Garmin Analysis - Looking To the Future Research Paper

Garmin Analysis - Looking To the Future - Research Paper Example In order to go forward in the future, there are three scenarios under consideration, which are related to different possible course of strategic actions that the company may follow to address its problems. In this report, these strategic options are evaluated on the basis of various financial models and descriptive analysis of the company’s existing position and outcome of these decisions. Before the analysis is carried out, it would be useful to provide a summary table of the performance of five identified business segments of the company in the last three years. Business Segments 2011 Net Sales % Change in Sales 2011 EBIT % Change in EBIT 2010 Net Sales % Change in Sales 2010 EBIT % Change in EBIT 2009 Net Sales 2009 EBIT Outdoor 363,223 13.82 171,245 13.43 319,119 6.62 150,973 2.01 299,300 147,996 Fitness 298,163 23.99 107,881 24.72 240,473 41.77 86,499 49.02 169,624 58,046 Marine 221,730 11.50 60,092 -3.75 198,860 11.94 62,431 8.71 177,644 57,430 Automobile/Mobile 1,590,59 8 -4.69 171,717 -16.60 1,668,939 -18.75 205,887 -57.86 2,054,127 488,584 Aviation 284,855 8.51 73,226 2.44 262,520 6.83 71,482 26.30 245,745 56,595 The table provided above provides trends in net sales and EBIT of all business segments, which would be referred to in the discussion related to the scenarios presented below. Scenario #1: Assault on the Smartphone Market Under this future scenario, the company may aim to target the Smartphone market which is worth $65 billion and it has been growing at a fast pace of 20% every year. The smart phone market is dynamic as new markets are emerging such as Africa and Asia. However, the competitive forces including companies like Apple, Google, Nokia, Blackberry, Samsung, HTC, and even manufacturers from Far East countries are already playing an important role in this industry having strong positioning and they share a major proportion of the global market. The company will have to invest heavily in developing technologies and acquiring assoc iated businesses as Garmin does not have any prior experience and its current market share is zero. The entry into this market segment the company will require an investment of $3 billion that could be raised from the capital market by offers shares to both institutional and private investors. Move to the Smartphone segment the company will have divest non-operations including aviation, and marine, in the third year and it expects to receive $500 million. In addition, by doing so, the company will have to let go of the profits generated by these segments, which are already observed to be slowing down in the year 2011. The following financial analysis is based on certain assumptions and understanding regarding future of Smartphone industry and the company’s investment decision: 1. The time period for investment appraisal is considered to be 5 years from the completion of the project and inception of sales. 2. The cost of investment is expected to be $3 billion which will be ra ised by issuing additional 75 million shares at a price of $40 per share. 3. The investment is expected to generate results from the year 2013. 4. In 2011, the Smartphone industry has grown by 20% and same growth rate is assumed for the year 2012 onwards as there are no signs of slowdown in both short and medium terms. 2011 ($ mn) 2012 ($ mn) 2013 ($ mn) 2014 ($ mn)