Managers' Forum ~ Business Case Reviews

Andrew S. Grove is a co-founder of Intel Corporation and today he is the a chairman of the board.  He used to be the CEO and during his years with the company it has become the world’s largest producer of microprocessors.

This case teaches us how global changes and competitiveness has a great effect on the business strategy.  As a multinational corporation economic circumstances in any part of the world may effect Intel’s product line.

There are a few concepts that are introduced that one should be aware of when managing a business.  Mr. Grove calls the first concept strategic inflection point.  In short this entails the changes that take place in the world that
causes the company itself to have to change its business strategy.  This could be as big of a change as war or as little as just a trend going through a certain culture.  But in general any kind of change is regarded as bad and people are reluctant to engage in change.  Most of the time however companies are forced into these changes through their competition.  A good example is the telecommunications businesses that have engaged in large mergers in the past few years.  The market has become entirely international and to be competitive one must operate in more than one country or continent.

The second concept is called the Christensen effect and it focuses on the new market approaches that are introduced all the time by different companies.  The question is, are these approaches good enough to make it in the market place?   A great example to illustrate this is the segment zero phenomenon.  Segment zero was referred to as the low cost computer segment.  This area was never kept up to date on new technological advances and such, because companies wanted to focus on their high priced computers with higher profit margins.  However,
during the Asian crisis there was an abundance of computer inventors which forced the price level of computers down all over the world.  Now all of a sudden the zero segment could be the most profitable segment to be in.  This led Intel to focus their attention on the zero segment customers.

There are other factors that must also be considered since the zero segment in reality was only a concept and not a product in it self.  With internet fueling computer sales one would think that the computer business is the factor separating people.  But the reality is that the telecommunications companies are.   The telecommunications companies are the ones who cause major price differences on use of phone lines in different countries.  In the US one can pay $20 per month for unlimited internet access, while in Asia and parts of Europe it costs per minute to access the internet. This changes the computer cost relationship to internet use.

In conclusion I find today’s competitive market very fascinating to study.   One major crisis or folk trend in one country can have a major impact on business strategy around the world.  With globalization the world is becoming so connected that when developing your business plan the companies top executives must know what is happening in every part of the world.
 

Puffer Sheila M., Global Executives:  Intel’s Andrew Grove on Competitiveness. Academy of Managment Executive, 1999 Vol. 13.

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