Thursday, September 5, 2019

Pfizer | Business analysis

Pfizer | Business analysis FOUNDATION If you build that foundation, both the moral and the ethical foundation, as well as the business foundation, and the experience foundation, then the building wont crumble. Henry Kravis. The basis for success of the execution and running of any operation, no matter its scale or field, is almost always governed by solid guidelines of thought and intention. Such processes are not merely meant as a tool of Show Tell, but also aid in providing its participants with a common framework to work within each member aware of the impact of their individual roles as being the stepping stone towards the bigger picture and into greener pastures. In the world of business, this holds truer than ever before, in lieu of its complex dealings with a wide array of parties. The dilemma is thus posed by consideration of an organizations goals and how to accomplish them when realistically they may be in direct contradiction to the individuals groups ideologies, but nonetheless are the minds behind the po tential success. The answer lies in a fusion of freedom of choice and match made in heaven whereby common groups are created, each in consensus with one another, and walking down a straight line. However for such a tactic to be successful, it is important to define clearly the building-blocks of such an institution. Mission Broadly defined, a mission statement is a declaration of organizational purpose (Bryson, 1995). The importance of defining such a statement and having a leader who would lead as an example of these values was stressed upon by Jerome H. Want in 1986, when he explained that not only does it help provide employees with a sense of direction within the organization, but also forges loyalties in the long run allowing for maximum productivity and innovation. The factors to be considered in developing an effective Mission Statement could be summarized as follows: (Pearce David, 1987; David, 1989) Identification of Target Customers Markets Identification of Principal Products/Services Specification of Geographic Domain Identification of Core Technology Expression of Commitment to Survival, Growth Profitability Specification of Key Elements in the Company Philosophy Identification of Company Self-Concept Identification of the Firms Desired Public Image Identification of Concern of Employees With the above points in mind, it is equally as important to note that even a good mission statement would have the potential of doing more harm than good if the values and behavior standards devised are not in conformity with those of its employees (Campbell, 1997). The performance-enhancing drivers of mission statements is thus contingent upon the following factors: (Bart and Tabone, 1998) To Provide a Sense of Purpose To Increase CEO Control To Define Behavior Standards To Enable Employees to Identify with their Organization To Give Greater Recognition to the Interests of External Stakeholders To Inspire and Motivate Employees To Refocus the Organization During a Crisis To Improve the Resource Allocation Process Pfizers Mission Statement: We discover and develop innovative, value-added products that improve the quality of life of people around the world and help them enjoy longer, healthier, and more productive lives. Values Organizational values can be defined as the ideals and beliefs upon which a company not only holds its personnel accountable to by the given standards but also the quality in which tasks are executed. This concept is exceptionally important nowadays as it encompasses the roles and relevant reactions of numerous stakeholders such as (Barrett, 1998): Society: Financial Performance lingers on the perception of the public in regards to an organizations environmental and social stances Shareholders: Investors associating themselves with the firms image need to ensure that they are socially responsible and quality conscious Potential Employees: To attract the best Human Resources whose values are aligned with those of the companys Existing Employees: To Retain their current employees by ensuring their personal fulfillment which include Physical Fulfillment including wages and facilities offered Emotional Fulfillment by encouraging open communication, friendly environment professional growth Mental Fulfillment by allowing opportunities to learn, express personal creativity overall personal growth Spiritual Fulfillment which creates a sense of importance in them Values can be grouped into cluster groups as defined by the McCann Window on Work Values (See Fig.1 in Annex A). The 8 value types can be described briefly as follows, and organizations may stress on either a single way of value or encourage a mix of these different environments (McCann, 2006): Individualism: Promotes competitiveness with special rewards allotted to those who outshine others Authority: Leaders take the lead and charge with a hierarchical system of management employees follow Compliance: Focus on business objectives with an obedient, streamlined workforce to maintain order Conformity: Built on traditions cultures, outsiders are seldom welcome and change is not smiled upon Collectivism: People-first policy where decisions are based completely on unanimous agreements by groups Equality: An open environment with casual attitude, where everyone is believed to be equally valuable Empowerment: No heavy rules or regulations where innovative ideas are welcome, no matter how radical Independence: Freedom to experiment allowed within a common framework seen in most start-ups The common error, as has been seen, is the communication or rather a lack of it in transmitting these values onto others, once the values have been decided upon. It is important to integrate them and to make them visible in the daily life of the organization. This can be achieved through several means including at public activities like meetings conferences, Printed Materials, Annual Reports and on Web Pages. (Vidal, et al, 2008) Pfizers Values: integrity customer focus performance innovation collaboration respect for peoplecommunity leadership quality Objectives Organizational Objectives provide a sort of visual image of how to meet goals set forth by the organization. In general, objectives have 3 main functions: To control a firms plan (set up targets within a department) To motivate or inspire people to reach a common goal To direct everyone in the organization in a single direction All the above factors also need to be consistent with the organizations larger goals which are categorized as: Those that aim to make a profit for their owners Those that aim to maximize benefit to society Those that aim to maximize benefit to their members Generally, there are 2 types of Objectives: Outcome Objectives which specify the final outcomes that are to be attained Process Objectives that specify the means to achieve the outcome objectives Furthermore, objectives exist at all different levels of an organization to provide synchronous movement. Corporate Objectives Deals with the organization as a whole (E.g. Goals, Profit Maximization, Growth, Overall Survival) Departmental Objectives Very Specific Objectives; Departmental Targets Individual Objectives Targets set forth for Employees (Often used in performance Appraisal, E.g. Sales) In general, objectives should be: S Specific M Measureable A Attainable R Results Oriented T Time Bounded Pfizers Objectives: Advance wellness, prevention, treatments and cures Bring the best scientific minds together to challenge the most feared diseases of our time Set the standard for quality, safety and value of medicines Use our global presence and scale to make a difference in local communities and the world around us Promote curiosity, inclusion and a passion for our work Be a leading voice for improving everyones ability to have reliable and affordable health care Maximize our financial performance so we can meet our commitments to all who rely on us. We will become the worlds most valued company to patients, customers, colleagues, investors, business partners, and the communities where we work and live. Assessment Although Pfizers Mission Statement provides a clear view of the industry it deals in and its policy dedicated towards the betterment of peoples physical health, the pharmaceutical industry during recent years has come under attack for a variety of reasons including: The high pricing of and widespread use of medicinal drugs The lack of focus in providing facilities in places that truly need it (e.g. Africa) The unsafe measures of clinical trials and a companys unwillingness to accept fault In view of these factors and several other issues that plague the industrys name, it is recommendable to allow for a new Mission Statement that would allow humanization of the company towards its customers. We careà ¢Ã¢â€š ¬Ã‚ ¦and we will listen to whoever requests it from usà ¢Ã¢â€š ¬Ã‚ ¦and we will use the advancements in the field of science and technology to bring forth a new era; where every man, woman and child around the world is entitled to lead a healthier and more productive life without the worries of financial constraints As for its objectives, Pfizer, although still under scrutiny from certain groups, which ultimately is unavoidable in a business of such a scale, has managed to demonstrate its commitments towards its objectives. This has been done on several occasions, such as: The creation of new innovative drugs like its most famous product, the antibiotic Terramycin in 1949, the break-through male impotence drug Viagra, which became the worlds fastest-selling pharmaceutical product (until overtaken by another Pfizer brand), most recently Exubera, the worlds first inhaled insulin drug in addition to Sutent, a cancer fighting drug. The collaborative projects launched with other institutions and its workings with universities such as the first-of-a-kind collaboration between academia and industry between them and the Washington University School of Medicine in St. Louis that focuses on discovering new uses for existing compounds. Also most recently they launched a diabetes research in collaboration with Hadassah Medical Organization and The Hebrew University of Jerusalem on drugs to replicate and regenerate insulin-producing cells in people with type 1 diabetes. In addition to the organizations standards in medical quality, the company has also since its creation been a mega-giant player in the industry on its own through proper management and innovative techniques, thus accomplishing their financial objectives distinctly. Fortune ® named Pfizer as the fifth-best wealth-creator in America. The company is a global leader in human pharmaceuticals, and also has a large array of consumer health care, confectionery, and animal health care products. In 2000, its revenues equaled $29.6 billion ( £20,14bn), eight of Pfizers pharmaceutical products attained sales of at least $1 billion ( £680.4 million) each1. In 2001, Pfizer has budgeted approximately $5 billion ( £3,402 billion) for research and development -more than any other drug company in the world2. _______________________________________________________________________________________________ 1 Pfizer..not just bigger, but better, message by Pfizer CEO Henry A. McKinnell (published at the Pfizer web site, philanthropy section) 2 Ibidem STAKEHOLDERS The best generalization of the term Stakeholder was perhaps given by Freeman who defined them as any group or individual who is affected by or can affect the achievement of an organizations business (Freeman, 1984). He also specified the narrow sense of a stakeholder by describing it as any identifiable group or individual on which the organization is dependent for its continued survival (Freeman Reed, 1983). The term now also incorporates those groups who might have an interest in the organization, regardless of the organizations interest in them (Preston Sapienza, 1990). The issue most businesses face however is one of clear identification of its stakeholders and the matter of just how much attention is to be paid to each category, and which segments can suffice without any at all. In his paper, Prioritizing Stakeholders for Public Relations, the author Brad L. Rawlins after analysis of various takes on the issue from numerous scholars researchers, proposes a 4 step process as a plausible solution (Rawlins, 2006): Identifying Stakeholders Prioritizing Stakeholders According to Attributes Prioritizing Stakeholders by Relationship to the Situation Prioritizing Publics by Communication Strategy We shall briefly look into each of the above steps and get an overall sense of their influence on an organization, but first a definition of The Public is deemed vital to eliminate the common mistake of interchangeably using the term with Stakeholders. The Public can be defined as a group of people who face a similar problem, recognize the problem, and organize themselves to do something about it (Dewey, 1927). Therefore organizations choose stakeholders by their marketing strategies, recruiting and investment plans, but publics are on their own and choose the organization for attention, usually from the ranks of stakeholders (Grunig Repper, 1992). Identifying Stakeholders Efforts have been made focusing on the attributes of stakeholders in their relation to the organization1 (Rawlins, 2006). The linkage model developed by Grunig and Hunt provides a good basis of identification of stakeholder relationships to an organization (See Fig.2 in Appendix A). The components of the model, which can be closely associated with the case of Pfizer, can be briefly described as follows2: Enabling Linkages Includes stakeholders with some control authority over the organization (e.g. Stockholders, Board of Directors, Government Legislators, etc.). A large part of the companys autonomy and resources are based on such a linkage and problems here could lead to significant problems in these aspects. _________________________________________________________________________________________________________ 1 Freeman, 1984; Savage, G.T., Nix, T.H., Whitehead, C.J., Blair, J.D. 1991. Strategies for Assessing and Managing Organizational Stakeholders. Academy of Management Executive, 19: 453-473; Harrison, J.S., St John, C.H. 1994. Strategic Management of Organizations and Stakeholders. St. Paul, MN: West Publishing Co; Mitchell, R.K., Agle, B.R., Wood, D.J. 1997. Toward a Theory of Stakeholder Identification and Salience: Defining the Principle of Who and What Really Counts. Academy of Management Review, 22: 853-886. 2 Grunig, J. E., Hunt, T.1984. Managing public relations. New York: Holt, Rinehart and Winston. Grunig Hunt developed the model based on the work of: Esman, M. 1972. The Elements of Institution Building. In J. W. Eaton (Ed), Institution Building and Development. Beverly Hills: Sage: 19-40; Evan, W. 1976. An Organization- Set Model of Interorganizational Relations. In W. Evan (Ed), Interorganizational Relations. New York: Penguin: 78-90: Parsons, T. 1976. Three Levels in the Hierarchical Structure of Organizations. In W. Evan (Ed.), Interorganizational Relations New York: Penguin: 69-78. Functional Linkages This segment is responsible for the effective functioning of the organization and encompasses both input (employees, suppliers, etc.) and output (consumers, retailers, etc.) processes. Normative Linkages Usually groups or association with common interests with the organization and with similar values and interests. Normative linkages could also include competitors within the same industry. Diffused Linkages Hardest to clearly defined as their involvement with the organization is limited and often brought about in cases of crisis. Includes the publics, activists and other special interest groups. Pfizers Stakeholders: Refer to Fig.3 in Appendix A. Prioritizing Stakeholders According to Attributes Now that an understanding has been gained in the identification of the stakeholders and their respective influences on an organization, it is important to establish a strategy in which the most important stakeholders be paid the tangible amount of attention. For this we will first look into the different sorts of stakeholder attitudes that an organization may come across; these are broken down into different levels of support (Savage et al, 1991). Supportive Stakeholder: Is in harmony with the organizations goals actions and is of low threat. Marginal Stakeholder: Is not a threat either due to low stakes in the organization. Non-Supportive Stakeholder: As the name suggests, an organization will often find itself at odds with such segments and is to be considered as a serious threat at all times. Mixed-Blessing Stakeholder: Has potential to be either a great and resourceful ally or a serious enemy. The best model present not only to assist in factoring the attention needed to be paid towards a segment of stakeholders but also to single out which ones within the segment are most important, is perhaps the one devised by Mitchell, Agle and Wood in 1997. This model uses 3 important components in its analysis (See Fig.4 in Appendix A): Power The strength of influence over other parties in persuading them to make a decision, for or against a cause or an issue, which otherwise would have gone another way. Legitimacy The existence of legal, moral or presumed grounds by which an outcome, behavior, direction or some process be altered. Usually such stakeholders have some form of investment in the organization, financial or otherwise and are dependent on the organization. Power + Legitimacy = Authority Urgency This feature requires the organization to respond to the stakeholder in a timely fashion, usually in cases demanding immediate public intervention measures. The combination of these 3 attributes leads to a prioritization strategy. Accordingly, Latent Stakeholders will have 1 of the 3 attributes Expectant Stakeholders will possess 2 features Definitive Stakeholders will have all 3 attributes Individuals and groups that do not have any of the 3 attributes will not be considered as stakeholders. The priority categories can be further broken down in sub-categories to allow for a clearer distinction of the elements possessed by each group and the technique to be used in their handling: Latent Stakeholders Since this group possesses only 1 attribute they are less prominent in the scope of the organization. It can include: Dormant Stakeholders; who have power but lack legitimacy and urgency thus effectively reducing the effects of their powers. Discretionary Stakeholders; who have legitimacy but lack the other two qualities. They are rather reliant on the good will of the organization since the lack of power negates their urgency on issues and are restricted in alternative measures. Demanding Stakeholder; who are considered to be rather bothersome since the only tool at their disposal is the one of urgency. Expectant Stakeholders Short of the extremely important stakeholders, this group requires an eye on it at all times since the combination of any two traits can yield a powerful effect. These are: Dominant Stakeholders; who receive much of managements attention since they can back up their actions based on legitimacy and a force of power. Dependent Stakeholders; who require a tactic of being socially responsible towards in resolving their claims since they have both legitimacy and urgency. Even though they may not possess the power to effect the organization directly through use of power, they may create hindrances through several other means. Dangerous Stakeholders; who have been known to stoop to low levels in their handling techniques with organizations. With the use of their power and urgency, these groups (e.g. social activists) highlight the importance of having boundaries at each negotiation. Definitive Stakeholders These have the highest priority since they have all 3 factors at their disposal and can significantly affect the organizations running in more ways than one. It is important to note however that in the model mentioned above, individuals and groups cannot be categorized permanently in a particular section and that with time, there may be a shift of attributes which would require a re-examination of their position on the importance chart. Prioritizing Stakeholders By Relationship to the Situation The situational theory uses the publics level of involvement to provide future predictions of activity by different groups and may be used by organizations to devise plans in advance to quench any upcoming problems. The level of involvement is a broad measurement of the extent where people find themselves personally connected to the situation. This involves all stakeholders who become involved in some situation (Grunig Repper, 1992), whereas those that remain inactive would be described as non-publics. Further categorization levels include: Latent Publics: who are aware of the problem facing them but are not effected to the extent of getting involved Inactive Publics: low levels of knowledge and/or lack of understanding of effect of issue and perhaps satisfactory relation to the organization limits their involvement on the issue completely Aroused Publics: initial low levels of knowledge; but since they accept the issue as problematic they may increase their understanding over time and get involved at a later time. Aware Publics: who are aware of the problemà ¢Ã¢â€š ¬Ã‚ ¦period! Active Publics: who are aware of the issue and desire to do something about it. They will usually have a high level of involvement as they would believe the issue directly affects them and strive to change the direction of the outcome. Prioritizing Publics By Communication Strategy Stakeholder management involves more than just predicting future behavior and avoiding issues before they arise. Social and personal tactics are important in forging long term relationships with those individuals or groups who may later prove to be an asset to the organization. Yet not all parties can be actively included in such measures and a final assessment is required to distinguish the levels of involvement to be pursued with each party. These can be segmented as such: Advocate Stakeholders: This sect should be utilized in a support-providing way in which their endorsements, campaigns, donations and attendance at functions are highly encouraged. Dormant Stakeholders: They are usually reluctant to get involved but should be encouraged to do so by conveyance of relevant information pertaining to the issues and the effects it could have on them. Overall objective would then be to try and increase emotional attachment. Adversarial Stakeholders: Although most managements use a defensive strategy on them, a positive negotiating environment has been seen to extract better results. The ultimate aim if not to get them to align themselves with you should be one which would allow both parties to walk away comparatively happy from the table. Apathetic Stakeholders: Although, initially non-active and a tendency to not get them involved, a tactic of positive reinforcement should be applied which would side them on the organizations front with the assistance of early, yet perhaps a bit biased knowledge of information. Assessment In terms of stakeholder performance and satisfaction, Pfizer has made great strides during recent years to improve their corporate image. Whilst they are still under scrutiny from many sections on factors such as pricing of drugs in poor nations and their obscenely large marketing budget a step which many claim lead to unnecessary sales of prescription drugs, they have taken steps to balance the negative scale with pro-active measures with stakeholders. These include: Animal Rights Groups: by greatly reducing the number of animals used in drug testing and making use of tissue studies and computer models. Those areas where it is deemed necessary to use animals, they do so within strict Government Policies Laws dictating the Ethical Rights of Animals. Employees: It introduced a sustainable transport program for the 3,600 employees at its operations in Sandwich, Kent. When developing its new UK headquarters at Tadworth, Surrey, Pfizer undertook extensive consultation to ensure that the companys integration into the areas existing infrastructure was as smooth as possible. The Public: Pfizers Health Awareness Program in the UK is driven by its expertise in health, education and science and by the recognition that it needs to be seen to be active in these areas. The company does this through forming partnerships with organizations and people who are active in the health arena and through raising public awareness of health issues. In 2003 Pfizer UK launched a cardiovascular disease awareness campaign highlighting the need to treat cholesterol and the risks of not doing so. The campaign also aimed to encourage individuals to seek further information from their GPs. It was launched in partnership with Heart UK and Diabetes UK, two established health awareness charities. The campaign was driven by Pfizers local marketing team, working within the companys sales team using a CHD awareness campaign of advertisements at over 60 poster sites, a website and a telephone hotline giving members of the public an opportunity to get further information. As part of the campaign, in June 2004 Pfizer helped to sponsor one of the flagship events the Big Heart Festival at Aintree Racecourse. Sponsorship covered a series of seminars featuring Merseyside cardiologists, which were open to the general public. This approach was chosen as it provided a means of getting the experts and a large number of the general public together to debate and discuss heart disease from experts in the field. Other activities at this event included: fitness training and health screening; blood pressure and cholesterol testing; advice from dieticians and other experts; a heart information center; and advice on how to stop smoking. The main challenges were coordinating the event, raising awareness about it, making it happen and making the public know that it was an event for all and not just the professionals. A focused advertising campaign and the use of the networks of the partners helped to overcome several of these challenges. Shareholders: Regional events, such as those on Merseyside help build relationships with customers and the wider community. Regional events demonstrate how Pfizer staff support the community in the region and add a business benefit in terms of staff interest and motivation. This Program was set up to help build strategic relationships with Pfizers customers. These relationships help inform the companys understanding of issues at the surgery and patient level. This program is one of many that Pfizer operates across the country to reduce inequalities in access to quality health care, to promote the think global but act local concept and to raise awareness of serious health issues a business objective. This is part of Pfizers business strategy of regional promotion. Similar programs are being replicated by Pfizer throughout the UK to raise health awareness and offer advice on health issues; this provides the opportunity to link business benefits to staff involvement. Elsewhere, Pfizers CR actions have included reducing the environmental impact of its operations through water and energy conservation and active participation in the United Nations Global Compact. _______________________________________________________________________________________________ Article 13 and CBI CSR Case Study Series, February 2005 APPENDIX A Fig.1: McCann Window on Work Values Fig.2: Linkage Model Fig.3: Pfizer Stockholders Fig.4: Stakeholder Typology: One, Two, Three Attributes Present Garmin: The Worlds Largest Competitor Garmin: The Worlds Largest Competitor Gary and Min started their venture in Lenexa, Kansas with startup capital of four million dollars. Not even a decade after launching Garmin, sales are at 105 million dollars with a profit of 23 million dollars. Just to give you an idea of how quickly the company expanded, by 1999 Garmin had a hold of 50% of the GPS market in North America, has a presence in 100 countries worldwide, and is carried by over 2,500 independent distributors. Garmin continues to innovate and expand; below we discuss the environment Garmin is battling in, the companys core competencies, and where it stands among competitors in greater detail. External Analysis As most people know, Garmin is the worlds largest competitor in the market for Global Positioning System (GPS) devices, and particularly in the Personal Navigation Device (PND) market. According to the company, Garmin is a leader in providing navigation, communication, information devices and, applications, most of which are enabled by GPS (global positioning system) technology  [1]  . Garmins stated goal in creating these devices is to enrich the lives of their customers, by providing high quality products that create value for consumers  [2]  . The industry for navigation and communication devices consists of a number of highly competitive firms that, like Garmin, design, create, and distribute GPS devices for a variety of uses. The areas where Garmin specifically creates products for are automobiles, outdoor use, marine vehicles, and aviation  [3]  . The industry has become extremely populous in recent years due to technological advancements and high demand for GPS dev ices, but Garmin has remained near the top of the industry throughout this time frame -as of today, Garmin sits sixth among firms in the scientific and technical instrument industry in terms of total revenue, fifth in terms of market capitalization, and second in terms of net profit margin  [4]  . Most of these firms follow distinctly similar business processes as well, relying on innovation and vertical integration, making for an even more competitive industry. In order to stay ahead, Garmin has had to pay close attention to the actions of both consumers and competitors. Despite the presence of so many competitors, Garmin is able to stay at the forefront of the industry due to its capabilities in several key areas which are crucial for success in the industry. These key success factors include establishing market share and brand recognition, investing heavily in research and development and innovation, having a strong, global distribution network, and implementing vertical integration. Successes in these areas are critical for firms competing in the navigation and information industry, and Garmin achieves a level of success in each area. Market share and brand recognition carries a huge importance for companies like Garmin, particularly in an industry that suffers from overcrowding and very uniform products. Garmin initially created a niche market for itself, distributing quality, cutting-edge navigation products. At the time, top competitors included giants such as Sony and Philips, creating a situation where Garmin had to create a niche for itself if it wanted to compete. Over time, Garmin has grown into an industry leader with a strong reputation for producing great products. According to the company, Garmin owns around 36 percent of the personal navigation device market, making it the first in the North American market and second in the European market, and they are first in both the recreation and aviation markets as well  [5]  . In order for companies to compete in such a populous market, one dominated by large, successful companies such as Garmin that distribute highly similar products, they must create so me sort of recognition for themselves. Garmin has already done so, creating a brand well-known by most consumers and allowing success to build upon prior success. Emphasizing research, development and, producing innovative products also grow in importance in such a large, parallel industry. Due to the dynamic nature of the technological and scientific industries, firms must rapidly develop new products or ideas in order to attract new customers or retain old ones. Garmin describes their industry in such a way: The market for our products is characterized by rapidly changing technology, evolving industry standards and changes in customer needs. If we fail to introduce new products, or to modify or improve our existing products, in response to changes in technology, industry standards or customer needs, our products could rapidly become less competitive or obsolete  [6]  . Consumers today will almost always look for the product with the latest and coolest features. Technology giants such as Apple and Google are proof that those firms that can either constantly improve their existing products or introduce new products will stay ahead of the c urve. The market for GPS-driven navigation equipment certainly falls under the same category. Garmin places a heavy emphasis on research and development as a means of constant innovation-in 2009 they spent nearly 240,000 dollars on RD, or roughly 8.1 percent of sales  [7]  . Other firms in the industry, such as TomTom at around 9 percent of sales, spend comparable amounts  [8]  . Garmin also currently holds over 1 billion dollars in cash on hand, allowing the company plenty of resources for investing in RD  [9]  . With technology changing at such a rapid pace any firm that fails to fully invest in discovering the next great technological advancement will only fall desperately behind firms such as Garmin and TomTom, or even Google and Apple. Also, due to the nature of the operations of firms like Garmin and TomTom, it is absolutely necessary for companies to create and maintain strong distribution networks. Garmin and TomTom, and many other firms who distribute PNDs, do not actually operate individual stores that sell the products they make. Instead, they sell the devices through other retailers or through their websites. Selling through third parties can create a lot of functional problems, such as increasing costs and poor customer service, so creating and managing a strong, effective distribution network is an essential activity. Garmin, for instance, uses an extensive network of nearly 3000 dealers in about 100 countries, while relying on regional sales managers and in-house sales staff to provide support  [10]  . Moreover, many of Garmins largest dealers are among the largest, most recognized retailers in the world, including Best Buy (which accounts for 13.4 percent of Garmins revenues), Target, Wal-Mart, Amazo, and Costco  [11]  . They also coordinate with in-country subsidiaries and local dealers around the world to manage their global sales, a task that would be nearly impossible without an established and well-managed distribution network. It is a testament to the importance of strong global connections that Garmin owns a significant share in the European market despite their late entrance into that particular segment. Without a strong distribution network, a firm competing in the industry could not reach the levels of profitability that firms such as Garmin and TomTom reach-instead, they would be incurring extra costs and losing revenues through inefficient supply chains. Furthermore, due to the capital-intensive nature of the business and the importance of RD, a certain amount of vertical integration is expected. A huge part of the industry, as we have seen, is the ability to design and produce new, innovative products. Such endeavors require large amounts of time and money commitments, making it much more logical for firms in the industry to take the product all the way through the production phase, from developing the idea to manufacturing the product. The industry leaders such as Garmin operate their own design and manufacturing facilities-in fact, Garmin believes its manufacturing capabilities to be one of the companys core competencies  [12]  . Vertical integration allows Garmin, and other firms, to solve common problems in the electrical industry, such as being quicker to market with products, streamlining the design and process functions, and minimizing logistical issues  [13]  . The efficiency and effectiveness of vertical integration makes it a common practice among firms in electronic fields, and any firm wishing to compete against leaders such as Garmin would most likely need to employ similar processes. Undoubtedly, any firm wishing to compete in the market for GPS-powered navigational and information equipment must excel in the key areas above. However, such practices do not guarantee success in such a complex industry. There are many factors that affect the profitability of firms such as Garmin, and one can rate the industrys attractiveness by considering the five forces model: the threat of new entrants, the threat of substitutes, the power of suppliers, the power of buyers, and the competitiveness of the industry. A significant risk of new entrants into the market exists due to the low barriers of entry that exist in the industry. One such low barrier to entry involves the extensive growth of the technology PND devices require. GPS technology, like most every other technology, is now easy to copy and implement due to its widespread use, and since the satellites GPS relies on are available for civilian use, it is not exactly difficult to establish a GPS system for use in products. When you factor in the decreasing prices of necessary components such as semiconductors and microprocessors, it becomes clear that the technology for PNDs represents a very small obstacle for new firms. The ease of obtaining the technology has lead to the current trend of smartphones, specifically the Apple iPhone and the phones Google sponsors, containing GPS technology  [14]  . One must also consider the channels of distribution to be a very low entry barrier for potential entrants, specifically firms that are a lready large and successful. As previously discussed, Garmin (and most other PND makers) sells through third party retailers such as Best Buy and Wal-Mart; unfortunately, this channel is easily accessible by top electronic companies such as Sony and Samsung. More than likely such large companies already own connections with the large retail chains, and the vast resources of electronic giants such as Sony offer them a strong advantage in dominating the retail channel. Google and Apple both own similar advantages. The low entry barriers are leading to an influx of companies entering the industry, and, most ominously for Garmin, new competitors such as Google are able to offer the same technology with features Garmin cannot replicate. The threat of substitutes in the navigation industry does not represent such an apparent problem per se; since all PND products use basically the same GPS technology, no real substitute exists. However, there are now substitutes to the PNDs companies like Garmin sell. Most notable, of course, are the smartphones with GPS capabilities. These phones offer a huge problem in that no person with such a phone would need to own a PND due to the phones equal capabilities. Another substitute is the current practice of car companies including built-in GPS systems into their vehicles. Garmin is managing to limit this threat by entering the market itself-they currently have contracts for built-in GPSs in 15 Dodge/Chrysler/Jeep vehicles  [15]  . Still, the company considers the in-dash vehicle segment, along with the phone segment, to be their biggest threats going forward. In such a competitive industry, and with all devices requiring vital components such as semiconductors and LCD screens, suppliers obviously own a decent amount of power  [16]  . Suppliers of these absolutely crucial components are, in effect, selling to everyone in the industry, creating a substantial amount of leverage for the suppliers. Garmin relies on these components, and so shortages or rising costs are devastating to the business  [17]  . Garmin is, however, able to slightly circumvent this issue by having sole source providers for some key components  [18]  . Even so, supplier power represents a significant issue in the industry. Even more alarming is the power of buyers in the industry. Prices for PNDs in the automobile market have been falling rapidly over the past several years due to the number of quality products the market offers  [19]  . As with any competitive industry, it is difficult to charge price premiums when products are virtually the same in terms of functional use, and firms are then forced to compete on price. Buyers are able to shop around for the best prices, and are more willing to choose a product because of auxiliary features such as appearance and ease of use. Garmin does own a distinct advantage in their other markets though, as prices in the aviation, outdoor/fitness, and marine markets are rising due to advancements in these markets over competition. However, the majority of Garmins sales still come from the automobile segment, making the power of buyers a very real threat. Just how competitive is the PND industry? The list of Garmins competitors is quite extensive. The threat from Google, Apple, and other electronics companies such as Sony, Samsung, and Motorola has been well documented. TomTom remains the biggest threat in the automotive segment, and the two companies are currently waging a battle for world domination of the PND market (Garmin currently leads in the US market, while TomTom leads the European market). MiTAC and Navigon AG are also strong competitors in the automotive market  [20]  . MiTAC is also a competitor in the outdoor segment (through subsidiary Magellan) along with Lowrance and Delorme, while Nike and Timex Corp. represent threats in the fitness area  [21]  . Raymarine Ltd., Lowrance, and Furuno are the biggest competitors in the marine segment  [22]  . Finally, competition in the crowded aviation industry comes from Honeywell, Avidyne Corp., L-3 Avionics Systems, and Rockwell Collins, Inc., among others  [23]  . Judging by the five forces model, the PND industry appears to be a very unattractive industry. The threat of new entrants, the power of buyers, and the competitiveness of the industry are all very high, while the threat of substitutes and the power of suppliers are at least moderately high. Garmin remains profitable due to its achievements in the key success factors of the industry, but those factors are not easily replicable by incoming firms. Most importantly, overcoming the market share advantage Garmin, TomTom, and others own seems nearly impossible. Even if one is able to penetrate the market, the strong competitive nature of the industry is sure to keep margins razor thin and profits very low. Overall, the PND industry looks like an overly risky environment for any firm. However, that does not mean Garmin can no longer be profitable. Garmin has built a highly successful business model, and despite recent struggles, they should be able to rebound. There are several strategies they can pursue to combat the new industry issues they face. For one, they can shift some of their focus to their other product segments. Right now, Garmins main threat is competition in their automotive segment from other PND producers and smartphones; consequently, it may be beneficial to place greater emphasis on the marine, outdoor, and aviation segments that may be more profitable anyway. Garmin can attempt to penetrate these markets even more, entering into new agreements with specialty retailers for the marine and outdoor segments and airlines for the aviation segment. Increasing RD ventures in the other segments might also give Garmin a new competitive advantage in those fields. Since prices have been increasing in these areas, Garmin may be able to substantially increase revenue by renewing focus in other segments. Overall, though, Garmin may need to do very little else. Garmin has already introduced their version of the smartphone to compete with Google and Apple, and there is no doubt that the poor economy has played a role in Garmins recent downturn. A recent study by Forrester Research analyzing the PND market found that, although companies like Garmin have suffered from competition from smartphones and price cuts, the Garmin should be fine for the foreseeable future-Charles Golvin, the author of the study, says, I think Garmin and TomTom will be successful going forward because theyre innovating and differentiating, and theyve got the software and skills and knowledge with maps that the phone makers dont  [24]  . In other words, it may be a case where Garmin needs to just trust in their successful business model and continue to produce high-quality devices. As the economy improves, and the devices continue to improve, sales will eventually rise. Internal Analysis Garmins mission is to enrich the lives of its customers, suppliers, distributors, employees 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.  [25]   Garmin follows a first mover, differentiation strategy. Through heavy investment in research and development they are able to develop new products that users perceive as more valuable and are willing to pay a premium for. The first mover aspect is most easily observed in their aviation division where they have received numerous awards as well as FAA certifications for being the first to market with new and innovative products. A recent review of recreational GPS receivers revealed 38 of the top 50 receivers  [26]  were Garmin products. With the Oregan 400t coming in at number one, and products from the Rino, GPSMap, and eTrex product lines all ranking in the top 10. This speaks for itself that the company has been able to define their products as superior. We have 36% of the PND market share, are number one in Aviation and Recreation, and number two in the marine division.  [27]   Garmin has been able to develop a high quality product while still striking a balance of costs, with their products costing only slightly more than their competitors. They have been able to achieve this in two ways, heavy investment in RD and acquisitions that have vertically integrated value chain operations. In 2009 alone the total expenditures on RD totaled $238 million or 8% of total revenue, up from 6% of total revenue in 2008  [28]  . The fruit of this labor is reflected in the ownership of more than 400 patents as well as 250 trademarks. This has also allowed the firm to not only be the first to market with new products, but also be able to design manufacturing processes that allows the company to adapt and be dynamic  [29]  . Garmin uses multi-disciplinary teams including industrial designers, various engineers as well members from manufacturing operations to develop products allowing them to quickly move from concept to manufacturing. The company has also used a seri es of acquisitions to vertically integrate itself creating a supply chain that has given it a competitive advantage. The company believes manufacturing operation in Shijr, Jhongli and LinKou, Taiwan, Salem, Oregon as well as Olathe is one of its Core Competencies  [30]  . Vertical integration combined with the engineering methods described above has allowed for reduced time to market, design and process optimization and logistical agility. Logistical agility is one area where vertical integration has really given Garmin an advantage. By operating its own manufacturing facilities, Garmin is able to re-engineer products when they experience component shortages. This is an advantage over competitors because manufactures in the electronics industry typically require long lead times.  [31]  Garmin has also used strategic alliances to enter new markets. When they began development of the nà ¼vifone Garmin partnered with ASUSTek Computer Inc. to design, manufacture and distribute co-branded location-centric mobile phones.  [32]  The business model was subsequently remodeled, stating that no new Garmin-ASUS phones will be developed, and Garmin will expand its own, internal development of mobile phones.  [33]  This failure further reinforces Garmins vertical integration strategy that has given them an advantage in the past. A SWOT analysis performed by Datamonitor in December of 2009 revealed the following Strengths and Weaknesses: Robust inorganic growth, Strong product innovation, and Intellectual property.  [34]  During 2008 Garmin made several acquisitions strengthening its presence in the European market. Another asset Garmin possesses is their relationship with auto manufacturers. Garmin currently has contracts to install Garmin devices with Hyundai, Suzuki, Chrysler, Ford, BMW, MINI, Citroen as well as motorcycle manufacturer Harley Davidson. A challenge Garmin is facing the rapid growth they experienced leading up to the weak economic climate experienced in 2009. We grew very rapidly through the late 2000s and when we finally got fully staffed in 2009, poor economic conditions hit. Developing management skills is one problem we face.  [35]  Other weaknesses included overdependence on the North American market, dependence on sole suppliers, and declining margins.  [36]  It is also ver y important to discuss the potential for a decline in demand for the automotive products. Almost 70% of 2009 sales were from the automotive/portable segment. It is becoming more and more common for consumers to use navigation technology built into smart phones they already own. It is our recommendation that Garmin leverage its existing assets to continue to be successful. We do feel it is wise to try and enter into the smart phone segment, however, it is already saturated and carving out a niche would be difficult. Manufacturers such as Apple, Motorola, and BlackBerry control the smart phone market and offer an opportunity for Garmin. While Garmin already offers an app for BlackBerry, we feel that licensing Garmins technology to other existing manufactures could create more value for the company. By developing apps for other platforms such as the iPhone, Android and Windows 7, Garmin could capture more of the phone segment, while keeping in-line with their current strategy of primar ily internal development. Charging a monthly fee for use of the app would also help shore up the declining margins by generating a recurring revenue stream. A timeline should be set to terminate the venture should it turn out to be unsuccessful with specifics determined on a case by case basis. The key to success in developing a smart phone that would compete directly with Apple, Motorola and the like would be to develop the phone completely in-house and continue the legacy of high quality, innovative products. The joint venture with ASUSTek clearly did not work, and historically Garmin has had the most success with products they engineer themselves. The major risks are the potential high costs of developing the technology, however one of Garmins core competencies is their ability to integrate the user interface and the software.  [37]  This provides them the ability to develop a product that will differentiate itself from current products and open the company up to a new produc t line. Garmin should also continue its efforts to vertically integrate. While they already own their own engineering and manufacturing operations, and also a large part of their distribution system, continued forward and backward integration could further shorten the time to market for the highly dynamic electronics industry. Further backward integration into the manufacturing of more of the parts would negate the need for re-engineering of existing products when there are shortages by easily being able to obtain the data to more accurately forecast demand, streamlining the entire manufacturing process. The major downside is the heavy investment in equipment to begin manufacturing more of the components; however, with no debt on the balance sheet, it would be rather inexpensive to finance such a venture. Further forward integration would also benefit Garmin by allowing them to capture more of the profits from the sale of their merchandise by once again leveraging their existing ass ets such as their ISO 9001 certification. A fully integrated distribution system would further decrease time to market, the potential for stock-outs and also increase the flow of detailed information about demand conditions to all aspects of the value chain allowing Garmin to continue to adapt and be dynamic. We believe these recommendations are consistent with Garmins mission, broadening its product offering, delivering a superior product and increasing share and stakeholder value. Competition Overview Garmin has three top competitors and they are MiTAC International Corporation, TomTom N.V., and Google. Each competitor has unique aspects different from Garmin that allow them to be successful. MiTAC owns several different GPS companies that are competing to steal market share away from Garmin. TomTom has the greatest market share in Europe and is competing head-to-head with Garmin for world-wide share. Google owns the rights to a wide variety of maps allowing it to have huge leverage in the purchasing of mapping rights. Each of these companies has the opportunity to over-take Garmin as the United States market leader in GPS devices. MiTAC is the maker of Mio GPS, Navman GPS, and Magellan GPS. Mio is a subsidiary of MiTAC International established in 2002 that develops products in the Personal Navigation Devices (PND), GPS TV, GPS phone, and Mobile Internet Devices (MID) markets  [38]  . Mio claims to be a Brand focused on customer needs who are a great user-focused provider of great customer experiences with the tagline Explore More. They believe that mobile business and communications will be a great part of life in the future and try creating products that adhere to that lifestyle. Navman GPS provide PNDs similar to Garmin and also are a major seller of marine GPS. Navmans advantage over Garmin is in the marine market segment rather than the PND market. Navman has a strong fan base, but has a low market share compared to its competitor Garmin. Magellan offers GPS products for hand-held outdoor devices and in-car navigation. It was purchased by MiTAC in 2009 and has been ranked by many as one of the top man ufacturers of GPS devices  [39]  . Magellans most unique attribute compared to Garmin is that it has the ability to select up to 20 destinations at once allowing the user to select the order in which to arrive at each destination. This feature is good for long, cross-country trips that include many pit stops along the way. Another difference between Magellan and Garmin is that Magellan devices generally have a larger screen size than the opposing Garmin products. One product, the Magellan RoadMate 1412 has a 4.3 inch-wide screen whereas the comparable Garmin nuvi 360 is only 3.5 inches  [40]  . A larger size could make the routes easier to read, but it may not be preferred due to taking up too much space. TomTom is a top manufacturer of GPS devices in competition with Garmin. TomTom is the European leader in the GPS market while Garmin is the leader in the United States. TomTom mostly competes with Garmin

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