Intel SWOT & PESTLE Analysis

Strengths

1. First Mover Advantage: Intel is the first in the semiconductor industry and is the first to manufacture the X86 series of microprocessors. Robert Noyce and Gordon Moore founded Intel in July of 1968 while its major competitor AMD was not founded by Jerry Sanders and seven others till as late as May 1st, 1969. Upon launch, the users of these two processors got separated. Corporate users, SME's, schools, and universities chose the Intel processor for its superiority on applications while gamers and people on low budgets opted for AMD because of the cost advantage.

2. Monopoly and Strong competitive presence in microprocessors industry: Being the largest player in the market it creates a huge entry barrier for new competitors. Intel enjoys what Warren Buffet coined as an “Economic Moat”.

3. Economies of Scale: The cost of manufacturing an additional chip decreases considerably once a technology has been developed and the company enjoys economies of scale. Also, the price of the building components of the chip decrease thus leading to profits. Intel has a huge advantage in terms of manufacturing capabilities all around the world which is a barrier to the entry of new competition.

4. Strong brand loyalty: According to brand finance report of 2016, Intel was at 40th rank among word top brands and had acquired 7th position when it came to tech companies. According to fortune, it ranks among 46th position for most admired companies. Intel has always established itself as ”brains” of the computer and always stayed away from the obvious positioning as a commodity.

Weaknesses

1. Unable to tap the smart phone market: Being mostly present in the personal computer segment Intel was unable to tap on the boom in the smart phone industry. Ironically, Intel’s legacy in the PC market actually turned out to be its biggest weakness when it came to boom in mobile products. The company’s powerful x86 architecture was perfectly suited for mains connected high performance PCs, but the requirements of mobile were different. Eventually companies like Qualcomm and AMD took the lead in the smart phone and mobile segment taking a prospective opportunity away from Intel.

2. A Large share of revenues comes from PC as a segment: There has been a decrease in the demand in PC industry after the advent of smart phones and this has come up to be a concern for Intel Inc as it tries to look for alternative avenues for business revenues. Still, the major chunk of its revenues comes from PC segment where Intel has been the market leader. But as this segment is shrinking Intel needs to look for another market for its microprocessors.

Economic

1. Developed economies of the target market: As the economies are developing and the level of lifestyle is on the rise, the purchasing power of people is increasing. This is a golden opportunity for Intel to be a ubiquitous part of their lives. According to a latest working paper(Global Economy and development- Brookings), the global middle class is expanding making it a good opportunity for Intel to capitalize on.

2. Economic nature of microchip industry: A peculiar characteristic of these industries is that they are high capital intensive but benefit considerably from economies of scale. The cost of producing an additional chip decreases considerably. Thus there are opportunities for creating profits down the line in case of developing countries with high demand.

3. Labour Cost: Labour cost has been an important factor by which Intel has moved its production facilities to develop nations thus seeking substantial profits as compared to a developed economy.