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Evaluation Of Corporate Diversification Strategies

An Evaluation of Corporate Diversification Strategies

SINGLE BUSINESS STRATEGY

Company: AMD

Single business: 95% or more of firm revenues comes from a single business. Advanced Micro Devices, Inc. (AMD) is a semiconductor company that designs, manufactures and markets microprocessors for the computing, communications and consumer electronics markets. The company also markets embedded microprocessors for personal connectivity devices and other consumer markets. The leading semiconductor company has manufacturing and testing facilities in the United States, Europe and Asia, and sales offices throughout the world (AMD 2006).

Sales by Business Area
It principally concentrates in semiconductor manufacturing. Total net sales for 2005 of $5.8 billion increased 17 per cent compared with net sales for 2004 of $5.0 billion (AMD 2006). This growth was driven by the performance of its microprocessor segment where net sales of $3.8 billion increased by 50 per cent compared to 2004, due to increased unit sales and average selling prices (AMD 2006).

Rationale for Business Strategy
Because a large pool of technology makers (computers, phone, gaming, servers, and internet, for instance) rely on the semiconductor industry for manufacturing consumer devices, it makes commercial wisdom for AMD to devote every drop of resources to meet increasing demand for advanced chips.

Appraisal of Business Strategy
Like other chips’ makers such as Intel Corp, AMD pursues a single-product line strategy. That strategy places the chips’ maker in a leading position in the development and innovation of electronics components.
Moreover, AMD’s single business model has earned the company the reputation as one of the most recognizable computer processor brands against staunch challengers like Intel Corp., and Samsung Electronics Co. Ninety per cent of the top 100 and more than 45 per cent of the top 500 of the Forbes Global 2000 companies or their subsidiaries are using AMD64...