Embed Size (px)
Citation preview
Garmin Ltd.
Case Analysis
Nathan Feather
July 8, 2010
FEATHER | 2
Table of Contents
Executive Summary.............................................................................................................................................. 6
Background and Description of Major Issues ............................................................................................ 7
Company Background ..................................................................................................................................... 7
Relevant History ............................................................................................................................................... 9
Key People & Organizational Structure ................................................................................................ 10
Vision/Mission/Goals .................................................................................................................................. 11
External Analysis ................................................................................................................................................ 12
Industry Opportunities and Threats ...................................................................................................... 12
Porter’s Five Forces Model .................................................................................................................... 12
Threat of New Entrants: Low .......................................................................................................... 12
Threat of Substitutes: Low ............................................................................................................... 13
Bargaining Power of Suppliers: Moderate ................................................................................. 13
Bargaining Power of Buyers: Low ................................................................................................. 14
Competitive Rivalry within the Industry: Low ......................................................................... 15
Strategic Group Analysis ........................................................................................................................ 15
Industry Life Cycle Analysis .................................................................................................................. 17
Relevant Environmental Issues ............................................................................................................... 18
FEATHER | 3
Social Changes ............................................................................................................................................ 18
Political and Legal Changes ................................................................................................................... 19
Economic Changes .................................................................................................................................... 19
Market Changes .......................................................................................................................................... 20
Technology Changes................................................................................................................................. 20
Internal Analysis ................................................................................................................................................ 21
Analysis of Competitive Advantage / Internal Assessment .......................................................... 21
Resources ..................................................................................................................................................... 21
Core Competencies ................................................................................................................................... 22
Core and End Products ............................................................................................................................ 23
Value Chain and Business Model ............................................................................................................. 25
Primary (Value-added) Activities ....................................................................................................... 25
Purchasing/Inventory Holding/Material Handling ............................................................... 25
Production .............................................................................................................................................. 25
Warehousing and Distribution ....................................................................................................... 26
Sales and Marketing ............................................................................................................................ 26
Dealer Support and Customer Service......................................................................................... 27
Secondary (Value-added) Activities ................................................................................................... 27
Infrastructure Activities .................................................................................................................... 27
Technology ............................................................................................................................................. 28
FEATHER | 4
Human Resource Management and Development ................................................................. 28
Resources and Competitive Advantage (VRIO Framework) ........................................................ 29
Inbound Logistics ...................................................................................................................................... 29
Operations/Production ........................................................................................................................... 29
Marketing & Sales ...................................................................................................................................... 30
Service ........................................................................................................................................................... 30
Analysis of Current Strategies ....................................................................................................................... 31
Enterprise ......................................................................................................................................................... 31
Inter-Organizational ..................................................................................................................................... 31
Corporate .......................................................................................................................................................... 32
Business Units ................................................................................................................................................. 33
Functional ......................................................................................................................................................... 33
Evaluation of Current Strategies .................................................................................................................. 34
Strategy Alternatives ........................................................................................................................................ 35
Alternatives and Analysis ........................................................................................................................... 35
Recommendation and Why........................................................................................................................ 36
Implementation Plan (Balanced Scorecard Approach) ....................................................................... 38
Strategy Themes ............................................................................................................................................ 38
Strategy Maps .................................................................................................................................................. 38
Balanced Scorecard ....................................................................................................................................... 39
FEATHER | 5
References ............................................................................................................................................................ 40
Appendices ........................................................................................................................................................... 43
Strategic Group Analysis .............................................................................................................. 43
Industry Life Cycle Analysis ........................................................................................................ 44
VRIO Framework ............................................................................................................................. 45
Porter’s Generic Strategies .......................................................................................................... 46
ERRC Model ....................................................................................................................................... 47
Strategy Map: Supply-Chain Efficiency ................................................................................... 48
Complete Strategy Map: Supply-Chain Efficiency .............................................................. 49
Strategy Map: Total Quality Management ............................................................................. 50
Complete Strategy Map: Total Quality Management ......................................................... 51
Balanced Scorecard ........................................................................................................................ 52
FEATHER | 6
Executive Summary
Garmin’s core competencies have enabled it to become the leading competitor in the Portable Navigation Device (PND) market. Through the analysis of Porter’s five forces model, it has been determined that the industry has a low threat of competition especially due to the low threats of entrants. In addition, the strategic group analysis has shown that Garmin is able to provide a wide breadth of products at a low cost. When looking at the industry life cycle, it has been determined that Garmin is currently in the growth stage. Garmin has seen a fall in stocks, sales, and revenue between 2008 and 2009, but those numbers have steadily increased by 2010.
The most important environmental change that Garmin needs to focus on is technology change, although economic changes are almost as important. Garmin’s products come from its research and development efforts, which make it extremely important to be cognizant about these technological changes. It has become evident that Garmin is aware of these technological changes and have decided to enter into the mobile handset industry. This leads to the major question of whether Garmin should enter into the industry or abstain from this business activity.
The strategic themes for Garmin at this point are logistics and supply-chain efficiency as well as total quality management. By properly executing these aspects of its business, Garmin is capable of creating a huge competitive advantage and be able to compete in the mobile handset industry. In addition, it is essential for Garmin to increase its advertising in order to bring brand awareness toward its mobile products as well as its other product line.
Creating strategic alliances with its distributors allowed Garmin to remain competitive and provided it with sustainable growth over the years. Unfortunately, in order to effectively enter the mobile industry, it is essential to create strategic alliances with more than just its distributors. Garmin needs to create strategic alliances with handset manufacturers, mobile operating system companies, as well as mobile phone service providers.
Investing more money into research and development for the mobile handset industry will also provide Garmin with greater potential to make a lasting impact on the industry. This means that GPS may not be the only competitive advantage that can be created by Garmin in this industry. Garmin has the resources to compete with many of these mobile handset companies.
Garmin has the resources available whether it is monetary and innovative and entrepreneurial-minded engineers as well as its top-management. This company culture that emphasizes innovation allows future opportunities for Garmin to create its own software for mobile handsets. This would lead to less dependency on other companies, and have more control over its operations to ensure quality and fast time-to-market products. This reinforces its strategic decision to pursue a vertical integration strategy. In short, there are many opportunities for growth in this industry and it is vital that Garmin pursues its innovative endeavors in this industry to create new revenue sources and become a more diversified company focusing on long-term stability.
FEATHER | 7
Background and Description of Major Issues
Company Background
Beginning as two separate companies, Gary Burrell and Min Kao combined their
strengths and joined forces by creating a parent company, Garmin Ltd. The name was
formed from the first three characters of their names, hence, “Gar” and “Min”. This
company was founded in George Town, Cayman Islands in 1989. Garmin is predominately
known for its high-tech Global Positioning System (GPS) products and services for
automobiles. Located in Olathe, Kansas, Garmin handles almost all aspects of its business
supply chain less the distribution and sales aspects.
Almost all of its design efforts, engineering and manufacturing, research and
development, and marketing efforts are handled in-house. As a result, Garmin feels that
feedback provided by engineers at all phases in the facility helps to reduce the time-to-
market, allowing it to get the product to the consumer at a faster time than its competitors1.
On December 8, 2000 Garmin Ltd. became a public company trading on the NASDAQ2. At
this current time, Garmin is not stated on the Fortune 500 list, but is currently listed as
number 1326 of the top 2000 companies in 2010 according to Forbes3.
The company operated in the technology sector and the science & technical
instruments industry4. Garmin classifies its target markets and segmentation to be broken
1 Reduced time-to-market (Annual Report, Page 20) 2 Garmin Goes Public (Garmin, FAQs) 3 2010 Forbes Top 2000 List (Forbes) 4 Sector & Industry (Yahoo!, Industry)
FEATHER | 8
up into four business segments according to its products. These business segments are
automobile & mobile, outdoor & fitness, marine, and aviation5.
Currently experiencing sales in excess of $2.94 billion, Garmin has been optimistic
about its growth and sustainability through the economic crisis of the past half-decade in
the United States6. At the end of the 2009 calendar year, Garmin had 8,437 full-time and
part-time workers located all over the world. Of these workers, 2,948 were located in the
United States, 68 in Canada, 4,727 in Taiwan, 623 in Europe, and 71 located in other
countries7. Most of Garmin’s employees are not part of any unions, minus a few agreements
from few countries.
Due to Garmin’s breadth in its product line, there are many competitors it
encounters. The competitors for portable automotive products are TomTom, MiTAC Digital
Corporation, and Navigon AG. For outdoor products, its competitors are Magellan,
Lowrance Electronics Inc., and Delorme. In terms of its fitness products, Nike Inc., Polar
Electro Oy, Suunto Oy, and Timex Corp are its competitors. Raymarine Ltd, Furuno
Electronic Company, and Simrad and Lowrance are the principal competitors for the
marine products. The fishfinder & sounder products, its competitors are Lowrance,
Raymarine, and Furuno. For aviation products, Garmin’s principal competitors are
Honeywell Inc., Avidyne Corporation, L-3 Avionics Systems, Rockwell Colling Inc., Universal
Avionics Systems Corporation, Chelton Flight Systems, Aspen Avionics, and Free Flight
Systems. In terms of family radio and general mobile services, Garmin’s competitors are
Motorola Inc., Cobra Electronics Corporation, and Midland Radio Corporation. Lastly, its
5 Target Market & Business Segments (Annual Report, Page 25) 6 Net Sales (Annual Report, Page 44) 7 Employees (Annual Report, Page 24)
FEATHER | 9
smartphone principal competitors are Apple Inc., HRC Corporation, Nokia Oyj, Samsung
Corporation, Sony Ericsson Mobile Communications AB, Google Inc., Motorola, LG
Electronics, Palm Inc., and Research in Motion Ltd8.
Relevant History
For the majority of its time between 2004 and 2008, Garmin’s total shareholder
returns have been greater than the total return on the NASDAQ Composite Index as well as
the NASDAQ 100 Index9. By the end of 2009, Garmin was able to reach higher cumulative
total shareholder returns once again. Looking at the long-term trends of the past 10 years
of Garmin’s presence on the NASDAQ, it experienced substantial growth between 2001 and
2007. Due to the economic and financial downturn in the United States, Garmin suffered
but only for a short period of time. By 2009, Garmin began increasing its shares on the
NASDAQ once again.
The year of 2009 ended up being a successful one for the company. Garmin has
expressed many of its highlights in the annual report. Garmin became the worldwide leader
in the Personal Navigation Device (PND) market, capturing the largest market share in the
United States. Garmin continues to expand its efforts into the global market and increase its
share in Europe, currently positioned second behind its competitor, TomTom10. During the
year, it generated total revenues of $2.95 billion, $3.5 earnings per share, and sold more
8 Principal Competitors (Annual Report, Page 19) 9 Total Shareholder Return (Annual Report, Page 42) 10 Europe Market Share (Wikinvest)
FEATHER | 10
than 16.6 million units. One of the most notable achievements of the company came about
with its near $ billion cash and marketable securities and becoming debt-free11.
Key People & Organizational Structure
The top direct holder of Garmin Ltd. is Thomas A. McDonnell, a director of the
company holding 53,717 shares. Secondly, Danny J. Bartel, an officer of Garmin, holds
76,400 shares. Lastly, Eller Donald, also a director of Garmin, holds 53,717 shares12.
In terms of top institutional holders, Sterneck Capital Management, LLC has the
most with 29,784,019 shares. The value of these holdings exceeds $1.15 billion. Second,
AXA has 18,160,182 shares which are valued at $701.5 million. Finally, BlackRock
Institutional Trust Company has 3,453,764 shares which are valued at $133.4 million. Each
of these top institutional holder numbers were reported on March 31, 201013.
Due to Garmin’s global reach, there are many stakeholders involved. Many of these
include the stockholders, suppliers, customers, employees, government (domestic &
foreign), retail partners, and members of the community. Much of Garmin’s efforts are
made through employee relations and high levels of responsibility among all aspects of the
design and manufacturing of its products making this a high priority.
Although the co-founder, Gary Burrell, does not have the major responsibilities that
he had previously, he still plays a key role in the sustainability of the business. Burrell is
mentioned as a Chairman Emeritus of the company. The current Chief Executive Officer of
the company is Min H. Koo, Ph.D., the other co-founder of the company. The Chief Operating
11 2009 Highlights (Annual Report, Page 1) 12 Top Direct Shareholders (Yahoo!, Major Holders) 13 Top Institutional Shareholders (Yahoo!, Major Holders)
FEATHER | 11
Officer is Clifton A. Pemble. The Chief Financial Officer is Kevin S. Rauckman. Lastly, the
Vice President is Andrew R. Etlend14.
One praised aspect of the company’s organizational structure is the use of its
vertical integration model. The main concept of this model is to maintain its business
operations through the use of in-sourcing. As a result, the organization is able to adapt to
the complex and dynamic environment15. In the past, Garmin has used a few slogans to
represent its business. Some examples include “We’ll take you there” and “Don’t just get
there. Arrive”. Garmin’s website praises its innovative and market-leading presence
through the slogan of “Garmin - Follow the Leader”.
Vision/Mission/Goals
The ultimate vision of Garmin is to (continue to) provide the best-in-class products
in its industry for its global customers. In addition, Dr. Min H. Kao plans to “develop
innovative new products and services for the next 20 years and beyond” as mentioned in
the letter to the shareholders16. It is also Garmin’s goal to continue research and
development efforts to improve and enhance its current products while providing
opportunities for new development in the future.
Garmin’s mission plays a major role in the way it conducts and operates its business.
According to Garmin, its mission “is to enrich the lives of its customers, suppliers,
distributors, employees and stockholders by designing, manufacturing and selling
navigation and communication products that provide superior quality, safety and
14 Dominant Figures of Garmin (BusinessWeek) 15 Vertical Integration Model (Annual Report, Page 4) 16 Letter to the Shareholders (Annual Report, Page 4)
FEATHER | 12
operational features, lower cost of manufacturing and ownership, and sufficient profits to
support desired company growth”17.
Garmin also has many goals to increase its market share and product lines. In order
to achieve these targets, its goal is “To create navigation and communication devices that
can enrich our customers’ lives”18. Its innovative and technologically-driven spirit allows it
to conduct business in such a wide product line. These products include automotive, mobile
& wireless, aviation, marine, fitness, and outdoor markets that many competitors do not
have the resources to compete. Garmin’s core values consist of innovation, convenience,
performance, value, and service.
External Analysis
Industry Opportunities and Threats
Porter’s Five Forces Model
Threat of New Entrants: Low
Garmin has been able to achieve a competitive advantage through its penetration
into the international markets. Much of this competitive advantage is through the ability to
provide cheaper products while maintaining high quality management through its
manufacturing and production processes. In addition, the use of strategic alliances with
retailers across the globe has provided it with more opportunity to expand its market share
in the domestic and international sectors.
17 Mission Statement (Shareholder Meeting, Page 3) 18 About Us (Garmin, About Us)
FEATHER | 13
The Portable Navigation Device sector requires lots of technical skill and education
in order to create and produce competitive products. Additionally, with Garmin’s large
breadth of products offered, it is very difficult for even large companies to compete in all
realms of its business. As a result, there is a low threat of new entrants into this industry.
Small companies will end up specializing in specific GPS devices (i.e. automotive, marine,
outdoor, or aviation) rather than offering multiple varieties of products and services. Even
if small companies try to penetrate the market through differentiation, it would be difficult
to gain a large market share due to the lack of resources available.
Threat of Substitutes: Low
Garmin has been able to use its vertical integration system as an advantage to
reduce the manufacturing costs and have used its research and development efforts toward
future products rather than lagging behind competitors in its industry. It is not only evident
that Garmin is an industry leader, but also an industry innovator. As a result, it is very
difficult for any competitor to provide products that are differentiated enough to gain any
more market share than it currently possess.
When looking at the strategic group analysis, the only way for substitutes to be a
viable option for competitors is by providing high-quality products for lower costs. There
are few current competitors who are able to offer these products. New competitors would
struggle to provide enough quality to make its products viable substitutes.
Bargaining Power of Suppliers: Moderate
Although Garmin has been able to use its expertise in GPS, it requires high-quality
and technologically advanced parts for its devices. Due to this, some of the parts are newly
FEATHER | 14
developed and are customized to the needs of Garmin. This gives a little power to the
suppliers because it is able to charge higher prices to Garmin due to this customization19.
Additionally, these customized products are provided by a select number of suppliers,
making it more difficult to negotiate on lower prices.
Other than this single factor, the bargaining power of suppliers is relatively low. For
more of the common materials acquired by Garmin, there is more bargaining power on its
behalf to lower the cost. In addition, Garmin is able to use its power to switch suppliers if it
deems it to be necessary. Garmin also utilizes its global reach in order to achieve a
competitive advantage and receive lower costs on materials.
Bargaining Power of Buyers: Low
As stated previously, one of Garmin’s competitive advantages is through economies
of scale. These lower costs make it difficult for other competitors to make a substantial
change in the market share. Garmin provides a larger breadth for a product line while
maintaining relatively low prices. In comparison, many of its competitors are only able to
differentiate it through pricing strategies.
Oftentimes, buyers fall into the price-quality heuristics. That is, higher priced items
are perceived to be of higher quality. In this case, Garmin has different products at various
prices which attract different consumer demands. Smaller competitors struggle with this
aspect of price and quality for its products. Additionally, Garmin’s alliances with various
retail outlets and distributors provide it with more opportunities to reach a larger share of
its target market.
19 Materials (Annual Report, Page 20)
FEATHER | 15
Competitive Rivalry within the Industry: Low
Looking over Porter’s five competitive forces, it is evident that the competition
within the industry is very low. This is due to the low threat of new entrants, low threat of
substitutes, moderate level of supplier power, and low levels of buyer power. With Garmin
as the industry leader, there is a lot of opportunity for growth and development while
worrying little about new competitors entering the market. If Garmin is able to maintain
and grow strong relationships with its suppliers, especially the select few it deals with in
terms of its customized parts, more opportunities for a competitive advantage are able to
be achieved.
Strategic Group Analysis
When developing the strategic group analysis, we will specifically look at the
principal competitors of Garmin in the Personal Navigation Device market. The
competitors that will be included in this market will be TomTom, Magellan, Mio, and
Navigon.
Although the analysis of market share is not directly related to the strategic group
analysis, we will use it to determine the market power that each of Garmin’s competitors is
capable of contributing, both to its competitive price propensity and breadth of product
line. In 2009, Garmin had a worldwide market share of 36% in the Portable Navigation
Device (PND) market. Second, TomTom had 30%. Third was Mio/Magellan/Navman with
12%, with Navigon a very minute market share20.
20 Worldwide PND Market Share (Shareholder Meeting, Page 9)
FEATHER | 16
Specifically looking at the United States market share for the PND market, Garmin
has a substantial portion with 47%. The next competitor even close to this market share is
TomTom with 19%. Third is Magellan with a market share of 17%, Mio with 7%, and the
rest of the PND market with 10%21.
Garmin’s mission reinforces the notion that it is able to provide products with
superior quality with lower costs of manufacturing, in turn, passed down to the consumers.
In addition, it is able to provide a large variety of products which range from automotive,
mobile, outdoor & fitness, marine, and aviation. TomTom provides navigation products for
car and motorcycle navigation, ultimately focusing primarily on the automobile sector. Mio
manufactures GPS devices for the purposes of automotive transportation. Magellan
provides automotive, hunting, and outdoor products. As a result, Garmin has a larger
breadth of products, Magellan has the second largest, TomTom, and then other PND
companies are more focused on specialization.
In terms of pricing, Garmin is able to use economies of scale from the global
environment to provide high-quality and low cost products. Although Magellan provides a
larger breadth of products compared to TomTom, the latter competitor has been able to
use its specialization to provide its products at a lower cost than Magellan. Lastly, the other
PND competitors have a low product selection, but also provide its products at a lower
price even though the quality of those products are much lower than the first three PND
21 United States PND Market Share (Wikinvest)
FEATHER | 17
companies that have been mentioned in the strategic group analysis. The strategic group
analysis model is included in the appendices22.
Industry Life Cycle Analysis
Ever since the Garmin became a publically traded company in 2000, it has
experienced growth in the NASDAQ except for slight downfalls between 2007 and 2009
due to the financial and economic crisis. The same can be stated when looking at the net
sales of the company. In 2005, the net sales of Garmin were $1.027 billion and $1.774
billion in 2006. By 2007, Garmin experienced a large increase in net sales, generating
$3.180 billion and $3.494 billion in 2008. By 2009, there was a slight fall in net sales which
amounted to $2.946 billion23. Both of these statistics show similar patterns and provide us
with a good basis for determining the industry life cycle of the company.
From this analysis, some might conclude that Garmin is at the maturity phase within
its industry due to the leveling out and gradual fall in both sales and stocks. On the
contrary, this could be explained by external factors such as the economic downturn which
played a role in the fall of stocks in many organizations. Through Garmin’s continuous
research and development efforts, it has enabled its company to be entirely dependent
from its competitors and the industry itself to make way for future growth and opportunity
for itself. As a result, it is my belief that Garmin is experiencing a temporary downfall in its
performance between 2007 and 2009 and will soon see growth in its organization in the
near future. As a result, Garmin may be encountered with the growth phase in the industry
life cycle.
22 Strategic Group Analysis 23 Net Sales (Annual Report, Page 44)
FEATHER | 18
Part of this determination of being in the growth phase can be reinforced in many
ways. Garmin’s global reach is emphasized through its ability to achieve economies of scale
and reduce the manufacturing costs of its products. Garmin has continued to delve into
new markets that were once unimaginable for the Portable Navigation Device market and
will continue to do so for some time. Its recent development into a new market is through
the mobile phone industry but has yet to see if its market penetration has made a positive
impact for its company. The industry life cycle analysis has been included in the
appendices24.
Relevant Environmental Issues
Social Changes
Garmin has not encountered many social environmental issues when conducting its
business. The only notable concerns may deal with privacy issues when providing GPS
services to consumers. These issues have been dealt with and discussed in the past and will
continue to be present in the evaluation of Garmin’s services.
In addition to privacy concerns, Garmin is very involved with corporate social
responsibilities (CSR) efforts. In short, some of these CSR activities include recycling,
product design, and safe & proper disposal of products25. The recycling efforts include two
programs, Product Recycling Worldwide and the WEEE program26.
Garmin has been involved in many European Union efforts in order to follow
guidelines for its product design. This includes the European Union RoHS Directive. Garmin 24 Industry Life Cycle Analysis 25 Environment (Garmin, Environment) 26 Recycling (Garmin, Recycling)
FEATHER | 19
has made substantial efforts in order to comply with these regulations. In addition, the
European Union REACH position is a chemical regulation in which Garmin supports and
complies27. Last, Garmin is concerned with safe device disposal because its products
contain mercury. Its program contains efforts to help minimize mercury pollution28.
Political and Legal Changes
Due to the complexity and dynamic nature of international political environments,
we will not delve too much in depth about these issues. However, it is important to be
cognizant about these potential barriers. Being aware of these issues and finding ways to
partner or form alliances with foreign companies can enable Garmin to increase its global
reach and do business in other countries. Over the years, Garmin has encountered a
number of legal challenges. Many of these have dealt with patent concerns from other
companies. These concerns arise from both protecting its patents and copyrights as well as
being aware of other patents developed by others so Garmin can avoid any legal
complications.
Economic Changes
The sales that Garmin generates are impacted by the economic fluctuations of the
markets in which it competes. The current economic issues it has encountered limited the
capacity for businesses and consumers to spend, which resulted in lower levels of revenues
27 Product Design (Garmin, Product Design) 28 Device Disposal (Garmin, Disposal)
FEATHER | 20
that Garmin could have gained in the past and near future. These constraints make it more
difficult for retailers to turn over its revenue and write off debt29.
During the recent economic crisis, many aspects of Garmin’s business were affected.
The revenues of the automotive and mobile segment fell by 19%, to a total of $2.1 billion.
The outdoor and fitness segment experienced a decrease in revenue by 10%, which fell to
$469 million. The revenue in the aviation segment fell by 24%, and the total revenue fell to
$246 million. Lastly, the revenue from the marine segment decreased 13%, causing the
revenue to fall to $177 million30.
Market Changes
Many of Garmin’s sales are susceptible to seasonal changes. In terms of consumer
products, its sales tend to be much higher in the fourth quarter. This trend is from the
result of automobile and mobile products being sold during the holiday season. Sales in the
second quarter are generally second highest due to the spring and summer marine season.
The aviation products are not affected be any seasonal changes31.
Technology Changes
One of Garmin’s most notable advantages is its innovative and product
developmental efforts. Many of these innovations have been protected with patents and
trademark registrations. Unfortunately, there are many threats that can arise with these
property rights being violated and exploited by other companies. As a result, it is important
29 Economic Conditions and Uncertainty (Annual Report, Page 24) 30 Economic Impacts on Revenue (Shareholder Meeting, Page 2) 31 Seasonality (Annual Report, Page 21)
FEATHER | 21
for Garmin to keep pursuing innovation and technological advancement while being aware
of the legal challenges that may arise.
Garmin places much emphasis on research and development within the
organization which is applied to all aspects of the business. This in-house technological
development process helps to improve current products as well as apply it to prototypes
for future products. It is also important to maintain innovation through hardware as well as
software development for its products.
Internal Analysis
Analysis of Competitive Advantage / Internal Assessment
Resources
Garmin has been able to identify its resources, which include financial capital
resources, physical capital resources, human capital resources, and organizational capital
resources. Some of Garmin’s financial capital resources come from investment from its
stockholders. Other financial capital resources come from its relations with alliances such
as its distributors and dealers as well as its relations with dealerships, aviation companies
and other alliances that give Garmin its competitive advantage.
In terms of physical capital resources, many of Garmin’s efforts through vertical
integration come from its physical buildings. These include locations in Taiwan, Kansas,
Oregon, as well as other locations all over the globe. These locations provide advantages for
Garmin in terms of reductions in costs, as well as its ability to perform the majority of its
FEATHER | 22
operations in-house. These locations also make it cost-effective due to its access to raw
materials.
Much of Garmin’s advantage comes from its human capital resources. Training is
essential for Garmin as its engineers have a lot of responsibility in the design, production,
and manufacturing process of its products. It is important to hire the best and brightest
engineers that bring innovative and entrepreneurial visions to the company. In addition,
the managers have a large responsibility in their ability to maintain quality efforts
throughout the whole production process.
Organizational capital resources are also another important aspect for Garmin and
its operations. Due to the job enrichment of its employees, the company operates in a more
decentralized and horizontal organizational structure than other companies. Many of its
operational decisions are made in an informal matter, but most of its strategic planning is
made formally. Controlling efforts are essential for Garmin as it focuses much of its quality
operations through its vertical integration structure.
Core Competencies
Garmin has used strategic alliances in order to achieve a competitive advantage over
its principal competitors. Garmin has made many efforts to work directly with automobile
manufacturers as well as automobile dealerships to install its products both dealer-
installed and factory-installed. There have also been promotional relationships with these
automobile dealerships. In addition, Garmin has made alliances with automobile rental
companies to install its products in its vehicles. Garmin has also made strategic alliances
FEATHER | 23
with boating and aviation companies and organizations in order to install its products in its
machines32.
Garmin has been able to operate in this competitive environment be being cognizant
about its core competencies. Garmin has been able to do this by using its vertical
integration model. In addition, Garmin has noted that being able to manufacture products
at competitive prices can be accomplished through “designs, functionality, quality and
reliability, customer service, brand, price, time-to-market and availability”33.
One core competency that Garmin uses as a competitive advantage is through the
use of intellectual property rights. These include patents, copyright, trademark, trade
secret laws, confidentiality agreements, as well as other property rights. At the beginning of
the 2010 calendar year, Garmin had over 400 patents and 250 trademark registrations34.
Core and End Products
Garmin has broken down its products into distinct segments. These segments
include automotive & mobile, outdoor & fitness, marine, and aviation. Within these
segments, Garmin has a variety of products that add value to the company. More products
will be made through research and development efforts, creating new prototypes for the
company.
The automotive and mobile segment has many products that fulfill the personal
navigation device (PND) portion of products. The nüvi product line consists of twenty-five
models. The nüvifone is a touchscreen smartphone which consists of 2 different models.
32 Distribution Channels (Annual Report, Page 18) 33 Core Competencies (Annual Report, Page 19) 34 Intellectual Property (Annual Report, Page 21)
FEATHER | 24
The zūmo consists of 4 models which are used for motorcycles. Lastly, there is the Garmin
Mobile for Blackberry and Garmin Mobile XT models35.
The outdoor & fitness segment consists of a number of models. The first model is the
Forerunner, which comprises of 9 different models. This is used as a lightweight training
assistant. The Edge has 5 different models and is used for cyclists, the Dakota has 2 models
and is used for outdoor activities, and the same goes for the Colorado product which has 4
different models and the Oregon with 9 different models. The Rino is used for two-way
voice communication and GPS navigation which consists of 5 different models. The
Approach G5 comprises of 2 models and is used for golfers. Lastly, the Astro is a used as a
dog tracking system36.
There are a large variety of marine products that Garmin offers. One of the most
common ones is the GPSMAP 7000 series which consists of 4 different models. The
predecessors were the GPSMAP 3000-6000 series which totaled 18 different models. In
addition, Garmin offers the GSD 21 and 22 which are “black-box” sounders. Another
product is the GMS 10 which is used to support multiple sensors37.
Garmin also offers a number of handheld and portable devices for its aviation
segment. The aera series comprises of 4 different models. The GPSMAP 495/496 as well as
GPSMAP 695/696 has other aviation tools such as weather reports, charts, and airway
information. Pilot My-Cast is used for flight planning, and receives information directly
from the National Weather service38.
35 Automobile & Mobile Products (Annual Report, page 7-8) 36 Outdoor & Fitness Products (Annual Report, Page 8-10) 37 Marine Products (Annual Report, Page 10-12) 38 Aviation Products (Annual Report, Page 14-15)
FEATHER | 25
Value Chain and Business Model
Primary (Value-added) Activities
Purchasing/Inventory Holding/Material Handling
It is Garmin’s belief that it is able to exploit its manufacturing efforts to become a
competitive advantage and believes it is one of its core competencies. Garmin has many
manufacturing facilities located all over the globe. Many of these include facilities located in
Taiwan, Kansas, and Oregon39. Through its vertical integration efforts, it has experienced
many benefits for almost all of its products as well as it accessories.
Garmin has many key components and materials which are essential to its
production and manufacturing of products. Some key components include
microprocessors, liquid crystal displays, and application-specific integrated circuits40.
These components are essential to the viability of the business because these materials are
limited and obtained from few suppliers which place these items at supply and pricing
risks. This makes it essential for Garmin to build close and effective relationships with its
suppliers.
Production
Throughout the whole production phase, Garmin has made efforts to provide
feedback, even before mass production occurs. As a result, Garmin saves time through the
production phase from start to finish; from the developmental phase to the manufacturing
39 Manufacturing and Operations (Annual Report, Page 19-20) 40 Key Components (Annual Report, Page 20)
FEATHER | 26
phase41. During the manufacturing phase, Garmin uses prototype design concepts and
processes to achieve higher efficiency, lower its costs, and provide better value and quality
to its customers42.
Warehousing and Distribution
When looking at the United States market, there are many activities that have
contributed more value to Garmin’s primary activities. Garmin deals with a number of
distributors to handle and sell its products. Many of these salespeople include regional
sales managers and in-house sales associates. Much of Garmin’s value comes from
networking with dealers such as Best Buy, Costco, Petra, Target, and Wal-Mart. Garmin also
has strategic alliances with online distributors such as Amazon.com43. In addition to its
vast array of networks in the domestic environment, Garmin also benefits from strategic
alliances in the global environment.
Garmin operated its own manufacturing facilities, due in part to its high quality
standards and dynamic vertical integration efforts. Having more control over its facilities
also allow it minimize problems it may encounter. Such problems may include component
shortages, lead times, re-engineering, and other safety concerns44.
Sales and Marketing
Many efforts have been made to increase its marketing and advertising. At the end
of the 2007 calendar year, Garmin incurred an advertising expense of $206,948. In 2008,
41 Reduced Time-to-Market (Annual Report, Page 20) 42 Design and Process Optimization (Annual Report, Page 20) 43 Distributors and Dealers (Annual Report, Page 17-18) 44 Logistical Agility (Annual Report, Page 20)
FEATHER | 27
the advertising expenses incurred were $208,177. Lastly, the 2009 advertising expenses
amounted to $155,52145. The cause of the reduction in advertising expenses in the latter
year resulted from macroeconomic conditions which impacted its sales for both Garmin
and its distributors.
In 2009, the vast majority of advertising expenses were targeted toward the
automotive and mobile sector. This amounted to a cost of $118,713, incurring more than
75% of its advertising expenses. The second largest sector that experienced advertising
expenses was the outdoor and fitness sector. The advertising costs amounted to $23,262.
The marine and aviation sectors had the lowest costs for advertising which totaled
$13,546.
Dealer Support and Customer Service
Garmin has seen customer service to be an important aspect in the way it does
business. Many of these customer service and technical support tasks include order
processing, answering customer inquiries and claims both through its website and on the
telephone as well as email and other electronic forms. Additionally, Garmin provides free
technical support assistance to its customers46.
Secondary (Value-added) Activities
Infrastructure Activities
Information Technology plays a vital role in the sustainability of the company. This
is reinforced through resources and budgeting for research and development. As a result,
45 Advertising Costs (Annual Report, Page 76) 46 Customer Service and Technical Support (Annual Report, Page 76)
FEATHER | 28
technological advancements can be made in all aspects of the business, whether it is
designing and producing, manufacturing, or distribution efforts made by Garmin to make
its operations more efficient, cheaper, and more effective.
In addition to information technology, Garmin makes contracts with its suppliers to
create a more effective integrated process. Garmin becomes more transparent by providing
its suppliers with its production schedule and provides them with weekly updates. As a
result, Garmin is able to produce its products at lower costs and reducing the time it takes
to go through the entire production cycle. The suppliers, in turn, benefit from being able to
plan ahead and be more efficient for its company as well as for Garmin.
Technology
Garmin has placed a large dependency on technology which is how it has thrived in
its industry. This has been evident from the vast amount of resources and funding placed
toward in-house research and development, so much so that it has become a core
competency of the company. This technology has been developed for its products have also
been used on future prototypes for Garmin’s development in new markets and
sustainability within the industry.
Human Resource Management and Development
Garmin places a great deal of emphasis on its employees. It is a top priority to hire
the best engineers to deal with the vertical integration process of the manufacturing and
production phase. Retention is essential for the viability of the company making training
and development an important aspect of the company’s operations, especially due to the
costs it takes just to train one employee. In addition, Garmin deals with business
FEATHER | 29
internationally and sees itself as having good relations with the workers and operations
overseas.
Resources and Competitive Advantage (VRIO Framework)
Inbound Logistics
When looking at inbound logistics, Garmin is able to exploit an opportunity in this
area of its business. This value is created through the strategic alliances it has with its
suppliers. Beyond the level of creating value, the inbound logistics of Garmin are not rare
from its competitors. As a result, the inbound logistics becomes a competitive parity. The
full representation of inbound logistic in the VRIO framework is included in the
appendices47.
Operations/Production
Garmin’s operations and production aspect of its business generates value to the
organization. Additionally, its operations and production is rare in respect to its
competitors. This is due to the vertical integration system that Garmin is able to operate its
business. All factors of production can be controlled, modified, and executed under one
organization which can lead to lower production costs and greater value to Garmin and its
stakeholders.
In terms of imitability, it can be rather costly for companies to pursue this vertical
integration model if they are currently operating under a horizontal integration structure.
The most important part of this analysis is that Garmin exploits its operations and
47 VRIO Framework
FEATHER | 30
production strategies, which is essential to capture a sustained competitive advantage. The
complete analysis of operations and production in the VRIO framework is included in the
appendices47.
Marketing & Sales
Garmin is able to generate value from its marketing and sales efforts. Through the
use of strategic competitive advantages, Garmin is able use its distributors and dealers as a
source of indirect marketing in localized segments. In addition to these close alliances,
Garmin is able to enter into new markets in areas that competitors would struggle. Garmin
has been increasing its advertising efforts over the years which will hopefully segment into
greater sales in the future.
Due to these close strategic alliances, it is rare for other companies to compete in
terms of marketing and sales. However, it is not costly for competitors to imitate. Therefore
marketing and sales becomes a temporary competitive advantage. The full analysis of
marketing and sales in the VRIO framework is included in the appendices47.
Service
The services offered by Garmin provide value to its organization. This includes call
centers for customers as well as other technical services. However, Garmin’s service is not
rare in comparison to other competitors. As a result, the service segment is a competitive
parity. The complete representation of service in the VRIO framework is included in the
appendices47.
FEATHER | 31
Analysis of Current Strategies
Enterprise
The mission of Garmin is essential when evaluating the current strategies at the
enterprise level. In short, its mission is to enrich its stakeholders by providing products of
high quality and safety at lower costs to consumers. Mentioned previously, Garmin has
been involved in a number of corporate social responsibility efforts in order to produce its
products while being cognizant about the environment and other social factors in which
the company operates.
Garmin sees itself as a provider for products that can not only be used for
recreation, but life-saving scenarios as well. This includes all segments of its products such
as automobile & mobile, outdoor & fitness, marine, and aviation. Additionally, Garmin
benefits all of its stakeholders but seems to place much focus on the government,
employees, and customers. As a result, Garmin is able to excel in these areas to produce and
manufacture products that consumers would benefit as well as treating employees in a
very professional manner.
Inter-Organizational
When analyzing the inter-organizational level, it is important to look at the
competitors as well as Garmin’s strategic alliances. Specifically looking at Garmin’s
competition, it is essential to determine what these companies are doing as well as what it
is capable of doing.
FEATHER | 32
In terms of TomTom, this company has decided to specialize in automobile Portable
Navigation Devices (PND) rather than creating a wide breadth of products. As a result,
TomTom has the capabilities to best utilize its resources and direct it toward more
effective devices. TomTom is capable of achieving much more through its specialization
strategy. If TomTom is able to differentiate its product more, it can make a larger impact in
the overall market share for the industry.
Another competitor, such as Magellan, has pursued a rather different strategy. Its
product mix is slightly larger than TomTom, but much narrower than Garmin. This makes it
more difficult for Magellan to compete with TomTom’s specialization in the automobile
PND market. Magellan has the resource capabilities to compete with its competitors and
dedicate toward more research to make more differentiable products to compete with
Garmin.
It is also important to take note of Garmin’s strategic alliances. Due to its ability to
make meaningful and difficult to imitate relationships, Garmin is able to create a
competitive advantage. These alliances include relationships with suppliers as well as
distributors.
Corporate
One of Garmin’s major competitive advantages is the use of effective vertical
integration. This is extremely important as it provides Garmin with opportunities to
control its operations at all levels of design, production, and manufacturing phases. In
addition, it allows for the company to incur lower costs throughout the whole production
process.
FEATHER | 33
The entire process of Garmin’s operations assumes the downstream process. The
raw materials are sent from its suppliers to the warehouses that Garmin owns. At this
point, the employees of Garmin design the products. These products go through the
production and manufacturing phase and then are sent to its distributors. From this point,
the products are then ready to be purchased. The whole process goes from the raw
materials all the way to the consumers.
Business Units
It is essential to be aware of Garmin’s firm-specific business model in order to make
effective decisions in the way the company functions. A result in this will lead to a
competitive advantage. This firm-specific business model includes cost-leadership and
differentiation.
Garmin is able to provide products at low costs to consumers through the
competitive advantage of economies of scale, which is its primary strategy. Garmin sees
lower costs and a broader target to be the best method to pursue when manufacturing its
products. As a result of being a cost leader, it is able to have more bargaining power to its
suppliers and less threats of entrants into the industry48.
Functional
Much of Garmin’s efforts are to achieve high quality in its production and
manufacturing stages. In some respects, Garmin is using Total Quality Management (TQM)
through its use of the vertical integration strategy. This helps reduce inefficiencies during
the whole process, eliminate defects, and lower costs for the company.
48 Porter’s Generic Strategies
FEATHER | 34
Through this vertical integration strategy, research and development (R&D) is able
to make a larger impact on the company. Even if the R&D efforts are not directly used for
its current products, it ends up being used for future prototypes. Additionally, the
investment in R&D helps provide more innovation for the company which helps the
sustainability and growth of Garmin.
Evaluation of Current Strategies
Garmin has been able to effectively use its mission to guide its decision-making and
manufacturing processes which has allowed the company to thrive with a competitive
advantage in many areas of its operations. By following its vision and values of the
company, the company benefits each of its stakeholders. In addition, the CSR efforts have
made an impact in the environment as well as the corporate image of the company. As a
result, Garmin’s strategies at the enterprise level are well exploited.
The inter-organizational level of Garmin is extremely effective. This is due in part to
its strategic alliances with distributors. As a result, it is very difficult for other
organizations to compete and limits new entrants in the industry. In addition, its strategy
to product a wide breadth of products while maintaining economies of scale and achieve
high quality provides value to the company as well as the consumers.
At the corporate level, the company has an advantage over its competitors in many
areas of its operations, specifically through vertical integration. This makes its corporate
levels extremely effective. In turn, the company is able to exploit an advantage and have the
ability to control all aspects of the production and manufacturing process.
FEATHER | 35
Through Garmin’s firm-specific business model, the company has found a way to
generate effective business units. In addition to the vertical integration model, Garmin has
also pursued the cost-leadership strategy. While making the business unites even more
effective, Garmin is able to increase its bargaining power while making it difficult for new
competitors to enter the industry.
The functional level of Garmin is very effective. This is due to the high quality
products it designs and produces. Through Total Quality Management, the functional units
have been found to exploit a competitive advantage. In addition, it gives Garmin a greater
incentive to invest in more research and development.
Strategy Alternatives
Alternatives and Analysis
With Garmin entering into the mobile industry, it is essential to look at alternative
decisions that could be made. Much of these analyses of alternatives can come from the
four-action framework. This framework is developed to determine blue ocean strategies
Garmin can pursue. The four actions are: eliminate, reduce, raise, and create.
The first framework, eliminate, is something in the industry that should be
eliminated. The reduce framework is something that the company should reduce below the
levels of the industry. The raise framework is something that the company should increase
at a level above the industry. Lastly, the create framework is something that the company
should add that the industry does not already have.
FEATHER | 36
The complete Eliminate-Reduce-Raise-Create (ERRC) model has been included in
the appendices with full analysis of Garmin’s alternative options49.
Recommendation and Why
Garmin has the resources and innovative-mindset to pursue business in the mobile
industry and compete with larger companies. It is essential for Garmin to analyze its blue
ocean strategy to fill a niche in the market that previously was not implemented. With
Garmin as the number 1 company in the portable navigation device market, entering
business and dealing with mobile handsets seem to make sense.
Google has made a huge impact on GPS service on handsets, which would be a
competitor to Garmin. Fortunately, Garmin has made a strategic alliance with Google and
have developed a handset that is powered by Google’s operating system, Android. In
addition, Garmin is providing its GPS services on the Android phone. This creates a huge
value to the consumers by creating a premiere phone with a strong operating system and
GPS capabilities beyond the level that Google can provide. Due to this strategic alliance, it is
viable for Garmin to compete in this industry. This reduces the chance of having to compete
against Google, which could be seen as the demise of the company.
It is my belief that Garmin is focusing on the long-term stability of competing in the
mobile handset industry. As a result, it is essential for Garmin to create these alliances in
order to make its way in the industry and become a superior quality product for its
consumers. As time continues, I envision Garmin continuing these alliances and eventually
49 ERRC Model
FEATHER | 37
become a necessary partner for all mobile phones by implementing its GPS products into
every handset.
It is my recommendation to pursue competition into the mobile handset industry by
creating alliances and becoming a prominent company for GPS products and services. This
will not only build the brand image of the company, but also generate new revenue sources
that would help the company compete in all areas of its business.
Creating an alliance with Google, a huge player in the technology industry, that is
also a new competitor in the handset industry can benefit both companies in the long-term.
This reduces the resources necessary to produce handsets because Google already has
close relations with HTC. In addition, this gives Garmin the ability to focus its efforts on
improving its product and finding new ways to innovate, developing new prototypes for
the future that could further compete in the handset industry.
Entering into this industry can provide a greater opportunity to generate greater
revenues, which would allow Garmin the opportunity to further invest in its products,
research and development, as well as expand its physical buildings and locations. This
would also help to create a stronger distribution network for the company which is
essential to compete as a low-cost provider.
FEATHER | 38
Implementation Plan (Balanced Scorecard Approach)
Strategy Themes
There are many important themes that Garmin has expressed, many of which have
become core competencies for the company. One of the most important strategic themes
deals with the providing efficient and industry-leading logistics and supply chain
management. The second theme deals with providing and fostering high innovation within
the company through total quality management.
Strategy Maps
The two strategy maps for the logistics & supply chain management as well as total
quality management strategic themes are included in the appendices. Much of the
explanation arises from these maps. The supply-chain efficiency strategy map focuses on
getting raw materials at a low cost50. In turn, Garmin can provide products at lower costs
and provide exceptional customer service. The most important aspect of this strategic map
is Garmin’s need to create fast time-to-market for its products51.
The other strategic map deals with total quality management52. This strategic map
looks to reduce the number of defects during its production and manufacturing process. In
turn, Garmin is able to provide warranty services as well as other technical services to its
customers. In short, Garmin is able to provide total quality management at all phases of its
50 Strategic Map – Supply-Chain Efficiency 51 Complete Strategic Map – Supply-Chain Efficiency 52 Strategic Map – Total Quality Management
FEATHER | 39
production and manufacturing process because of its vertical integration operational
strategy53.
Balanced Scorecard
Much of the explanation from the balanced scorecard comes from the figure itself,
which is included in the appendices54. In order for Garmin to satisfy its shareholders, it is
essential for it to increase its revenue streams, return on equity, and reduce costs as well as
improve productivity within the company. When customers think of Garmin, they perceive
price, quality, time, logistics, image, and relations. From an internal process perspective, it
is essential for the company to excel by building the brand, making the sale, setup the
service, and service the customer. When looking at a learning and growth perspective,
Garmin must develop engineer competencies, technology infrastructure, and quality
management.
53 Complete Strategic Map – Total Quality Management 54 Balanced Scorecard
FEATHER | 40
References
BusinessWeek. (2010, 07 01). Garmin: CEO & Executives. Retrieved from BusinessWeek:
http://investing.businessweek.com/research/stocks/people/people.asp?ticker=GR
MN:US
FAA. (2006, 08 28). Garmin. Retrieved from FAA:
http://www.faa.gov/about/office_org/headquarters_offices/ato/service_units/enro
ute/surveillance_broadcast/program_office_news/industry_day_8-
28/media/Garmin.pdf
Forbes. (2010, 04 21). The Global 2000. Retrieved from Forbes:
http://www.forbes.com/lists/2010/18/global-2000-10_The-Global-
2000_Rank_14.html
Garmin. (2009, 12 31). 2009 Annual Report. Retrieved from Garmin:
http://www8.garmin.com/aboutGarmin/invRelations/reports/2009_Annual_repor
t.pdf
Garmin. (2010, 05 01). 10-Q. Retrieved from Garmin:
http://www8.garmin.com/aboutGarmin/invRelations/reports/Q12010_10Q.pdf
Garmin. (2010, 05 20). 2010 Shareholder Meeting. Retrieved from Garmin:
http://www8.garmin.com/aboutGarmin/invRelations/reports/2010_Shareholder_
Mtg_Presentation.pdf
Garmin. (2010, 07 01). About Us. Retrieved from Garmin:
http://www8.garmin.com/aboutGarmin
FEATHER | 41
Garmin. (2010, 07 01). Careers. Retrieved from Garmin:
http://www8.garmin.com/careers/
Garmin. (2010, 07 01). Disposal. Retrieved from Garmin:
http://www8.garmin.com/aboutGarmin/environment/disposal.html
Garmin. (2010, 07 01). Environment. Retrieved from Garmin:
http://www8.garmin.com/aboutGarmin/environment/?activeBranchId=about
Garmin. (2010, 07 01). Investor FAQs. Retrieved from Garmin:
http://www8.garmin.com/aboutGarmin/invRelations/faq.html
Garmin. (2010, 07 01). Product Design. Retrieved from Garmin:
http://www8.garmin.com/aboutGarmin/environment/productdesign.html
Garmin. (2010, 07 01). Recycling. Retrieved from Garmin:
http://www8.garmin.com/aboutGarmin/environment/recycling.html
NASDAQ. (2010, 07 01). Stock Chart - Garmin Ltd. Retrieved from NASDAQ:
http://www.nasdaq.com/aspx/chartingbasics.aspx?symbol=GRMN&selected=GRM
N
Wikinvest. (2010, 07 01). Garmin Market Share. Retrieved from Wikinvest:
http://www.wikinvest.com/image/Garminmshare.jpg
Yahoo! (2010, 07 01). GRMN: Industry: Scientific & Technical Instruments for Garmin Ltd.
Retrieved from Yahoo!: http://finance.yahoo.com/q/in?s=GRMN+Industry
FEATHER | 42
Yahoo! (2010, 07 01). GRMN: Major Holders for Garmin Ltd. Retrieved from Yahoo!:
http://finance.yahoo.com/q/mh?s=GRMN+Major+Holders
FEATHER | 43
Appendices
Footnote #22
Strategic Group Analysis
(Specifically the United States Portable Navigation Device market)
Product Selection High Low
Pri
ce
Lo
w
Hig
h
Garmin Magellan
TomTom
Other
FEATHER | 44
Footnote #24
Industry Life Cycle Analysis
(Growth Stage)
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
4,000,000
2005 2006 2007 2008 2009
Industry Life Cycle Analysis
Net Sales
Potential Growth
FEATHER | 45
Footnote #47
VRIO Framework
Value? Rare?
Costly
to
Imitate?
Exploited by
Organization?
Inbound
Logistics Yes No -- --
Competitive
Parity
Operations/
Production Yes Yes Yes Yes
Sustained
Competitive
Advantage
Marketing
& Sales Yes Yes No --
Temporary
Competitive
Advantage
Service Yes No -- -- Competitive
Parity
FEATHER | 46
Footnote #48
Porter’s Generic Strategies
Lower Cost Differentiation
Broad Target
Cost Leadership Strategy
Differentiation Strategy
Narrow Target
Cost Focus Strategy
Differentiation Focus
Strategy
FEATHER | 47
Footnote #49
ERRC Model
Eliminate Raise
Environmental Waste
Production defects
Employee Training & Recognition
Customer Service Satisfaction
Customer Loyalty
Supply-Chain Efficiency
Reduce Create
Inventory Levels
Logistical Complexity
Demographic Expertise
Distribution Strategies
FEATHER | 48
Footnote #50
Strategy Map: Supply-Chain Efficiency
Strategic Theme: Supply-Chain Efficiency
Profits and ROI Financial
Learning
Engineers
Lowest prices
Low cost of raw materials
Customer
Internal
Fast time-to-market
Technical Support
Attract & Retain More Customers
Grow
Targets
• (internal) • Production cycle time
Initiatives Measures
• Production Time
• Designation Time
• Fast time-to-market
Objectives
FEATHER | 49
Footnote #51
Complete Strategy Map: Supply-Chain Efficiency
Strategic Theme:
Supply-Chain Efficiency
Objectives Measures Targets Initiatives
Financial Profitability Growth Revenue
Sales Volume (internal) Increased customer service
Customer Customer Retention
Number of customers
#1 PND sales Customer Call Centers & Technical Support
Internal Fast time-to-market availability
Production time & designation time
(internal) Engineer training & development
Learning Engineer Competency
Competency testing
(internal) Experience & Training
FEATHER | 50
Footnote #52
Strategy Map: Total Quality Management
Strategic Theme: Total Quality Management
Profits and ROI Financial
Learning
Engineers
High quality
Fewer defects
Customer
Internal
Total quality evaluation
Warranty Service
Attract & Retain More Customers
Grow
Targets
• (internal) • Small number of defects
Initiatives Measures
• Total number of products
• Number of defects
• Total quality evaluation
Objectives
FEATHER | 51
Footnote #53
Complete Strategy Map: Total Quality Management
Strategic Theme: Total
Quality Management
Objectives Measures Targets Initiatives
Financial Profitability Growth Revenue
Sales Volume (internal) Increased customer service
Customer Customer Retention
Number of customers
(internal) Warranty Service & Technical Service
Internal High quality production
Number of defects
(internal) Small number of defects
Learning Engineer Competency
Competency testing
(internal) Experience & Training
FEATHER | 52
Footnote #54
Balanced Scorecard
Financial Perspective
Increase Revenue
Streams
Reduce Costs /
Improve
Productivity Return on
Equity
Customer Perspective
Price Quality Time Logistics Image Relations
Internal Process Perspective
Make
the
Sale
Setup
the
Service
Service
the
Customer
Build the
Brand
Learning and Growth Perspective
Engineer
Competencies
Technology
Infrastructure Quality Management
