intel corporation case study

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Intel’s Operations Management Strategy: 10 Decisions, Productivity

Intel Corporation’s operations management (OM) strategy focuses on supporting product development as the basic factor in the 10 strategic decision areas. Operations managers deal with these 10 strategic decisions for the purpose of optimizing organizational processes and productivity. As a leading semiconductor business, Intel already maintains optimized operations that suit strategic objectives. The company’s efficient semiconductor fabrication processes are an indicator of operations management success. A testament to this operational success is Intel’s attractiveness as one of the major global fabricators of chips for other firms. However, the company needs to continue evolving to address rapid market changes associated with rapid technological advancement and obsolescence. This need highlights the importance of successful operations management to support Intel’s product development objectives via the 10 strategic decision areas. While the company has high productivity, changes in market conditions impose challenges that require adjustments in operational approaches. Intel’s operations management implements these adjustments through computer-assisted decision-making processes.

Operations management needs in its global semiconductor business pushes Intel to find new ways to optimize efficiency and productivity. As a technology business, the company takes advantage of its technology-savvy human resources to successfully maintain automation to support operations managers’ activities. Through these efforts and a constant monitoring of the global market, Intel remains effective in the 10 strategic decision areas. Such effectiveness depicts continuous success and long-term leadership in the industry.

Intel’s Operations Management: 10 Decision Areas

1. Design of Goods and Services . Intel’s mission statement and vision statement guide operations management decision-making in this strategic decision area. The company’s objective in this area is to produce profitable and excellent output that satisfies market demand. For example, Intel’s corporate vision and mission emphasize leadership in bringing semiconductor products to every customer around the world. This aim is achieved through microprocessors and other products designed with cutting-edge technologies and distributed globally. Intel’s operations management supports these activities through cost minimization and resource planning to optimize the impact of product designs on organizational stability.

2. Quality Management . The determination and satisfaction of quality expectations are the objectives in this strategic decision area. Intel’s operations managers evaluate quality expectations through market research and feedback from customers, sellers, and distributors, among others. The data is used as a basis for implementing adjustments in operational policies. For example, to address concerns regarding defects, adjustments are made in Intel’s operations management policy on margins of error. Such action supports optimal productivity while addressing quality issues. Operations management effectiveness in this strategic decision area aligns with Intel’s generic competitive strategy and intensive growth strategies .

3. Process and Capacity Design . Operations managers’ objective in this strategic decision area is to maintain processes through standards compliance and resource adequacy to support productivity goals. In the case of Intel Corporation, such goals are achieved through process automation. As part of the company’s operations management, reviews are regularly conducted on available technologies and related resources to determine capacity statuses and requirements. For example, operational capacity levels are evaluated to develop corresponding solutions to optimize Intel’s operational productivity in its microprocessor fabrication plants. These efforts in operations management ensure high-efficiency processes and advantageous economies of scale, which are among the strengths highlighted in the SWOT analysis of Intel Corporation .

4. Location Strategy . Cost-optimal distances from target markets, suppliers, and resources are the objectives in this strategic decision area of operations management. Intel’s approach to achieve these objectives focuses on human resources and logistics. For example, the company prioritizes access to talent necessary to maintain the competitive advantage of its semiconductor business. Nonetheless, to complement this situation, distributor locations are optimized for maximum reach in target markets. These locations are included in Intel’s marketing mix or 4P . The approach ensures the company’s operations management effectiveness in this strategic decision area.

5. Layout Design and Strategy . Intel aims to maximize efficiency of the flow of resources and information to address this strategic decision area. Through such maximization, the company’s operations management supports high productivity. Intel fulfills this aim by using office layouts that facilitate efficient work and creativity. For example, the company’s office layouts make it easy for employees to meet and share creative ideas for new product development. Also, many characteristics of layouts, including processor fabrication plant layouts, are based on Intel’s organizational structure (company structure) . Any new product line requires new spaces, layouts, and corresponding components in the corporate structure. This approach shows that Intel’s operations management in this strategic decision area is flexible to accommodate changes linked to business growth and expansion.

6. Job Design and Human Resources . In this strategic decision area, the main objective is to maintain adequate human resources to support operational efficiency and productivity goals. Intel satisfies this objective through an operations management approach that primarily involves human resource management. For example, the HR strategy involves job designs that support Intel’s organizational culture (corporate culture) , which emphasizes discipline, results orientation, and other factors. Also, the company has productivity enhancement measures, such as leadership development programs and seminars for better employee output. Thus, Intel’s operations management addresses the aims in this strategic decision area.

7. Supply Chain Management . A high-efficiency and adequate supply chain is the objective in this strategic decision area of operations management. In Intel’s case, the supply chain is automated to maximize efficiency. For example, the company has computer systems and databases for monitoring and determining areas that need immediate adjustment. In addition, Intel’s operations management efforts influence suppliers through policies that extend to their business activities. For instance, the company develops and implements policies to improve the sustainability and environmental impact of the entire supply chain, inclusive of suppliers and other relevant organizations. These operations management efforts are part of Intel’s corporate citizenship strategy . These efforts are also partly responsible for the company’s high operational productivity and economies of scale that contribute to Intel’s competitive advantage in the semiconductor industry.

8. Inventory Management . Intel’s operations managers are concerned with inventory holding and ordering to support business productivity goals. The objective is to ensure that the inventory satisfies capacity requirements alongside market demand. Intel’s operations management approach for this strategic decision area involves a serialized inventory and the “first in, first out” (FIFO) method. For example, the FIFO method addresses issues with technological obsolescence, especially with regard to intermediate products in semiconductor fabrication processes. Correspondingly, serialization allows Intel to track every item in its inventory. The resulting combination ensures the company’s efficiency and effectiveness in satisfying changes in market demand. This operations management approach supports increasing R&D investment, which is a significant technological external factor, as noted in the PESTLE/PESTEL analysis of Intel Corporation .

9. Scheduling . In operations management, the objective in this strategic decision area is to establish short-term and intermediate schedules that satisfy market demand. An appropriate approach in Intel’s case involves short-term schedules for immediate concerns and generalized schedules for regular processes. For example, the company uses short-term schedules for microprocessor fabrication processes involving batches or projects. On the other hand, generalized schedules are for regular processes, like equipment maintenance and product development iteration. This approach ensures that Intel’s operations management and productivity efforts satisfy dynamic needs and relatively constant needs in the semiconductor business.

10. Maintenance . Process stability and reliability are the objectives in this strategic decision area of operations management. Intel has a multi-pronged approach to ensure effective solutions for these concerns. For example, operations managers coordinate with HR management teams to maintain an adequate workforce. In addition, Intel supports high operational productivity by maintaining cutting-edge technologies, such as equipment used to fabricate semiconductor chips. Another operations management approach involves high R&D investment to maintain technological competitive advantages, which address the external force of competitive rivalry described in the Five Forces analysis of Intel Corporation .

Intel Corporation 2005

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Intel Corp.--1968-97

By: David J. Collis, Gary P. Pisano, Peter Botticelli

Traces Intel's history and strategy from 1968 to 1997. Examines the company's decision to exit DRAMS and its entry into microprocessors. Focuses on how the company managed to achieve and sustain its…

• Length: 26 page(s)
• Publication Date: May 8, 1997
• Discipline: Strategy
• Product #: 797137-PDF-ENG

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Traces Intel's history and strategy from 1968 to 1997. Examines the company's decision to exit DRAMS and its entry into microprocessors. Focuses on how the company managed to achieve and sustain its competitive advantage in microprocessors, and the threats it faces in the future.

Learning Objectives

To introduce students to competitive strategy, industry analysis, and competitive dynamics.

May 8, 1997 (Revised: May 22, 2008)

Discipline:

Geographies:

United States

Industries:

Electronics manufacturing

Harvard Business School

797137-PDF-ENG

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9.25 intel corporation.

Intel manufactured the first commercial chip in 1971, but it was the success of the personal computer (PC) that turned this division into its primary business. The company invested heavily in research throughout the 1990s and created successively faster chips, which fostered the rapid growth of the computer industry and gave Intel a dominating position in the industry. The market is fiercely competitive, and Intel has fought actions for illegal conduct brought by Advanced Micro Devices, and even in 1997 spent $750 million for control of the PC industry. {6} In 2005 Intel had 82% of the PC microprocessor market. {6} The company also conducted research into electrical generation and transmission, and has recently introduced a 3D transistor promising enhanced performance and energy efficiency.

Acquisitions made over the 2010-11 period show that Intel is again attempting to diversify away from chip manufacturing: McAfee (computer security technology for US$ $7.68 billion), Infineon Technologies' Wireless Solutions ( laptop, smart phones, etc. technology) and Fulcrum Microsystems Inc.( network switches). Intel Corporation 2011 net income was $12.9 billion from revenues of $54 billion. {13} The corresponding figures for the 2012 fiscal year were $14.6 billion from revenues of $53.3 billion. {14}

A 1990s 'Intel Inside' marketing campaign of the 1990s made its Pentium processor a household name. In the 2010 rankings of the world's 100 most powerful brands Millward Brown Optimor placed the company's brand at 48. {1}

Chip Making

Intel started with memory chips, becoming the leading manufacturer of RAM and ROM chips in the later 1970s. The microprocessor (almost simultaneously invented by Intel and Texas Instruments) allowed Intel to mass manufacture its Intel 4004 microprocessor for calculating machines in 1971, which it followed by the 8008 and the 8080 microprocessors, though none were great revenue earners. With IBM's PC, introduced in 1981, rapidly becoming successful, Intel created the 80286 microprocessor in 1982, and the 80386 microprocessor in 1986, outdistancing IBM and making Intel a key supplier of reliable microprocessor chips. Intel invested $200 million in design and $800 million in production facilities for the 80386 microprocessor. {6} Memory chip production was phased out, and Intel ceased licensing the design to AMD and other companies. Intel set up exclusive supply from three of its own factories, and this control of the market, and increasingly advanced design, made Intel the unquestioned market leader by the early 1990s.

Intel introduced the 486 microprocessor in 1989, the Intel Pentium in 1993, and the Pentium II in 1997. After much trial and error, Intel created the Pentium 4 in 2001, and in 2011 the first Pentium mobile processor. {8}

Intel were slow to react when a floating point error was discovered in their Pentium microprocessor in 1994, but though the recall cost $500 million, the adverse publicity coincided with their 'Intel Inside' marketing drive, and perversely proved helpful.

Intel research has now diversified into solid state (flash) memories, and the company shipped its first solid state drive in October 2008, rapidly expanding capacity and efficiencies in the years following. Their 'Ramsdale' flash memory, shipped in 2011, has 40 GB memory and an interface speed of 220 Mbytes/second.

In common with its competitors, {4} Intel set up manufacturing centers abroad (Ireland, Israel, China, Costa Rica, Malaysia and Vietnam) {5}, after careful evaluation of all relevant factors. {3}

Intel have sold chips to many PC manufacturers, but in February 2009 their biggest customers were Hewlett-Packard and Dell. {1}

'Intel Inside' Campaign

Other companies manufactured microprocessors, and when Intel could no longer call the 386 brand its own, the company set up the 'Intel Inside' marketing campaign with nearly 200 OEM (Other Equipment Manufacturers) partners in 1991. The object was to create from what before had been of interest only to PC manufacturers a brand memorable to Intel's direct customers (dealers) and the end-users (consumers and business purchasers). Such a brand strategy was a fairly new approach, but aimed to make customers confident of their computer's inner workings. Intel had spent $4 billion on marketing its logo by 1997, but results were striking.

Threats to Intel

Most threats come from alleged abuse of its market position. {1}

1. The European Commission accused Intel of anti-competitive practices, mostly against AMD in July 200, and after extensive investigations, fined the corporation US$ 1.44 billion in May 2009. 2. South Korean regulators accused Intel of breaking antitrust law, and the Fair Trade Commission ordered Intel to pay a fine of US$25.5 million in June 2008. 3. Intel agreed to a settlement with the US Securities and Exchange Commission (SEC) in July 2010 to pay $100M in penalties for not accurately disclosing accounting information to investors.

Points to Note

Sources and further reading.

1. Intel, Inc. Funding Universe. Detailed account with good reading list. 2. Intel Business Plan, July 1968. Ideas Lab . October 2005. 3. Intel: A Case Study of Direct Foreign Investment in Central America by Felipe Larraín, Luis F. López-Calva and Andrés Rodríguez-Clare. PSU . 1999. 4. Semiconductor Industry — The History and Trends 87 by 'Csanad'. Hubpages . Worldwide spread of the industry. 5. List of Intel manufacturing sites . Wikipedia . Brief listing. 6. Intel Case Study . Slideshare . Jay A Smith. 2008. 7 Intel finds Bing for mobile 40 percent more efficient than online search . Microsoft Advertising . October 2011. 8. Intel mobile CPUs to launch in June 2011. CPU World . June 2011. 9. Ingredient branding case study by Stuart Whitwell. Intangible Business . November 2005. 10. The Inside Scoop on How Intel Manages Its Facebook Page by Michael Stelzner. Social Media Examiner . August 2010. 11. A new expedition into management's familiar territory . Review by Andrew Hill of Great by Choice: Uncertainty, Chaos and Luck — Why Some Survive Despite Them All by Jim Collins and Morten Hanson. HarperBusiness. 2011. FT . October 2011. Includes comparison of Intel with AMD. 12. Intel, Seeking Edge on Rivals, Rethinks Its Building Blocks by Don Clark. WSJ . May 2011. Intel's new 3D chip. 13. $18 Billion in Dividends, Buybacks Returned to Stockholders . Intel Newsroom . January 2012. 14. Intel Reports Full-Year Revenue of $53.3 Billion, Net Income of $11.0 Billion by Patrick Darling. Intel Newsroom . January 2013.

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Case study: Intel Corporation

Intel has made numerous strategic changes to Its business model over the last 30 years to address changing market conditions and therefore maintain its ability to add value, buttressing the organizations effectiveness at capturing profits. The technology landscape has been extremely dynamic over this period and companies that have not adapted rapidly have faced extinction. Intel Is amongst the survivors while others such as Compact no longer exist.

The first major course correction that is relevant to this discussion is Intel’s transition from being a supplier of memory chips to signing and manufacturing microprocessors. Though Intel’s exit from the low margin highly competitive memory chip market was evolutionary, it was nevertheless perhaps the most critical “added value” preserving action the company has taken. Cross licensing patents in the memory chip business made it very difficult for Intel to control its pricing. There were many other suppliers in the DRAM market with lower cost structures, suppressing margins in the industry.

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Intel’s ability to add value was being inhibited by this abundance of competitors with an aggregate production capacity greater than the market was demanding.

Transnational to the microprocessor business allowed Intel to create a new portfolio of patents, and set It up to dominate the market for personal computer microprocessors. After gallon huge success as a microprocessor supplier to IBM , Intel wisely broke free of Vim’s requirement that the company license its technology to secondary suppliers.

This decision dramatically improved Intel’s ability to add value and extract profits from the PC business. As a result of this decision Intel’s leverage relative to the PC manufacturers such as MM, Compact and Dell dramatically increased.

The Memos ere now clamoring for the scarce supply of the most advanced microprocessors that they could only source from Intel. Per Exhibit 1 Intel’s revenue grew more than tenfold from 1980 to 1993.

Intel’s “Intel inside” campaign was highly unusual for a non-consumer facing component supplier however the strategy proved effective at adding and capturing value. Through this marketing Intel successfully differentiated Its products from competitors and gained valuable mind share. The fact that Intel was able to essentially impose this requirement on Memos was a manifestation of their superior ability to add value relative to the PC manufacturers.

MAD managed to mount a credible threat to Intel’s hegemony of the PC microprocessor market.

Intel reacted to this threat by increasing research and development and expending resources to recapture and maintain a technological lead over MAD. Mad’s presence in the market negatively impacted Intel’s ability to add value to and extract value from the PC industry. Per Exhibit 1 R expenditure grew to $3. 9 billion during this period.

Net income dropped from 10. 5 billion to $3. 7 billion between 2000 and 2001. Microsoft and Intel were the two entities that extracted the most value from the PC revolution.

Though there were moments of conflict between them, for example with regards to the RISC vs.

. CICS processor architectures, the two companies essentially enjoyed a symbolic relationship which helped malignant this highly lucrative market. It is only in recent years that the alliance has begun to fray as a result of challenges Trot ten module computing paradigm snort knelt renters “Welted” dominance AT the PC industry in the ass with Intel capturing greater than 70% of the CPU market and Microsoft capturing over 80% of the PC operating system market.

As computing has increasingly gone mobile the key requirements of microprocessors has renovations from clock speed to low power leaving Intel open to attack from a strong competitor, namely, ARM holdings which has always focused on designing low-power, battery life preserving microprocessor cores, which it licenses to its partners such as , Texas Instruments and Samsung .

ARM-based microprocessors have grown to dominate the fast-growing mobile computing space, leaving Intel scrambling to reengineering its microprocessors to minimize power consumption.

This is an ongoing disruption to Intel’s value adding and capturing capability and it is yet to be seen how successful the company is at addressing this challenge.

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Intel Corporation's Internal Ecology of Strategy Making

This case amalgamates several cases concerning strategic decision making at Intel Corporation. The case discusses the company’s decisions surrounding its entry and exit from several lines of businesses, most involving varieties of semiconductors that cost billions of dollars to develop and produce, and profoundly influence the company and the marketplace. The case illustrates Intel’s culture and style of decision making at several key moments in the company’s history.

Also see: Intel Corporation’s Internal Ecology or Strategy Making (Abridged)

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Strategy & Execution

Intel Corporation: Outsourcing Dilemma

Intel Corporation: Outsourcing Dilemma ^ W25607

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Product Description

Publication Date: February 03, 2022

California-based Intel Corporation (Intel) was one of the world's leading semiconductor circuit firms. In July 2020, manufacturing delays with Intel's 10 nanometre (nm) and 7 nm chips were adversely affecting the company's customers at a time when demand for personal computers and laptops was at its peak. Unlike its competitors, Intel was vertically integrated. Competitors such as Advanced Micro Devices, Inc. had outsourced their chip manufacturing to leading contract manufacturers such as Taiwan Semiconductor Manufacturing Company Ltd. (TSMC) and were experiencing better market capitalization growth by focusing on designing chips for PCs and other product categories. TSMC had become the leading contract manufacturer for chips globally. Intel's former chief executive officer (CEO) believed that Intel's chip quality was the best because its manufacturing facilities were in house. At the same time, geopolitical issues between Taiwan, the United States, and China meant that regulatory authorities in the United States were not in favour of outsourcing critical chip manufacturing. In January 2021, Intel's newly appointed CEO would have to decide whether Intel should outsource chip manufacturing to a contract manufacturer like TSMC and whether, in the long run, Intel should remain a vertically integrated unit or spin off its manufacturing division. Saurabh Bhattacharya is affiliated with Newcastle University. Arpita Agnihotri is affiliated with Pennsylvania State University - Harrisburg.

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