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TETRA THREAT

FRAMEWORK in analysingIntels strategy to sustain

competitive advantage in

microprocessors.

Group Members-

Name Specialisation Roll noPooja Shahani MMS-HR 48

Dhwani

Vibhakar

MMS-HR 57

Parin Shah MMS-

Marketing

47

Nikita Chitalia MMS-HR 05

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The Four Threats to

Sustainability

The Tetra Threat Framework-Imitation Substitutio

n

Slac

kHoldup

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About Intel

Intel, the world leader in siliconinnovation, develops technologies,

products, and initiatives to continually

advance how people work and live. Founded in 1968 to build

semiconductor memory products, Intel

introduced the world's firstmicroprocessor in 1971.

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Threat-Imitation

Semiconductor companies had historically not beenvery vigilant in enforcing intellectual property rightsthrough patent infringement suits and related legalstrategies as technology moved so rapidly that patentsquickly became economically obsolete.

Also since most companies drew from commonunderlying technology bases it was not always clearwho might be infringing upon whom.

By early 1990s Intel faced credible threats from anumber of rivals which could produce microprocessorscompatible with Microsofts MS-DOS Operating System

including- AMD

Texas Instruments

Cyrix

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Threat-Holdup

BUYER POWER

Is it possible that all of the buyers

(OEMs) were appropriating value from

Intel? Intel Inside- PCs value increased

with the Intel brand.

Many buyers wanted RISC to becomethe standard architecture.

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Threat-Holdup

SUPPLIER POWER Suppliers were able to receive funds

from Intel for development of newtechnology . Though this technology was

for industry at large it wanted accessfirst.

Suppliers made long term contractsnecessary for custom solutions.

The complementors like Microsoft couldcontribute to the success or failure ofmicroprocessor since it has ability to gainfrom expanding the pie rather than

fighting for the existing pie.

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Threat-Substitution

In 1989, when Intel launched its 4thgenerationmicroprocessor it faced potential competitivethreat from alternate RISC architecture. Intelused CISC. RISC was had speed and costadvantages over CISC.

Microsoft moved towards operating systems thatwere not tied to the x86 architecture (WindowsNT, CE). This allowed Microsoft to extract moreof the total surplus generated.

Sun Microsystems motto, The Network is the

Computer. IBM decided not to sell any 386 based

computers until it could develop a newarchitecture that used IBMs own proprietarycomponents.

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Using tetra threat framework to show

how Intel sustained competitive

advantage in microprocessors

1. Threat of Imitation

2. Threat of Substitution

3. Threat of Hold up

4. Threat of Slack

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Response to threat of Imitation

RELATIONSHIPS-Maintained strong relationship with itscomplementors like Microsoft which helped them to provide thecustomers best service which prevented customers from switchingto another company.

UPGRADING-From time to time it kept on upgrading its product withnext generation microprocessors which made it difficult to copy.

ECONOMIES OF SCOPE-It started project CRUSH and introducedmore than 2000 designs for the customers which show its scopeeconomies strategy for reducing threat to imitation

High switching cost. It allowed dual sources of critical pieces ofproduction equipment.

Intellectual Property Protection (IPP)- Intel was able to litigateagainst competitors like AMD by protecting their microprocessor

code with patents. Intel Inside campaign-The campaign was a result of Intel's desire for

the end-users ability to differentiate Intel's microprocessors. It wasdesigned to create brand recognition among the PC users

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Response to Hold-Up

CONTRACTING-Intel entered in market by having contractswith the suppliers for mass production of parts. Thus it hold-up its suppliers.

BUILDING RELTIONSHIPS-It has made a strong trustrelationship with its complementors and suppliers.

The processors which it made were used so commonly that

the complementary products were valued very high alongwith this.

Intel started its Intel Inside ad campaign in an effort to createbrand recognition among PC users. As the demand of thisproduct increased in the market and complementors wereforced to use this product.

BUILDING BARGAINING POWER-Complementors andsuppliers are highly dependent on Intels product.

Engaged in Dual sourcing to avoid reliance on one supplier.

They always asked for standard solutions rather than customsolutions to avoid holdup

Intel senior management routinely met with Microsoftmanagement to coordinate new developments

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Response to threat of

Substitution RECOMBINING-The life of the microprocessor

became very short so they charged a heavy pricefor the new products initially and then reducedthe price

After the evolution of internet, competitors

complementors also became the complementorsof Intel due to their production of uniqueproducts.

FIGHTING-It always tried hard to fight stronglywith its competitors.

It reduced the number of chips to be produced bylicensing companies which reduced the threat ofsubstitution and also increased their revenuefrom 30% to 75%.

STRADDLING-strongly competed with Motorolain RISC keeping its CISC microprocessors

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Response to threat of

Substitution Intel hedged against the adoption of the RISC

architecture by releasing the i-860.At thesame time, they developed the technology forthe Pentium.

Intel found a new customer in Compaq. Intel backed operating systems other than

Windows. Microprocessors for Linux - RedHat.

Partnered with OEMs through programs likeIntel Inside to promote not only themicroprocessor, but the PC as well. Hedgedby getting into servers like the 32-bit Xeon

processor in 1998.

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