Intel’s Diversification Strategy
Intel has developed several relationships that look to be beneficial in the future. Intel has been closely working with Microsoft in developing and coordinating processor and operating system development. Further, both companies combine their efforts in the development of new designs. Additionally, Intel uses the services of independent software vendors who develop software applications for the processors. A major threat to Intel in the Internet era is facing competition from other companies that are developing server platforms.
Under Barrett’s strategy, Intel believed that it could engage in client platforms, server platforms, communications and networking because of its strong financial capabilities, top-notch circuit design and manufacturing abilities. A risk of Barrett’s strategy was that it did not focus on the Intel manufacturing of microprocessors, which were the sole reason that it had been able to achieve financial success. Further, Intel believed that diversifying into the four areas would be beneficial without having conducted an in depth analysis of the situation.
Intel’s strategy with DRAM was using metal-oxide semi-conductors, which allowed massively production of DRAM. The metal-semi oxide technology allowed to reduce the cost of developing chips and allowed increased performance. Competition from Japanese semiconductor companies like Toshiba and NEC increased their world memory market. The Japanese companies were able to produce more semiconductors because they had available cheap capital.
Intel has been able to protect its intellectual property in the microprocessor industry. Further, Intel has utilized its wealth of trade secrets in design and production and patents as a negotiating power in cross-licensing agreements. Unlike the DRAMs, the microprocessors have been developed with a microcode, which is copyrighted preventing other companies from copying its microcode.
Greatest threats to Intel’s competitive advantage
The emergence of reduced instruction set computing (RISC), which used fewer transistors to achieve the same results, as the complex instruction set computing architecture (CISC) was a major threat. The RISC architecture was simpler and cheaper, and Microsoft companies together with other companies such as Dell were pushing for the adoption of the RISC architecture. Intel was using the CISC architecture that used more transistors. Thus, to be able to address this challenge, Intel had to divide its resources to develop both CISC based chips and RISC based chips. Intel decided to back most of its resources in the production of its new 486 processor and used the RISC i860 chip for specialized uses. Further, Intel developed the Pentium processor that integrated techniques utilized by the RISC. NEC copied one of Intel’s microcode. However, Intel had protected its intellectual property that allowed it to sue NEC for copyright infringement.
Recommended strategic Alternatives for Intel
Instead of diversifying all at once, Intel needs to approach each business area at a time. Prior to this, the company needs to conduct an in depth analysis of the market trends regarding the product or business they want to launch. Intel also would benefit with liaising with other companies in the communication business, for example, Samsung and form collaborations that may benefit both companies.
