Jeremy BlanchardCesar Calvo Medina

Dong Sun ChangEvan Dasilva

Jiten GoyalShannon Rohan

COMPETITIONSTRATEGY

&

INFORMATIONTECNOLOGY

TEAM 1

How Does it Work?

GPS Receiver Determines

Altitude

Latitude

Longitude

Speed

Direction

What is a Navigation Device?Receiver Hardware Maps&Software

Index

Industry Analysis1

Company Overview2

Recommendations3

Conclusion4

Industry Analysis1

GPS Navigation Industry

Platform&

Applications

Wireless Location

Based Services

Points of interest & other Data

Satellite Aerial &

Imageries Mobile phones

Auto In-Dash Navigation

Portable Navigation Devices

Outdoor & Sport Devices

Maritime & Aviation

GPS Chipsets & Components

Maps & Geospatial

Data

Content Components Devices End Users

Application & Services

Source: JP Morgan

Consumer&

Business

AAAGas Stations

Retailers

GeoEyeIntermap

Digital Globe

NavteqTeleAtlas

TeleNav, Google,

Networks in Motion, Yahoo

Mobile Carriers,

GM OnStar

GPS Chips: QualcommSiRF,

Global Locate

Modemn& others: Sierra, Enfora, Trimble, Novatel

Intellectual Property in the GPS Industry

Maps, software and content

Chip and other components

Satelliteinformation

Provided free by the government

Protected by patents

Protected by copyrights

Devices Industry Analysis

1.Current Competition

Source: Michael Porter. Competitive Strategy (New York:Free Press, 1980)pp22-23

2005 2006 2007 2008E

4 5 12

21

Column1

Rivalry 1

CAGR 2005-2008E 80%

MARKET GROWTH

49%

23%

16%

4%

Others8%

MARKET SHARE

Top 3 Concentration: 88%

Source: JP Morgan, million Units of GPS sold in US

Source: JP Morgan, Global GPS devices shipments

External Pressures 1

SUBSTITUTES Paper Maps, Compass, Self Orientation

In-Dash Car Manufacturers

Phone Manufacturers/

Wireless carriers/

Google, MS Live maps

NEW ENTRANTS

Bargaining Power

Suppliers

1

Components

Applications & Services

Content

End User

Business

Customers

GPS Devices Industry Analysis

1.Current Competition

Source: Michael Porter. Competitive Strategy (New York:Free Press, 1980)pp22-23

Device Industry Performance 2007

ROA

The industry was performing well in 2007…

ROE ROS

Economy Industry

5.9

14.4

Economy Industry

12.6

29.3

Economy Industry

4.7

14.4

Industry Performance 2008ROA ROE ROS

However, TomTom’s results in 2008 affected the overall industry performance

Economy Industry

5.9

-3.2

Economy Industry

12.6

-68.5

Economy Industry

4.7

-15.3

Excluding TomTom the industry is still in good shape…

Economy Industry

5.9

15.7

Economy Industry

12.6

35.3

Economy Industry

4.7

12.5

Segment Market Size Main Players

Outdoor/Fitness $ 0.4Bn

Marine $ 0.2 Bn

Aviation $ 0.9 Bn

PND $7.1Bn

In-Dash $16.1 Bn

Smartphones $ 124.6 Bn

Navigation Devices Market Segment

Industry Trends

Hardware commoditization -> steep margin erosion PND

Lower penetration due to high price and long design cycleIn-dash

Driver of GPS penetration Smartphone

Play a key role in navigation evolutionLBS

Market Positioning

LowCost DifferentiatorN

arro

wBr

oad

Index

Industry Analysis1

Company Overview2

Recommendations3

Conclusion4

Garmin, a World Leader in GPS Devices

Founded in 1989, Garmin Ltd is a leading, worldwide provider of navigation,

communications and information devices.

Main Figures

MARKET CAP $ 4.4 Bn

EMPLOYEES 8,919

REVENUE $3,494 M

NET INCOME $733 M

Income Breakdown

Outdoor

/Fit-

ness18%

Marine7%

Auto/

Mo-bile62%

Aviation13%

Vertical Integration

Supply Chain

Manufacturing R & D Assembly Distribution

Highly vertically integrated, from manufacturing to distribution

Alliances

Partnerships , Contracts & Joint Ventures

Long Term Contracts

Strategic Alliances

Joint Ventures

More Integration

Company Product Lines

Source: Annual Report

Fitness / Outdoor

Marine Aviation

Automotive / Mobile

31 products 45 products

56 products 34 products

Performance Evolution by Segment

Fitness / Outdoor

Marine Aviation

Automotive / Mobile

2005 2006 2007 20080

5001,0001,5002,0002,5003,000

35%

40%

45%

2005 2006 2007 20080

100

200

300

400

500

50%

55%

60%

2005 2006 2007 20080

50

100

150

200

250

45%

50%

55%

60%

2005 2006 2007 20080

50100150200250300350

60%

65%

70%

Margin Income (M$)

Company Product Lines

High LowLo

wH

igh

Market ShareM

arke

t Gro

wth

Company Product Lines

High LowLo

wH

igh

Market ShareM

arke

t Gro

wth

Performance Evaluation 2008

5.9

+9.8

+9.3

25.0

Economy Industry* Firm TOTAL

ROA ROS

Garmin is performing well above the industry average

4.7

+7.8

+8.5

21.0

Economy Industry* Firm TOTAL

*ExcludingTomTom

SWOT Analysis

•Excessive vertical integration

•Nuvifone•74% of revenue from

PNDs

Weakneses• Brand recognition• Wide range of products and

services• Market leader• Robust R&D efforts

Strenghs

•Price erosion in PND•NAVTEQ and TeleAtlas

(map suppliers) acquired by rivals

• Mobile convergence

ThreatsOpportunities• Several cash cow segments• Navigation becoming a

necessary feature – service and application

• Huge growth expected for LBS

Index

Industry Analysis1

Company Overview2

Recommendations3

Conclusion4

Sustainability Threat

Substitution

Value Created

Value Captured

SlackHold Up

Imitation

Strategy Against Imitation

Establish exclusive relationships with OEMs

Aviation

Marine

Outdoor

Explore new GPS applications

Create new business segments

GPS New Applications: Welfare Technology

Senior citizens, patients with chronic diseases, citizens with handicaps have been left behind in technology development

Nearly 20 percent of the US population will be 65 or older by 2030

GPS Tracking Home Healthcare Monitoring

GPS Tracking

Integrated as a passive passenger

Voice Activated Guide

Implanted devices

Home Healthcare Monitoring

• Integrated healthcare

• GPS applications in next generation medical devices

• Preventing acute emergency conditions

Home health monitoring is expected to grow from $3bn in 2009 to $7.7bn dollars by 2012

NPV Valuation: Medical Devices

2009 2010 2011 2012 2013

(100)

13 40

69 80

NPV$450M

Expected Cash Flows (Mn) Long Term Growth

5%

WACC

15%

Sustainability Threat

Substitution

Value Created

Value Captured

SlackHold Up

Imitation

Backward IntegrationWhy?

How?

Supplier Hold Up

Over $1.5 Billion in Working Capital

Acquisition

Application & Platform Development

Asset Specificity

Backward Integration

Acquisition Options

Michelin

Intermap

Failed Venture into PND Industry

Divest of Non-Core Business

Purchase Range of $300-$500 Million

Provide Development Capital

NPV Valuation: Map Company Acquisition

2009 2010 2011 2012 2013

(300)

37 44 48 52

NPV$31M

Expected Cash Flows (Mn) Long Term Growth

2%

WACC

15%

Sustainability Threat

Substitution

Value Created

Value Captured

SlackHold Up

Imitation

Cost Control

Manufacturer Applications &

Platforms

Outsourcing

Outsource production of commoditized PNDs

Keep proprietary & value added manufacturing in-house

Sustainability Threat

Substitution

Value Created

Value Captured

SlackHold Up

Imitation

The Plan

Urgent Priority -Long auto development cycle

Automotive Partnerships

Initial production in-house -Long term: outsource production

Partnerships with luxury brands -Garmin brand recognition

Why ?

$16.1 billion market

By 2012, 19% of new vehicles projected to have in-dash navigation

Barrier to Adoption

Average cost: 6% of MSRP

Automotive Partnerships

Automotive Partnerships

Current Players

General automotive suppliers

-Toyota (select vehicles)-Renault Clio -Fujitsu Ten Eclipse

-MINI (mount)-PSA- Peugeot Citroën -Jeep Grand Cherokee

New Trends

NPV Valuation: In-dash Market

2009 2010 2011 2012 2013

(100)

11 20 26 27

NPV$63M

Expected Cash Flows (Mn) Long Term Growth

2%

WACC

15%

The Mobile Convergence…2007 iPhone

… is not a new Idea1981 Swiss Army Knife

Smartphones = Disruptive Technology

Time

Per

form

ance PNDs

Smartphones

?

Delaying Factors

Enabling Factors

Location Based Services

Smartphone Evolution

Open Application platforms

Economic environment

PNDs new services

Current Pricing Schemes

4G technology

Garmin Reaction: The Nuvifone

A new concept of mobile phone centered around

Location Based Services

Good Decisions

Identify smartphone as the market for disruption

Establish a separatebusiness unit

Keep the organization independent

Bad Decision

Closed Source Platform

Open Platform for Innovation

Garmin Users Software Developers

• Users submit innovative ideas to Garmin

• Users vote on submitted ideas

• Best idea awarded a Prize

• Developers submit applications similar to iTunes

• Developers select projects from the proposed ideas

• Provide SDK

• Host Apps

• Issue Prizes• Super-users to

enforce rules

Objective: Lead the development of LBS

Location Base Value ChainChip Makers Chip Makers

Handset

Platform Developers

Mobile Carriers

GPS as a Platform for Two Sided Markets

GPS Device

Points of Interest GPS Users

Creating Same Side Network Effects

PND PND Users

Same side network effect critical to increase growth

Garmin Developed Apps

This road is a one way.

Accident on 93 South. At a standstill.

Gas here is only $2.69.

User POI ReviewsUser Traffic Updates

User Map Updates

Garmin Caravan

Great-accept

waypoint-

Hey guys,let’s stop at

Joe’s Tavern .-Insert waypoint-

Ok-accept

waypoint-

Garmin Destinations

I can’t wait to blog about my

trip.

on

Got a flat tire.200 euro for the

tow and fix.

3rd Party Developers

NPV Valuation: Garmin Platform

2009 2010 2011 2012 2013

(100)

1 6 24

67

NPV$309M

Expected Cash Flows (Mn) Long Term Growth

5%

WACC

15%

Conclusion

UbiquityGarmin devices in

all the Market Segments

• Enter (In-Dash)

• Explore (Medical Devices)

• Defend (Aviation, Marine, & Outdoor)

ServicesGarmin as a

platform for two sided markets

• Acquire Map Company

• Open Platform for Innovation

• Generate User Content (Web 2.0)

Location Based World

Q&A