CEO Craig Barrett enacted changes, both external and internal, at Intel his first three years. First, he initially expanded into new markets by pouring money into producing information and communication appliances and services. Later he was forced to pull out of these same markets due to lack of growth brought on by weak demand and market saturation. Some of this lack of growth was due to economic conditions occurring after September 11, and some was due to changing customer needs and expectations. In addition, some of Intel’s biggest customers, Dell and Cisco, complained that the chip manufacturer was directly competing against them.
Internally, Barrett initiated a sweeping reorganization by creating new departments and combining others in an attempt to simplify and synergize operations. Barrett’s goal was to make decision processes at Intel more efficient and more nimble through decentralization and delegation. During this process there were also job cuts, with 5,000 leaving through attrition. Barrett has also attempted to shift the culture by bringing in consultants and aiming to improve customer relations and inspire a sense of competition. The jury is still out on whether these sweeping changes will have the desired effect.
Intel’s major environmental pressures fall under the following three categories: Geopolitical
Geopolitical pressures occur in the form of crisis and/or geographic realignments. Nearly every organization was affected by the crisis experienced at the World Trade Center on September 11, 2001, and the following war, and Intel was no exception.
In the aftermath of September 11, there was a major economic downturn negatively effecting Intel. In addition, changing customer needs and market saturation caused some researchers to advise of a potential 34% decline in global sales of chips.
There has always been a fierce competition in the PC chip market between Intel and its chief competitor Advanced Micro Devices (AMD). Both companies continually strive to be first to the market place with the latest smallest, fastest, and more energy efficient chip. During this time AMD produced a chip that outperformed the latest Intel chip. In addition to these pressures, there were also some credibility issues as production problems forced Intel to recall some of its line of pc chips.
Internal Organizational Pressures
Intel’s major internal pressures fall under the following three categories: Growth
Intel attempted to spur growth by entering into new markets, producing new products, and marketing to a new set of customers. These attempts were rebuffed by poor execution, lack of demand, and pressures from existing customers.
Integration and collaboration
Barrett instituted a series of reorganization moves aimed at improving integration and collaboration by decentralizing and delegating. This led to the creation of new units and the combining of others, while managers were assigned new responsibilities.
Craig Barrett became CEO at Intel following in the steps of 3 others who had shaped Intel into an industry defining and market leading organization. There was pressure to retain his predecessor’s principle of doubling microprocessor performance while making it progressively cheaper. There was also personal pressure to create a legacy in line with those that held the job before.