Intel Knows Best? A Major Marketing Mistake :: essays research papers

INTEL Knows Best? A Major Marketing MistakeProblem StatementWhen Thomas Nicely, a mathematician at Lynchburg College in Virginia, firstwent world with the fact that Intels new Pentium cut short was defective Inteladmitted to the fact that it had sold millions of defective chips, and had knownabout the defective chips for over four months. Intel said its reasoning fornot going public was that most people would never encounter any worrys withthe chip. Intel said that a spreadsheet user doing random calculations wouldonly have a problem every 27,000 years, therefore they saw no reason to replaceall of the defective chips. However if a user possessed a defective chip andcould convince Intel that his or her calculations were particularly vulnerableto the flaw in the defective chip then Intel it would supply those people with anew chip. This attitude of father knows best fostered by Intel created anuproar among users and owners of the defective chips. Six weeks after Mr.Nicely went pub lic, IBM, a major purchaser of Pentium chips, stopped allshipments of computers containing the defective Pentium chips. Intels stockdropped 5% following this downright move by IBM. IBMs main contention was that itputs its customers first, and Intel was failing to do this.Intels handling of this defective chip situation gives rise to manyquestions. During the course of this paper I will address several of them. Thefirst of which is how did a smart set with such a stellar reputation for consumersatisfaction fall into the trap that the customer does not know best? Secondly,what made this chip defect more of a public issue than other defective productsmanufactured and sold to the public in the past? Finally, how did Intel recoverfrom such a mistake? How much did it cost them and what lessons can othercompanies learn from Intels marketing blunder so that they do not make the samemistake?Major FindingsIntel is spearheaded by a chief executive named Andrew Grove. Grove is a"tightly w ound engineering Ph.D. who has molded the company in his image. Boththe secret of his success and the source of his current dilemma is an anxiousmanagement philosophy built around the motto Only the paranoid survive."However, stock-still with this type of philosophy the resulting dominance he hasachieved in the computer arena cannot be overlooked. Intel practicallydominates the computer market with $11.5 billion in sales. Intel has over 70%of the $11 billion microprocessor market, while its Pentium and 486 chipsbasically control the IBM-compatible PC market. All of these factors have