re: "If the inferior firm (AMD = HCLP)) has high costs and must sell at a discount to the leader (INTC) it can never pose a real threat of taking over leadership from the low cost high price dominsnt firm. (LCHP = INTC)."
I find your analysis to be both thoughtful and provocative; but I have to disagree with your basic premises. The only, and I must repeat: ONLY reasons why AMD has been has been a high cost producer is poor initial production, poor yields, and, hence poor initial implementation of perfectly excellent plans. These issues have obviously been non-trivial and the company could go under if they do not change this pattern very soon. However, if they can, they will suddenly become the low cost producer; and, I should add, by far. iNTEL, so far to their great advantage over AMD, has redundant production facilities, redundant research facilities (ie very expensive redundant research teams duplicating efforts while working in blind competition with each other), and extraordinarily high promotional (advertising) costs. If AMD is able to get its act together before it collapses; it will be, by far the low cost producer. The company is, to employ two hackneyed cliches; "lean and mean" by necessity while iNTEL, though paranoid (and perhaps, in part, because of it) very "fat", and, hence, vulnerable.
Regards,
DARBES |
