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.
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The Typical cross-country correlation in in dusty profitability is extremely weak
Source: Tarun Khanna, Harvard Business School
Source: Geoff Waring, “Industry differences in the persistence of Firm-specific Returns” 1996
People began to notice problems with the industry approach…
Rest of World
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
Performance Differentials in the Steel Industry(1981-1990)
1990 Value of $1 Invested in 1981
Average = $1.38
Source: R.P. Rumelt (1995)
#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.
“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.”
Source: Clayton Christensen, Past and Future of Competitive Advantage, 2001
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.
The resource must have value by adding value to the customer or lower the producers costs. (Patented 8 track technology is no longer valuable)
The resource must have limited access. (Eg. Tangible like Oil field, retail space, Prime time TV or intangible skilled labor and sales channels.)
The resource does not have an abundant substitute. (eg. Skilled labor can be substituted with automation.)
The owner must be able to capture the value created. (eg. Public roads vs. toll roads)
The central, integrated,
concept of how
we will achieve
Supporting Organizational Arrangements
Structure, processes, functional integration, etc.