Intel Corporation SWOT Analysis and Strategic Overview

Introduction

Intel Corporation is one of the most successful companies in the world. The company has specialized in several different types of processors over the years and has established itself as an industry leader. This paper examines Intel Corporation using the case study Intel Corporation: 1968–2008 as its primary source. The investigation includes a brief history of the company, a SWOT analysis, and strategic recommendations.

History, Development, and Growth

Intel was founded in 1968 by Robert Noyce and Gordon Moore, who were at the time serving as executives at Fairchild Semiconductor (Hill & Jones). Both were well known for their expertise — Noyce in management and Moore in research and development. When both executives became dissatisfied with the management practices imposed on the company by executives in New York, they decided to pursue a new venture (Hill & Jones). Because the two had such strong reputations in California, they were able to raise more than $2 million in a single day. Their new business venture involved the development and distribution of silicon memory chips. The magnetic-based memory devices that were popular at the time were slow, and the two executives believed that silicon devices could make computers run faster. This idea became the foundation of Intel, which eventually grew into the world's leading manufacturer of computer chips.

Noyce and Moore brought significant prior experience to the venture. The MOS research needed to create the new chip had been conducted at Fairchild, the company they had left. In order to gain access to and commercialize that research, they built Intel's foundation upon it (Hill & Jones).

Andy Grove was one of the individuals most critical to the company's early development. Grove was known for his discipline and his expectation that employees under his management demonstrate the same. He was also highly controlling in his dealings with managers, requiring them to make detailed revenue and cost projections designed to ensure that capital was being properly allocated and utilized.

Although Intel encountered problems in the development of DRAM (dynamic random-access memory) chips, the company ultimately succeeded in bringing the product to market while guarding the manufacturing process as a closely held secret from competitors. By 1970, Intel had created the 1103, a device capable of holding four times as much data as the highest-capacity semiconductor then available. By the end of 1971, the 1103 was being used by 14 of the 18 leading mainframe computer manufacturers.

Intel continued to build and develop unique products that made computing easier and enabled new technologies. Among the company's most important creations were Read Only Memory (ROM) chips and the microprocessor. The development of ROM was significant because it allowed programming to be permanently written into a circuit. However, this created a problem: if a programming error occurred, the chip was rendered useless because it could not be erased. This led to the development of the EPROM (Erasable Programmable Read-Only Memory) chip. The EPROM became extremely popular, and for a two-year period Intel was the only company manufacturing it. Intel also developed several microprocessors of varying speeds, which would prove to be a critical component in the emergence of personal computers.

By the mid-1970s, the personal computer industry was gaining momentum. Intel identified an opportunity to sell its products in an entirely new market. The first personal computer, the MITS Altair, utilized an Intel microprocessor. Apple and IBM subsequently developed personal computers that also used Intel processors. At the same time, Microsoft was gaining prominence in the computer industry. Intel and Microsoft became closely linked when Microsoft developed MS-DOS to run on Intel microprocessors. Over time, the PC industry began to expand and fragment, with major players including IBM, Compaq, Dell, and Zenith.

By 1982, nearly 70% of all microprocessors in personal computers were manufactured by Intel, with AMD holding most of the remaining market share. Two years later, Intel was evaluating what to do with its DRAM division. Japanese competitors had entered the DRAM market, and profits from DRAM sales had declined dramatically. Intel decided to exit the DRAM business and concentrate on other areas.

Andy Grove became CEO of Intel in 1987 when Gordon Moore stepped down. Having exited DRAMs, Grove directed the company to focus on developing faster microprocessors. Grove understood that users expected access to machines that would be both faster and capable of holding more information. This led to the development of the i386 microprocessor, which transformed Intel and contributed to $2.9 billion in sales in 1988 as computer manufacturers, including Compaq, began selling PCs featuring Intel processors.

Internal Strengths and Weaknesses

1. Innovation. The primary internal strength of Intel is innovation. Since the company's founding, Intel has consistently been among the first to develop and manufacture new components for computers. The creativity of its founders and the talent they recruited has benefited the company enormously. Intel has developed products that were not only revolutionary but also timely and necessary, demonstrating a keen understanding of the industry environment and the needs it demanded.

2. Appropriate Management Style. Another internal strength is efficient management, foresight, and ambition. Andy Grove, though controversial, maintained firm control over the people he managed and understood that the absence of discipline could jeopardize the company. In terms of foresight, Noyce and Moore identified unmet needs in the industry and manufactured products specifically designed to address them, enabling Intel to maintain a lasting competitive advantage. The company has also demonstrated consistent ambition, remaining passionate about shaping the future and continuing to transform the relationship between people and technology.

3. Brand Name Reputation. The efficiency and quality of Intel's products have earned the company a strong global reputation. This reputation has generated brand loyalty among both the PC manufacturers that use Intel products and the consumers who purchase computers containing Intel components.

4. Research and Development. A significant portion of Intel's success can be attributed to its sustained commitment to research and development. The company has consistently identified user needs and developed products that run faster and more efficiently with each generation, resulting in microprocessors that shrink in size while growing in performance. According to the case study, Intel invested approximately $5.5 billion in R&D during the 2000s — a commitment that has produced products widely regarded as best-in-class.

5. Marketing and Relationships with PC Companies. Intel has excelled at marketing its products and cultivating relationships with PC manufacturers. The "Intel Inside" campaign, for example, represented a new form of brand recognition aimed directly at consumers who were increasingly purchasing computers from manufacturers rather than assembling them independently. The campaign informed buyers about the importance of the Intel chip in ensuring compatibility with existing software and delivering the latest technology. Intel also effectively demonstrated to PC companies the value of its microprocessors, with its strong reputation reinforcing confidence in product quality.

6. Manufacturing Efficiencies. One of Intel's major strengths is its close relationship with the engineers who build the equipment used to manufacture its products. As the case study explains:

"Due to its scale, Intel enjoys considerable leverage over equipment suppliers. In some cases Intel will design a new machine itself and then have equipment vendors manufacture it. In others, Intel works closely with vendors on the design of a piece of equipment. As a result, Intel itself holds hundreds of patents relating to the process of manufacturing semiconductors. Whenever equipment is developed specifically for Intel's requirements, vendors are generally prohibited from selling that equipment to other companies, such as AMD, for a given period (Intel Corporation: 1968–2008, p. 99)."

This approach to the manufacturing process increases efficiency, lowers costs, and improves profitability.

1. Growth Without Direction. By the time a new CEO was in place in 1998, the PC industry had matured both domestically and internationally, and the internet had become the dominant new frontier. The new CEO believed Intel's future depended on network-related chips; however, the company failed to gain traction in that market because it was already well established by entrenched competitors. Intel also attempted to enter the market for phone chips, where it faced stiff competition including Texas Instruments. These efforts illustrate a recurring weakness: attempting to grow without sufficient strategic direction.

2. Loss of Corporate Direction and Poor Management. During the Barrett era, Intel appeared to lose its sense of identity. The company struggled to find its footing amid rapid technological change and shifting consumer demands, leading to capacity constraints and product delays that damaged its reputation. Many industry observers felt that Intel had grown too large to manage effectively. In some respects the company had lost the identity it had worked for decades to build.