Role of Metformin for Treatment of Type Ii Diabetes Mellitus

Role of Metformin for Treatment of Type Ii Diabetes Mellitus The role of metformin in the treatment of type II Diabetes Mellitus Introduction: Diabetes mellitus is a sever inherited or acquired disease which occurs when either pancreas does not produce enough insulin, which characterises type I diabetes and it is most commonly diagnosed in children, or the insulin that has been produced does not get used by the body effectively, type II diabetes and therefore patients will have abnormally high level of glucose. Type II diabetes was previously called non-insulin-dependent or adult-onset diabetes (World Health Organisation, WHO website). The latest estimate of the number of diabetics worldwide in 2001 by the World health Organisation (WHO) is 171 million and this figure is likely to be doubled by 2030 (WHO website). A recent study conducted in the UK using the General Practice Research Database (GPRD) illustrate that the mortality rate is twice as high for patients with diabetes type II than those without it (Mulnier et al, 2006). The prevalence of type II diabetes is increasing rapidly both in the UK and worldwide. It has increased by 54% (from 2.8% to 4.3%) and the incidence has increased by 63% over the past decade (Gonzalez, 2009). In most of the cases Type II diabetes is associated with another disorder, obesity, (Krentz et al, 2008). Hence such high increase in the incidence rate for type II diabetes could be due to the increased rate of obesity over past few years as the life style of the population is generally getting poorer and 20% of the population is now obese (UK Obesity Statistics). Understanding and treatment of diabetes has advanced throughout the twentieth century and since insulin has been discovered, many antidiabetic therapies and oral agents such as, Sulphonylureas and Biguanides have been developed to improve glycaemia. Sulphonylurea was the first oral therapy to be discovered for diabetes. It is insulin secretagogues and hence it combats the abnormally high level of blood glucose but it also causes hypoglycaemia and weight gain as it can prolong insulin secretion (Warrell et al, 2006). Biguanides is a class of drugs that are considered antihyperglycemic agents. Metformin is a primary member of this class and it has surpassed sulfonylureas as the most prescribed oral antidiabetic drug in the UK and most parts of the world (Filion, 2009). Metformin is now the most popular treatment for diabetes type II as a study carried out using The Health Improvement database from 1966 to 2005 in the UK shows that only a small number of patients were treated with insul in and its use did not change significantly over the time of study period, in 1966 Sulphonylurea was the most common drug and metformin was relatively less common but by 2005 the use of Sulphonylurea had decreased remarkably and there had been a parallel increase in the use of metformin as a therapy for diabetes (Gonzalez, 2009). In 2006 the American Diabetes Association recommended it as the first drug of choice for patients. In the 15th edition of the Model list of Essential Medicine by WHO, metformin is one of the only two antidebetic oral drug agents (the other is glibenclamide) stated there (WHO, 2007). The other members of biguanides drug class are phenformin and buformin however these two drugs are no longer used in many countries because it carries a very high risk of lactic acidosis. Historical development: In medieval times, French lilac or Goats rue known as Galega officinalis was used as a remedy for intense urination associated with the disease that is now known as diabetes mellitus and the active ingredient in the French lilac that had blood glucose lowering properties was discovered as galegine or isomyleneguanidine, but later on it was discovered that this ingredient was toxic in the plant that caused death of grazing animals (Witters, 2001). In 1918, guanidine was discovered to be blood glucose lowering agent but then it was also found that it is too toxic to be used as a therapy (Foye, 2007). Whilst guanidine itself and some of its other derivatives were considered to be too toxic to be used for diabetes mellitus treatment, the biguanides, two linked guanidine, proved to be safe and effective for the treatment of diabetes (Witters, 2001). In the 1920s, in a search for these guanidine-containing compounds with antidiabetic activities, phenformin, buformin and metformin were discovered. Although they were known to have glucose lowering properties it was not until 1957 when these biguanides were tried on man and introduced clinically in Europe (Gottlieb Auld, 1962, Reitman Schadt, 2007). For the first time in a medical literature by Ungar et al (1957, as cited by Oubre et al 1997) biguanides were described as an efficacious new class of oral drug for the treatment of diabetes. Phenformin which is similar to metformin in structure was very popular in 1960s but in early 1970s it was found to be associated with lactic acidosis and by 1976 clinical studies proved that the hazards of phenformin treatment outweighed its benefits and therefore, phenformin and all the products containing phenformin were withdrawn by the Ministry of Health and buformin was also withdrawn from many countries for the same reason (WHO, 2003). Howe ver, metformin was proved to be safer and did not have same risk of lactic acidosis if appropriately prescribed, and it took another twenty years after a safe and effective use in the Europe until United States Food and Drug Administration (FDA) approved it for use in the United States (Reitman Schadt, 2007). Glucophage the trade name of metformin, formulated by a drug company called Bristol-Myers Squibb, was the first brand to be marketed in the United States (U.S. FDA). Metformin used to be only prescribed for diabetes but then studies published in European journal of clinical investigation 1998 proved that metformin can have a significant effect on reducing weight as well (Paolisso et al, 1998). Meformin has now been used for over 50 years and it has established to be first-line drug of choice for the treatment of diabetes type II, but to get its maximum effect in the anticipation to reduce insulin resistance, weight loss and also to contribute in the improvement of cardiovascular diseases,the American Diabetes Association and the European Association for the Study of Diabetes strongly recommend to use metformin along with lifestyle intervention (Papanas Maltezos, 2009). Mode of Action/ Physiological Effects: Metformin is an antidiabetic oral drug that belongs to a class of drugs called biguanides. It acts by lowering the amount of glucose that liver makes on its own in the body hence it has antihyperglycaemic effects. It was licensed as antihyperglycaemic medication in Europe in 1970s, at that time there was only little known about the mode of action and its physiological effects on body. Despite metformin being in use since 1950s, its cellular mechanism of action is not definite. It primarily acts by inhibiting gluconeogenesis in the liver and hence it reduces the hepatic glucose output; it has also been shown to enhance glucose uptake in the muscles and improve peripheral insulin sensitivity (Ronco et al, 2008). Insulin is a very powerful anabolic hormone and it is involved in the synthesis and storage of glucose, lipid, and amino acid/protein. When blood glucose level rises, insulin is produced by the beta cells of the pancreas. As described by Gropper et al (2008) in their book, it stimulates the uptake of glucose by muscle cells and adipocytes, it also inhibits the gluconeogenesis by the liver to bring about an overall decrease in plasma glucose level. Insulin binds to a specific receptor on the plasma membrane of muscle cells and adipocytes which initiates a cascade of second messenger system that stimulates the tubulovesicle-enclosed GLUT4 glucose transporters to be translocated to the plasma membrane. Insulin also activates the enzyme glycogen synthase and inhibits glycogen phosphorylase and together they help store glucose in the form of glycogen. Hence this way glucose is removed from the blood circulation and is brought to normal level (Gropper et al, 2008). The majority of individuals with type II diabetes are insulin resistant. They have plenty of insulin circulating but their body is not able to respond to it either by having defective or insufficient number of insulin receptors therefore, glucose cannot enter the cells resulting in increased level of plasma glucose. Pancreas continues to produce more insulin in an effort to lower the increased level of glucose and eventually when an individual can no longer produce enough insulin to compensate for the rise, type 2 diabetes develops (Kaufman, 2008). Figure 1shows an overview of antihyoerglycaemic effect of metformin in type II diabetes mellitus. Metformin has various metabolic effects on lowering the hyperglycaemia. It partially acts by improving insulin action and partially by non-directly insulin dependent effects (Krentz Bailey, 2005). Metformin suppresses the hepatic glucose output by decreasing gluconeogenesis, glycogenolysis and fatty acid oxidation and this is the most evident principal blood glucose lowering mechanism and it does so by mainly increasing insulin sensitivity (Krentz Bailey, 2005). In the skeletal muscles metformin increases the insulin mediated glucose uptake and glycogen formation (glycogenesis), it also reduces the fatty acid oxidation. These changes in the muscle cells increase glucose transporters to move to the plasma membrane surface so that glucose can enter the cells (Krentz Bailey, 2005). Another way in which metformin lowers hyperglycaemia is via increasing the anaerobic metabolism of glucose which produces lactate as a by-product and this contributes in lowering the amount of glucose available to move to the serosal side from the lumen, lactate is taken to the liver via portal system (Bailey et al, 2008). Another way in which metformin works independent of insulin action to lower glucose is via increasing the splancchic glucose turn over (Krentz Bailey, 2005). The effect of metformin on skeletal muscles and adipose tissues in improving glucose utilisation in them appears to work through improved binding of insulin to its receptors on the plasma membranes of these cells and therefore, metformin seems to be ineffective without some residual functioning islet cells (Porte et al, 2002). Metformin has no direct effect on insulin secretion in contrast to other antidiabetic drugs such as sulfonylureas, therefore it does not cause hypoglycaemia rather in clinical practice it shows anti-hyperglycaemic actions (Porte et al, 2002). The level of glucose throughout the day changes, it is typically higher after eating and lower in the fasting state. The fasting plasma glucose concentration is measured by the HbA1c test, HbA1c is a glycosylates haemologlibin that is glucose attached with hamemoglobin so the higher the concentration of glucose the higher the level of HbA1c ( Medline Encyclopaedia, 2009). A fasting glucose level lower than 6mmol/l or 7% is normal in non-pregnant individuals and an elevated level shows that either the patient is diabetic or the patient has impaired fasting glucose/impaired glucose tolerance (Bupas health information factsheet, 2008; American diabetes association, 2009). It is important for type II diabetes patients to achieve normal or near-normal glycaemic control with their oral anti hyperglycaemic medications. There are numerous studies that show the effect of metformin decreasing the fasting plasma glucose level. Such as a study by Lozzo (2003), done on type II diabetes patients over 26 weeks with metformin increased the whole-body insulin sensitivity and that was likely to be determined by the reduction in HbA1c and body weight. A similar study done on patients with newly diagnosed Type II diabetes mellitus showed that adding metformin to insulin therapy effectively decreased the HbA1c level from 10.8 to 5.9% and 100% patients achieved an HbA1c less than 7% (Lingvay, 2007). Metformin has also been suggested to work by a biochemical pathway through activation of a protein kinase enzyme 5 adenosine monophosphate-activated protein kinase (AMPK). Its activity is regulated by the depletion in ATP (Adenosin tri-phosphate) and raised level of AMP when energy demand increases, such as in a exercising muscle, thus it is a â€Å"metabolic stress-sensing enzyme† that regulates the energy demand and energy production balance by modulating various metabolic pathways that bring about glucose, protein and fatty acid metabolism homeostasis (Hawley Zierath, 2008). In order for metformin to be effective in the inhibition of the production of glucose, activation of AMPK is required (Zhou, 2001). Kim et al (2008) published a study in 2008 that further described the mechanism of metformin through the activation of AMPK. This study was done on hepatocytes and it showed that through AMPK-dependant pathway metformin increased the gene expression of small heterodimer pa rtner, (SHP), SHP protein represses the transcriptional activity of a number of nuclear reptors including hepatocyte nuclear factor, and that in turn inhibits the expression of the hepatic gluconeogenic genes PEPCK and Glc-6-pase, these are the two enzymes that perform a key role in the homeostatic regulation of blood glucose levels and inhibition of these enzyme gene expression lead to the hepatic glucose production in vivo. Metformin has advantageous effects on atherosclerosis by decreasing Low Density Lipoprotein levels by about 0.26 mmol/L (10 mg/dL), whereas other oral agents appear to have no obvious effects on LDL cholesterol levels (Bolen et al, 2007). Recent prospective and retrospective studies confirm this drug not only being safe for its glucose lowering effects but also indicate its potential anti-atherosclerotic and cardioprotective effects (Scarpello Howlett, 2008). In the UKPD (United Kingdom Prospective Diabetes Study) a randomised trial on obese and overweight patients with initial metformin monotherapy showed a significant reduction in myocardial infarction and diabetes related deaths, it showed 39% decrease in heart attacks and 36% decrease overall mortality rate; metformin was found to be more effective than any other medication with regards to the strokes and overall mortality rate in overweight patients (Krentz Bailey 2005). Kooy et al (2009) investigated whether metformin had sus tained beneficial effects on metabolic control and risk of cardiovascular disease. After a follow-up period of 4.3 years it was found that metformin added to insulin in type II diabetic patients improved body weight, glycaemic control and it reduced the risk of macravascular disease. A 2007 systematic review evaluating antidiabetic agents and outcomes in patients with both diabetes and heart failure showed that metformin is the only antidiabetic agent that is not associated with harm in patients with heart failure and diabetes. In this systematic review and meta-analysis of controlled studies, two of three studies showed association of metformin with reduced all cause mortality and no association with increased hospital admissions. (Eurich et al, 2007) Pharmacokinetics The chemical name of biguanide is  1-(Diaminomethylidene)guanidine (chemical  formula C2H7N5) and it includes compounds that  have biguanide structure. Figure 2 shows the  molecular structure of metformin that has  biguanide structure with two methyl groups  added on the amine group of the first carbon  atom therefore its chemical name being  1,1-dimethylbiguanide and chemical formula  C4H11N5 (Porte et al, 2002). Metformin is taken orally so it has to pass through the digestive system in order to get into the systemic circulation. It is absorbed from the small intestine and does not get metabolised, under fasting conditions the Bioavailability of metformin ranges between 40%-60% (Foye, 2007). From the gastrointestine it gets completely absorbed after 6 hours of oral administration and after absorption it is rapidly distributed and in the plasma it is completely undetectable after 24 hours; the plasma concentration of metformin reaches its peak value within three hours of its oral administration (Papanas maltedoz, 2009). Unlike other biguanides such as phenformin the binding of metformin to plasma protein is negligible and therefore it does not seem to interact with highly plasma protein bound drugs such as sulphonamides and is excreted unchanged (Foye, 2007). Metformin does not get metabolised by the liver and therefore is excreted in the urine from the body as unmetabolised drug through the active tubular excretion and about 30% of an oral dose is excreted through faeces that may be unabsorbed metformin and that retain in the gastrointestinal tract (Porte et al, 2002). It has plasma half life of about 2 to 5 hours in patients with normal renal function but and renal function impairments may lead to retention of metformin in the blood plasma (Foye, 2007). According to Diabetes UK the daily dosage of metformin should be started from 500mg and then gradually increased to a maximum of 2550mg per day but it is entirely individualistic that it depends on the health of individual to consider what dosage is required. Generic metformin is sold in the form of tablets. A slow or extended release preparation of metformin (Glucophage XR ®), introduced in 2004 can act over 24 hours, it has been designed to release metformin slowly over a longer period of time than standard metformin (acts over 8-12 hours) and so its half life is increased to four to eight hours. Timmins et al (2005), in their study on 16 volunteers with 1000mg standard metformin dose twice a day or 2000mg Glucophage XR ® once a day, found out that the pharmacokinetics parameters are similar in Glucophage XR ® to standard metformin, but Glucophage XR ® it is evident to report fewer gastrointestinal side effects than standard metformin so patients who cannot tolerate standard metformin can switch to Glucophage XR ® (Feher et al, 2007). Side effects and contradictions When prescribed appropriately the most common adverse side effects of metformin include a change in taste, nausea or vomiting, abdominal distension or gas, loss of appetite, diarrhea, skin rashes or urticaria, rare – Lactic acidosis (Warrell et al, 2006). These problems are usually mild and occur in the first few weeks for taking the medication but it may discourage the patient from taking the drug, starting the medication in low dosage and increasing it slowly help reduce these side effects (Warrell et al, 2006). In clinical trial done on a total of 286 subjects, 141 were given metformin and the rest were put on placebo. This trial found that 53.2% of subjects who were given Metformin reported diarrhea in comparison with 11.7% for those on placebo, and 25.5% subjects on metformin reported nausea/vomiting compared with 8.3% for those on placebo (Drug Facts and Comparisons, 2005). Compared with any other antidiabetic oral drug metformin is most associated with gastrointestinal distress (Bolen et al, 2007). Phenformin was withdrawn from its theraputical use because of its association with lactic acidosis. Metformin which is similar in structure to phenformin has also been associated with lactic acidosis; however the risk associated with metformin is ten times lower than phenformin (Warrell et al, 2006). A case control analysis on the study population of 50,048 type 2 diabetic subjects using the U.K – based General Practice Research Database found out that the rate of incidence of lactic acidosis per 100,000 person-years is 3.3 cases amongst metformin users (Bodmer et al. 2008). Lactic acid is a by-product of metabolism and it becomes toxic if it is not neutralised fast enough. Lactic acidosis associated with metformin is a very severe and potentially fatal condition that can be avoided easily if the drug is prescribed carefully (Fitzgerald et al, 2009). It arises by the mode of action of metformin, that is the inhibition of hepatic gluconeogensis- a process that consumes lactate, produced by glycolysis, continuously to produce glucose (Warrell et al, 2006). Adopted from Fitzgerald et al. BMJ 2009 In normal conditions during respiration glucose is broken down into two pyruvate molecules in the first step (glycolysis), in the presence of enough oxygen mitochondria oxidises the pyruvate into CO2 and H2O through Kreb cycle by the use of pyruvate dehydrogenase enzyme. But if there is not enough oxygen present, the mitochondria cannot oxidise all of pyruvate so this excess amount of pyruvate is converted into lactate by the lactate dehydrogenase and this lactate is then used in the process of gluconeogenses in the liver. (Fitzgerald et al, 2009; Nicks A, 2009) As shown in figure 3, at site A metformin decreases the activity of pyruvate dehydrogenase and the conversion of pyruvate into CO2 and H2O, therefore at site B it enhancing the anaerobic metabolism even in the presence of enough oxygen and resulting in the increased production of lactate and as metformin inhibits the process of gluconeogenses in the liver, the lactate is not used up and is built up to the toxic extent. Lactic acidosis is the built up of lactate level in the blood (usually >5 mMol/L). (Nicks A, 2009; Fitzgerald et al, 2009) As indicated in figure 3, lactate is excreted 70% by liver, 5% by kidneys therefore liver or renal dysfunctions lead to the retention of lactate and hence to a severe form of lactic acidoses even in the absence of metformin and because metformin is excreted by kidneys if kidneys do not function properly then metformin builds up and hence the severity of lactic acidosis is even greater (Misbin, 2004). The most common contraindications to the use of metformin in people with type II diabetes are renal and liver dysfunctions, congestive heart failure and advanced age, ≠¥ 80 years, and the mortality rate of lactic acidosis is close to 50% (McCormack et al, 2005). But although heart failure has long been known as a contraindication for metformin use a systemic review 2007 showed that metformin is the only anti-diabetic drug that is not associated with any harm in patients withheart failure Eurich et al, 2007). A Medline searched review on the evidence for the use of metformin in the presence of these contradictions concludes that metformin treatment alone does not result in lactic acidosis unless other contributing factors exist as well (Tahrani et al, 2007). However if ingested in toxic doses or in the presence of renal elimination impairment, lactic acidosis does occur (Fitzgerald et al, 2009). The renal function of patients using metfomin should be regularly monitored. It showed be withdrawn if there is any disturbance in the renal function found. Figure 4 shows the current recommendations on contraindications and guidelines for the withdrawal of metformin. Metformin dose should be reviewed if serum creatinine level is greater than 130  µmol/l and a cut-off serum creatinine level above which metformin should be stopped is 150 µmol/l (Fitzgerald et al, 2009). It should be withdrawn during suspected tissue hypoxia that is a condition in which body tissues are deprived of adequate oxygen so cells are forced to respire anaerobically. Patients aged greater than 80 years are at greater risk because they are more likely to have heart problems and kidney or hepatic dysfunctions and patients should be more careful about their alcohol intake while they are on metformin because alcohol can seriously harm liver and that can lead to lactic acidosis (Tahrani et al. BMJ 2007). Metfor min should be withdrawn before any radiographical procedures involving iodinated contrast and should remain discontinued until after three days as this contrast dye may temporarily impair kidney function and cause the retention of metformin indirectly leading to lactic acidosis (Thomsen andMorcos, 2003) â€Å"Review dose of metformin * If serum creatinine is >130  µmol/l or estimated glomerular filtration rate is Stop metformin * If serum creatinine is >150  µmol/l or estimated glomerular filtration rate is Withdraw metformin* * During periods of suspected tissue hypoxia (such as myocardial infarction, sepsis) * For three days after use of contrast medium that contains iodine * Two days before general anaesthesia *Reinstate when renal function stabilises Contraindications * Renal dysfunction * Congestive cardiac failure needing drug treatment * Hypersensitivity to metformin * Acute or chronic metabolic acidosis * Impaired hepatic function Precautions * Age >80 years until renal dysfunction ruled out * Acute myocardial infarction * Radiological studies involving iodinated contrast * Surgical procedures * Alcohol intake † Salpeter et al (2003), in a system review considered 194 studies published between 1, 1959, and March 31, 2002 that evaluated metformin mono therapy or in combination with other treatments for at least one month, in data from these 194 studies there were no fatal or nonfatal lactic acidosis cases found in 36,893 patient-years in the metformin group or in 30,109 patients-years in the nonmetformin or placebo group. It also did not find any difference in lactate levels in metformin therapy and placebo or other non-biguanide therapies. This systemic review concluded that there is no evidence to support association of metformin therapy with increased risk of lactic acidosis or increased lactate level compared with other antihyperglycemic treatments provided that the drugs are prescribed in a suitable dose and all the contraindications are taken into account. Another side effect to the use of metformin is that when it is used in long term it is associated with malabsorption of vitamin B12 (Ting et al, 2006). Combination with other antidiabetic drugs Metformin monotherapy works well with life style interventions in type II diabetic patients but when Type II Diabetes is not controlled with Metformin monotherapy adequately it is often combined with other antidiabetic drugs to maximise its effect. The combination of metformin with rosiglitazone as a single product is known as Avandame, itwas approved by the FDA in October 2002 for the treatment of diabetes and although it has not been appraised by the National Institute for Clinical Excellence (NICE) yet it is often prescribed to patients with type II diabetes who fail to control their glycaemia despite the maximum dose of metformin (Diabetes UK, 2009). The active constituent of Avandamet, metformin and rosiglitazone,have different mechanism of action complementing the action of each other. The tolerability profile of Avandamet is similar to that of metformin, it is more effective in terms of lowering the HbA1c level than metformin or rosiglitazone (Wellington, 2005). Pooled data from two double-blind studies that involved 550 patients randomised to be given metformin with rosiglitazone or placebo patients were divided into obese, overweight or non-overweight. Patients from all groups improved their level of HbA1c and fasting plasma glucose (FPG) to a clinically important extent but the greatest improvement was found in the obese group, these patients improved their glycaemic control, beta cell function and insulin sensitivity with the addition of rosiglitazone to metformin than those who received placebo/metformin (Jones et al, 2003). Metformin can be combined with glyburide which is a member of sulphonylureas and it acts by enhancing insulin release from the cell of pancrease. The combination of these two drugs is proves to be successful in improving the glycaemic control in patients with type II diabetes Studies, such as sixteen week multicenter, randomized, double-blind, 4-arm and parallel clinical trial study (Chien et al, 2007) that involved a total of 100 Chinese patients with type II diabetes and out of which 76 were randomly given metformin 500mg, glyburide 5mg, glyburide/metformin 2.5 mg/500 mg or glyburide/metformin 5.0mg/500mg. After 16 weeks, those who received a combination of both drugs had a greater decrease in both fasting plasma glucose and HbA1c compared with those who received either metformin or glyburide. Insulin therapy alone sometimes fails in patients for the treatment of type II diabetes so metformin can be added to improve the sensitivity of insulin and this combination of two drugs results in superior glycaemic control compared with metformin or insulin alone and it also minimizes the weight gain in insulin therapy ( Wulffele et al, 2002). Continued use of metformin after insulin introduction patients with type II diabetes not only reduce weight and improve glycaemic control but have beneficial effect on cardiovascular outcomes (Kooy, 2009). Addition of pioglitazone to metformin is another combination for the treatment of type II diabetes, this is shown in double-blind, placebo-controlled, clinical trial done by Kaku (2009), compared with metformin monotherapy patients who received pioglitazone plus metformin improved their HbA1C by mean 0.67% and they significantly improved their fasting glucose level and other important markers such as free fatty acids, adiponectin and HDL, that are linked with increased insulin resistance and cardiovascular risks. Metformin can also be combined with other antidiabetic oral agents as a triple therapy for diabetes type II. In a study which was supported by Bristol-Myers Squibb Pharmaceutical Research Institute, 365 patients who were given metformin/glyburide treatment prior to a 24-week double-blind treatment were either assigned to rosiglitazone or placebo while carrying on with metformin, 40% of those patients who received rosiglitazone in addition to metformin/glyburide were able to achieve final HbA1c less than 7.0% and this study concluded that combination of rosiglitazone to metformin/glyburide is â€Å"an effective therapeutic strategy† for those who are unable to control their glycaemia and this treatment is beneficial for lowering HbA1C and fasting plasma glucose levels (Dailey et al, 2004). Who should be treated? Metformin is a very effective antihyperglaecamic drug for patients with diabetes type II and the American Diabetes Association (2006) recommended it as the first drug of choice for patients. Metformin is a preferred treatment for obese diabetics. In most of the cases Type II diabetes is associated with another disorder, obesity (Krentz et al, 2008). Obesity increases the risk of developing type II diabetes and many antidiabetic drugs increase body weight whereas, metformin demonstrates a significant weight loss in type II diabetic patients, Golay (2007) in his review on summarising the effect of metformin on body weight confirms that metformin has been shown to induce weight loss in nondiabetic obese patients, although long term studies on these patients are very rare. Therefore patients with obesity and on the risk of developing diabetes type II should start on metformin. Metformin is also effective with regards to strokes in obese/overweight patients i.e. those on the risk of developing diabetes. UKPD showed a significant reduction in myocardial

The History of Intel

THE HISTORY OF INTEL The microprocessor has changed our lives in so many ways that it is difficult to recall how different things were before its invention. During the 1960’s, computers filled many rooms. Their expensive processing power was available only to a few government labs, research universities, and large corporations. Intel was founded on July 18,1968 by engineers, Gordon Moore, Robert Noyce, Andrew Grove, and Arthur Rock. Rock became Chairman, Moore was President, Noyce was Executive Vice President in charge of product development and worked with Moore on long range planning, and Grove headed manufacturing.The purpose of the new company was to design and manufacture very complex silicon chips using large-scale integration (LSI) technology. Moore and Grove’s vision was to make Intel the leader in developing even more powerful microprocessors and to make Intel-designed chips the industry standard in powering personal computers. Moore and Noyce wanted to seek In tel because they wanted to regain the satisfaction of research and development in a small growing company.Although the production of memory chips was starting to become a commodity business in the late 1960’s, Moore and Noyce believed they could produce chip versions of their own design that would perform more functions at less cost for the customer and thus offer a premium price. Intel’s unique challenge was to make semiconductor memory functional. Semiconductor memory is smaller in size, provides great performance, and reduces energy consumption. This first started when Japanese manufacturer Busicom asked Intel to design a set of chips for a family of high-performance programming calculators.Intel’s engineer, Ted Hoff, rejected the proposal and instead designed a   Single-chip, a logic device that retrieved its application instruction from semiconductor memory. Buying Back the Cash There was a problem with this new chip Busicom owned it. Intel was convinced to repurchase the rights to the product. Intel then offered to return Busicon’s $60,000 investment in exchange for the rights of the product. The Japanese agreed after struggling with the financial troubles. The Microprocessor Hits the Market Intel’s first microprocessor, the 4004, was introduced in 1971.This $200 chip delivered as much computing power as the first electronic computer, the ENIAC. After the 4004, Intel introduced the 8008 microcomputer, which processed eight bits of information at a time. The 4004 and 8008 began to open new markets for Intel products. Today, affordable computing power is available to designers of all types of products, producing creativity and innovation. Turning Point: IBM PC In 1981, Intel microprocessor family had grown to include the 16-bit 8086 and the 8-bit 8088 processors. These two chips created 2,500 winning designs in the year.A product from IBM was one of those designs, which became the first PC. Intel was convinced IBM to ch oose the 8088 as the brains of its first PC. Because of IBM’s intelligent decision, the PC business grew to tens of millions of units every year. In 1982, Intel introduced the 286 chip. It contained 134,000 transistors and provided 3 times the performance of other 16-bit processors during the time. The 286 were the first microprocessor that offered software compatibility with its predecessors. The Microprocessor Machine In 1985, the Intel 386 hit the market.The 386 could perform more than five million instructions every second. Compaq’s DESKPRO 386 was the first PC based on the new microprocessor. In 1989, Intel 486 processor was ready to hit the market. This new chip resulted in 1. 2 million transistors and the first built-in math coprocessor. This chip was faster than the original 4004. In 1993, Intel introduced the Pentium processor, which set new performance standards with up to five times the performance of the Intel 486 processor. The Pentium processor uses 3. 1 million transistors to perform up to 90 MIPS, about 1,500 times the speed of the original 4004.In 1995, Intel’s first processor in the P6 family, the Pentium Pro processor, was introduced. It included 5. 5 million transistors and contained a high-speed memory cache to accelerate performance. The Pentium Pro processor was a popular choice for multiprocessor sewers and high performance workstations. Intel introduced the Pentium II processor in May 1997. It contains 7. 5 million transistors packed into a unique Single Edge Contact Cartridge and delivers high performance. Intel offers Pentium II processors for Mobil PC, carrying new levels of performance and computer capabilities. In April 1998,Intel introduced the Celeron processor. This is the latest Intel processor created to meet the computing needs of Basic PC users. Intel’s recent introduction is the Pentium II Xeon processor. This is the newest addition to Intel’s Pentium II brand. It is Intel’s first microprocessor designed for mid and higher server workstation platforms. The company’s success in memory chips was built from the resources involved in working on projects to design and develop the world’s best microprocessor. INTEL’S STRATEGY Intel's primary business into the mid 1980s was memory chips, which accounted for 70 percent of revenues.In 1985 and 1986, Intel closed eight memory chip plants. They were fighting a never winning battle with the Japanese produces of memory chips. Gordon Moore and Andrew Grove refocused the company on advancing the technology of microprocessors. Intel decided to create a new vision and strategy for the company. Their vision was to make Intel-designed chips the industry standard in powering personal computers. Intel supplies the computing industry with chips, boards, systems, and software. Intel's products are used as â€Å"building blocks† to create advanced computing systems for PC users.Intel's mission is to be th e preeminent building block supplier to the new computing industry worldwide. Intel has several objectives in order to pursue their vision. The objectives include PC and server management advances through new Intel hardware and software products, alliances with other industry leaders, education and development programs, and industry standards efforts. Most importantly, Intel's greatest objective was making the PC an indispensable and persuasive appliance, which would ultimately compete with the TV, VCR, and telephone.Andy Grove crafted a series of strategies in order to reach Intel's objectives: 1. Introduce innovative products quickly. Andy Grove's vision of making the PC tomorrow's information appliance required the company to do more than be a leader in advancing microprocessors. Intel tries to bring innovative products to the market as quickly as possible. In 1995, Intel introduced the new high-end Pentium Pro processor. This came less than three years after the introduction of the Pentium processor, which is now the processor of choice in the mainstream PC market.Together, these products provide computer buyers with a wide spectrum of computing choices. Due to the growing popularity of the Internet, Intel programmers developed a software product called Streaming Media Viewer that software developers could incorporate into their products and allow users to view video as it arrived from the World Wide Web. Also, Intel developed hardware based cryptographic technology that provided increased levels of security for data communicated over the Internet. Intel's strategy of bringing innovative products to the market quickly has proven to be costly.In 1996, Intel spent $500 million on R&D projects to develop products (other than microprocessors). Even though other producers were using joint ventures to build the extremely expensive fabrication plants, Intel chose to go alone. Beyond their primary task of making microprocessors, Intel invests in a range of computi ng and communications applications that support their core business. Intel's supercomputer and network server efforts take advantage of the flexibility and power of Intel architecture, while their flash memory business supports booming communications applications, such as, cellular phones.Intel executives saw the future PCs equipped with new features, such as, digital video, stereo sound, 3-D graphics, fax, and data communications. Intel decided to add these features into its next generation microprocessors. Intel decided to compete with the Taiwanese computer industry. They felt that the Taiwanese were too slow to adapt their products to the latest Intel innovations. By producing motherboards, it would enable Intel engineers to integrate new functions. 2. Promote the Intel brand. Intel invests in education and marketing programs that describe the benefits of genuine Intel technology.In 1990, Intel initiated a marketing program to build the Intel brand and make PC users aware of the benefits of genuine technology and products. Intel asked PC makers to put the Intel logo on their machines. The company also sponsored television and print advertising campaigns stressing that by choosing an Intel-based PC, users got the ultimate in quality, reliability, software computability, and value. The marketing program was a success and had become a prominent element in Intel's strategy ever since.Not only did Intel continue to sustain its dominant market share, but also customer feedback revealed that PC buyers, not just computer techies, really cared about their computer's chip and performance capabilities. Instead of assigning its two new chip generations numbers like 286, 386, and 486 chip generations, Intel named them Pentium and Pentium Pro. This helped Intel build their brand name by allowing PC buyers to become familiarized with their products. Experts believed that Intel was spending over $100 million annually on promoting their name among consumers. . Alliances wi th other industry leaders. The breakup of the old computer industry is what gave Intel its chance and made the mass-produced computer possible. The old computer industry was vertically aligned. Industries used to build their computers from bottom up. Now, these companies purchase products from other industries to build their computers. Because PCs contained components from so many different vendors, Grove believed industry participants in different horizontal specialties had to develop new products in parallel.Intel works with other industry leaders to develop new PC technologies, such as the PCI â€Å"bus†, which has been widely adopted. This technology removes bottlenecks to provide greatly enhanced capabilities. They incorporate their chips into PC building blocks, such as, PC motherboards, to help computer manufacturers bring their products to the market faster. Intel also works closely with software developers to create rich applications, such as, PC video conferencing a nd animated 3D Web sites, that make the most of the power of Intel processors. Also, Intel is working with the U. S.Department of Energy to build the world's fastest computer supercomputers. As Intel introduced new generations of microprocessors, it was beneficial for Microsoft and other developers of operating systems and software to be ready to go to market with new software systems and products that capitalized on the speed of Intel's new processors. Andy Grove and Bill Gates began meeting in the 1980s to explore how their organizations can share information. Intel believes that if computers work better, do more, and are easier to use, more PCs will be sold and more Intel processors will be needed.As with any other strategy, it is necessary to evaluate performance and initiate adjustments in vision, long term direction, objectives, strategy, or implementation in the occurrence of changing conditions, new ideas, and new opportunities. For example, in 1994, a mathematics professor found a flaw in how Intel's new Pentium chip did division in certain situations. The media got a hold of this and there was negative publicity about Intel floating around. Intel explained to its consumers that the chances of this happening were minute. Intel admitted the flaw, but Andy Grove felt that it shouldn't concern nyone except the most demanding scientists. Intel wanted to stand behind there â€Å"Intel Inside† campaign, so they had to reevaluate their strategy. Within days of the incident, Intel offered all owners of Pentium based computers a free replacement of their Pentium chip and took a $475 million write off to cover the costs. Even though it was considered a disaster, only a few owners took a replacement chip. Intel focuses on being a best-cost provider. Their strategic target is the value conscious buyer. They want to give customers more value for their money.Intel's product line carries good-to-excellent attributes, several to many upscale features at low co st to the PC buyer. Overall, their focused strategies have kept them on the right track. However, Intel continues to attract competition, both from makers of software-compatible microprocessors and from makers of alternative-architecture chips. SWOT ANALYSIS To provide a good overview of Intel’s business position and whether it is healthy or unhealthy, a SWOT analysis was conducted. This analysis will show if there is a good fit between Intel’s resource capability and its external situation.STRENGTHS Intel is one of the most profitable companies in the world. It is a leader in its industry with over 80 percent of the world’s 250 million personal computers powered by Intel microprocessors and over 90 percent of all new PCs currently being assembled with â€Å"Intel Inside†. Intel is a recognized market leader with an attractive customer base and a good reputation of creating an advanced quality product. Some of Intel’s strengths are its financial co ndition, brand-name image, good management skills and technical expertise. Financial ConditionOne of Intel’s major strengths is the ability to fund for research & development. The company has a high degree of profitability, cash flows from depreciation, and low dividend payout. Therefore, Intel can provide the financial resources and use their financial strength to fund the capital requirements associated with refurbishing existing plants and building new ones. Intel’s strategy to maintain a leader status in the industry and to accommodate expected demand is necessary for them to stay ahead of competitors by producing more advanced products and building new plants or refurbishing existing plants.In recent years, Intel has built a new fabrication plant about every 9 months and announced that its goal is to reduce that to every 6 months. Also, for the past 6 years, it has led the semiconductor industry in new capital investments. Brand Name Image In 1990, Intel initiated a marketing program to build the Intel brand and show PC users the benefits of Intel technology and products. The reason for the program was to increase sales of the Intel brand and lower sales of AMD’s cloned microprocessors. Their marketing strategy was to ask PC makers to put a distinctive â€Å"Intel Inside† sticker on their machines.They also sponsored television and print advertising campaigns promoting that an Intel-based PC provided customers with ultimate quality, reliability, software compatibility, and value. This was a major success and created a good brand name image for Intel. Management Skills and Technical Expertise Talented and skilled individuals from the beginning managed Intel. They had the expertise to manage Intel by choosing the right individuals that had the technological know-how to bring it to the top. Intel’s skill and expertise proved to be a strength back in 1985 when Intel’s primary business was the memory chip.Japanese comp etitors started producing and marketing their memory chips at lower costs than Intel. However, Intel had the skills and expertise to abandon the memory chip business and put their full energies into a secondary microprocessor business. They wanted to become leaders of the industry and they proved that they knew what needed to be done to accomplish their vision. WEAKNESSES Diversity Intel is one of the most successful companies and it is hard to find a weakness in such an established firm. Intel is known for its strengths, competencies, and capabilities. However, one of Intel’s weaknesses is the focus on primarily microprocessors.The diversification of companies into other industries allows them to be less risky in case a rival developed a better product. For example, Microsoft is expanding into the Internet business to become more diversified. America Online and Netscape are merging to enhance their core business. Intel could become even more successful if it were to diversif y into other industries. The company can be in grave danger if another firm was to rise to the top with the manufacturing of microprocessors or if technology promoted a more efficient product than the microprocessor. Leadership After GrovesAndrew Groves has been the backbone of Intel for many years. Under Grove, Intel was very aggressive in protecting its technology. He is a hands-on manager whose high level of involvement and attention to detail inspired and intimidated subordinates. A big part of Intel’s success is Groves’ leadership style, competitive ability, and innovative mind set. Eventually, Groves will retire and the question will be what will happen to Intel? Will Groves’ successor lead Intel to remain on top. Andrew Groves has proved to be an excellent leader, but the leadership after him is questionable. OPPORTUNITIESMarket opportunity is a big factor for shaping Intel’s strategy. Intel is equipped with the right resources and has the capabili ty to pursue many opportunities that exist. The company’s innovation has helped build alliances to expand the firm’s market coverage and competitive capability. Intel also has the ability to grow rapidly because of strong increases in market demand. Innovation Andrew Groves has a vision of the PC as tomorrow’s information appliance. He wants to have televisions, VCRs, game players, cable boxes, and telephones to be pushed to the background and bring PCs to be in the spotlight.Groves does not want to just lead in advancing the microprocessor, he wants to fully utilize the capability of the microprocessor and introduce a number of PC-based communications products to meet the broad range of consumer needs. Some of the products that Intel has available are chip products used for keyboards, printers, copiers, and fax machines. These chip products are used to enhance cellular phones, pagers, digital cameras, and personal digital assistants. Intel is also manufacturing universal Serial Bus- single type of connector to attach printers, modems, CD-ROM drives, and other peripherals.Other innovative products include Intercast plug-in cards, a ProShare line of conferencing products,   And an I960 RP processor. Intel has a software lab in Shanghai developing multimedia and 3-D content in Chinese. They have created software to help popularize long-distance telephone calls on the Internet and a hardware-based cryptographic technology that provides levels of security for data communicated over the Internet. Intel is introducing new products and technologies on a weekly, sometimes daily, basis. They are gradually increasing their R&D budget to look for valuable ways to broaden their product line.Their reputation for innovation is among the best in the U. S. In fact, Intel was ranked third for its innovation in 1997. Strategic Alliances Alliances expand the firm’s market coverage and competitive capabilities. It is essential that Intel develop a cl ose relationship with other PC component producers, manufacturers, software developers, cable TV companies, media and telecommunications companies, and entertainment companies. Before the mid-1980s the structure of the old computer industry was aligned vertically, in which each company sold their products based on their own proprietary technology.They designed and built their computers themselves. Buyers had to commit to the whole package of one manufacturer. Since then, the computer industry is growing horizontally. Each product depends on another product. This is why it is important to collaborate with others. Products within each horizontal specialty should be compatible with other specialty products to make a powerful PC or other PC-based product. Growth Intel has the ability to grow rapidly because of strong increases in market demand. The process of making PCs has changed with that of the past. Only a few PC makers produced the components inside of the PCs.Therefore, the deman d for Intel’s products increased. Intel had the ability to grow rapidly because it responded quickly to market demand and had the capital and expertise to develop advanced powerful products faster than competitors. THREATS Looking at Intel’s external environment, there are some factors that create a threat to the company. Some of the threats Intel is facing are competition, slowdowns in market growth, and the bargaining power of consumers. Competition In 1997, Advanced Micro Devices (AMD) and Cyrix were the two major competitors that challenged Intel by cloning Intel’s microprocessors and marketing them at lower prices.This created a major threat to Intel’s market share. A third competitor was developed by the partnership among Motorola, IBM, and Apple Computer. They were producing and marketing Power PC chips for Apple’s line of PCs and certain IBM PCs. For example, the Power PC offered a reduced instruction-set computing (RISC) processor which ha d a simpler instruction set and higher computing speeds than Intel’s chips. This was an attractive feature for the end user, which also threatened Intel’s market share. The competitors mentioned above are just three of the major companies that are a threat to Intel.There is also the possibility of other companies making a technological breakthrough by developing a more powerful and cheaper product that will outlive Intel. For such reasons, Intel has to be innovative and ready for any possible external threat. Slowdown in Market Growth Intel is always planning ahead of things. They refurbish or build plants two years before the new product ever is produced. This could be considered an advantage or disadvantage. It is an advantage to Intel because they are constantly developing technologically advanced and more powerful products, which allows them to compete and be a leader of the industry.However, the major disadvantage is the possibility of the PC market slowing down. Intel could be hurt tremendously if the market growth slows down because they have already planned ahead and invested a lot of capital into the plants. Bargaining Power of the Consumer Cost pressures are also a threat to Intel. Consumers are demanding lower prices on products or higher quality for the prices they are paying. If a consumer can get the same product at a lower price from competitors, it can be a major threat to the company.Intel can influence bargaining power of the consumer by making sure the prices are low based on cost efficiency and the quality is maintained. The SWOT analysis provided the opportunity to view the company’s overall position. An evaluation of Intel’s strengths, weaknesses, opportunities, and threats support the fact that above all Intel has established a healthy position in the industry. TESTS OF A WINNING STRATEGY Test 1: Goodness of Fit The goodness of fit test determines if a company’s strategy is suitable for its internal and external situation in order to obtain market success.Intel is a member of the technology sector and in the semiconductor industry. Firms involved with technology must deal with the quick obsolescence that is inherent when dealing with computers. An example of this is Moore’s Law coined after Gordon Moore, Intel’s founder, who truthfully stated that â€Å"the power and complexity of silicon chips would double every year with proportionate decreases in cost†. This external environmental situation causes two problems for companies in the industry. One problem is that a company must constantly innovate to stay on top and secondly, the company will need capital in order to create new technology.Does Intel’s strategy adequately deal with the constant change that is prevalent in its business environment? The Intel’s strategy is to cannibalize its own products. In other words Intel strives to make its own products obsolete. A Company’s profits and market position can be severely undermined if another company offers a faster chip with more capabilities. Intel is able to do this because of its internal situation. Intel has vast amounts of capital, â€Å"†¦a ‘war chest’ of about $10 billion†. This is useful when the average plant costs will be about $2. 5 billion dollars around the year 2000.Test 2: Competitive Advantage Test The competitive advantage test ascertains if a company’s strategy leads it to have a sustainable competitive advantage over its rivals. The competitive advantages that Intel has are its brand image and research prowess. Intel’s brand name is a competitive advantage because it helps keep the sale of silicon chip clones from rivals down so that these companies do not erode Intel’s profitability and market share. If a company had a clone of equal performance, it would be easier for consumers to switch over if not for the power of brand name and awareness that keeps customers loyal.The strategy that Intel has is to increase the awareness and preference for its products. Research prowess is a competitive advantage for Intel. It has large amounts of capital compared to its competitors. For example, next year Intel will spend $3 billion on research and development, â€Å"which is more than AMD generated in sales in 1998†. Intel continues to produce innovative products faster than its rivals do in order to receive the lion’s share of profits so as to keep itself able to acquire the capital to produce these innovations. Test 3: Performance TestThe performance test ascertains if the company’s strategy is helping the company become profitable and help obtain long-term market position. Located in the Appendix are several profitability ratios for Intel from 1983 until 1998. In Appendix A-E are graphs representing this data? In Appendix F are the actual numerical data. After 1986 is when Intel changed its strategy to what it is pres ently. The data used to compute these ratios was from the Intel case in Strickland and Thompson’s Strategic Management 10th Edition. The 1997 and 1998 were compiled from data obtained from Intel’s homepage located at http://www. ntel. com. Appendix A shows the gross profit margin. The gross profit margin has, since 1986, been steadily increasing and since 1990, has remained above fifty percent. This profitability ratio shows the amount of money that remains after making a product that is available for the company to utilize. This shows that the company is strong in this aspect. Operating profit margin is shown in Appendix B. This shows the profit of the company prior to interest payments and taxes taken out. The ratio was negative for the years 1985 and 1986. After 1986, the operating profit margin has been strong reaching a peak of 39. 4% in 1997. Appendix C displays the net profit margin, which is the profit the company realizes. After posting a loss in 1986, the net profit margin of Intel has steadily improved and strengthened. Since 1990, Intel has been positing profits higher than fifteen percent. It reached a profit peak in 1997 with a net profit margin of 27. 7%. Intel has at the present time has a dominant 75. 7 % market share. This is a dominant position since its next closest rival, Advanced Micro Devices (AMD), has merely fifteen and one-half percent of the market share. Its other competitor Cyrix has only 5. 6%.This data is represented in pie chart form in Appendix G. The data has shown that Intel’s strategy has successfully completed all of the tests and is thus a winning strategy. Its present strategy is allowing it to respond to the business environment and maintain its competitive advantages while raking in profits. Andy Grove’s Performance as CEO It is imperative to acknowledge Gordon Moore, his mentor, before discussing the performance of Andy Grove. Gordon helped to set the Intel culture as being one of low bureau cracy and set the standard of holding one-on-one meetings with his subordinates in order to help the flow of information.Moore has is own ‘law’ which stated that the power and complexity of the chip would double every eighteen months with proportional decreases in costs. This helped Intel from the onset set its sights on innovation and being a leader. Appendix F shows the numerical numbers for the return on stockholders’ equity (ROE) and return on assets (ROA). Appendix D and E show their values graphically. These ratios are used to gauge how effective management is. Andy Grove became President in 1979 and was given more total control in 1987 when Gordon Moore served only as chairman.To adequately ascertain how well Andy Grove has been as CEO, an examination of the following these ratios are necessary. The ROE since 1987 has been strong with most years above twenty-percent as displayed in Appendix D. The highest value being in 1997 with 35. 99%. This ratio is put into perspective when one compares the ROE with that of the industry. The ROE-to-Industry ratio taken from Daily Stocks website which is 131. 4%. The ROA since 1987 has also been steadily increasing into the teens and lower twenty’s. The ROA-to-Industry for Intel is large 140. 4% from Daily Stocks website.This analysis shows that Andy Grove has done a superb job at Intel. Other factors concerning Andy Grove speak well of his performance as the CEO of Intel. His views have permeated into the corporate culture of Intel and have helped it become the dominant force in its industry. The strategy-making style that Grove uses is that of a master strategist. The master strategist exerts strong influence over the strategy of the company. Andy Grove’s own view, which is his ‘law’, of â€Å"only the paranoid survive† has helped keep Intel on its toes and looking ahead to what is happening.This is shown by the fact that Intel builds factories years before they are needed in order to stay on top of the market. Andy Grove’s leadership has helped Intel not fall into the pitfall of becoming stagnated by its own success. The shortcoming that Andy Grove has in being a manager is he is too good. As stated in the SWOT analysis, Andy Grove’s permanent retirement from Intel could set the company floundering unless the company finds someone as well qualified and with an analogous approach to management style. INDUSTRY ANALYSIS The U. S. icroprocessor industry comprises of more than 100 companies that design, manufacture, and market semiconductors to original equipment manufacturers and personal computer end users. The following information is a profile of the dominant economic characteristics of the microprocessor industry. Market Size: $300-$350 billion worldwide consumption. Scope of Competitive Rivalry: Global. Market Growth Rate: 15-20 percent annually. Stage in Life Cycle: Rapid growth and takeoff. Number of Companies in Industry : About 174 companies. Customers: 80 million microprocessors for use in PCs and network servers.Degree of Vertical Integration: Mixed; forward and backward integration. Ease of Entry/Exit: High entry barriers in the form of capital requirements. Technology/Innovation: Rapid technological changes microprocessor production. Product Characteristics: Highly standardized. Scale Economies: Companies can realize economies of scale. Learning and Experience Effects: Strong. Capacity Utilization: Manufacturing efficiency is higher when capacity is increased. Industry Profitability: Above par. 1995 Industry Usage 1997 Industry Usage Error! Not a valid embedded object.The two pie charts above display the industry usage in 1995 and 1997. As shown, the computer sector is the main user of the microprocessor. Within two years, the computer sector increased its usage by 11% and is expected to continue increasing over the next several years. Computers are the main focus in the microprocessor industry , which is why many rivals are competing for market share in that sector. THE FIVE FORCES MODEL OF COMPETITION Rivalry among competing manufacturers in this industry is a strong force of competition. It is focused on such factors as performance features, new product innovation, quality, and brand image.New product innovation plays a major role in the microprocessor industry because it determines the intensity of rivalry among competing firms. Companies are trying to gain better market position and competitive advantage. Threat of potential entry is a weak force due to the fact that it is hard for a newcomer to break into the market. Moreover, economic factors put a potential entrant at a great disadvantage because of the learning and experience curve effects. The existing microprocessor companies have advantageous positions in the industry from the experience they have gained from being in the industry longer than new entrants have.Leaders of the industry, like Intel, have verticall y integrated their manufacturing to make products at low efficient costs that entrants would not be able to compete and be exposed to fierce competition. Other entry barriers are economies of scale, brand preferences and resource requirements. Competition from substitutes is a weak force because there are no substitutes in the industry. The microprocessor is needed to manufacture many types of equipment, such as, TV sets, VCR’s, cameras, wristwatches, kitchen appliances, mobile phones, and stereo equipment.There is no other product that can be used in place of the microprocessor. Power of suppliers is moderate. Some companies rely on suppliers to supply a component more cheaply than industry members can make themselves. This can increase their leveraging power. However, suppliers also tend to have less leverage to bargain over price and other terms of a sale because the industry they are supplying is a major customer. A microprocessor company usually orders in large quantitie s, which in turn decreases suppliers leverage. Also, major companies are integrating backwards to self-manufacture the component.Backward integration allows companies to negotiate favorable terms with suppliers. Power of customers is a strong force in the industry primarily because buyers are large and purchase much of the industry’s output. Purchasing in large quantities gives a buyer enough leverage to obtain price concessions and other favorable terms. For instance, PC makers have a substantial bargaining leverage when deciding to use Intel’s chips in their computers. International Competitiveness Due to fierce international competition, the microelectronics industry has become highly globalized. To compete effectively, U. S. icroelectronics suppliers must sell to all domestic and foreign markets. The profit margins for certain products are so slim that only through international sales can a supplier generate profits adequate to remain in business. Survival in this highly international industry requires microelectronics manufacturers to be first to market with leading-edge products that focus on high-end technology. Only those suppliers who introduce the breakthrough products can maintain profit margins that will support research, development, and the purchase of new equipment for manufacturing the next generation product. COMPETITOR ANALYSISIntel's rivals: Advanced Micro Devices, Cyrix Corporation, Motorola, IBM, Apple Computer, and the Power PC are favorably positioned, but not in the same leading position as Intel. Intel dominates the computer industry. Intel works closely with alliances to introduce many innovative products that give them a leading edge over their rivals. Intel’s products are distinguished from their competitors, which make it difficult to clone. In 1997, Intel's two biggest competitors were Advanced Micro Devices (AMD) and Cyrix, both of which made â€Å"Intel-clone† microprocessors and marketed them at pric es below those charged by Intel.A partnership among Motorola, IBM, and Apple Computer to produce and market Power PC chips for Apple's line of PCs and for certain IBM PCs represented a third competitor. Sun Microsystems was a fourth competitor, producing and marketing a microprocessor line that competed against Intel chips in a limited number of computing applications. These competitors can possibly take some of the market share away from Intel. Therefore, Intel needs to maintain market dominance by continuing to make a high quality microprocessor with process technology improvements.These factors will help Intel stay ahead of their competitors. Advanced Micro Devices (AMD) had carved out a niche providing less expensive microprocessors than Intel's mainstream offerings. AMD, confident that NexGen had strong technology despite its low sales, promptly scrapped its own design for a chip to compete with Intel's Pentium Pro in favor of a design (subsequently named K6) that NexGen had un der development. Whereas previous generations of AMD chips had been clones of Intel's designs, AMD and NexGen engineers had designed the K5 and K6 from scratch.AMD hoped that its K6 chip would be an attractive alternative to Intel's higher-priced Pentium Pro chip. AMD was planning to introduce 180, 200and 233 MHz versions of its K6 chip during 1997 and a 300 MHz version was the plans for 1998. AMD expected that 5 of the top 10 PC manufacturers would be using the K6 in some of their models during 1997; analysts projected that AMD could sell up to 5 million K6 chips in 1997. The K6 was expected to sell for about 25% less than Intel's Pentium   Pro chips. IBM and Compaq announced in 1997 that they would use AMD's K6 processors in their low-end machines.During the first three weeks of September, nearly half of all the desktop computers sold through retailers used the AMD K6 microprocessor, according to market researcher PC Data Inc. That is a dramatic improvement from last year when 9 2% of those same machines had Intel chips inside. Today, only 43% of retail PCs sold use Intel. Industry analysts expected Cyrix to be more successful in marketing its M2 against Intel's MMX Pentium in the price-sensitive home computer and notebook segments. The stigma of a non-Intel chip posed a high barrier for Cyrix to hurdle in, penetrating the high-end desktop and notebook segments.Motorola, Apple, and IBM initiated a partnership in 1991 to develop the Power PC chip as an alternative to Intel chips. After production delays and disagreements over design, IBM and Apple finally agreed to a common design in 1995. The Power PC along with Sun Microsystems' UltraSPARC chip was a reduced instruction-set computing (RISC) processor, whereas, Intel, AMD, and Cyrix chips were complex instruction-set computing (CISC) processors. Chips incorporating RISC designs used simpler instruction sets to achieve higher computing speeds than CISC processors. Also, RISC designs had better floating-point performance.KEY SUCCESS FACTORS Technology-Related KSFs Intel has many key success factors that helped it prosper in the market place. Intel has product innovation capability and the funds available to invest in research and development. Intel's reputation for innovation was among the best of any U. S. company, it ranked third on innovation among all U. S. companies. Besides investing in R&D, Intel had to gut and refurbish its existing fabrication plants every three years to produce the new chips and sometimes build a new plant to accommodate the expected   demand.Year after year, building new plants became very expensive because they used exotic tools and equipment to etch finer and finer lines on a silicon chip. Finer etching also required more labor and production time. Intel estimated that each succeeding generation of microprocessors required more than twice the capital and manufacturing capacity for production. Intel intended to be among the handful of chip producers that c ould afford to build top-of-the-line chip fabrication plants. Manufacturing-Related KSFs Intel has the flexibility to manufacture a range of models and sizes.Besides the products already in the market, it has additional products in various stages of development. For instance, Intel has a segmented brand including the Celeron, Pentium II, and Merced chip which is expected to be available in 2000. Distribution-Related KSFs Intel works closely and distributes to PC component producers, PC manufacturers, software developers, cable TV companies, media and telecommunications companies, entertainment companies, and information-communications appliance for both the home and the workplace.Intel is involved with Microsoft, Pointcast, America Online, IBM, Cisco Systems, and others to develop and promote Internet software. Marketing-Related KSFs To diminish the sales of clones of Intel microprocessors marketed by AMD, Cyrix, and others, Intel initiated a marketing program in 1990 to build the I ntel brand and make PC users aware of the benefits of genuine Intel technology and products. Intel asked PC makers to put a distinctive â€Å"Intel Inside† sticker on their machines. Manufacturers who used Intel microprocessors in their PCs also used the logo on their packaging and in their ads and brochures.The company also sponsored many television and print advertising campaigns to promote the Intel’s brand name image. Skills-Related KSFs Intel has the ability to develop innovative products and product improvements. Also, it has the ability to get newly conceived products past the R&D phase and out into the market very quickly. They are always ahead of their competitors and always find new ways to improve their product. Intel’s team consists of many experienced employees using top of the line technologies. Organizational CapabilityIntel has the ability to respond quickly to shifting market conditions and customer needs because of its many years of experience and the ability to invest in R&D. Andy Grove’s management style also plays a major role in organizational capability. His concern for the flow of information helped instill Intel’s corporate culture and allows every employee to contribute to the company. INDUSTRY PROSPECTS AND OVERALL ATTRACTIVENESS The factors that make the industry attractive are the large use of computers at home, work, libraries, coffee shops, and bookstores. Computers allow easy access to Internet, e-mail, and research.PC’s use up-to-date technology, which makes life easier and daily tasks simpler. The fastest growth was expected to occur in Asia outside Japan, where use of PCs was still relatively limited and where the market potential was largely untapped. The Chinese market was the largest in the Asia-Pacific region (with projected growth of 25-35 percent annually over the next several years), followed in order by Korea and Japan. Also, PC sales in Europe were expected to grow 8% annuall y. The profit outlook seems favorable because a computer at home or work will be a necessity.The factors’ making the industry unattractive was that Intel was producing new products too quick for the market to catch up. New developments were occurring at such a fast and furious pace that the end result was unpredictable. There was a lot of competition going on. The Internet was central to most of the forthcoming developments in information technology. This is the reason why Intel is mainly focused on the computer sector. As Andy Grove put it, â€Å"The Internet is like a 20-foot tidal wave coming thousands of miles across the Pacific, and we are in kayaks. It’s†¦ gaining momentum, and its going to lift you and drop you.It affects everybody†¦the computer industry, telecommunications, the media, chipmakers, and the software world. † FUTURE PROSPECTS Their commitment to R&D creates future generations of products and the manufacturing processes they use to make them, while their capital expenditures ensure the availability of state-of-the-art factories that allow them to deliver high-volume, high-performance microprocessors efficiently. Looking into the future, they will continue to manufacture quality microprocessors that will live up to the Intel name and strive towards perfecting their existing ones.

BRAAAP Company Essay

Introduction The Braaap motorcycle brand was established in 2008 by Brad Smith. Brad began with a vision to supply motorbikes which would making motorcycling more fun and accessible for people. The plan from the start was to build a motorcycle that would compete with custom built American race bikes, but be affordable for people that wish to have a go at this sport. It took a lot of visits to different manufacturers before they found one that believed in his vision. Since then it has been onwards and upwards for the Braaap brand, they have their own concept stores in Tasmania and Victoria, and franchise opportunities throughout Australia and the rest of the world. Braaap are also one of the only motorcycle brands on the market to offer a lifetime warranty. Key Characteristics of Braaap products and services The Braaap products have four major features to their products and services, they are: Lifetime warranty option, customisation, flexible finance and built for adults. The lifetime warranty option is available on all their products and bikes. Having this option improves the attractiveness of the product to their customers and gives them piece of mind about repairs and maintenance on aspects of their bikes. Customisation is another feature that Braaap offer to their customers. This means that the customers can choose from a wide range of colours and accessories to personalise their motorbikes to suit their own tastes. This doesn’t impact the performance of the bikes at all, in fact with all the different options available to purchase the customer can change some of the accessories on their bikes as their tastes change. This would actually improve the life of the bike and make certain that customers would perhaps return at a later stage to either upgrade their bikes or their cust omisations. Currently 37% of Braaap customers return at later stages to upgrade to full size bikes. Flexible finance is a big feature that Braaap offer, from $3 per day finance it makes owning a motorcycle very affordable for most people. As the bikes vary in price, Braaap will provide term payment and also a rent to own option. This enables customers to ride now and pay later. Braaap bikes have been spec ifically designed to that adults can ride them. They have the Learn to Ride program,  Lifetime Coaching and Ride Club which enables most adult riders to become proficient in riding the Braaap bike the correct way Review of pricing policy and analyse pricing variables to determine their effect of demand The pricing policy for the Braaap products are based on dealership and manufacture prices, including Braaap overheads, this determines the final price that’s displayed online and instore. These prices encompass all the products within the Braaap brand from clothing, spare parts, motorcyc les etc Prices for the bikes are as follows: Kids 50cc$1,799.00 88cc$1,999,00 125cc$2,399.00 Classic 150cc$2.999.00 Maistro 150cc$3,999.00 Pro 190cc$4,649.00 Road Racer 250cc$3,999.00 Braaap are a reasonably priced brand with the performance of the other major motorbike brands like Yamaha and Honda. Yamaha in comparison with the 250 cc road racer with a similar model sells for around $8,999.00 and Honda is around $4,300.00.This means that they are competitively priced and affordable to the mass market. One problem that could arise is the price of the components, if the cost of these rise this could influence the overall price of the motorbikes. Other factors that could affect this is the strength of of the Australian Dollar and the international market. Analyse the impact and importance of the following elements to market outcomes. a/The promotional methods – Customer Interaction Programs like having permanent ride clubs established to provide safe and fun riding environments for all riders from beginners to the more advanced. They have a ride club with sponsored events and  fundraisers; these provide another alternative for riders of all levels to be involved. They also have email newsletters that people can get regular updates as well as a facebook page (38570 likers) which promotes the safe riding environment and a place for people to interact with others. Using current technology is a huge plus for Braaap as the website is full of information, embedded videos for customers to see and also online stores and information about franchise opportunities, dealership opportunities and staff opportunities. b/Channels of distribution – The channels of distribution are online and instore. They have also introduced a franchise opportunity within Australia and are actively looking at distributors in the international market. The dealership opportunity is very generous with a Cashflow Positive Guarantee which removes cashflow risk. The other benefits are the same as the concept stores with the easy finance option, Braaap website availability plus customisation etc. c/Level of customer service provided_ Braaap have passionate and motivated sales staff that excel in the level of customer service provided. The despatch from their online stores is fast (the plan is to have parts ordered during the week and to the customer by the weekend so they can ride). The Braaap Company has a high expectation with regards to their customer service and they only employ driven people that love the motorcycle industry as much as they do. Braaap also demands a high level of customer service to be provided to their customers from their partners within Australia, NZ and the USA. Identify Braaap’s potential customer base and key pressure points for success in reaching them Braaap’s potential customer base is the 80% of customer’s new to the sport. They are not actively targeting the existing 3% of customers that currently own dirt bikes. The way that Braaap reach their potential clients is via social media, hosting dirt bike events regularly and through their Learn to Ride programs (registration is done on their website). Establish the components of the marketing mix, include information on how  each element of the marketing mix has been used, their significance to each other and their relevance to the customer base.

Blind Violence and Desire in Macbeth Essay - 802 Words

In Macbeth desire and violence are prevalent throughout the book. Desire blinds one’s ability to think clearly when making a decision. If violence is used due to one’s desire than violence becomes a never ending cycle until the outcome of the violence goes against the one whose desire led to violence. When making a decision, one should use reason, which is having a logical justification or motive. Violence is committed many times in the book but not all for the same motive. Macbeth commits several acts of violence in the book due to his desire for the kingship of Scotland. Macbeth starts to desire the kingship of Scotland after the three witches tell him of the future. The witches tell Macbeth he will become the king of Scotland, but†¦show more content†¦Macbeth’s desire leads him to murder Duncan in his sleep. Macbeth has committed violence, with desire as its cause, which has put him in a situation where there is no turning back because he has already committed one act of violence. The one act will lead to more. With the repeating effect of violence and an inability to see clearly because of desire, Macbeth is on a path to trouble. Macbeth is blinded from logical reasoning after his first act of violence. His desire to keep his kingship that he has gained from killing Duncan leads him to see Banquo as a threat to his throne: When first they put the name of king upon me And bade them speak to him. Then, prophet-like, They hailed him father to a line of kings. Upon my head they placed a fruitless crown And put a barren scepter in my grip. (3.1.63-67) Macbeth fears Banquo’s descendents will take his kingship. He thinks that Banquo should be murdered to stop it from happening, â€Å"And though I could / With barefaced power sweep him from my sight / And bid my will avouch it† (3.1.134-136). In the quote, Macbeth is says that he would kill Banquo and offer his desire for Banquo’s death as sufficient justification for killing him (Shakespeare 88). Macbeth does not murder Banquo but cons murderers into committing the violence. Macbeth is not thinking clearly though because he would know that violence only breeds more violence. The murderers kill Banquo and further continue theShow MoreRelatedThe Theme Of Ambition In Macbeth And Enders Game880 Words   |  4 Pagesin human nature is so powerful that it can blind one’s vision of achieving success. Both Lady Macbeth’s ambition from Shakespeare’s MacBeth and Peter’s ambition from Card’s Ender’s Game blinds judgement and logic , and they eventually end up more harming than succeeding. In the play MacBeth by Shakespeare, MacBeth is strangely met by three witches, who declares his prophecy of being king, but later losing the crown. Lady MacBeth ambitious goal for MacBeth remain king results in her going to extremeRead MoreMacbeth and Its Relevance in Todays Society947 Words   |  4 Pagesthat are still relevant today. Macbeth is no exception†. 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There are many factors, which contribute to the degeneration of Macbeth. Macbeth is very ambitious and courageous, and is later portrayed as a moral coward. All of these qualities lead to his tragic death at the end of the play. There are three major points, which contribute greatly to Macbeths degeneration. The first was the prophecies, which were told to him by the witches. The second factor was when Lady Macbeth influenced