In this paper the researcher attempts to analyse the business environment of ARM along with an appraisal of the organization’s strategy. The aim of the paper is to understand the effectiveness of the strategy adopted by ARM in the increasingly competitive world of today…
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According to the study conducted ARM may see itself in the PC Market in direct competition with Intel. Intel, initially operated in the PC Market and both the companies, though manufactured microprocessors, catered to different markets entirely. Intel had strong hold over the PC industry while ARM boasted sales in the mobile industry. However, in the recent years, with the PC market coming to a cooling phase, Intel has decided to enter the mobile market and make competition tough for ARM. The possibility of new entrants in the market is quite low. New entrants in the case ARM are only occurring in the shape of Intel that previously went with capturing the PC market; and even though Intel is a huge company as compared to ARM, it will still be facing difficulty in competing with ARM. This makes threat of new entrants low. There are two reasons behind the low threat of entrants. Firstly, ARM has been able to develop a near monopoly in the cell phone market. The buyers of ARM are satisfied with ARM at this point of time and do not wish to switch to new substitutes. Another reason is that ARM has developed specific software that work with its microprocessors; and asking buyers to switch would be asking to invest money and time in understanding and adapting to different software that could complicate issues. Threat of Substitute Products is medium for ARM. At this point of time, the threat of substitute products is balanced for ARM. While the semiconductor industry is quite competitive with the presence of industries such as Intel, Samsung, Toshiba etc, ARM is able to generate revenues because of its software and licensing. This makes it difficult for competitors to replace the ARM chips in 95% of the cell phones (Clara, 2012). Manufactures of cell phones have adapted to the technology of ARM and do not wish to switch over to substitute products that may not generate the same value as that of ARM. The cost of switching over to substitute products is quite high for the buyers which include additional risk; but this is counterattacked by the presence of giants in the semi-conductor industry that could take hold of the ARM market with some effort. Bargaining Power of the Buyers: Bargaining Power of the Buyers in the case of ARM is quite high. This is because the buyers mainly include chipmakers such as Qualcomm, who would likely produce their own semiconductors if the prices of the chips exceed further. At the moment, ARM is generating profits through royalty and license fees on the chips that it sells with royalty as low as 1 percent for each chip (D’ Altorio, 2010). Bargaining Power of the Suppliers: Bargaining Power of the Suppliers in this case is medium. This is because ARM does not manufacture its own microprocessors but is dependant of outside suppliers. ARM has its own RISC chips that are energy efficient and sell the most; therefore supplier power is low as compared to the buyer power Competitive Rivalry: From the above analysis, we can conclude that competitive rivalry for ARM in the cell phone market is low but in the semiconductor industry, ARM ranks quite low in terms of its sales. ARM enjoys a significant power in the market due to its licensing but other than
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