The Moment Is Now GLOBAL MEGATRENDS IMPLICATIONS TO STRATEGY FORMULATION & EXECUTION: A CONTEXT FOR TRANSFORMATION Dr. Fariborz Ghadar William A. Schreyer Chair of Global Management, Policies and Planning; and Founding Director, Center for Global Business Studies Pennsylvania State University Web Site:

2| AMD Executive Forum | January, 2010 © 2011 Fariborz Ghadar All Rights reserved - CONFIDENTIAL International Product Life Cycle u High Engineering Content u Few Manufacturers/ Less Competition u Unique/ Non-Standard u R&D Sales >10% u Technical Advertising u Small Market u Small Export Market u Price/Cost High u Manufactured in Triad Phase I High Tech Phase I High Tech

3| AMD Executive Forum | January, 2010 © 2011 Fariborz Ghadar All Rights reserved - CONFIDENTIAL Phase I High Tech Phase I High Tech International Product Life Cycle Phase I High Tech u High Engineering Content u R&D Sales > 10% u Small export market u Small market u Few Manufacturers/ Less Competition u Price/Cost high u Manufactured in Triad u Technical advertising u Unique/ Non-Standard Phase I High Tech u High Engineering Content u R&D Sales > 10% u Small export market u Small market u Few Manufacturers/ Less Competition u Price/Cost high u Manufactured in Triad u Technical advertising u Unique/ Non-Standard u Process Engineering Emphasis u Mass Advertising u Growing Market u World Market u Growth of Export Market u More Standardized u R&D Drops u Rising Competition u International Manufacturing u Price/Cost Declines Phase II Growth and Internationalization Phase II Growth and Internationalization

4| AMD Executive Forum | January, 2010 © 2011 Fariborz Ghadar All Rights reserved - CONFIDENTIAL International Product Life Cycle Phase I High Tech u High Engineering Content u R&D Sales > 10% u Small export market u Small market u Few Manufacturers/ Less Competition u Price/Cost high u Manufactured in Triad u Technical advertising u Unique/ Non-Standard Phase I High Tech u High Engineering Content u R&D Sales > 10% u Small export market u Small market u Few Manufacturers/ Less Competition u Price/Cost high u Manufactured in Triad u Technical advertising u Unique/ Non-Standard Phase II Growth and Internationalization Phase II Growth and Internationalization Phase II Growth and Internationalization u More Standardized u R&D Drops u Rising Competition u International Manufacturing u Growth of export market u World market u Price/cost decline u Mass advertising u Growing Market u Process Engineering Emphasis Phase II Growth and Internationalization u More Standardized u R&D Drops u Rising Competition u International Manufacturing u Growth of export market u World market u Price/cost decline u Mass advertising u Growing Market u Process Engineering Emphasis u Standard Product u No Engineering Emphasis u High Competition u Manufactured where factors of production are lowest u No R&D u World Market u No Advertising u Saturated Market u Price/ Cost 1.0 Phase III Maturing Phase III Maturing Phase III Maturing u Manufactured where factors of production are lowest u No R&D u Standard Product u World Market u No engineering emphasis u Saturated market u No Advertising u Price/cost ~ 1.0 u High competition Phase III Maturing u Manufactured where factors of production are lowest u No R&D u Standard Product u World Market u No engineering emphasis u Saturated market u No Advertising u Price/cost ~ 1.0 u High competition

5| AMD Executive Forum | January, 2010 © 2011 Fariborz Ghadar All Rights reserved - CONFIDENTIAL Global Competitive Positioning  Unique/Non-Standard  High Engineering Content  Few Manufacturers/ Less Competition  Price/Cost High  Manufactured in Triad  R&D/Sales >10%  Technical Advertising  Small Market  Small Export Market  Unique/Non-Standard  High Engineering Content  Few Manufacturers/ Less Competition  Price/Cost High  Manufactured in Triad  R&D/Sales >10%  Technical Advertising  Small Market  Small Export Market Phase I: High Tech  More Standardized  Process Engineering Emphasis  Rising Competition  Price/Cost Declines  International Manufacturing  R&D Drops  Mass Advertising  Growing Market  World Market  Growth of Export Market  More Standardized  Process Engineering Emphasis  Rising Competition  Price/Cost Declines  International Manufacturing  R&D Drops  Mass Advertising  Growing Market  World Market  Growth of Export Market Phase II: Growth & Internationalization  Standard Product  No Engineering Emphasis  High Competition  Price/Cost  1.0  Manufactured where factors of production are lowest  No R&D  No Advertising  Saturated Market  World Market  Standard Product  No Engineering Emphasis  High Competition  Price/Cost  1.0  Manufactured where factors of production are lowest  No R&D  No Advertising  Saturated Market  World Market Phase III: Maturing

6| AMD Executive Forum | January, 2010 © 2011 Fariborz Ghadar All Rights reserved - CONFIDENTIAL International Product Life Cycle Phase I: High Tech Phase II: Growth & Internationalization Phase III: Maturing

7| AMD Executive Forum | January, 2010 © 2011 Fariborz Ghadar All Rights reserved - CONFIDENTIAL Factors Affecting Global Competitive Positioning  Employee Relations  Cultural Sensitivity  Marketing & Advertising  International Trade  Political Risk & Government Intervention  Ownership  Transfer Pricing, Management Fees, Royalty Payments, Profit Repatriation  Financing Product Life Cycle

8| AMD Executive Forum | January, 2010 © 2011 Fariborz Ghadar All Rights reserved - CONFIDENTIAL Where are our… Markets? Customers Competitors? Culture? Where are we?

9| AMD Executive Forum | January, 2010 © 2011 Fariborz Ghadar All Rights reserved - CONFIDENTIAL Global Competitive Positioning Survey A B C D Where are our customers? Where are our markets? Where are our competitors? Where is our corporate culture? Where will we be?

10| AMD Executive Forum | January, 2010 © 2011 Fariborz Ghadar All Rights reserved - CONFIDENTIAL Discussion at Tables What are the implications of these trends to our firm? How are businesses attempting to respond to some of these global economic and social trends?

11| AMD Executive Forum | January, 2010 © 2011 Fariborz Ghadar All Rights reserved - CONFIDENTIAL International Product Life Cycle Phase I: High Tech Phase II: Growth & Internationalization Phase III: Maturing

12| AMD Executive Forum | January, 2010 © 2011 Fariborz Ghadar All Rights reserved - CONFIDENTIAL International Product Life Cycle Phase I: High Tech Phase II: Growth & Internationalization Phase III: Maturing

13| AMD Executive Forum | January, 2010 © 2011 Fariborz Ghadar All Rights reserved - CONFIDENTIAL Does the Rule of Three Work? ?3

14| AMD Executive Forum | January, 2010 © 2011 Fariborz Ghadar All Rights reserved - CONFIDENTIAL The Rewards go to #1 or #2 Earnings Years 3.) $0 1.) $100M 2.) $36M 3.) $0 4.) - $28M predevelopment cost doubling reduces earnings to $96M predevelopment cost doubling reduces earnings to $96M

15| AMD Executive Forum | January, 2010 © 2011 Fariborz Ghadar All Rights reserved - CONFIDENTIAL Market Share & Return on Investment Return on Investment Market Share Cost of Capital

16| AMD Executive Forum | January, 2010 © 2011 Fariborz Ghadar All Rights reserved - CONFIDENTIAL Market Position Inner Circle  Rule of Three  Full Line  Market Coverage  Field Forces  SOA Tech R&D  Vertical Integration  Scale

17| AMD Executive Forum | January, 2010 © 2011 Fariborz Ghadar All Rights reserved - CONFIDENTIAL Inner Circle Challenges  Monitor Outer Circle for “Breakouts”  Penetrate Niches  Manage costs  Convergence of other “Circles”  Modernize/Recreate Industry  Stabilize Inner Circle  Cover Innovations  Globalization Inner Circle  Rule of Three  Full Line  Market Coverage  Field Forces  SOA Tech R&D  Vertical Integration  Scale

18| AMD Executive Forum | January, 2010 © 2011 Fariborz Ghadar All Rights reserved - CONFIDENTIAL Market Position & Market Valuation Market CAP X X X X X X X Market Share

19| AMD Executive Forum | January, 2010 © 2011 Fariborz Ghadar All Rights reserved - CONFIDENTIAL Our Total Resource Network Expanded Resource Network Core Resource Network Our Business

20| AMD Executive Forum | January, 2010 © 2011 Fariborz Ghadar All Rights reserved - CONFIDENTIAL Global Competitive Positioning Phase I: High Tech Phase II: Growth & Internationalization Phase III: Maturing Product Innovativeness Product capabilities Process technology Information technology R&D capability A Customer Intimacy Brand franchise Distribution systems B Market research Competitive position Operational Excellence Efficient operations Financial strength Low cost D C Leadership Organizational Capability Shared mindset Reward system/metrics Structure

21| AMD Executive Forum | January, 2010 © 2011 Fariborz Ghadar All Rights reserved - CONFIDENTIAL Innovation & Core Competencies  Customer Intimacy  Operational Excellence  Innovation

22| AMD Executive Forum | January, 2010 © 2011 Fariborz Ghadar All Rights reserved - CONFIDENTIAL Recent Research Shows the Rise of the Niche Players Reference:  Wall Street Journal Article  Financial Times Article  Harvard Business Review Article MMonitor Outer Circle for “Breakouts”  Cover Innovations CConvergence of other “Circles”  Modernize/Recreate Industry  Stabilize Inner Circle PPenetrate Niches  Globalization Inner Circle  Rule of Three  Full Line  Market Coverage  Field Forces  SOA Tech R&D  Vertical Integration  Scale MManage costs

23| AMD Executive Forum | January, 2010 © 2011 Fariborz Ghadar All Rights reserved - CONFIDENTIAL Create a Culture that Lives The Value Promise Effective Leadership Employee Enthusiasm Customer Satisfaction Improved Profits Commit to creating a valuable, differentiated employee experience Commit to creating a valuable, differentiated employee experience

24| AMD Executive Forum | January, 2010 © 2011 Fariborz Ghadar All Rights reserved - CONFIDENTIAL What Will it Take to Succeed?  Focused operations based on core competencies  Customer responsiveness  Relentless improvement  Innovative products & services  Value delivery  Reward for global focus New. Quick. Global, “Good Deal”

25| AMD Executive Forum | January, 2010 © 2011 Fariborz Ghadar All Rights reserved - CONFIDENTIAL Global Tectonics Environmental Degradation Economic Integration Environmental Degradation Economic Integration Population Urbanization Disease & Globalization Resource Management Population Urbanization Disease & Globalization Resource Management Knowledge Dissemination Information Technology Biotechnology Nanotechnology Knowledge Dissemination Information Technology Biotechnology Nanotechnology Future Conflict Governance Future Conflict Governance

26| AMD Executive Forum | January, 2010 © 2011 Fariborz Ghadar All Rights reserved - CONFIDENTIAL What To Do? Empower the people to do the right thing Core Competencies Strategic Intent LET’S DO IT!

27| AMD Executive Forum | January, 2010 © 2011 Fariborz Ghadar All Rights reserved - CONFIDENTIAL Trademark Attribution AMD, the AMD Arrow logo and combinations thereof are trademarks of Advanced Micro Devices, Inc. in the United States and/or other jurisdictions. Other names used in this presentation are for identification purposes only and may be trademarks of their respective owners. ©2010 Advanced Micro Devices, Inc. All rights reserved.