Inside Intel Inside

Purpose
Intel, a company based on Santa Barbara, California, founded in 1968 by Robert Noyce and Gordon Moore, is mostly known for making microprocessors for computers. Initially they were making semiconductors and later they started making microprocessors. Over time, they became the biggest market leader in this industry. In 1980, it had 70% market share in desktop microprocessor market. During 2002, Intel microprocessors could be found in over 80% of the personal computers sold worldwide. Over the recent years, there has been an increase of sales in low price computers and portable devices (like, cell phones, PDAs etc.). Even though they were the market leaders in the overall PC-based microprocessor market, Intel still has not dominated the market for these product categories. This caused Pamela Pollace, vice president and director of Intels worldwide marketing operations to face a vital question for the future of Intel, whether or not to extend their brand. The purpose of this report is to analyze the key issues, figure out appropriate marketing strategies and construct action plans.
Key Issues
1. Portable Devices: Intel was the market leader in desktop computer microprocessor. But, according to recent data, sales of desktop computers appeared to be stagnating, while the sales of portable digital devices were increasing at a healthy rate.
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Worldwide Sales of Selected Devices

450 400 350 300 250 200 150 100 50 0 Cell Phones Desktop Computers Portable Computers PDAs Millions of Units sold
1997 108 65.4 14.2 0.6
1998 172 73.9 15.6 0.8
1999 284 90.9 19.9 1.3
2000 413 102.3 26.1 3.5
2001e 390 92.9 27.3 12.8
Intel already had a marketing campaign called Intel Inside, which was created to make people aware of what was inside their PC. A key issue was whether the same campaign would be a fit for brand extension to portable devices. It was uncertain whether the customers will be accepting the Intel as a brand for portable devices. Moreover, will the customers really care about the silicon in their cell phone? Should Intel extend its branding campaign to new product categories?
2. PC: The sales of the desktop computers were stagnating. At the same time, other competitors were coming in to this market and trying to invade Intels market share in PC microprocessor market. In mid-1990s the demand for low cost PCs was increasing and the demand for high end PCs (dominated by Intel) was decreasing. Companies like AMD, Texas Instruments and Cyrix were already in the low end PC market.
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US PC Market Share by Price

50 45 40 35 30 25 20 15 10 5 0 Under $1000 $1000-$1500 $1500-$2000 Over $2000
Percentage
1995 3 24 26 47
1996 5 23 25 47
1997 20 24 26 30
Intel needed to capture this market in order to maintain their overall market share.
Situational Analysis (5 Cs)
Company
Collaborators
Competition
Customer
Context
PC
Market leaders in microprocessors
PC
AMD Texas Instruments Cytrix
Microsoft Apple Other OEM
PC Users
Economy
Emphasis on Innovation Safety Leading technology
Portable Devices
Microsoft
Portable Devices
Texas Instruments Motorola Qualcomm
Cell Phone Users
Social/ Cultural Trends
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Market Strategies and Action Plan

1. Portable devices: Intel started making microprocessors back in the early 1970s. Back then the computer market was still very immature. Level of competition was almost zero. People did not really know much about computers and how it worked. Intel was the only big player in the market. They had somewhat the first movers advantage at that point of time. Through Intel Inside campaign, they positioned their processor in the consumers mind into thinking that computers with Intel processors inside were the best computers. Huge amount of promotional campaign helped Intel become synonymous to safety, reliability and leading in technology. Lack of competition helped them gain the market share
The Measles Ad (1991)
reasonably easily. On the other hand, majority share of the non-PC portable device market was captured by cell phones. Cell phone industry in 2001, unlike the computer industry in 1970s, was already matured. People were already well-aware of cell phones. The market share was already full of other competitors like Texas Instruments (50%), Motorola (12%) and Qualcomm (12%). Intel had only 1% of that market. The other brands didnt go through much brand awareness campaign for their products like Intel did. Therefore, their brand awareness was very low; customers didnt know which company was building the chip inside their cell phones. But, it worked absolutely fine to fulfill the needs of the customers. So, customers did not really care anymore from which company their cell phones hardware was coming from, as long as their needs were fulfilled. This means that the Intel Inside campaign would require a lot of modification to make people care about whats inside their cell phones and that would require a massive amount of investment in marketing.
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Considering all these factors, we believe, it would be wise of Intel to not go for brand extension. Firstly, trying to get into a new market with high level of competition is going to be extremely costly. Since the customers do not care about the chips in their phones, trying to show how Intels chip will be better for the phone will require a very expensive new marketing campaign, where the risk still lies in not knowing whether the consumers will respond to any sort of branding campaign in mobile phone category. Secondly, there is a big risk associated with extending the brand that it might dilute the equity of the company. Thirdly, a previous experiment to extend the brand (Intel Outside) was proved to be a failure proving customers are not willing to accept Intel as a brand outside the computer industry.
2. PC: During mid-1990s, the demand for low end PCs costing less than $1000 increased significantly, whereas, the demand for PCs costing under $2000 dollars decreased. To capture the low-cost desktop market, Intel launched the Celeron processor. Celeron Processor along with Pentium II was able to capture approximately 24% of the sub-$1000 PC market. But AMD still had 60% market share in this segment. One of the main reasons behind Intel being unable to capture and dominate this market was keeping Celeron a silent brand. Firstly, in order to capture this market, Intel should target the low end market and promote their product through communicating Intels safety, reliability and leading technology in their PCs. Secondly, Intel should work together with its OEMs to increase their research and development to innovate on new pioneering ideas that will meet the demands of the customers better and take them one step ahead of the competition. Intel should emphasize on technical and qualitative benefits of its processors to this low end segment and convey the message to the customers that Intel stands for value for money.
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Inside Intel Inside

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Purpose

Worldwide Sales of Selected Devices

1997 108 65.4 14.2 0.6

1998 172 73.9 15.6 0.8

1999 284 90.9 19.9 1.3

2000 413 102.3 26.1 3.5

2001e 390 92.9 27.3 12.8

US PC Market Share by Price

Situational Analysis (5 Cs)

Microsoft Apple Other OEM

Emphasis on Innovation Safety Leading technology

Cell Phone Users

Social/ Cultural Trends

Market Strategies and Action Plan

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