CASE STUDY
Read the following case and answer the questions given at the end.
INTEL STRATEGY TAKES A CHANCE
Andy Grove is taking a big risk. The CEO of Intel, maker of microprocessor chips, is basing his business strategy on an assumption. Grove guesses that AT&T, IBM, Matsushita, Motorola, Philips. Sega, and Sony can't keep up with his firm. He's sure enough that he's gambling nearly a third of Intel's revenues, $3-5 billion in 1994, that the company will dominate a slew of, businesses in which it has no experience.
Such aggressiveness has worked in the past. The so-called "Mad Hungariarf poured money into product development and factories to establish the Santa Clara, California, company as the hardware companion of Bill Gates's software champ, Microsoft. Today, Intel supplies the, microprocessors in about three-quarters of all PCs sold. Its gross profit margin is 58 percent; net earnings last year were $2-3 billion on sales of $8-8 billion, making Intel the most profitable company of its size in the world. Its size is fluid, however; Intel is growing so fast, it doubles in size roughly every two years.
So. Grove might ask, what is the risk in his gamble '?
The firm faces growing competition from other chip makers, notably the RISC chip, an inexpensive, ultrafast microprocessor developed by IBM, Motorola, and Apple Computer and featured in Apple's PowerPC series. Also clonemakers have scored a crucial victory in a lawsuit affirming their right to copy Intel codes governing the behavior of microprocessors.
Grove thinks that his company can stay on top by flooding the market with ever faster, yet still inexpensive, chips. Its newest chip, the"Pentium, is proof of how fast Intel can move. The chi p crunches data at almost twice the rate of the best-selling chip today (also Intel's). The goal is simple : create chips to enable PC producers to double the performance of their machines at every price point every year. New, more powerful chips should appear every year or two.
Pushing down prices is part of the objective. Grove argues that what Intel loses in profit margins it can more than make up in volume. He says he doesn't care about margin percentages. "1 want to increase dollar profits, and they are a product of margin times unit volume".
Grove anticipates that. volume will grow not from corporate customers., but from the demands of consumers and home-office users for convenience and novelty. The ultimate aim : to transform the PC powered by Intel chips into an all-purpose consumer device for heading down the information superhighway, controlling the TV, VCR, telephone, answering machine, and so on.Two lines, printed on fortune cookie slips, conveyed Grove's strategy to Intel's 29,500 employees :
I Job 1
2. Make the PC "IT"
Grove says the first line is a reminder to strengthen Intels No. 1 Position in the microprocessor market and establish Pentium as the best-selling- microprocessor faster than any , before'it. Line 2 refers to-Grove's desire to turn the PC into the cornerstone of 21st-century information technology.
Getting there,' says Grove, is easier. because there is competition. If it wasn't for the threat of PowerPC, and what he calls the "megahattle," Intel would not be moving so quickly, "We are making gutsier moves investment-wise, pricing-wise, I every way, because we've got a competitive threat," he says. "The net result is well get to advance to the next level of competition."
Questions :
I. What is Grove's vision for Intel ? What is Intel's mission ?
2. How effectively do Intel's organizations objectives define and fulfill its mission ?
3. What is the purpose of the fortune cookie slips ?
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Strategic management 