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AMD vs. INTEL. Case depicts competition in a fast cycle market AMD has migrated upwards in terms of product offerings and internal capabilities Intel is a leader now being challenged being an underdog Pressure on both comes from the commodization of PCs and computer chips - PowerPoint PPT Presentation
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AMD vs. INTELAMD vs. INTEL
Case depicts competition in a fast cycle marketCase depicts competition in a fast cycle marketAMD has migrated upwards in terms of product offerings AMD has migrated upwards in terms of product offerings and internal capabilitiesand internal capabilitiesIntel is a leader now being challenged being an Intel is a leader now being challenged being an underdogunderdogPressure on both comes from the commodization of Pressure on both comes from the commodization of PCs and computer chipsPCs and computer chips
No brand loyalty among end usersNo brand loyalty among end users No switching cost for intermediate customersNo switching cost for intermediate customers Price and performance are key isssuesPrice and performance are key isssues Performance easily imitated though route to achieving it may Performance easily imitated though route to achieving it may
differdiffer
INTEL’S APPROACHINTEL’S APPROACH
Short product life and catching up behaviour of Short product life and catching up behaviour of competitors makes development cost higher and margin competitors makes development cost higher and margin lowerlower
Relied on planned obsolescence to fetch premium price Relied on planned obsolescence to fetch premium price and discourage imitationand discourage imitation
Has resorted to use of discounts to seal off marketHas resorted to use of discounts to seal off market
Had also used the Intel Inside campaign to create brand Had also used the Intel Inside campaign to create brand loyalty to Intel’s processorloyalty to Intel’s processor
AMD’S APPROACHAMD’S APPROACHHas shifted from being a renovator to being an innovatorHas shifted from being a renovator to being an innovator
Has also expanded core competencies through Has also expanded core competencies through acquisitionsacquisitions
Now matches Intel in ability to offer new productsNow matches Intel in ability to offer new products In 2003 exceeded Intel by introducing 3 new productsIn 2003 exceeded Intel by introducing 3 new products
Had traditionally offered lower price than IntelHad traditionally offered lower price than Intel Product performance has reached parity with IntelProduct performance has reached parity with Intel
Range of product offerings also increased to cover Range of product offerings also increased to cover microprocessor, memory and connectivity solutionsmicroprocessor, memory and connectivity solutions
However, highly dependent on PC business.However, highly dependent on PC business.
STRATEGIC CONSIDERATIONSTRATEGIC CONSIDERATION
How can far can both parties rely on price for How can far can both parties rely on price for competition?competition?
Is product innovation sufficient to create competitive Is product innovation sufficient to create competitive advantage?advantage?
Is the use of discounting by Intel sustainable?Is the use of discounting by Intel sustainable?
Are there forms of inimitable relative advantage each Are there forms of inimitable relative advantage each can rely on?can rely on?
How can business and competition be redefined?How can business and competition be redefined?
POSSIBLE AMD FUTURE STRATEGYPOSSIBLE AMD FUTURE STRATEGY
Tap into other PC manufacturers category to get volumeTap into other PC manufacturers category to get volume Need to consider tailoring marketing for small manufacturersNeed to consider tailoring marketing for small manufacturers
Diversify into non PC products especially in Diversify into non PC products especially in communication and digital equipmentscommunication and digital equipments
Seek alliance with chip users like Nokia for development Seek alliance with chip users like Nokia for development of future flash memoryof future flash memory
Consider marketing Consider marketing products as a suiteproducts as a suite that offers that offers competitive pricecompetitive price
Enhance speed of R & D further Enhance speed of R & D further
POSSIBLE INTEL FUTURE STRATEGYPOSSIBLE INTEL FUTURE STRATEGY
Consider Consider asset unbundlingasset unbundling to improve cost and create to improve cost and create more slack resourcesmore slack resources
Increase speed of R & DIncrease speed of R & D
Develop processors for niche applicationDevelop processors for niche application
Go for exclusive arrangements with customers through Go for exclusive arrangements with customers through long-term contractslong-term contracts
Create long-term commitment through mutual investmentCreate long-term commitment through mutual investment
Offering lower price from beginning more viable than Offering lower price from beginning more viable than questionable discounting practicequestionable discounting practice
CONSIDERATIONS FOR AMDCONSIDERATIONS FOR AMD
Should and could AMD sustain a head on clash with Should and could AMD sustain a head on clash with Intel?Intel?
Sun Tzu would recommend avoiding head-on clash with Sun Tzu would recommend avoiding head-on clash with a bigger forcea bigger force
However, AMD has also grown into a formidable competitor However, AMD has also grown into a formidable competitor capable of challenging a giantcapable of challenging a giant
Decision will depend on assessment of external Decision will depend on assessment of external opportunities and internal strength.opportunities and internal strength.
A likely possibility is that will be convergence in terms of A likely possibility is that will be convergence in terms of capabilities of AMD and Intel leading to more intense capabilities of AMD and Intel leading to more intense competitioncompetition