Intel Pestel and Five Forces Analysis

1. PESTEL:

Strategic analysis is basically concerned with the structuring of the relationship between a business and its environment. The external environment which is dynamic and changing holds both opportunities and threats for the organizations. The organizations while attempting at strategic realignments, try to capture these opportunities and avoid the emerging threats. So it is very important for organizations like Intel to study and understand about the external environment. To do this, we can use the PESTEL framework.

P POLITICAL

E ECONOMIC

S SOCIO-CULTURAL

T TECHNOLOGY

E ENVIRONMENT

L LEGAL

In PESTEL framework, the external environment is classified into six broad categories: Political, Economic, Social, Technological, Environmental and Legal. Changes in these external forces affect the types of products produced, the position of them, market strategies, types of services offered and choice of business.

Political Forces:

Intel being a multinational company, it has to operate according to different government policies of different countries depending on the stability of the countries (Writer, 2006)

Politics has a serious impact on the economic environment of the country. Political ideology and political stability or instability strongly influence the pace and direction of the economic growth. Politics can consist government stability, political values and beliefs shaping policies…(Ho Chi Minh City, 2006)Therefore, the politics of a country affect the investment decision of organizations in this country strongly. Seeing Vietnam has socio-political stability, Intel were in serious discussion for chip manufacturing in India but the government was a bit slow on semiconductor manufacturing proposals so therefore it choose Vietnam. But it took Intel 4 years of negotiation until the Vietnamese government gave them the license (Rediff News, 2007).

Economic Forces:

The trends are the economic part of the societal environment can have an obvious impact on business activity” (Thomas and David, 2000)

Economic factors throw light on the nature and direction of the economy in which firm operates. The firms must focus on economic trends in segments that affect their industry. The economic factors can also be divided into some categories like GNP trends, money supply, inflation rate, unemployment… Seeing that Vietnam is one of the fastest growing economies in the South East Asia. Which has grown by 7 to 8 percent a year, It is also the South East Asia’s fastest growing PC market and the low cost (low labors cost, low living cost) (little or no cost pressure) are some of the main reasons why Intel choose to invest in Vietnam.(BusinessWeek, 2006).

Social – Cultural:

Social values like demographic factors such as population, age distribution, literacy levels, inter-state migration, rural-urban mobility… or cultural factors like social attitudes, customs, beliefs, rituals…influence business practices in a major ways (All, 2008). One of the main reasons for a company’s investment decision is the workforce of this country. Some of the countries that Intel has made investments like China and Vietnam have young and plentiful supply of workforce. (According to http://www.orientsoftware.net/about-us/why-vietnam.aspx , Vietnam’s labor force has a 96% literacy rate and high scientific and technological knowledge). Vietnam also has socio-political stability (Evancarmicheal, 2007).

Technology:

Technological factors represent major opportunities and threats which must be taken into account while formulating strategies. Technological breakthroughs can dramatically influence the organization’s products, services markets, suppliers, distributors, competitors, customers, manufacturing processes, marketing practices and competitive position. Technological advancements can open up new markets, change the relative position of an industry and render existing products and services obsolete. Technological changes can reduce or eliminate cost barriers between businesses, create shorter production runs, create shortages in technical skills and result in changing values and expectations of customers and employees. This is especially important for an IT company such as Intel as it can be the key for the companies to survive or the reason which made the failure of some