TETRA THREAT
FRAMEWORK in analysing
Intels strategy to sustain
competitive advantage in
microprocessors.
Group Members-
Name Specialisation Roll no
Pooja Shahani MMS-HR 48
Dhwani
Vibhakar
MMS-HR 57
Parin Shah MMS-
Marketing
47
Nikita Chitalia MMS-HR 05
Sustainable competitive advantage
The Four Threats to
Sustainability
The Tetra Threat Framework-
Imitation Substitutio
n
Slac
k
Holdup
About Intel
Intel, the world leader in silicon
innovation, develops technologies,
products, and initiatives to continually
advance how people work and live.
Founded in 1968 to build
semiconductor memory products, Intel
introduced the world's first
microprocessor in 1971.
Threat-Imitation
Semiconductor companies had historically not been
very vigilant in enforcing intellectual property rights
through patent infringement suits and related legal
strategies as technology moved so rapidly that patents
quickly became economically obsolete.
Also since most companies drew from common
underlying technology bases it was not always clear
who might be infringing upon whom.
By early 1990s Intel faced credible threats from a
number of rivals which could produce microprocessors
compatible with Microsofts MS-DOS Operating System
including-
AMD
Texas Instruments
Cyrix
Threat-Holdup
BUYER POWER
Is it possible that all of the buyers
(OEMs) were appropriating value from
Intel?
Intel Inside- PCs value increased
with the Intel brand.
Many buyers wanted RISC to become
the standard architecture.
Threat-Holdup
SUPPLIER POWER
Suppliers were able to receive funds
from Intel for development of new
technology . Though this technology was
for industry at large it wanted access
first.
Suppliers made long term contracts
necessary for custom solutions.
The complementors like Microsoft could
contribute to the success or failure of
microprocessor since it has ability to gain
from expanding the pie rather than
fighting for the existing pie.
Threat-Substitution
In 1989, when Intel launched its 4
th
generation
microprocessor it faced potential competitive
threat from alternate RISC architecture. Intel
used CISC. RISC was had speed and cost
advantages over CISC.
Microsoft moved towards operating systems that
were not tied to the x86 architecture (Windows
NT, CE). This allowed Microsoft to extract more
of the total surplus generated.
Sun Microsystems motto, The Network is the
Computer.
IBM decided not to sell any 386 based
computers until it could develop a new
architecture that used IBMs own proprietary
components.
Using tetra threat framework to show
how Intel sustained competitive
advantage in microprocessors
1. Threat of Imitation
2. Threat of Substitution
3. Threat of Hold up
4. Threat of Slack
Response to threat of Imitation
RELATIONSHIPS-Maintained strong relationship with its
complementors like Microsoft which helped them to provide the
customers best service which prevented customers from switching
to another company.
UPGRADING-From time to time it kept on upgrading its product with
next generation microprocessors which made it difficult to copy.
ECONOMIES OF SCOPE-It started project CRUSH and introduced
more than 2000 designs for the customers which show its scope
economies strategy for reducing threat to imitation
High switching cost. It allowed dual sources of critical pieces of
production equipment.
Intellectual Property Protection (IPP)- Intel was able to litigate
against competitors like AMD by protecting their microprocessor
code with patents.
Intel Inside campaign-The campaign was a result of Intel's desire for
the end-users ability to differentiate Intel's microprocessors. It was
designed to create brand recognition among the PC users
Response to Hold-Up
CONTRACTING-Intel entered in market by having contracts
with the suppliers for mass production of parts. Thus it hold-
up its suppliers.
BUILDING RELTIONSHIPS-It has made a strong trust
relationship with its complementors and suppliers.
The processors which it made were used so commonly that
the complementary products were valued very high along
with this.
Intel started its Intel Inside ad campaign in an effort to create
brand recognition among PC users. As the demand of this
product increased in the market and complementors were
forced to use this product.
BUILDING BARGAINING POWER-Complementors and
suppliers are highly dependent on Intels product.
Engaged in Dual sourcing to avoid reliance on one supplier.
They always asked for standard solutions rather than custom
solutions to avoid holdup
Intel senior management routinely met with Microsoft
management to coordinate new developments
Response to threat of
Substitution
RECOMBINING-The life of the microprocessor
became very short so they charged a heavy price
for the new products initially and then reduced
the price
After the evolution of internet, competitors
complementors also became the complementors
of Intel due to their production of unique
products.
FIGHTING-It always tried hard to fight strongly
with its competitors.
It reduced the number of chips to be produced by
licensing companies which reduced the threat of
substitution and also increased their revenue
from 30% to 75%.
STRADDLING-strongly competed with Motorola
in RISC keeping its CISC microprocessors
Response to threat of
Substitution
Intel hedged against the adoption of the RISC
architecture by releasing the i-860.At the
same time, they developed the technology for
the Pentium.
Intel found a new customer in Compaq.
Intel backed operating systems other than
Windows. Microprocessors for Linux - Red
Hat.
Partnered with OEMs through programs like
Intel Inside to promote not only the
microprocessor, but the PC as well. Hedged
by getting into servers like the 32-bit Xeon
processor in 1998.
