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    Intel - Emergent Strategy

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    anilkurhekar
    Intel originated as a memory company but transformed its core business from DRAMs to microprocessors in the 1980s despite top management's view that DRAMs were strategic. Middle managers responded to the shifting competitive environment from design/process technology to manufacturing/commoditization by allocating more manufacturing capacity to the growing microprocessor business, which emerged as more profitable. Over time this strategic direction emerged from organizational routines rather than top-down strategy, and Intel exited the memory business as it diminished.

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    Intel - Emergent Strategy

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    anilkurhekar
    1K views2 pages
    Intel originated as a memory company but transformed its core business from DRAMs to microprocessors in the 1980s despite top management's view that DRAMs were strategic. Middle managers responded to the shifting competitive environment from design/process technology to manufacturing/commoditization by allocating more manufacturing capacity to the growing microprocessor business, which emerged as more profitable. Over time this strategic direction emerged from organizational routines rather than top-down strategy, and Intel exited the memory business as it diminished.

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    Intel originated as a memory company but transformed its core business from DRAMs to microprocessors in the 1980s despite top management's view that DRAMs were strategic. Middle managers responded to the shifting competitive environment from design/process technology to manufacturing/commoditization by allocating more manufacturing capacity to the growing microprocessor business, which emerged as more profitable. Over time this strategic direction emerged from organizational routines rather than top-down strategy, and Intel exited the memory business as it diminished.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as DOC, PDF, TXT or read online from Scribd
    Download as doc, pdf, or txt
    1K views2 pages

    Intel - Emergent Strategy

    Uploaded by

    anilkurhekar
    Intel originated as a memory company but transformed its core business from DRAMs to microprocessors in the 1980s despite top management's view that DRAMs were strategic. Middle managers responded to the shifting competitive environment from design/process technology to manufacturing/commoditization by allocating more manufacturing capacity to the growing microprocessor business, which emerged as more profitable. Over time this strategic direction emerged from organizational routines rather than top-down strategy, and Intel exited the memory business as it diminished.

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    Emergent Strategy

    Strategic direction may emerge from actions taken by middle management, and
    organizational routines rather than by strategy as designed by top management.

    Intel, the world’s largest manufacturer of microprocessors (MPs), was


    widely regarded as a highly innovative and skillfully managed high
    technology company. However, Intel originated as a memory company, in
    the business of DRAMs –Dynamic Random Access Memory- and EPROMS-
    Erasable Programmable Read only Memory. So how did the core business
    of Intel get transformed from DRAMs to MPs in 1980s, and how did this
    happen, despite top management clinging to the view that DRAMs were
    the core strategic business of Intel?

    Initially, the distinctive competences of Intel included design and process


    technology, in line with the basis of the competitive environment at that time.
    However, the industry was in a state of rapid change and fierce competition, and as
    such, the basis of competition shifted to manufacturing and commoditization. Intel
    faced increasing turbulence in this new environment and attempted to solve their
    manufacturing problems by entering into the business of producing
    microprocessors.

    One of the regulations within Intel was with respect to the allocation of
    manufacturing capacity: the different product divisions competed for manufacturing
    resources from the centre. Intel’s resource allocation strategy criteria attempted to
    manifest the external competitive realities of the different businesses by allocating
    manufacturing capacity in proportion to the sectors that displayed the highest profit
    margins. Although the official corporate strategy was committed to memory, and
    top management continued to allocate R&D funds to work on memory, the reality of
    the cumulative events was that, as MPs gradually became more profitable,
    manufacturing capacity was increasingly allocated away from memory and towards
    MPs.

    Furthermore, Intel had a tradition and a culture of ‘constructive confrontation’;


    candid discussions regarding the merits and demerits of the different strategic
    initiatives and allocation of resources were encouraged. Middle managers had a
    mandate to respond to the external competitive pressures of the environment.
    When several middle managers took the initiative to use a new process technology
    which favored logic and MPs rather than memory, this resulted in the rapid growth
    of the MP business.

    Despite the fact that the official corporate strategy was inherently committed to
    memory, Intel’s external and internal environment produced a major shift in the
    allocation of resources away from the memory business to the emerging MP
    business. Although there was still heavy investment in DRAMs, the actual
    allocations for the manufacturing capacity were decided at lower levels in the
    organization. By the time top management realized this, Drams’ market share had
    diminished to such an extent that it needed an investment of several hundred
    million dollars in order to survive, and a decision was made to exit the memory
    business.

    (Prepared by Urmilla Lawson, Graduate Business School, University of Strathclyde.)

    Source: R.A. Burgelman, ‘Fading memories: a process theory of strategic business


    exit in dynamic environments’, Administrative Science Quarterly, 39(1994), pp. 24-
    56.

    Questions

    1. Identify the processes at work in strategy development at Intel.

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