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MGT599 Case-Intel Essay

            In today’s world we see a lot of giant orgnziations around us who have made duopolies. These giants have their strong footholds in the airline, beverages and steel industries. To name a few of them, they include Boeing and airbus, coke and pepsi and arcelor and mittal steel. If we look at the microprocessor industry, its not a long time ago that there was only one largest chipmaker, known as INTEL but its prowess and hegemony was pulverized by Advaced Micro Device (AMD) who in no time got the much needed technical lead in the industry which resulted in stealing a major chunk of Intel’s share. This caused Intel to suffer many financial setbacks. As Intel’s inventories piled up, it lowered down the gross margins below AMD’s for the first time in history (Einhorn, 2006). It also has to bear a negative effect on the stock. Previously its stock traded for about $29 a share but then its price plummeted to $18. The story does not end over here, it also had to witness another poor quarter which slided its revenues by 13% and brought it up to $8 billion with a net income thinning to $885 million, a

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decrease of 57%. When Paul Otellini, Intel’s chief operating officer, was made the chief executive of the company he wasted no time in devising a new strategy which is famoulsy known as a ‘right hand turn’. This is because the world’s largest chip maker is facing major challenges to compete with AMD in the market. The strategy included launching of new range chips which was done to bring the company on the top and to again recoup its share which it had lost to AMD (McConnon, 2007).

Paul strategy clearly changed the mission, vision and goals of the organization. His main agenda was to clear out all the hurdles and cobwebs of ‘Grove’ era and to come out with new ones so customers can get what they want instead of Intel thumping them up with whatever it makes (David, 2006). He immediately scrapped the old logo of Intel inside, called pentium brand a stale and corporate’s logo a relic (Edwards, 2006). Paul was also of the opinion that as times have changed, Intel have to change with it so it has to introduce products which appeal to the masses. So where did the change come at the organizational level in terms of strategies and polices? Previously, Grove and his successor Craig.R.Barrett spent energies and resources on desigining powerful microprocessors  for personal computers and making hyperrpoducitve plants who can produce a lot of micro processors in a day than any one else.

Paul on the other hand carefully analyzed the whole investment done in past and instead of scrapping all of them in one go, he just made a reallignment with the new model. Instead of making chips only, he wanted Intel to diversify its business model and create other chips as well as some softwares and amalgamate them together. This was his new strategy whose ultimate goal was to create platforms. In relation to this he reorganized the company all way form top brass to the lower levels. The basic purpose of reorganization was to create business units that can lead a research in different fields such as health, mobility innovating different products etc. This had a very fruitful effect as Intel came up with a lot of new than ever (Einhorn, 2006).

Also, Intel culture was previously shaped up as a place for nerds or paranoids only. So it only gave attention praise and respect to those individuals who have a technical and engineering background. As Paul was first non-engineer to run the firm, he understood this problem. He instead of hiring engineers only, also went for software developers, sociologists, ethnographers and even doctors to develop the products. Another move by the chief executive of the company was to change the tag line. The outdated and mundane tag line of Intel inside was immediately scrapped and was replaced by ‘leap ahead’. Now these things clearly show us how things have been changing at Intel, what strategic choices were made there which changed its mission and ultimate goals (David, 2006). At the same time, Pentium brand was phased out slowly and it was replaced by three different brands. Intel also came up with laptops/notebooks under an old brand Centrino (McConnon, 2007). They launched a new brand known as “core”.

Another achievement by Intel was to get the dual core chips introduced in apple products that were never done before. In past grove and Barrett considered apple and its products as inferior so they did not pay any consideration to it but Otellini looked this as a golden opportunity and convinced apple’s CEO Steve Jobs in selling Mac’s and other products with Intel chips inside it. He also made Apple agreed on starting up new partnerships to step up their innovation in designing PC’s because Paul Otellini acknowledge apple’s efforts in the past and consider it as a forerunner in designing. Google signed up another strategic partnership. Google was in need of servers who consume less electricity as yearly electricity bill of servers crossed 50 million mark so Intel in this way found another client by supplying less energy consuming chips (Edwards, 2006).

Now the story becomes more interesting when Paul Otellini hires Kim from Samsung group. Kim is a fine marketer as he achieved one of the biggest milestones in his life by bringing Korean brand at the top and making it a hot product to buy all around the world. It included all Samsung products ranged from electronics, mobile phones, computer chips/hardware, and consumer electronics. Why Kim was chosen by Paul? Because Paul believed that an outsider can muffle up all the grumbles in the organization when a change is implemented otherwise it gets nasty and difficult to control that would be a loss to the company (Einhorn, 2006). One of the best things about Kim was he made it clear to Intel management and production team that they are there not only to produce silicon but to make things easier for people putting more energies and efforts in research and development and coming up with variety of products which can put individuals at ease.  Paul is also in search of fine executives from top-notch electronic companies around the world. This is because those executives possess great knowledge in their respective fields and they can help Intel in making those chips that can be used in different electronic devices that would ultimately be reducing the researching cost of the product (McConnon, 2007).

To Conclude, Intel was down and out, lost share price at the stock market, lost market share of its product to AMD but little changing in the company’s strategy made it upright again. No one ever estimated it would recover so fast after falling from zenith. The main player who is behind it to receive all the credit is the CEO who after holding the charge of the office immediately scrapped the outdated strategy adopted by the past executives. He also did not hesitated in throwing out old tag lines of Intel that is no doubt a daunting step on his part to take. It was akin to handle a bull by its horns. Apart from this Paul changed the company’s culture and took away all the stars from technical people. Infact he gave voice to the lower management staff too to raise their opinions and make Intel a better place to work in. Moreover, hiring right executives from right places was also one of the major achievements by Paul like hiring of Kim from Samsung. Lastly, making partnerships and looking for new clients also increased Intel’s profits; previously it was neglected due to a tunnel approach followed by the past leaders of the company (Edwards, 2006).

References

David, F.R (2006). Strategic Management: Concepts and Cases.11th Edn, Prentice Hall.

Edwards, C. (2006). Inside Intel. Business Week. 3966, 46.

Edwards, C. (2006). Intel Sharpens its offensive. Business Week. 3995, 60.

Einhorn, B. (2006). Chinas Net Cafes, Intel pours it on. Business Week. 4008, 52.

McConnon, A. (2007). The Mind-Bending New World of Work; Motion-capture technology burst out of Hollywood and into business from aerospace to advertising. Business Week, 4028, 46.

 

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