Intel Case Study

Topics: Profit sharing, International Financial Reporting Standards, Risk Pages: 4 (1030 words) Published: June 19, 2013
To:Andrew Grove, President and CEO
Subject: Recommendation on Various Operational Issues
Date:December 31, 1994

This is to highlight few areas of operational issues that were identified during the Intel’s crisis over the floating-point problem in the processor and to discuss potential solutions to avoid similar issues in the future.

The following are the key issues covered in this memo:
Intel’s Product Recall & Media Response Strategies
Manufacturing process – Supply Chain Risk Management
Accounting Policies
oWarranty Liabilities
oStock-based Compensation Expenses
Review of Employee Profit-sharing Program

< Intel’s Product Recall & Media Response Strategies >
As Intel learned through the crisis over the defected product, the company’s recall strategy, if poorly managed, could have “significant impact on firm’s reputation, sales, and financial value” 1. It was evident that Intel did not have clear strategies on how to handle the consumers and/or media, when product defect issue is surfaced and it was clearly demonstrated that how costly it could be of not having clear recall and media response strategies. Recommendation: We recommend Intel executive management to implement a two-tiered product recall strategy i.e. “proactive recall and passive recall”2 and to create a customer/media response team as well as an emergency recall committee. The new task team will be responsible for monitoring potential product defect issues identified internally or externally (i.e. customer complaints) and classify the issues into one of two categories – “Risk-analysis” or “Fast-track”. 3 Minor defect issues that are worthwhile investigating are to be classified as “risk-analysis” category and get reported to R&D department; major defect issues that could seriously harm Intel’s brand equity are to be placed into “fast-track” category, which requires to be reported to “emergency recall committee”...
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