Corporate Analysis
Capstone Project
Presented by:
Team “B” - Synergy
Scott, Irene, April, Simplicious
Contents
Executive Summary ................................................................................................................................................1
Garmin Company Description ................................................................................................................................2
Technological Innovations ......................................................................................................................................3
Marketing Strategy .................................................................................................................................................3
Product ...............................................................................................................................................................3
Price ....................................................................................................................................................................4
Place ...................................................................................................................................................................5
Promotion...........................................................................................................................................................5
PEST Analysis ..........................................................................................................................................................6
POLITICAL............................................................................................................................................................6
ECONOMIC..........................................................................................................................................................7
SOCIAL ................................................................................................................................................................7
TECHNOLOGICAL ................................................................................................................................................8
SWOT ANALYSIS1 ....................................................................................................................................................9
STRENGTHS .........................................................................................................................................................9
WEAKNESSES ......................................................................................................................................................9
OPPORTUNITIES..................................................................................................................................................9
THREATS .............................................................................................................................................................9
COMPETITIVE ANALYSIS2 ..................................................................................................................................... 10
Financial Ratio Analysis Garmin Ltd (GRMN)....................................................................................................... 13
Critical Success Factors ........................................................................................................................................ 14
APPENDIX
Income Statement ......................................................................................................................................... A17
Balance Sheet .................................................................................................................................................. A2
CCash Flow....................................................................................................................................................... A4
Other Financial Data ........................................................................................................................................ A5
SOURCES
Corporate Overview Sources ............................................................................................................................ S1
Technological Innovations & Marketing Strategy Sources ............................................................................... S1
PEST Analysis Sources ....................................................................................................................................... S1
SWOT Analysis Sources..................................................................................................................................... S2
Competitive Analysis Sources ........................................................................................................................... S3
Critical Success Factors Sources ....................................................................................................................... S3
Executive Summary
Garmin, founded in 1990 by two electrical engineers, is a leader in global positioning system navigation
devices. Its principal offices are located in the Cayman Islands.
The company produces over 100 products in the aviation, marine, outdoor, fitness, automotive, mobile, and
OEM markets. Presently, Garmin’s business is in the maturity stage, though they plan to continue to
innovate how navigation capability is brought to market via product line extensions, such as the nüvifone.
This phone is intended to help Garmin maintain market share and compete with mobile phone
manufacturers.
Garmin’s primary competitor is Tom-Tom in the personal navigation device (PND) market. With respect to
the growing market of mobile cell-phone based GPS units, the iPhone and Blackberry present the greatest
challenge to Garmin in the market. Garmin also faces stiff competition from L-3 Avionics Systems and
Rockwell Collins within the aviation space.
The most significant risks facing Garmin are an increase of new entrants that offer personal navigation
devices consolidated with mobile cell phones. Additionally, there is a risk of market saturation of PNDs
because of their long life cycles and usability. There are, though, significant opportunities Garmin possesses.
The use of GPS technology is on the rise across all age groups. Additionally, if Garmin is able to form a
strategic partnership with a company such as Google, it can capitalize on Google’s extensive map
capabilities.
Garmin’s financial position is strong, although they have experienced a decline in revenue growth. In FY07,
Garmin enjoyed a growth of revenues upwards of 79%. The following year, in FY08, the results were not as
stellar. Revenues grew at a rate of 9%.
Even so, Garmin outperformed the S&P 500 on profit margin. The company enjoys a quick ratio of 3.8
(assets in short-term investments versus liabilities). Overall, their financial position is stronger than that of
their close competitor, Tom-Tom, who carries considerable debt and higher risk. Garmin carries no debt.
An Analysis of GARMIN – Team Synergy -- 1
Garmin Company Description
Creating navigation and communication devices that enrich their customer’s lives is what Garmin is all
about. One year after a brain-storming session around a card table with a small group of engineers, Garmin
launched its first product in 1990. The GPS 100, a panel-mounted receiver intended for the marine market,
debuted at the 1990 International Marine Technology Exposition in Chicago.1
Garmin’s next product was a handheld GPS receiver used by military personnel serving during the first Gulf
War in 1991. The company expanded industry application of these devices for the fitness and sports
industries next. One of their most popular product lines the eTrek series of handheld GPS devices. The eTrek
product line continues.2
Garmin’s focus on continual innovation, along with a desire to meet their loyal customer’s expectations, has
fueled an ever-growing list of products. Today, application of Garmin’s products span a wide range of
industries to include automotive, aviation, marine, fitness, outdoor recreation, and wireless. 3
The company designs, manufactures, markets, and sells its own products, which is a significant competitive
advantage because they live and breathe their solutions. Research and development is paramount to
Garmin’s long-term success. Their employees must not only design, market and sell the product but also use
it in all of its applications. This enables Garmin to remain focused on continual improvement of their
products making them to the end of one 4
Garmin sells over 100 products found in all shapes and sizes. Garmin is also leveraging their navigation
software and sells the product for use on laptop computers. Most recently, Garmin announced the launch of
their new smart-phone, the nüvifone, intended to compete with smart-phones on the market. 5
Source: http://gpsdock.com/blogs/2008/01/31/garmin-nuvifone-to-compete-with-iphone/
An Analysis of GARMIN – Team Synergy -- 2
Technological Innovations
Garmin pioneered the standalone portable navigation device market. The market for stand-alone GPS
devices is fast- growing and increasingly competitive as multi-capability devices, such as smart-phones, are
gaining market share. GPS technology moved onto cell phones a few years ago and is a fast-growing feature
on the devices. Some 77 million GPS-equipped smart phones will ship worldwide in 2009, up 35% from last
year. (Garmin, 2008)
One of the key strategic initiatives of the company for its future growth is continuous innovation,
development, and introduction of new products. Garmin benefits greatly from the consistently expanding
aviation, marine and fitness segments. Product development for these segments accounts for nearly 30% of
Garmin's sales and approximately 45% of its operational earnings. (Kiley, 2009)
Garmin leverages its GPS expertise to deliver navigation devices for anything that moves. Garmin also
distinguishes itself from competitors through rapid research-and-development (R&D) cycles that deliver
product refreshes quickly.
Marketing Strategy
Garmin's primary marketing strategy is to "provide a quality product at an affordable price." The overarching
mission of this strategy is: “to enrich the lives of customers, suppliers, distributors, associates and
stockholders by designing, manufacturing and selling navigation and communication products that provide
superior quality, safety and operational features, lower cost of manufacturing and ownership, and sufficient
profits to support desired company growth.” (Garmin, 2007)
Product
Garmin designs, manufactures, markets and sells over 100 products worldwide for consumer, business
and military applications. As customer demands have evolved - Garmin has launched new products.
Their communication and navigation products serve the aviation, marine, outdoor, fitness, automotive,
mobile and OEM markets.
As the navigation component of its devices becomes more commoditized, Garmin is branching out into
services and new devices such as the nüvifone to sustain its market share and competing with mobile
phone manufacturers. The navigation is integrated into the nüvifone as a prominent feature rather than
an after-thought.
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Garmin's focus on R&D ensures the latest features are brought to market quickly through
product refreshes.
Garmin is betting on the nüvifone to help it stay relevant as GPS functionality becomes
pervasive on cell phones. This stride comes with significant execution risk in a competitive
industry.
Adoption of GPS service by wireless carriers could cannibalize sales of Garmin's personal
navigation devices.
An Analysis of GARMIN – Team Synergy -- 3
Price
According to Pricegrabber.com, Garmin produces seven of the top ten most popular GPS products. In
2008, Garmin’s GPS products sold for an average of $467. Overall, the non-Garmin GPS products on the
list had an average price of $307, priced 34% lower than Garmin GPS products. (Pricegrabber, 2008)
Garmin ranked highest in a list of average price ranges for all GPS products by manufacturer:
 $500 average price range - Garmin
 $400 average price range - TomTom, Magellan, and Lowrance
 $200 average price range - Mio and ViaMichelin
Another study performed by PriceGrabber in 2007, reported a continuing downward trend in GPS prices,
despite new introductions of high-end products, like the Garmin Nüvi 660. The lower-end products and
the introduction of value-oriented products introduce stiff competition around the $200 price range.
*Pricing based on average monthly price of all GPS products
Source: Market Reporter Pricegrabber.com, 2007
Despite this downward trend - Garmin continues to employ a niche product pricing strategy because the
standalone GPS market is still considered a niche market. Garmin’s pricing is geared toward the higherincome consumer.
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Average sale prices for Garmin's navigation devices continue to fall as competition increases
which adversely affects their market share.
Garmin recently benefited from lower input costs affecting their ability to remain competitively
priced. (Pricegrabber, 2008)
An Analysis of GARMIN – Team Synergy -- 4
Place
Garmin products are available in a variety of retail channels on three continents: North America, Europe
and Asia. As consumer demand for GPS technology increases, especially in the automotive market,
Garmin has opportunities to meet the needs of consumers in more key markets.
Garmin also has relationships with many original equipment manufacturers. The consumer product
distributors of the company include giants such as Chrysler/Mopar, Toyota, Harley-Davidson, BMW
Motorrad, and Honda Motorcycle.
In 2008, Stan Brajer, director of fitness sales and marketing for Garmin, announced that they wanted to
focus more on specialty markets as part of their goal to win back independent bicycle dealers. (Norman,
2009)
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Garmin’s distribution network includes 3,000+ independent dealers and the largest electronics
retailers.
Garmin's consumer products are marketed through local distributors who resell to dealers.
Garmin's distribution reach diminishes as retailers such as Circuit City close stores.
Promotion
Garmin utilizes an in-house advertising agency that handles all of the company's promotional and
communication needs. In 2008, they also became an exclusive navigation supplier to Kenwood’s new
2008 lineup of in-dash automotive electronics. Garmin aligned with Kenwood on print, radio and online
advertising in addition to a dedicated internet site and point-of-purchase materials to inform customers.
(Garmin, 2007)
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The company's focus is on increased consumer awareness of the Garmin name.
Efforts include typical media placements (periodical ad space, billboard, radio)
An Analysis of GARMIN – Team Synergy -- 5
PEST Analysis
POLITICAL:
GPS devices are rendered useless without a satellite system to support them. Global Navigation Satellite
System (GNSS) is the standard generic term for satellite navigation systems that provide autonomous geospatial positioning with global coverage.1 Currently, the United States has the only operational GNSS in the
world referred to as the NAVSTAR Global Positioning System (GPS). The European Union is currently working
on the Galileo project expected to launch in 2013. Russia’s GLONASS and China’s Beidou are similar projects
underway, but neither will deploy until after 2013.
The European Union (EU) began to develop GNSS in order to have an independent system they can rely
upon in times of war or political disagreement. Presently, the United States and/or Russia could disable EU’s
access to GPS through encryption. The U.S. was successful in its request that the EU leverage a different
frequency for Galileo GPS, thereby ensuring any jamming of their GNSS system would not affect the US
system.3
Until 2000, the U.S. had at their disposal a capability on the satellites called Selective Availability (SA), which
allowed them to render locations incorrectly on the GPS. The EU felt that civil infrastructure using the GPS
was vulnerable, as a result believed an independent system was needed. In 2000, Bill Clinton disabled SA
and committed that future satellites wouldn’t include the SA capability.4
China is currently the third largest export market for U.S. goods. China is part of the World Trade
Organization. Prior to their accession in 2001 to the WTO, China severely limited imports by imposing high
tariffs and taxes. China’s post-WTO accession tariff rates are “bound,” meaning that China cannot raise them
above the bound rates without “compensating” WTO trading partners. China’s most important revenue
source is the Value Added Tax which ranges between 13 and 17 percent and continues to be uneven.
Importers from a wide range of sectors report that, because taxes on imported goods are reliably collected
at the border, they are sometimes subject to application of a VAT that their domestic competitors often fail
to pay. 5
European Union countries, collectively, ranked second as a U.S. goods export market in 2007.
Notwithstanding the existence of customs laws that govern all EU Member States, the EU does not
administer its laws through a single customs administration. This makes uniform application of decisions
impossible, thereby increasing costs for appeals. The United States has continued to raise serious concerns
both bilaterally with the EU and in the WTO ITA Committee in Geneva about a series of EU measures that
have the effect of no longer providing or guaranteeing duty free treatment for certain information
technology products, to include smart-phones with GPS. The EU is applying new duties as high as 14 percent
on imports of these products. 6
Canada is currently the largest export market for U.S. goods. If NAFTA (North American Free Trade
Agreement) expired, Garmin could face significant costs related to tariffs and taxes. 7
An Analysis of GARMIN – Team Synergy -- 6
ECONOMIC:
While economic pressures have severely affected consumer discretionary spending, shipments of GPSenabled cell phones will increase 6.4% from 2008. It is expected that nine out of every 10 smart-phones will
contain GPS capability by 2014, as compared to one in three in 2008.8 Shipment of GPS handsets, though, is
expected to drop four to five percent in 2009.
The current economic crisis will likely last through the end of 2010. Recent news, published by Bloomberg,
indicates the world’s largest economy (US) shrank at a .7% annual rate from April through June.9 Europe’s
economy contracted more than estimated in the second quarter as consumer spending was weaker than
earlier reported. 10 In late 2009, China announced an enormous fiscal stimulus package. Since then the
Shanghai Composite Index has rallied some 90 percent. Despite this fact, questions remain over their ability
to sustain over the longer-term as the stimulus goes away.11
Given the state of the economy, businesses around the world are concerned about the impact inflationary
pressures could have on their businesses. Selling into international markets result in exposure to
movements in currency exchange rates. Tax rates, such as repatriated earnings taxes, can have a significant
impact upon the company. In 2008, Taiwan increased these taxes to 19% from 12%, resulting in a loss of
.30c per share that year alone. 12
The state of several major economies, as of September 30, 2009:
Country
Interest Rate
Growth Rate
Inflation Rate
Jobless Rate
U.S.
EU
China
.25%
1.00%
5.31%
-3.8%
4.8%
7.9%
-1.5%
-.20%
-1.2%
9.8%
9.6%
4.3%
Exchange
Rate
77.0450
1.4732
6.8255
Source: http://www.tradingeconomics.com
SOCIAL:
Telecom Times reports that by 2015, the expected the number of GPS subscribers will reach 160 million,
which translates to a 33.7% compound annual growth rate. U.S. 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.13
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 continue to pressure personal navigation device makers. One
person interviewed recently, summed up the general sentiment of desiring one device when he said, “The
simplicity of having one device and not needing to pull the Garmin out of my glove compartment is enough.
I want to get into my car and do as few things as possible.” 14
The European Union has implemented several environmental regulations in the past few years, one of which
is the RoHS (restriction of hazardous substances) Directive. This directive bans new electrical and electronic
equipment containing more than permissible levels of hazardous substances on the European Union market
after July 1, 2006. Since then, other countries have adopted the RoHS directive. Garmin has expended
considerable effort and resources to ensure compliance with the directive, although not all of its products
are RoHS compliant. 15
An Analysis of GARMIN – Team Synergy -- 7
TECHNOLOGICAL:
Although China is a large potential market for GPS makers, there were questions as to the state of their
infrastructure 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. Since that time, China has made significant strides to address the
infrastructure shortcomings. China and the European Union have joined forces to work toward Information
and Communications Technologies (ICT) standards. 16
Source: Cellular News, July 12th, 2009 http://www.cellular-news.com/story/38484.php?s=h
Of additional concern, the US Air Force is seeking comments from receiver manufacturers regarding an SVN49 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 highlights a vulnerability of Garmin’s product, as it is completely
dependent upon properly functioning satellites. These anomalies could impact service levels, and brand
confidence would be significantly affected. 17
An Analysis of GARMIN – Team Synergy -- 8
SWOT ANALYSIS1
STRENGTHS
 Core competency of Garmin is its ability to leverage GPS technologies and in-house manufacturing
to create trendy but useful products for high growth markets.
 Provides efficient after sales services and superior customer support in areas like repairs, technical
support and warranties services.
 Manufacturing their products in-house reduces mishaps and ensures quality products.
 The company owns its manufacturing facilities in Taiwan and receives tax incentives from the
Taiwanese government slated to end in 2011. Cheap labor allows the company to keep its operating
costs low.
 Garmin produces quality products that are ISO certified and further approved for use in aviation by
the FAA.
WEAKNESSES
 GPS devices (inherent product weakness) are accurate to within 15 meters and certain atmospheric
and weather factors may affect their accuracy. This has allowed competitors like NavSync Ltd and
Ekahau Inc. to differentiate their products. These companies have developed Wi-Fi-based Real Time
Location Systems that boost GPS accuracy and have created new products like NavTrac Wi-Fienabled GPS devices that support asset and inventory tracking from inside buildings to around the
world.
 GPS satellites are monitored and controlled by the U.S Department of Defense, potentially limiting
sales to certain clients (i.e. foreign governments).
 Endures a low sales cycle during the first half of the year versus the latter half of the year as
consumers plan annual trips and marine activity.
 Owning manufacturing facilities and their related costs can be considered a weakness when sales
volumes decline.
OPPORTUNITIES
 A brand awareness drive to increase visibility in the world, in Europe they sponsored the English
Premier League football club at Middlesbrough and “Garmin-Slipstream” cycling team.
 The use of GPS technology within varying age groups is rising and there are increased opportunities
to provide cutting-edge applications of the technology.
 The need for all-in-one devices and the shift by most electronic and manufacturing companies
toward consolidated products and applications provides continued opportunity.
 Garmin could capitalize/invest in the technology of applications such as Google-Maps such as streetlevel images and specialty routing options.
THREATS
 Increase of new entrants offering personal navigation devices consolidated into mobile devices like
the iPhone and Blackberry.
 GPS satellites may become inoperable due to decaying gravity; over time, they will be pulled into
Earth’s atmosphere.
 There is a risk of market saturation of GPS devices because of their long life cycles and usability,
hence reducing non-recurring sales/revenues coming to the company.
An Analysis of GARMIN – Team Synergy -- 9
COMPETITIVE ANALYSIS2:
TARGET MARKETS
(By demographics, psychographics, geography, etc. as applicable)
Garmin’s target markets are currently broken down into four main segments:
1. Automotive/mobile
2. Outdoor/fitness
3. Marine
4. Aviation
Source: GARMIN-LTD-10K-Annual-Reports-20090225
MARKET SEGMENTS
1. Mobile cellular device owners, through the company’s new Nüvifone
2. Car owners without in-built GPS systems in their cars.
3. Nature and trail tracking enthusiasts, including joggers.
4. Auto rental companies, to provide GPS devices as an option to their fleet of cars, for example
Enterprise and Budget car rental companies.
5. Resell companies that buy in bulk and resell their products i.e. Best Buy and Wal-Mart.
6. Auto companies like Toyota and Ford that offer the product in their cars.
7. Marine enthusiasts and for navigating Oceans, lakes and rivers.
8. Aviation industry for air planes through aircraft companies like Raytheon and Cessna.
An Analysis of GARMIN – Team Synergy -- 10
PORTER’S FIVE FORCES:
(Measurement scale: Very Weak, Weak, Medium, Strong and Very Strong)
DEGREE OF RIVALRY/COMPETITION – Very Strong
Garmin’s primary competitor is Tom-Tom with 25% market share; Garmin holds 50% (Newsweek.com)
of the Personal Navigation Device market (PND) including GPS consumer products for automotive
navigation. They also have stiff competition from their aviation-centered products from L-3 Avionics
Systems and Rockwell Collins. Another source of rivalry is the mobile industry that has incorporated low
cost GPS navigation services into mobile phones and PDA’s using 3G, EDGE and wireless internet
technology as a base to download interactive maps. The iPhone and Blackberry are the strongest
competition as regards to their personal GPS navigation line as GPS devices have proliferated the
market. Garmin has swiftly replied to this threat by releasing the nüviphone with downloaded maps.
THREAT OF SUBSTITUTES - Weak
Garmin is at the forefront of providing directional information. The only substitute to the GPS navigation
system offered by Garmin are maps that are periodically updated, printed and sold in local book and
corner stores. Another option to obtain directional information is the use of online map and locations
services such as Google Maps and MapQuest, which allow you to route a journey, print it, and follow the
provided directions to your final destination.
The threat of substitutes is weak is because the GPS based technology has been bundled with features
like route mappings, frequently updated maps, voice turn-by-turn command and location based services
(i.e. gas stations, weather information, traffic and entertainment information). These bundled services
give Garmin an edge and give consumers greater benefit.
SUPPLIER POWER- Strong for data supplier and Weak for manufacturing
Garmin has a single supplier Navteq for its data to digital mapping services. There is only one other
possible supplier (Tele Atlas NV) for the same services but were out bided by rival TomTom for their
services thus making Navteq a powerful supplier as bundled services are what create the added value to
Garmin products. The same is true in regards to a strong supplier power when it comes to SiRF
Technology Holdings, Inc. who as of 2005 provides an architecture on which Garmin devices are built.
(SiRF Architecture.)
In respect to suppliers for product components, Garmin has a select number of suppliers that
individually provide sub components to their factories. The individual and separate suppliers with whom
Garmin has arrangements for component supplies have little power.
An Analysis of GARMIN – Team Synergy -- 11
BUYER POWER – Medium
By the end of 2008, Best Buy accounted for 10% of Garmin’s total sales as per the 2008 Annual report. In
the U.S consumer product sales channeled through Garmin’s network of dealers and distributors.
Major retailers carrying Garmin products (Garmin, 2008 Annual Report):
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Best Buy—one of the largest U.S. and Canadian electronics retailers;
Amazon.com—internet retailer;
Costco—an international chain of membership warehouses that carry quality, brand name
merchandise;
Halford’s—a large European retailer specializing in car parts and accessories;
Petra—a large distributor who sells to such dealers as Costco and Amazon.com;
Target— one of the nation’s largest general merchandise retailers;
Wal-Mart—the world’s largest mass retailer; and
Wynit—a large distributor who sells to such dealers as Radio Shack and Amazon.com.
Garmin depends on their automotive/mobile segment for 70% of their revenues but because of the
maturing nature of this segment of their business, there is less growth. (Garmin, 2008 Annual report)
BARRIERS TO ENTRY - Medium
First-mover companies like Garmin and its competitors (i.e. “Cobra, Lowrance, Thales, Navman,
Raymarine, Mitac, TomTom, Honeywell, Dell, Hewlett-Packard, and PalmOne”), have invested heavily in
GPS technology-based infrastructure and have intellectual property rights protecting their businesses
making it difficult for new entrants. New entrants stake claim by creating add-on services sold either to
the GPS market competitors.
It is important to note that there is vigorous price competition among the competitors. Gone are the
days when TomTom and Garmin used to charge $500 for GPS navigation units. Garmin has gone down
to as much as $150 a unit and that does not include the cheaper bundled GPS models bundled with
mobile cellular devices that have recently hit the market in the last 1 ½ years.
The telecommunications industry is heavily regulated by the FCC, the same is true for the company’s
operations in Europe where they are subject to regulation and certification for each product they bring
to market. Thus, any loss in certification or delay in attaining these credentials may lead to loss of
market share.
An Analysis of GARMIN – Team Synergy -- 12
Financial Ratio Analysis Garmin Ltd (GRMN)
Garmin had fantastic growth year in FY07 in which it grew revenues 79%. In FY08, however Garmin has
grown revenue to $3.5B at a conservative 9% rate. FY08 was a challenging year for Garmin which saw its
profits rise slightly by 6% behind the 9% revenue growth but this was misleading because its net income fell
significantly as a percentage of revenue by 3% due mainly to an increase in R&D, SG&A and COGS. Net
Income fell to $732 million from $855 million in FY07.
Garmin has outperformed the S&P500 on profit margin but is only slightly trailing the industry by 1%. Total
Profit margin for FY08 was 22% but decreased 5% from FY07. Return on Assets has declined 1% and Return
on Equity declined 3% to 33% from 36%. Clearly, high expectations and slowing economy have had an
impact on Garmin’s capability to maintain this level of performance.
Garmin has apparently not become more efficient because of its growth as evident by its declining operating
income and a decrease in inventory turnover.). Inventory as a percentage of revenue has grown significantly
which may either be a temporary condition due to the slowing economy and missed forecasts or a lesser
efficient model. The Quick Ratio or “acid test” of Garmin’s financial health shows that Garmin has 3.8 times
assets in short-term investments (cash flow, A/R and short-term investments) versus liability. Cost of Sales
rose to 55% as a percentage of revenue, which is up 2% from FY07. Likewise, R&D rose .9% to 5.9% as a
percentage of revenue and SG&A rose 1% to 13% as a percentage of revenue.
If we compare Garmin’s liquidity to Tom-Tom NV a $2.3B competitor, we find that Tom-Tom carries much
more debt and risk with a Current Ratio of .35. This means that Tom-Tom carries .35 cents in assets for every
$1 in liability compared to Garmin, which carries $4 of assets to $1 liability. If Garmin were able to increase
its inventory turnover even further and maximize its use of cash store it may be able to put more pressure
on a struggling competitor like Tom-Tom with either a leveraged buy-out or increasing pricing pressure.
One area the company has improved upon is in decreasing the average days of A/R by reducing a total of 38
days by moving A/R from 121 days to 83 days. The potential use of this cash was offset by the increase in
COGS.
Garmin is a healthy financially although less efficient over the last 2 years. The current equity return and
profit margin is above the S&P 500 average however Garmin has to deal with managing costs as a
percentage of revenue. Garmin carries almost no risk to solvency and its ability to cover its liabilities as the
Current Ratio shows it has more than 4.5 times assets to liabilities. Garmin carries no debt. This can be
construed by many investors as a lack of innovation, efficient use of capital, vision and capacity for
expansion. Garmin’s growth trend has slowed significantly and it will need to become more efficient and
expand its revenue base either through a better use of cash or a reduction of inventory for a better return
on capital.
See Appendix for financial statements and charts.
An Analysis of GARMIN – Team Synergy -- 13
Critical Success Factors
1. Leverage use of cash and control expenses
Garmin has the strength afforded a company with significant assets and no long-term debt. Garmin
could put price pressure on smaller competitors by becoming even more efficient with its own
expenses and use of inventory and build up a stronger cash position in order to reduce prices or use
the cash for purchase into a marketplace through its competitors or incentives to partners.
2. Diversify Product Line
The popularity of smart-phones and online mapping software is a risk to Garmin’s business model as
there will be less desire to purchase stand-alone navigation devices. Garmin must either diversify its
product line or find a new way to collaborate with auto and boat manufacturers. Of course Garmin
can continue to compete in the phone space or expand nüviphone partnerships. The risk is the
margins of these businesses are typically much less and have greater competition.
Garmin has sufficient cash to purchase its way into IP or diversify in the phone market or buyout a
smaller competitor that has valuable IP such as TOM-TOM.
An Analysis of GARMIN – Team Synergy -- 14
APPENDIX
1
Income Statement Garmin Ltd (GRMN) in thousands U.S. Dollars
PERIOD ENDING
27-Dec-08
29-Dec-07
30-Dec-06
Total Revenue
3,494,077
3,180,319
1,774,000
Cost of Revenue
1,940,562
1,717,064
891,614
Gross Profit
1,553,515
1,463,255
882,386
Research Development
206,109
159,406
113,314
Selling General and Administrative
485,389
396,498
214,513
Non Recurring
-
-
-
Others
-
-
-
Total Operating Expenses
-
-
-
862,017
907,351
554,559
Total Other Income/Expenses Net
52,956
71,129
40,036
Earnings Before Interest And Taxes
914,973
978,480
594,595
607
207
41
Income Before Tax
914,366
978,273
594,554
Income Tax Expense
181,518
123,262
80,431
-
-
-
732,848
855,011
514,123
Discontinued Operations
-
-
-
Extraordinary Items
-
-
-
Effect Of Accounting Changes
-
-
-
Other Items
-
-
-
732,848
855,011
514,123
-
-
-
$732,848
$855,011
$514,123
Operating Expenses
Operating Income or Loss
Income from Continuing Operations
Interest Expense
Minority Interest
Net Income From Continuing Ops
Non-recurring Events
Net Income
Preferred Stock And Other Adjustments
Net Income Applicable To Common Shares
1
A1
Balance Sheet Garmin Ltd (GRMN)
27-Dec-08
29-Dec-07
30-Dec-06
PERIOD ENDING
Assets
Current Assets
Cash And Cash Equivalents
696,335
707,689
337,321
Short Term Investments
12,886
37,551
73,033
Net Receivables
791,146
1,059,889
459,520
Inventory
425,312
505,467
271,008
Other Current Assets
58,746
22,179
28,202
Total Current Assets
1,984,425
2,332,775
1,169,084
Long Term Investments
262,009
386,954
407,843
Property Plant and Equipment
445,252
374,147
250,988
Goodwill
-
-
-
Intangible Assets
230,954
196,030
67,580
Accumulated Amortization
-
-
-
Other Assets
1,941
1,554
1,525
Deferred Long Term Asset Charges
-
-
-
Total Assets
2,924,581
3,291,460
1,897,020
Liabilities
Current Liabilities
Accounts Payable
479,176
801,883
337,682
Short/Current Long Term Debt
-
-
-
Other Current Liabilities
-
-
-
Total Current Liabilities
479,176
801,883
337,682
Long Term Debt
-
-
248
Other Liabilities
215,481
127,028
-
Deferred Long Term Liability Charges
4,070
11,935
1,191
Minority Interest
-
-
-
Negative Goodwill
-
-
-
Total Liabilities
698,727
A2
940,846
339,121
Misc Stocks Options Warrants
-
-
-
Redeemable Preferred Stock
-
-
-
Preferred Stock
-
-
-
Common Stock
1,002
1,086
1,082
Retained Earnings
2,262,503
2,171,134
1,478,654
Treasury Stock
-
-
-
Capital Surplus
-
132,264
83,438
Other Stockholder Equity
(37,651)
46,130
(5,275)
Total Stockholder Equity
2,225,854
2,350,614
1,557,899
Net Tangible Assets
$1,994,900
$2,154,584
$1,490,319
A3
CCash Flow Garmin Ltd (GRMN)
PERIOD ENDING
Net Income
27-Dec-08
29-Dec-07
30-Dec-06
732,848
855,011
514,123
Operating Activities, Cash Flows Provided By or Used In
Depreciation
78,417
64,037
44,475
Adjustments To Net Income
111,702
(2,554)
(3,076)
Changes In Accounts Receivables
206,101
(477,108)
(230,111)
Changes In Liabilities
(330,294)
484,238
136,459
Changes In Inventories
83,035
(224,180)
(95,658)
Changes In Other Operating Activities
(19,645)
(17,356)
(4,357)
Total Cash Flow From Operating Activities
862,164
682,088
361,855
Investing Activities, Cash Flows Provided By or Used In
Capital Expenditures
(119,623)
(156,777)
(92,906)
Investments
130,744
112,775
(93,772)
Other Cashflows from Investing Activities
(67,470)
(131,693)
(39,707)
Total Cash Flows From Investing Activities
(56,349)
(175,695)
(226,385)
Financing Activities, Cash Flows Provided By or Used In
Dividends Paid
(150,251)
(162,531)
(107,923)
Sale Purchase of Stock
(659,943)
9,228
(34,376)
-
(248)
(11)
Other Cash Flows from Financing Activities
2,143
17,434
9,660
Total Cash Flows From Financing Activities
(808,051)
(136,117)
(132,650)
(9,118)
92
149
($11,354)
$370,368
$2,969
Net Borrowings
Effect Of Exchange Rate Changes
Change In Cash and Cash Equivalents
A4
Growth Rates %
Company Industry
S&P 500
Sales (Qtr vs year ago qtr)
-26.60
-12.60
-9.10
Net Income (YTD vs YTD)
-47.90
-10.50
-5.00
Net Income (Qtr vs year ago qtr)
-36.80
-38.60
-11.30
Sales (5-Year Annual Avg.)
43.56
23.69
13.14
Net Income (5-Year Annual Avg.)
32.62
18.72
12.74
Dividends (5-Year Annual Avg.)
24.57
3.18
11.70
Profit Margins %
Company Industry
S&P 500
Gross Margin
45.1
46.8
38.1
Pre-Tax Margin
22.3
0.9
10.4
Net Profit Margin
17.8
5.1
7.1
5Yr Gross Margin (5-Year Avg.)
47.3
46.6
37.8
5Yr PreTax Margin (5-Year Avg.)
30.4
11.2
16.5
5Yr Net Profit Margin (5-Year Avg.)
25.6
8.5
11.5
Financial Condition
Company
Industry
S&P 500
Debt/Equity Ratio
0.00
0.40
1.39
Current Ratio
4.5
3.3
1.5
Quick Ratio
3.8
2.5
1.2
Interest Coverage
21.4
61.6
23.4
Leverage Ratio
1.3
1.9
5.2
12.28
20.33
21.10
Book Value/Share
Investment Returns %
Company
Industry
S&P 500
Return On Equity
22.6
9.7
15.7
Return On Assets
17.2
5.1
5.9
Return On Capital
20.9
6.4
8.2
Return On Equity (5-Year Avg.)
35.0
14.8
19.1
Return On Assets (5-Year Avg.)
27.4
7.8
7.9
Return On Capital (5-Year Avg.)
33.8
10.0
10.6
Company
Industry
S&P 500
Income/Employee
60,469
19,667
56,806
Revenue/Employee
339,059
280,441
846,884
Receivable Turnover
5.0
5.7
13.1
Inventory Turnover
3.4
4.1
9.4
Asset Turnover
1.0
0.7
0.8
Management Efficiency
A5
SOURCES
Corporate Overview Sources:
1 Garmin
Company: About Us (2009).
Retrieved September 25, 2009, from Garmin Website:
http://www8.garmin.com/aboutGarmin
2 Garmin Culture: Stories from the Inside (2009).
Retrieved September 25, 2009, from Garmin Website:
http://www8.garmin.com/careers/culture.html?activeBranchId=careers
3 Wikipedia - The Free Encyclopedia: Garmin (Sept 18, 2009).
Retrieved September 25, 2009, from Wikipedia Website:
http://en.wikipedia.org/wiki/Garmin
4 Wichita Business Journal: Report: Garmin smartphone will cost $500 (Sept 22, 2009).
Retrieved September 25, 2009, from Wichita Business Journal Website:
http://wichita.bizjournals.com/wichita/stories/2009/09/21/daily23.html
5 Wall Street Journal: Garmin Tried to Find Ways Around Smartphone Threat (Sept 22, 2009).
By Ben Charney; Retrieved September 25, 2009, from Wichita Business Journal Website:
http://online.wsj.com/article/BT-CO-20090921-703769.html
Technological Innovations & Marketing Strategy Sources:
1.
Becky H. GPS brownout unlikely. Colorado Springs Business Journal (CO). n.d.;Available from: Regional Business News,
Ipswich, MA. Accessed September 25, 2009.
2. Bertolucci J. Let a GPS Be Your Trail Guide. Kiplinger's Personal Finance. August 2009;63(8):p70.
3. Event Brief of Q2 2009 Garmin Ltd. Earnings Conference Call - Final. Fair Disclosure Wire (Quarterly Earnings Reports).
4. Garmin Signals The Worst Is Past. Wall Street Journal - Eastern Edition, August 6, 2009:pB5.
5. Kiley D. THE RIGHT DIRECTION. BusinessWeek. September 28, 2009;(4148):p75.
6. Mott G. Golf & GPS Technology. Cigar Aficionado. September 2009;17(6):pp81-85. Available from: Business Source Premier,
Ipswich, MA. Accessed October 1, 2009.
7. Norman J. Garmin Changes Strategy to Focus on Specialty Bike Channel. Bicycle Retailer & Industry News. April 15,
2009;18(6):p10.
8. http://electronics.pricegrabber.com/gps
9. http://finance.yahoo.com/q?s=GRMN
10. http://www.garmin.com
11. http://www10.giscafe.com/nbc/articles/view_article.php?articleid=493609
12. http://www.gpslodge.com
13. http://www.mobilewhack.com/garmin-and-tomtom-sold-over-10-million-pnds-in-2007/
14. http://www.tomtom.com
PEST Analysis Sources:
1 Garmin
Tries To Find Ways Around Smartphone Threat >GRMN (September 21, 2009)
By Ben Charney; Retrieved September 25, 2009, from Wichita Business Journal Website:
http://online.wsj.com/article/BT-CO-20090921-703769.html
2 Wikipedia - The Free Encyclopedia: Global Navigation Satellite System (Sept 18, 2009).
Retrieved September 25, 2009, from Wikipedia Website:
http://en.wikipedia.org/wiki/Global_Navigation_Satellite_System
3, 4 Wikipedia - The Free Encyclopedia: Global Navigation Satellite System (September 19, 2009).
Retrieved September 25, 2009, from Wikipedia Website:
http://en.wikipedia.org/wiki/Galileo_positioning_system
5 2008 National Trade Estimate Report on Foreign Trade Barriers – China (September 21, 2009)
Released by US Trade Representative; Retrieved October 18, 2009, from government website:
http://www.ustr.gov/sites/default/files/uploads/reports/2008/NTE/asset_upload_file930_14640.pdf
6 2008 National Trade Estimate Report on Foreign Trade Barriers – European Union (September 21, 2009)
Released by US Trade Representative; Retrieved October 18, 2009, from government website:
http://www.ustr.gov/sites/default/files/uploads/reports/2008/NTE/asset_upload_file991_14650.pdf
7 2008 National Trade Estimate Report on Foreign Trade Barriers – Canada (September 21, 2009)
Released by US Trade Representative; Retrieved October 18, 2009, from government website:
http://www.ustr.gov/sites/default/files/uploads/reports/2008/NTE/asset_upload_file165_14638.pdf
8 GPS Enabled Handsets Expected Bypass Economic Downturn (January 23, 2009)
GPS World Magazine; Retrieved September 23, 2009, from GPS World website:
http://www.gpsworld.com/consumer-oem/news/gps-enabled-handsets-expected-bypass-economic-downturn-3109
S1
9 Economy
in U.S. Shrank 0.7%, Less Than Anticipated (January 30, 2009)
By Shobhana Chandra; Retrieved September 25, 2009, from Bloomberg website:
http://www.bloomberg.com/apps/news?pid=20601068&sid=a3g5lqDmy2N8
10 Eurpoean Economy Contracts More Than Estimated (July 30, 2009)
By Simone Meier; Retrieved September 25, 2009, from Bloomberg website:
http://www.bloomberg.com/apps/news?pid=20601068&sid=aGu9Z_GJCYoQ
11 Chinese Economy May Be Headed Into an Iceberg (July 30, 2009)
By Anna Fedec; Retrieved September 23, 2009, from Trading Economics website:
http://www.tradingeconomics.com/Economics/GDP-Growth.aspx?Symbol=CNY
12 Garmin Hit By The Tax Man (April 30, 2008)
By Carl Gutierrez; Retrieved October 18, 2009, from Forbes website:
http://www.forbes.com/2008/04/30/garmin-navigational-technology-markets-equity-cx_cg_0430markets17.html
13 Mobile navigation subscribers increase two-fold to reach 28 million (October 11, 2009)
Telecom Tiger Magazine; Retrieved September 24, 2009, from TelecomTiger website:
http://www.telecomtiger.com/fullstory.aspx?passfrom=vasstory&storyid=7371
14 Sendng GPS Devices the Way of the Tape Deck (July 7, 2009)
By Jenna Wortham; Retrieved September 26, 2009, from New York TImes website:
http://www.nytimes.com/2009/07/08/technology/08gps.html?scp=1&sq=needing%20to%20pull%20the%20Garmin%20out%2
0of%20my%20glove%20compartment%20is%20enough&st=cse
15 Garmin Company: Product Design (2009).
Retrieved October 18, 2009, from Garmin Website:
http://www8.garmin.com/aboutGarmin/environment/productdesign.html
16 The Need to Redirect China’s GPS Market (September 24, 2007).
Retrieved September 24, 2009, from Garmin Website:
http://www.eetasia.com/ART_8800480860_499488_NT_8bbe4c58.HTM
17 Air
Force Polls Receiver Makers for Solutions to Satellite Problems (June 30, 2009).
GPS World Magazine; Retrieved September 26, 2009, from GPS World Website:
http://www.gpsworld.com/gnss-system/receiver-design/news/air-force-polls-receiver-makers-solutions-satellite-problems8487
1
SWOT Analysis Sources
Garmin Tries To Find Ways Around Smartphone Threat (September 21, 2009)
By Ben Charny; Retrieved September 25th 2009 , from The Wall Street Journal :
http://online.wsj.com/article/BT-CO-20090921-703769.html
New NavTrac Wi-Fi-enabled GPS Devices Support Asset and Inventory Tracking … (April 27, 2009)
By Ekahau Inc.; Retrieved October 19, 2009, from Industrial Embeded Systems website:
http://www.industrial-embedded.com/news/Contracts/16967
US says GPS satellite coverage may fail soon (May 16, 2009)
By J. Mark Lytle; Retrieved September 23, 2009, from TechRada: SATNAV News website:
http://www.techradar.com/news/portable-devices/satnav/us-says-gps-satellite-coverage-may-fail-soon-599431
Garmin to sponsor well known UK football club Middlesbrough (Jul 23rd 2007)
By Ludovic Privat; Retrieved September 23, 2009 from GPS Business News,
http://www.gpsbusinessnews.com/Garmin-to-sponsor-well-known-UK-football-club-Middlesbrough_a278.html
Garmin in a Good Position (April 17, 2007)
By Katy Marquardt; Retrieved Sep 23rd 2009, from Kiplinger.com website:
http://www.kiplinger.com/columns/picks/archive/2007/pick0417.htm
Garmin Company: Investor information;
Retrieved September 25, 2009, from Garmin website:
http://www8.garmin.com/aboutGarmin/invRelations/execBios.html?activeBranchId=investor
S2
2
Competitive Analysis Sources:
Setting a New Course (November 7, 2007)
By Daniel McGinn; Retrieved October 4, 2009, from News Week Article:
http://www.newsweek.com/id/68909
Garmin hits iPhone directly with Nüvifone (January 30, 2009)
Retrieved October 8, 2009, from Electronista website:
http://www.electronista.com/articles/08/01/30/garmin.nuviphone/
Garmin Limited (NASDAQ: GRMN)
Retrieved October 4, 2009, from Forbes.com website:
http://finapps.forbes.com/finapps/BuyHoldSellAnalysis.do?tkr=grmn
GPS Devices and Systems Will Generate Revenues of $240 Billion by 2013 (April 28, 2009)
Retrieved October 7, 2009, from ABIresearch website:
http://www.abiresearch.com/press/1115GPS+Devices+and+Systems+Will+Generate+Revenues+of+%24240+Billion+by+2013
Who Keeps Digital Maps Going in The Right Direction? (January 14, 2009)
By Amol Sharma; Retrieved October 10, 2009, from The Wall Street Journal website:
http://online.wsj.com/article/SB120027487946287479.html
Garmin Company: Garmin Chooses SiRF as Supplier on Selected New Garmin Devices (August 30, 2005)
Retrieved October 11, 2008, from Garmin Press Release:
http://www8.garmin.com/pressroom/corporate/083005.html
Garmin company: 10-K 2008 Filing
Retrieved October 11, 2009, from Garmin company website:
http://www8.garmin.com/aboutGarmin/invRelations/reports/10-K_2008.pdf
Critical Success Factors Sources


S3
MSN Money. (2009, 10 6). Retrieved from http://www.msn.com:
http://moneycentral.msn.com/detail/stock_quote?Symbol=GRMN%2C
Press, A. (2009, September 9). http://online.wsj.com/article/SB12542356078994945. Retrieved from The Wall Street
Journal Online.