MNG00114 Competitive Strategy

Table of Contents

Introduction.

Analysis of the internal environment

2.1. Resources of company.

2.2. Key competencies.

2.3 VRIO framework.

2.4 Strengths and weaknesses.

Analysis of external environment

3.1. Macro environment

3.2. Industry environment

Recommended strategic direction.

4.1. Strategic goals.

4.2. Current strategy.

4.3. Recommendations.

Conclusion.

References.

1. Introduction to Garmin Ltd.

Garmin Company was founded in the year 1989 that is involved in scheming, expansion, production, and promotion of transportable and hand-held GPS assisted products. Moreover, this company provides direction finding communication and information products for the marine aviation, automobile, and more markets. The values of the company can be seen in its culture of honesty, respect, and integrity for all the stakeholders (Garmin 2020). This business strategic report discusses the internal environment analysis of the company by evaluating its resources and competencies. Besides, it entails the analysis of the external environment that further includes macro and industry environment analysis. Furthermore, it discusses the business strategic direction for the company.

2. Analysis of The Internal Environment

2.1. Resources of the company

The internal resources that are responsible for developing competitive advantage for Garmin Ltd. are as follows:

Physical resources: The most essential physical resource that is crucial for the success of a business is the cash balance of the company that it uses for establishing the core competencies of the company. The company invested substantially in equipment, plants, and other assets in numerous locations of the world including the United States. However, the physical resources like location can be considered as its pitfall as at some locations where there is more success, the engineering talent is not engaged.

Human resources: The key human resources of the Garmin Company are its proficient engineers and dedicated workers. The development staff and the engineering department are trustworthy, knowledgeable, and have managerial competencies. All its human resources are the backbone of the company's success and productivity.

Financial resources: Garmin has an enormous amount of financial resources that result in higher productivity in its operations. The Company has earned $3758 million in the year 2019 that is constantly growing and leading to control of business costs and increasing the profitability of the business.

Organizational resources: These resources of the company are in the form of its strategies for producing the products. Innovation is an important resource that aids it to excel in the presence of such an enormous competition. It designs user-friendly products with a wide range of benefits. The strategy of vertical integration enables the company to develops the products in an improvised manner (Frenzel 2019)

2.2. Key competencies

The key competencies of the company are GPS technology and the vertical integration that are responsible for the success of the company.

GPS technology: It has invested much in the research and development that enabled it to bring innovation in the market for the consumers. Garmin has been successful in refining its GPS products to the level that cannot be copied by others and hence it is competent in the industry in this respect. The company has made it successful by using a grouping of numerous algorithms, cartographic data collection, and hardware, with the help of dedicated engineers &development team.

Vertical integration: The manufacturing capability of the company is the key competency that assisted it in quickly designing the processes, products for the attainment of lower cost, better customer value, and efficiency. As of now, the company is responsible for manufacturing, mechanical design, software development, and circuitry design in each product line of business. This is an added advantage as this in-build capability enables the company for better teamwork between the producers and designers.

Distribution strategy: The Company has its versatile distribution strategy that is proposed to enhance its worldwide penetration and existence that further upholds high excellence criteria to confirm the satisfaction of customers. The distribution network of the company entails circuit city, Wal-Mart, best buy, and more (Garmin 2018).

2.3 VRIO framework

VRIO can be defined as the strategic management framework that assists the companies to safeguard the resources and competencies offering an enduring competitive advantage. The VRIO analysis is the tool that concentrates on the competences of the Garmin discussed above (Hernández, Lemus, and Medrano 2020).

Resources/capabilities

Value

Rare

Imitation

Organization

Competitive advantage

Distribution network

Yes

Yes

No

No

Sustained

Brand image/ position

Yes

No

Can be imitated via enormous investment

Yes

Temporary

Technology/ Innovation

Yes

Yes

No

Yes

Temporary

Production skills

Yes

No

Yes

No

Parity

Knowledge

Yes

Yes

Yes

Yes

Sustained

2.4 Strengths and weaknesses

The above internal business environment analysis identified certain strengths and weaknesses of the Garmin Company that are discussed as follows:

Strengths of the Garminare numerous that enables it not only to keep the better market share but also to penetrate to the newer markets. These are as follows:

  • Vertical integration as its manufacturing capability enables it to develop improved products and help the business to earn higher profit margins (Sukhorukova 2015).
  • Engineering talent is the strength of the company meaning that it has a highly proficient team of developers and designers for the creation of exclusive products of the company.
  • GPS technology is the backbone of its success and is its strength that is highly responsible for the competitive advantage of the company (2017)
  • Moreover, the company possesses its industrial facilities in Taiwan and collects tax enticements from the Taiwanese regime.
  • The after-sales service of the Garmin is its strength that is efficient in respect of superior customer support for technical issues, repairs, and services of warranty.
  • The company’s capital structure is completely equity-based and it is one of the strengths of business as it does not have to incur any interest cost.
  • In addition to this, it has diversified product lines in numerous industries. Therefore, in case of failure or decline in one position, its success will not be affected and can gain stable growth.

The weaknesses of the Garmin are as follows:

  • The higher attrition rate is one of the weaknesses of the company. Moreover, the Garmin Company has to spend much on the training and development of its workers.
  • Although it has invested substantially in R&D activities still it was failed to spend much in relative to its competitors.
  • GPS satellites are supervised and measured by the U.S. Department of defense that is possibly restraining sales to definite customers.
  • Moreover, most of its engineering staff is active on the west coast. Although the success of Garmin in the Midwest, it is still gone out on fairly a little of faculty by being situated in Kansas.

3. Analysis of The External Environment

3.1. Macro-environment

The macro-environment analysis can be done with the help of external PEST analysis for the company. The PEST analysis is the framework that is utilized by the marketers of the company for examining the external business environment or the macro-environment factors that have an impact on the business activities. The external factors are political, economic, socio-cultural, and technological that are analyzed to understand the threats and opportunities for the company (Damiri and Chan 2019). The two external environment trends are as follows:

Political trends: Political factors are those related to the regulations and rules of the government that can positively or negatively impact the business operations. These entail political stability, current legislation, compliance, taxation, and more that have to ability to make business environment friendly or unfriendly. The largest political trend facing the company is a federal guideline on the avionics business by the FAA (federal aviation administration) (Mills and Reiss 2017). These guidelines have increased expansion costs and time. Garmin manufactures mainly its products in amenities in china and Taiwan, thus any variations to labor guidelines in these nations or changes in importation rules may influence the Garmin Company. The company has to deal with numerous foreign laws in external countries. There is a requirement of licensing to operate in the countries efficiently. The United States federal government usually does not interfere in the matters of the private firms and hence companies are powerful in the decision-making process. 

Technological trends: The technological factors are those that are outwardly produced variations in the technologies and the procedures that are used by the rivalries in the industry. The major technological trend is the growth of the smartphone industry in the market as smartphones have embedded navigation features. Therefore, this is constantly recessing the revenue for the Garmin Company and other navigation product-based companies. The growing prevalence of smartphones has radically decreased the revenues from Garmin’s dash fixed direction-finding devices and handheld devices. Therefore, Garmin Company needs to distinguish itself to remain in the competition with the integral navigation of smartphones. Moreover, the United States technological trend is seen in the form of newer technologies like cloud computing, artificial intelligence, big data, and others that are to be used in the software development and are as a way of creating a competitive advantage for the company (Trabucchi, Buganza and Pellizzoni 2017). The United States is the biggest technology market in the world that represents 32% of the total in recent times.

3.2. Industry environment

Industry analysis is to be done by applying the porter’s five forces framework. It is one of the most predominant and tremendously considered strategic frameworks for assessing the industry’s appeal. This framework supports the company to regulate the industry appeal and competitive power of a market. The five forces assumed by porter are the threat of new entrants, competitive rivalry, bargaining power of suppliers, bargaining power of customers, and the threat of substitute goods (O'Hara et al 2017).

The threat of new entry: It is difficult for businesses to enter in the navigation industry. The new entrant should form their cartography catalogs to be remaining competitive with the prevailing companies. Due to the ever-growing market for smartphones, this industry has become unattractive for numerous companies. The products of Garmin like fish finders that do not require directional technology are more vulnerable to competition from the newer participants. Moreover, these products form smaller presents of Garmin and the influence of any damage in market share would be negligible. Thus, the threat of new entrants is moderate.

Competitive rivalry: The industry in which Garmin is operating is extremely competitive. The products of the company have to face a lot of competition in the market. These products are easy to replicate and thus many companies are producing the equivalent products in the market. The strategy that Garmin has to adapt to be competitive in the market is that it must produce superior quality products and sold them to fewer costs. Thus, it can be said that the industry has relatively stronger competition. The threat of competitive rivalry is high.

The threat of substitute goods: Since most of the products of Garmin are reliant on the navigation technology, thus the only substitute product for the offerings of Garmin is the smartphones. The navigational features are already embedded in the mobile handsets thus the market for the Garmin is declining. Thus, the company must add some more features into its products and embed these features into the navigational devices so that its products are worthier than mobile phones. Thus, it can be said that the threat of substitute goods is moderate in the Navigation industry.

Bargaining power of suppliers: There is the low bargaining power of the suppliers for the Garmin Company since it has its in-built manufacturing capability. However, the company has certain suppliers who manufacture the raw constituents of its electronics. These constituents entail NAND flash memory that has fewer suppliers in the industry. Thus, these may be demanding for the company. Therefore, the suppliers' bargaining power is strong in the case of other suppliers.

Bargaining power of buyers: The consumer’s power is highest in the divisions that use original equipment manufacturer (OEM) conglomerates. Since the company is trading only with a minority of clients; their power is this condition is countless. The bulk of Garmin produces are severely promoted to the bulk customer. The outcome of this is less customer power. Therefore, it can be said that the bargaining power of the buyers is moderate in the industry.

4. Recommended Strategic Direction

The business-level strategies are those enable the business to differentiate itself and set strategic goals to be competitive in the industry and to position itself in the industry. There are five major types of business-level strategies that must be adopted by business namely cost leadership, differentiation, focus differentiation, focused low-cost, and integrated low-cost differentiation. Garmin can adopt a cost leadership business-level strategy for its products to remain in the competition in the industry. Besides, it must differentiate its products to compete with smartphone markets. This will help it in building brand loyalty and getting higher demand for its exclusive products. Moreover, it must focus on the niche market to sell its products like youngsters who are more addicted to technological products. This will help it by demanding a higher price for the product. On a global basis, it must adopt the strategy of integrated low cost/ differentiation that can help it building competitive advantage by combining the strategies and they may position themselves to adapt easily in the changing environment.

4.1. Strategic goals

Strategic goals for the Garmin Company are recommended as follows:

The first goal for the company is to serve the interest of all its stakeholders since they are required for bringing quality products. In the case of Garmin, its engineers and developers are the most essential stakeholders that are strength to the company whose interests are to be best served by the company since these are available in the limited quantity in the industry. The second aim for the company must be to develop its business division that has been a failure at times.

4.2. Current strategy

  • In fitness, one of the product lines of Garmin, it should manufacture some weight loss products so that it can contribute to solving the obesity problem that is globally increasing. The strategy for the same is by moving the attention of its training improved platforms to weight loss and making a new promotional drive.
  • Due to the rise of the market for smartphones, the auto section of the Garmin has been declining. The strategy to overcome this must be to enhance its competitiveness in the market by manufacturing more effusively combined solutions. This may be done by embedding radar-based structures and assimilating the current comfort functionality as media and weather control into the directional unit. It must make the tailored-made products in this respect so that these products are more attractive to the consumers.
  • It presently leads the market in airplane avionics, and retrofit. This division of the market signifies a slight part of the avionics industry in full. The actual cash is in the hugely profitable and armed avionics. The maximum rational of these for the company to interrupt is commercial. This market is predicted to bring in $ 210 billion in the yearly revenue.

4.3. Recommendations

It has been proposed that intensifying into the commercial avionics market can create numerous billions of bucks as revenue for the company. Though, breach into this market would need lots of manufacturing periods to grow and examine the composite systems essential for the great commercial airplane. Moreover, the company has a slight familiarity to build avionics for an airplane with big jet locomotives, thus it must thieve engineers from opposing companies. This will help the company to make bigger profits out of this project but this would require an enormous investment that the company cannot support thus this project may not be viable for the company.

The modification of fitness division by adding weight loss products would be a modest manufacturing deed since the company only needs to alter the current algorithms. The essential variations to their marketing could have undesirable effects. Growing advertisement expenses could lessen the functioning yield margin and piercing the message in their advertisements could harm the brand itself. Moreover, the fitness division has been facing firm growth over the last few ages, and accordingly should not be the attention of a strategy variation.

Furthermore, structuring a more combined direction-finding system would need moderately few manufacturing time. Most of the functions that would be applied in such a structure have now been constructed in current products of the company. It makes this strategy attractive in respect of viability and operative revenue. Moreover, the trades of the dash top navigation divisions will probably fall, and incomes from the in-dash divisions are predictable to raise at 8 % yearly. This strategy will be profitable for the company in complete sense (Garmin 2018).

5. Conclusion of Business Strategic Report of Garmin Company

From the above business strategic report of the Garmin Company, it can be concluded that the key resources of the company are cash balance, human resources, financial and organizational resources. One of the major strengths of the company is GPS technology that is the backbone of its success. The major weakness of the company is the high attrition rate in this industry. The core competencies of the company are its distribution strategy, vertical integration, and GPS technology. Moreover, the threat of competitive rivalry is high; the threat of new entrants is moderate; the threat of substitute goods is moderate in the Navigation industry; the bargaining power of the buyers is moderate, and the bargaining power of suppliers is also moderate.

References for Business Strategic Report of Garmin Company 

Damiri, D.M., and Chan, A.2019. The strategy of Increasing Repeat Purchase in Restaurant Companies: Study in Bandung City, Indonesia. Review of Integrative Business and Economics Research8, pp.160-167.

Frenzel, J. 2019. A Strategic Audit of Garmin LTD.

Garmin 2018. Annual report. [Online]. Available at https://www8.garmin.com/aboutGarmin/invRelations/reports/2018_Annual_Report.pdf [Accessed on 6 May 2020]

Garmin 2020. About us. [Online]. Available at https://www.garmin.co.in/company/about/ [Accessed on 6 May 2020]

Herbert, T. 2017. Assessing the Accuracy of GPS Control Point, Using Post-Processed and Absolute Positioning Data. American Journal of Environmental Engineering and Science4(5), pp.42-47.

Hernández, J. G. V., Lemus, J. A. L. and Medrano, M. D. J. M. 2020. Circular Green Economy: An Analysis Based On The Theory Of Resources And Capabilities. Economia Coyuntural, Revista de temas de perspectivas y coyuntura5(1), pp.37-69.

Mills, R. W. and Reiss, D. R. 2017. 2. The role of trust in the regulation of complex and high-risk industries: the case of the US Federal Aviation Administration’s voluntary disclosure programs. Trust in Regulatory Regimes, p.37.

O'Hara, N. N., Nophale, L. E., O'Hara, L. M., Marra, C. A. and Spiegel, J. M. 2017. Tuberculosis testing for healthcare workers in South Africa: A health service analysis using Porter's Five Forces Framework. International Journal of Healthcare Management10(1), pp.49-56.

Sukhorukova, O. 2015. Garmin: "The roads we take". [Online]. Available at https://www.hbs.edu/openforum/openforum.hbs.org/goto/challenge/understand-digital-transformation-of-business/garmin-the-roads-we-take.html [Accessed on 6 May 2020]

Trabucchi, D., Buganza, T., and Pellizzoni, E. 2017. Give Away Your Digital Services: Leveraging Big Data to Capture Value New models that capture the value embedded in the data generated by digital services may make it viable for companies to offer those services for free. Research-Technology Management60(2), pp.43-52.

Remember, at the center of any academic work, lies clarity and evidence. Should you need further assistance, do look up to our Strategic Management Assignment Help

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