Am: a Customer Centric Approach to Innovation

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AMD : A Customer-Centric Approach to Innovation
ISEG – ISM MBA Program
September 30, 2010
Professional Management Skills Assessment
Word Count: 2600

This case analyzes the strategy of AMD, a microprocessor manufacturer which is a direct competitor of another microprocessor company, Intel. Between the two companies the competition has never been really balanced because of Intel’s much more Important Size and budget. AMD has found itself in a bad shape several times but has always success in overcoming difficulties resulting from its far smaller market shares and – over the years – has built a strategy to survive and strengthen its position against its giant competitor Intel.

What would it take for AMD to see significant increase in its market share in processors used in corporate desktops and notebooks? How can the success of Opteron in the server segment be leveraged to other segments? It would take a lot for AMD to catch up with Intel as the gap in terms of market share between the two companies is huge. Except in very specialized niche markets, Intel has kept a significant leadership in every segments, including the server microprocessor market where AMD best performed. Still in the second quarter of 2010, the domination of Intel over the market was undeniable with 86.1% market share against 13.7% for AMD on the pc processor segment, 72.2% against 27.5% on the desktop microprocessor market and a 93.5% market share against 6.5% on the x 86 server microprocessor segment. (Michelle Maisto citing IDC, 2010). Moreover as mentioned by Ofek and Barley “Intel’s dominant market position could limit AMD’s ability to make inroads to key market segments beyond servers, such as corporate desktops and notebooks.” In order to gain significant market share in processor used in corporate desktops and notebooks, AMD should, in my opinion, focus on differentiating its products by giving them an added value that would be valuable to end users. That’s what, so far, the company couldn’t achieve for the desktops and notebooks ranges of microprocessors. Indeed, their price/performance ratio is not as interesting as the performance of their range of servers’ microprocessors.(Ofek & Barley p.11) To not have a value added on those microprocessors, that would differentiate them from Intel’s microprocessors, is definitely a big issue for opening significant inroads into this market. The product differentiation is one solution. By improving the quality and the number of features of its desktops and notebooks microprocessors, AMD can get a competitive advantage over Intel’s product. Though, since Intel’s R&D funds are much higher (Ofek & Barley p.19), one good way to overtake Intel would be to perpetuate the “virtual Gorilla” Strategy presented by Ofek & Barley p.3. Technology partnership would indeed accelerate the improvement of AMD products and would create synergies with partners that, in the case of AMD, often are potential customers too. The second solution for AMD is to differentiate its product by conceptualizing new ways of using products based on their assets. The example given on the paper is a perfect illustration of what could have been done to create a new way of using corporate desktop by “reinventing the commercial client” with the “Server based computing.” (Ofek & Barley p. 12). The idea was great; it was about selling to clients a computing system based on the best asset of AMD which was the server’s microprocessors. Finally the “customer centric approach” set by AMD to improve and develop its products in a way that serves the best end users is a good idea to explore. It first allows the company to create products with features that are supposed to be very close to customers’ expectations. On the other hand this perpetual communication and mutual feedback introduced between AMD and the end users contribute to build a relationship based on trust that might turn to be a long term relationship....
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