Intel Porter Five Forces Analysis
Five Forces analysis of Intel covering threat of new entrants & substitutes, bargaining power of buyers & suppliers and competitive rivalry.
Threat of New Entrants:
Intel is involved in making computer chips or semiconductor chips. The threat of new entrants in this industry is low. Computer chip making has evolved into complex designing (both hardware and software) due to various companies' years of Research and development. Hence, it is not easy to enter computer chip-making without proper IP rights. Several brands like AMD, Nvidia, Intel, QUALCOMM, etc., have invested a lot of money in R&D, property, plant, and equipment required for chip designing and manufacturing. Hence, only firms who can invest a large capital and are willing to take risks can enter this industry. Several existing firms in this industry have invested heavily in advertisement to gain market share. As a result, only a few companies could survive and have been in the industry for several decades. There is high brand recognition of the existing players among the consumers. Hence, not everyone can enter this industry easily. If anyone wants to enter, it will take years to build its brand among the consumers. Existing players are quite aggressive, and it's not easy for a new player to survive. However, some Chinese firms are trying to enter chip-making and designing by providing low-cost products to the customer. Overall, the threat of new entrants is low.
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This concludes the threat of new entrants in the Intel Porter Five Forces Analysis.
Threat of Substitutes:
Below are the threats of substitute products of Porter’s Five Forces analysis of Intel:
The threat of substitutes for Intel is moderate. As there are very few firms providing the same product in the market, there are not many options to substitute.
Intel provides products that are better performing as compared to its competitors, which gives it an advantage. Also, Intel is the market leader and has the highest market share. The threat of substitutes is moderate as Intel has invested heavily in research and development. As a result, it provides better performing and higher quality products to their customer. Also, there is a high switching cost for a business/consumer in the computer chip industry because of compatibility and dependence issues. Availability is another factor while considering the substitute. There is a semiconductor shortage in the industry, and intel, the industry leader, provides the majority of the chips. Hence even if customers want to switch to its substitute, it is not readily available. However, some firms offer chips that can perform the same task. Hence, a business/consumer can switch to another product. Overall, the threat of substitute is moderate.
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Bargaining Power of Customers:
In the Intel Porter Five Forces Analysis the bargaining power of the customers can be explained as:
The bargaining power of Intel’s customers is low. High Switching Cost: In computer chips, many hardware and software around it depend on that chip. Hence switching to another product will require a lot of changes and hence a lot of time and money. Hence, customers cannot easily switch and have low bargaining power. Less substitute available: As only a few players are there in the industry, a customer does not have a lot of options. Hence, low bargaining power of the customer. High brand awareness among the end-user: The end-users recognize Intel and demand PC/Laptop, which has intel inside it. Hence because of demand from end-user PC and Laptop makers don’t have any option but to use Intel chips in their products.
Overall, the bargaining power of the customer is low.
Bargaining Power of Suppliers:
Following is the bargaining power of suppliers in the Porter’s Five Forces analysis of Intel:
Bargaining power of suppliers depends on the following few factors. The raw material, which is for fabrication, is available from number of player but is provided by only few countries. Intel has easy access to raw material required for manufacturing/fabrication of its chips. Hence, bargaining power of supplier is moderate. Moderate size of supplier result in less pressure on a firm which gives advantage to Intel which is huge in size. Hence bargaining power of supplier is low in this respect. For some chips Intel depends on other firms which are limited. This gives the supplier an upper hand. Intel has significant control on its supply chain. Also. R&D investment by Intel and IP right which it has does not allow forward integration to happen for its supplier. Overall, the bargaining power of suppliers is low.
Competitive Rivalry:
The impact of key competitors in the Intel Porter Five Forces Analysis is as follows:
The competitive rivalry among the existing firms competing with Intel is very high. The semiconductor industry faces high competition, and the rivalry among the firms is very high. Each player is expected to release the next and upgraded version of their product every year. Competitors release several products and features for their customers in a year. Some direct competitors of Intel are AMD, Samsung, Nvidia, and QUALCOMM. Most of the market is already covered in developed economies. However, some scope is there is developing economies. Hence, there is a high level of competition to gain market share in the highly penetrated market. There is a high switching cost for laptop and PC manufacturers, once you establish a contract with an OEM, it will continue for several years, and there won’t be any competition there.
Considering all the above factors, the competitive rivalry among the existing firms is very high.
To conclude, the above Intel Porter Five Forces Analysis highlights the various elements which impact its competitive environment. This understanding helps to evaluate the various external business factors for any company.
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