INTEL ProcessorsCase StudyPresented to: Dr Ahmed Shalaby

Presented by: Mohamed BadrawyEman Asaad

Agenda•INTEL’s Background

•Hot Topics:

▫ Comparing Branding for business & consumer Comparing Branding for business & consumer marketsmarkets

▫ Shifting Branding strategy from focus on functionality Shifting Branding strategy from focus on functionality to focus on image/attitudeto focus on image/attitude

▫ Success factors for branding a component/ingredientSuccess factors for branding a component/ingredient

▫ Evaluation of INTEL’s Segmentation & TargetingEvaluation of INTEL’s Segmentation & Targeting

Agenda▫ The development of PODs into POPs; a condition for The development of PODs into POPs; a condition for

being in businessbeing in business

▫ Competitive strategies of INTEL VS AMD (Advanced Competitive strategies of INTEL VS AMD (Advanced Micro Devices)Micro Devices)

▫ How IMC contributed in the success of “Pentium” How IMC contributed in the success of “Pentium” Branding AMD’s proposed positioning to compete Branding AMD’s proposed positioning to compete with INTELwith INTEL

▫ INTEL’s move to consumer electronic products; INTEL’s move to consumer electronic products; digital cameras, digital homes (how far is it from digital cameras, digital homes (how far is it from producing microprocessors?)producing microprocessors?)

▫ TOWSTOWS

INTEL’s Background• Intel Corporation is the largest semiconductor manufacturer in the world, with 11 fabrication facilities and

six assembly and test facilities around the world.

• Intel has changed the global marketplace dramatically since it was founded in 1968; the company invented the microprocessor, the "computer on a chip" that made possible the first handheld calculators and personal computers (PCs).

• By the early 21st century, Intel's microprocessors were found in approximately 80 percent of PCs worldwide.

• The company's product line also includes chipsets and motherboards; flash memory used in wireless communications and other applications; networking devices and equipment for accessing the Internet, local area networks, and home networks; and embedded control mi crochips used in networking products, laser printers, factory automat ion instruments, cellular phone base stations, and other applications .

• Intel has remained competitive through a combination of clever marketing, well-supported research and development, superior manufacturing proficiency, a vital corporate culture, prowess in legal matters, and an ongoing alliance with software giant Microsoft Corporation often referred to as "Wintel."

Intel Foundation by Robert Noyce and Gordon Moore

1968

Intel introduced the 16-bit 8086 processor followed by the 8088, the 8-bit bus

1978

Intel introduced the 286 processor

1982

Intel introduced the 386 SX microprocessors

1988

Intel introduced the 486 processor.

1989

AMD used Intel's 386 model to introduce AM386

1990

Intel lost the “386” trademark case against AMD

1991

Intel introduced Pentium

1993

Apple started using Intel processors.Intel leap ahead brand campaign

2006

INTEL’s Branding Issues 1/2Branding for business

• In late 70’s, Intel introduced 8086 processor followed by 8088 which was mainly competed by Motorola

• Endorsement of 8088 microprocessor by IBM for its first PC

• In late 80’s, launched successful products in 386 and 486 technology of microprocessor

• Threat from competitors with similar naming products; AMD, Nex Gen Microsystems was emerging .

• Trademark battle with AMD over 386 naming convention of microprocessors

• March 1, 1991 INTEL lost the court battle for explanation of being generic and hence not trademark worthy against AMD.

INTEL’s Branding Issues 2/2Branding for consumer markets

• Intel turned over to an alternative strategy getting away from using model numbers in brands to manipulating a full campaign using:

“Intel, the computer inside” slogan

• In the late 1980’s, there was a significant shift in the general focus of the personal computer industry toward the mass-market, non-technical business, and home PC users;

• INTEL Focus shift from ‘Push’ (Computer manufacturers communication) to ‘Pull’ (Consumers communication); more focus on actual computer buyers instead of computer manufacturers:

• Use of logo ‘Intel Inside’ to highlight the presence of Intel chips inside PCs• Co-op Marketing, sharing advertising expenses with OEMs• Advertising Program through print, billboard and spot TV ads to build equity

• Intel aimed to change it’s image from a micro-chip maker to a quality standard-bearer.

• Intel believed that if they could gain consumer confidence as a brand, they’d be able to transfer the equity of the Intel brand to launch new products and technologies.

Market Share Evolution• From 1968 to 1978 Intel’s market share was 100%

• 1992, Intel’s Pentium took 90% of the world’s market share.

• 1997, Intel’s share dropped below 30% against AMD gaining 20% of the microprocessor market.

• In the third quarter of 1998, Intel’s share dropped down from 68% to 56% due to strong competition with AMD & Cyrix.

• From the third to the fourth quarter of 1998, Intel’s share rose to more than 80% due to the Celeron chip technology

• 2005, Intel controlled 84% of the market share in china against 16% to AMD.

Success factors for branding a component/ingredient• Market Need was that many consumers were uncertain about the

quality and reliability of microprocessors, and Intel found a way of taking away the mystery of the product, gaining the confidence of the end consumers that “Intel Inside” represented quality and reliability

• “Intel Inside” campaign aimed to “educate both the retail sales associates and the consumer about the value of Intel microprocessors, and to explain to them the difference between the microprocessors” – without getting into the technical issues,

• They succeeded to fulfill their aim through;▫ Convincing consumers that is significantly impacts performance of end

product▫ Implanting the perception in Consumers minds that the chosen

ingredient is superior to competitive offerings▫ Clearly placed / positioned symbol or logo on product packaging or body▫ Creating Push and Pull programs

Evaluation of INTEL’s

Segmentation & Targeting

• Intel’s segmentation was based on price and performance. Depending on it, the target market also differed.

• Having a technological product with its specifications upfront actually helps the customer appreciate the benefits and shortcoming at the time of purchase and prevents any dissatisfaction thereafter.

• Xeon performed poorly in comparison to Opteron and needed up gradation

The development of PODs into POPs; a condition for being in business

• In the fall of 1999, AMD unveiled a 700 MHz version of its Athlon chip, which surpassed the latest Pentium in terms of performance.

• The release of the 700 MHz Athlon put Intel in the unfamiliar position of trailing a competitor’s technology advancements.

• Major PC manufacturers had been reluctant to buy AMD processors, however, and as of late 1999 none of the top PC makers used an AMD processor in its machines. “It’s the same reason that people bought IBM for years and nothing else,” said an executive with a computer reseller.

• Intel succeeded to implant the concept of reliability on its branded processor in any computer to assure its quality performance, the factor that made all OEMs or computer manufacturers mandate the inclusion of Intel processor as a base for its quality standard, rather than having it as an extra advantage in the past.

• Nowadays, the PODs are the inclusion of Intel’s updated generation of processors

Competitive strategies of INTEL VS AMD (Advanced Micro Devices)

• Year 2000, The important issue for AMD was to keep pace with Intel’s highest performing chips, a valuable point of comparison that helped AMD’s stock rise 353 percent from 1999 to 2000. By June 2000, AMD was selling microprocessors to every major PC manufacturer.

• Many industry analysts considered AMD’s revitalized business to be a “serious challenge” to Intel.

• Intel experienced a number of product flaws, shortages, and delays in 1999 and 2000, which critics partly blamed Intel’s push to beat rival AMD to market with faster processors.

• Intel’s product delays enabled AMD to gain significant inroads in the PC microprocessor business.

• In 2000, AMD had increased 4 percent to a 17 percent share of the chip market. In addition, nine out of the top 10 PC makers were using AMD chips in their computers in 2000. “AMD Shows It’s Ready for Prime Time.” Forbes, April 13, 2000.

• Intel experienced a number of product flaws, shortages, and delays in 1999 and 2000, which critics partly blamed Intel’s push to beat rival AMD to market with faster processors.

• Intel’s product delays enabled AMD to gain significant inroads in the PC microprocessor business.

• In 2000, AMD had increased 4 percent to a 17 percent share of the chip market.

• In addition, nine out of the top 10 PC makers were using AMD chips in their computers in 2000.

How IMC contributed in the success of “Pentium” Branding

Launch: Andy Grove in an exclusive interview on CNN announced the new subrand name as ‘Pentium’

Developing Brand Awareness:Internal Focus: PR department monitoring all references in press to ensure that ‘Pentium’ is being used instead of ‘P5’ or ‘586’

AdvertisingFamous advertising campaigns – ‘bunny people’, ‘Blue Man Group’

Consumer Response to various surveys highlight their association to the Intel brand

AMD’s Proposed Positioning to Compete with INTEL

• “Innovating...Innovation.”

• AMD is changing the way the processor industry operates.

• Our customer-centric, approach helps customers decide what is important to them while we are there to provide expert guidance.

• Our processors allow companies to achieve their “green” goals while still managing to increase performance.

• And finally, we will provide performance-per-watt at a lower price than Intel.

• Customers will relate the AMD brand to superior value in the computer server market segment.

• From here we can leverage that brand to introduce desktop and mobile processors as well.

AMD’s Proposed Strategy to Compete with INTEL• The goal of our new marketing strategy is to gain market share

and favourably position AMD for the future.

• The main premise of the strategy is a retreat to our core competencies so that we may invest the resources necessary to build a brand for ourselves.

• Concentrating on server processors and a customer-centric way to interact with our customers will allow us to differentiate ourselves from Intel.

• The time invested in establishing our customer-centric vision will provide a sufficient barrier to entry for Intel and give us a sustainable competitive advantage in the short term.

• Using this advantage we have time to build our brand and then leverage this image to enter the desktop market as well.

INTEL’s move to consumer electronic products; digital cameras, digital homes (how far is it from producing microprocessors?)

• New Ventures▫ Consumer electronics, e-commerce and Internet hosting▫ In 1999, acquired 12 companies for $6 billion▫ Invested in 25 communication technology and over 125

internet-focused startups

• Exiting non-processor businesses▫ Internet venture proved futile due to lack of experience and

stiff competition from established players▫ Exited non-processor business▫ Stopped manufacturing network servers and routers on

complaints from big customers of microprocessors

“I think we have cleaned up our product line. In this difficult times [these peripheral businesses] were distracting us from our core strengths”

- Craig Barrett, CEO (2001)

• In 2000, Intel introduced two new digital cameras, the Me2Cam and the Pocket PC Camera, a digital music player, the Intel Personal Audio Player. For children, a Computer Sound Morpher.

• Said John Middleton, marketing manager for Intel’s consumer products, “These products extend the business and the brand and they make the Internet more fun.”

• the company spent $50 million on over 20 new projects, including an effort to install 3,000 terminals on seats at Madison Square Garden and a start-up called Vivonic.

• Craig Barrett, within five years he expected that every new business Intel ventured into would generate revenues exceeding $1 billion.

• Revenues plummeted 21 percent to $26.5 billion, while net income dropped 70 percent to $3.6 billion. Intel’s new businesses rang up zero profits. A former Intel executive said, “They’re dabbling in everything and overwhelming nothing”

Performance Gap

• Intel exited non-processor businesses such as digital cameras, streaming media software for online audio and video transmissions, toys, and networking hardware.

• The company shut down its Connected Products unit that made many of Intel’s consumer products.

• Intel stopped manufacturing network servers and routers after several of its big chip customers, including Dell and Cisco and Hewlett-Packard, complained that Intel was competing against them.

Performance Driver

TOWS

Strengths Weaknesses

1. Market Pioneer.2. Top brand equity.3. High effective R&D4. Affordable resources (Human,

Financial…)5. Cumulative experiences.6. Strong relations with OEMs.

1. Monopoly of decision in some situations.

2. Flocculation of planning strategies.

Opportunities SO WO

1.Arising of new markets.2. Continuous demand for new & high performance technologies.3.Arising of new technologies in different fields.4. Presence of potential affiliations.

S4O1: Affordable resources: Arising of new markets

S6O4:Strong relations with OEMs: Presence of potential affiliations

W1O1: Monopoly of decision in some situations: Arising of new markets

Threats ST WT

1. Flocculation in global economy.

2. Fast phase-out of PC technologies.

3. Strong competition.

S3T1: fast paced innovation overcoming the fast paced phase out of PC technologies

S2T3:Top brand equity: Strong competition

S4T1: Affordable resources: Flocculation in global economy

W2T3: Flocculation of planning strategies: Strong competition

Summary• Intel Pentium had garnered huge brand recognition through

press, technical magazines and ads.

• Discontinuation of this theme would have meant drainage of efforts and resources put into building the brand Pentium.

• Also, introduction of processors happened every next year making it impractical to launch promotion campaign for every product.

• Intel’s segmentation was based on price and performance. Depending on it, the target market also differed.

• Having a technological product with its specifications upfront actually helps the customer appreciate the benefits and shortcoming at the time of purchase and prevents any dissatisfaction thereafter.

• Xeon performed poorly in comparison to Opteron and needed up gradation