Businessmodel of Mentor Graphics

Customer Segments

Mentor Graphics has a niche market business model, with a specialized customer segment. The company targets its offerings at large firms in the communications, computer, consumer electronics, semiconductor, networking, military and aerospace, multimedia, and transportation industries.

Value Proposition

Mentor Graphics offers three primary value propositions: accessibility, performance, and brand/status.

The company creates accessibility by offering a wide variety of options. Its customers use its products to test a broad range of electronic components and systems, including integrated circuits, printed circuit boards, field programmable gate arrays (FPGAs), embedded systems and software, and wire harness systems. Furthermore, its solutions are used in the design and development of many electronic products, including transportation electronics, IoT platforms, computers, medical devices, industrial electronics, manufacturing systems, and wireless communications infrastructure.

The company has demonstrated strong performance through tangible results. Its solutions enable clients to develop superior electronic products, increasing the accuracy of complex designs. It also helps them produce more quickly and cost-effectively, reducing product time-to-market schedules.

The company has established a strong brand due to its success. It touts itself as the only EDA provider with an embedded software solution. It recently generated annual revenues of $1.18 billion. Lastly, it has won many honors, including the “Best Design Solution” Supplier of the Year Award by TowerJazz (2015) and recognition of its Veloce Power Application as a Hot 100 Product by EDN.

Channels

Mentor Graphics’ main channels are its direct sales team and its network of distributors and sales representatives. The company promotes its offering through its website, social media pages and participation in workshops, symposiums, and conferences.

Customer Relationships

Mentor Graphics’ customer relationship is primarily of a personal assistance nature. The company assists customers in the following ways:

• Training Services – The company maintains the Mentor Learning Center, which provides online instructor-led courses and classroom instructor-led courses at a Mentor training facility.
• Consulting Services – The company provides clients with access to experts who can help them integrate its technologies and methodologies into their workflows. The experts provide Yield Enhancement Services, Data Management Services, DFT Services, Verification Services, Electrical and Wire Harness Design Services, and Valor MSS/DFx Implementation Services.
• Productivity Services – The company offers customers access to experienced engineers who provide design know-how and support at every stage of a project. Specific services provided include Product Adoption and Migration Services, Operations Services, and Engagement Services. Despite this orientation, there is a self-service component. The company’s Mentor Learning Center includes online, on-demand training libraries that enable customers to learn at their own pace. Its website also provides a selection of white papers.

Key Activities

Mentor Graphics’ business model entails designing, developing, and manufacturing its products and offering product-related services to customers. Its manufacturing operations mostly involve reproduction of its technical software, printing of documentation, and assembly.

Key Partners

While Mentor Graphics manufactures many of its products, it also occasionally contracts with third parties to produce its offerings. The company also maintains the following partnership programs:

Design Area/Foundry Partners – The company utilizes the technologies of various firms to complete or enhance its solutions. These partners fall into the following categories:

• IC Nanometer Design – Foundry Partners
• Silicon Test & Yield Analysis
• Embedded Systems
• Functional Verification
• FPGA Partners Higher Education Program – The company maintains partnerships with over 1,200 colleges and universities worldwide that have engineering programs. The program aims to advance the development of skilled engineers in the electronics industry, providing the institutions with Mentor Graphics software, academic research, training, and cutting-edge design tools for classroom instruction. Specific partners include Harvard University, Princeton University, and MIT.

Term for Startup Program – The company addresses the specific needs of startups by offering economical pricing and contract terms that last 12 to 18 months. The terms provide intensive support to ensure productivity with Mentor Graphics‘ products.

Key Resources

Mentor Graphics’ main resources are its human resources, who include the engineering employees that design, develop, and manufacture its products, sales/marketing employees that promote them, and the training/consulting staff who provide instruction and advisory services.

It also places a high priority on intellectual property, with approximately 1,200 patents for inventions that are within its products or otherwise relevant to EDA technology, and 260 patent applications pending.

Cost Structure

Mentor Graphics has a value-driven structure, aiming to provide a premium proposition through significant personal service and frequent product enhancements.

Its biggest cost driver is research and development, a fixed cost. Other major drivers are in the areas of sales/marketing and administration, both fixed expenses.

Revenue Streams

Mentor Graphics has two revenue streams:

• System and Software Revenues – Revenues generated from the sale of licenses of software (primarily term and perpetual licenses) and emulation/other hardware systems.
• Service and Support Revenues – Revenues generated from the sale of software and hardware post-contract maintenance or support services and professional services (consulting, training, and other services). They typically last from three to four years.