Garmin in the Global Positioning Satellite Marketplace - Essay Example

Garmin: Case Analysis BY YOU YOUR ACADEMIC ORGANIZATION HERE YOUR HERE HERE Garmin: Case Analysis Situation Analysis Garmin is currently experiencing a high level of competition in its GPS (global positioning satellite) marketplace. The maker of satellite-navigation technologies faces competition from companies such as Tom Tom and Magellan Navigation (Annual Report, 2007). The most significant situation facing Garmin involves the product itself, as the majority of other GPS products on the market are quite similar to Garmin’s technology and these GPS products generally perform the same or similar functions to the end user. As a result, Garmin must differentiate its products in order to remain a leader in the GPS sales market. The Firm’s Main Strengths Sales volume and high levels of customer demand point toward Garmin’s strengths in the GPS marketplace. In 2007, Garmin company announced that 75 cents per share dividends would be included for investors as a reward for the company’s sales performance (Hough, 2008). Garmin has only recently paid dividends after being in business for 20 years, which indicates sizeable growth in sales which can likely be attributed to consumer satisfaction regarding the product. One of the main strengths of a company is its ability to lure investors and use stock equities to boost capital. Garmin’s ability to pay handsome dividends and the company’s commitment to investor relations represent the firm’s largest strengths. Additionally, Garmin has recently signed a six-year agreement with NAVTEQ, the digital map supplier responsible for the majority of Garmin’s electronic GPS routes (Annual Report). NAVTEQ will continue to provide map assistance and upgrades, allowing the company to maintain focus on its brand and remain a leader in effective and accurate GPS technologies. The Firm’s Main Weaknesses The company’s main weakness is an external issue involving the current economic climate across the United States. Consumer wealth is diminishing and it is relatively common knowledge that customers are scaling back on purchases in order to sustain a quality lifestyle. This change is most noticeable with Garmin’s stock price shift from nearly $100 to $19 in 2008 (Hough). The majority of Garmin’s products are designed for the consumer rather than on a B2B model (business-to-business) which creates a situation in which the company must understand its consumer and create products which will be in high demand in difficult economic climates. The Firm’s Main Opportunities Garmin’s main opportunity lies in marketing and its ability to create effective sales and marketing promotions to build brand loyalty. With such a high volume of competition in the GPS market, Garmin should recognize that its own GPS products are not that dissimilar from competitor products. This gives the firm the opportunity to create various marketing strategies, focusing on more than competitive pricing, to ensure higher sales volumes. Additionally, one of Garmin’s main revenue lines comes from the automotive industry in terms of GPS navigation. With slumping auto sales, this gives Garmin the opportunity to branch out in the pursuit of other industries in which GPS navigation might be in demand in the near future. This will give Garmin a more diversified business model and will not impact the company as highly when national economic conditions are eroding sales volumes. The Firm’s Main Threats Garmin’s main threats come in the form of competitor actions and changes in consumer preferences and lifestyles. Sales of the Tom Tom GPS system have been steadily rising, based on consumer views of its functionality and overall aesthetic design. This suggests that consumers find Tom Tom to be more congruent with their own personal needs. To combat competitor activities, Garmin has designed new product options for the fitness-minded consumer and the recreation-minded consumer (such as hiking and camping). However, as GPS technology becomes more mainstream and late-to-market competitors begin to grow, Garmin faces the threat of losing market share and diminished sales volumes unless the business can create products which are important to the customer. Consumer lifestyle changes are exceedingly difficult to predict, another threat to Garmin’s long-term stability in the GPS marketplace. The business must understand what drives its customer base in order to develop effective products both short- and long-term. This represents a threat from a marketing and sales perspective. The Firm’s Current Strategies Keeping the company without debt is a main strategy to sustaining a competitive and strategic advantage. The business, unlike its competition, has worked to pay down debt, repurchase outstanding shares volumes (adding more investor value), and free up a large amount of its cash flow (Hough). This represents a company with a focus on avoiding leveraging and other financing to expand, giving this company a great deal of opportunity over that of competitor efforts which generally work with large amounts of debt as a standard business practice. Having a positive cash flow and cash reserves allows the company to make sizeable changes to its research divisions or for international expansion into foreign markets without having to rely on eroding stock value. The Main Issue Garmin is currently facing the risk of becoming a secondary sales company if the business does not become more in touch with consumers and develop products which are considered superior to competition. Though the company is experiencing growth, evidence suggests that Garmin should be more focused on marketing and sales philosophy in order to build a solid brand which customers can connect with and prefer. Recommendations Boone & Kurtz (2007) describe the notion of product positioning in which a company utilizes creative advertisements to create a consumer image of the company or the product based on meeting consumer perceptions. The company should identify specific product-related features and benefits which are absent in competitor products and create a positioning strategy to make their own product appear superior. For instance, if other competitors are focused on price, Garmin can focus on its quality from a quality positioning tactic in marketing and emphasize the product’s reliability or ease-of-use to differentiate Garmin from competition. This will create the consumer perception that Garmin products will have higher long-term value than that of competition and boost sales volumes. Product positioning tactics involve focusing on one or several dimensions of the product and making the product appear superior even if it is not. For instance, if Garmin decided that the most appropriate promotional focus should be on product, through creative advertisements the business can make Garmin appear to be an upscale or luxury-minded product simply through effective window-dressing techniques (such as using stainless steel on the GPS casing). Identifying the new stainless steel features in all advertisements would appeal to the contemporary consumer looking for both quality and upscale technologies. Additionally, Garmin should conduct marketing research in the form of surveys and focus groups in order to determine what is really driving consumers to buy (or not buy) their products. This is an inexpensive method of gathering consumer research which is needed at Garmin in the face of high competition and no positioning model in marketing. Garmin should also consider creating more wireless technologies by partnering with well-known brands such as Verizon or Nextel and providing standard Garmin GPS to all wireless phones. Though this might represent a short-term cut in profitability, the long-term brand preference and brand loyalty earned by Garmin would be a long-term investment strategy. This would put the name Garmin into the minds of more consumers who do not necessarily have a need for GPS in marine or automotive environments. This can create a connection with the mobile user and build long-term gain for Garmin. References Annual Report. (2007). “Garmin: Follow the Leader”. Company annual report retrieved 20 Nov 2008 from http://www8.garmin.com/aboutGarmin/invRelations/reports /2007_Annual_report.pdf Boone, L. & Kurtz, D. (2007). Contemporary Marketing. 12th ed. Thomson South-Western, United States: 340-342. Garmin. (2008). “About Us”. Retrieved 20 Nov 2008 from www8.garmin.com/aboutGarmin. Hough, Jack. (2008). “Smart Money Stock Screen/Growing Dividends”. Wall Street Journal. New York, NY. 20 Nov 2008: D.4. Read More