1. www.ePowerPoint.com 1 Industry, Strategy, Business Model (continued) Intel Case Study www.ePowerPoint.com

2. 2 4 C’s & 2 S’s Review ___ Company Suppliers Competitors Substitutes ChannelCustomers Collaborators 協力者 / 協業者 “5 th C”

3. www.ePowerPoint.com 3 Channel How customer gets your product/service Direct – company’s own network  Sales Force, Mail, Telemarketing, Vending, Some Internet/Catalog, Company Store Indirect – via one or more other companies  Sales Agents, VAR (value added resellers), Stores (department, convenience, supermarkets, Some Internet/Catalog (e.g. Askul)

4. www.ePowerPoint.com 4 Collaborators Partners, helpers, advisors, experts Directly or indirectly help the company Examples  Industry experts, user groups, educators, advisors  Industry or trade groups  Government, NPOs, universities  Complementary product/service providers Software makers for hardware Computer magazines, manuals, websites

5. www.ePowerPoint.com 5 In Class Exercise ___ Company Suppliers Competitors Substitutes ChannelCustomers Collaborators

6. www.ePowerPoint.com 6 5 Forces Affect Industry Profitability Company Supplier Power New Competitor Entry Substitutes Buyer Power Channel / Customer Current Competitor Rivalry Profit = Price – Cost cost price

7. www.ePowerPoint.com 7 Today’s Drucker A business has 2 basic functions: marketing and innovation. Peter Drucker

8. www.ePowerPoint.com 8 Intel Case Study Technology Innovation  Big idea, new technology/business area: (semiconductors, IC chips) Marketing Innovation  Intel Inside Company is more than its products  “Platform” (product series, same technology base)  Strategic Choices  Sustainable Competitive Advantage

9. www.ePowerPoint.com 9 Intel 1968-1977 Case “Trying to do things nobody else could” – Robert Noyce (co-inventor integrated circuit IC) Gordon Moore (creator of “Moore’s Law) Andy Grove joined, took personal “risk” First 2 DRAM products not successes 3 rd product 1103 became world leader,  90% of Intel revenues (concentrated)

10. www.ePowerPoint.com 10 Intel DRAM Strategy Strategy: push product design, be first to market  Design & process technology leader  Investment in plant & equipment  Costs drop over production volume (scale) growth  Prices drop with competitive capacity  DRAM generally not protectable with patents  Japanese started introducing products more rapidly Invested more heavily in production (44% vs. 22%)  1986 Intel decided to exit DRAM business 1/3 of R&D, but only 5% of Revs, was small player in market Japanese beat Intel on process technology (of commodity)

11. www.ePowerPoint.com 11 Intel and Microprocessor 1970 CPU chipset order for Busicom calculator  Technology development “paid by customer”  Bought rights for “non-calculator” use Hard to see future even for Gordon Moore  “…never gave it another thought” – Moore  “We didn’t take it (PCs) seriously” – Grove Non-sequential forecasting Sometimes easier for outsider to see  Exit: By 1984 mid-level managers shifting technology Hard to leave business that began company Especially for long time senior managers Mid-level managers closer to daily business realities

12. www.ePowerPoint.com 12 Intel Suppliers Competitors Substitutes ChannelCustomers Kyocera, etc Motorola AMD, TI, Cyrix RISC 日本の DRAM ENDUSERENDUSER Licensees -IBM -Others Direct IBM Compaq Dell Packard Bell CHANNELCHANNEL Software Providers OS Application Equipment (sole/dual) collaborators

13. www.ePowerPoint.com 13 Apple/Motorola vs. IBM/Intel First to Market Closed architecture Sole-provider  Exclusivity  Proprietary Big, famous name Standardized, open architecture  Components  Software  Scale economies Intel gets benefit of IBM marketing and strategy (derived demand) INTERDEPENDENCE OF COMPANIES (p.30, 22) “Value Chain” 1994 Apple/IBM-Motorola PowerPC chip 2006 Apple/Intel

14. www.ePowerPoint.com 14 Intel Microprocessor Progression Chip (bits) Transistors Year Introduced Initial Price Licensees Intel-Chip Market Share 8086 (8-bit) 29,000 1978$3601230% 80286 (16-bit) 134,000 1982$360475% 80386 (32-bit) 275,000 1985$2991 (IBM)100%-IBM 80486 (64-bit) 1,200,000 1989$950??

15. www.ePowerPoint.com 15 386 Changes Everything (1985) Intel 386 Investments  $200 million for design  $800 million for production facilities  Decides not to license, except IBM IBM choice allows Compaq entry and Win  IBM delays selling, to create more closed architecture  Compaq enters Desktop market with Intel 386

16. www.ePowerPoint.com 16 486 and Wintel Collaboration Hardware advance precedes software advance  Microsoft Operating System (new DOS) not ready for 386  Need large installed base of hardware for software upgrade Emerging collaboration between MS & Intel  WINdows + INTEL = “WINTEL” platform  Software + Brain Software investments (past and future)  Increasing switching costs

17. www.ePowerPoint.com 17 “Intel Inside” – Marketing Innovation Ingredient （材料） /Component （成分） Marketing  Another example? Intel is “superior to other chips”  Market maturity, education higher (2 nd, 3 rd PC)  Buyer Intel preference moved from 60% to 80%  AMD: “it shouldn’t matter which chip” but it DOES IBM, Compaq resisted, but then gave in  Couldn’t fight Intel  Better to have branded “Intel Inside” “premium” chip  6% rebate for use in partner marketing Fight competitors with technology, marketing, lawyers and money power (all pointed to same goal)  1997 spent $750 million  More valuable than patent

18. www.ePowerPoint.com 18 Ending Question Is the internet good or bad for Intel?

19. www.ePowerPoint.com 19 Some Important Strategic Ideas Where is the most “value” in a computer? Success attracts competition, company must protect against  2005 Intel has 82% of PC processor market Technology moved so rapidly that patents became obsolete  protect by know-how, branding, scale, luck Small stuff that goes inside other stuff  Allows focus, expertise, scale, “piggy-backing” Thrived on derived demand driven growth and rapid change

20. www.ePowerPoint.com 20 Typical Market Positions & Strategies PositionGoalStrategy Leader Most Sales -Grow Market -Grow Share Challenger Challenge Leader -Target Leader -Target Small Follower Grow Carefully -Maintain Base -Grow Quietly Niche Find Safe Space Specialize Toyota Nissan Mazda Daihatsu

21. www.ePowerPoint.com 21 Fragmented Industries (fragment= 破片） Market divided over many companies No dominant leader Largest competitor may only have a few percent market share Examples:  Restaurants  Book stores  Repair shops  Publishing  Pet shops  Hair Salons  Hotels ラーメン

22. www.ePowerPoint.com 22 Fragmented Industry Strategies Construct formula facility Expand geographically Increase vertical integration Become low-cost producer Specialize by product/service Specialize by customer type Build brand

23. www.ePowerPoint.com 23 Company Who are we? Why are we here? What are our goals? What are our strengths? What are our weaknesses? What are our key competitive advantages? What is our market position? What is our strategy? What is our business model?

24. www.ePowerPoint.com 24 Homework Assignment Design your own personal “life” meishi わし の めいし 1.Your Name (as you want it) - Nickname (optional) 2.Title (life position) 3.Purpose statement 4.Ideal living place(s) 5.Identifying email address 6.Anything else important -Logo -Website -Business Name -Cool Phone Number Print 15 枚 copies please Send me a file by 5/12 Email: nbc1@bizsmith.com (any languages that fit)

25. www.ePowerPoint.com 25 Homework Assignment Design your own personal“life meishi” Jay Andrew Smith International Educator Promoting Growth And Understanding Around the World New York + San Francisco + Kagoshima + Brugge jay@soulproprietor.us SAMPLE name “title” Purpose/goal Cool place(s) Meaningful email/HP address logo www.vistaprint.jp, ppt, Paint, illustrator, etc. by hand all OK

26. www.ePowerPoint.com 26 4 Cs + 2s – The Players Company (us)  Mission, Goals, People, Structure, Strategy, Model Customer (goal)  Who? How many, How strong, How important, Wants & Needs Channel (path)  Sales Team, Distributors, Service, Support, Partners Competition (them)  Who, Current, Future, Advantages, Position Substitutes (other choices for customer)  What, Advantages, Costs, New Technologies Suppliers (inputs)  Who, How many, How strong, How important to us,

27. www.ePowerPoint.com 27 5 Forces Buyer Power (Customer /Channel)  How many, how big, how valuable, how sensitive Supplier Power  How many, how big, how important to us, to them Current Competitor Rivalry  How many, cost structure, capacity, positioning, exit costs New Competitor Entry  Ease of entry, cost of switching, Substitute Products/Services  Advantages/disadvantages, cost of switching