Mike Adamo Helen Butz Rob Davis Ray DeMaio Joey Mayfield James McKeague Nate Steinhubel

CO-BRANDING Cummins Turbo Diesel Engines Dodge Ram Pickup Truck

CO-BRANDING NutraSweet Brand Sweetener Pepsi-Cola Company

HISTORY Founded in Robert Noyce and Gordon Moore Goal was to develop memory products Bit Static RAM (SRAM) K Dynamic RAM (DRAM)

HISTORY Intel's leadership was firmly established - Defined the microprocessing field Leader in breakthroughs - Invented 16 of 22 of major breakthroughs - All between 1971 and 1981 Led to a decade of prosperity

HISTORY Trouble hits in Intel falls behind 's Revolutionary breakthroughs slow down IBM buys a 20% stake in Intel

ECONOMICS Sales peaked in Leader until Hoped to capture the 32 bit market Impact of the 286 and 386

ECONOMICS Market Shares - Intel's share for microprocessors in PCs Around 80% - Intel's market share for the 386 market 100% for the market “Run out of Steam by 1993” - The 486 Intel the sole producer in 1992

TECHNICAL AND POLITICAL Relationship between Intel and AMD - “Cross Patent License” 386 and Legal Issues Court Rulings - Microprocessor vs. Microcomputer

CULTURAL Intel's Reputation Early success Seller's Standpoint Marketing Techniques “Intel Inside” Campaign

THE THREE C’s Customers IBM, Hewlett Packard, Compaq, Consumers, O.E.M.S. Competiton AMD, other O.E.M.S. Company SWOT

Scenario 1991  George H.W. Bush is President during Gulf War I.  Paula Abdul’s “Rush Rush” #4 on Billboard Hot 100.  Intel releases 486SX chip for a lower price consumer market, selling for $258.

WHO ARE INTEL’S CUSTOMERS? OEMs Businesses Consumers

PRODUCT LIFE CYCLE for Consumer Computer Market Transition Period from Introduction Stage to the Growth Stage. Network Externalities Network size drives up utility

MOORE’S LAW 586 Predicted release of 586 chip

CONSUMER DECISION PROCESS STEP 1 Identify the Problem -I need a computer

CONSUMER DECISION PROCESS STEP 2 Gather Information -Catalogs -Magazine Advertisements -Ask Friends -OEM Customer Service

CONSUMER DECISION PROCESS STEP 3 Generate Alternatives -Major OEM Brands -Micro Processors STEP 4 Evaluate Alternatives -Customer Service -Price -Is this a Reliable Brand -Is this a Quality Product ?

CONSUMER DECISION PROCESS STEP 5 Make Decision STEP 6 Evaluate Decision

B.C.G. PORTFOLIO ANALYSIS Intel Chips have a high relative market share The market growth rate for computers is also high (Moore’s Law)

GROWTH STAGE PLC STRATEGIES StrategyCompany Imitate Innovate Differentiate (in the consumer’s mind)

COMPETITIVE ANALYSIS Performance Superiority Characteristics Best Product Innovators Always a Market Leader High Price Performance Superiority Strategy Invest Mainly in R&D [Currently doing] Problem: Only gives Intel a short-term competitive advantage.

A N A L Y S I S STRENGTHS  16/22 major breakthroughs in microelectronics  80% Market Share

Opportunites cont.  Ideal versus Actual state~ Intel chips as well as computer industry have became external (I have to) as opposed to internal (I want to) Examples “I have to pay my credit card online.” “I need to check up to date stock prices.”

Problems w/AMD 1976~ Intel signed patent cross license with AMD 1981~ Agreement terminated 1982~ Signed a technology exchange agreement, barter system 1987~ Products were not being exchanged, leading to 5 yrs. arbitration 1991~ AMD files antitrust suit in federal court, closed by FTC. Gave right to AMD to copy Intel chip

ALTERNATIVES 1.) Focus solely on R&D and continue to lead the market in innovation. (586 line) 2.) Sign Agreements with Compaq, HP, and IBM to have Intel in ‘X’ # of computers but without any co-branding. 3.) Intel Inside is used with consumers but not to businesses (still have Intel just no logo) 4.) Continue with Intel Inside Campaign as planned (persuade Compaq & HP to join)

EVALUATION OF ALTERNATIVES Focus solely on R&D Pros Known for market innovation Guide market trends Seen as Premium product Already good at this Cons Expensive May not always be leader Abundance of Imitators Risk of Technology Leapfrogging Non-Sustainable competitive advantage

PACE OF PRODUCT INTRODUCTIONS Start of Design Work Public Unveiling Volume Shipments 4 years

RESEARCH AND DEVELOPMENT a comparison of costs = $100 Million $618 Million $214 Million Research and Development Costs found from SEC Federal Filings

EVALUATION OF ALTERNATIVES Focus solely on R&D Pros Known for market innovation Guide market trends Seen as Premium product Already good at this Cons Expensive May not always be leader Abundance of Imitators Risk of Technology Leapfrogging Non-Sustainable competitive advantage

EVALUATION OF ALTERNATIVES Purchase Agreements Pros Guaranteed sales Blocks up channels for other micro-processor manufacturers Less money needs to be spent on advertising Cons No growth in brand awareness or equity OEMs have no incentive to stay with Intel past contract dates

EVALUATION OF ALTERNATIVES Differing Ad Strategy for Business Buyers

Pros Still allows for Intel to grow brand awareness with consumers OEMs are still buying our chips Cons No growth in Brand Equity with Businesses -Major market segment Little incentive for OEMs to remain with Intel chips

EVALUATION OF ALTERNATIVES Continue Intel Inside Campaign Cons Increase in advertising expenses Major OEMs may not sign on Intel name could be spread into not as high quality computer brands Could lose premium image Pros Increase in Brand Awareness and Equity Intel could become synonymous with computers OEMs have incentive to remain with Intel A source of Sustainable competitive advantage

BRAND EQUITY PYRAMID Brand Salience Consumer- Brand Resonance Consumer Judgments Consumer Feelings Brand Performance Brand Imagery 4) Intense, Active Loyalty 1) Deep Broad Brand Awareness 2) Points of Difference 3) Positive Accessible Reactions Intel Inside campaign coupled with own Intel ads serve to grow this area Intel is the market leader Intel…short for intelligence Feel Safe about buying an Intel Inside Computer Why doesn’t this OEM use Intel? Possibly in future? Kevin Lane Keller, Building Customer-Based Brand Equity: A Blueprint for Creating Strong Brands, Working Paper Series, Report (Cambridge, Mass: Marketing Science Institute, 2001), [Solomon, Marshall, Stuart; Marketing Textbook 4 th edition page 277]

WHICH ONE WOULD YOU CHOOSE? WHY?

“A product is something that is made in a factory; a brand is something that is bought by a customer. A product can be copied by a competitor; a brand is unique. A product can be quickly outdated; a successful brand is timeless.” A quote by Stephen King of the WPP Group of London, A Communications Agency which serves over 300 Fortune 500 companies.

EVALUATION OF ALTERNATIVES Continue Intel Inside Campaign Cons Increase in advertising expenses Major OEMs may not sign on Intel name could be spread into not as high quality computer brands Could lose premium image Pros Increase in Brand Awareness and Equity Intel could become synonymous with computers OEMs have incentive to remain with Intel A source of Sustainable competitive advantage

QUANTITATIVE ANALYSIS The primary goal of a financial manager is to maximize shareholder wealth by investing in profitable projects. The foundation of my analysis is formed on the basis of two fundamental principles: The Stand-Alone Principle Pro-Forma Financial Statements.

Assume the following: –Combined advertising expenditures for Hewlett- Packard and Compaq amount to $80 million. –Income tax rate is 34% Is it beneficial to both HP & Compaq to adopt the “Intel Inside” marketing campaign? QUANTITATIVE ANALYSIS

EVALUATION OF ALTERNATIVES Continue Intel Inside Campaign Cons Increase in advertising expenses Major OEMs may not sign on Intel name could be spread into not as high quality computer brands Could lose premium image Pros Increase in Brand Awareness and Equity Intel could become synonymous with computers OEMs have incentive to remain with Intel A source of Sustainable competitive advantage

SEEKING A BASIS FOR VALUE SUPERIORITY QUESTIONS TO ASK Who is the real customer? –OEMs Consumers and Businesses What is important to the customer? –Quality Product –Reliable [a brand they can trust] –Price

CONT. How well are we perceived to be doing? –OEMs For small OEMs Intel Inside is great For larger ones it is monopolistic Still have a great product Starting to lose market share to imitators –Consumers and Businesses Businesses see us as a top of the line product [quote from case] No deep broad brand awareness in consumer market

CONT. How can we enhance our position? –What are some sources of competitive advantage? Scale, Scope, and Efficiency… (most have this) Financial Condition… (equal across firms) Brand Equity… (Sustainability) Location… (not important in this market) Skills… (not sustainable and costly)

HOW? Co-Branding Two Great Brands, One Great Product! Magazine and Newsprint Stickers on Computers Logo on Boxes

INTEL’S OWN AD OFFENSIVE We continue with our current ad strategy of Superior Performance.

HOW DOES THE INTEL INSIDE LOGO BRING VALUE TO YOUR BRAND Brand Loyalty Name Awareness Perceived Quality Brand Association Other Proprietary Brand Assets Provides value to consumer by enhancing customer’s: -Interpretation/ Processing of information -Confidence in the purchase decision -Use Satisfaction Provides value to firm by enhancing: -Efficiency and Effectiveness of marketing programs -Brand Loyalty -Prices/margins -Brand Extensions -Trade Leverage -Competitive Advantage Source: Aaker, 1991, p17

CONT. Possible Offensive Moves of Competitors? –Continue to imitate our products –Start their own co-branding campaign Defensive Capabilities of Competitors? –Lower prices

DECISION TIME Need to decide as a company whether to sign on with Intel Inside or not. Use Company Objectives and Mission Statements as groundwork for decision V.P. of Communications needs to inform us of your decision and reasons

QUESTIONSQUESTIONS