The value chain
concept was created by Michael Porter and explained
in his book “Competitive Advantage”,
published in 1980. The value chain is a series
of activities that create and build value- culminating
in the contribution of total value to the organization.
Porter used the concept of value chain as a systematic
approach to examining the development of an organization’s
competitive advantage in the marketplace.
In using the value chain concept, the total activities
undertaken by a business are split into Primary
Activities and Support Activities. Primary activities
relate to inbound logistics, operations, outbound
logistics, marketing and sales, and service. Support
activities include procurement, technology development,
human resource management, and firm infrastructure.
Here however, we will discuss only the contribution
of the primary activities to nurturing and solidifying
Intel’s competitive advantage in the industry
(Porter, 1980)
No doubt, Intel has emerged as the market leader
in the design and manufacture of microprocessors,
having an almost unbeatable advantage over its
competitors. Yet Intel has realized that the best
way to retain its market position is to make it
easy and efficient for people to do business with
the company. Since 1998, Intel has developed and
used an e-business strategy to maintain relationships
with its customers, employees and suppliers. The
company’s goal is to become a 100% ‘e-business
enabled’ corporation. In terms of the value
chain concept, Intel has made remarkable progress
and reaped tangible benefits in the volume of
business it does on the Web, as well as created
savings of time and money for both itself and
its customers. (Pallato, 2001)
Let us analyze Intel’s strategy in terms
of the primary value chain activities:
Inbound Logistics: Prior to implementation of
its e-business initiative, Intel used the traditional
methods of pen, paper and telephone to place and
track its supplies and suppliers. Furthermore
it ordered supplies only in response to customer
orders. Consequently the company lost out on many
business opportunities, where it could not meet
emergency demands, changing customer needs or
large orders for want of adequate stock. However
this all changed with the launch of its e-business
initiative in 1998. Today, Intel uses the Internet
to speed the flow of information between itself,
its suppliers and customers. By tracking its deliveries
and supplies over the Web, the company has reduced
its order and manufacturing lead times. It tracks
its supplies from various countries all over the
world. Intel’s goal is to move towards a
100% automated system for its supplies and purchases.
Operations: Intel uses its Web based e-business
system to aid in the quick exchange of details
and queries pertaining to customer orders, design
specifications and proprietary information. Design
specifications and models can change every 6 months.
Intel has many made-to-order deals with big volume
direct customers and this almost instantaneous
system can shave off a week or two in design and
delivery of the final product, enabling the product
and its suppliers to take full advantage of its
novelty and price in the market.
Outbound Logistics: Intel uses its web based
system to track deliveries to customers and resellers.
It can thus expedite delivery by noting friction
points, ascertaining the reasons and smoothing
shipments there. Using its ‘vendor driven’
inventory management system, Intel can maintain
its inventory levels to respond to fluctuating
customer demand, make reliable forecasts and shipments
on time.
Marketing & Sales: Intel has also improved
time to market for its products to customers.
By putting its customer order entry system on
the Web, it has reduced errors by 75%. It can
take orders round the clock, where more than 25%
of its transactions occurring after normal business
hours. Its ability to establish links with over
75,000 system resellers worldwide has led to considerable
increase in its sales volumes. Online sales doubled
from US$ 1 billion to US$2 billion a month. Hundreds
of Intel suppliers use the Web to check the status
of inventory levels, payments and shipments.
Service: Intel focuses on many areas of support
and service for all its products. From advanced
data centers, application platforms, architecture
planning, integration of business applications,
e-commerce applications and solutions, system
migration and server consolidation. Employing
a set of highly skilled consultants having considerable
technical expertise in designing, building, implementing
and optimizing solutions on Intel architecture.
Intel provides a variety of services in the areas
of wireless, hardware design, networking and communications,
software development, business strategies and
solution providers. Intel has established alliances
with other leading software technology providers
and solutions such as Oracle and SAP to give added
value to its customers. It has a variety of solution
blueprints on its website advertising its successful
applications from a variety of industries. A database
of solution providers and resellers of Intel products
and solutions has been provided on a technological,
geographical and language basis for ease of access
and use. (Intel Website).
The success of Intel’s value chain can
be judged by the fact that it helped the company
earn revenues of US$30.1 Billion in 2003. The
company has over 78,000 employees worldwide, with
294 offices and facilities for its 450 odd products.
Intel was ranked 53 in the list of Fortune500
companies in 2003. By converting from its EDI
systems to one using its RosettaNet business process
standards with XML forms, Intel is expected to
make further giant strides in the way it does
business.
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