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8/10/2019 JIten_Intel TetraThreat FRamework
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B Y
Bansi Parekh (MMS HR) 32Jiten Pujara (MMS MKTG) 33
Nikesh Savla (MMS MKTG) 40
Sonam Somaiya (MMS HR) 53
Intel Case
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Early years
Founded in 1968 by Robert Noyce and GordonMoore
Recruited Andy Grove as Director of Operations
Initial Strategy Develop semiconductor memorychips for main frame computers and mini computers
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Intel in the DRAM business
Introduced 2 products in 1969
3101 ( 64 bit bipolar static random access memory)
11010 ( 256 bit metal oxide semiconductor )
1972 1103 1 kilobit DRAM DRAM accounted for 90 % of the cos revenues
Strategy Push the envelope of product design
First to market its newest devices
Leading edge of process technology
Leadership strategy through Product design
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By 1979 Intel succeeded in introducing devices andprocess technologies that were ahead of competitionand commanded significant price premiums
But later product life cycle for DRAMs began toshrink
It was still working on the 16K DRAM, whenJapanese companies released the 64K.
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Japanese companies like Fujitsu and Hitachi enteredthe market
Japanese Strategy invest heavily in manufacturing
Since access to capital with lower interest rates
Japanese cos invested 40 % of their sales revenues
US cos 22% of their sales revenues
Japanese cos had technological advantage in
Photolithography Japanese cos production yields 70 % to 80 %
US cos production yields 50 % to 60 %
By early 1990s Japanese cos captured nearly half
the world market for DRAMs
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Intel and the Micro processor
1970 - Japanese co - Busicom contracted with Intelto make a set of chips for an electronic calculator
Came up with CPU
It purchased non calculator rights from Busicomthough the market for it was nor apparent
3 years later introduced 8 bit microprocessor 8080
Intel executives did not forseetheir true commercial
value Later on Apple, Radio Shack and Commodore
entered the desktop computer market
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Setting the Personal Computer Standard
Competition between Intel and Motorola
IBMs strategy
Project CRUSH and Project CHECKMATE
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Exit from DRAM
Success of the 1-megabit DRAM
DRAM technology driver
The middle management in action
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Reasons for DRAMs being less attractive
Difficult to patent
Easy to imitate
No microcode that could be protected
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INTEL as a microprocessor company
The 80386 Manufacturing Strategy
Compaq filling in IBMs gap
Risk for Intel delay in getting an operating system
for the 386 Transformation of the computer industry from
vertical to horizontal alignment
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Tetra Threat Framework
Threat of ImitationThreat of
substitution
Threat of hold-up Threat of Slack
Tetra threatFramework
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Threat of Imitation
Technology moved so rapidly that patents quickly becameeconomically obsolete
Companies used same technology hence it was not alwaysclear who might be infringing upon whom.
AMD and Cyrix produced microprocessors which werecompatible with Microsoft DOS
Intel responded by Intel developing higher capacity andcheaper microprocessors to compete
Intellectual Property Protection (IPP) against AMD
Intel Inside campaign: to differentiate Intel
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Threat of Substitution
Reduced instruction set computing (RISC) Threat:
Fast and Cheap as compared to CISC
Intel Responded by i-860 (a substitute for X86)
IBM decided not to sell any X86 based computersuntil it could develop a new architecture that used
Intel responded by partnering with compaq
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Threat of Substitution
Microsoft moved towards operating systems that were nottied to the x86 architecture
Intel responded by developing processors for Linux-Redhat
Sun Microsystems motto, "The Network is the Computer
Intel responded by programs like Intel inside
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Threat of hold-up
BUYER POWER
Intel Inside" PCs value increased with the Intel brand
Allocation of new products in short supply - Intel released all new chipsin short supply pricing them at a premium.
Chips preferentially as a function of OEMs' past behavior
Many buyers wanted RISC to become the standard architecture
Intel hedged with the i860 RISC processor and released the Pentium.Also, by introducing Intel Inside, it made the industry more dependent
on Intel's CISC chips
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Threat of hold-up
SUPLIER POWER
Suppliers were able to receive funds from Intel forthe development of new technology on condition thatthey would have first access to technology
Intel engaged in dual sourcing to avoid reliance on onesupplier
Suppliers made long-term contracts necessary for
custom solutions They wanted standard solutions that would be used by
the industry at large.
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Threat of hold-up
COMPLEMENT POWER For Intel, complementors like Microsoft can contribute
to the success or failure of a microprocessor.
Intel senior management routinely met with Microsoftmanagement to coordinate new developments.
Intel Capital - the idea was to create a market ecosystem fordevelopment, by investing in complementors.
Intel's strategy to pay $100 million to independent
software vendors to accelerate their product plans helpedIntel spread its roots with more software developers
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Sustaining the Market Position
90% Market share = Market dominance
Intels 3 strategies to defend the share Intel Inside
Systems Business Supplier Relationships
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A. Intel Inside
Reward Power (6% rebate)
Co Branding with major PC vendors (OEM)
Co Branding with software suppliers
Vendors Concerns and Opposition IBM & Compaq Opted out
Coercive & Expert Power
Intel had supplier power so Compaq & IBM opted-inagain (Cross-licensing and Outsourcing mbd)
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B. Systems Biz
Founded Systems Group
Manufactured and sold subsystems and complete sys Supercomputers
Specialized PCB Full PCs
Targeted End-users
Reuters
Carrefour
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C. Supplier Relationships
Largest buyer of Semiconductor chips (Supplier buyer)
Sole-Sourcing from best-tech supplier For Standardization
Improve cross-facility and to ramp up production Problem with sole-sourcing Supplier didnt respond to tech advancements and support
Back to Dual-sourcing
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Internet - Threat/Opportunity?
Intels competitive advantage was buildingtechnologically superior and faster uP which wasuseful for standalone desktops (P2P model)
Ext. Threat: with the advancement of networking, anew model of computing emerged (C-S model)
Sun uSys came up with N/w PC (nonWIntel)
Opportunities Open-Architechture languages & Tech that could support and
grow uP market
Banking on and investing in Internet companies
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6 Forces
Power and competency of-
Competetors
Suppliers
Current Customers Potential customers
Complementors
Doing stuff differently from current way
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THANK YOU