Amd vs Intel Analysis Essay Example

processor(Moore  2003). The  transistors  are  what  give  the  piece  of  silicon  that  we  call  a  processor  the  power  to  play  games  and  send  email. Eventually  every  person  will  have  the  equivalent  of  a  supercomputer  in  their  house  automating  tasks  and  responding  to  numerous  other questions.

This potential future could not be possible without the invention of the first  single  chip  microprocessor  by  Intel  Corporation  in  November  of  1971. This  processor  was  known  as  the  Intel  4004  and  was  developed  by  a  team  of  engineers  who  had  no  idea  how  important their invention would be to society decades later(Ceruzzi 2003). Despite  Intel  having  invented  the  very  first  processor  in  the  world,  they  are  not  the  only  processor manufacturer in the modern world today. In the late 20th century, there were three anufacturers in the market with Intel clearly dominating but at the end of the century, Cyrix  merged  with  national  semiconductor  and  no  longer  participated  in  the  global  consumer 1 microprocessor  market. That  left  AMD  (Advanced  Micro  Devices)  and  Intel  Corporation  to  battle it out for the consumer processor market. AMD  was  founded  in  1969(AMD  2006)  by  Jerry  Sanders  who  always  maintained  that  “customers should come first, at every stage of a company’s activities. ” It was that concept that  allowed AMD to grow from an initially small market share to 23. % of all processors shipped  worldwide in 2006(Krazit 2006). However, despite this significant market share gain, Intel still  has what encyclopedia Britannica defines as a realistic monopoly whereby it is able to increase  its  price  in  order  to  maximize  profits  regardless  of  market  conditions(Britannica  2007). This  monopoly  existed  in  part  due  to  Intel  having  developed  the  first  processor  and  having  significantly more resources than AMD has retained at any point in history yet AMD has slowly  but surely managed to gain market share against its larger competitor (Appendix 12). . 2 Analytical Steps in Topic Discussion This area of research was chosen because many of the mainstream technology writers, financial  analysts  and  other  media  outlets  have  attributed  the  success  of  AMD  or  Intel  to  sheer  technological innovation yet we know from companies like HP who used to focus on innovation  that  it  is  only  part  of  a  company’s  success  and  definitely  not  the  source  of  success  for  any  company  in  the  modern  business  era(Deshpande  2005).

Some  of  the  other  areas  that  contribute  to  a  company’s  success  include:  marketing  strategy, strategic  management,  partnerships  with  the  big  retailers  and  general  consumer  behavior. The  previous  areas  of  success are a statement of the researcher’s beliefs with regards to the general success factors  for all organizations. Dr. Rosabeth Kanter recently wrote in the Harvard Business Review that  “Every  few  years,  innovation  resurfaces  as  a  prime  focus  of  growth  strategies.

And  when  it  does, companies repeat the mistakes they made the last time. ”(Kanter 2006) This quote is

an  example of the competitive battle between AMD and Intel during the past six years. Using the  above  quotation  as  guidance  for  this  exploratory  study,  the  researcher  will  explore  the  strategies utilized by AMD and Intel in order to grow and succeed within the global consumer  microprocessor  market  (GCMM). This  research  can  be  broken  down  into  four  other  smaller  2 uestions  that  will  allow  me  to  gauge  the  other  contributing  factors  towards  the  success  of  both of these companies in the GCMM.

These questions are:

• Is strategic management the key differentiating factor between Intel and AMD? What are the key success factors behind the performance gap between AMD and  Intel? What differentiates these two companies in this regard? How significant a factor are consumer perceptions of the companies on the  consumer processor marketplace? Do these consumer perceptions influence  success?
• How can AMD grow its market share in the consumer market?
• The researcher will answer these questions using academic frameworks combined with his own  insight and analysis in order to comprehensively refine these questions into researchable form. This approach will allow me to evaluate the effectiveness of the current stra tegies employed by  Intel/AMD  and  their  overall  success. Initially  it  is  the  researcher’s  intention  to  examine  the  innovation  concept  again  in  a  bit  more  detail  before  proceeding  with  a  review  of  other  academic concepts.

After a strategic innovation picture of these two companies is acquired, the next step will be to  analyze  the  marketing  operations  with  regards  to  the  consumer. Selden  and  Macmillan  developed a comprehensive process that will allow us to determine whether AMD or Intel truly  have a customer centric approach which is a concept that they term as essential in the modern  globalized  business  environment(Selden  and  MacMillan  2006). Lastly  the  various  supplier,  retailer and consumer relationships will be discussed using the analytical framework developed  by  Yoffie  and  Kwak.

This  framework  will  allow  us  to  analyze  whether  the  complementary  relationships that exist between hardware and software manufacturers are being utilized in the  most efficient way to deliver critical value for AMD and Intel. 3 1. 3 Previous History of AMD and Intel The researcher has chosen these pieces of academic literature to be the basis for this research  in  order  to  create  a  solid  academic  foundation  from 

which  to  accurately  answer  the  earlier  research questions.

At this point before delving further into a review of literature relevant to  the topic of the success of AMD and Intel in the processor market it is essential to understand  in brief what events have occurred in the last 6 years. AMD finally caught up to Intel when they  released  the  first  64bit  processor  for  the  consumer  market,  months  before  Intel  intended  to  released theirs in September, 2003 and consequently this processor defeated I ntel’s Pentium 4  in  subsequent  benchmarking  tests  (See Appendix  1).

Later on  when  Intel  thought  they  would get the upper hand by releasing the first dual core processor (two processors on one chip) the  Pentium D, AMD beat Intel again by releasing their X2 which defeated Intel’s Pentium D in all  the  relevant  benchmarks  (See  Appendix  1). After  two  successive  defeats  Intel  realized  that  unless they created processors that answered consumer needs, AMD would continue to defeat  them in both the consumer and business market. Intel defeated AMD in both the business and consumer market in mid 2006 with the release of  their  Core  2  Duo™  line  of  processors.

Not  only  were  these  processors  more  efficient  (See Appendix 1) than AMD’s, they also managed to compete on a power and cost basis at the same  time. With  that  being  said,  the  market  is  still  pretty  competitive  for  both  AMD  and  Intel  yet  according to the Orange County Business Journal in California, Intel is not supposed to be fully  being able to appreciate its success until mid 2007 due to the accumulation of unsold Pentium 4  and Pentium D chips (Womack 2006). This success can be seen in Appendix 12 where Intel has  demonstrated record profits in the second quarter of 2007.

The most publicized facet of the successful processor market is the speed at which innovation  has  occurred. A  new  line  of  processors  or  even  single  products  comes  out  at  least  every  half  year, in the last two years we have gone from a single core

on a processor to four cores in 2007  but despite this innovation, the software applications to be able to use all this innovation are  few  and  far  between. Despite  the  lack  of  software  to  support  these  applications,  consumers  4 ontinue to purchase brand new PC’s with hardware that at best minimally affects their day to  day lifestyle (Goldsborough 2005). In the perfect world if we look at the PC market objectively  we should see that consumers make purchases according to what they need as op posed to the  best deal offered by the big three pc retailers in the world such as Dell, HP, and Lenovo. A key facet of Intel or AMD’s success is their partnerships with the various PC retailers around  the world. In the GCMM, a majority of the processor sales occur because companies like Dell,  HP  and  Lenovo  sell  Laptops  and  Desktops  to  consumers.

These  retail  companies  are  at  the frontline when it comes to customer interaction and the bottom line therefore they are a key  driver for AMD and Intel. Intel previously had a competitive advantage over AMD by partnering  with Dell who is widely known as the largest PC retailer in the world. However in 2006, AMD  announced a partnership with Dell that has essentially negated that competitive advantage and  put AMD on equal ground with the biggest retailers of Intel based PC’s in the world(Edwards  2006).

It  is  these  partnerships  with  the  big  PC  retailers  that  affect  the bottom  line  of  Intel  or AMD as these retailers are the ones who market to the consumer on a daily basis; hence it is  essential to examine consumer behavior. An understanding of

consumer behavior will allow us  to  determine  which  complementary  relationships  are beneficial  to  AMD  and  Intel  in  terms  of  their success within the processor market.

Looking  into  consumer  behavior,  many  psychologists  will  tell  you  simply  that  we  as  human  beings are not rational people and are driven by our needs as stated by Abraham Maslow the  father of behavioral psychology. In a pivotal paper on the managerial significance of behavioral  decision theory, Itamar Simonson concludes that in some situations, consumers do have clear  and strong preferences for particular products or service characteristics(Simonson 1993).

This  simple  statement  more  than  a  decade  ago  indicated the  increasingly  important  nature  of  consumer  behavior  theory  and  why  business’  need  to  understand  this  theory  in  order  to  maximize success in their respective field. 5 Some  scholars  have  criticized  Maslow’s  theories  due  to  their  vague  nature  and  over  simplification but at the end of the day, from a logical standpoint, human beings motivations  have not changed that drastically and are essentially still the same as they were sixty? our years  ago(Ewen  1980). Despite  Maslow’s  contemporary  theoretical  applicability,  a  more  modern  approach is still required as stated by Simonson who further states that companies can increase  their sales significantly by supplementing the voice of the customer with the various “irrational”  influences  on  purchasing  decisions  and  translating  that  knowledge  into  specific  sales,  positioning, pricing, and communications tactics.

Lastly  to  round  out  the  discussion  around  Intel  and  AMD  with  regards  to  their  success  in  the  consumer  processor  market,  the  researcher  will  be  looking  into  the  strategic  management  process  and  the  marketing  machines  of  both  these  companies  in  order  to  understand  their  places  in  the  market. One  of  the  most  prevalent  issues  with  regards  to  either  company  has  been  a  delay  in  the  launch  of  products,  which  is  detrimental  to  any  company  in  any  industry  (Rodda 1998).

Intel enthusiasts will say the only reason AMD has done well so far is because of  Intel’s  mistakes  with  regards  to  meeting  product  launch  dates. However  meeting  consumer  expectations is just part of the problem and that issue may lie with the strategic management  initiatives  adopted  by  both  companies. However  sometimes  it  is  not  just  about  strategically  managing your own company but rather about how to strategically manage your competition. The purpose of examining the management of your competition is the ability to momentarily  slow  your  opponent  or  totally  put  them  out  of  the  game  (Stalk  2006).

The  microprocessor  market is more competitive than ever where the best strategy for a company like AMD would  be to strategically manage the larger Intel Corp. in the effort to utilize their size and flexibility to  gain market share. There are numerous strategies and competitive advantages that a company can gain in order to  achieve success in the consumer market place. In terms of AMD and Intel, due to the size of  the market and there being only two competitors, these business strategies become even more  crucial because one false move by either company can set them on the backburner in order to catch up with the competition. The researcher’s purpose in pursuing this course of study as the  has alluded to above is to explain the success of the only two companies in the GCMM in terms  of  business  as  opposed  to  innovation. After  reviewing  the  current  literature  concerning  the  business aspects of AMD and Intel in chapter2, chapter 3 will discuss in detail the results of the  survey instrument proposed in the next chapter. Lastly chapter 4 will begin with the conclusions  of  the  research  and  will  end  with  recommendations  for  future  research.

Combining  the  strategic,  marketing,  collaboratory  and 

consumer  aspects  of  this  paradigm  will  allow  us  to  determine  whether  or  not  there  exists  a  set  of  characteristics  that  could  be  termed  “critical  success  factors”  in  the  GCMM. The  next  section  will  detail  the  methodology  used  by  the  researcher in order to determine the best approach for exploring this area of business. Research Methodology 1. 4 Designing the Research Program

Designing  the  most  appropriate  research  program  for  this  dissertation  proved  to  be  problematic for the researcher. The first issue that was encountered as stated in the purpose  for  this  dissertation  was  that  traditional  research  was  based  on  the  physical  performance  of  Intel  and  AMD. These  kinds  of  benchmarks  though  useful  would  not  fall  into  the  realm  of  relevant  business  research  therefore  a  broader  perspective  is  needed  to  comprehensively  understand the global consumer processor industry.

The  distinction  must  be  drawn  between  Consumers  and  business’  here,  Companies  and  Consumers  purchase  PC’s  for  very  different  reasons  hence  the  multitude  of  Business  CPU  related research is also irrelevant and cannot be used to create a pertinent research program. The literature review (chapter 2) revealed five classes of consumers and their various adoption  mechanisms in relation to technology however deciding between a qualitative and quantitative  methodology would prove problematic due to the mixed nature of this subject and the research  question.

Maylor and Blackmon compiled a very concise summary (See Appendix 6) of the two different  approaches  and  their  various  aspects  in  their  book,  Researching  Business  and  7 Management(Maylor  and  Blackmon  2005). The  researcher  must  note  that  the  book  caters  specifically for business related research hence the provided summary may be simplistic but it  carefully  accounts  for  all  the  questions  that  could  be  answered  in  any  potential  business  scenario.

The potential scenario within the scope of this paper is the critical success factors in the global  consumer  microprocessor  market. Before  the  research  question  can  be  understand,  the  relevant linkage must be established between the topic and the research quest ion. There are  numerous definitions of success hence quoting or referencing a single definition would defeat  the  validity  for  this  paper  since  success  could  be  argued  from  numerous  perspectives. The  researcher  defines  success  with  reference  to  the  semi? onductor  industry  as  the  positive  progress made by a company in creating sustainable competitive advantage even if immediate  profits  are  not  realized. Critical  success  can  then  be  defined  as  the  factors  of  success  that  a  company should prioritize in order to proceed in a constructive direction. The processor market  is  inherently  global  in  the  consumer  context  because  Intel  and  AMD  are  the  only  two  competitors who supply the pertinent retailers with their products.

Thus it can be concluded that the main aim for this research is to discover the main influences  behind the purchase of a particular PC by a consumer and the relation of this influence to the  critical success of Intel and AMD. Though it was the researcher’s intention at the beginning of  this  research  to  consider  the  business  perspective,  the  subsequent  literature  revealed  the  following contradictory discoveries from a theoretical standpoint:

1. The industry is highly competitive and the products are technologically advanced yet both companies

have fallen back on price competition in order to generate  profits. Price cannot be a consideration for the average consumer because it is at the  retailers where the products with the processors are bought. Therefore it is the  retailers that endure the immediate costs for the processor with the consumer  dealing with the initial cost and the markup.Consumers cannot appreciate a significant price cut because the retailers decide the spread of products and what  processors go inside. Looking at Appendix 5, there is no significant price differential between AMD and Intel based retail products hence price cutting is a flawed and  inconsequential strategy. 8

2. The rate at which processors are released is only increasing despite the lack of  software support for multi? cores and the benchmarks stating that consumers do not  need the latest generation of processors. The innovation strategy adopted by AMD and Intel is illogical from a business standpoint hence it cannot be a factor for  success within this industry because this innovation is not targeted at their  customers.

3. The literature suggests that customer centricity is critical to any business in the  modern globalized business environment yet as established in the above point, Intel  and AMD are both pushing Quad Cores on the average consumer. Customer focus  has been lost by both of these companies yet Intel in its 2nd Quarter 2007 has  recorded significant profits therefore this theoretical base is invalidated. Despite the lack of customer focus, Intel and AMD are still able to generate profits therefore  customer centricity from a business standpoint is irrelevant.

4. First Mover Advantage has also been a popular theory employed by the academic  populace to explain the

success of company over another yet as proved in the  literature review it does not apply to the CPU industry. The GCMM is so fast moving  that companies willing to invest in FMA would not garner the traditional advantage  thereby negating the invested resources which could have been used in a more