intel and firm analysis
Download
Skip this Video
Download Presentation
Intel and Firm Analysis

Loading in 2 Seconds...

play fullscreen
1 / 22

Intel and Firm Analysis - PowerPoint PPT Presentation


  • 146 Views
  • Uploaded on

Intel and Firm Analysis. James Oldroyd Kellogg Graduate School of Management Northwestern University [email protected] 801-422-7888 650 TNRB. Persistence of Superior Returns by Industry. The Typical cross-country correlation in in dusty profitability is extremely weak.

loader
I am the owner, or an agent authorized to act on behalf of the owner, of the copyrighted work described.
capcha
Download Presentation

PowerPoint Slideshow about 'Intel and Firm Analysis' - Faraday


An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -
Presentation Transcript
intel and firm analysis

Intel and Firm Analysis

James Oldroyd

Kellogg Graduate School of Management

Northwestern University

[email protected]

801-422-7888

650 TNRB

persistence of superior returns by industry
Persistence of Superior Returns by Industry

The Typical cross-country correlation in in dusty profitability is extremely weak

Source: Tarun Khanna, Harvard Business School

persistence of superior returns 1980 1989
Persistence of superior returns 1980-1989

Source: Geoff Waring, “Industry differences in the persistence of Firm-specific Returns” 1996

slide4
A Cautionary Note

People began to notice problems with the industry approach…

Year

Rest of World

Industry

Year

2%

Industry

  • In the U.S., corporate strategy is typically the icing on the cake, not the cake itself
    • Business units must be competitive on their own merits
    • …in attractive industries
    • But the icing can make the decision difference between a good cake and a bad one

U.S.

18%

3%

10%

Corporate

Business

Transient

Transient

Group

parent

42%

11%

46%

4%

Business

Firm

segment

34%

30%

In much of the rest of the world, corporate strategy is more prominent

Membership in a diversified entity has a larger effect on profitability

The effect on profitability is more likely to be positive

Source: Tarun Khanna and Jan W. Rivkin, “Estimating the Performance Effects of Business Groups in Emerging Markets,” Strategic Management Journal, 2000

Countries: Argentina, Brazil, Chile, India, Indonesia, Israel, Mexico, Peru, the Philippines, South Africa, South Korea, Taiwan, Thailand, and Turkey

Source: Anita M. McGahan and Michael E. Porter, “How Much Does Industry Matter Really?” Strategic Management Journal, 1997

variance within the steel industry
Variance within the Steel industry

Performance Differentials in the Steel Industry(1981-1990)

1990 Value of $1 Invested in 1981

$4.50

$4.50

$4.00

$3.50

$3.00

$2.50

$2.00

$1.38

Average = $1.38

$1.29

$1.50

$1.00

$0.76

$0.50

$0.26

$0.07

$0.00

LTV

Armco

Bethlehem

Inland

USX

Nucor

Source: R.P. Rumelt (1995)

firm strategy
Firm Strategy

Firm

Industry

Business Unit

  • Which Business Units?
  • Business Unit Boundaries
  • Managing Cross Business Synergies
  • Choose Your Sandbox
  • Business Definition
  • Firm Resources

Strategic Advantage

moore s law
Moore’s Law

Gordon Moore:

#29, Moore, Gordon Earle

72 , self made

Source: technology, Intel (quote, executives, news)

Net Worth: $5,300 mil

Hometown: Woodside, CA

Undergraduate: University of California Berkeley, Bachelor

Graduate: California Institute of Technology, PhD

Author of "Moore's Law": Power of microchips doubles every year (later amended to every 2 years).

Developed first integrated circuit at Fairchild Semiconductor in 1950s, cofounded Intel with Robert Noyce (d. 1990), venture capitalist Arthur Rock. Intel now world leader in microchips (annual sales, $30 billion), but Silicon Valley's linchpin lately slipping; stepped down as Intel's chairman emeritus; gave half of fortune to

Gordon and Betty Moore Foundation to support the environment, education and science.

creating advantages
Creating Advantages
  • Become the Standard
    • License the technology at low cost to many suppliers to become the standard
    • Low bargaining power (e.g., IBM)Intel does not reap high profits from the standard
  • Become a Proprietary Standard
    • Intel eliminates licensing on the 386 once it has capacity to supply the industry; IBM is only competitor
    • IBM does not choose to incorporate 386 as the PC standard right away, opening the door for Intel to negotiate with Compaq
    • Speed to market capabilities allow Intel to be first to market with next generation microprocessors
sustaining advantage
Sustaining Advantage
  • “Intel Inside” campaign (Differentiators)
    • creates brand awareness with end customers (costly to imitate)
    • creates bargaining power over computer manufacturers
  • Speed to market capabilities (Sequencing)
    • reputation and ability for developing the next generation of processes faster than other players
  • Cost and complexity of market entry
    • cost of development and fab is approximately $1 billion
  • Intel’s financial resources allow it to:
    • buy options on a wide variety of new technologies
    • vigorously defend its patents
the transitory nature of advantages
The Transitory Nature of Advantages

“Every competitive advantage is predicated upon a particular set of conditions that exist at a particular point in time for particular reasons. Many of history’s seemingly unassailable advantages have proved transitory because the underlying factors changed. The very existence of competitive advantage sets in motion creative innovations that, as competitors strive to level the playing field, cause the advantage to dissipate.”

Clayton Christensen

Source: Clayton Christensen, Past and Future of Competitive Advantage, 2001

structure of microprocessor market before and after the 386
Structure of Microprocessor Market Before and After the 386

PC

Mfr

Licensee

PC

Mfr

Licensee

IBM

PC

Mfr

Intel

PC

Mfr

Licensee

Licensee

PC

Mfr

what is the resourced based view
What is the Resourced Based View?

The RBV assumes that firms are endowed with different bundles of resources. These may include: locations, brand names, distributions channels, patents, cultures etc.

Resourced Based View (RBV)

The RBV seeks to understand what resources are important and what a firm needs to do to protected and renew their important resources.

resources and capabilities must be
Resources and Capabilities must be…

Valuable:

The resource must have value by adding value to the customer or lower the producers costs. (Patented 8 track technology is no longer valuable)

Rare:

The resource must have limited access. (Eg. Tangible like Oil field, retail space, Prime time TV or intangible skilled labor and sales channels.)

Non-substitutable:

The resource does not have an abundant substitute. (eg. Skilled labor can be substituted with automation.)

Appropriable:

The owner must be able to capture the value created. (eg. Public roads vs. toll roads)

types of resources
Types of Resources
  • Resources and capabilities
  • Examples

Physical

  • Warner Bros. Film library
  • DeBeers diamond mines
  • Toyota’s superior lean production facilities
  • PP&E
  • Physical infrastructure
  • Financial Resources
  • Product selection decision

Internal

Intellectual

  • P&G’s Brand names
  • Amazon’s technology patients
  • Rx drug development process
  • Brand names
  • Patients/ IP
  • R&D capability
  • Market insight

Network

  • Microsoft’s broad customer base
  • Kellogg’s supply channels
  • Airlines partnerships
  • Supplier channels
  • Customer relationships
  • Complementary networks

External

resources capabilities
Resources & Capabilities

Capabilities

& Activities

Resource

Commitments

Resources

  • Intangible & Tangible
  • Endowments
  • Knowledge
  • Brand Names
  • Financial Capital
  • Oil reserves
  • Orchestrating
  • Effective use of logistics
  • (e.g., Wal-Mart)
  • Motivating & retaining
  • employees (Marriott)
  • Design and production
  • Skills (Komatsu)
  • Speed to market (Intel)
  • Lumpy commitments
  • Investment in new fabs
  • New market entry
creating firm strategy
Creating Firm Strategy

Mission Statement

Objectives

  • Strategic Analysis:
  • Industry analysis
  • Customer/mkt place trends
  • Envmt forecasts
  • Competitor analysis
  • Assessment of firm capabilities (SWOT)

Strategy

The central, integrated,

externally-oriented

concept of how

we will achieve

our objectives

Supporting Organizational Arrangements

Structure, processes, functional integration, etc.

slide22
Where will we be active? (and with how much emphasis?)

Arenas

  • What will be our speed and sequence of moves?
  • Speed of expansion
  • Sequence of initiatives
  • Product, market, and geographic categories
  • technologies
  • value chain stages

Vehicles

Staging

Economic

Logic

Differentiators

  • How will we get there?
  • Internal development
  • JVs
  • Licensing/franchising
  • Acquisitions
  • How will we obtain our returns?
  • Cost economies (scale, scope, learning)
  • Premium price (service, features)
  • How will we win?
  • Image, customization, price, styling, reliability, etc.
ad