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Millennials

Corporate Strategy and Diversification

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Garmin has been diversifying its production for the latest 10 years. In 1989, Min Kao and Gary Burrell founded the company with the idea of transforming paper maps into digital maps. They came up with a unique product, the GPS, which enabled Garmin to have a lot of market power in the first years. However, after its success, new competitors entered the market and that is why the GPS company started diversifying, still maintaining arelated business.

The company diversifies using internal and external growth.

Internal growth strategy refers to the growth within the organization by using internal resources. It focus on developing new products, increasing efficiency, hiring the right people, better marketing etc. Internal growth strategy can take place either by expansion, diversification and modernisation.

External growth strategyrefers to foreign collaboration. Foreign Collaboration may be defined as “an agreement between two companies from two different countries for mutual help, cooperation and also for sharing the benefits in common”.

Thus, on the one hand, the company expanded by making impressive investments by itself while on the other hand, it acquired several competitors and established a few alliances and partnerships.

Acquisitions, alliances and partnerships

Garmin characterized its expansion focusing on acquisitions, alliances and partnerships. A brief outline is given below.

  • In May 1999, Garmin and AirCell heralded an alliance and developed new products, bringing more affordable flight communications, navigation and safety to general aviation aircraft;
  • In July 2011, Garmin acquired Navigon, a popular company in Germany in the portable navigation device market and a worldwide leader in navigation applications and smartphones;
  • In September 2011, Garmin acquired Garmap, a mapping and mobile applications provider from South Africa.
  • In December 2011, Garmin acquired Centro GPS, the distributor of Garmin’s automotive, outdoor recreation, fitness and marine products in Chile;
  • In February 2012, Garmin acquired Interphase Technologies, a company that offers repair services and accessories for interphase products;
  • In June 2014, Garmin built a partnership with Myfitnesspal, a worldwide known calorie counter. The two firms focused on promoting healthy and active lifestyles for consumers.
  • In January 2015, Garmin acquired the assets of South Africa’s iKubu Ltd., a privately-held designer of computer vision and radar systems for the cycling market, showing interest for the latter’s Backtracker on-bicycle low power radar system
  • In April 2016, the company announced that it has made an agreement for the acquisition of DeLorme, producing consumer-based satellite tracking devices with two-way communication capabilities.

These cooperations have enabled Garmin to gain competitive advantages. In fact, the company benefited from the knowledge of these firms and was able to diversify its product portfolio.

The path of Garmin’s expansion started from Kansas, US, where it was founded. In the beginning, its target was the American market: the company benefited from an early mover advantage and thus was profitable enough to start with.

However, in 2010, the company moved its Board of Directors from the Cayman Islands to Switzerland. In fact, after conquering the American market, Garmin’s goal was to expand in Europe. The location was strategically chosen since Switzerland is in the middle of the continent and in proximity to the major Western and Eastern European markets. Thus, not only the company would have expanded its geographic scope but also its willingness to find an ownership or partnership would have concretized. Moreover, Switzerland was particularly attractive thanks to an environment of fairness and rules as well as several tax agreements with other European countries. This facilitated the relations and the position of the company in Europe.

From that moment on, the company internationalized its production opening subsidiaries all over the world. For instance, it moved part of the manufacturing process in Taiwan so as to take advantage of lower labour costs. Also, from 2012 on, Garmin opened new offices in China, Germany and Japan to sustain the automotive growing market demand.

Nowadays, Garmin operates in several countries besides US, Switzerland, and Taiwan: it operates as Formar in Belgium, as Garmin AMB in Canada, as Belanor in Norway, as Trepat in Spain and as Garmin-Cluj in Romania.

@manu_scogna10

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