Intel is a company recognized for its fast microprocessors for Desktop PCs, but in 2000, the trend in the market started to take a turn from PC technology to mobile computing segment. To tackle the technological change, Intel developed Centrino mobile technology which resulted in huge success and returned the threatened market share back to Intel. This development, however, required a radical change in the strategy and organization of the company. Centrino platform enabled the company to improvise the design, production, marketing and architecture of all the products Intel deals with.
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Intel started to lose its market hold; in 2001, Advanced Micro Devices (AMD) increased its market share from 16.7 in 2000 to 20.2 percent due to the launch of 1GHz processor by AMD. Customer demand changed from desktop PC to mobile PC, and underestimation of mobile market and strategic disagreement could have led the company into a great loss of market share.
Intel is the market leader in the microprocessors for PCs. By 2000, it had 80 percent of the microprocessor market due to their fast processor speed of up to 2 GHZ. Intel has an edge over its competitors through processor frequency, design leadership and effective manufacturing.
Intel predominantly produces microprocessors for PCs, which is the primary revenue source and is well funded by the company. Mobile business group, on the other hand, is less funded. Dependency of the company on processor speed, Strategic disagreements and time consuming production of broadband technology are some of weaknesses of the project. Due to the lack of knowledge about desktop processors are being used in notebook designs, Intel under estimated the market for mobile processors. There was a lack of brand name before the launch of Centrino, and the four vectors of performance were not fulfilled in a coherent order.
Introduction of Centrino platform gave birth to the platform approach to mobile computing. Platform approach, broadband connectivity and mobility can be used in future technologies such as Merom and Tejas. Microprocessors are designed with a greater focus on power efficiency and processing speed. The foresaid features could sustain the market leadership of the company. Reduction in cost may be achieved through forward and backward integration.
Advancement in microprocessor technology obsoletes manufacturing facilities previously under use. Microprocessor industry has price sensitive features, and Intel has to prevent reduction in brand loyalty due to the change in consumer demand. Competitors such as AMD, are making it difficult for the company to sustain its market share. As WIFI penetration has increased, competitors may lead due to better connectivity feature.
Porters Five Forces
Threat of New Entrants
The threat of new entrants is less likely in IT industry due to large capital investment required for microprocessor production, designing, and marketing. However, change in consumer demand from processor speed to mobility may encourage new companies to enter the market.
Threat of Substitute products/services
Switching costs of Desktop PCs and laptops are comparatively high due to the long life of products. However, due to the change in technology customers may be inclined towards substitutes with a better mobility and features instead of the processor speed only.
Bargaining Power of Customers
Customer satisfaction is necessary for the company to sell its products in the market. Intel introduction of Centrino platform fulfills the requirements of consumers, but its price has to be similar to the products offered by its competitors, or Intel can put emphasis on the quality of the product to differentiate it from its competitors. Competition has resulted in the manufacturing of innovative microprocessors by Intel, enhancing consumer choice.
Bargaining Power of Suppliers
The lower the bargaining power of a supplier the better it is for business. Specialized market has always been affected by price fluctuations from suppliers but as the industry has grown supplier has lost the power to monopolize the market for materials in the industry. IT market has a variety of inputs that allows the suppliers to have a level of bargaining power
Intensity of Competitive Rivalry
The main rival of Intel is AMD with a lesser share of the industry than Intel. Industry growth is a faster pace due to the popularity of mobile devices and devices focused on mobility. Intel products differ in its platform technology, and brand identity. Degree of rivalry is relatively high as there is an intense competition to gain the maximum market share.
Strategic Alternative 1
Fast processing speed, connectivity feature and mobility are the characteristics of Intel’s Centrino platform technology. The change in customer demand from speed to mobility can be effectively handled by the foresaid features of Centrino. Intel follows the strategy of Market Leadership because customers prefer product features over price. So, the company started putting emphasis on fulfilling the consumer demands.
Strategic Alternative 2
Intel offers platform technology with greater processing speed and mobility. Centrino is differentiated among the products introduced by competitors due to its specific features.
Intel had to work on a different technology with greater speed and mobility. It started working on Platform technology which reduced the size of chipset and provided better performance e.g. less heat emission, greater speed and reduced size. Intel is also working on shifting the focus from consumers to corporate clients.
Recommended Action Plan
Suggested action plan will focus on the company’s progress in the future and ensure its market leadership in IT industry. Intel should consider division of departments to focus and specialize in manufacturing of platform technology. Connectivity and broadband feature should be highlighted and capital should be invested in research and development of new features according to the changing consumer demand in the market.
Intel is the pioneer company in producing platform technology. The attempt of Centrino launch was dependent on various factors including industry convergence towards connectivity and consumer demand change towards mobility. Expansion of platform technology is taking place into consumer and corporate markets, and the top management is making sure to use this technology in its future business to gain maximum advantage of a differentiated product. Investment in research and development is vital for the company’s progress and future.
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