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The Silicon Arts Company is a new company that has been around for four years now and is producing digital imaging integrated circuits (IC’s). They have customers in three major area of the world. North America makes up 70% of sale while Europe makes up 20% and South East Asia makes up the last 10% of Silicon Arts sales. Currently Silicon Arts has an annual sales turnover of around $180 million. In the year 2000 Silicon Arts grew their sales by 78%, but that was short lived because in early 2001 their revenue fell by 40% because of the major industry slowdown that was occurring. So Silicon Arts had to figure out a way to reduce cost and begin freezing capital expenses. Since they were able to reduce cost enough by the last two quarter of 2001 they were again recording revenue growth. By the time that 2002 came around the Silicon Arts Company was in a very strong financial position and they were beginning to look at growth plans for the company.
Silicon Arts appointed Hal Eichner a chairman for the company to figure out a way for the company to begin to grow. Hal came up with a two point agenda for the company to pursue its growth potential, the first one was to increase the market share, second was to keep pace with technology. To achieve either one of these option Silicon Arts is going to have to a) Expand the existing digital imaging market share, or b) enter the wireless communication market. There were two different proposals that were brought up: Dig-image, W-Comm.
The Dig-Image proposal says that the company will grow 20% year1. The demand will grow 7% annually from year 2 onward. When year 5 comes around their will be a new technology ...