Slides On Arm Holdings business model


Modularization is an approach where the program is subdivided into various sub-programs in which each program perform different and specific function. It is a form of computer programming in which application code is classified into smaller individual programs, out of these, each subunit performs different function or subroutine. In Intellectual property providing firms, modularization of the products can be seen as a trend which contributes towards growth of outsourcing and low cost competitors (Singh, 2013). With reference to ARM holdings, it design and licensed the microprocessor cores used in different products like smartphones, ipods, digital cameras, tablets, PCs etc. Its partners not only increased company's sales but also provide great knowledge base. Second, differentiation is a key element that helps to effective utilization of star SIPs.

Further, modular design, design automation, system-on-chips design, system level integration, silicon foundries, knowledge integrators etc. are the factors which are included in its modularization. It enable ARM holdings to design microprocessors, chips and other intellectual property to serve consumers beyond expectations (Akhavan and Hassan, 2010). Besides this, its functional modularization depicts that the components of the systems perform varied tasks and functions from each other. Contrary to this, in the software engineering, modularization refers to the process of breaking a software system into different sub-sets.

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Key performance indicators (KPIs) are the factors which helps to measure business performance of ARM holdings. It is essential for the company to analyse that how it is performing in the market so as to take effective quality of decisions to enhance potential performance. There are different types of KPIs which ARM holdings can use to assess their operational as well as financial performance. Profitability is the most important element which indicates that ARM holding's operational performance. With regards to ARM holdings, its gross margin has been increased from 95.2% to 95.9% because of high proportionate increase in revenue as compare to proportionate increase in cost of sales. ARM Holdings' total revenues has been inclined from £795m to £968m in the year 2015. It may be because of high market demand, qualitative and innovative products and services etc (Marr, 2012). ARM Holdings's quality policy is to satisfy customer needs and desires by delivering products accordingly. Along with this, it also monitor its product quality on a consistent basis to bring necessary improvements. As a result, company will be able to satisfy the consumers, enhance repetitive purchasing and consumer loyalty as well (wik and et al., 2015).

While, net earning of the company has been increased by 33% due to having effective control over the indirect expenditures. As a result, ARM holdings provided more return to the shareholders as in 2015, Its EPS has been increased from 0.55 to 0.72 by 31% (Howell, Wills and Johnston, 2014). It helps to enhance investors satisfaction and thereby ARM holdings will be able to retain its existing shareholders and attract new as well. Through this, company will be able to meet its long term capital requirement by collecting required quantity of funds. Apart from this, its ROCE, ROA and ROE also indicates a rising trend as it got inclined to 20.33, 17.17 and 20.43 in the year 2015 (Kylili, Fokaides and Jimenez, 2016). It shows that ARM holdings is generating larger return on their invested capital and equity capital.

On the contrary to it, liquidity ratio indicates company's ability to pay short-term obligations effectively (Marr, 2012). Current ratio of ARM holdings got increased from 3.35% to 3.61% which demonstrates that business is now more able to pay timely to the suppliers. Besides this, high total assets by 15%, increased operating margin by 8%, huge investment in research and development clearly depicts that ARM holdings is performing well in the market (ARM Holdings annual report, 2015). By evaluating and examining the financial performance of the company, managers can identify reasons for adverse or unfavourable operational results and can take decisions for the enhancing performance in the future period.

Platform technology refers to the group or combination of various technologies which are used by ARM holdings to prepare microprocessors and other devices. For instance, hardware and software are the basic platform in personal computing. With reference to ARM holdings, it announced new software platform and free OS in order to simplify and speed up the development of IoT products (Khan, 2015). ARM mbed IoT (Internet on things) device technology built standard for internet protocols, security and standard based manageability to integrate its solutions and optimize the use of energy to design cost constrained devices. Moreover, PolarSSL technology, System-on-chips (SOC), TrustZone technology, Big.LITTLE technology, Crypotobox technology. Dulog technology etc. are used by the company.

Along with this, RISC machines and Low electricity consumptions are also the technologies used by ARM holdings. In order to design its plaform technology, ARM holdings create partnership with many organization like Ericsson (leader wireless network), Atmel, Freescale, Marvell, SeeControl, Zebra. etc. Further, its mbed IoT device platform comprises three elements that are mbed OS, mbed device server, mbed OS is a free OS which enable ARMK holdings to focus on innovation, product differentiation, declining cost of product development and time as well (Taylor, Artman and Woelfer, 2012). Apart from that, it acquired Apical and Spirit. In this, Apical is a highly successful and leading technological company in the UK. Its innovative and advanced technological products are used in more than 1.5 billion android phones and above 300 million industrial devices like IP cameras, digital cameras and tablets as well. While, Spirit is a power-efficient technology which helps to maintain ARM holdings's product cost by reducing the consumption of power.

With regards to ARM holdings, it use Canvas as a business model to design intellectual property for the corporate clients as well as customers. Canvas is a strategic management tool which allows ARM holdings to design, describe and invent new technological products for the customers (Dudin and, 2015). In this model, Microsoft and University of Michigan are the key partners while, manufacturing of CPU, GPU, investment in R&D and acquisition with the organizations like Sansa Security, Wicentric, Offspark, Sunrise Micro device are the key activities involved in the operations. In order to develop products, it use numerous resources, like human capital, IP, physical resources, development tools etc. In its value preposition, it aids value by maintaining the cost to produce processors and PCs, as a result, ARM holdings became able to charge lower prices for the consumers.

Further, customized designs, differentiation opportunities, less power consumption and less waiting time for the consumers helps to drive value. Less production cost helps to attract larger customers, which in turn, assist business to enlarge their revenue and profitability to a greater extent. ARM holdings sales their products to both businesses and customers and it maintain strong relationship with the consumers by delivering best quality products and services (Liang and, 2012). On the other hand, distribution channel includes direct distribution, license system and delivery of services through the factories. It bear cost of manufacture, R&D, marketing and distribution as well. It generates revenue by performing R&D activities, designing processors and chips as per consumer demands and design to semi-conducter partners for license and royalty fees.

In the business model, ARM holdings sustain its profitability by building an eco-system, industrial architecture and IP management. In the eco-system, it requires high level of disintegration which comprises strong collaboration of the stakeholders, business development with OEM and partnership to gain competitive advantageous (Williamson and De Meyer, 2012).

ARM design an innovative and pioneering ecosystem by power-efficient server innovation with Dell's collaboration. Moreover, its joint partnership with NVIDIA, AMCC, Linaro and Xilinx also enable ARM holdings to assure an eco-friendly environment for the community (Kosoy and Corbera, 2010).


Leadership style refers to the way of directing people, implementing plans and motivating people. There are different types of leadership styles which can be used by the leaders to manage their staff. For instance, autocratic, democratic, transformational, transactional etc. are some of the leadership styles which leaders can implemented to administrate their subordinates (Akhavan and Hassan, 2010). Leadership is crucial for the success of ARM holdings because it helps to guide personnel and team members to fulfil their assigned tasks and duties effectively and efficiently. Proper guidance and support enable employees to complete their job responsibilities and, which in turn, provide assistance to ARM holdings to achieve their target goals and objectives. Moreover, it encourage employees to put their best efforts towards completion of their accountability which increase employee performance to a major extent (Wang, Chich-Jen and Mei-Ling, 2010).

Currently, Simon Segars is the Chief Executive Officer (CEO) of ARM holdings, he is a chief chipmaker who moved from android devices to the Internet of Things (IOT). He implemented democratic leadership style, also called participative leadership style. It refers to the involvement of employees in the process of decision-making so as to increase their motivation level. This in turn, they will put best efforts for the completion of their job duties which makes an effective contribution towards target accomplishment. Simon's vision is to drive technological products or services by empowering people to deliver bet services. It pay focus on recruiting talented and skilled engineers and workforce who will be highly able to deliver best services to the consumers.

In the present times, cost control becomes an essential part of business survival and growth. It refers to the practices and functions which are used by the ARM holdings to maintain their cost of production. CEO of the ARM holdings's also pay consideration to manage their product cost by using cost control leadership. Power-efficient technology is of great significance in the management of production cost. EnLight technology helps to reduce the energy cost of car parking by 50% which is a very huge decline (Enlight technology reduces ARM's car park lighting energy cost by 50%, 2013). Enlight proven as a complete solution to control the consumption of light and energy which helps to decline operational cost and enlarge profitability. Furthermore, the use of ARM architecture to decline energy consumption provide assistance to the company to reduce their direct cost. In addition to this, regular monitoring of the operations also enable ARM holding to address huge increase in cost, henceforth, immediate action have been taken by the managers to control their direct as well as indirect cost and manufacture energy-efficient chips.

Change management is regarded as the process of implementing changes to the IT infrastructure in more standardized and systematic manner. Upgrading hardware capacity, new version to role over the old ones, developing new and innovative software are the factors which brought changes in the ARM holdings. Retirement of Warren East is one of the key incidents in the year 2013 which brought a dramatic management in ARM holdings (Shimpi, 2015). It is because Warren was the first designer or semiconductor and processor technology. But after his retirement, Simon Segars has been appointed as ARM holdings CEO who has international experience of leadership. He believes in partnership and collaboration to leading people in ARM holdings. This leadership change surprised company's investors who were believed that ARM makes tremendously growth during East's leadership. Further, Softbank bought ARM holdings worth $32 billion is also a dramatic change in ARM holding's leadership. Along with this, executive Nikesh Arora's resigned also bring significant changes in the leadership of the ARM holdings. Over the past years, there are numerous key incidents incurred in ARM holdings.

According to McKincey's 7's, there are 7 elements of leadership that are system, strategy, structure, staff, style, skills and shared value. ARM's strategy is to achieve high progress so as to ensure long term growth.

Its business strategy focuses on key growth drivers that that are gain or maintain long term market, increase ARM technology to produce smart devices. Generate new revenue stream, invest to develop a sustainable business. Developing energy-efficient products, innovative products, high customer support, worldwide technology, developing a healthy work environment, equal opportunity to the workers and providing high return to the shareholders are the factors. In 2015, Simon announced its new strategy to capture larger market share by increasing revenues (Singh, 2013). Building of chip technological products, creation of new software and faster the development of innovative and advanced technologies are the main focus area of the CEO to achieve its strategic aims and targets. Moreover, it aims to create new revenue stream specially through Internet of Things (IoT). ARM's system is to addressing market opportunities as well as threats and maximizing the opportunities and minimizing the threats.

Moreover, it pay focus on bringing improvements in the products, processes and services offered to the customers. While, it has vertical structure in which top to down communication exists. With regards to staff, ARM holdings focuses on recruiting talented and experienced engineers for the development of innovative and advanced microprocessor, IP, software and other tools (Hanafizadeh and Ravasan, 2011). Along with this, it also makes an huge investment in staff training and development to encourage and motivate their personnel and increase their productivity and competencies. Contrary to this, it is a leading company in technological devices and products. Thus, innovative and creativity are the two most important skills that engineers must have to design new and innovative processors. It drive value by energy-efficient products, new revenue streams, technological advancements, product differentiation and innovations as well (ARM strategy, 2015).

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Due to such leadership style adopted by Simon, ARM holdings performance has been increased, which are examined here as under:

  • Revenue rose up from 795 to 968 GPB Million by 22% which is a sign of good performance.
  • Effective control over cost helps to maintain product cost as in 2015, its cost of sales rose up from 38 to 39 GBP Million by 3% (Marr, 2012).
  • Due top larger the revenues and effective control over cost, GP has been improved from 757 to 929 GBP Million by 23%. As a result, ARM holding's gross margin got improved from 95.2 to 95.9 by 1%.
  • Investment in research and development activities got improved from 224 to 278 GBP Million by 24% in 2015 (ARM Holdings annual report, 2015).
  • Net income of ARM holdings got improved from 255 to 340 GBP Million by 33% which shows improvement in operational performance (Kylili, Fokaides and Jimenez, 2016).
  • Increasing ROCE, ROA and ROE by 13%, 17% and 14% is a sign of better operational performance in the year 2015. Through this, shareholders return has been increased as in 2015, EPS rose up from 0.55 to 0.72 by 31%.
  • Current ratio of the ARM holdings got improved from 3.35 to 3.61 by 8%, which shows that company maintained its short-term assets to pay timely to the short-term payables (Howell, Wills and Johnston, 2014).

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  • Dudin, M.N. and, 2015. The Innovative Business Model Canvas in the System of Effective Budgeting. Asian Social Science. 11(7). p.290.
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  • Marr, B., 2012. Key Performance Indicators (KPI): The 75 measures every manager needs to know. Pearson UK.
  • Shimpi, A, L., 2015. "ARM Partners Ship 50 Billion Chips Since 1991 - Where Did They Go?". Rouledge
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  • Taylor, H., Artman, E. and Woelfer, J.P., 2012. Information technology project risk management: bridging the gap between research and practice.Journal of Information Technology. 27(1). pp.17-34.
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