Marketing Management

Intel Pentium

Marketing Management Case 1 Group Assignment

By:

EMBA06 group A6

Arjen Seckel

Mustafa Hanif

Xavier Barbier

Cedric van der Meulen

Richard Diepeveen

Table of Contents

QUESTION 1 2

QUESTION 2 443

QUESTION 3 AND 4 665

QUESTION 5 887

QUESTION 6 887

APPENDIX A 998

Question 1

1

Assess Intel's brand situation prior to November 24, 1994. What were the major elements of its success?

Pentium was (and still is) the best-known brand name of all personal computer microprocessors. Intel started out at the end of the sixties and was the first to introduce a microchip with semi conductors. It was also Intel's Gordon Moore that predicted that the capacity of a chip would double every 18 months and it was Intel that did the just that almost ever since.

At the beginning of the 1990-'s Intel started a huge marketing campaign promoting it's Pentium as the number one chip for PCs in the growing market of home and business users, using their famous slogan "Intel inside" a step change from the former run-of-the-mill promotion campaigns of x86 chips - that failed to achieve distinct brand recognition. Intel also learnt from its strategic dissonances (and their bitter results) and was relatively quicker to change and harvest from this new campaign. At the heart of the success of this campaign was the co-branding strategy where the Intel inside message was located near the established big cats of the PC markets e.g. IBM, Compaq - and therefore

Consumers readily identified a quality, up to date computer as one with an Intel chip inside. The consumers believed the Intel chip was an essential part of the computer they purchased. The brand of the chip inside was even more important than the brand of the computer itself. The chip was considered to be the brain of the computer and consumers were prepared to pay a premium for it.

Powerful marketing and a high tech chips however were not the only reason for Intel to become the dominating brand. On top of an excellent marketing strategy, Intel had a very important partner in their fight for dominating the market. That partner was Microsoft. What the Intel Pentium chip was for the hardware was Microsoft's operating system for the software. Windows became an almost essential element of a computer. Microsoft's Windows 95 operating-system software complemented Intel's Pentium chips, and vice versa. Each product made the other more valuable and the companies were mutually dependent. This situation created large profit margins and a dominant market position for both companies and fuelled the growth strategy of the Intel Corporation.

Question 2

2

In what ways was the Intel brand vulnerable?

Knowledge of how customers and others perceive the brand (brand image) provides useful and even necessary background information when analyzing a brand, it's positioning and it's vulnerability. In theory there are four all-too-common identity traps: the brand image trap, the brand position trap, the external perspective trap and the product attribute fixation trap (summarized in Figure 2 in Appendix A). The identity trap theory provides substantial insight into what a brand identity is and is not. It represents approaches to creating an identity that are excessively limiting or tactical and that can lead to ineffective and often-dysfunctional brand strategies3. In some cases firms fail to realize the role that a brand identity can play in helping an organization understand its basic values and purpose. This is called the external perspective trap. In answering the question at hand the external perspective trap is used to analyze in what way the Intel brand was vulnerable.

The common viewpoint of organizations is to maintain an external focus - how customers perceive the brand. In this case, Intel maintained an external focus and failed to internally communicate the vision and values of their brand. How can Intel's employees execute the brand promise to their customers if they lack knowledge, inspiration, and understanding? Because Intel's image is in large part based on employees' combined efforts to deliver value to customers and partnering companies, Intel's lack of internal focus created a huge difference between Intel's brand promise and their deliverance of that promise. The problem here is that both the customer and the marketplace are defining Intel's image instead of the company creating a more accurate portrayal of the future brand promise. While brand image tends to be tactical, brand identity should be strategic, reflecting a business strategy that will lead to a sustainable advantage. Looking at brand vulnerability from a more strategic level Michael E. Porter's five-forces model: customers, suppliers, competitors, potential competitors, and providers of substitutes can be helpful as a framework to analyze all the important relationship Intel had. In Intel's case the Porter model misses one force. The very important force of Intel's 'partner' Microsoft. After all there's clearly a critical mutual dependency between those two companies. This analyses focuses on this partner rather than on Intel's suppliers.

1) Customers

Intel has multiple direct and indirect customers

Indirect customers

Indirect customers can be divided into home users (consumer market), business users (business market) and vendors (wholesale and retail market). All will be addressed as consumers. As a result of Intel's very successful campaign, Intel had effectively