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A Vision for a Smarter World - ARM

A Vision for a Smarter World - ARM
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  Introduction Inventions, literary works, music and design are all intangibleassets. The legal right to these ‘creations of the mind’ is referredto as Intellectual Property (IP). ARM Holdings is the world's leadingsemiconductor Intellectual Property (IP) supplier. A semiconductoris the electronic controller at the heart of many devices that weuse every day, such as Smartphones, tablets, digital televisionsand washing machines. In fact, ARM IP is at the heart of 35% of all consumer devices worldwide. ARM has an innovative business model. ARM does not manufacturethe products in which its technology is used. Instead ARM createsthe technology that is then used by other companies – its partners. These partners incorporate ARM IP with their own technology tocreate smart, energy-efficient chips suitable for modern electronicdevices. ARM licenses its IP for a one-off licence fee and thenreceives royalty fees for every chip that contains its technology. ARMeffectively acts as an outsourced research and development (R&D)department to its network of partners.With its headquarters in Cambridge (UK) and offices around theworld, ARM employs over 2,500 highly skilled people. To maintainits market leading position, ARM carefully monitors changes in itsexternal environment to ensure it can continue to outperform itscompetitors. Analysing these changes allows ARM to establishopportunities, threats and challenges. Key opportunities forgrowth include:• Advancements in technology – including machine-to-machinecommunications between smart sensors, referred to as ‘TheInternet of Things’. For example, appliances in the home thatcan be monitored and controlled wirelessly by the homeownerwherever they are.•Market development – increasing market share in new marketssuch as servers and networking equipment. ARM’s technologyis well placed to provide lower power options to transport,distribute, analyse and store data across the internet.•Demand for energy efficient technology – the market demandshigh performance products using low power technology. This case study will demonstrate how ARM’s strategies contributeto the achievement of its business vision, aims and objectivesusing an integrated approach focusing on innovation, its peopleand its network of partners.  Vision, aims and values  An organisation’s vision outlines what the company wants to achieve. A vision should be aspirational and inspirational for stakeholders,especially employees. ARM’s vision is: ‘To create a world where all electronic products and services, based upon energy efficient technology from ARM, make life better for everyone.’  This vision willaffect every aspect of the business. All strategic decisions will begeared towards making this vision a reality. To help deliver the vision, an organisation will set aims. Aimsdescribe what the business intends to do in the long-term. Inorder to achieve its vision, ARM aims to:•attract and retain the best talent globally•continue to grow the business to ensure maximum revenue todevelop new technologies through R&D and also deliver fundsfor shareholders•promote collaboration and shared learning through its network of partners.  A vision for a smarter world       S      T      R      A      T      E      G      Y Curriculum topics covered: • Aims, vision and values•Business strategy •SMART objectives•Culture  ARM’s biggest asset is its people. Due to the knowledge-intensivenature of the business, ARM relies on its innovative and highlyskilled employees to maintain its market leading position.Maintaining its highly motivated workforce is therefore a key aim. To aid the achievement of its aims, ARM has set seven corebusiness values. A company’s values demonstrate the things itdeems to be of the upmost importance. These values underpineverything that the company does. ARM’s core values include:• Teamwork and selflessness – sharing information andknowledge openly both internally and externally.•Constructive pro-activity – developing practical solutions with a‘can do’ approach.•Partner and customer focus – understanding their needs.•Responsiveness – always reacting with a sense of urgency.•Innovation – developing practical solutions to problems.•Personal development – through training, coaching andmentoring.•Delivery of results – using expertise to benefit ARM. These ARM values support the achievement of its vision and aims. They also compliment its business model and demonstrate thecompany’s focus on its workforce. An organisation’s vision, aimsand values all influence the development of plans for the futuredirection of the company, namely its business strategies. Strategy  A business strategy is the plan by which aims and objectives willbe put into action. Objectives are the specific targets to achievethe aims. Without business strategies in place an organisation willnot have a clear direction so would be more likely to fail. ARM hasa number of strategies in place to achieve its aims and contributetowards its vision. These include strategies related to growth,Human Resources (HR) and its network of partners. ARM has seen dramatic growth in recent years. To continue toexpand the business ARM has identified three main drivers forgrowth which are identified in the table. Through focusing onthese three areas, ARM aims to continue to grow and maximiserevenue. ARM HR strategies support its growth strategies. By attracting andretaining people with high levels of skills and expertise, ARM cancontinue to develop the competencies which give it a competitiveadvantage and enable it to drive its vision forward. To do this ARM’sHR team must ensure a pipeline of talent through workforce planningand recruitment. Training and development opportunities also help toensure a motivated workforce that will ‘live’ ARM’s values. Growth driver  Increase marketpenetrationIncrease value persmart electronicdeviceDevelop andlicense newtechnology Strategy  ARM has achieved more than 95%penetration of the mobile market.However, ARM is involved in far morethan mobiles. From the 10 billion chipdesigns sold, over 5 billion go into thingsthat are not mobiles. As other end-markets require smarter processors, ARM hopes to increase its market sharein other application areas such as smart TVs, routers and servers. As consumer products becomesmarter they often contain multiple ARM chips, increasing the royalty feeopportunity. Smartphones and TVs cangenerate 5-10 times more royalty thana basic model.Develop new technology throughcontinued investment in R&D to createadditional revenue from royalties.  Dramatic growth has meant the ARM workforce has increased by40% in the past three years. As over 80% of ARM employees areeducated to degree level or higher, this growth has created achallenge for the ARM HR team. During workforce planning, gapscan arise between what ARM wants to achieve (its objectives) andthe resources available to achieve them. These strategic gaps aredealt with through Human Resource Management (HRM). One suchstrategic gap is attracting sufficient young people with scientific skillsto meet the growing needs of the business. To overcome this gap ARM promotes the importance of science, technology, engineeringand maths (STEM subjects) to young students. The ARM ecosystem strategy supports its business model. ARM’speople develop effective relationships with over 1,000 companiesthat licence ARM technology. The working environment that ARMhas created is referred to as its ecosystem of partners. Theserelationships stimulate innovation between companies to developthe next generation of products. As well as attracting newpartners, a large amount of growth occurs when existing partnersupgrade their ARM processor to the next generation. This strategydirectly supports ARM’s vision and its aim of shared learning. Delivering a strategy Behind every business strategy are tactics. Tactics are the meansby which the strategy will be implemented. Objectives, which canbe set at a function level or for the whole business, outline theoutcomes the business needs in order to achieve its aims. TheSMART objectives model helps ensure that objectives areachievable. It states that objectives should be: Through the setting of SMART objectives, ARM is able to plan forthe future to aid the achievement of its business strategies. ARMSMART objectives are influenced by many factors, for example,the innovative and technical nature of the business requires ahighly skilled workforce. A functional objective for its HR strategy isthat 30% of new recruits in 2013 will be graduates. This figure willincrease to 40% in 2015 and 50% by 2017. A tactic that supportsthis objective is that ARM has a strong presence at the leadinguniversities’ careers fairs around the world. It also runs a two-week Global Graduate Conference that enables new graduates tobecome more effective in a shorter space of time. This objectiveand tactic supports its business aim to attract and retain the besttalent globally, as well as promoting the company’s value of personal development. Another ARM SMART objective is to have an overall market shareof between 40% and 50% by 2017. In 2012 ARM’s market sharewas 32%, an increase of 2% to 3% per year for the last five years. The growth drivers of increasing market penetration and value persmart electronic device support this objective, and as ARMpartners use ARM technology in more of their products thecompany’s market share is set to continue to grow. S • Specific M • Measurable  A  • Agreed R • Relevant T • Time-framed        S       M       A       R       T  In relation to increasing penetration in new markets, a SMART objective has been set that by 2017 ARM aims to have a 10% to15% share of the IT server market. This supports the growthstrategy of market penetration. Networking servers are a newmarket where ARM technology is increasingly being used by itspartners, however, ARM had no market share. To evaluate andtest its technology in this market ARM invested in R&D throughout2012. This enabled ARM to generate technology used in severalcommercial products in 2013. Culture  As well as external factors, many other factors within anorganisation have a huge impact on its business strategies. Everyorganisation has a typical way of doing things, known as theorganisation’s culture. This particularly relates to employees’behaviour patterns and relationships. A culture is not developedovernight, it takes time to build and will be heavily influenced bythe organisation’s vision and values. ARM’s culture is one of honesty and accountability. This in turncreates trust amongst its employees and stakeholders andsupports its values of team building and its ‘can do’ approach. The leadership at ARM creates a supportive working environmentby using its personal development and ecosystem strategies tomaximise employee potential and innovation. ARM Corporate Social Responsibility (CSR) initiatives both reflect andenhance the company’s culture and HR strategies. CSR involvestaking into account the wider needs of society to ensure thebusiness has a positive impact. In 2012, ARM set a CSR objective todevelop relationships with charities to create long-term value for boththe charity and ARM. This was achieved using the following tactics:• ARM entered into partnerships with Code Club and the RaspberryPi Foundation to encourage the development of skills in ComputerProgramming and STEM subjects amongst young people.• ARM is committed to helping both causes through financialand mentoring support. ARM involvement with Code Club and the Raspberry PiFoundation aims to increase children and young adults’ exposureto computer programming and the opportunities available throughstudying STEM subjects. It is hoped that this will help develop thenecessary skills to be technology leaders of the future. Thisdemonstrates how ARM CSR activities bring benefit to both thecharities and ARM’s HR strategies of workforce planning. Conclusion In a technology driven industry, ARM IP allows its partners to meetthe demands of their markets. As consumers expect more andmore from the performance of their digital devices, ARMtechnology creates innovative solutions that enable its network of partners to meet these demands. ARM’s vision, culture and values, coupled with clear, well-definedstrategies, have enabled the company to maintain its marketleading position in its core markets whilst experiencing dramaticgrowth in several new areas. Its focus on its workforce and itsecosystem of partners have created a culture of trust and opencommunication where individuals and innovation can thrive tocreate the technological products of the future. These benefit thecompany’s key stakeholders, partners and society in a sustainableway that few other companies can compare with.  ARM | A vi s ion for a s marter world E x am- s  t   yl   e q u e s  t  i   on s 1. Describe a key growth driver for ARM. (2 marks) 2. Explain the difference between business objectivesand tactics. (4 marks) 3.  Analyse to what extent the culture at ARM supports itsvision and aims. (6 marks) 4. Evaluate the effectiveness of ARM’s focus onemployee development in maintaining its marketleading position. (8 marks)
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