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Mike Adamo Helen Butz Rob Davis Ray DeMaio Joey Mayfield James McKeague Nate Steinhubel

Mike Adamo Helen Butz Rob Davis Ray DeMaio Joey Mayfield James McKeague Nate Steinhubel. CO-BRANDING. Cummins Turbo Diesel Engines. Dodge Ram Pickup Truck. CO-BRANDING. NutraSweet Brand Sweetener. Pepsi-Cola Company. HISTORY. Founded in 1968 - Robert Noyce and Gordon Moore

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Mike Adamo Helen Butz Rob Davis Ray DeMaio Joey Mayfield James McKeague Nate Steinhubel

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  1. Mike Adamo Helen Butz Rob Davis Ray DeMaio Joey Mayfield James McKeague Nate Steinhubel

  2. CO-BRANDING Cummins Turbo Diesel Engines Dodge Ram Pickup Truck

  3. CO-BRANDING NutraSweet Brand Sweetener Pepsi-Cola Company

  4. HISTORY Founded in 1968 - Robert Noyce and Gordon Moore Goal was to develop memory products - 1969 256 Bit Static RAM (SRAM) - 1970 1K Dynamic RAM (DRAM)

  5. HISTORY Intel's leadership was firmly established - Defined the microprocessing field Leader in breakthroughs - Invented 16 of 22 of major breakthroughs - All between 1971 and 1981 Led to a decade of prosperity

  6. HISTORY Trouble hits in 1981 - Intel falls behind - 1980's Revolutionary breakthroughs slow down IBM buys a 20% stake in Intel

  7. ECONOMICS Sales peaked in 1984 - 286 Leader until 1991 - 386 Hoped to capture the 32 bit market Impact of the 286 and 386

  8. ECONOMICS Market Shares - Intel's share for microprocessors in PCs Around 80% - Intel's market share for the 386 market 100% for the market “Run out of Steam by 1993” - The 486 Intel the sole producer in 1992

  9. TECHNICAL AND POLITICAL Relationship between Intel and AMD - “Cross Patent License” 386 and 486 - Legal Issues Court Rulings - Microprocessor vs. Microcomputer

  10. CULTURAL Intel's Reputation Early success Seller's Standpoint Marketing Techniques “Intel Inside” Campaign

  11. THE THREE C’s Customers IBM, Hewlett Packard, Compaq, Consumers, O.E.M.S. Competiton AMD, other O.E.M.S. Company SWOT

  12. Scenario 1991 • George H.W. Bush is President during Gulf War I. • Paula Abdul’s “Rush Rush” #4 on Billboard Hot 100. • Intel releases 486SX chip for a lower price consumer market, selling for $258. http://www.billboard.com/bbcom/charts/yearend_chart_display.jsp?f=The+Billboard+Hot+100&g=Year-end+Singles&year=1991

  13. WHO ARE INTEL’S CUSTOMERS? Businesses Consumers OEMs

  14. PRODUCT LIFE CYCLEfor Consumer Computer Market • Transition Period from Introduction Stage to the Growth Stage. • Network ExternalitiesNetwork size drives up utility

  15. MOORE’S LAW 586 Predicted release of 586 chip www.intel.com

  16. http://www.j-bradford-delong.net/E_Sidebars/E-conomy_figures2.htmlhttp://www.j-bradford-delong.net/E_Sidebars/E-conomy_figures2.html

  17. CONSUMER DECISION PROCESS STEP 1 Identify the Problem -I need a computer

  18. CONSUMER DECISION PROCESS STEP 2Gather Information-Catalogs -Magazine Advertisements -Ask Friends -OEM Customer Service

  19. ? CONSUMER DECISION PROCESS STEP 3Generate Alternatives -Major OEM Brands -Micro ProcessorsSTEP 4Evaluate Alternatives -Customer Service -Price-Is this a Reliable Brand -Is this a Quality Product

  20. CONSUMER DECISION PROCESS STEP 5Make Decision STEP 6Evaluate Decision

  21. B.C.G. PORTFOLIO ANALYSIS • Intel Chips have a high relative market share • The market growth rate for computers is also high(Moore’s Law)

  22. GROWTH STAGE PLC STRATEGIES

  23. Performance Superiority Characteristics Best Product Innovators Always a Market Leader High Price Performance Superiority Strategy Invest Mainly in R&D [Currently doing] Problem: Only gives Intel a short-term competitive advantage. COMPETITIVE ANALYSIS

  24. OPPORTUNITIES A N A L Y S I S STRENGTHS • 16/22 major breakthroughs in microelectronics • 80% Market Share

  25. Opportunites cont. • Ideal versus Actual state~ Intel chips as well as computer industry have became external (I have to) as opposed to internal (I want to) Examples “I have to pay my credit card online.” “I need to check up to date stock prices.”

  26. Problems w/AMD • 1976~ Intel signed patent cross license with AMD • 1981~ Agreement terminated • 1982~ Signed a technology exchange agreement, barter system • 1987~ Products were not being exchanged, leading to 5 yrs. arbitration • 1991~ AMD files antitrust suit in federal court, closed by FTC. Gave right to AMD to copy Intel chip

  27. ALTERNATIVES 1.) Focus solely on R&D and continue to lead the market in innovation. (586 line) 2.) Sign Agreements with Compaq, HP, and IBM to have Intel in ‘X’ # of computers but without any co-branding. 3.) Intel Inside is used with consumers but not to businesses (still have Intel just no logo) 4.) Continue with Intel Inside Campaign as planned (persuade Compaq & HP to join)

  28. Pros Known for market innovation Guide market trends Seen as Premium product Already good at this Cons Expensive May not always be leader Abundance of Imitators Risk of Technology Leapfrogging Non-Sustainable competitive advantage EVALUATION OF ALTERNATIVESFocus solely on R&D

  29. PACE OF PRODUCT INTRODUCTIONS Start of Design Work Public Unveiling Volume Shipments 686 586 486 386 286 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 4 years

  30. RESEARCH AND DEVELOPMENTa comparison of costs $618 Million = $100 Million $214 Million Research and Development Costs found from SEC Federal Filings

  31. Pros Known for market innovation Guide market trends Seen as Premium product Already good at this Cons Expensive May not always be leader Abundance of Imitators Risk of Technology Leapfrogging Non-Sustainable competitive advantage EVALUATION OF ALTERNATIVESFocus solely on R&D

  32. Pros Guaranteed sales Blocks up channels for other micro-processor manufacturers Less money needs to be spent on advertising Cons No growth in brand awareness or equity OEMs have no incentive to stay with Intel past contract dates EVALUATION OF ALTERNATIVESPurchase Agreements

  33. EVALUATION OF ALTERNATIVESDiffering Ad Strategy for Business Buyers

  34. Pros Still allows for Intel to grow brand awareness with consumers OEMs are still buying our chips Cons No growth in Brand Equity with Businesses -Major market segment Little incentive for OEMs to remain with Intel chips EVALUATION OF ALTERNATIVESDiffering Ad Strategy for Business Buyers

  35. Cons Increase in advertising expenses Major OEMs may not sign on Intel name could be spread into not as high quality computer brands Could lose premium image Pros Increase in Brand Awareness and Equity Intel could become synonymous with computers OEMs have incentive to remain with Intel A source of Sustainable competitive advantage EVALUATION OF ALTERNATIVESContinue Intel Inside Campaign

  36. BRAND EQUITY PYRAMID 4) Intense, Active Loyalty Consumer- Brand Resonance Possibly in future? Why doesn’t this OEM use Intel? Feel Safe about buying an Intel Inside Computer Consumer Judgments 3) Positive Accessible Reactions Consumer Feelings Brand Performance Intel is the market leader Brand Imagery Intel…short for intelligence 2) Points of Difference Intel Inside campaign coupled with own Intel ads serve to grow this area Brand Salience 1) Deep Broad Brand Awareness Kevin Lane Keller, Building Customer-Based Brand Equity: A Blueprint for Creating Strong Brands, Working Paper Series, Report 01-107 (Cambridge, Mass: Marketing Science Institute, 2001), [Solomon, Marshall, Stuart; Marketing Textbook 4th edition page 277]

  37. WHICH ONE WOULD YOU CHOOSE? WHY?

  38. “A product is something that is made in a factory; a brand is something that is bought by a customer. A product can be copied by a competitor; a brand is unique. A product can be quickly outdated; a successful brand is timeless.” A quote by Stephen King of the WPP Group of London, A Communications Agency which serves over 300 Fortune 500 companies.

  39. Cons Increase in advertising expenses Major OEMs may not sign on Intel name could be spread into not as high quality computer brands Could lose premium image Pros Increase in Brand Awareness and Equity Intel could become synonymous with computers OEMs have incentive to remain with Intel A source of Sustainable competitive advantage EVALUATION OF ALTERNATIVESContinue Intel Inside Campaign

  40. QUANTITATIVE ANALYSIS • The primary goal of a financial manager is to maximize shareholder wealth by investing in profitable projects. • The foundation of my analysis is formed on the basis of two fundamental principles: • The Stand-Alone Principle • Pro-Forma Financial Statements.

  41. QUANTITATIVE ANALYSIS • Assume the following: • Combined advertising expenditures for Hewlett-Packard and Compaq amount to $80 million. • Income tax rate is 34% • Is it beneficial to both HP & Compaq to adopt the “Intel Inside” marketing campaign?

  42. Cons Increase in advertising expenses Major OEMs may not sign on Intel name could be spread into not as high quality computer brands Could lose premium image Pros Increase in Brand Awareness and Equity Intel could become synonymous with computers OEMs have incentive to remain with Intel A source of Sustainable competitive advantage EVALUATION OF ALTERNATIVESContinue Intel Inside Campaign

  43. SEEKING A BASIS FOR VALUE SUPERIORITY QUESTIONS TO ASK • Who is the real customer? • OEMs • Consumers and Businesses • What is important to the customer? • Quality Product • Reliable [a brand they can trust] • Price

  44. CONT. • How well are we perceived to be doing? • OEMs • For small OEMs Intel Inside is great • For larger ones it is monopolistic • Still have a great product • Starting to lose market share to imitators • Consumers and Businesses • Businesses see us as a top of the line product [quote from case] • No deep broad brand awareness in consumer market

  45. CONT. • How can we enhance our position? • What are some sources of competitive advantage? • Scale, Scope, and Efficiency… (most have this) • Financial Condition… (equal across firms) • Brand Equity… (Sustainability) • Location… (not important in this market) • Skills… (not sustainable and costly)

  46. HOW? Co-Branding Two Great Brands, One Great Product! Stickers on Computers Magazine and Newsprint Logo on Boxes

  47. INTEL’S OWN AD OFFENSIVE We continue with our current ad strategy of Superior Performance.

  48. HOW DOES THE INTEL INSIDE LOGO BRING VALUE TO YOUR BRAND Perceived Quality Name Awareness Brand Association Brand Loyalty Other Proprietary Brand Assets Provides value to firm by enhancing: -Efficiency and Effectiveness of marketing programs-Brand Loyalty-Prices/margins-Brand Extensions-Trade Leverage-Competitive Advantage Provides value to consumer by enhancing customer’s: -Interpretation/Processing of information-Confidence in the purchase decision-Use Satisfaction Source: Aaker, 1991, p17

  49. CONT. • Possible Offensive Moves of Competitors? • Continue to imitate our products • Start their own co-branding campaign • Defensive Capabilities of Competitors? • Lower prices

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