Technological change represents another key threat. As new technologies emerge and the end needs of users shift, the existing industry paradigm can shift quickly and decisively. For example, if the personal computer were to become outmoded in the next ten years, AMD's capture of the market leading manufacturers would be worthless. This is entirely possible, given the pace of change. AMD must always be on top of change in the industry, or risk being left behind.
Lastly, there is the risk of talent defection. AMD relies on top talent to develop its technology, to market the products, and to fight the legal battles. If their supply of talent were to be compromised, either by Intel or by startups, AMD would find it increasingly difficult to compete. They must ensure that their human resources systems are sufficient to attract and retain the top talent that is required to drive their business forward.
Analysis of Current Issues
There are three current issues facing AMD. The first is the competitive relationship with Intel. The firm has won a decision in Japan against Intel but similar action in the U.S. has been less successful. It remains to be seen whether or not AMD can parlay its success in the Japanese courts into increased market share in that country. Intel's response to AMD's recent exploitation of the regulatory system and marketing success has been to engage the company in a price war. AMD is going to need a complex, integrated strategy in order to not only fend off Intel attacks but to strike back at its much larger rival.
The second current issue is with respect to integrating ATI into the company and building the synergies that AMD management hopes will allow it to better compete against Intel. There are several culture issues that must be addressed in bringing a new firm into the fold. Moreover, building the communications systems that will facilitate knowledge-building and product synergies will take time. Furthermore, there is a high risk of talent defection from ATI as a result of this takeover. Too much defection could reduce the value of the transaction.
The third strategic issue is with respect to building share in the new portable device markets. AMD has an opportunity to establish market share in these growing segments and if it can do so, it can achieve substantial growth that will not only help revenues but will also help the company to build the critical mass necessary to battle Intel and other competitors.
Strategic Options
The first strategic option is to continue focusing on stealing PC makers away from Intel. There is significant room for expansion in this market and despite the rise in portable devices, there is no indication that personal computing is going to disappear anytime soon. This option has relatively low R&D costs and plays to AMD's existing strengths in marketing and technological development. This option, however, does not give AMD much chance to take advantage off the rapid growth in portable devices. Moreover, it places virtually the firm's entire revenue streams in the middle of a price war with Intel.
The second strategic option is...
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