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Strategic Management: ARM Holdings - Essay Example

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Strategic Management: ARM Holdings Company Overview: ARM Holdings is widely recognized as the world's leading semiconductor and intellectual property suppliers. The British multinational firm, founded in the year 1990 is headquartered in Cambridge, UK and is listed on the London Stock Exchange primarily, with secondary listing on the NASDAQ…
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Strategic Management: ARM Holdings
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Download file to see previous pages Figure 1: Business Model Source: ARM Annual Report (2011) pp. 14 The company’s model is highly cash generative, as is seen from the figure above. A significant proportion of ARM’s revenues are generated from royalties, which is an integral and reliable part of its cash flow. ARM Strategy “To continue to gain market share in long-term growth markets such as mobile phones, tablets, consumer electronics and embedded digital devices" ARM Annual Report, 2011 pp. 17 The company's fundamental strategy is to achieve sustained growth through customer satisfaction and delivering of products and services which meet their requirements, on time. The company is highly focused on corporate strategies that ensure continuous improvement with regard to its products and services, as well as improving its internal functioning which includes enhancing employee growth, performance and productivity. ARM’s key growth strategy is built on three key drivers: increasing its market outreach through greater penetration; increasing value of products and services offered; and generating additional royalties from new technologies. AMR has so far managed to achieve over 95% market penetration in the mobile handsets product category. As a part of its long-term strategy the company aims to offer more license based products in order to increase its revenues from royalties. It is also planning to increase and expand its market share in newer target-end markets. The rapid innovation in technology is driving the growth of smart devices which require ARM processor-based chips, thus increasing the demand for ARM products paving way for a greater and larger market segments. ARM's corporate strategy is to exploit this opportunity in increasing its cash inflows, by increasing the value received by ARM for every smart device sold. Furthermore the company also plans to outsource its R&D activities, in a bid to increase its revenues from license fees and royalties. The development and licensing of new technology is likely to result in greater revenues in terms of additional royalties received. The Macro environment: PESTLE Analysis The macro-environment comprises of factors which are external to the organization and have a significant influence on the overall functioning of the company. It comprises of PESTLE i.e. Political, Economic, Social/ Cultural, Technological, Legal and Environmental factors. Political factors: Governments in most of the countries during the past year have been struggling to balance their national budgets and are keen on reducing their national debt. Most of their efforts are hence directed towards saving up on investments related to IT projects (Menifield, 2010). Furthermore, due to the recent economic meltdown, governments in countries such as U.K, U.S. as well as China have been struggling to devise a deficit plan to counter the sluggish market attitudes, and reduce unemployment. Government in most of the European nations was focused on developing counter strategies to address the issues faced by nations in terms of defaulting debts. In China, there were wide ranging concerns faced by the government with regard to sustaining of national growth, mainly due to the effect of economic crisis on a majority of its export markets (The Guardian, 2012; Businessweek, 2011, ARM Annual Report, 2011). Economic factors: Consumer ...Download file to see next pagesRead More
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