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Estratgia de Entrada de Empresas Multinacionais em Mercados Emergentes: O Estudo do Caso

Intel
[Emerging market entry strategies of multinational corporations: the Intel case study]

Abstract
Multinational companies with experience in developed market operations are starting to shift their interests toward
emerging markets such as Africa, Asia, Midle East and South America. While they emerge, such economies may be
lucrative especially due to the potential current client base and the strong possibility of growth in the near future. This paper
studies the technologic strategy employed by a multinational corporation on entering emerging markets. The chosen
research method was single-case study. Our results show that the subject company developed a differentiated entry strategy
for emerging markets, one quite aligned with the literature.

1. Introduction
The saturation of affluent, developed markets and their reduced profit margins have led multinational companies to an
increased interest in emerging markets (ARNOLD; QUELCH, 1998). This appears reasonable, as the sum of emerging
populations, on average 80% of the population worldwide, brings more opportunities than individual wealth.
Companies in the information technology sector, especially, appear to have obvious reasons for focusing on this market, as
information and communications technology (ICT) infrastructure is crucial in enabling first offerings of products and
services to unexplored market segments. Infrastructure technologies play an important part in bringing markets closer,
aiding economic development, aggregating demand and reducing transaction costs. They also make reduction of
communication travel and other costs feasible, consequently creating new forms of corporate activity.
Emerging markets are generally characterized by a history of recession or stagnant economy, domestic unrest and turbulent
politics, an aging population and low fertility rates, led by low growth in many market sectors. Paradoxically, these markets
show some of the highest economic growth indicators of the past years (RAHMAN; BHATTACHARYYA, 2003). They are
therefore an additional market to which multinationals may offer their products and services.

The next few billion users at the base of the pyramid certainly represent a vast business opportunity for the industry, but
capitalizing on this opportunity is a complex challenge, as it requires new products and services that satisfy the specific
needs of emerging markets and new business models that add value to companies production chain. Intel has recently taken
a step in this direction, establishing Platform Definition Centers (PDCs), an operation explicitly directed at generating
innovation to serve the bottom or base of the pyramid (BoP).
Intels PDC strategy is a cutting-edge movement in the global environment. In this context, the present study will attempt to:
(i) gain a deeper understanding of the reasons that motivated the subject company to offer products and services to the
emerging market segment; (ii) identify the characteristics of the technological innovation strategy employed by the
company to carry out its activities in these markets; (iii) identify the business model that supports this strategy; (iv) identify
the process of new product and service development. These are the basic points this study seeks to explore.

2. Study outline and methodology


This study is predominantly exploratory and seeks to deepen understanding of technological strategies developed by
multinational companies for entry into emerging markets.
We chose the case study as our research strategy; according to Yin (2003), the case study is most adequate when how and
why questions are being posed on a set of contemporary events. The subject company was Intel and data collection was
carried out through interviews of managers and employees directly connected to the company area active in emerging
markets. Each interview was preceded by a clear definition of its theme. We employed a semi-structured, no disfarado
questionnaire with open-ended questions, which we based upon themes found in our review of the literature.
Additionally, secondary data were collected from internal documents and the companys official website.

3. Literature Review
3.1 Emerging market characteristics
Corporate interest in emerging markets has risen significantly over the past few years, due to these markets potential for
new sales. Reputable companies may quickly take hold of large markets and, once their presence is established, obtain
significant sales growth over time, even if market share remains unchanged (NAKATA; SIVAKUMAR, 1997).

The (economic) bottom of the pyramid consists of approximately four billion people (two-thirds of the world population)
earning under US$ 2.000 per year (PRAHALAD; HAMMOND, 2002). The most relevant piece of information on these
markets is that they are underserved by multinationals. Prahalad and Lieberthal (1998) note that, when present,
multinationals solely compete for the top tier of the market pyramid. The mass markets in these countries are still
completely uncharted territory, and therefore an even greater challenge to the entry of multinational corporations.
Rahman and Bhattacharyya (2003) suggest three criteria which may be used to define a developing economy as an
emerging market: (i) the country must be recognized as a promise of substantial future economic growth; (ii) the countrys
economy must have been recently opened to foreign investment, and the opening process should be undergoing continued
evolution; (iii) the country should offer an institutional infrastructure that makes transactions easier.
The first challenge to entry is having in-depth knowledge of these markets; the next step is establishing new business
patterns and patterns of technological innovation. According to Prahalad and Lieberthal (1998), a new business model
requires resource shifts, extensive rethinking of cost and structure, and redesign of the product development process.
Furthermore, multinationals must rethink the abilities of managers responsible for their activities in emerging markets.
Prahalad and Hart (2002b) note two common assumptions regarding this aspect: managers are not naturally excited by
challenges with a humanitarian dimension; and there is great difficulty in finding talented managers with the skills
necessary for work at the bottom of the pyramid.
Another characteristic of emerging markets, according to Prahalad and Hart (2002b), is that their consumers, even those at
the bottom tier of the pyramid, are not restricted to basic needs provided by sectors such as housing, textiles or food. The
bottom of the pyramid is waiting for high-tech businesses such as financial services, cellular telecommunications, and lowend computers Prahalad and Hart (2002b).

3.2 Emerging market entry strategies


In light of the economic potential and unique characteristics of this market, how can companies overcome barriers and
challenges to entry? Are traditional practices employed in affluent markets applicable to emerging markets? How do
multinational corporations expect to beat local companies?
Prahalad and Hart (2002a) define four elements though which multinationals should structure their strategies to meet the
needs of emerging markets:

1. Creation of buying power, through the use of credit mainly microlending providing the poorest segment of the
population with resources that will foster purchasing of products directed at the bottom tiers.
2. Innovation, using local creativity and research to overcome infrastructure issues and serve the poorest population
segments satisfactorily and profitably.
3. Improve access to information, through fragmented distribution systems, use of partnerships to leverage traditional
knowledge bases, sustainable production of goods and, mainly, use of new IT technologies and new business models to
meet specific needs of the low-income population. By using shared access systems (Internet kiosks, for instance), wireless
infrastructure and developing specific technologies, companies are able to drastically reduce connection costs, making
telecommunications services accessible to a much greater number of people, even low-income populations.
4. Adapt solutions to local markets. Multinationals must foster local markets and promote local solutions, generating wealth
at the lowest income levels, bringing together high-end technology and a keen perception of local needs, not letting business
models break from the local culture and lifestyle.
Prahalad and Hammond (2002b) outline a series of strategies that can help companies gain entry into emerging markets:
1. Overcome external barriers. A strategy critical in overcoming infrastructure issues and other external barriers is the use of
ICTs to connect the informal sector and established markets; in short, improving connectivity is an important catalyst in
speeding up economic growth and creating more effective markets.
2. Change management perspectives. The most critical internal barriers to taking advantage of business opportunities at the
bottom of the pyramid are perception-related. Top management must face its own prejudices.
3. Build new partnerships. A fundamental part of learning about and entering into emerging markets is developing
partnerships with key players who know the markets well. However, a choice of partners must go beyond business. Nongovernmental organizations and community groups are a fundamental source, besides frequently being where most
experimentation of new product models occurs.
4. Change organizational structure. Structural changes may be necessary, such as creating new R&D activities for and in
emerging countries, and setting up a risk capital fund for such markets may be a good learning opportunity.
5. Share risks. Entering an emerging market can be risky; however, one way to minimize this risk is by forming alliances
between companies that share a common interest. One example would be sharing rural ITC network construction cost
between communications companies and consumer goods companies seeking channels to boost their sales.

The challenge of innovating in emerging markets is mainly directed at creating robust, sustainable technologies that can be
ported to the developed world. The base issue is discovering how to simultaneously bring together quality, low cost,
sustainability and profitability in a single solution. It is a consensus in the literature that a new and specific business model
must be created to face the challenges of working with this market. Boyer (2003) suggests a list of strategies that appear to
be adequate recommendations for companies to start the emerging markets innovation process:

Rethink technology platforms and the business models that support them. This might include radical innovations,

or a mix of high-tech and simple solutions. The result would be simpler, more transparent, accessible and affordable
technologies.

Focus on meeting functional needs and services, instead of simply producing more products. This will require

identifying new sources of value from the demand side point of view. It may also require a radical change in how
innovation is understood.

Focus on capital efficiency, not just labor productivity. In most emerging market cases, there is incredibly little

working capital involved an inspiring accomplishment.

Explore shared use and access models that disaggregate ownership access while widening the consumer base.

Unlike developed markets, in emerging ones there is a community of users rather than a single user.

Replace assets with information. In emerging market cases, services can add value fundamental in marketing the

product.

Focus on different metrics. Managers are trained to concentrate on margins, but sales volume is often more

pertinent to emerging markets.

Tap into diverse knowledge sources across disciplines. Learning to see old problems in a new light may come from

a different perspective or practice.

3.2.1 Innovation in emerging markets


Prior to characterizing models of innovation in emerging markets, we chose to briefly describe generic models of
innovation. Neely and Hii (1998), through a review of the literature, identified five different types of innovation process in
organizations:

Technology-push in this model, innovation comes from scientific progress, which results in a flow of new

products to the market.

Marketing-pull the key factor of the innovation process in this model is the identification of users needs. R&D

activities are directed according to previously-identified user needs.

Coupling model from the assumption that the two aforementioned models are flawed, the coupling model was

developed in the 1970s in an attempt to bring both together. In this model, innovation is influenced by interactions
between science and technology and the markets needs.

Integrated model unlike all the other models, which predicted a sequential flow of innovation, the integrated

model promotes parallel, multifunctional development. The key concern of this model is development time, which
defines who will compete in the market.

Systems Integration and Networking this model predicts integrated development through alliances and

collaborative work between companies of different sizes and at different geographical locations, made possible by IT.
The cited models are helpful in defining the strategy to be employed for innovation. However, before defining this strategy,
Prahalad and Lieberthal (1998) note five questions multinational corporations must answer: (i) who is the emerging middleclass market in these countries? (ii) how do these countries distribution networks operate? (iii) what mix of local and global
leadership is necessary to foster business opportunities? (iv) is the adoption of a single business strategy for all business
units within the country necessary? (v) is a local partner necessary?
In an attempt to answer these questions, Prahalad (2005) lists twelve principles of innovation for emerging markets:
1. Focus on price performance of products and services.
2. Innovation requires hybrid solutions, that is, mixing new technologies and infrastructure.
3. Solutions must be applicable to other markets/countries, with minor adaptations.
4. Focus on conserving resources: eliminate, reduce, and recycle.
5. Product development should start at a keen understanding of functionalities required by the market; radical product
redesign.
6. Process innovations are as critical as product innovations.
7. Analysis of the infrastructure and environmental situation.

8. Work on client education is a key process.


9. Products must work under hostile circumstances.
10. Language, culture, and socioeconomic level diversity should be taken into account by the project team.
11. Design methods of reaching the bottom tiers at low cost.
12. The project team should focus on developing a platform, so that new functions may be added quickly and easily.
Nascimento and Yu (2003) highlight some innovation strategies for emerging markets: (i) low unit cost and large-scale
production; taking the most advantage of production efficiency and economies of scale to reduce unit cost; (ii) the
distribution system should be low-cost and agile; (iii) distribution should be geared at small retailers; (iv) major retailers
should be avoided, particularly due to their significant power of negotiation; (v) provide accessible purchasing conditions
(affordable price, low installments, no requirement of collateral); (vi) attention to the target audiences preferences and
needs, and (vii) awareness of changes in audience preference, and rapid development and launch of products to meet this
demand.
With few exceptions, local companies and non-governmental organizations have been more innovative and effective in
emerging markets than multinationals (PRAHALAD; HART, 2002b). Classic examples of local companies that developed
highly successful innovation strategies geared at bottom-of-the-pyramid markets are Grameen Bank and Cemex.
Grameen Bank is a Bangladesh financial institution that pioneered the sale of microcredit services to low-income
populations, particularly women who ran small business craft. Provision of financing was added to training and information
necessary for credit recipients to deal with their new reality. The success of Grameen Bank may be measured, not solely by
financial results, but mainly by the explosion of worldwide financial institutions interest in microlending.
Cemex, a cement company, developed a project entitled Patrimonyo Hoy, which fostered development of low-income
communities in Mexico by teaching local populations to save towards the dream of building homes for themselves
(LETELIER; FLORES; SPINOSA, 2003; PRAHALAD, 2005).
In a highly competitive environment, companies start searching for ways to survive. This fierce competition creates a need
for constant release of new products to the market. According to Mattar and Santos (2003), the success of a company is
tied to its capacity in understanding how forces in the business environment work and its competence in skillfully
converting this knowledge into products and services that offer greater value to consumers.

3.3 New product development


From the content put forth above, knowing how new products are classified becomes necessary. There are many such
classifications; the most widely used one is that developed by Clark and Wheelwright (1993), which classifies projects into
four types: Incremental or Derivative; Platform or Next-Generation; Breakthrough; and Research and Advanced
Development.

Incremental or derivative projects these projects create derivative, or improved, products or processes; they are
also known as sustaining projects, as they can create innovation in the company though little change to existing
products or processes, at low cost, quickly, therefore allowing for more immediate returns.

Breakthroughs these entail significant changes to the product and the production process. When successful, such
projects establish a completely new product or process concept. We will describe this type of project in further
detail below, as it is the type adopted by our subject company.

Platform or next-generation projects these create new systems of solutions for consumers, and involve
significant changes to the production process, the product, or both.

Advanced development projects, also called Research and Development (R&D) projects, are conducted by a
separate, specific group within the company, directed at conducting such projects. Their purpose is the creation of
knowledge know-how and know-why to be included in the development of future products. In such projects,
the technological exploration and investigation process must be separated from the application of already-known
technologies to products that already have a specific target market.

3.3.1 Product platform


Thinking of platforms for product families instead of individual products is one of the five keys to success over the product
development cycle (GUPTA; SOUDER, 1998 apud HALMAN; HOFER; VAN VUUREN, 2003). The platform appears to
be a successful strategy for creating varied products while using resources efficiently. It is connected to identification and
exploration of points in common between what the company offers, its target markets, and its product creation and delivery
process.
There are, however, some limitations to the platform concept (HALMAN; HOFER; VAN VUUREN, 2003). Many studies
have been directed toward a better understanding of the costs and trade-offs associated to development of product platforms.

Seeking to clarify the platform concept, Halman, Hofer and Van Vuuren (2003) distinguish it from the product family and
the individual product. A product family has been defined as a collection of products sharing a common platform; a platform
is the common base to all individual products belonging to one family.
The long-term success of a company depends on its new product pipeline; some products replacing older ones, others meant
to meet the needs of new markets. With ever-increasing integration of the world economy, many products must be global, so
that they may satisfy consumers and rules the world over.
Development teams must take on a global perspective when researching technology for new products. Teams must be
intimately familiar with market research of the consumers needs and preferences, distribution channels, support issues and
rules of technical and product safety. Standardization is a key point of the global solution.
One can notice the strong connection between platform concepts and strategies that are and should be adopted by
companies entering emerging markets.
The next section will describe, in detail, the strategy employed by Intel in entering emerging markets.

4. The Intel case


4.1 The platform approach: Intels new technology strategy
The computer industry has traditionally developed its products after the technology-push model. However, in recent years
Intel chose to adopt a differentiated technology strategy and started working with the product platform concept. The first
challenge of this new business approach is identifying end users needs and developing technologies to meet them.
Additionally, Intel tests and validates all hardware and software components of the end product and interacts with the
ecosystem (all industry players, including equipment manufacturers, system integrators, resellers and service providers),
seeking alignment to ensure interoperability of the developed solution and provide more attractive experiences to the end
user.
In this scenario, the technology focus shifts from a simple offer of independent devices and components to an understanding
of which daily-life problems relevant to consumers may be solved through technology.
While this new structure may not be a verticalized business model, it does add the most value to the product. Integrated
solutions demand the adoption of development patterns geared at reducing production time and cost. The adoption of this
new strategy by Intel is justified by a maturing process the market started undergoing in the late 1990s. Market penetration
requires further added values, so a pure horizontal industry model may no longer be efficient.

The issue thus far was adaptation to either business model, as there were two market segments willing to work with both
models. However, as the PC market matured, most of it settled at an intermediate level of customers unwilling to both pay
as much and deal with as many variables as are present in the pure horizontal model.
This new market outline is headed toward alignment of both models benefit. The challenge of Intels platform concept is
finding the middle ground between these models. The platform makes greater integration possible, which adds value to the
product, but at the same time there is a concern for keeping economies of scale, which are possible with the horizontal
model.
The reigning logic is that, in attaining control of most of the end solution, the company can add the most value to the
platform. The challenge lies in understanding and defining the degree of integration for each platform, as, while greater
integration is sought as a way of increasing added value, the concern is still present of making market economies work as to
keep the end price (and cost) attractive.
Another challenge yet to be solved by the platform business model is that of maximizing component reuse. Emerging
market platforms still show a low level of reuse, because components tend to be quite differentiated when tailored at the
specific needs of diverse emerging markets. On the other hand, end cost tends to increase with increasing use of overly
unusual components, which may render the end solution unfeasible. As well as differentiated products, emerging markets
require solutions adequate to the users income. Although the component reuse paradox still has no defined direction, it is
currently one of the main points on the agenda of Intels platform centers.

4.1.1 Characteristics of Intel product platforms


Intel defines the platform as an integrated set of elements that, when together, add up to a greater value than the sum of their
parts. Intel platforms comprise five main components: (i) Hardware (processors, chipsets, communication devices, memory,
boards and systems); (ii) Software (operational systems, applications, and compilers); (iii) Technologies; (iv) Standards and
initiatives (Wi-Fi, WiMAX); (v) Services (digital media distribution, communications, and systems administration).
There are five basic premises to the Intel platform approach:
Collaboration: work with end users and interact with the entire IT industry ecosystem, even defining the manner in which
the product will reach the market. The objective is to gain understanding of end users requirements and find new value
propositions;
Innovation: understand and innovate through platform architecture to deliver value propositions to the ecosystem;

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Training: habilitate key elements in the interoperability of all components throughout the platforms life cycle;
Standardization: align the ecosystem and globally standardize interfaces and key components to maximize the industrys
revenue and value strategy;
Integration and Delivery: use core competencies; lead the industry in integration testing, validation, marketing strategy
and delivery solutions seeking to provide value to the end user.
Innovation results from an integrated approach that fosters additional opportunities for all ecosystem participants to
collaborate in developing more convergent solutions, and consequently make the opening of new market segments possible.
4.2 The emerging markets platform definition center (PDC)
Intel has always focused on mature markets, or mature segments of emerging markets. The initiative of expanding activity
to BoP segments in emerging markets began less than four years ago.
In 2002, starting this new focus, Intel launched a new platform geared at emerging markets. Under this new market strategy,
it opened four PDCs in the main hubs of emerging markets. The purpose and challenge of these centers is to identify local
social, cultural, geographical and economic factors, and from this data understand the needs and specifications of each
country or region, then develop a technological solution to meet these needs.
Each local market faces unique challenges, such as access to technology, literacy rates, lack of infrastructure, or specific
environmental conditions. These situations often require much more than standardized solutions; quite the opposite, they
require solutions adapted to durability, trust or extreme resistance requirements.
Based upon the scenario that only 10% of the world population owns personal computers, Intels objective is to work
toward digital inclusion of emerging markets. However, it does not intend to reach the 90% that still do not own a personal
computer, but rather foster adoption of PCs by the next 10% of the world population and then move toward the bottom of
the pyramid. PDCs were established in four key markets: So Paulo (Brazil), Bangalore (India), Cairo (Egypt) and Shangai
(China). These centers will serve the Latin American, Middle East, African and Asian markets respectively.
The centers work started with an understanding of local needs, obtained through in-depth research, meant to comprehend
the daily practices, convictions and values of ordinary people in the groups being studied. The result provided Intel with a
deeper understanding of the possible benefits that would be generated by a radical increase in access to digital technology.
Among other results, these studies identify many of the elements that must be aligned to support each regions ITCs. From a
mapping of this context appear the beginnings of development of new platforms for emerging markets, whose basic
requisite is the development of products to meet the following premises: (i) ensure that the infrastructure expands Internet

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access, so that technology is disseminated among the population; (ii) provide schools with adequate technological tools and
training for teachers, and (iii) work in tandem with the government to expand use of technology so that essential public
services may be provided more efficiently.
As noted before, the PDC initiates the entire platform definition process not with technology in mind, but rather the end
user. One path used by the company in learning about user needs is ethnographic research. This work is conducted by a
multidisciplinary team of sociologists, psychologists, social scientists, engineers and designers who seek to make
observations from the social standpoint of technology.
Research seeks to determine users real concerns regarding the use of technology, and the problems that users try to solve
through technology. Such platforms, developed out of one centers needs, may be ported to other regions with similar needs.
The company maintains that traditional research methods such as surveys or focus groups may identify trends and specify
what users are doing with computers, but are unable to describe the whys. Therefore, other techniques are employed, such
as in-depth interviews and direct observation of people in their daily routines at home and at work. The intent is to obtain an
understanding not only of the individual, but also of the context they are part of and their social connections. Studies
thereby seek to explore the values, wishes, motivations and aspirations that guide technology decisions around the world.
The challenge of each center is to understand local needs without, however, allowing the result of its work to become overly
specific, because in such a chaos, expanding the platform to similar segments of other emerging markets is far more
difficult. The tendency is that platforms be created as globally as possible. Another important aspect is the possibility that
solutions for emerging markets may be ported to mature markets.
At its core, each center has a development focus, defined by social area of activity; independently, cooperative work is
carried out between the centers. As an example, we may mention the ICaf project, where 75% of the solution was
developed by China and the Brazilian PDC participated in the remaining 25%. The PC conectado project is also an example
of collaborative work that featured joint participation by Latin America and India. PDC Brazils focus is education, but it
also takes part in collaborative work with the other centers. Half of employees time is usually allocated to the local focus,
and the other half in collaborative work with other PDCs.

4.3 The product life cycle (PLC)


In 2000, Intel implemented the product life cycle (PLC), which has the same classic characteristics and stages of a
traditional funnel model of new product development. It was initially created for chipset development, but has later been

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used for several product types, and even in platform development. Temos que colocar aqui alguma meno figura 1. Ela
no pode aparecer solta.
Figure 1: PLC product life cycle Intel

Source: Adapted from Intel


The first stage of the PLC is pre-exploration, which is directed at detecting market and business opportunities. In order to do
so, the company tries to develop a detailed understanding of the market it intends to explore. This stage is carried out
through ethnographic research, as described in the preceding section.
The purpose of the second stage, exploration, is to identify the markets needs, and their potential size, as well as return on
investments, with the intention of obtaining approval for new product concepts. The third stage planning comprises all
requisites, specifications, prototypes and tests required by the new concept. This stage is finalized when the new product or
platform proposal is approved. The fourth stage, development, involves implementation of the plan, production of the
material, development of technical specifications, and quantification and validation of prototypes. It is concluded when the
pilot is authorized. The fifth and final stage, production, consists of the implementation, launch and evaluation of the new
product or platform. The production step also involves the possibility of product discontinuation, depending on feedback
and market evaluations.

4.4 Adaptations of the PLC to emerging market platforms


The platform development centers adapted the PLC process to meet the needs of emerging market platforms with specific
characteristics. One of the main specificities of such platforms is expansion of the first stage of the development cycle (preexploration), precisely due to the requirement of a keen understanding of markets previously unknown to the company. In
the emerging market platform PLC, pre-exploration is conducted through ethnographic methods (as seen in the preceding

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section) and takes, on average, 6 months to conclusion. It comprises the following stages: (temos que escrever aqui alguma
meno figura 2, ela no pode aparecer solta.):
Figure 2: Pre-exploration stage

PILOT
With designer,
develop prototypes
(use models) of
solutions, using new
technologies.
models) of
solutions, using new
technologies.nters.n
DEVELOP
d India.ork between
Build a frameworkthe
for
harnessing
centers.pecifWiWgf
complexity and dxjhlkdjglkjghkg
creating a more lhkglhkdlghkldgk
controlled reality. hlkhl

GENERATE IDEAS
Turn field learning into
business
opportunities.
(awareness)

FIELD RESEARCH
Observe people in their
own environments and
assess unmet needs.

UNDERSTAND
Explore how people
deal with specific,
daily-life problems.

Source:
Adapted

from Intel
The first stage of the development cycle is meant to transform field learning into new business opportunities, which are
materialized through the creation of new concepts in technology use. After conclusion of the first stage, the new platform
definition follows the normal PLC course, with the three initial stages which involve technical definition of the product ,
the business plan and the first half of the development phase (up until construction of the initial prototypes) being the
responsibility of the PDCs. The companys traditional R&D centers are then responsible for development of the final
prototypes, meant for market testing. These facilities are centralized, and mostly established in the U.S. and China.
The approval process for definitions drafted by the PDCs goes into the normal PLC flow, and is defined by the companys
decision makers.
Innovation stemming from PDC market strategy is only a small part of the companys overall strategy. Traditionally, Intel
operates with a more compartmentalized innovation model, and resources allocated to PDCs add up to a minuscule fraction
of the total budget for new solution development. Much of the companys resources are still meant for traditional R&D.
However, the visibility, expectations and strategic importance of PDCs are approaching the importance of traditional R&D.
PDC success is measured by sales results.

4.5 Results of PDC work in emerging markets

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In less than four years of activity, all PDCs are already showing results. Each center has launched at least one new platform
meant to address specific needs. These are the first generations of emerging market platforms. The company is currently
working on what it calls the second generation of platforms for such markets.
4.5.1 India
Community PC
This platform was launched in early 2006 in India, as the result of ethnographic studies in rural areas of the country. The
solution seeks to adjust to specific conditions of said rural areas, such as heat, dust, humidity and intermittent power
availability.
The resulting solution offers a robust computer that may be powered by a car or truck battery. Consumers may therefore
continue using the equipment during a power outage (several of which may occur on a single day). This solution is
particularly important for communities in the countryside, where generators or other power backup infrastructure may not
be readily available.
4.5.2 China
ICaf
This platform was developed after the socioeconomic conditions specific to China. In the United States, cultural and
socioeconomic conditions support the possibility of individual PC ownership. In Asia, however, technology is still often
shared. As a result, shared access to PCs in cyber cafs is very popular; in this shared environment, users send e-mail, watch
videos and play in real-time with gamers in distant locations.
A typical Internet caf in China has from 100 to 500 PCs. One of the challenges of operating such a business is keeping all
the equipment functional 100% of the time, as it is the main income generator. Waiting for repairs or updates on a computer
impacts productivity, and subsequently causes a loss in revenue. Seeking to solve this problem, Intel developed an
integrated, standardized platform solution that bundles an Intel motherboard with management software to allow centralized
monitoring and repairs. The key benefit is a reduction in repair or update times. Due to similar needs, Intel is studying the
possibility of porting this solution to Brazil.
Learning PC
Another platform developed in China was the Learning PC. Researchers tried to understand why many families in China
were reluctant to adopt home PCs, even when able to afford one. They found that childrens education is one of the greatest
concerns of Chinese families, who seek to provide their children with the best possible learning tools. However, these

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families see computers paradoxically. While on the one hand they are aware of the many benefits computers bring to
education, on the other they believe PCs may expose children to many distractions, such as access to gaming, chats or
malicious information.
The solution developed by Intel was the implementation of a physical blocking key on computers, which allows parents to
set the PC to learning mode, in which only educational software can be accessed. When parents wish to access other
applications, they may turn the key to unrestricted mode. This solution provides parents with a sense of safety, as they
maintain control over use of the computer.
4.5.3 Brazil
PC Conectado
The initial study was conducted in the state of Minas Gerais; research identified huge educational discrepancies. While the
region is highly developed and technology is widely accessible, local underprivileged communities are subject to an
enormous lack of information and resources. The use of virtual technology in public schools was found to be minimal.
Students, teachers and administrators have practically no access to computers or the skills to incorporate technology in the
classroom.
To solve this discrepancy, the state government, in a partnership with Intel, launched the Escolas em Rede (Networked
Schools) program in 2004. The program deployed computers to the labs, libraries and management offices of over four
thousand public schools. Training of students, teachers and administrators in basic computer skills is also part of the
program scope. By the end of 2006, all public schools in the state were expected to be included in the program.
The development of the Intel solution included hardware and software with specific educational solutions that allowed their
use in the classroom and effective management of content to be taught. Reduced acquisition and maintenance costs were
also part of the solution.
4.5.4 Africa
Intel Teach
In many rural South African schools, resources for IT infrastructure are less scarce than are those for basic needs such as
water, electrical power, or telephones, and, while it is a distant reality, one of the governments aims is that all schools have
computers by 2013.
Nevertheless, the region still faces major challenges regarding the lack of skills to work with computer technology among
teachers.

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Through official training centers in each community, the Intel Teach program helps local educators expand their teaching
capabilities so that they may become more comfortable with technologies that aid learning. The centers train one facilitator
from each school who, in turn, will multiply knowledge to all educators in their respective schools. Questions on how, when
and where to incorporate technology tools and resources are aligned with lessons that help create, access, and align
educational goals.

5. Final considerations
According to several sources in the literature, it is clear that the design of an emerging market entry strategy must
encompass many specificities; among them, a rethinking of the business model and redesign of the product development
process are primordial (PRAHALAD; LIEBERTHAL, 1998).
Results of fieldwork have shown that Intel possesses a fully outlined, differentiated business strategy to meet the needs of
these markets: PDCs, with a clear focus and a solution definition process fully directed at emerging markets; and product
platforms that create a new approach to business structure in order to make innovation possible. From these two
fundamental concepts, one may notice that Intel is exceptionally aligned to the literature, as it follows the main
recommendations of the latter.
Among the main reasons for the multinationals entry into emerging markets is the growth potential provided by the
massive, unexplored market at the base of the pyramid and the less fierce competition to be found in this scenario. Intel,
however, understands that emerging markets require more than just standardized low-cost products. Above all, these
markets require development; ITC and education infrastructures must be created so that emerging users may be inserted into
active markets. This understanding has led to training programs and activities for educators and students and to a concern
with the access of rural populations to basic technology structures.
The main strategic recommendations mentioned by Prahalad and Hart (2002a) for meeting the needs of emerging markets
are: creating conditions for access to technology by the poorest populations; innovation from a deep understanding of the
end user; the creation of less centralized distribution systems, providing shared access to the population; and adaptation of
existing solutions to BoP markets. All of the aforementioned strategies are present in the services offered by Intel platforms.
Crosschecking the principles of innovation in emerging markets listed by Prahalad (2005), we found Intel to meet nearly all
of them. The items that leapt out the most, as they were clearly worked on in developed platforms, were: (i) solutions must
be applicable to other markets/countries, with minor adaptations; (ii) product development should start at a keen

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understanding of functionalities required by the market; radical product redesign; (iii) analysis of the infrastructure and
environmental situation; (iv) work on client education is a key process; (v) products must work under hostile circumstances;
(vi) the project team should focus on developing a platform.
Items (i), (ii), (iii) e (vi) are the starting conditions for the definition of all platforms; item (iv) is one of the focuses of the
Brazilian, Chinese and African platforms; item (v) was the focus of the Indian platform, developed in order to overcome
product use difficulties brought about by precarious power conditions.
According to the classification outlined by Neely and Hii (1998), the Systems Integration and Networking model appears to
most closely approximate Intels mode of action, especially due to their network integration and management-based work.
This is the result of the platform approach, where Intel uses its key player advantage to create standardization in the market,
walking the line between industry horizontality and verticality, in order to both facilitate access by more consumers and
create a competitive edge.
Other points that were highlighted in the literature and observed to support their activity in emerging markets are concerns
with the managerial skills of top management; change in organizational structure to provide more clearly directed work; and
a long-term vision for emerging markets. The latter is clearly demonstrated in the educational initiatives carried out in the
Indian and Brazilian communities.
It is important to note that, while it has generated very innovative initiatives, Intels activity in emerging markets is still
providing embryonic results for the organization. However, according to the companys viewpoint, establishing this new
direction and way of thinking, with clear medium and long-term perspectives for the development of this market segment, is
currently more important than financial returns.
In light of the innovative work being carried out by Intel, there is still much to explore. We recommend that the product
definition process for emerging markets be analyzed in other companies, not only multinational corporations, but also local
ones.
As a limitation of this study, we may note the fact that only professionals from the Brazilian PDC were interviewed. In order
for information to be validated, and for a wider view on the subject, interviews of employees from other Intel PDCs may
play an important role.

6. References
Arnold, David J. and Quelch, John A. New strategies in emerging markets. Sloan Management Review. Fall: 7-20, 1998.

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Yin, R.K. Estudo de caso. Planejamento e mtodos. 3rd ed. Porto Alegre: Bookman, 2003.
Intel website: http//:www.intel.com. Retrieved in October 2006.

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