseases such as Alzheimer's. Currently, Int
microprocessors on one sliver of silicon. This allows laptops developing sensors that can communicate with comp
to run for five to ten hours rather than three to four, which networks, enabling care givers to monitor the health of
was typical before. They also power the new Apple iMacs, elderly remotely. One benefit of this would be to all
allowing them to run at over twice the speed of the models elderly people to remain in their own homes.
(based on an IBM chip) they replaced without generating In line with his strategy, Otellini has reorganized I
additional heat. into platform-specific divisions: digital home (for consu
Second, lntel is focusing on 'complete technology P G and home entertainment), corporate (business P G
platforms' rather than individual microprocessors. servers), mobility (laptops and mobile devices) and hea
Platformization, as Intel calls it, means bundling a range of care, and scattered the processor engineers among th
chips and the software needed to tie them all together, New product development has abo been reorganized
offeringdifferent features such as security, video, audio and the past engineers worked on ever faster chips and m
wireless capabilities in a combination to suit a particular keters were asked to sell them. Now new products
, target market. This is recognition of the fact that computer developed by teams of people: chip engineers, so
J
manufacturers value the opportunity to buy a complete developers and marketers all work together to de
package of chips from one manufacturer rather than attractive new products. The type of person lntel hires
assemble components from several suppliers. It also means changed too. They include ethnographers, sociologists
that lntel sells more components, and so takes a larger slice software developers. Ethnographers, for example,
of the selling price of each PC.Whereas lntel can handle the researchinghow people in emerging markets like China
process in-house, AMD requires partners to develop plat- India use technology.
forms. Also-in a move that symbolizes Intel's break with*
Otellini has also announced plans to broaden Intel's past-the Pentium brand name is being phased out
target markets. Rather than focus only on PC manufac- the 'lntel inside' strap-line dropped in favour of 'lntel 1
turers, lntel intends to be a major technological player in ahead.'The chan'ge in branding strategy is being led by
home entertainment,wireless communicationsand health- Kim, chief marketing officer, recruited from Sarnsung
care. In home entettainment, Otellini's vision is for the PC widely credited with raising its brand awareness an
to be the central connection to individual entertainment as a leading consumer electronics company. Kim
devices. The company has developed the Viiv multicore directly to Otellini. The company has spent $2 billion
chip, which allows P G to connect to DVD players, N s , global marketing communications campaign to pro
stereo systems, and so on, so that consumers can move the new strapline and logo. lntel has abo become
digital content around the home.This means that Viiv com- porate technological partner with BMW, which see
puters can act as an a!-in-one DVD player, games console, chips powering operations across BMW dealerships,
CD player and television, and enable downloads of movies, company and its cars. The partnership also makes In
music and games, which can then be moved around the major sponsor of BMW's Sauber Formula One motor
home. Already Viiv has been chosen as the chip to power team. The male-dominated F1 audience, with its
Windows Media Centre PG. interest in technology, is a core target market for lnte
In targeting wireless communications, lntel is hoping to Not everyone at lntel is happy about the reorganizat
make a breakthrough in an area where it has traditionally and the increased emphasis on marketing, however. B
been weak. Hitherto, Intel's focus on PC microprocessors Otellini's elevation to CEO anyone not working for the
meant that investment in chips for mobile communica- PC business was considered a second-class citizen,
tions was considered secondary. lntel has yet to prove itself many high-level engineers working on PC products
in the mobile handset market because of its poor record in they have lost their star status. Some regard marketin
producing radio chips. lntel is supporting WiMax, a new little more than gloss and glitz, and others have left to
wireless broadband technology, and hopes to enter new rivals such as AMD.The competition is also critical of In
markets such as smartphones and wireless broadband. Intel practice of offering volume-based rebates to cornp
intends to manufacture chips to power mobile handsets manufacturers, which they claim acts as a barrier to en
and devices such as the BlackBeny and the Apple iPod. This view was supported by Japan's Fair Trade Commiss
i
Managing products P A cE 4 i7
found lntel guilty of using rebates to shut out its Economist, 14 May, 67-9; Nuttall, C. (2005) Intel
ventures Beyond P G , Financial Times, 12 November, 3;
Kilby, N. (2006) Intel's Power Drive, Marketing Week, 5
January, 21; Durrnan, P. (2005) lntel Attacked for
Stifling Competition, Sunday Times, 20 March, 10; ,

on: Edwards, C. (2006) Inside Intel,, Business Week, Edwards, C. (2006) AMD: Chipping Away at Intel's
9 January; Anonymous (2005) Intel's ~i'~ht-hand Turn. Lead, Business Week, 12 June, 72-3.

Interpret Intel's move from its reliance on microprocessors for PG into home entertainment, healthcare and mobile . '.

Locate each of lnteb moves (products and markets) since Otellini became CEO in the Ansoff product growth matrix.

How has the COQorate culture changed since Otellini became CEO? Support your answer with examples.

What challenges does lntel face as it moves into home entertainment, healthcare and mobile communications?

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. This case was prepared by David Jobber, Professor of Marketing, University of Bradford.