PEST Analysis – Garmin
POLITICAL:
Garmin GPS devices, or any GPS device for that matter, are rendered useless without a satellite system to
support it. Global Navigation Satellite Systems (GNSS) is the standard generic term for satellite
navigation systems that provide autonomous geo-spatial positioning with global coverage. 1
The United States currently has the only fully operational GNSS in the world, which is known as the
NAVSTAR Global Positioning System (GPS). The European Union is currently working on the Galileo
project, which would add a second fully operational system in 2013. Russia’s GLONASS and China’s
Beidou are similar GNSS efforts, but are not expected to be fully deployed prior to 2013.2 Russia does
have some satellites deployed and operational; however, they are currently with restrictions.
The European Union has taken on the Galileo project because they feel it is necessary to have an
independent system upon which it can rely even in times of war or political disagreement. As it presently
stands, the United States and/or Russia could disable their access to GPS by applying encryption. The
United States has been very leery of the European Union’s initiative out of fear that it would impede its
military upper-hand. Through political channels, the US was successful in having the EU leverage a
different frequency for the Galileo positioning system. By doing so, the jamming of this GNSS system
would not affect the US system and they would retain an advantage.3
What precipitated the desire to build Galileo was that the US satellites possessed something called
Selective Availability (SA) that allowed the US to intentionally render locations on the GPS inaccurate.
The EU felt that civil infrastructure using the GPS was vulnerable and, therefore, an independent system
was needed. By 2000, Bill Clinton had disabled SA and indicated there was never any intent to use it.
Satellites being launched no longer have SA capability. 4
ECONOMIC:
While economic pressures have severely impacted consumer discretionary spending, shipments of GPSenabled cell phones will increase 6.4% from 2008. Shipment of GPS handsets is expected to drop 4 – 5%
in 2009. Based on a study performed by ABI Research Services, the interest in GPS-enabled phones
continues to rise. It is expected that 9 out of every 10 smartphones will contain GPS capability by 2014,
as compared to one in three in 2008. 5
The current economic crisis will likely last through the end of 2010, with some signs of recovery
throughout 2010. During this time, consumer discretionary spending will likely deteriorate further.
Recent news, published by Bloomberg on September 30, 2009, indicates the world’s largest economy
(US) shrank at a .7% annual rate from April through June, the best performance in more than a year. 6
Europe’s economy contracted more than estimated in the second quarter as consumer spending,
investment and exports were weaker than earlier reported. 7
In late 2009, China announced an enormous fiscal stimulus package. Since then the Shanghai Composite
Index has rallied some 90 percent. While this could be perceived as an indication of China’s economic
turn-around, questions remain over their ability to sustain over the longer-term as the stimulus goes
away.8
Given the current state of the economy and its volatility, businesses around the world are concerned about
the impact inflationary pressures could have on their businesses. Selling into International markets results
in exposure to movements in currency exchange rates. Additional exposure exists with marketable
securities that, as interest rates change, gains and losses associated with those securities have an impact.
Of course the cost of credit is another significant concern, especially for those companies that rely heavily
upon it to manage their cash.
The following table provides a snapshot of the state of several major economies, as of September 30,
2009:
Country
U.S.
EU
China
Interest
Rate
.25%
1.00%
5.31%
Growth
Rate
-3.8%
4.8%
7.9%
Inflation
Jobless
Exchange
Rate
Rate
Rate
-1.5%
9.8%
77.0450
-.20%
9.6%
1.4732
-1.2%
4.3%
6.8255
Source: http://www.tradingeconomics.com
SOCIAL:
According to the TelecomTimes Bureau, mobile navigation devices are seeing a gradual uptake in 2009.
By 2015, it is expected the number of subscribers will reach as many as 160 million. This represents a
33.7% compound annual growth rate. Trends show that the US and Japan subscribers are opting for the
mobile devices in large numbers, whereas the EU is seeing a more gradual replacement of personal
navigation devices. 9
Consumers are interested in carrying around one device, as opposed to multiple devices (e.g., one phone
and one GPS device). This expectation from consumers will apply pressure upon manufacturers to find
new ways to differentiate or possibly form an alliance with a phone manufacturer to join forces. In a
survey done by three major cell phone manufacturers, they found GPS was the feature their customers
“most want to see” in their next phone.
More than 40 percent of all smart-phone owners use their mobile devices to get turn-by-turn directions,
according to Compete, a web analytics firm. For iPhone users, that number is more than double. As
these phones enhance their GPS capabilities, it may likely squeeze personal navigation device makers. In
the article, they interviewed a 22-year old marketer from New Jersey. He said “the simplicity of having
one device and not needing to pull the Garmin out of my glove compartment is enough,” he said. “I want
to get into my car and do as few things as possible. 10
One popular trend that has emerged is the sport of geocaching. Essentially, this is a high-tech treasure
hunt played across 100 countries in the world, including Antarctica. The game works by people
identifying hidden containers on a map and then searching to find the container using their GPS-enabled
device. Presently, there are over nine hundred thousand geocaches all around the world and the sport is
growing rapidly. Geocaching came to be after the United States removed Selective Availability in 2000
and improved accuracy of GPS positioning data. 11
TECHNOLOGICAL:
Although China is a large potential market for GPS manufacturers to sell their devices, there were
questions as to the state of their infrastructure back in 2007. In an article found in the EETimes Asia,
there was a lack of an industrial standard and supervision for GPS operations in China. The perception
was some operators were taking advantage of this situation and cheating their users. The article
recommended GPS operators establish contact with the transportation administration department in China
to address this concern and the desire for policy support. 12 Since that time, China has made significant
strides to address the infrastructure short-comings. China and the European Union have joined forces to
work toward Information and Communications Technologies (ICT) standards. 13
More recently, there has been a somewhat concerning development brought to light by the US Air Force.
They are seeking comments from receiver manufacturers regarding an SVN-49 signal anomaly that is
causing signal distortions. This involves the GPS IIR-20(M) spacecraft launched in early 2009, but not
yet operational. Due to the number of manufacturers, it is impossible for the Air Force to work through
this matter on their own. This brings to light the vulnerability of Garmin’s product, as it is completely
dependent upon properly functioning satellites. Should anomalies like this impact its users, in all
likelihood confidence in their brand would be significantly affected without the average consumer being
aware of the root of the problem. 14
Sources:
1 http://en.wikipedia.org/wiki/Global_Navigation_Satellite_System
2. http://en.wikipedia.org/wiki/Global_Navigation_Satellite_System
3 http://en.wikipedia.org/wiki/Galileo_positioning_system
4 http://en.wikipedia.org/wiki/Galileo_positioning_system
5http://www.gpsworld.com/consumer-oem/news/gps-enabled-handsets-expected-bypass-economicdownturn-3109
6. US Economy Shrank 0.7%
Published: 9/30/2009 9:46:54 AM By: TradingEconomics.com, Bloomberg
7. European Economy Contracts More Than Estimated
Published: 10/7/2009 9:45:19 AM By: TradingEconomics.com, Bloomberg
8. The Chinese Economy May Be Heading Into an Iceberg
Published: 7/30/2009 6:50:10 PM By: Anna Fedec, contact@tradingeconomics.com
9. http://www.telecomtiger.com/fullstory.aspx?passfrom=vasstory&storyid=7371
10. . http://ezinearticles.com/?The-Present-and-Future-of-GPS-Devices&id=1858530A
11. http://www.geocaching.com/
12. http://www.eetasia.com/ART_8800480860_499488_NT_8bbe4c58.HTM
13. http://www.ed.ac.uk/about/edinburgh-global/research/china-eu
14. http://www.gpsworld.com/gnss-system/receiver-design/news/air-force-polls-receiver-makerssolutions-satellite-problems-8487