GOPRO CASE ANALYSIS
MGMT 260
Professor: Donna Gallo
Saurav Tuladhar
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COMPANY: Go Pro
Introduction
The case is about GoPro an action camera manufacturing company, focusing on its 2017
turnaround strategy to restore its profitability.
In the case GoPro is portrayed as being one of the finest examples of how a company can
create a new market based on product innovations that customers want. The company began as a
homemade camera tether and plastic case vendor in 2004 to an action camera vendor with
$350,000 in sales in 2005 to a global seller of consumer electronics with revenue of $1.6 billion
in 2015.
The case states that the company’s shares had traded as high as $98 in October of 2014,
just months after its initial public offering in June 2014. Though, in the third quarter of 2015, the
companies magic had disappeared, and by the fourth quarter of 2015, its revenues dropped by 31
percent to $1.6 billion. Leading to the company stock to trade at less than $20 by the end of
December of 2015. Which kept on continuing to fall , and by the end of 2016, revenues had
dropped another 27 percent to $1.2 billion. Recording an all-time high net loss of $419 million in
fiscal 2016, helping drive its share price to less than $9.00 in December 2016.
To the reaction of the fall, GoPro launched a turnaround plan in early 2017 to reverse its
downfall, with its first quarter sales in 2017 increasing by 19 percent from the first quarter of
2016 and its operating expenses declining by $50 million. Its adjusted EBITDA improved from a
$87 million loss in the first quarter of 2016 to a $46 million loss in the first quarter of 2017. The
improvement was driven by a trade-up program that provided GoPro owners with $100 off a
HERO5 Black. And although the first quarter offered promising signs of a turnaround, it was far
too early to know if the first quarter 2017 improvement was sustainable or not.
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External Environment
Economic Environment
As mentioned in the case 60 percent of GoPros revenue was generated outside the United
States and between 70 percent and 90 percent of GoPro camera users in international markets
used cameras in their local language as of first quarter of 2017. So, there is a lot of currency
exchanged in the business process. And the fluctuations in the currency exchange rate is a major
factor in GoPros profitability.
As the case states GoPros industry was expanding due to demand from developing
countries, with the largest demand in the Asia Pacific region. Due to the increase in disposable
income and rapid growth in adventure sport tourism in emerging countries. Several action
camera vendors sponsored extreme sporting events in various emerging economies to promote
their camera brands. This growth highly increased GoPros revenue due to increase in buying
power of the people and economic growth.
Technological Environment
As mentioned, during 2006 google bought YouTube and the trend of uploading videos
and video streaming was increasing and people had an advance platform for this which was
YouTube .And GoPro also had a YouTube channel in which it uploaded a lot of videos which
was a huge success for GoPro as they had millions of views and could reach more people. Also
there was a rise of content distribution partners who were rapidly increasing like Amazon Fire
TV, Roku, Comcast Watch- able, Sky, Vessel Entertainment, Xbox, LG, and Virgin America.
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Rise of using apps.
At the time, the use of mobile phone were getting more advanced and GoPro had Splice
which was an app that promised desktop-level performance for editing video on an iPhone. So,
the ongo editing was a new trend as you didn’t need to carry your laptop everywhere the mobile
phone was a pocket laptop.
Political/Legal Environment
As mentioned, the company pointed out that it had imported materials from china for its
products there was a lot of tax tariffs on the products which would have increased its price and
the cost of sales of the company. Also, since GoPro operates internationally there are a lot of
different tax policies and tariffs applied to GoPro products shipped internationally.
GoPro also faced dangers from patent claims like in 2015 as the manufacturer of Polaroid’s
CUBE action camera, C&A Marketing, sued GoPro for patent violation.
Socio-cultural Environment
In a fortunate coincidence for GoPro, in fall 2006 Google purchased a then-small
company, YouTube, and in spring 2007 the GoPro HERO3 with VGA video was launched. The
combination of GoPro’s HERO3 video quality and the increasing popularity of YouTube caused
GoPro’s sales to triple in 2007.
Consumer sales, primarily for extreme sports, had accounted for the largest part of global
demand the demand for GoPros for professional applications had grown exponentially due to the
focus on better viewing of sports events. Action cameras were increasingly being used for TV
production and to record closer details of sports. In addition, the security industry was also
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finding increasing usage for action cameras in 2016, which added more fuel to the industry
growth. Also the popularity of social networking sites was a major driver of the action camera
industry in 2017 and price polarization continued as a crucial trend.
However, young consumers were increasingly choosing smartphone cameras over
traditional, which meant they were less likely to purchase an action camera.
Industry Environment
The case mentions that the sales in the global action camera industry grew 44 percent in
2014, reaching 7.6 million units, and retail value of $3.2 billion. Camera unit sales increased by
38 percent in North America in 2014. However, the largest growth came from the Asia Pacific
region, which was up by 114 percent. Meaning the Asian market was growing more than the
North American one.
As mentioned, the Sales of action cameras worldwide reached 10.5 million in 2017, up
from 8.4 million in 2015. Although the action camera market was expected to enjoy continued
sales growth through at least 2019, several factors, including lengthening replacement cycles,
were expected to slow down the growth rate.
The consumer sales from the use in extreme sports, had accounted for the largest part of
global demand up to mid-2015, but professional sales, primarily driven by TV production,
security, and law enforcement, were expected to increase too. In 2014, consumers were
responsible for about 86 percent of action camera sales, with the remainder coming from
professional uses. Although GoPro dominated the action camera industry in mid-2015, there was
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increased competition from other companies, including Garmin, TomTom, Canon, JVC, Ion
America, Polaroid, and Sony .
A defining characteristic of the action camera industry in 2015 was the increase in the
number of competitors. In early 2015, the market was experiencing rapid growth and attracted
many new entrants, which had the expected effect on price (lower), quality (higher), and features
(more). A list of producers of action cameras in June 2017.
Action cameras
Key Brands
Other Brands
Brands
Garmin
Gopro
Sony
Contour
Braun
Htc
Brands2
Ion
Rollel
Drift innovation
Kodak
Veho
Xiaomi
In 2016, the action camera industry experienced adjustments in usage. The demand for
action cameras for professional applications had grown exponentially due to the focus on better
viewing of sports events. Action cameras were increasingly being used for TV production and to
record closer details of sports. In addition, the security industry was also finding increasing usage
for action cameras in 2016, which added more fuel to the industry growth.
In addition to increased demand for action cameras for professional applications, the
industry was expanding also due to demand from developing countries, with the largest growth
in the Asia Pacific region.
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Porter’s Five Forces of Competition:
Rivalry Assessment –
GoPro operates in a very competitive industry. This competition does take toll on the
overall long-term profitability of the organization. As other competitors provide products at a
lower cost but Gopro does not have any major rivals. It’s a dominant player in the industry.
Which it maintains by building a sustainable differentiation and building scale so that it can
compete better.
Barriers to entry
There is no extreme barriers to entry to this industry as there are new entrants in the
market but it is hard to compete with big brands like GoPro due to them having more money to
spend and buyout small companies that try to enter the market with innovative features.
Power of Substitutes
Though there are no substitutes for this product for professional users who do activities in
extreme conditions like the ocean, dessert, sky. The mobile phones do provide good video for
beginners who are just starting out and are not into extreme sports.
INTERNAL ENVIRONMENT
Corporate Resources
Marketing
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The company’s marketing and advertising efforts are focused on consumer engagement
by exposing them to GoPro content, this approach shows what the brand is about by
demonstrating the performance, versatility, and durability of its products. Which is a really good
strategy, in addition to this social media is the core of GoPro’s consumer marketing. As The
company’s customers captured and shared personal GoPro content on social media plat- forms
such as YouTube, Twitter, Facebook, Pinterest, and Instagram.
Sales
GoPro sold directly to large and small retailers in the United States, Europe, the Middle
East, and Africa, and directly to consumers throughout the world through its e-commerce
channels The company believed that diverse direct sales channels were a key differentiator for
the company and it segregated its products among those channels. The full line of GoPro
products were sold directly to consumers through the company’s online store, gopro.com
Financial Analysis ( Table 1 )
Gross profit margin= Sales revenues − Cost of goods sold/Sales revenues. Go pro is
decreasing its gross profit margin from 2014 to 2016 but at a slow rate so it is in a bad situation.
Operating profit margin= Sales revenues − Operating expenses/Sales revenues. GoPro
has significantly decreased its operating profit margin in 2016 from 2014 which is a bad
indicator.
Current ratio Current assets/Current liabilities
Decreasing from 2015 to 2016 which is a bad indicator.
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Working capital Current assets - Current liabilities
The numbers in 2016 and 2015 are negative which are bad indicators for the company.
Key strengths
As mentioned, GoPro puts an emphasis on quality, which is one of its biggest strength
because people including me believe in the quality and toughness of the GoPro products which is
a key strength for its future. The company believes that when consumers use GoPro products and
services, they enabled authentic content that increased awareness for the company and drove a
self-reinforcing demand for its products.
In addition, GoPros near automatic process for its users to stay engaged in an activity
without having to pause to document their experience. And making the smartphone central to the
GoPro experience. Is a key strength as no other devices(laptops) are needed unlike other
cameras..
The company intends to continue pursuing its goal of developing the world’s most
versatile cameras, drones, and stabilization products. Which is a key strength as it’s the best
product people can get and the versatility is amazing.
Key weaknesses
As mentioned in the case, GoPro is in financial problem. The financial problem is GoPros
greatest weakness as the even if the sales were down 31 percent from the same period the prior
year, costs of revenue decreased only 7 percent. So, there is a bad strategy in place for GoPro.
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Since it is a high end product the threat of competitions providing same quality at a lower price
might be very possible.
Competence Evaluation:
Core Competencies
GoPro dominates the action camera industry The company as mentioned keeps on
pursuing its goal of developing the world’s most versa- tile cameras, drones, and stabilization
products. And is successful in doing this as this is what Go Pros are best known for. Though
GoPro is still lacking to create a cheaper supply chain to leverage its suppliers to increase
profitability.
Evaluation of Strategies:
Focused Differentiation Strategy
Go pro uses a focused differentiation strategy. Targeting a niche market of people who want
cameras they can use in extreme conditions and can withstand being thrown a lot. A camera that
can be used under water and in the sky with no wear of getting damaged or not working.
Focusing on this small segment rather than the whole camera industry.
Business/Competitive Strategy
Blue Ocean Strategy
GoPro created a new demand for cameras, creating the action camera that could be taken
anywhere anytime. It created a new industry segments and dominates this market. Creating a
new need for people. Allowing them to take cameras in extreme conditions to create memories.
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Corporate Strategy
Related Businesses
Go pros strategy is to expand by investing and creating related business that have similar
value chain relationships. To expand in similar types of industries like the video editing, content
storage and accessories. Which all fall or relate to the content creation industry. GoPro has
created or acquired companies like
GoPro Plus: a cloud-based storage solution that enabled subscribers to access, edit, and
share content. Capture: a mobile app that allowed users to preview and play back shots, control
their GoPro cameras and share content. Karma Grip: a handheld or body-mountable camera
stabilizer that helped achieve zero-shake video. And it provides accessories that are mountable,
wearable, and voice-activated which are used to create better content. Which has all helped to
transfer specialized expertise, technological knowledge, or other resources across the value
chain. Sharing costs by combining related value chain activities into a single operation.
Central Strategic Issues:
GoPro uses and export strategies the main advantage is the Low capital requirements. and
the use of Economies of scale in utilizing existing production capacity.
Major Disadvantages of this strategy is to it relatively hard to maintain a cost advantage of
home-based production. Also, the transportation and shipping costs are also very high. Including
the inventory cost. In addition, the Exchange rates is also a huge risk including the Tariffs\import
duties.
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Strategic Recommendations:
The strategic recommendation I would like to give GoPro is to outsource its production in
an different country like China so that the costs of production are lower. In addition to this I
would like GoPro to utilize economies of Scale in order to decrease its costs. So that the GoPros
camera costs also decrease which will increase its competitiveness as a lower price and high
quality is key to success.
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Appendix
Table 1 Go Pro Financial Analysis
.
Revenue
2016
2015
2014
1185481
1619971
1394205
Cost Of Revenue
723561
946757
766970
Operating Expense
834889
618466
440200
Operating Income
-372969
54748
287035
Gross Profit Margin
0.3896477
0.4155716
0.449887212
Operating
0.2957382
0.618224
0.684264509
Assets
192114
279672
Liabilities
430739
295177
0.4460102
0.9474722
-238625
-15505
Current Ratio
Working Capital
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