Managerial Challenge

Managerial Challenge

After reading the section titled “Dominant Microprocessor Company Intel Adapts to Next Trend”  and the article titled “2018-2019 Intel Corporate Responsibility Report: Creating Value through Transparency,” complete a list of reasons how a single firm like Intel comes to dominate some markets. Although this assignment allows you to create a list, you must follow the APA style of writing and include research to support your list and place this information in your reference section. 

  • Follow the APA style of writing with in-text citations and a reference list.
Dominant Microprocessor Company Intel Adapts to Next Trend

With continuous innovation, ever-faster, more-powerful chip designs, and a business plan rivetedon supplying the $300 billion personal computer (PC), and tablet industries, Intel Corporation dominates the high-end market in microprocessors. After being forced out of the dynamic random access memory (DRAM) chip business by Japanese rivals in 1986, Intel reinvented itself as the lead supplier of microprocessors for PCs. Intel has an 85 percent market share in the microprocessor chips for laptops and 75 percent market share for desktops. In addition, Intel sells90 percent of the chip sets that control the flow of data from the microprocessor to the display screens, modems, and graphical user interfaces (GUIs). Its market dominance provides it with enormous economies of scale in production and increasing returns on its marketing expenditures because of network effects. The result is high markups and margins; for example, Intel has attimes earned 25 percent net profit margins on its microprocessors. Because intellectual property is the company’s most important asset, Intel protects its proprietary trade secrets about chip design and manufacture by using tight nondisclosure agreements with its customers. Some Intel chip bulk purchasers found, however, that Intel withheld vital information about technical specifications required to fully integrate the chips into new products unless it is given access toits customers’ new technologies. Intergraph, a maker of high-end workstations for media applications, alleged, for example, that Intel withheld information about subtle bugs in someIntel chips until Intergraph agreed to license its GUI technology to the chip supplier. Intel’s high-end chips are designed to run Microsoft’s complex software for PCs and tablets. In 2007, 261million units were shipped on a 2.1 billion installed base of PCs. The market for digital telephones, handheld computers, video-game players, and set-top control boxes for digital televisions may be even bigger than the PC market. Such devices require inexpensive flash memory chips that quickly process data. Samsung and Advanced Micro Devices (AMD) are the leaders in this new chip segment. To break into this business, former Intel president Andy Grove says Intel must prepare to sell lower-end chip products for under $40, despite the fact that Intel’schips previously sold for $87 to $200.

Textbook:
Managerial Economics: Applications, Strategy, and Tactics (14th Edition)
James McGuigan, R. Charles Moyer, & Frederick Harris
(Chapter 11 pg. 384-385)