How Has Amd Created A True Duopoly In The Microprocessor Business? Essay - 1,087 words

How has AMD created a true duopoly in the microprocessor business? According to Porter, there are two main strategies that can make any firm profitable in any industry. The scientist is sure that failures did not follow any strategy or try to follow both, but it is impossible because there is a key difference in these strategies. They are Low-cost Strategy and Differentiation Strategy. Following the first strategy, the firm tries to diminish all its expenses. These measures give it an opportunity to reduce prices comparing with other firms in the market. At the first sight, the measures seriously constrain profit margins. But the costs on producing the product are reduced the same.


It means that the firm will makes more profit than other firms in the industry. The firms competitors can follow two different ways: they can undercut the prices of its products (it is called a price war), or start to produce the products different. In this case, the competitors will not take care about prices. These measures are taken in Differentiation Strategy. This way is more profitable method because a price war can diminish profits almost completely. Thats why there are a lot of substitute products. In the world of severe competition the way Advanced Micro Devices (ADM) has reached its success is the best evidence of well organized and planned marketing strategy.


For a long time Intel and ADM have been struggling for the first place in the electronics market. During the period, AMD has become from a producer of cut-rate clone chips a real competitor and rival to Intel. Advanced Micro Devices, Inc. (AMD) was established in 1969 as a producer of microprocessors for computers. It was founded in Sunnyvale, California. The first products of the company were logic chips, and later it supplied the market with non-volatile flash memory.


The best processor made by AMD at that time was 29K. Other attempts were not successful. In 1975, Intel was considered to be the company number one in producing microprocessors; and the most famous one was 8080. The same year AMD presented a reverse-engineered clone of the 8080 microprocessor. The company decided to concentrate the affords on producing Intel-compatible microprocessors and flash memory. Though AMD was not as popular as Intel but it became a competitor in secondary markets. With the purpose to avoid direct competition, in February 1982, a contract between two companies (Intel and AMD) was signed. According to the terms of the contract AMD became a licensed second-source manufacturer of 8086 and 8088 processors.


In 1986, IBM, one of the largest producers of personal computers, decided to use the Intel 8088. But according to the terms of IBM's policy it was to have two or more suppliers of chips. By the time AMD had produced its 80286 processors and was ready to work under the terms of arrangement. The same year Intel revoked the agreement with AMD. The AMD 386 project was not supplied with technical details. In 1991, after a long legal dispute, AMD won the case; and, according to the decision of the Supreme Court of California, Intel had to pay about $1 billion as a compensation for violation of contract.


But AMD was sentenced to develop "clean room" ...................................................................................................................................................................................................................................................................................................................................................................

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Essay Tags: intel, differentiation strategy, processor, supreme court, microprocessor

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