6 1 Business Plan Part 1: AMD Student’s Name Institutional Affiliation Course

6
1
Business Plan Part 1: AMD
Student’s Name
Institutional Affiliation
Course
Professor’s Name
Date
Contents
2 Executive Summary 6
2.1 Keywords: 6
3 Mission and Vision Statement & Innovation Description 6
3.1 Mission Statement 6
3.2 Vision Statement 6
3.3 Innovation Description 6
4 Company Description 7
4.1 Type of Business 7
4.2 Legal Structure 7
4.3 Core Competencies 7
4.4 Demographics Overview 8
4.5 Location 8
4.6 Financial Viability 8
5 Industry Analysis and Trends 8
5.1 Industry Information 8
5.2 Industry Trends 10
5.3 Key Players in the Industry 12
5.4 Competitive Advantage Analysis 12
5.5 Barriers and Challenges to Entering the Market 13
5.6 Environmental Scan 13
5.6.1 Significant Factors in the Macro-Environment 13
5.6.2 SWOT Analysis 16
5.6.3 Copyrights, Patents, and Intellectual Property Rights 17
5.6.4 R&D Activities 18
5.6.5 Failures in the Industry 18
5.6.6 Opportunities 18
5.6.7 Changes in the Market 18
5.6.8 Products and Services 19
6 Strategic Positioning, Strategic Intent 21
7 Product 23
8 Management Plan 24
8.1 Board of directors & rationale for members 24
8.1.1 The Executive Committee 24
8.1.2 The Audit Committee 25
8.1.3 The Compensation Committee 25
8.1.4 The Nominating Committee 25
8.2 Organizational chart 25
8.3 Key managers 26
8.4 Plans to attract, develop, and retain key personnel 26
8.5 Future additions to the current management team 26
8.6 Compensation and reward plans 27
8.7 Training and motivation plan 27
8.8 Insurance plans and costs 27
8.9 Government rules and regulations 28
8.10 Drucker’s Five Questions 28
8.10.1 What is your mission? 28
8.10.2 Who is your customer? 28
8.10.3 What does your customer value? 28
8.10.4 What results do you seek? 29
8.10.5 What is your plan? 29
9 Marketing Plan 29
9.1 Competitive Advantage 29
9.2 Characteristics of the Target Market 30
9.3 The Demand of the Target Market 31
9.4 Nature of the Competition 33
9.5 Total Sales to the Target Market in the U.S. 34
9.6 Sales Projections 34
9.7 Percentage of Demand Expected 34
9.8 4 P’s 35
9.8.1 Product 35
9.8.2 Price 35
9.8.3 Place 35
9.8.4 Promotion 36
9.9 Overall Marketing Strategy 36
9.10 Specific Marketing Mix 36
9.11 Strengths and Weaknesses in Satisfying Customer Needs 37
9.11.1 Strengths 37
9.11.2 Weaknesses 37
9.12 Communication Plan Internally and Externally 37
9.12.1 Internally 37
9.12.2 Externally 37
9.13 Channels of Distribution 38
9.14 Sales Strategy (CRM Program) 38
9.15 Product Cost 38
References 39
Business Plan Part 1: AMD
Executive Summary
Keywords:
Mission and Vision Statement & Innovation Description
Mission Statement
“Build great products that accelerate next-generation computing experiences.”
Vision Statement
“High performance and adaptive computing is transforming our lives.”
Innovation Description
A relatively new and possibly disruptive invention, cloud gaming (also known as game-streaming) is a very new concept. It entails people playing games remotely on a server while simultaneously broadcasting the live game feed to their computers as they compete (Nelius, 2019). Cloud computing and game streaming are used in conjunction with one another. As with game streaming, virtual machines are comparable to game streaming. Their actions occur in the cloud and are only sent to the customer’s device (Nelius, 2019). The server is responsible for the process-intensive portions of any activity the customer participates in. The visual feed of the virtual machine’s user interface is sent to the user’s computer over the internet and shown on the user’s computer. This technology is particularly well suited for folks who like playing graphically demanding video games (Laghari et al., 2019). Buying a gaming system that can run the most recent games with the greatest graphics and highest resolutions is expensive. Many consoles cost hundreds of dollars or more (Singh, 2021). These stunning visuals will be accessible to the ordinary gamer via cloud-based game streaming, allowing consumers to enjoy quality gaming at a more reasonable price (Laghari et al., 2019). This discovery can completely transform the gaming business as the gaming world evolves to include greater visuals and smoother action (Laghari et al., 2019). Therefore, cloud gaming is likely to be an excellent investment for AMD.
Company Description
Type of Business
AMD is in the manufacturing business. The company manufactures semiconductor chipsets of various speeds and clocking frequencies and then sells these chips to original equipment manufacturers (OEMs) for inclusion in the devices manufactured by these manufacturers (Craft Co, 2022). As a secondary business, AMD creates graphics cards to be added to gaming and computing devices to enhance their computing power (Craft Co, 2022). According to Craft Co, AMD also offers data hosting and management services through its datacenters headquartered in California but spread out throughout the US (2022)
Legal Structure
AMD is formally and legally self-designated as a corporation (Craft Co, 2022). The company has several subsidiaries that specialize in specific products such as Xilinx (Craft Co, 2022). These smaller business units are all in the ambit of AMD and make up the company’s portfolio.
Core Competencies
AMD is a multinational semiconductor corporation. Semiconductors are electronic components that may be found in a wide range of electrical devices and systems. The term “integrated circuit” refers to a silicon wafer that is made up of several interlinked transistors on a chip, and AMD is a company that specializes in the production of such devices. The company also makes graphics cards and sells them to companies and individuals as well as selling its chips. Hence, the company has extensive expertise in creating computing chips, graphics cards and creating and managing datacenters. The intended cloud gaming venture is one which is promising for AMD because it leverages existing competencies such as datacenter expertise and existing infrastructure to further create value for the company and its shareholders. Cloud gaming will mesh well with the company’s existing competencies because the company already has competencies that will expedite this undertaking.
Demographics Overview
The expected target market is
Between 18-65
Male
With at least $10 to spend on gaming every month
Location
The company is located in California, in the U.S. (Craft Co, 2022)
Financial Viability
According to Craft Co, AMD has a stable financial outlook, with its stock prices seemingly bullish for the foreseeable future and its financial performance being relatively good (2022)
Industry Analysis and Trends
Industry Information
AMD is a major semiconductor manufacturer which also deals with graphics processing utilities. Semiconductors are a critical component of modern electronics, serving as a critical component of many commonly used electronic devices such as smartphones, tablets, and personal computers- essentially all of the modern devices that are commonly used (Statista, 2022). As one would anticipate, given its vital role, the semiconductor business is large and competitive, as is the case with other industries. In 2020, worldwide semiconductor sales will hit 466 billion U.S. dollars. According to industry forecasts, the semiconductor industry is expected to increase once again in 2021 (Statista, 2022). Memory semiconductors, graphics processing units, and 5G chips were the fastest-growing segments of the semiconductor business in 2017 (Statista, 2022). Therefore, despite its relatively small size, AMD is one of the most important companies in the world.
The global chip shortage is expected to occur in 2021 and beyond. The COVID-19 pandemic affected the semiconductor sector, with the first disruption noticed in China and Taiwan – two of the world’s largest chip-producing countries – where facilities were forced to close when the pandemic first arrived in late 2009 (Statista, 2022). While semiconductor output rebounded and revenue increased in 2020, spikes in demand owing to shifting consumer habits, along with issues in chip capacity allocation, led to a worldwide chip shortage in 2021. In addition to geopolitical conflicts between the U.S. and China, major weather occurrences such as the winter storm that slammed Texas have exacerbated the chip shortages (Statista, 2022). Consequently, several large semiconductor firms have predicted that shortages would remain until 2022, if not beyond.
Figure 1: Industry Sales
(Statista, 2022)
In the semiconductor sector, smartphones represent a significant market share, particularly as these devices grow more powerful and capable of supporting technologies like X.R., 5G, and artificial intelligence. As cloud data centers and edge computing become more prevalent, the semiconductor industry will see an increase in the importance of servers and data centers, which will be aided by the development of artificial intelligence processors (Statista, 2022). Increased demand is also projected for industrial and automotive applications, which will expand as production facilities and automobiles become smarter and more connected due to the increasing need for more powerful semiconductor technology to do these jobs (Statista, 2022). Although the sector has the potential to capitalize on these prospects, worries about techno-nationalism and future supply chain disruption may restrict the degree to which it can do so.
Industry Trends
Figure 2: Semiconductor Market Overview
Source: (Hruska, 2021)
Figure 3: Semiconductor Market Forecasts
Source: (Jewell, 2021)
Figure 4: Top Semiconductor Revenues
Source: (Jewell, 2021).
Key Players in the Industry
Intel (Competitor)
NVIDIA (Competitor)
Google (Competitor)
Samsung (Competitor)
TSMC (Partner)
Competitive Advantage Analysis
Table 1
Company
Competitive advantage
Elaboration
AMD
Strategic alliances
AMD partners with other companies such as Meta to provide its cloud gaming services (Fenollol, 2022).
NVidia
Cost leadership
NVidia has the lowest costs for cloud gaming (Fenollol, 2022).
Samsung Electronics
Differentiation
Cloud gaming services will be available across all Samsung devices, including mobile phones and televisions (Perez, 2022), making it convenient for those who already own Samsung devices.
Google Stadia
Differentiation
Its services are reliable, and one gets a slightly different selection of games and superior performance (Fenollol, 2022).
Barriers and Challenges to Entering the Market
The main barrier to entering the cloud market is the high startup costs. Another significant barrier is the tendency of customers to take a long time to adopt new technologies. Hence, often wait for long without realizing any profits.
Environmental Scan
Significant Factors in the Macro-Environment
Political factors
Being a multinational company, AMD can be affected by international political fallouts. A critical point is the ongoing war between Russia and Ukraine and the geopolitical standoff between NATO and Russia together with its allies. The war has caused supply chain shocks and ripple economic effects because of an ideological difference. The prices of many consumer goods have been rising because of the inflation resulting from the geopolitical standoff between NATO and Russia with its allies (Amaro, 2022). The world is in a delicate political state, and it may not take much to escalate the conflict between Russia and Ukraine further and involve others in this conflict (Amaro, 2022). Such a happening would be disastrous, to say the least, leading to war on a scale never seen before. Therefore, the world, especially Europe and the Americas, is in heightened tension and alertness because of the geopolitical conflicts between European countries and others.
Economic factors
Coming from an economic slump in 2020, the world’s economy is now improving. However, many financial analysts predict that the world is not out of the woods yet. The war between Russia and Ukraine – coincidentally being some of the largest producers of gas and wheat – has seen the prices of commodities shoot up (Amaro, 2022). AMD is in a unique place where this economic condition is considered. AMD is a company that specializes in data centers and the manufacturing of specific chips (Craft Co, 2022), and the parts for building or maintaining these are going to get more expensive with time. Therefore, although some inflation is definitely to be expected, rapid inflation in the countries where AMD does business will be very detrimental to the company’s operations.
Social factors
Social factors also impact how AMD is run and how the company does its business. The company is a multinational and relies on the world having some degree of globalization and egalitarianism to conduct its business as usual. Fortunately for AMD, the world today, with the U.S. at the forefront, continues to champion freedom, equality, and democracy (United States Department of State, 2021). These values are so ubiquitous that some people have lost sight of what they mean. Values that encourage the members of different societies the world over to come together are being propounded day by day, ensuring safety and freedom for most people.
Technological factors
The pace of technological innovation, especially for a chip manufacturer, is blistering. Many of the world’s silicon chipsets produced a mere ten years ago are now obsolete and even viewed as archaic by some of the more progressive youth (Kareta, 2022). The rapid pace of innovation described by Kareta (2022) forces AMD to keep on its toes and continue spending many millions on research and development (AMD, 2022). This is an inconvenience for the company, seeing as sometimes the changes between two different generations of the same chip are slight. AMD has to keep spending much money for fear that its competitors will outperform it, a pressure that can be draining at times.
Legal factors
Operating internationally does have its drawbacks. Liability is a real risk and may be debilitating for the company that finds itself in such a predicament (Golson, 2019). The governments in countries where AMD is operating intend to sometimes change their laws on multinational corporations, a state of legal flux that may be tiresome for any company. The changing laws and the harsh penalties for breaking them tend to cost AMD a lot because the company has to maintain lawyers for every country in which it operates.
Environmental factors
AMD, a silicon manufacturer, is a company heavily invested in technologies that can stem the tide of global warming. The company exclusively supplies Tesla, a well-known electric vehicle company, with AMD Ryzen chips for Model 3s and Model Ys (AMD, 2022). This fact suffices to make the company eligible for various incentives. The company also has a very proactive corporate social responsibility strategy, emphasizing the company’s dedication to conserving the environment (AMD, 2022). Now, some of the products that go into semiconductor chip manufacturing are potentially harmful to the environment (AMD, 2022). This risk necessitates the careful monitoring of AMD’s supply chain by the company’s upper management. All corrupt or incompliant suppliers are sternly warned at first. If nothing changes, their arrangements with the company are terminated (AMD, 2022). The company is environmentally accountable.
SWOT Analysis
Figure 5: SWOT Analysis
Copyrights, Patents, and Intellectual Property Rights
AMD has patented its data center configurations and the trademarks which it is to use in its planned foray into cloud gaming. Other patents include the company’s similar and related patents for technologies that will help expedite the cloud gaming venture.
R&D Activities
A lot of research and development will be necessary to stay ahead of the rest. New algorithms for sorting data and making efficient use of 5G networks will have to be patented. Also, other related activities, such as designing new data center configurations. Considering those details, it is clear that AMD will have to significantly increase its spending on research and development in the coming years to keep up and even surpass its considerable competition.
Failures in the Industry
So far, cloud gaming has not been prevalent. Only around 40% of customers are interested in this technology, which is an ill omen for the optimism of those who thought about and carried out the investments in cloud gaming in different companies. This is the most significant failing of the industry. Also, the amount by which semiconductor chips can be made to accept new transistors is reducing day by day, implying that at some point in the foreseeable future, making smaller and faster chips and GPUs may start becoming very expensive and may bring with it a diminishing marginal return. So far, no solutions have been found for these issues.
Opportunities
Investment in cloud gaming
Further dabbling in data center-related ventures
Investing in P.C. products
Downwards integration (the selling of some of AMD’s products to the end-users instead of to OEMs and retailers)
Changes in the Market
In recent years, the cloud gaming market has speedily blossomed and grown. Large companies have joined the fray, sinking billions into cloud gaming in the hope of catching the trend while it is yet young. Many prominent market researchers project that the cloud gaming market will grow by a CAGR of between 30% to roughly 60% by 2027. This growth is large, and if it is realized, the growth could see the toppling of some giants in the industry and the creation of new behemoths. Change is expected in the size and composition of the industry.
Products and Services
Table 2: Products and Services
Product/Service
Detailed Description
Product Lifecycle
Copyrights, Patents, and Intellectual Property Rights
R&D Activities
Processors
AMD manufactures chips for secondary OEMs. These chips handle advanced computations at hundreds or even thousands of cycles per second.
Maturity
Product name
Product description
Patents
Improvement of current product lines
Development of new processors
Graphics Cards and Accelerators
AMD manufactures graphics cards for sale to individual consumers and large OEMs, depending on the customers’ preferences. These are silicon chipsets that are used to enhance a device’s computational ability and enable the device to render complex graphics in high resolutions and with high refresh rates.
Maturity
Product name
Product description
Patents
Improvement of current product lines
Embedded Products
AMD provides small chipsets that enable producers to create extremely small devices with excellent graphics.
Growth
Product name
Product description
Patents
Improvement of existing products
How the Position in the Product Life Cycle Affects the Business Plan
Some of the products that AMD has are in advanced stages of the product lifecycle, and this necessitates fresh innovation. Having been around for a long time (AMD, 2022), processors and graphics cards and accelerators are in the mature stages of the product lifecycle (Stark, 2022). As posited by Stark (2022), these products have steady revenues and contribute significantly to the long-term health and prosperity of the company, but they manifest little potential for growth. Embedded devices are the only products in the growth phase that AMD has. To keep growing, AMD needs to innovate and create new products or services which can reinvigorate the company. AMD needs to reinvigorate itself, hence the cloud gaming venture.
How the Position in the Industry Cycle Affects the Business Plan
The position of the semiconductor industry in its industry lifecycle affects the business plan. The semiconductor industry has been in the maturity phase for quite some time, possibly for close to twenty years now (Feldhan, 2003), and it is still growing (Jewell, 2021). While the decline of this industry is not yet in sight, and it is still growing, albeit with some ups and downs (Hruska, 2021), the companies in the industry would do well to prepare themselves for the inevitable decline. Introducing new products would be a good idea. Now, top-of-the-range computing is indeed getting faster and faster (Shalf, 2020), but it is also quite expensive (Singh, 2021), and many consumers are not able to afford top-of-the-end processors. AMD may have already realized this, judging by its newfound focus on datacenters as a primary revenue stream (AMD, 2022). Therefore, to prepare themselves for the inevitable decline of the semiconductor industry and the maturity phase of the cloud computing or software-as-a-service industry, AMD would do well to look into ways of harnessing growing interest in cloud computing by investing cloud gaming.
Strategic Positioning, Strategic Intent
AMD had an excellent year in 2021, and it is expected that the company’s good fortune will continue. AMD has published its strategic outlook for 2022 and subsequent years in a comprehensive report (see AMD (2022)). AMD’s $35 billion purchase of Xilinx is expected to be completed in the first quarter of 2022. Xilinx is the leading manufacturer of field-programmable gate arrays. The two companies will most certainly gain market share from Intel due to their partnership. AMD has lately received two enhancements (AMD, 2022). One comes from KeyBanc, which raised its overweight rating from sector weight to $155 and set a price objective of $155 per share (AMD, 2022). Another comes from Goldman Sachs, in which the analyst expects the stock to reach $170 in the next several months. AMD performs very well when forming collaborations with major technology companies. AMD processors will be used to run the metaverse and assist in operating its data centers by Meta Platforms. In 2022, Tesla’s latest Model 3 and Y cars will also be fitted with the latest AMD Ryzen processor (AMD, 2022). AMD also announced earlier this month that Amazon Web Services has decided to expand its AMD EPYC processor-based products and services with the public release of the new Amazon EC2 Hpc6a Instances, which are specifically designed for high-performance processing workflows in the cloud and are powered by AMD EPYC processors (AMD, 2022). Investors might feel a sense of anticipation because of what is yet to emerge when agreements like these are announced. AMD announced profits for every share of $0.73, above expectations of $0.67, and sales of $4.30 billion, exceeding expectations of $4.12 billion in the most recent quarter (AMD, 2022). All in all, AMD is doing well, and different strategies are geared toward taking advantage of the company’s meteoric growth.
AMD has released a lot of technology, taking the market by storm, and it is likely to continue with this trend with time. For the purchase of Xilinx, AMD stated that it had gained permission from the People’s Republic of China’s State Administration for Market Regulation (SAMR) for the transaction (AMD, 2022). AMD expects the transaction to be completed in the first quarter of 2022.
AMD continues to gain significant traction in the data center field, as seen by the increasing usage of powerful AMD EPYC processors, AMD InstinctTM accelerators, data center solutions, and the addition of new clients and the expansion of cloud capabilities. Leading cloud providers launched more than 130 new public instances in the third quarter (AMD, 2022). The result of AMD’s efforts is a server that delivers industry-leading performance-per-watt across a wide range of applications. AMD currently powers 73 supercomputers on the most recent Top500 list, representing a more than threefold increase from the previous ranking in November 2020 (AMD, 2022). AMD also powers four of the world’s top ten most powerful supercomputers and also the most formidable supercomputer in Europe, the Middle East, and Africa (EMEA).
Current assumptions serve as the foundation for AMD’s forecast remarks. AMD estimates sales to reach around $5.0 billion, give or take $100 million, in the first quarter of 2022, representing an increase of roughly 45 percent year over year and approximately 4 percent quarter over quarter, according to the company (AMD, 2022). The rise in revenue from one year to the next is likely to be caused by development throughout all industries. It is projected that increasing client/server processor income would be the primary driver of the quarter-over-quarter growth.
According to its financial forecast, AMD forecasts a non-GAAP gross margin to be roughly 50.5 percent in the first quarter of 2022. AMD anticipates sales of about $21.5 billion for the entire year of 2022, representing an increase of roughly 31 percent above revenue in the prior year, driven by an increase across all sectors (AMD, 2022). According to the company, AMD forecasts a non-GAAP gross margin to reach roughly 51 percent in the fiscal year 2022 (AMD, 2022). Thus, AMD is likely to pursue a business strategy known as “grow-and-build” to achieve success. Using this method, the firm will be able to capitalize on recent advancements while also aggressively expanding. AMD is projected to outperform Intel and NVidia due to its future growth-oriented approach to corporate strategy.
Product
Game-streaming works concurrently with cloud computing. Virtual machines are similar to game-streaming because the activities in the cloud are only relayed to the customer’s device (Fenollol, 2022). The computing takes place in the cloud (Fenollol, 2022). The process-intensive aspects of any activities the customer engages in are done on a server. The visual feed of the user interface of the virtual machine is relayed over the internet to the user’s computer for display (Fenollol, 2022). This technology is especially suited for those who play graphics-intensive games. Gaming consoles that can run the latest games with the best graphics and highest resolutions are costly, often selling at thousands of dollars and above (Singh, 2021). Cloud game-streaming will make these beautiful graphics available for the average gamer, enabling them to experience premium gaming at an affordable price. This innovation can revolutionize the gaming industry as the gaming world changes to manifest higher graphics and smoother motion. Although the internet may be slow in many places, the investment in 5G internet infrastructure in the USA will make streaming games more attractive and cheaper than purchasing expensive gaming consoles and equipment (Fellonol, 2022). Overall, cloud gaming, which is likely to make gaming so much more affordable and enjoyable for the average Joe who cannot afford a gaming rig costing thousands of dollars, will be a valuable addition to the gaming world.
Management Plan
Board of directors & rationale for members
The board of directors for the investment in cloud gaming will be composed of a task force appointed by the upper management at AMD. The members of this board are to be appointed on necessity and merit. The members will only be appointed to the board of directors presiding over the cloud gaming division if their posts are necessary (if the division cannot be profitable to its full capacity without them) and if they are eminently qualified for the job both education-wise and experience-wise. The board of directors will consist of the following personnel. Every member belongs to only one committee so as to eliminate conflicts of interest and to save the members’ time.
The Executive Committee
Magnus Svidler – majority shareholder, independent director (chairperson)
Wu Xi Chan – COO (deputy chairperson)
Mary Adler – CEO (secretary)
Susanna Watson – CFO (treasurer)
The Audit Committee
Peter Svidler – former auditor in Morgan Stanley, independent director (chairperson)
Jan Carlsen – former CFO, independent director (deputy chairperson)
Jane Doe – financial advisor, majority shareholder, independent director (secretary)
The Compensation Committee
Ben Botez – mayor’s chief of staff, independent director, majority shareholder (chairperson)
Alexandra Finegold – HR director (deputy chairperson)
Hosea Crowley – independent director, majority shareholder (secretary)
The Nominating Committee
Adam Smith – liaison officer (chairperson)
Eric Rozman – independent director (deputy chairperson)
Levy Rosen – independent director (secretary)
Lucy Whitman – independent director
Organizational Chart
Figure 6: Organizational Chart
Key managers
A cloud gaming division will manage the new data centers. This division will be structured with a director of the entire cloud gaming division at the top of the pyramid, followed by an operations manager, a tech manager, a data center manager, and a project manager. H.R. and marketing functions will be maintained by the company’s H.R. and marketing respectively. The managers will also have supervisors under them for critical functions of their respective departments.
Plans to Attract, Develop, And Retain Key Personnel
Attracting key personnel will be done through marketing the company and approaching top talent with lucrative offers. An emphasis will also be placed on intrinsically motivating employees to join the company by infusing them with enthusiasm and eagerness to work with AMD on the project. AMD intends to transform the gaming industry, along with other industry leaders, and attracting top talent, especially in the research and development department of the cloud gaming division is key to making this transformation a reality.
Future Additions to The Current Management Team
Later on, the management team will grow. A customer relations manager will be hired to deal with the ever-increasing number of clients the company expects to have over the coming years. Also, artificial intelligence is expected to play a role in efficiently allocating data center resources as the number of users in each data center grows (McKendrick, 2021). With time, a data science manager will be added to the management team. Other managers are expected and will be hired as the need for their services comes up.
Compensation and Reward Plans
The company’s top talent is to be highly compensated with perks and good payment packages topping the range, with lead researchers’ and engineers’ salaries starting from approximately $200,000 annually. Other skilled employees will be similarly well remunerated, with their salaries being in the top range of all workers in the U.S., depending on their industries. Additional rewards will be doled out to those who fit the criteria. Bonuses will be given to those whose actions demonstrably bring monetary value to the company.
Training and Motivation Plan
Vroom’s expectancy theory of motivation will be used to conceptualize the company’s training and motivation. The employees will be trained initially by experts hired to do that. Other more experienced employees will do the rudimentary training. According to the expectancy theory of motivation, employees perform according to what they believe will result from their performance (Eccles & Wigfield, 2020). Therefore, the employees in the cloud gaming division will be remunerated and motivated to bolster the impression that their actions directly translate into rewards or punishments. Motivation will be essentially monetary, through team events such as team building will be conducted once a quarter. Top managers will also be taught intrinsic motivational techniques such as giving credit where it is due (Eccles & Wigfield, 2020). Therefore, the company’s training will be done by contracted experts. According to Vroom’s expectancy theory of motivation, the company’s motivation will be both intrinsic and extrinsic.
Insurance Plans and Costs
The company plans to get insurance covers for all its assets in the cloud gaming division. The datacenters and all the supporting infrastructure will be covered by insurance, which is essential (Pembroke Insurances, 2022). The costs of this insurance have not been divulged. However, Pembroke Insurances (2022) estimates that the cost of insuring a single data center ranges from $50,000 to $200,000 annually. With 8 data centers, this could mean that the annual insurance costs for the data centers should range from $400,000 to $1.4 million. The company’s existing insurance agreements may also need to be renegotiated along with legal arrangements, which will mean additional legal costs. It is difficult to know precisely what these renegotiations and the legal fees will cost, but it should be less than $100,000.
Government Rules and Regulations
Datacenters have to comply with the law. First, these facilities have to be built according to existing building codes for their respective municipal areas. Environmental regulations must also be followed to the letter, along with land-use restrictions and zoning policies. Datacenters themselves are not very strictly regulated in the U.S. as of March 2022, but this could change.
Drucker’s Five Questions
What is Your Mission?
The mission is to build great products which accelerate next-generation computing.
Who is Your Customer?
The customers are companies which create products that incorporate AMD’s technology and sell it to their clients.
What Does Your Customer Value?
The customers value privacy, staying ahead of the competition and keeping their users’ data safe.
What Results Do You Seek?
AMD seeks to capture at least thirty percent of the cloud gaming market by the year 2027 and translate this significant market share into additional cloud-gaming-related revenues of at least $15 billion.
What is Your Plan?
Primary and edge datacenters will be constructed using investors’ financing, and then these investors will be given shares in the undertaking. AMD will launch an aggressive marketing campaign to publicize its new investment and sign up companies to partner with AMD on rolling out cloud gaming to these companies’ users. With time, the company will endeavor to improve its cloud gaming capabilities. An IPO on the cloud gaming division will be held in at most 8 years to enable the investors to cash out. This plan should, with some modification, be a useful blueprint to guide the new executives of AMD Cloud Gaming.
Marketing Plan
Competitive Advantage
AMD specializes in data center products and products involving semiconductor chips, and herein lies the company’s competitive advantage. The company has stiff competition in the semiconductor industry from other giants such as Intel, NVidia, and Samsung. Furthermore, should the company invest in cloud gaming, AMD will be facing stiff competition from the tech behemoths of Silicon Valley such as Google (with its Stadia platform), Microsoft, Ubisoft, and E.A. AMD has several large clients, as highlighted above, such as Tesla, with the firm’s Ryzen series of chipsets giving the company a sizeable advantage over its competitors, especially with gaming GPUs and such things. AMD has had a great year in 2022, with the company experiencing significant growth in 2021, surpassing its competitors. Also, the company has already been venturing on a small scale into the world of game streaming. As can be seen from the above exposition of its competitive advantage, AMD is in a good place. The company has a good brand name, and its products are gaining popularity quite rapidly. AMD has a good chance of winning out over its competitors in the long run if the firm can keep up with its current pace of innovation and growth.
Characteristics of the Target Market
The target market for AMD is likely to be adult males between the ages of 18-65 largely within the middle classes of America’s social strata. It is anticipated that AMD’s development of a cloud gaming service will assist the company’s existing clients in providing lightning-fast gaming services to its gamers. Other significant organizations that provide their customers with online multiplayer role-playing games are also likely to become AMD’s clients for the game-streaming services provided by the company. As a general rule, AMD sells its products to businesses rather than individuals requiring AMD’s semiconductor products. AMD’s game-streaming services will be an excellent fit for this business model (Insider Intelligence, 2022). To turn this invention from a concept into a reality, the company will need to establish commercial ties with companies such as E.A. Games and PlayStation to access their large user base. The user base of these enterprises consists of average online game-playing Americans, many of whom are male and in their twenties. According to data from the United States government cited by eMarketer, 65 percent of all “hard-core” gamers are males between 18 and 45. (Insider Intelligence, 2022). Gaming is growing more diverse, though, as mobile gaming is being mostly replaced by P.C. gaming in terms of popularity. Currently, the gaming business in the United States is expanding significantly, with over half of the country’s population, or 179.6 million Americans, predicted to be active gamers by 2022. (Insider Intelligence, 2022). AMD’s customer base will grow as a result of this expansion.
The Demand of the Target Market
It is anticipated that the target market will be almost exclusively comprised of adult males between 18 and 65. However, the direct clients of AMD will include but not be limited to gaming companies such as E.A. Sports, Zwift, the Pokemon Company International, Mythical Games, and Bonfire Studios. These firms, together with others, will form the direct clientele of AMD, purchasing server facilities and other services to avail game streaming or cloud gaming services for their clients who pay for their subscriptions to the service. The demand, therefore, can be calculated by using a demand formula derived using data points from studies done in the past. In the year 2018, Morgan Stanley found that customers were willing to pay (in 2018 dollars) $14.75 to access cloud gaming services.
The demand for game streaming services, once the market matures, is likely to be very high. Console gamers manifest the highest willingness to upgrade to 5G in conjunction with changing their gaming setups from dedicated consoles with offline games to games that are exclusively played on remote servers and have their feeds streamed to their devices (Laghari et al., 2019). According to Parsec, a company specializing in remote access technology, some consumers would like to play high-speed, low-lag, high-refresh-rate, and high-resolution games without spending a premium on high-end hardware. These customers are willing to pay for this privilege, both on mobile phones and on P.C.s and consoles (Parsec, 2018). However, as long as 5G is not mainstream in America, it is likely that only a few gamers will shift to cloud gaming because the latencies and bandwidth caps set on 4G networks hinder the full utilization of the powers of cloud gaming. According to Takahashi (2021), 94% of users in the US, Germany, China, and Japan have already tried cloud gaming, with a third of them liking it and doing it for three days or more a week. A=Takahashi further states that another 29% of these gamers play once or twice per week. The data states that cloud gaming is growing more and more popular, meaning that the demand for this service will only skyrocket more people become aware of how cloud gaming can revolutionize their gaming experiences, especially with fast and affordable internet being on the rise. Google Stadia price their cloud gaming at $9.99, an offer that includes access to their services and a small number of games for play (Fenollol, 2022). With the educated guess that the percentage of users willing to pay $9.99 is 40% (van Sloun, 2019); and the percentage of users willing to pay $14.75 is 33% (Tekahashi, 2021); a demand calculation can be done to find out the elasticity of demand for cloud gaming in America.
PED = [(Q₁ – Q₀) / ((Q₁ + Q₀) / 2)] / [(P₁ – P₀) / ((P₁ + P₀) / 2)]
Following the above formula, the initial and final quantities are 72 million (40% of the 180 million gamers in the U.S.) and 59.4 million (33% of the 180 million gamers in the U.S.). The initial and final prices are $9.99 and $14.75 respectively. Hence, the revenue increase with the higher prices is 21.81%, while price elasticity of demand is -0.4984. The demand for cloud gaming is inelastic at the moment. Furthermore, with the prices and quantities given above, the supply and demand equations are
P = 9.99 – 72000000Q
P = 14.75 + 59400000Q
The supply and demand graph is as shown below.
Figure 7: Supply and Demand
According to the graph above, the equilibrium price is 12.6 dollars per month, with demand being satisfied at that price and approximately 65.7 million customers being subscribed to cloud gaming in the U.S.
Nature of the Competition
AMD faces stiff competition in its new game streaming or cloud gaming endeavor. The entire tech industry, it would seem, has realized the immense potential for profitability that cloud gaming possesses. Google, Microsoft, Facebook (now Meta), NVidia, and other tech giants mentioned above and elsewhere all want a share of the pie (Takahashi, 2021). These companies are some of the largest in the world, with their sizes dwarfing AMD. The sheer size of Google, for instance, is stupendous: Google’s market capitalization is almost $2 trillion (Companies’ Market Cap, 2022). Therefore, AMD faces an upwards climb, competing with companies with employees who have money to hire some of the sharpest minds in the world for a slice of the revenues from the promising cloud gaming industry. These companies also have massive customer bases, strong brand names, and considerable know-how in managing and profiting from data centers and cloud computing. Ergo, AMD has a tough battle ahead of it because it is competing with the best of the best. The company may have to focus on an angle not focused on before – the smartphone game players in the USA and beyond.
Total Sales to the Target Market in the U.S.
The total video game sales revenues from cloud gaming platforms are expected to be approximately $1.6 billion at the very least (Takahashi, 2021).
Sales Projections
The total sales will be rather high. There are approximately 180 million active gamers in the U.S., 65% of whom are the target market (Insider Intelligence, 2022). In this market, AMD can expect a 1% market share in the first year of working with its large clients to sign up their users for cloud gaming. Assuming an average of one day a week spent playing for the customers for 52 weeks a year and revenue of $0.08 per customer (Rubasinski, 2021), the total anticipated sales come to (1,800,000 x 0.65 x 24 x 52 x 0.08) or $116,812,800. For this target market, the sales projections come to slightly over $116 million in the first year.
Percentage of Demand Expected
The sales expected by AMD are $116,812,800, and the sales in the cloud gaming industry are expected to be $1.6 billion. Therefore, the percentage of demand expected is to be approximately 7.3% in the first year.
4 P’s
Product
The product will be the cloud gaming provision. This can also be considered a service because AMD will be offering its facilities to other companies that want to use them to enable their players or users to game online at whichever technical specifications they deem sufficient. Cloud gaming will be the major item offered by the company, and AMD will have a specific business department set aside to market its cloud gaming. Marketing the endeavor may prove the silver bullet that makes it a roaring success.
Price
The pricing for cloud gaming will be done competitively. The price for an intermediate subscription will be less than that of Google Stadia, enabling even those who are parsimonious with their money to feel that they are getting value for their cash. The aim, of course, will be to undercut Google, Facebook, and other competitors so that AMD can command a larger and larger market share.
Place
The marketing for the cloud gaming services will be done online using targeted advertisements and offline using dedicated sales agents. The sales team will go to the OEMs (Original Equipment Manufacturers) and game design companies and demonstrate the benefits of using AMD’s cloud gaming infrastructure and facilities to offer even mobile gamers a taste of what it feels like to game with premium machinery. This angle will have to be worked by several different teams across the U.S. with different prospective clients to scoop up as many of them as possible. The marketing will be mainly done online and face-to-face.
Promotion
The promotion of the cloud gaming services will be done using discounts and bonuses. Having a few large clients has its perks: giving promotions will be simple because each client can be considered on a case-by-case basis. Tailored discounts and offers can get the clients to invest further in cloud gaming and bring more profits to the company that way.
Overall Marketing Strategy
The marketing strategy for AMD in the company’s operations is a strategic marketing approach. This means that the company will mostly market its goods and services online or by word-of-mouth using its capable sales representatives. Building a close relationship with the clients is usually of the essence with this strategy. Being a step in the value chain rather than the final rung where the company directly deals with the end-users, AMD is not constrained to put as much effort into marketing as more front-facing firms. AMD has been trying to step up its marketing efforts and its brand strength worldwide, therefore, using online marketing. The company sometimes works with advertisers such as Google and Facebook to create customized and targeted ads for those in a position to fill large orders of semiconductors. Nonetheless, AMD mainly relies on conversational marketing to achieve its ends using its capable sales team. The sales team may have to be expanded slightly so that it does not get overwhelmed with its duties and that it can cope with new objectives and even operational and organizational changes.
Specific Marketing Mix
Product: Cloud gaming services and infrastructure.
Price: Competitive pricing
Place: Online and using sales representatives
Promotion: Specialized or customized discounts for the company’s clients
Strengths and Weaknesses in Satisfying Customer Needs
Strengths
The company has good tech support for handling customers’ queries.
The company has a good record of accountability and transparency when it comes to how the company handles its clients.
The company has a well-designed customer relationship management department whose employees are responsible and well trained.
Weaknesses
The company’s ability to satisfy its customers is limited by the widespread availability of 5G and reliable internet infrastructure.
Cloud gaming will be expensive at first, costing between 10 and 30 dollars a month. This is a small amount for someone who is working, but many gamers are teens and children who do not have any money of their own.
Some server downtime is inevitable, translating to potential losses of money for the company, dissatisfaction of its clients, and a potential P.R. nightmare if the word gets out that AMD’s services are unreliable.
Communication Plan Internally and Externally
Internally
Internal communications will be conducted through emails and electronic means of communication. In-person communication will also be a primary method of communication.
Externally
External communications will be done through previously arranged means such as bulletins, emails, and advertisements.
Channels of Distribution
The major channel for distribution of the cloud gaming services will be via the internet since this is the only way cloud gaming services can be availed for the company’s clients and adapted for the end-users who are the customers of AMD’s clients.
Sales Strategy (CRM Program)
The most optimal sales strategy for cloud gaming services is using strategic-partner selling. AMD expects to have very close long-term relationships with its immediate clients, who will then use the data center services provided by AMD to avail cloud gaming to their customers. In this relationship with its clients, AMD will treat each client separately and build individual relationships with each client.
Product Cost
The cost of accessing cloud gaming will be a fixed $8 per month for the basic Package (unlimited usage and 10 games with 16 GB of RAM on a next-gen Ryzen chipset). The Premium package will cost $14.75 monthly, and it will have twice as many games with twice as much processing capacity for the premium users. There will be a free plan where users will have to pay to play games ($5 per game per month), and they will be limited to the equivalent of 8 GB RAM on a current Ryzen chipset).
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