Intel crop Essay Example

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Intel Corporation: Porter’s Five Forces Analysis

Intel Corporation is a global technology firm and the largest producer of semiconductor chip. Porter’s Five Forces model provides an analysis of the company with regards to the impact of existing competitors, buyers, potential substitutes, potential entrants and suppliers.

The Bargaining Power of Buyers

Retail buyers in the laptop, desktop, and associated markets have minimal bargaining power because of their limited influence on the market. However, computer manufacturers such as HP and Dell have a high bargaining power since they place large sales volumes thereby contributing significantly to the overall sales volume realized by Intel. Servers also have a high bargaining power that emanates from compatibility issues associated with Intel chipsets that use the EPIC architecture whereas competitors use the RISC architecture.

The Bargaining Power of Suppliers

Intel’s contractors that supply raw materials used to develop its products also have minimal bargaining power since the supply contracts are prior agreements that do not have an impact on the competition between rival companies. Pricing for contractors that supply raw materials is also aggressive since Intel has a large pool of suppliers. Manufacturers of end products such as mouse and keyboards also have minimal bargaining power that emanates from their dependence on Intel to make meaningful utility of their products. However, research experts and engineers have a higher bargaining power due to their vast experience in the company. As a result, Intel would find it difficult to substitute them with inexperienced employees.

Existing Competition

The processor industry presents high levels of price competitiveness. The functional differences between Intel and AMD processes are also minimal. The industry presents low marginal costs and high fixed costs. Apparently, Advanced Micro Devices (AMD) stands out as the main rival to Intel in the production of microprocessors and chipsets. Intel managed to beat the competition emanating from NexGen and Cyrix. However, the developers of Sledgehammer, Thunderbird, and Athlon CPUs also pose significant threat to the company. All companies in the industry endeavor to undercut one another. The slashing away of margins and the rapid introduction of new products is the strategy that the main companies (Intel and AMD) use to beat competition. Sunk costs also present high costs of exiting the market thereby increasing competition.

Potential Substitutes

Intel’s major concern of a substitute emanates from the products of its main rival, AMD. This is because it is inappropriate to compare Sun/UNIX machines with Intel/Windows machines. As a result, only specific circumstances determine the battle over a particular product by both Intel and AMD. About the CPU market, it is apparent that there is no substitute since the CPU is the main component of a computer.

Potential Entrants

Developing microprocessors and chipsets requires massive capital investments. The condition suffices to be the greatest entry barrier to any firm that intends to join the industry. The high innovative technology required in the industry is the other barrier that prevents other firms from joining the industry. The industry demands specialized and patented technological expertise in the design of new products as well as the manufacturing process. The comparatively lower price of products also requires the use of economies of scale to attain price competitiveness. As a result, firms that intend to enter the industry should have a high capital base that would enable them to produce high volumes of products. Developing processors and chipsets for the server and desktop markets also demand substantial amounts of time and sunk costs to ensure that the products deliver the intended performance. These factors present significant barriers to entry for potential entrants.

Work Cited

­Starek, Damian. “Porter’s Five Forces Analysis Based on the Semi-conductor Industry.” Prezi 2012. Online. <>