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Avimanyu Master subtitle style Click to edit(Avi) Datta, Doctoral Candidate, College of Business, Washington State University
9/19/12
Overview
The Intel Case: Fading Memories (Burgelman, 1991, 1994) & Capabilities Model (LCM) the Intel case and Conclusions
Leadership
Reconsidering Observations
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Successful shift from memory to processors - 1974 to 1984 (Burgelman, 1991; 1994) continued to consider Intel a memory company even though market share in memory (DRAM) was in steep decline 9/19/12
Top-management
$ millions
400
Market Share
300
0.25 0.2
200
0.15 0.1
100
0.05 0
-0.05
Year
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Brief Conclusion
Strategic
decision in 1984 to exit memory was sensemaking after-thefact internal selection environment, i.e., the production rulethat favored microprocessors, was more adaptively robust that top-down strategy
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Intels
Intel Corp
Three
Key Questions
Microprocessors
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Innovative Design: Intel was the first to develop DRAM. Moors Law was the brain child of Gordon Moore who was the founder. The law was based on the demand of memory . Intel also produced Worlds first 1Kb DRAM.
Price High in early life-cycle: make money and reinvest in subsequent generations.
Move Quickly to New generations: As competitors offered substitute products and overall market price decreased, Intel moved to new generations.
Thus, Intel emphasis was on product design, not so much on process development or realizing efficiencies through 9/19/12
(eg Nikon)
Sophisticated Demand: DRAMS were used
competition Japanese firms had greater 9/19/12 need to be efficient, which increased their
Strategy
suppliers, enabling them to develop manufacturing machinery that produced higher results.
The strategy was build on building
Institutional Factors
downturns.
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complexity
Wrong
Strategy
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Strategy
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careful with unidimensional (one product) strategy your technological innovations or avoid commodity business. When a novel technology becomes a commodity, the company(s) with higher manufacturing capability wins. advantage is temporary. Life span of strategies are getting shorter. 9/19/12
Protect
Competitive
Existing capabilities, Circuit Design (CD )& Technology Design (TD) did not match competitive dynamics Exploration did not focus on manufacturing scale (& large market)
Avoiding timing delay associated with absorptive capacity build-up priming investment in exploration came through investment in DRAM
successful transition had more to do with unique circumstances (luck) than strategy (brains)
Loss of market share in memory (precipitating ultimate exit) predated successful transition to microprocessors no transforming strategy was articulated.
9/19/12 Market for microprocessors developed
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Creation
microprocessor for its PC, which will become a de-facto standard. Intel won the contract.
Wintel become a standard industry
architecture.
Standard
making it proprietary.
Enforcing Proprietary standard
Suing companies that attempt to copy its microcode no of licenses from 12 to 4 thereby increasing profits 30% to 75%. sufficient production capacity so that there is no need to license to other 9/19/12 manufacturer
Cutting
Building
Competitive Advantage
Substitution Threat s
advantage
Saturation
Buyer power
Supplier Power
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Intels Response Intellectual property Protection Intel Inside Campaign: Created Brand Awareness. Program also included software vendors with the line Runs even better on a Intel Microprocessor
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Hedged against adoption of RISC by releasing i-860 Introduced Pentium (improved version of x86) Intel backed OS other than Windows like Linux
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Hedged against adoption of RISC by releasing i-860 Intel inside campaign made industry more dependent on CISC Architecture Introduced Pentium (improved version of x86) Building of Motherboard through forward integration
Intel never asked for custom solutions, rather focused on standard solutions.
Cases were dropped by virtue of Intels goodwill in replacing chips Intel showed that suppliers appropriate value from Intel as well
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CREATE market ecosystem by investing in complementors Partnerships with Apple (later in 2006), Linux-Red hat
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DRAM vs Microprocessors
Disadvantages with DRAM Easier to Imitate Difficult to patent There is no microcode that can be protected There was little opportunity for a proprietary Standard What Intel did right with Microprocessors? Intel Branded the Microprocessor Kept the No. of Competitors down Changed Industry structure and dynamics Successful at counteracting threats to 9/19/12sustainability
PDAs
enter the market and the product becomes a commodity leading to perfect competition and eroding margins.
Dominance: Intel wanted to to stay ahead
of competition so early entry to Internet, PDAs would flatten the curve when the 9/19/12
Questions? Comments?
9/19/12