Intel Corporation is the world’s leading corporation in the manufacturing of processors for computing devices. The firm successfully addresses the challenges and threats prevalent in its macro-environment of the technology business. These Five Forces highlight the external forces acting on a firm’s business environment. Therefore, it is a tool that helps the managers to optimize the threats of forces for their benefit. They further show the competitive environment faced by industry. This analysis helps to devise strategic policies to sell Intel’s products. As revealed in the analysis, Intel is facing intense competition. Therefore, it must develop policies and strategies to enhance its competitiveness in the market. The company can devise successful policy operations after understanding the issues through this analysis. The outcome of these policies must ensure dominance in the processor’s market.
Porter’s model assists in identifying the intensities of these forces affecting the business. Therefore, Intel should devise a shrewd strategy to cope with the impact of these forces. Moreover, by addressing these forces shaping the external environment of the company, the company can boost its resilience and competitiveness. The intensity and extent of these forces are also realized in this analysis based on Porter’s Model.
Intense competition or competitive rivalry (moderate force)
Intel’s performance is dependable on the competition in the market. This section of the analysis reveals the influence of competition on the company’s performance. The corporation is influenced by the succeeding external factors that are responsible for intensifying this force:
- Aggressive rivalry of the firms (moderate force)
- Growth rate of the market (moderate force)
- High costs of switching brands (weak force)
These factors collectively shape the competitive environment of industry. Despite the intensive rivalry in the market and on legal grounds, the corporation is able to cope with competition mainly due to its massive size and great economy of scale. Other companies, therefore, moderately impact the company. This situation adds to the company’s strength. Furthermore, the moderate growth rate of the market further weakens the competitive scenario in the market. Even more, the force of competition is further checked by the high cost of switching. This factor restricts the customers from changing their brand priority. To demonstrate, it is not easy for the desktop or laptop manufacturers to use processors other than Intel as it would cost them excessive losses in terms of sales and manufacturing costs. Thereby, this moderate force of competition can be reduced if the firm devises a strategic policy to address these factors.
Customers or buyers’ power to bargain (weak force)
This section of Porter’s Model identifies the force of threat posed by the buyers or customers with its intensity. The company’s business is dependent on the sales of its products. The analysis revealed that the company is facing weak buyers’ bargaining power in the external business environment of the company:
- High costs of switching (weak force)
- Limited availability of substitutes (weak force)
- Weak backward integration (weak force)
The higher costs of switching are the first factor revealed by this analysis that contributes to the weak force. It makes it difficult for the computing device manufacturers to move to the other brand. This would cause them extra costs and the loss of the market. In the same way, the limited availability of substitutes further weakens the impact of this force. Moreover, the weak backward integration further enfeebles this force. The customers’ bargaining power is checked by this factor when PC manufacturers find it difficult to create microprocessors. Therefore, the customers do not exert a strong force on the company as described in this section of the analysis.
Suppliers’ bargaining power (weak force)
The company depends on the suppliers for the smooth manufacturing of its products. The influence of suppliers on Intel is revealed in this aspect of the analysis. The subsequent given external factors, along with their intensities, are affecting the business of the company:
- Overall supply of materials (moderate force)
- Modest size of suppliers (moderate force)
- Weak forward integration (weak force)
The company has excessed the materials used in the manufacture of microprocessors fabrication. The analysis reveals that this force is exerting a weak influence on the company. The primary factor of this weak force is the modest suppliers’ size. This contributes to the weak force of suppliers’ bargaining power. Moreover, the company has another advantage of weak forward integration, thereby contributing to the elevated degree of the company’s backward integration. To demonstrate, the company is maintaining tight control of its supply chain. On the contrary, suppliers fail to control the company’s supply chain. Thereby, these factors contribute to the overall weak force exerted by the suppliers in the external environment of the company, as revealed by Porter’s Model.
The threat of substitution or substitutes (weak force)
Substitution or the threat of substitutes can cause a reduction in sales and thus the overall performance of the company. The impact and intensities of this force are considered in this external analysis of the company. This section of the analysis highlights the intensity and impact of substitution, which influence the external working environment.
- High costs for switching (weak force)
- Low substitutional availability (weak force)
- Low ratio of performance-to-price of substitutes (weak force)
The high costs of switching have made the substitution very difficult. This factor does not let the customers get away from the company. Therefore, this factor has a weak influence on the company’s business. The semiconductor business has limited availability of substitutes and substitutions; thus, Intel has an advantage of low competitors available in the market. For instance, substitutes are difficult to find even if the customers desire to make a shift. In the same way, the substitutes’ low ratio of performance-to-price further weakens this force of threat. Consequently, it is very difficult for the computing device manufacturers to shift from Intel to another processor creator. In short, the intensity of this force is weakly influencing the external environment of Intel’s business, as shown by this analysis.
New Entrants or new entry threat (moderate force)
The company is facing the threat of new entry into its external working environment. This section of the analysis highlights the impact of this force in the working environment of Intel Corporation. The ensuing elements are contributing to the moderate force of new entrants or new entries into the company:
- Surrounding potential new entrants (strong force)
- Modest difference in the brand (moderate force)
- High costs of switching (weak force)
The number of these new entrants is not significant in the semiconductor environment. Nonetheless, these new entrants have the potential to compete against Intel in the manufacturing of efficient processors. To demonstrate, Apple can develop semiconductor industries, and it can start the provision of these processors to non-Mac operating systems. Therefore, this potential of new entrants can significantly capture the market share. Moreover, brand differentiation exerts a moderate force on the company’s external environment. It strengthens the new entrant in many ways. On the other hand, the high costs of switching significantly limit the threat of this force. The risks involved in switching the brand for computer manufacturers are high. They cannot shift from Intel processors to another brand as this could cause them a spike in cost as well as vulnerability in the loss of market share. By and large, as shown in this segment of the Five Forces Analysis, the new entrants exert a moderate force on the remote environment of Intel. The company must devise strategic advantages to mitigate this threat to ensure long-term growth and development.
Summary and Recommendations
Summary
The analysis reveals the influence and intensity of five forces on the company’s business environment. The most significant forces that can endanger Intel’s market dominance and growth are intense competitive rivalry and the threat posed by new entrants. Therefore, the company must devise strategies to mitigate these influences. Nonetheless, other threats posed by these forces can affect long-term business operations.
The succeeding forces are affecting the business environment revealed by this analysis:
- Intense competition or competitive rivalry (moderate force)
- Customers or buyers’ power to bargain (weak force)
- Suppliers’ bargaining power (weak force)
- Threat of substitution or substitutes (weak force)
- New Entrants or new entry threat (moderate force)
Recommendations
As shown by this analysis, the corporation needs to address increasing competition in the semiconductor business environment. This force is most intense in terms of its influence. The firm can mitigate competition as well as new entrants’ threats by devising a policy that would enable the firm to ensure a competitive edge against its rivals. The company can successfully address these challenges by undergoing rapid innovation to ensure competence by providing the best microprocessors.
In addition, Intel should create a new alliance and collaboration to expand its business operations besides Microsoft. This could be a game-changer as the company can open an era of expansionism. For instance, the company can reduce its dependence on Windows by manufacturing microprocessors for smart home devices. It would lead to expansion in Intel’s operations, market, and growth. The threats of competition and new entrants can be minimized by remaining resilient to them. For this purpose, market diversification has the potential to address the weak force of customers’ bargaining power.
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