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 No brand loyalty among end users No brand loyalty among end users No switching cost for intermediate customers No switching cost for intermediate customers Price and performance are key isssues Price and performance are key isssues Performance easily imitated though route to achieving it may differ Performance easily imitated though route to achieving it may differ

INTEL’S APPROACH Short product life and catching up behaviour of competitors makes development cost higher and margin lower Relied on planned obsolescence to fetch premium price and discourage imitation Has resorted to use of discounts to seal off market Had also used the Intel Inside campaign to create brand loyalty to Intel’s processor

AMD’S APPROACH Has shifted from being a renovator to being an innovator Has also expanded core competencies through acquisitions Now matches Intel in ability to offer new products In 2003 exceeded Intel by introducing 3 new products In 2003 exceeded Intel by introducing 3 new products Had traditionally offered lower price than Intel Product performance has reached parity with Intel Product performance has reached parity with Intel Range of product offerings also increased to cover microprocessor, memory and connectivity solutions However, highly dependent on PC business.

STRATEGIC CONSIDERATION How can far can both parties rely on price for competition? Is product innovation sufficient to create competitive advantage? Is the use of discounting by Intel sustainable? Are there forms of inimitable relative advantage each can rely on? How can business and competition be redefined?

POSSIBLE AMD FUTURE STRATEGY Tap into other PC manufacturers category to get volume Need to consider tailoring marketing for small manufacturers Need to consider tailoring marketing for small manufacturers Diversify into non PC products especially in communication and digital equipments Seek alliance with chip users like Nokia for development of future flash memory Consider marketing products as a suite that offers competitive price Enhance speed of R & D further

POSSIBLE INTEL FUTURE STRATEGY Consider asset unbundling to improve cost and create more slack resources Increase speed of R & D Develop processors for niche application Go for exclusive arrangements with customers through long-term contracts Create long-term commitment through mutual investment Create long-term commitment through mutual investment Offering lower price from beginning more viable than questionable discounting practice

CONSIDERATIONS FOR AMD Should and could AMD sustain a head on clash with Intel? Sun Tzu would recommend avoiding head-on clash with a bigger force However, AMD has also grown into a formidable competitor capable of challenging a giant However, AMD has also grown into a formidable competitor capable of challenging a giant Decision will depend on assessment of external opportunities and internal strength. A likely possibility is that will be convergence in terms of capabilities of AMD and Intel leading to more intense competition