Intel case study, 1968-1997

¶ … strategy did INTEL use to gain a competitive advantage in microprocessors?

Intel initially fostered close ties with IBM, beginning with project "CRUSH" in 1980. Project CRUSH was a "sales effort intended to secure 2000 design wins that year" and because of the IBM contract, earned Intel far more than their goal. Moreover, the success of Intel's early generation microprocessors helped propel IBM into fame and fortune. The success of IBM would, in turn, aid Intel in becoming the industry leader even when their relationship with IBM dwindled less than a decade later. The main strategy Intel used to gain a competitive advantage in microprocessors was developing a horizontal alignment approach to manufacturing.

Instead of diversifying product development, Intel chose to narrow their focus on one specific item that kept them leagues ahead of their competitors, especially their American ones. A horizontal alignment strategy also meant that open architecture became the hallmark of the PC revolution. When major players like Compaq and Microsoft joined forces with Intel, the horizontal alignment strategy and open architecture model of PC manufacturing had caught on and led to Intel's overall success.

In 1983, Intel launched project CHECKMATE. Project CHECKMATE coincided with the development of the next-generation 80286 microprocessor (p. 4). However, it wasn't until Intel developed the 80386 that the company's manufacturing and marketing strategies truly blossomed. Following the successive successes of their increasingly sophisticated microprocessors, Intel licensed IBM to manufacture the 80386. By allowing IBM to manufacture its own 386 microprocessors, Intel was the "sole source" of the microprocessor for all other PC manufacturers, "supplying the needs of the entire industry," (p. 6). Intel beefed up their manufacturing processes and helped create the economies of scale that would initiate the PC revolution.

2-How did INTEL sustain this competitive advantage?

Interestingly, IBM became complicit in Intel's tremendous market share advantage vis-a-vis any other microprocessor manufacturer. After purchasing the exclusive rights to manufacture 80386 microprocessors from Intel, IBM opted out of the competitive retail market of 386-loaded computers. Funneling their funds instead into research and development of the next generation of microprocessor would severely backfire for IBM, especially as companies like Compaq lie lurking around the corner. Intel used IBM's refusal to purchase the next generation of microprocessors as a boon instead of a crisis.

Compaq came to Intel's rescue almost immediately, purchasing 386 processors for use in a fledgling consumer machine. The venture was risky but paid off brilliantly and Intel was poised to launch the next generation 80486 microprocessor well before IBM could come to the table. Moreover, Microsoft began developing operating systems compatible with successive generations of microprocessor technology.

Reduced Instruction Set Computing (RISC) processors posed a brief threat to Intel's glowing successes during the 1980s. Instead of buckling under the pressure to create a RISC-like microprocessor to compete in the enterprise market, Intel instead revitalized its own proprietary x86 microprocessor technology. Just as Intel had chosen early on to specialize in microprocessors, and just as Intel opted for a horizontal integration strategy for marketing, manufacturing, and distribution, Intel also chose to keep investing in their core strength. After AMD was granted rights to manufacture clone microprocessors, Intel answered by aggressive R&D campaigns for the next generation of microprocessors. Finally, Intel sustained its competitive advantage via a consumer (OEM)-oriented marketing campaign using the slogan "Intel Inside."

3-Why did it not succeed in DRAMs?

When Intel still faced major competition from Motorola, a company that had landed a lucrative and long-term contract with Apple, Intel was forced to investigate new ways of marketing both their microprocessors and their DRAM (dynamic random access memory). Japan had gained a nearly crushing lead in the DRAM manufacturing process technology and so Intel would have had to channel large sums of money into acquiring DRAM process technologies to keep up. Intel did not succeed in DRAMS not because it failed but because it never sincerely tried.