CAPTURING CHINA’S HIGH POTENTIAL MARKETS: INTEL’S QUEST FOR MAXIMIZING GROWTH Case Solution
Question 1
Distribution was the major challenge which was being faced by Intel in China. As China was an emerging economy therefore, the distribution mix for China was different as compared to the distribution mix for Europe and US. There were three basic methods on which Intel relied upon for distributing its PCs and the mobile PC processors to the end customers. These three distribution methods were:
- Multinational Corporations
- Local Original Equipment Manufacturers
- Distributors or Channels
Till now, Intel had never analyzed these three distribution methods. Currently, most of the products of the company were sold to the end consumers through the channels in China. The overall balance for the multinational corporations, local original equipment manufacturers and the channels stood at 18%, 25% and 56% respectively. Intel had always used the channel distribution method to enter into China and sell the products to the end customers. The channels better understood the preferences of the customers, spread the technology processors among the early adopters and had a very effective reach within the target markets of Intel. However, now the challenge for John Antone and Intel was that as the Multinational Corporations continued to expand into China therefore, the channel distributors would be facing stiff competition from these MNCs.
Adding the fourth channel in the distribution network in China was also a solution to this threat by adding the channel of direct sales through the internet, but as most of the end customers of the company were not sophisticated and most of the markets did not have well developed banking infrastructures and transportation(Best, 2012). The use of credit cards had just been introduced in China. Therefore, selling the product to the end customers via internet was a solution itself full of many other issues.
Therefore, Intel needs to analyze the three distribution methods and then choose the best distribution method for addressing the threats in the short run as well as in the long run by exploiting its own strengths such as brand power and overcoming the weaknesses of the company in China. Therefore, the following distribution methods would be most effective for addressing the threats and actualizing the opportunities in the short run and the long run.
Distribution Method for Short Run (1-2 years)
Currently, Intel is distributing its products through the channels in its major markets in China, therefore, for now the most effective distribution strategy for the short run for Intel would be to continue distributing its products through these channels(Best, 2012). The channel membership program of Intel should be expanded to support the resellers and the retailers to widen their reach in more remote areas of the market. This was because the channels of the company had limited access to the credit and to capital and they relied heavily on the support structure of Intel to sell their products.
As stated in the case, the re sellers had been divided into three different categories of tiers and entry into any tier depended on the numbers of the Intel products sold in each quarter. The lower tier was named as Intel Technology Re sellers and there were no minimum purchase requirements. This showed that the access to this channel was easy but they generated only 15% of revenue for Intel through channels. Therefore, Intel needs to invest more resources for conducting channel membership program for this tier also and not relying just on the web touch only.......................
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