Intel Corporation: 1968 – 1997

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INTEL CORPORATION: 1968 – 1997

Synopsis:

This case traces the strategic decisions of Intel Corporation which defined its evolution from being a start-up developer of semiconductor memory chips in 1968 to being the industry leader of microprocessors in 1997 when it ranked amongst the top five American companies and had stock market valuation of USD 113 billion.

Intel in DRAM business:

The strategies employed by Intel for DRAM business focussed on:
1. Pushing the envelope of product design
2. Being first to market with newest devices
3. Premium pricing and skim marketing. No emphasis on mass production

Initially, Intel had a successful run in this business as they:
1. Had no immediate competition
2. The demand for memory
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Competitor
1. Defining industry standards: RISC v/s CISC technology led to stepping up of Intel’s R&D for new generations of the X86. Intel developed two generations of its X86 line simultaneously (the Pentium and the Pentium Pro) and committed to a massive expansion in production capacity for these products.
2. The threats from Clones: Intel’s drive for intellectual property protection and settlement with AMD followed by overwhelming successful propagation Pentium and Pentium Pro chips offset the threat from clones.

Customers:
The ‘Intel Inside’ campaign with OEMs and “Runs better on a Pentium processor” sticker on PC software strengthened customer recognition of Intel as a brand. Biggies like IBM and Compaq opted out of these campaigns as they feared this would dilute their brand. However, growing demand and popularity of Intel brand brought IBM and Compaq back to Intel. Intel emerged as a clear leader.
Intel’s System Business added to the bottom line but the microprocessor was by and large their main line of business.

Supplier Relationships
Intel moved from sole-source suppliers to dual to multi suppliers to ensure responsiveness to requests for technical support and improvement.

STRATEGIC MANOEUVERS and IMPLICATIONS)

Intel strategic implications:
1st stage: DRAM story learning
2nd stage: Microprocessor story learning
3rd stage: The future

DRAM story:
R & D had three components:
1. Product development

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