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CAPTURING CHINA’S HIGH POTENTIAL MARKETS: INTEL’S QUEST FOR MAXIMIZING GROWTH Case Solution & Answer

CAPTURING CHINA’S HIGH POTENTIAL MARKETS: INTEL’S QUEST FOR MAXIMIZING GROWTH Case Solution

            Already 60% of the staff was supporting the channel to fill in the gap for weak skills of the channels in the areas of marketing and finance. Increasing this cost to increase the revenues from the ITRs was essential for Intel over the short run for increasing its market share from this tier. The channel distribution method would be mostly effective for Intel in China in the short run because Intel is currently the largest PC and microprocessor seller in China and its market share is much higher than of AMD. Apart from this, the brand awareness of Intel was strong among the tier 1 and tier 2 cities. Moreover, other strength of Intel was in the cost of the new PC of Intel which was equal to a single income of an average worker in city and rural areas. Finally, the channels have also become more aware about the products of Intel and what the customer preferred the most. Therefore, for the short run, distributing through the channels is the most effective method for China.

Distribution Method for Long Run (3-5+ years)

            As Intel would grow in China, then the threat from the Multinational Corporations would become more intense in China as more and more MNCs would be entering emerging economies such as China in the long run. The growth of the MNCs in China would make the competition more intense for the channels and they would be attracted by any of the microprocessor company which gave them the best deal(Best, 2012). Therefore, in the long run, John needs to distribute its products through the LOEMs.

Apart from the competitive threats, there were also certain weaknesses associated with the growth of the MNCs. For instance, the worldwide trio represented 40% of the worldwide shipments of Intel therefore, the negotiating pressure for the prices would be high for Intel. However, in order to overcome the threat for the channels, the best distribution method for Intel in the long run would be through LOEMs. LOEMs were basically a blend of the channels and the MNCs. Nonetheless, customization of the products was limited in these distribution methods but they had vast distribution networks. This distribution method would give Intel a significant advantage even in the face of the competition from Dell and HP.

However, if Intel promoted the wrong product mix through LOEMs, then this might become a disaster for the company due to market fluctuations of Intel’s product prices. The strength of Intel with this distribution method lies in the fact that Intel will have not to spend more resources on training the channels. Nevertheless, support would still be provided from Intel’s account reps to multiple LOEMs. However, the management of Intel will have to fill in the communication gap in order to overcome the fear of LOEMs that their business plans might be leaked to their competitors. Overall, distributing through LOEMs would be the best distribution strategy for Intel in the long run. In order to simplify the implementation of this distribution strategy, Intel could also encourage the COEMs to grow into LOEMs.

Question 2

            The recommended distribution methods for Intel have been evaluated on the basis of the quantitative factors of the market share, the revenues and the profit potential of each of the distribution methods. The qualitative factors associated with the recommended distribution method are also evaluated below.

Short Run Distribution Method – Channels

            In China, the market share captured by the channels is 56% in the PC market. Therefore, we have calculated the Intel’s revenue in 2004 for channels on the basis of the total revenue of the company. Over here, we assumed that 56% market share is also representative of the sales of Intel derived through its channels. Based on the tier structure as shown in exhibit 9 of the case for the channels, the sales in percentage and the market shares of the total channel sales have been calculated for the IPP, GID and ITRs individually(Best, 2012). Their total market share equals to 95%, therefore, 5% has been allocated to other channels which could fall into any of the three tiers(Best, 2012)………………………

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