1. Company Background
Garmin,1 founded in 1989 in Lenexa, KS, by Gary Burrell and Min Kao, began largely
with the development of GPS devices in automobiles. Garmin, currently establishing United
States headquarters as an active Swiss corporation, introduced software innovations to create
marine and aviation systems devices. By 2003, Garmin developed a wearable GPS product, the
Forerunner, a watch with calculation competencies in time, pace, and distance. By discovering
new utilities for GPS technologies, Garmin currently produces an array of products spanning
across several segments.
Among Garmin’s five segments: automotives/mobile, outdoor, fitness, aviation, and
marine, Garmin’s success has historically come from the automotives/mobile segment for
personal navigation devices (PNDs). Technological advances, namely that of smartphones’
inclusion of navigational applications, have forced Garmin to generate more complex business
strategies, such as the implementation of partnerships within the automotive industry and
answering the decline of their former flagship industry. Over the past five years, revenue
steadily increased for products in the fitness and outdoors segments. New competition in the
wearable devices (wearables) market has manufactured products, such as the Fitbit, Apple
Watch, and Samsung’s Gear S2, causing marked market expansion. Garmin’s previously
focused on targeting serious runners, but has since expanded its product-line to fitness and
outdoors-oriented consumers.
1
Garmin Ltd, Swiss parent company with U.S. headquarters:Garmin International Inc. in Olathe, KS.

2. Mission, Vision, and Values
Mission Statement
An effective mission statement defines a company’s existence. It explains a basis of
production and the target market, all encompassed in a brief statement. Thompson et al.
elaborates that that most companies’ mission statement convey “Who we are, what we do, and
why we are here” (2010, p. 28). Garmin outlines their mission, vision, and values briefly and
effectively. Garmin’s Mission Statement reads:
“To be an enduring company by creating superior products for automotive, aviation,
marine, outdoor, and sports that are an essential part of our customers’ lives” (About Us
2015).
Although Garmin fails to address themselves in terms of the whole technology industry, they
succinctly list their product segments. The mission provides a brief introduction while allowing
for strategic flexibility.
Vision Statement
Well-conceived visions describe “the company’s futuristic course―‘direction we are
headed and what our future product-consumer-market-technology focus will be’” (Thompson et
al. 2010, p 28). Continuing with brevity, Garmin illustrates their Vision Statement as follows:
“We will be the global leader in every market we serve, and our products will be sought
after for their compelling design, superior quality, and best value” (About Us 2015).
Garmin identifies three major components in their vision statement. First, Garmin operates
globally. Second, Garmin offers a diverse product catalog. Finally, Garmin exemplifies their
strategic differentiation. The mission statement hints at this strategy with the phrase “superior
products,” but the vision statement completes the package adding“ best value” (About Us 2015).

3. The technology industry requires forward thinking, and Garmin’s mission and vision outline a
strong competitive stance emphasizing superior quality products.
Values
When asked about culture, Garmin’s Employment Specialist, Lynda Wolf, highlighted
three components: relaxed environment, sense of urgency, and collectivism.2,3 Garmin identifies
Our Values as follows:
“The foundation of our culture is honesty, integrity, and respect for associates,
customers, and business partners. Each associate is fully committed to serving customers
and fellow associates through outstanding performance and accomplishing what we say
we will do” (About Us 2015).
These values set expectations for employees in terms of character and behavior. Thompson et al.
suggest values provide guidance towards its mission and vision (2010). Garmin certainly sets
benchmarks for their employees and promote a culture of unity.
Strategic and Financial Issues
Strategic Imperatives:
2
“We are a relaxed environment (no dress code!) but with a sense in urgency in all that we do” (Wolf 2015).
3
Collectivism: The group prioritized over an individual

4. 1. “How will Garmin respond to continuing decline in the Personal Navigation
Device (PND) market?”
Garmin and TomTom remain the best positioned in the PND market. The entire market
saw a decline of 21.4% in units shipped4 (Eddy). In Competitive Strategy, Michael E. Porter’s
explanation of “technological substitution” best explains the automotive navigation industry’s
decline (p. 258). Also addressed in Garmin’s 2014 10-K filing, smartphones’ navigation
capacities devalue Garmin’s top revenue segment Automotive/Mobile5. Alternatively, Garmin’s
fitness segment grew, contributing 20% of Garmin’s $2.87 billion revenue, compared to 14% of
$2.63 billion revenue in 2013 (Garmin 2014 10-K, p. 47). TomTom, a Dutch GPS company,
pursued similar ventures by shifting from sole focus on PNDs, to including wearables (TomTom
2014 Annual Report, p. 16). Their success stems from the PND market, more specifically in
Europe. While TomTom maintains a geographic advantage in Europe, Garmin’s experience with
product diversity creates a competitive advantage. In response to PNDs, Garmin’s Employment
Specialist, Lynda Wolf, explained Garmin was well aware of“the decline of the PND would be
coming now that everyone uses their phones for turn by turn directions” (2015). Because PNDs
have been a major source of revenue in Garmin’s GPS technology, Garmin must respond to the
decline urgently in search of growth across their other segments.
2. “How can Garmin obtain larger market share in the wearables industry?”
Similar to the prior imperative, our second strategic imperative emphasizes growth, more
specifically from wearables. “The wearable market has exploded,” explains Garmin software
4
Decrease from 28 million units shipped to 22 million units shipped.
5
Automotive/Mobile segment accounted for 43% of net sales (pg. 20).

5. engineer Jordan Jurcyk in response to changes seen while working at Garmin (2015). Though
TomTom presents itself as a competitor, FitBit and Apple present tougher competition through
massive advertising campaigns and more products shipped than other competitors. Jurcyk
identifies Fitbit as Garmin’s major competitor in the wearable industry. FitBit and Apple
exemplified their dominance by accounting for 8 million units of the 18.1 million units sold
throughout the wearables industry in 2015 second quarter sales (“Apple” 2015). Over a year, the
growth from 5.6 million units to 18.1 million units reflects rapidly technology growth with
untapped potential brewing.
Fitbit’s specialization in fitness products gives them a competitive advantage across the
wearables industry. Under risks, Fitbit’s 2014 10-K details Garmin, Jawbone, and Misfit as
“specialized electronic companies” and other competitors such as Apple, LG, and Xiaomi (p.
40). This growing competitive market requires increased innovation to create product
differentiation and disparity, increased marketing to attract and retain customers, and quality
products that encourage customer loyalty.
Strategic Objective:
1. “Reach $215 million revenue in the fitness segment in the 2015 fourth quarter”
Technology producers tend to thrive during the fourth quarter after the historically
dormant third quarter, due to increased spending during the holiday season. Based on net sales

6. patterns,6 Garmin should aim to earn above $215 million in fitness sales. As the
Automotive/Mobile segment declines, the fitness and outdoors segment, including wearable
products, particularly watches, have the most potential growth. As competitors have increased
advertising, such as Fitbit increasing Sales and Marketing,7 Garmin’s second to third quarter
reports reflect a decrease8 in advertising in the fitness segment. Upon the release of three new
wearable models, Garmin Vívofit, Garmin Elevate, and Garmin Forerunner, Garmin must
advertise effectively moving into the fourth quarter to increase consumer awareness and establish
themselves as a valid competitor.
2. “Maintain competitiveness in all segments while increasing market share in the
wearables industry.”
Garmin must remain competitive in its five segments. While business to consumer
Automobile GPS sales decline, Garmin can still work from business to business. Garmin’s
business to business operations include partnerships with Original Equipment Manufacturers
(OEMs) distributing in-dash GPS systems. To address falling PND revenue, Garmin must
continue differentiating through innovative, valuable products.
Garmin’s product diversity calls for attention across many markets. Garmin can measure
competitiveness among these markets by addressing market shares.9 As Garmin progresses,
increasing net sales through a combination of Garmin’s differentiation strategy and heightened
investment will assist Garmin’s assumption of market shares in various segments.
Financial Imperatives:
6
Graph in Revenue section of Financial Analysis
7
$1,322,000 to $2,451,000 (Fitbit 10-Q June and September 2015, p. 18, p.19 respectively)
8
$19,955,000 to $16,394,000 (Garmin 10-Q June and September 2015, p. 21, p. 20 respectively)
9
Firm’s net sales divided by net sales of industry

7. 1. “How will Garmin address increased investment in marketing and R&D?”
Garmin must increase investment in marketing and R&D to maintain competitive
leadership. Strategies to improve market awareness of Garmin’s innovative products will lead to
enhanced sales. Increased R&D will allow Garmin to innovate at the rapid pace of the
technology market. In an industry like fitness wearables, the amount of competitors combined
with the ease of market entry demands constant product innovation. According to Fitbit Inc.’s
last quarterly report, marketing and R&D expenses accounted for 27% of revenue (p.33). For
Garmin, total marketing expenses accounted for 5% of revenue while R&D represented 14% of
revenue (p.49). Specifically in the fitness sector, Garmin’s combined marketing and R&D
expenses totalled to 16% of revenues. Garmin fails to significantly surpass Fitbit’s spending on
marketing and R&D due to their more diversified product-lines. Still, Garmin should continue to
create products that offer the best and most utilitarian features while simultaneously fostering
product recognition and availability in comparison to their competition. There must be a
significant hike of investment in order to accelerate company growth while maintaining
relevancy in various markets.
2. How will Garmin address decreasedrevenue in their historically vital segment,
Automotive/Mobile?
The most critical contribution to Garmin’s success through the past decade has been its
portable GPS systems for automobiles. What had traditionally been the main source of revenue
now faces rapid declination. In the most recent quarterly results, the automotive sector revenue
decreased by 14%. According to Garmin’s 2013 10-K, there has not been year over year revenue

8. growth in the automotive sector since 2008. TomTom, the main competitor in this industry, has
seen declining revenue for the past four years, mimicking the overall dissolution of the industry.
GPS navigation devices in automotives represent a declining industry because of a technological
substitute, smartphones. Garmin must face this issue by finding a solution to making these types
of products relevant again, or putting more focus into new industries that have the potential for
greater future growth. This remains critical for revenue growth, let alone consistency. Given
Garmin’s five segments, it would be contrary to their best interest to pursue a declining industry.
Financial Objectives:
1. “Similar to most technology companies, Garmin must take on more loans, thus
increasing their debt-to-equity ratio in order to sufficiently fund internal reinvestment.”
Garmin must gain more capital to achieve the necessary levels of marketing and R&D.
There has been a long standing hesitation for debt financing at Garmin, which has limited their
spending to finances from cash flows and owner’s equity. Many of the expenses are covered on
a percentage of revenue basis, a strategy that has worked sufficiently in the past, but as revenues
fall, maintaining such structure becomes increasingly difficult. Garmin must start taking on
reasonable amounts of debt in order to reinvest a sufficient amount of money back into the
company. According to the most recent annual report, Garmin invested 7% of revenues ($39
million) from the fitness sector back into fitness R&D (p.49), a figure not substantial enough to
account for an industry that must gain effective emphasis throughout the company. Garmin’s
overall R&D expenses totaled $372 million in 2014 (p.49). A loan for this same amount in long
term debt could double R&D, yet keeping long-term debt equity at only 21%. This figure is still
below the industry10 average of long-term debt-to-equity at 43.43% (YahooFinance). Adding this
amount of debt allows for liabilities-to-equity to remain under 50%. This would maintain a
10
Figure taken from Yahoo Finance “Scientific and Technical Instruments” Industry Average

9. healthy debt-to-equity ratio without risking taking on excessive debt at an early stage.
Reinvesting back into the company would, in turn, lead to greater and more innovative projects
and products to cultivate company growth.
2. “Garmin must adapt by investing and creating value in other segments,
particularly in outdoors and fitness, to generate revenue.”
The rapid decline in Garmin’s former most valuable segment remains an inescapable
subject. Garmin must hedge recession by growing in already inhabited markets. From 2013 to
2014, the net sales of Garmin’s fitness sector grew from 14% of total sales to 20% at $568
million (Garmin 2014 10-K, p.47). This jump illustrates the great possibilities of the fitness
wearables industry that continues to grow. This particular industry provides stiff competition
from other companies like Fitbit that specialize in fitness, or Apple that have far more resources
than Garmin. Despite these factors, the proper amount of investment into this product segment
should still produce significant revenue growth. Other industries such as outdoor, marine, and
fitness showed increased sales from year end 2013 to 2014 as well (p.47). This also provides
encouragement as the automotive sector declines, displaying untapped resources for growth
within Garmin’s product mix. The fitness and outdoors sectors must become the peak of
importance throughout company operations, such as marketing and R&D, in order for Garmin to
garner its growth potentials.

10. Financial Analysis
Garmin’s financial position does not incubate the necessary growth the company desires.
Garmin has plateaued in several categories in the recent past, failing to emulate historically
consistent revenues. Management recently described Garmin’s balance sheet as “strong,” but
numbers do not validate assertions pointing toward potential growth. While reforming Garmin’s
financial structure does not come at the forefront of importance, adjusting financial objectives
could elevate them to a higher competitive level.
Balance Sheet
Asset Analysis

11. At year end December 27, 2014, Garmin recorded total assets of $4.69 billion, slightly
down from $4.88 billion in 2013 and $4.81 billion in 2012 (Garmin 10-K, p.63). A fall from
$771 million in 2013 to $626 million in 2014 in net receivables as a result of loan agreement
made in 2013 between Garmin and Bombardier contributed greatly to the decrease in total assets
(p.71). Garmin loaned cash in seven installments beginning in March 2013 and ending in
September 2013 to assist Bombardier provide avionic systems to Learjet Incorporated. These
installment loans suddenly increased Garmin’s receivables in 2013. Bombardier began paying
back Garmin’s loan in five installments starting in 2013, and by year-end 2014 had fully
relinquished its debt.
Despite the overall decreases in total assets, aspects of Garmin’s asset base have
remained more stable or increased. Inventories and Property, Plant, and Equipment have
increased in each of the last three years. Between year-end 2013 and 2014 Property, Plant, and
Equipment grew by over $15 million with Inventory growing by just over $38 million resulting
from Garmin’s strategic acquisition of Fusion Electronics.11
To analyze the effectiveness of Garmin’s asset management, Fixed Asset Turnover,12
Total Asset Turnover,13 and Inventory Turnover14 must be considered. Each of these ratios will
be compared to Garmin’s significant competitors in their various industries.15
11
Fusion Electronics is a New Zealand based provider of marine audio equipment. Garmin’s June, 2014 acquisition
included all of Fusion’s assets.
12
Fixed Asset TurnoverRatio- (Sales/Net Fixed Assets)Measures howwell a firm is using property, plant, and
equipment in order to create sales.
13
Total Asset Turnover-(Sales/Total Assets)Measures howwell sales are created through all assets.
14
Inventory Turnover-(Cost of Sales/Average Inventory)Measures how quickly and efficiently inventory on hand is
sold.
15
These competitors include some of Garmin’s main areas of concentration- Fitbit Inc. in the fitness industry,
Telenav Inc. in the mobile industry,Flir Systems in the marine industry, and TomTom in the automotive industry.
Note: Fitbit Inc. financial records only go back to 2014

12. Inventory Turnover Ratio suggests Garmin competes evenly with a few competitors in
the fitness and marine sectors. However, when compared with TomTom, the main competitor in
the automobile product industry, Garmin falls well short of the same turnover efficiency.
Garmin’s inventory turnover, consistently between 3 and 4 for the past three years, does not
provide reason for concern considering the wide variance of inventory strategies across all
markets. Compared to TomTom, Garmin’s large inventory contributes to less turnover, not
exclusively fewer sales.

13. When examining the Total Asset Turnover Ratio, Garmin once again remains consistent
with its competitors. Garmin’s ratio has been at 0.56, 0.54, and 0.60 from 2012 to 2014,
meaning revenues hover above half the total amount of company assets. The outlier in this ratio,
Fitbit, enjoys an asset turnover over double that of any of the listed companies. Garmin shows
strong consistency, but does not create a major competitive advantage in terms of asset turnover.
Garmin must seek manners to increase Total Asset Turnover, converting assets into sales
revenue, thus increasing profitability.
The final asset analysis ratio, the Fixed Asset Turnover Ratio, gives insight into the
efficiency in which companies turn assets, such as Plant, Property, and Equipment, into sales
revenue.
Garmin falls behind many of its competitors in terms of Fixed Asset Turnover, with the
past three years having turnover between 6 and 7 in contrast to TomTom, which lies consistently
over 30. Telenav’s ratio greater than doubles that of Garmin, with Flir being the only competitor
with comparable turnover despite being considerably smaller companies. Garmin’s lower Fixed
Asset Turnover ratio can be due in part to Garmin’s larger amount of fixed assets compared to

14. the rest of the market. In addition to greater amounts of fixed assets contributing to a major
discrepancy in this ratio, Garmin’s product variance does not assist in making Fixed Asset
Turnover a more favorable quotient. Garmin’s size should not excuse them from producing sales
revenue from assets of Property, Plant, and Equipment in a more significant way.
Recommendations for Asset Analysis:
Garmin lives up to the self-proclaimed strong balance sheet, thanks in part to an
encouraging asset section. Despite falling total assets due to the collection of short-term loans
and decreases in long-term investments, Garmin’s financials should not come as apprehensive.
However, if Garmin continues to increase assets, like Inventory and Property, Plant, and
Equipment, investments must result in increased revenue. Although the balance sheet is strong,
various turnover ratios suggest underperformance. Garmin enjoys an advantage over many
competitors with greater amounts of assets, but they need to improve turnover to levels
comparable to those of their competitors.
Liability Analysis

15. Garmin’s liabilities remain consistent with historical measurements. Currently, Garmin’s
balance sheet reflects no long-term or short-term debts. Garmin funds themselves almost
exclusively through equity and cash flows. In 2014, Accounts Payable accounted for over 60%
of the liabilities, with remaining amount as Deferred Long Term Liability Charges and other
miscellaneous liabilities. Total liabilities have remained between $1.2 billion and $1.3 billion
the last three years with no significant changes (p.63).
Despite Garmin’s strategic avoidance of debt, ratios continue to provide constructive
insight, specifically how liabilities compare to assets. Two useful ratios in this category are the
Current Ratio16 and the Quick Ratio17.
Garmin sits in the middle of the four other competitors in regards to Current Ratio, with
quotients of 2.79, 2.87, and 2.43 from 2012 to 2014. These numbers do not match Flir and
Telenav. Nevertheless, these figures still serve as encouragement, as a current ratio above 1.0
shows sufficient short-term assets to meet short-term liability obligations. This ratio exhibits
Garmin’s ownership of double the current assets compared to current liabilities.
16
Current Ratio- Measures a firm’s ability to pay off short term liabilities with short term assets.
17
Quick Ratio- Measures a firm’s liquidity and whether or not it can pay off short term liabilities but without
inventories as used in the Current Ratio.

16. In respect to the Quick Ratio, Garmin lies in a solidified position amongst their
competition. From 2012 to 2014, Garmin’s quick ratio was 2.02, 2.44, and 2.36, respectively.
Even without inventories, ample amounts of current assets provides Garmin sufficient coverage
of current liabilities.
Recommendations for Liability Analysis
The liability section of Garmin’s balance sheet does not provide cause for concern due to
its simplicity. Accounts Payable and Deferred Long Term Liability Charges account for most
liabilities due to their debt avoidance efforts. From the standpoint of liquidity and short-term
financial health, Garmin should face no difficulties in handling short-term liabilities. Contrarily,
Garmin’s lack of debt strays from conventional approaches. Many successful companies,
including Garmin’s competitors, take on a combination of debt and equity with little
consequence. For Garmin to continue competing at a high level they must quickly innovate
across all their ventured industries. In order for proper investment in marketing and R&D,
Garmin must take on debt, whether it be short or long-term. The industry average18 for long-
18
Figure taken from Yahoo Finance “Scientific and Technical Instrument” Industry Average

17. term debt-to-equity remains 43.43% (YahooFinance 2015), meaning common practice across
competitors remains obtaining reasonable amounts of debt. Garmin’s liabilities indicate a
reasonably healthy company, however, Garmin’s liabilities do not forecast growth and
innovation potential.
Equity Analysis
Because of Garmin’s resistance to debt, stockholders’ equity rises in criticality in regards
to Garmin’s success. In 2014, Total Stockholders’ Equity dipped lower than it had in the past
three years at just over $3.4 billion with 2012 and 2013 being at $3.5 billion and $3.6 billion,
respectively (p.66). In this struggling time period, however, outstanding stocks remained
constant at just under $1.8 billion. Greater amounts of negative Treasury Stock each of the past
three years serve as a primary reason for drops in Total Stockholders’ Equity. In 2010, Garmin
authorized the currently used share repurchasing program. Under this authorization, Garmin
purchased $183.2 million worth of Treasury Stock in 2014 (p.91).
In addition to a strategic increases in Treasury Stock repurchases, Garmin became
increasingly aggressive with dividend payments. In 2014, Garmin issued quarterly dividends of
$0.48/share (p.72), an increase from $0.40 in 2012 and $0.45 in 2013, to increase investor
attractiveness. Garmin’s dividend issuances strongly differ from competitors and the technology
industry as a whole. Of the five competitors in this analysis section, only Flir has historically
issued dividends. Despite this, Return on Equity19 and Equity Ratio20 provide insight to Garmin’s
position in comparison to their competitors.
19
Return on Equity- (Net Income/Shareholder’s Equity) The amount of net income returned as a percentage of
shareholder’s equity.
20
Equity Ratio- (Total Equity/Total Assets)Investment leverage ratio measuring how much of assets are financed
by owner’s investments.

18. In terms of Return on Equity, Garmin compares evenly with their competition. From
2012 to 2014 Garmin saw Return on Equity at 15.36, 16.73 and 10.70, the drop in 2014 resulting
from decreased net income. These numbers closely mimic Garmin’s competitors, but the
significant drop in 2014 occurred due to tax increases. That being said, Garmin does not
separate itself from competition, but competes at a fairly even level. Return on Equity is
expected to rise from year end 2014 to 2015, but Garmin must be careful to ensure returns do not
steadily fall.

19. Garmin’s equity ratio consistently measures at 0.73, 0.75, and 0.73 over the past three
years. This ratio is fairly high, but does not come as a surprise because Garmin’s lack of debt
financing. In comparison to other companies, Garmin’s ratio is not too high, as both Flir and
Telenav have comparatively high equity ratios, as well. On the other hand, Fitbit and TomTom
finance via equity, but also take on debt thus explaining their lower ratios.
Recommendations for Equity Analysis
From an Equity standpoint Garmin remains in a fairly consistent and stable position.
Garmin strongly relies on Stockholder’s Equity, therefore making this a critical part of the
balance sheet. With internal intentions to increase net income and the continuation of stock
repurchases, the Return on Equity should continue to climb and appeal to investors. As stated in
the liabilities recommendation, Garmin needs more capital to increase leadership in their various
industries. If loans from debt fund investment in capital, Equity would not come under
heightened scrutinization. However, if Garmin cannot create ample funding solely through cash
flow while continuing debt avoidance strategies, Garmin will seek increases in Stockholders
Equity to remain competitive.
Income Statement
Segmented Revenue Analysis
In recent years, Garmin’s focal industry has transformed as the popularity and demand
for PND’s and GPS systems have declined. With their new focus, Garmin separates revenues by
segment in their annual reports, those segments being Marine, Outdoor, Fitness, Aviation, and
Automotive/Mobile. The chart below depicts the shifting percentages of revenue attributed to
each segment.

20. As seen in the graphs above, the revenues earned by the Automotive/Mobile segment have
declined from 2012 to 2014 by a total of 13%. Contrariwise, Garmin’s recently deemed focal
market, Fitness, began increasing revenue shares by a total of 6% in the past three years. This
inverse relationship between Automotive/Mobile and Fitness exemplifies the strategic direction
Garmin’s management sees as most profitable in the future. The remaining segments, Marine,
Outdoor, and Aviation, maintained relatively unchanged contributions to overall revenues,
further signifying the growing focus on the fitness industry.

21. The graph above depicts progressive quarterly net sales specifically by the Fitness
segment for Garmin. As seen, Garmin’s Fitness revenue threshold has maintained a position
above 20% in the past four quarters along with a peak rising above 25%. Not only do the
numbers speak to the recent effective strategic shift, but they also show that raw revenues from
fitness products have remained at or above $100 million. These results should come as
momentous figures in support of Garmin’s strategic shift, along with our suggested strategic
objective of continuing such growth.
Recommendations for Revenue Analysis
Internal and external stakeholders alike recognize the importance of revenue growth
based on two factors. First, in the technology industry, the most clear cut measurement in terms
of success remains revenue due to high overall costs. Garmin has had favorable gross profit
margins as of late, and such management efficiency must continue in order to continue operating
at an effective and competitive level. Second, Garmin’s Fitness segment growth must surpass
that of recent years in order to properly portray their strategic shift away from PND’s and GPS
systems. As management has mentioned in public reports, Fitness growth has become
paramount to the future success of the company, thus increased revenue percentages from this
segment must continue significant growth in terms of percentages contributed to overall revenue.
Net Profit Margin Ratio

22. Outside of revenue analysis strictly pertaining to actual revenues and the accompanying
segment contribution percentages, gross profit margin provides insight into the cost effectiveness
of products sold by companies.21 Gross profit margin remains a key relational measurement for
technology companies because of industry tendencies to fail to earn profits (Investopedia 2015).
The gross profit margin, in turn, aids in the forecasting of a company’s ability to begin gaining
profits in the future. As shown by the graph above, Garmin maintains a consistent gross profit
margin above 50%, turning out quotients of 53%, 53.5%, and 55.9%. The upward trend suggests
an efficient revenue and cost structure, a vital statistic in scrutinizing technology companies.
The graph above also shows Telenav as the leader in gross profit margin, but Telenav’s
advantage should not come as a concern to Garmin as they operate in primarily in the
Automotive Industry which Garmin has addressed is declining. Garmin works to maintain
competitiveness in the navigation market, though because of decline in GPS production in the
automotive industry, revenue contribution remains important. The graph also illustrates
21
Gross Profit Margin = (Sales – COGS)/Sales. “It measures the relative profitability of a firm’s sales after the cost
of sales has been deducted,thus revealing how effectively the firm’s management is making decisions regarding
pricing and the control of production costs” (Moyer, McFuigan, Rao, Kretlow 2012)

23. Garmin’s advantage over Fitbit, the key competitor Garmin targets in terms of the fitness
wearables industry.
Statement of Cash Flows
Because Garmin funds itself without accumulating debt, cash flows indicate internal
growth potential (assuming no debt structure reform.) In regards to Net Income, Garmin
experienced a sharp decline from 2013 to 2014 after significant growth from 2012 to 2013. This
decline disconcerts at first because of a 41% drop in Net Income in 2014. However, diving into
the details of this sudden drop reveals an increase in income tax expense of $318 million. This
massive tax increase resulted from company restructuring that required a large tax payment, but
was only a one-time expense moving forward (p.51).
Operating Cash Flow significantly dropped from 2013 to 2014 as Net Income declined.
Contributing factors to this decline remain a $66 million decrease in accounts receivable due to
increasing fourth quarter sales and timing of collections as well as the aforementioned tax reform
due to internal restructuring (p.55).

24. In evaluating the cash flow statement, another key figure remains Free Cash Flow.22 Free
Cash Flow weighs greatly in importance for Garmin as it measures the excess cash available to
finance activities like marketing, research, or paying dividends to shareholders.
Garmin historically performs well in terms of overall cash flows, unsurprisingly due to
their dependency on Free Cash Flows. The only issues arising from these figures remain the
steady year-over-year decline. As was the case with operating cash flows, 2014’s net income
drop contributed to the downfall. Moving forward, Garmin must address these declines in order
to prevent the continuation of this trend.
Stock Market Analysis
22
Free Cash Flow=(Operating Cash Flow-Capital Expenditures) Excess cash a company has after spending required
money to maintain or grow asset base (Investopedia 2015).

25. As demonstrated by the graph above, Garmin’s stock price fluctuated greatly in the past
five years. Garmin (GRMN) began at $30.53 in January 2011, rising all the way to a peak in
February 2012 at $48.05. After reaching the aforementioned pinnacle, GRMN fell to $32.97 at
the onset of 2013. Experiencing substantial growth throughout the latter half of 2013 through the
start 2015, Garmin’s stock price has since normalized to an amount more indicative of the
current state of the company in terms of recent overall growth.
As mentioned previously, GRMN has regularized at a more telling representation of the
current state of a transitioning technology company like themselves. Although the past five
years provides a snapshot of more recent trends in success measures such as revenue growth, a
review of historical prices in the past ten years demonstrates the performance potential the
company maintains when segment focuses align with growing market developments. For
example, in 2007, GRMN saw its stock price spike at an all-time zenith of $119.40. At this point
in time, the personal navigation device market, Garmin’s focal segment, was young and
blossoming, thus creating an attractive technology growth stock for investors.

26. The recent struggles of Garmin’s stock price can be attributed to the rapid deterioration of
the PND and GPS markets. Such technologies no longer require devices solely manufactured for
the purpose of these services, as progressions in smartphones led to the inclusion of GPS
technology. Management recognizes the decline of the segment that led Garmin to its previous
prominence and has responded by shifting specialization to other segments, most specifically the
fitness wearables market. While third quarter results do not exhibit an overall report suggestive
of rapid growth in the short term, key statistics suggest upward trends in terms of Garmin
discovering a newfound niche market within the fitness segment. For instance, Garmin saw an
increase of 4% in units shipped in comparison to that of the previous year. Additionally, and
more appreciably, Garmin’s revenue in the fitness wearables segment rose dramatically by 23%
in the past year. These tidbits of optimistic information serve as persuasive evidence towards
potential stock growth. Moreover, Garmin presents a more cost-friendly alternative to major
fitness wearables competitor, Fitbit, as exhibited by the lower stock price and lower P/E ratio,
thus portraying Garmin as an undervalued company (Romov 2015).
In combination with the aforementioned factors deeming Garmin an undervalued stock,
Garmin also takes pride in significant dividend distribution. As noted by nodes across the x-axis
on the graph above, Garmin issues dividends on a quarterly basis. In the past five years,
dividends have ranged from $0.40 to $0.80. These dividend allocations show a particularly high
value placed on the welfare of the shareholder. Conversely, such dividend allocation can also be
seen as a misuse of cash; these funds have the potential to be used in Research & Development
as opposed to dividend issuance.
Recommendations for Stock Price Analysis

27. As insinuated by the strategic objectives and the financial imperatives, consumers and
investors alike lack familiarity with Garmin and their new production directions, thus increasing
the importance in a bolstering in marketing spending. With competitors as viable as Fitbit, brand
recognition heightens in significance, especially in anticipation of Garmin’s release of
comparable products to those of Fitbit. Increasing marketing spending, assuming such efforts
are effective, will in turn increase revenues, specifically in the fitness wearables segment. As
consumers and investors realize the growth in the fitness wearables market, confidence levels in
the company’s newly established market alcove will rise, subsequently causing a relational rise
in Garmin’s stock price.
Financial Analysis Conclusion
Throughout the financial analysis, Garmin did not show signs of a significantly
struggling organization. Negative aspects of the past three years, such as falling net income, can
be contributed to factors like increased taxation as opposed to internal management mishaps.
Management continues to hedge falling revenue in the automotive sector by setting up potential
growth in the four other industries, most significantly in fitness. While inventory management
standards may not compare to their competitors, Garmin still competes at a high level in sales.
In the short term Garmin, has strong financials with copious working capital and current assets to
cover short-term liabilities.
The main issue Garmin faces financially remains the absence of clear signification of
growth potential and financial stability. Garmin does not take large debt risks. Rather they prefer
to solve financial issues through internal funding. Riding automobile revenues may be
sustainable in the short term, but Garmin’s establishment of a competitive advantage in other
markets will eventually determine their success in the future. Despite their reluctance to debt,

28. Garmin would benefit greatly by garnering outside financing outside of stockholder’s equity to
propel growth. As previously mentioned, a long-term debt to equity around 20% would provide
significant increases in capital while remaining well below industry average. Garmin remains
financially strong in the short-term, but needs exploring mechanisms to employ long-term
growth.
Remote Environment
Technology
Early adopters of new technology frequently achieve the highest returns on innovations
because customers seek the newest gadgets (Hitt, Ireland, and Hoskisson, 2015 p. 49). Garmin
proved this theory through their pioneering of the PND industry. First movers typically maintain
the highest profit margins and establish industry expectations. In the early stages of a novel

29. technological innovation, products tend to have lower profit margins due to competition’s ability
to further enhance the product. Garmin, TomTom, Fitbit, and MiTac constantly race to create
the next gadget, not only in search of higher profit margins, but in order to increase brand
recognition. While the first mover achieves significant initial profits, product improvements or
low-cost substitutes can attract a larger market. For example, Garmin engineered the first fitness
watch, but competitors such as TomTom and Fitbit soon adjusted the technology into a
transformative product of their own while targeting a lower cost segment. The competitor's’
market entry with varied target market demographic cut into Garmin’s profits. With a
differentiation strategy, Garmin must avoid a price battle by increasing brand recognition as a
valuable product. The wearables industry continues to show potential for high profits, but the
companies entering must prepare to innovate quickly to cope with constantly adapting
competition.
In the remote environment, the infinite growth potential of the technology market
increases the value of superior technologically knowledgeable human capital. In this era, a
predominant amount of companies rely on social media promotion. Consumer awareness
through social media increases in importance constantly due to widespread use of Facebook,
Twitter, and Instagram as information gathering tools for various goods and services. Besides the
increased importance of social media due to widespread consumer utilization, social media
presents another advertising resource for companies. Social media eases consumer-seller
communications by presenting expanded information availability regarding a company’s
products. Garmin and their competitors participate in the various forms of social media, allowing
for constant consumer-seller interaction, heightened brand recognition, customer loyalty
improvements, and market expansion (DeMers, Jayson. 2014). Because of this technological

30. era, firms in the technology industry must use social media outlets and other technological
connection mechanisms to maintain communication with their customers, thus easing the retail
process by shortening and simplifying the methods in which consumer demands are met.
Economy23
Governments worldwide responded to the 2008 Financial Crisis24 by creating policies25
to aid the recovery process. These policies from the Financial Crisis of 2008 have had lasting
impacts on the Global Economy. Because the United States (U.S.) has the largest Gross
Domestic Product (GDP) in the world, it is appropriate to begin with the United States’ response
prior to looking abroad (IMF 2015).
As of late, Greece’s struggles in the Eurozone have forced the European Central Bank
(ECB) to respond with quantitative easing strategies26 much like that of the U.S. Because of
these struggles and various bankruptcies, the Euro depreciated in comparison to the U.S. Dollar,
which has strengthened as a result of Switzerland’s Central Bank’s “decision to withdraw its
ceiling on the exchange rate between the Swiss Franc and the euro, and the ECB’s announcement
and launch of its programme of sovereign bond purchases” (Country Forecast Germany 2015).
Arguably, due to the strengthening of the U.S. Dollar, China has decided to lower the value of
their currency. Lowering the value of China’s currency resulted in damaging emerging markets.
Commodity prices have shifted downward, causing some to assert China needs to shift to a
“consumer-driven economy, with a greater emphasis on service industries” (Tora 2015). China,
the European Union, and the United States remain the largest players in the economy, and with
keen observation on economic trends, the global economy will see growth.
23
Additional economic analysis in appendix
24
2008 Financial Crisis led to Great Recession
25
Particularly Monetary Policy
26
QE as in targeting 2% inflation

31. As global companies, Fitbit and Garmin have experienced drops in income because of the
United States’ strong dollar. For instance, Fitbit reported losses of $1.4 million and $0.9 million
for the nine months ended September 2015 and 2014, respectively (Fitbit Q3 November 2015, p.
39). Garmin estimated a loss in revenue of $52 million dollars, 7% of revenue (Garmin 2015
Q3). TomTom, a Europe-based company, faced a 4% decline in Gross Margin, attributing
decline in revenue to the strengthening of the dollar. All companies must cope with the stronger
U.S. dollar and adjust to interest rate fluctuations and inflation. All companies must address
foreign vacillations, such as reduced earnings as a result of demand reductions in international
markets due to the strong dollar. Domestic companies hold the strongest advantage, but
wearable technology has grown globally. Despite challenges stemming from the strong dollar,
the technology industry remains a strong investment in the economy that promotes long-term
growth.
Industry Analysis
Define Industry
“Scientific & Technical Instruments”
In the broadest sense, Garmin competes in the technology industry. Typically,
companies in the technology industry produce smaller hardware and Yahoo associates Garmin
with the Scientific & Technical Instruments industry (2015). Similar to many of its competitors,
Garmin provides several products that apply to multiple industries. With such a wide span of
products, Garmin creates the chances for brand awareness expansion, but this poses a challenge

32. for marketing. Analysis continues with a narrow focus on the wearables industry, one of
Garmin’s multiple product industries.27
Wearables Industry
The wearables industry is growing quickly and society is trending towards a more healthy
lifestyle, thus creating a market for “fitness wearables.” Garmin, Fitbit, TomTom, Xiaomi and
Apple compete in the wearable fitness market (Garmin 2014 10-K p.15). This market looks to
provide customers with GPS tracking, movement recording, sleep monitoring, and analysis of
fitness, such as, heart rate monitoring, recovery analysis and pace setting within the customer’s
fitness activities. This market targets the customer base that wants advanced fitness tracking and
information. The watches have a wide customer base, ranging from individuals desiring
wearables with pedometric capabilities, to customers seeking products with software capabilities
to count calories burned and track heart rate and pace while running.
Key Characteristics
Fast-paced market
The wearables market within the technology industry transmogrifies quickly. With firms
constantly innovating, competition intensifies. Companies’ ability to produce inventive products
in a fast-paced market becomes critical due to the resulting market climate. Pioneers, or first
movers,28 in any industry see advantages ranging from brand recognition, customer loyalty, or
above-average returns. Through the natural progression of business, competitors will respond
27
Automotive, Aviation, and Marine Industry in Appendix
28
a competitive advantage a company earns by being the first to enter a market

33. quickly to new products by improving the existing product, thus making first-mover advantages
short-lived (Liang 2009). First-movers often struggle to promote new, innovative products to an
entire market and must select a niche market to address. Second-movers take the first-movers
innovative ideas and apply them to untapped market segments while also attempting to appeal to
the entire market. Considering specific application to the wearables industry, product release
timing importance intensifies, whether it be primary or responsive moves.
Market size and potential growth
Recent years have provided substantial growth in the wearables industry. There are
several reasons optimism surrounding the smartwatch industry, such as the fact that the United
States has become more health conscious. Additionally, roughly fifty-five percent of the
population wears a watch (Danova 2014). By 2018, this industry is expected to be worth $9.2
billion, as individuals seek to further enhance the connectivity of wearables and other devices,
taking advantage of the “Internet of things.” The potential growth in the wearables industry is
enormous, a contention derived from the simple congregation of growing popularity in watch-
wearing and fitness awareness.
Wide variety of product-lines
The wearable industry addresses a broad athletic spectrum. Some watches track running
specifics such as distance, pace, and heart rate, while others are designed for golf, measuring
distance from the hole. Each industry has competitors that specialize in specific technological
competencies. While it remains important to provide more products to a broad customer base,
companies must avoid expanding outside their core competencies for fear of losing out on profits
from specialization. For example, Fitbit specializes in fitness tracking technologies, solely

34. focusing on fitness watches. Fitbit provides a prime example of the benefits of specialization, as
they own the highest amount of market share in the smart-watch industry (“Apple" 2015). While
specialization aids Fitbit, a wide variety of product-lines can also attract many customers in the
wearables industry.
Porter’s Five Forces Analysis
Rivalry Among Existing Competitors
The fitness wearables industry has a combination of established competitors and new
market entrants. The main competition for Garmin, as expressed by multiple internal resources,
remains Fitbit. In their 10-Q, Fitbit included Garmin in their list of main competitors. Similar
products across an industry with multiple competitors creates a very tense competitive landscape.
This competition only shows signs of intensification as new products and competitors arise
(Fitbit 10-Q). This industry proves to present a large amount of competition for Garmin, and
future competition becomes dependent on future innovations. Companies like Fitbit, Jawbone,
and Microsoft currently offer similar fitness products to those of Garmin. Garmin must place
focus on differentiation to impart a secondary value on consumers in regards to their products.
An increase in secondary value would increase consumer switching costs because of the total
tradeoff increase.

35. Fitbit leads in terms of market share in the fitness wearables industry as of Q2 2015
(24.3%) (Fitbit 2015). As of Q2 of 2015, Garmin (3.9%) sits behind Apple (19.9%) and Xiaomi
(17.1%) in market share of the industry. These three companies enhance market differentiation
and diversity in this industry through varying highlights of mission statements, values, and core
competencies. The variation in such characteristics only intensifies rivalry across the industry.
Threat of New Entrants
Apple and Xiaomi’s annual increase in market share in the wearables industry
exemplifies the ease in which the market accepts new entrants, as Apple increased by 19.9% and
Xiaomi by 17.1% Although the aforementioned numbers suggest otherwise, Apple and
Xiaomi’s increased market shares rose rapidly due to factors independent to each company.
Apple remains one of the most widely recognized brand names in the world and has a reputation
for quality products. Apple utilized their brand recognition upon the release of the Apple Watch
to garner their portion of the market share. Xiaomi, a Chinese company, had never introduced a
wearable product until it's Mi Band. Xiaomi utilized brand recognition in Asian markets to
gather their claim of the market share.
Garmin began competing in the wearables industry in 2011, giving them a substantive
outlook of the current market landscape. Companies like Garmin, TomTom, Apple, Xiaomi,
Samsung, Microsoft, and Google have broken into this industry on the strength of strong brand

36. names and recognition. An examination of market players would suggest difficulty in market
entry, but, as displayed by the previous list, established technological companies with easy brand
identification do not face the same toil as younger entrants. Also, products across the industry
differentiate enough for customers to develop a preference. In sum, market entry threats do not
come from young, up-and-coming companies, but rather established and notable players in the
technology market. In order for Garmin to prevail against competition, factors such as brand
recognition and signature features must be included in their wearables products.
Bargaining Power of Buyers
Inspecting the wearables industry suggests minimal amounts of buying power for
consumers. In most cases, buyers purchase one fitness wearable until innovations deem their
previous watch technological laggards. Because of the expanded life of wearables, players
within the industry do not concern themselves with repeat customers as much as attracting new
ones. Additionally, there are few switching costs for buyers in the wearable industry because, of
the consumers readiness to sacrifice brand loyalty for a price reduction. Garmin must
differentiate by offering unmatched products and components.
Threat of Substitutes
Michael E. Porter suggests “substitute industries limit the potential returns of an industry
by providing price-performance alternatives” (1985). Currently, smartphone adaptations and
applications provide the largest threat to the wearables industry. Navigation applications have
already ousted the need for stand alone PNDs and GPS systems, but health and wellness

37. applications also substitute features only provided by wearables. For instance, Apple included
their “Health” application as part of the iOS 8 update. Standard inclusion, combined with other
free fitness applications threaten the need and demand for fitness wearables.
Although these applications offer similar attributes as fitness watches, wearables
manufacturers must, and most likely will, supply products that provide users technologies that
cannot be utilized by any sort of substitute technology. Because wearables can create a
performance-gap between mobile phone applications and wearables, applications will most
likely serve as more cost friendly substitutes that sacrifice performance attributes.
With smartphones and mobile applications innovating rapidly, Garmin must place their
attention on increasing the switching costs between their wearables and the mobile applications.
An increase in switching costs would most likely come through secondary value created by
greater performance and technological abilities of wearables.
The Apple Watch’s technologies beyond fitness make it a predator across the entire
wearables industry. The Apple Watch maintains nearly 20% of the wearables industry while
only being on the market for less than a year (“Apple” 2015). Although the Apple Watch tracks
heart rate, cadence, and pace, GPS technologies do not come standard directly via the watch
(Dalek 2015). Despite failing to provide some of the advanced customary fitness wearable
capabilities, the Apple Watch’s extra features, such as social media, news, calendars and internet
abilities make it a substitute. The wearables industry should be aware that Apple is looking to
add features such as GPS and waterproofing to the second generation Apple Watch (Axworthy
2015). These watches offer more features than strictly fitness wearables, therefore, Garmin must
focus on differentiating from these products for the next 3+ years until the smartwatch industry
separates itself from wearables around 2018 (Club Industry 2015).

38. Bargaining power of suppliers
GPS industry uses many similar components of computers, thus creating increased
intensity across the competitive landscape for technology industry suppliers. This heightened
competition takes away from the bargaining power of suppliers. The competitive scenario
allows the GPS and wearables industry the advantage because of competitive pressures to lower
prices to entice customers (Garmin 10-K 2014 p.43). This further supports Porter’s suggestion
that suppliers have more power when they can control prices due to market dominance and other
factors. Because of legitimate threats of substitutions, suppliers cannot focus on competition for
only first movers and initial actors. That being said, specific components in the GPS and
wearables industries are only demanded by certain distributors.
Companies are constantly coming up with new ideas for GPS inclusion in various
products and ways to innovate, forcing suppliers to provide specialized manufacturing on short
notice. Suppliers get a competitive advantage when able to adapt to such materialization of
supplies on short notice, creating more competition and less power.
Porter suggests that product importance for the supplier and organization also has a large
effect on supplier bargaining power. Suppliers gain greater control when they specialize in the
production and supply of specialized parts. Companies like Fitbit would be negatively affected
by supplier specialization because of the enhanced power of a singular supplier of necessary
goods. However, the market size and growth potential further decreases bargaining power of
suppliers.
Diversification advantages for customer companies do not end at market size and
numerous players. When companies, such as Garmin, diversify product lines and segments,

39. suppliers’ bargaining power further decreases due to increased competition for a greater amount
of technological parts and components necessary for the completion and production of goods.
Attractive Industry
According to Business Insider, the wearables industry has easily projectable growth over
the next five years, but will begin to be overshadowed by the smartwatch industry. By 2019,
experts predict the wearables industry will become a niche market. With Garmin already thriving
in multiple niche markets, including aviation and marine, they have proven ability to compete in
niche markets. Niche focusing would allow Garmin to potentially keep up an industry that is
expected to grow at an annual compound rate of 35% over the next five years (BI 2015). With
Apple shifting focus towards the smartwatch companies such as Google and Microsoft will react
to compete more directly with Apple. With these larger companies out of the niche wearables
market, Garmin would have massive growth possibilities.
Similar conclusions can be drawn by weighing the five forces framework derived from
Business Insider forecasting. Businesses Insider’s analysis reveals advantageous factors favoring
Garmin, all leading to the conclusion that the company must pursue long-term growth. Assuming
consumers will confuse fitness specific wearables and smartwatches, short-term entry and
success rises in importance in order to distinguish between the two in future long-term markets.
During this time, Garmin would experience more competitive rivalry, increased consumer
buying power, and also a high threat of substitutes due to reactive tendencies of competitors.
With an abundance of recognized brand names in the industry, short-term entrants would in turn

40. have high turnover in terms of entry and exit of the market. The suppliers would also be at the
mercy of the companies in the industry for the near future due to the lack of differentiation.
Considering the aforementioned factors, Garmin must plan on competing in the wearables
industry for the long-term. Garmin will likely find difficulty in capturing a large portion of the
market share in the near future, but a long-term plan would solidify the niche of wearable fitness
watches.
Strategic Maps
The strategic group map above displays the positive correlation between substantial
spending on R&D and a firm's revenue. Garmin, a company that excels in all facets measured by
this strategic group map compared to their competition, exemplifies the overall enhancement
obtained by high levels of spending on R&D29. When analyzing any strategic group map
viewers must note the clustering and congregation of similar companies in terms of the factors
29
The size of the bubble is correlated to domestic stock price

41. laid out by the axes. Generally speaking, the market leader makes itself an outlier, as it sets itself
apart across an enumeration of factors, including those encompassed by the strategic group map
(Pietzak et al. 2015, p.55). The wearables industry recently gained a new competitor, Fitbit,
most notorious for their fitness watches. Although Fitbit does not allocate a larger amount to
R&D in comparison to many competitors, Fitbit’s allocation goes entirely towards the wearables
niche. In addition to Fitbit’s more specifically-tailored research tactics, Garmin and Fitbit
remain neck and neck in terms of stock price despite Garmin’s presumed notoriety based on the
sheer age comparison of the two companies.
The strategic group map above depicts a comparison of Garmin and its competitors
through their amounts of revenue directly from fitness products and the market capitalization of
each company. Because Telenav and Flir do not participate in the fitness wearables market,
these companies did not contribute much insight to the map. On the other hand, TomTom and
Fitbit offer noteworthy figures pertaining to the measurements displayed in the graph. Garmin
trumps TomTom in all three facets measured by the map, something those knowledgeable about

42. the subject have come to expect.30 Garmin operates with greater effectiveness than TomTom in
the multiplicity of their segmented markets. On the other hand, Fitbit gives Garmin a standard
they must achieve in order to reach the prominence the company once had during the boom of
their PNDs and GPS systems. Fitbit more than doubled the amount of Garmin’s fitness related
revenue while surpassing the former giant in market capitalization, as well. Although these
numbers seem ominous, it must be considered that Fitbit does not generate revenues from
sources outside of this segment. Also considered, Garmin is yet to operate at optimal
effectiveness in the fitness segment, let alone begin sufficient specialization measures. In sum,
Fitbit’s current position in the fitness market becomes a target for future initiatives for Garmin.
Once Garmin reaches said initiatives, the company will see growth similar to that of the early
2000’s when stock prices peaked over $100.
30
TomTom’s fitness revenue was derived from the difference of consumer revenues and the combination of
automotive, licensing and telematics revenues.

43. Internal Analysis & Value Chain Analysis
Garmin
The value chain analysis refers to the processes in which a company enables themselves
to produce and distribute products (Porter, Michael 1985 p.39 ). Once procedures are analyzed
separately, strengths and weaknesses become inherently apparent. When analyzing a company’s
efficiency, relative comparison to competition in terms of coherence heightens in importance.
Garmin’s value chain analysis will be compared to TomTom, a long-standing competitor in the
GPS market. While comparing, it must be taken into account that Garmin is vertically integrated
and TomTom is horizontally integrated. Garmin’s primary activities consist of inbound
logistics, operations, outbound logistics, marketing & sales and service. Garmin’s support
activities include procurement, technology, human resource management, and firm
infrastructure.
Primary Activities
Inbound Logistics
Prior to analysis, it must be noted that Garmin utilizes internal connections by operating
internationally, specifically in Taiwan. Also a necessary prerequisite to analyzation, Garmin
uses many common components seen in computer-based devices. When purchasing these
materials, Garmin has a multitude of competing suppliers to choose from, as these suppliers
serve multiple industries, giving Garmin pricing leverage over suppliers due to the
overabundance of willing suppliers. On the other hand, Garmin finds disadvantages when

44. producing new technology because of strict constraints in new products as a result of the lack of
mainstream production.
Operations
Operations, broadly speaking, involve taking materials and turning them into the product
that customers desire. Garmin’s production process reaches higher levels of efficiency because
of engineers with expertise in numerous disciplines. (Garmin 2014 10-K p.16). Garmin also
holds a competitive advantage in manufacturing because they own their manufacturing facilities,
which regulates costs and, more importantly, quickens time to market in comparison to
competitors. With a development process that involves supply chain specialists, combined with
maintained control over manufacturing, Garmin holds substantial advantages in production.
Garmin’s development process mirrors the internal processes of the rest of the company
through variation of inputting engineers, much like the overall variation of the company’s
products. The design process takes place at their facilities in the United States. They have
manufacturing facilities at most of their design locations, easing the process of fixing
malfunctions in the development processes. Vertical integration allows Garmin to respond
quickly in the technology industry.
Outbound Logistics
Garmin’s distribution process of products does not differ from other GPS competitors due
to a similarity of retailers. Some of Garmin’s largest distributors are Amazon, Best Buy, Costco,

45. Halford’s31 and Wal-Mart (Garmin 2014 10-K, 15). Garmin depends on these relationships to
distribute their products, which cater to individuals rather than mass purchasers. Within their
partnerships to sell product to individuals, Garmin depends heavily on the sellers to promote
their product. Significant training and education goes into these relationships because of the
importance of these factors contributing to overall sales.
Garmin’s utilizes multifaceted distribution to account for their play in five different
sectors. Some sectors cater to a distributor that sells products to individuals, while other sectors
focus on OEM’s32. Garmin benefits from OEM sales because they have the ability to sell large
quantities of product to one buyer. Garmin specifically tailors their technology to OEMs’
products to continue profitable relationships with OEMs. This relationship presents problems as
it depends on the partnership to have strict constraints on their products. These partnerships
include checks and balances that ensure Garmin some profitability. Some OEM’s that Garmin
partners with are BMW, Harley Davidson and Chrysler. These partnerships benefited Garmin to
the extent of increasing OEM sales within the automotive segment. As far as sustaining the PND
and automotive market, OEM sales rise in importance in order to sustain respectable automotive
revenues.
Marketing and Sales
Garmin allows its distributors to handle marketing, thus utilizing the point-of-sale
marketing strategy (Garmin Q1 2015, Earnings Call). The point-of-sale technique comes to
fruition when the consumer, product, and money all come together in one place to initiate the
product purchase (Quelch and Cannon-Bonventre 1983). The decline in the PND industry led
31
A large automotive parts distributor in Europe
32
Original Equipment manufacturer

46. Garmin to focus on the wearables industry. In the first quarter of 2015, they experienced a
thirty-one percent growth from the previous year in sales of wearables. However, they
experienced a decline in the profit margin of wearables because of increased advertising and
R&D expenses, due to market competitiveness. Garmin returned to normal marketing strategies
to promote their product while improving their point-of-sale marketing within the wearables
industry.
Garmin focuses on the industrial look of their products and invested more into product
packaging. They have also made significant efforts in training their retailers to be
knowledgeable about their products to further motivate consumers to purchase Garmin products.
Looking at the immediate marketing of their wearables, Garmin intends to launch a new
advertising campaign for the holiday season to compete with their largest wearables competitor,
FitBit. This launch includes television advertisements with aims to propel themselves past
competitors in terms of brand awareness. Garmin generally focuses on point-of-sale marketing to
initiate sales of their products, but with the abundance of competitors, management realizes the
need for increased marketing during the hooliday season.
Service
Garmin focuses on increasing the value of their products, a process that does not stop
after customers purchase products. Michael Porter describes service as “activities that strengthen
the product's value after the product has been sold” (Porter, Michael 1985 p.40). Garmin
provides free technical support to their customers through email responses and a call center
(Garmin 2014 10-K, 77). Garmin also provides its customers with a one year warranty on all
products. Product malfunctions are met with Garmin’s guarantee to fix or replace the product

47. free of charge. Garmin focuses on customer value in every process of the business, giving
Garmin the ability to continue growth as the PND industry disappears. Their focus on post-
purchase service enhances their total brand identity.
Support Activities33
Firm Infrastructure
The technology industry requires firms to innovate and respond to changes in technology
at an accelerated pace. Garmin’s ability to respond and anticipate changes in the market is
centered on their vertical integration of their processes. Garmin could technically be considered
a divisional structure, with divisions of employees with specific objectives, resources and
encouragement to experiment and invent. These tactics foster new developments as a result of
Garmin’s high human capital. The internal approach of Garmin makes it easy to keep scrupulous
control over their products due to active management of all components of the production
process. Garmin’s infrastructure targets quality products and expedited response to the market,
however, customers are the most important aspect of their in-house approach. Their
infrastructure also allows them to produce reliable products. Garmin accomplishes this through
their reliability lab where they put all their products through testing that push their products to
the brink of destruction (Wolf 2015). All of these in-house processes allow Garmin to set the
standard of reliability within their various industries. Adding to Garmin’s in-house approach is
their current CEO, Clifton Pemble, who joined Garmin in 1989 as a software engineer. Dr. Min
Kao cofounded Garmin in 1989 and he has continued to focus on retention rate and emphasizes
33
Technology in appendix

48. individual employee value. Their firm structure focuses on working in teams to make timely
releases.
Human Resource Management
Garmin’s valuable human capital makes it easier for less attention to business
assiduousness. Garmin focuses on retention of employees because of significant training costs in
the technological industry. When Garmin has spent significant time and capital in developing an
employee, they cannot afford high turnover rates. Garmin has done things to display an enticing
work environment for employees, such as a lack of dress code to cater to employee
comfortability in the workplace (Wolf 2015). Garmin focuses on the final product that
employees produce rather than stereotypical workplace environmental details.
Procurement
Players in the GPS industry heavily depend on suppliers of navigational technology
components. Garmin has a long-term partnership with HERE34, the company that provides
Garmin with mapping data and traffic information in their PNDs (Garmin 2014 10-K, 25). The
GPS industry does not have many players, with TomTom remaining as the key competition.
Garmin’s partnership with HERE resulted from a partnership agreement between TomTom and
TeleAtlas, a deal that, at the time, seemed to hand TomTom a majority of the market share.
Because HERE remains the only relevant option for Garmin in terms of their technological
suppliers, HERE holds most of the bargaining power at Garmin’s expense.
34
formerly known as Navteq

49. TomTom35
Garmin and TomTom have been butting heads in the GPS industry for years, as they have
always competed against each other for market share of PND’s. This rivalry continues into the
wearables industry. Both companies face the problem of increased saturation of the wearables
industry. Fitbit introduced itself to the industry with a fitness band cheaper than the fitness
watch Garmin. Now, there are several public and private companies competing in this industry
such as Apple, FitBit and Xaiomi. TomTom has a long-standing competition against Garmin;
therefore, TomTom will be used for the following comparison.
Primary Activities
Inbound Logistics
TomTom’s inbound logistics process compares very similarly to Garmin’s. Both
companies have a surplus of suppliers willing to produce material for each of them. Because of
the similarity in demands by the companies, suppliers’ processings become that much
easier(TomTom Annual Report, 2014). Players across the computer industry experience
shortages of inputs, and such shortages are felt by all participants in the market due to the
similarity of suppliers. TomTom has strict agreements with their suppliers to be consistently
served in order to continue production during materials shortages. Despite these agreements,
TomTom does not gain a competitive advantage because regardless of contractual idiosyncrasies,
each player is equally affected by variances in supplier performance.
35
It should be noted that TomTom is much less informative than Garmin on their internal process. TomTom takes a
less specific approach when describing their operations

50. TomTom partners with TeleAtlas to produce the maps their products use. This is a long-
standing, stable partnership a large amount of mutual dependency. TomTom and TeleAtlas have
an agreement to update maps on a yearly basis, an uncommon type of agreement in the GPS
industry.
Operations
TomTom outsources all of their production, creating a lack of control of their production
process (TomTom, About 2015). TomTom counteracts their lack of control by performing
supplier audits to ensure alignment with TomTom ETCOP36. First, ETCOP focuses on the fair
and reasonable treatment of employees within the outsourced production nodes. Second,
ETCOP also touches on environmental standards of their suppliers in order to decrease
responsibility for the world’s growing carbon footprint. Finally, TomTom focuses on
outsourcees’ product specifications. Agreements with outsourced producers include product
guidelines and parameters, along with frequent update requirements to TomTom’s management.
Even though TomTom does not have total control over manufacturing, they have significant
leverage over their producers to ensure quality goods.
Outbound Logistics
Distributions of TomTom’s products do not differ from industry norms as they rely on
well-known, large retailers, such as Best Buy, Target, Walmart, Amazon to distribute their
products. Customers can also purchase products directly through TomTom (TomTom 2014
Annual Report, p.56). As for their PNDs, TomTom has several OEM contracts to install a
TomTom in automotive companies’ production processes. TomTom outsources their
36
Ethical Training Code of Practice-TomTom’s way of ensuring that their ethical guidelines are in included in
contracts with suppliers.

51. distribution, similar to their other processes. Combined with OEM contracting, TomTom has
utilized fleet management technologies to replace the revenue losses from the PND decline.
Marketing and Selling
TomTom’s depends heavily on partnerships, such as their OEM relations and fitness
relations with Nike. Outside of these partnership agreements, TomTom relies on relationships
with distribution companies to sell fleet management products and services.
TomTom’s advertising campaigns developed a promotional reputation of creating
humorous commercials. Their most recent commercial promoting their fitness watch advertised
the user luxury of lessened straps on runners. The advertisement showed a voluptuous woman
running without straps and no heart rate monitor around her chest, leaving a lasting impression
on viewers. TomTom historically utilized such shock-value tactics in most television
advertisements (TomTom strapless commercial 2014).
Service

52. TomTom relies on the services they provide after the initial sale of their software or other
products. Within their fleet management sector, the licensed mapping software comes with
continuous update fees to fuel TomTom revenues (TomTom Annual Report 2014, p.56). The
upgrades come with up to date mapping software used in the fleet management technology. The
fleet management software updates provide increased value for users of the product, thus
explaining the growing popularity of TomTom fleet management systems across European
distributors. TomTom also provides two year warranties, an uncommon practice across the
industry. In short, TomTom’s services after initial sales provide extra value to buyers, an aspect
they must maintain to stabilize market share performance.
Support Activities
Procurement
TomTom uses procurement activities to preserve business as a means to cope with the
lack of internal control over many steps of their value chain process. TomTom’s relationships
with suppliers account for historical success. In other words, TomTom maintains high levels of
leverage on their suppliers and producers. The most important aspect of this support activity
remains their outbidding of Garmin and subsequential 2007 acquisition of TeleAtlas (Hoef and
Kanner 2007). The acquisition gave TomTom exclusive access to TeleAtlas mapping
technologies, thus gaining a competitive advantage by having property rights over a significant
map developer.
Human Resource Management
TomTom’s employees greatly contribute to the value consumers gain in purchasing
TomTom products. TomTom maintains employee-centricity through significant allocation of

53. resources to employee development and training (TomTom Annual Report 2014, p.24). Due to
high employee training costs, TomTom and other technology companies focus on retaining
specifically tailored talents. TomTom has programs like individual career development plans
within the company to ensure employee progression.
Firm Infrastructure
TomTom’s infrastructure depends on strong relationships with suppliers, producers,
distributors, and retailers. Without these strong relationships, TomTom would lose market share
and ultimately disappear. TomTom’s headquarters focuses on maintaining the quality and value
of their products, as well as investigating strategies to maintain strong business relationships.
Core Competencies Garmin: Built to last, culture, vertical integration
Garmin’s operations focus on bringing superior navigation within the wearable,
automotive, marine, and aviation industries Garmin utilizes their core competencies through
their vertical integration (Garmin 2014 10-K p.16). By keeping processes in-house, Garmin can
focus on the value of their products provide because of the relative ease provided by internal
handling of value chain processes. Garmin also maintains high customer value levels through
constant innovation and product development efforts. All companies want increase repeat
customers to create constant income and maintain a positive public image (Leinbach-Reyhle.
Nicole, 2014).
Garmin’s internal production process allows them to maintain a strategic advantage in
regards to product release frequency. Garmin also ensures rapid time to market by lowering
rates of employee turnover to maximize human capital “profit margins.”. Overall, Garmin builds

54. products to last, and their vertical operations combined with the culture of the company keep
Garmin at the forefront of the GPS industry.
Core Competencies TomTom: Focus on Relationships and ease of product use
TomTom relies on their dependable relationships with suppliers and manufacturers to
maintain consistent product sales. These relationships allow them to focus on bringing superior
mapping to their products. Because of this, TomTom can focus more on the software that goes
into their products and allow their manufacturers to find the best way to produce the hardware
that goes into vehicles. TomTom puts significant focus on development of their maps, as
exemplified by outbidding Garmin for the acquisition of TeleAtlas giving them sole access to
their mapping systems (Hoef and Kanner 2007). This acquisition has allowed TomTom to
maintain their lead in the fleet management market, the company's greatest strength and prospect
of company growth. The acquisition of TeleAtlas and the employee culture make TomTom
sustainable and allow it to hedge the falling PND market.
Garmin Areas of Weakness
Garmin must continue to boost company branding in order to vie with a new set of
competitors. They have entered a market that has a number of private companies along with tech
giant, Apple. Garmin’s greatest weakness continues to remain the lack of investment in
marketing and creation of brand idenity and recognition.
Current Strategy
In the past decade, Garmin has seen many internal and external changes. Previously, a
consistent and growing flow of revenue, Garmin’s automotive segment of products has steadily
declined in past years. Garmin combats this issue with three major strategies. First, Garmin

55. continues to innovate automotive sector product relevancy with the addition of new features that
extend to more than just navigational tools. The recently released “babyCam” incorporates an in-
car camera so drivers can see their children in the back seat while driving without turning
around. Another camera-focused innovation, the “Dash Cam,” allows for the driver to see behind
the vehicle.37 Second, through partnerships and alliances with OEMs,38 Garmin provides
navigation devices, which maintain business-to-business relationship. Finally, Garmin
diversifies its product line, competing in multiple markets. This product mix39 hedges Garmin’s
risk in a given industry. Despite difficulties in the automotive/mobile segment, Garmin seeks
growth from growing industries, such as the wearable industry to gain revenue. These strategies
have been successful to an extent and continue to make Garmin a strong company. Questions of
Garmin’s long-term success still arise given automotive navigation tools have been Garmin’s
niche product, but with continued efforts towards these strategies, Garmin maintains hope for
long-term growth.
As addressed in the financial analysis section, Garmin rarely takes on debt. Garmin’s
funding relies on a basis of equity and cash flows. Financing without debt has long been
associated as a part of Garmin’s culture and strategy.
Recommendations
To expand and grow, Garmin can alter some current strategies. Garmin should continue
marketing its diverse product mix to compensate for declining revenue in the automotive
segment. Because the automotive segment’s revenue has accounted for over half of Garmin’s
37
Beneficial when reversing vehicle to help prevent accidents
38
Some of Garmin’s automotive produceralliances include BMW, Toyota,Hyundai, and Mercedes Benz
39
Product mix enters automotive, aviation, fitness,marine, and outdoors segments

56. total revenue prior to 2013, to maintain success as a company, Garmin must see increased market
shares in a new industry or industries. The wearables industry remains Garmin’s most attractive
option. Garmin’s fitness segment revenue40 has seen the biggest increases the past three years
and the wearables industry provides the largest opportunity for growth. As previously addressed,
Garmin’s task to improve market share in niche industries requires innovative products and
brand and product awareness. Each avenue to gain a larger market share requires increased
investments to R&D and marketing. Currently, competitors like Fitbit put more emphasis on
R&D and marketing expense as a percentage of revenue than Garmin while competitors like
Apple have a higher capacity for resources to allocate towards market and product awareness.
Garmin’s financial structure requires more investment returning to the company, specifically into
R&D and marketing to bolster sales revenues. This challenging recommendation, because it
counters Garmin’s history, demands taking on manageable levels of debt. To ease the
adjustment, this should be a gradual change. With increased capital invested in the company,
Garmin promotes future growth and long-term success.
Implement Strategy
Similar to most technology corporations, Garmin historically experiences higher revenue
in Q4. For Garmin’s products to compete with competitors, they must invest heavily into
marketing. Garmin should not take on serious debt in the fourth quarterto address marketing. As
40
Fitness segment driven by wearables

57. a short-term objective, Garmin should seek a fourth quarter revenue goal of $215 million or
higher.41
In regards to the capital optimization strategy, debt accumulation should be addressed
following the Q4. Because this strategy differs from historical trends, investment in Garmin may
be static. To help prevent stagnant if not declining investment, Garmin should take on debt
gradually as they implement their capital optimization strategy. The first and third quarter,
according to quarterly reports, have had lower streams of income in the past, so employing a
strategy to take on more debt to invest in R&D illustrates the desire to compete and provides
more opportunity for engineers to explore possibilities. Garmin has had success financially, but
as a long-term objective, Garmin should seek growth for the future and prove their ability to
reinvest in themselves through debt and sustain growth.
Conclusion
Within the past decade, Garmin’s primary source of revenue, the Automotive/Mobile
segment, has declined and continues to do so as a technological substitutes have entered the
market. Because smartphones have captured consumer’s interest, applications included in such
41
Based on quarterly trends

58. devices have created pushback against PNDs. Garmin continues to respond to the decline in the
PND market by diversifying their product line. Moving forward into the fourth quarter, Garmin
needs the fitness segment to show positive growth after a slump in the third quarter. Though
Garmin addresses factors for the third quarter slump such as seasonality, increased
competitiveness, and a stronger USD, Garmin should continue seeking marketing opportunities
in the fourth quarter to boost revenue expansion to reach $215 million.
Wearables they have introduced include the Garmin Fenix 3, the Garmin Forerunner 25,
and the Garmin Vívofit HR and they now have the task to properly raise awareness to consumers
through advertisements and sponsorships. This objective overlaps with the second objective, and
with a differentiation strategy, Garmin must continue to bring new valuable products to the
market at appropriate times.
Garmin should look forward to the future, and begin to take on debt gradually. This
structural change, with increased investment in R&D and marketing, will help optimize future
objectives regarding expansion into new industry or growth of market shares. Though Garmin
experiences challenge with the decline of their automotive/mobile segment, these challenges can
be addressed by maintaining competitiveness in other segments while increasing competitiveness
in the wearables industry to gain market share.
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Notes
1: Garmin’s strategy to address the decline of PNDs will not reside just with increased revenue
from the wearables segment. Increased accommodation for the PND itself can be seen in the
Appendix.
2: Expansion of brand recognition goes beyond marketing. Garmin International Inc. had a
submission in the Business Wire explaining the expansion of Garmin stores into Miami, Florida.
This provides an additional medium of sales and an outlet to attract new consumers (2015).
Appendix
Addressing PND decline (Strategic Imperative 1):
While still marketing the PND, Garmin has worked to maintain competitiveness with a “back up
camera, lane detection alerts, Bluetooth and voice activated navigation” to name a few added

64. features (Wolf 2015). With these new features and their historical success in this product,
Garmin continues its business to business relationship by strategic alliances with automotive
manufacturers. Most recently, Honda Motors has partnered with Garmin for the next four years
(Garmin Expands 2015).
Financial Statements from Garmin 2014 10-K

67. Economic Analysis

68. The Great Recession led to several drastic changes in the U.S. economy. For example,
before 2008, the Federal Reserve’s (Fed) policy rate42 was above 500 basis points and in 2008
fell to 25 basis points, a number that has not been adjusted. The Fed’s excess reserves had been
next to nothing, and now these reserves are around $4.5 trillion dollars, about 25% of U.S. GDP
(Andolfatto 2015). Finally, the unemployment figures, which had spiked to 10% in 2009, have
since fallen to 5.1% (Economist U.S. 2015). The Fed used tools, particularly the short-term
interest rate, to make these changes in reaction to the Great Recession.
David Andolfatto, vice president and economist at the Federal Reserve Bank of St. Louis,
explains the economic contraction of 2008 as unique for two reasons: it was “unusually severe”
and “U.S. Treasury Securities fell to the interest rate on reserves” (2015). He notes this drop off
begins prior to start of the recession, which relates to a decline of consumer expectation (shown
42
Federal Reserve’s policy rate: Federal Reserve’s “interest rates.”

69. above). Further, he explains the situation as a liquidity trap,43 meaning the Fed’s increase in the
supply of base money did not change the consumer price level. Following 2008, injections to the
money supply have been “held as excess reserves in the banking system” (Andolfatto 2015).
This came as a result of Quantitative Easing. Since the financial crisis, the U.S. economy has
improved, but still faces the effects of this monetary policy (Country Forecast U.S. 2015). Before
addressing the short-term interest rates, Federal Reserve Bank of San Francisco President John
Williams said that the Fed must consider “Global developments, such as slowdown in China and
weak growth in Europe, Canada and Mexico” which all push down inflation (Sussman 2015).
Janet Yellen, Chair of the Federal Reserve System, suggests that keeping the inflation
close to 2 percent helps avoid costs to households and businesses. Without a target, or when
inflation strays well away from 2%, adverse effects follow. Unanticipated high inflation
discourages business investment, reduces real purchasing power from retirement income, and
reduces real purchasing power of labor income. An alternatively, low interest rate “constrains a
central bank’s ability to combat recessions” (Yellen 2015). These situations encourage the Fed to
maintain, or try to maintain, a 2% target rate.
The two factors that display that the U.S. has not fully recovered from the Great
Recession are the growth rate of PCE, which still remains under 2%, and the large amount of
excess reserves in the banking sector (Andolfatto). Yellen plans to increase the federal funds rate
to begin the normalization process of the economy. With the Federal Open Market Committee
(FOMC), Yellen helps determine monetary policy and the Economist’s Country Forecast U.S.
September 2015 explains that the sooner the FOMC tightens monetary policy, the sooner the Fed
can respond to a future recession. John Williams addresses concerns for tightening monetary
43
“that is,the economy is satiated with liquidity and any further attempts to injectliquidity (withdrawbonds) will
only lead investors to hold reserves as if they were bonds” (Andolfatto).

70. policy too soon amidst global unease. Because it has been nine years since the central bank last
raised rates, Williams mentions that the Fed needs to know more about the strength of the U.S.
recovery, China’s growth/recession potential, and instability of financial markets (Sussman
2015). The Economist presumes that because “the Eurozone and Japan are both in the middle of
monetary easing programmes,” Yellen will be more hesitant in proceeding with tightening
monetary policy for fear of “divergence in global policy” (Country Report U.S. 2015).
Global
Garmin has initiatives of increasing their global presence and they have offices in the
United States, United Kingdom, and Taiwan. Most competitors in the GPS industry have offices
throughout the world to increase the global presence, to better understand the culture, and to gain
better relationships for manufacturing. Garmin currently has strong global presence in Europe
and Asia with room to expand in these areas because TomTom and Mitac currently have a
stronger presence in those areas outside the United States. Another avenue GPS companies use
to increase their global presence is through partnerships with foreign vehicle companies to install
GPS devices in their vehicles. Garmin has several partnerships with vehicle companies, like
BMW, Toyota, and Mercedes, installing in dash GPS systems (Garmin 2014 10-K, p.15). These
partnerships produce profits with brand recognition and expand Garmin’s global reach.
China’s economic down turn needs to be touched on when discussing the global segment
because the Chinese are a leader of production in the world. Their currency and stock market
have taken significant hits this year and has caused other countries to discuss action that need to
be taken to maintain their own economy. Some feel that China is in a transition period to a
service driven economy because their e-commerce industry is growing at a significant rate
(Godement 2015). When looking at these numbers it would seem that China will climb out of