Gopro 33165q

Strategy analysis of GoPro

A strategic report made by: Sacha Lefils ([email protected])

ed by Aurore Haas, instructor of TD7 in SKEMA, Lille

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I.

Introduction

The aim of this strategic report is to understand how GoPro, Inc. former Woodman Labs Inc. had become the leader of personal cameras. By thoroughly looking into the external environment of the firm and how it managed to seize opportunities to outdo competitors, we will try to explain what were the keys of the success. After a personal experience and deception about the quality of movies one could realize without a professional equipment, N. Woodman decided to create what it calls “the most versatile cameras Enabling you to share your life through incredible photos and videos is what we do.”. 1 Creating such cameras was the major advantage of the company that managed to sell for $150.000 of worth and by diversifying itself GoPro had known one of the fastest growth a company can dream of, even if it now encounters difficulties. To better understand the brand, we have to understand the man. Nick woodman has always wanted to create something, after its 2 failures as an entrepreneur he decided to execute a surf trip in Australia and to record its actions he used a little camera he had bought strapped to his arm, a creation of his one. We are in 2001 and the idea is born. In 2005 he created Woodman Labs and begin to sell his cameras which become nearly immediately a thing tohave for all the sportifs. With the years the company has grown up, has been introduce to the stock market, merge other firms etc… To become this incredible worldwide company which create the camera which film the jump space of Felix Baumgarter.

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https://gopro.com/about-us

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But for months the company has been navigating a series of turbulent waves, the investors are scared, shareholders sales their shares and the revenue of the firm declined 31% at the beginning of 2016. Now we will try to analyse the strategy of this firm, why it first succeed then breakdown and how it will try to fix the present turbulences.

II.

Internal Strategy

1. Value chain management Secondary activities Human resources management: recruitment, faithfulness and training Firm infrastructure: Structure, Strategy and Departmentization Technological development: Software, Perpetual improvement of cameras and R&D Procurement: Open to everyone Inbound Logistics: Real Time Value Network

Operations: Manufacturing and Outsourcing

Outbound logistics: Real Time Value Network

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Marketing & Sales:

Service:

Customer Adverts, relationPromotions and ship Complementary goods

A) Secondary activities

 Human resources management: As the CTO (chief technical officer) of the company Stephen Baumer said during an interview in 2011, the recruitment was a key solution to improve the company’s growth. In fact, he said: “We were small at the beginning, about 7 people”2. Today, GoPro is made of 1.54K employees3 after the recent lay out of 7% of the workforce in January 2016. According to the data, the recruitment has a strategic need to be more competitive and extend the company’s power. The second way for GoPro to obtain competitive advantages was by keeping their employees and dragging important ones. In his interview in Fortune in 20144, N Woodman explained that one of his prides was the fact that “people would want to leave other really good jobs to come work here.” Before adding: “Now GoPro has got to be one of the most exciting places to work because the work we do here is so loved by so many people around the world.” Last but not least, one of the force of Woodman’s company was the capacity to train its employees by surrounding them with experienced people. In the same interview than before the CEO explained that he managed to recruit Tony Bates as the president of the brand.

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http://www.supplychainbrain.com/content/videos/2011-videos/gartner-2011/gopro-retools-supply-chainfor-rapid-growth/ 3 https://www.macroaxis.com/invest/ratio/GPRO--Number-of-Employees 4 http://fortune.com/2014/10/20/how-nick-woodman-modeled-gopro-after-red-bull/

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Tony Bates was the former CEO of Skype and the vice-president of Microsoft. A source of experience that couldn’t be neglected.  Firm infrastructure As every important company, GoPro works on its Organizational Structure (the arrangement of jobs within an organization) and its Organization Design (process of making decisions) in its everyday life. As the strategy of the company was to innovate, the structure was more organic, that means with more flexibility and free-following information. But with the recent turn-over and the difficult situation of GoPro has been in since 2016, we assist at a new approach of the structure more mechanistic that organic that means a company which know what to deliver their products and try to reduce the costs. So, except for this change in the internal structure, the model of the GoPro company is quite similar to every big companies with work specializations, departmentalization and within chain of commands. That why we can encounter a financial department, IT department, financial department, Legal department etc. and a board of directors at the top level management.

 Technological development Still in its interview to Supply-Chain-Brain in 2011, Stephen Baumer explained that one of the best solutions they used to fasten their growth was the installation of software “to gain a more comprehensive look at their supply chain” and so they started to find out “more specifics software”.

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In fact, he recognized that the infrastructures in which the group was located were not good enough to communicate among the firm. That is why the first software they put in place was the ERP (Enterprise Resource Planning) in 20110 after a “fairly explosive growth” due to an innovation and then have continued to search the most adapted software until today.

Actually, the use of software is linked to the growth of the company which couldn’t have been possible without the constant evolution of the cameras GoPro deployed among years. The very history of GoPro could be explained by that. GoPro was made by an invention, the first wearables cameras in the world. An improvement that have made GoPro the leader of wearable cameras. The real history of GoPro started with the HERO camera but the success of the improving it.

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The curve of the graph5 presents the revenue of GoPro until 2013. The first important sales started with the introduction of the wide-angle lens brought by the HERO 5. Then an explosion occurred in 2011 with the HD HERO, first HD wearable camera granting $380.000 revenues for the firm. Then in 2013 the first “connected” GoPro 4K definition make Woodman a billionaire with more than $1.2B of revenues for the company. Finally, in 2015, the brand exceeds $1.6B of revenue6, their higher point before the decrease.

But to not talk about the cameras, GoPro always try to be competitive by innovating. In fact, by looking to the past few years, R&D department was very attractive to invest in.

By looking at the Figure nearby7, we can see that in the past 4 years, the R&D investment has been multiple by 6. From a $36.115 thousands in 2012 to a $241.694 thousands in 2015.

Morover, in 2015 GoPro relased its first drone : Karma a new innovation created by the R&D department. And in July 2016 just after outsourcing their company in , the group bought out Stupeflix and Kolor to make the “firm’s hub of R&D in Europe” as said Charles Prober, the vice-president of services and sotfwares8. A spearhead against the

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Source : DEVONSHIRE CAPITAL ORBES : 12/31/2015 7 https://www.statista.com/statistics/451127/gopros-randd-expenditure-worldwide/ Source : GoPro 8 http://www.lesechos.fr/11/07/2016/lesechos.fr/0211117630157_gopro-renforce-ses-equipes-de-r-d-en.htm 6

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difficultes encountred since the begging of the year.

 Procurement The Procurement could be done with every supplier if they follow the law and respect the "CALIFORNIA SUPPLY CHAIN TRANSAPRENCY STATEMENT”. In fact, everyone has the possibility to become a supplier of GoPro just by subscribing in their website to this link: https://gopro.com/supply-chain. The registration asks the company’s location information, the to treat with the brand, the company’s financial statement, and for what service or products they are applying. This kind of strategy allows GoPro to never be dependent of a supplier and grant them a strong bargaining power against the asker of the partnership.

B. Primary activities

 Inbound Logistics What is important about the shipping and storing of the products in GoPro is the evolution the brand had had to face to continue its growth. That’s why in 2013 the company took the decision to Work with the Group “One Network” and their Cloud Platform, the “Real Time Value Network”.

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The company considered itself different in “Everything” (their headline). And It is explained by this photo coming from their Website: http://www.onenetwork.com/why-one-network/

This solution was made to “maximize GoPro’s ability to see and respond to supply chain problems” according to One Network’s CEO in an article on their website9. A strategic implementation for GoPro after the incredible year 2012 where they almost doubled their results.

 Operations What always has been attractive about GoPro is the manufacturing and more the assembly of the elements. The firs GoPro was made by a single camera assemble with a wearable strap to film one’s outdoor activities easily.

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http://www.onenetwork.com/2013/11/gopro-chooses-one-networks-cloud-platform-global-supply-chainvisibility/

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Today, the manufacturing of GoPro is separated in 2 parts. The first one is a manufacture done by the company on its own country, based in San Mateo, California. The second one is by creating partnerships with manufacturer (e.g. the company Foxconn in Brazil since 2014). Thanks to this solutions, GoPro managed reducing considerably its costs and it’s actually in this year where the Company obtained its better result.

 Outbound Logistics The Outbound logistics is linked to the Inbounds logistic by the use of the One Network’s

Cloud platform, the Real Time Value Platform that manages to simplify the shipping and the transportation from manufactures to the distribution centers. For the distribution, the cameras can be sold Online, directly from the company’s website or on several Retailers, distributors and resellers. As for today there is no GoPro proper store.

 Marketing & Sales The marketing of the company is really customer-oriented. The very example of that is the moto of the Brand for its HERO cameras: BE A HERO.

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During its interview for Fortune10, Woodman explains that he has based all its marketing and the main structure of the company on the Red Bull Model. And when he thinks about Red Bull he imagines something extraordinary, something “incredible”. And so is the advertising of the firm, show what people can do, what everyone can do. It is a relation of sharing and ion that put the customer in the first place as the next sentence resumes it: ” Enabling you to share your life through incredible photos and videos is what we do. This is your life...GoPro. “11

But what makes the consumer buying is not only the advert or the promotion of the cameras but also all the equipment that comes with it. In fact, buy a GoPro is buy a camera but also buy everything needed to enjoy the camera such as a Super Suit for the protection, stabilizers for shooting, SD Cards for memories, floaty to go underwater. Filters for the lens, or LCD touch for the Back Pack. More than 60 not essentials but recommended accessories in order to provide the best experience.

 Service The strength of GoPro regarding its customers is the Quality service the brand offers thanks to its community.

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http://fortune.com/2014/10/20/how-nick-woodman-modeled-gopro-after-red-bull/ https://gopro.com/about-us

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The first thing is the Customer for sharing its experiences. After buying a camera, GoPro delivers a software for treating, mounting and sharing videos easily. And this software is about to be enhance thanks to a new service (currently in Beta Version) “PLUS” that allows using the software on smartphone.12 A new way to share that can be explained with the numbers of videos shares everyday on the YouTube channel of the company which has today 4.3 M of subscribers and their last advert for the HERO5 + Karma drone more than 5.5M of views in one month. A social media solution that allows the firm to collect information about what customers want and allow customers to identify themselves through the brand. 2. Management of resources: VRIN Study

GoPro VRIN (before 2016)

Value

Rare

Inimitable

Non-Substitutable

Human resources

YES

YES

YES

NO

Their products

YES

YES

NO

NO

Brand image and customer relationship

YES

YES

YES

YES

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Source : GoPro website

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 Human resources: a no-sustainable advantage One of the key resources of GoPro is the human resources starting by his leader: Nick Woodman. Nick Woodman created the company without a huge amount of money or experience. Indeed, it was the second experience as an entrepreneur after the failure of his first company and he managed to become a billionaire at the age of 37. But as presented before, the history of GoPro was not only the story of a single man but one a specific team chosen for competencies they could bring. Tony Bates as president, Jack Lazar as CFO (chief financial Officer) or Nina Richardson as COO (Chief Operating Officer), GoPro managed to build a team that pushed them to the highest place. But not only the Boards of Directors, employees too were attracted by the Company as explained N. Woodman in its interview given to Fortune (c.f. 1.A). Human resources of GoPro clearly had their value (before 2016) and couldn’t be replace that easily. That’s why we could categorize it as a competitive advantage. However, since 2016, most of the staff have changed, some decided to abandon ship (e.g. J. Lazar) other were fired (more than 7% of the employees) which put forward the nonsustainability of the human resources.

 GoPro’s Products a competitive advantage not sustainable A tangible resource is basically the financial & physical resources a company is able to deploy in order to create their product.

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In of resources, GoPro possess no much compares to competitor but enough to had become the leader of wearables cameras.

And it is a fact that their product is a competitive advantage. It’s rare because they were the first brand to produce it (a creation of a market is always profitable more than new entrance), because patents protect them against plagiarism and because they provide the best quality among camera (that’s why the HERO3 was the most sold camera in 2013). It is also valuable because the main idea of the GoPro Source : Google Image

encountered a customer need, Nick Woodman need to be able to film oneself doing activities without any help. But even if their cameras are protected by patents, the market of mini-wearables camera is now developed and GoPro has to face competitors with same particularities but another design. Here is a camera developed by TomTom, the GPS Brand called the TomTom Bandit. It possesses the same capabilities than the GoPro HERO5: 4k Video, Stills resolution of 16M (14M for HERO5), battery life around 3h (1-2h for HERO5). But the real difference is on the price where GoPro is lot more expensive €429.00 on GoPro website against €299.00 for the TomTom Bandit on TomTom website.

Actually, GoPro products are a strength and a competitive advantage for the firm. But it is not sustainable and nowadays a smart could easily become a wearable camera.

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. Brand Image and Customer relationship: a sustainable competitive advantage Before 2016, the image of the brand was spotless, the results were excellent and the firm has known of the fastest growth ever seen. But the best result they ever had and still have is the relationship they maintain with their customers. In term of value, they actually didn’t answer a need of customers but they anticipated it by offering not only a new product but a new way of communication by the possibility of sharing videos. They seized the opportunity given by the growth of social medias and allowed customers to use their products in their activities. Sharing exiting experiences and then communicate the pleasure they have using GoPro camera. For the first time, the brand image did not lie on the company marketing team but on the consumer whose made themselves the advertising of the product. So here is the rare point.

e

So the brand image is already a competitive advantage. but regarding at the history of the brand and the fact that it was based on the very image of the customers, it seems difficult for a company to do the same. Furthermore, the company is now well known and thinking of wearable camera is thinking of GoPro. That make they quite inimitable and a unique case in the marketing history.

Finally, the only sustainable competitive advantage of GoPro is the brand itself, because it is based on the customer more than on the firm or the product deliver. And the moto of the firm is the exact transcription of what they expect for their s: be a hero and share it with the world.

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3) Ressources and Capabilities. GoPro.inc has many ressources, so, to be more efficient in our analysis we will separate the ressources in two different groups: The tangible ressources (Financial and Physical) and The Intangible ressources (Patents, reputation, Image…).

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a) Tangible resources :

So we can see the GoPro.inc has know for more than 120 millions of dollars for its Property, Plant and Equipment. Unfortunately it’s impossible to find the details of this balance sheet on

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Internet, but it will really help us in the second part of our study, the business strategy section. But we already know, even if the year is not finished, that 2016 had been rude with GoPro which has announced that they will be laying off 7% of their 1,500 workers . « They had a worse 4th quarter than expected and are suffering from a drop in their stocks » according to W.A.C.D

b) Intangible resources : First of all the technological advance, indeed GoPro as pioneer in this market, it has a true advance in therm of innovation, even if it rest on its laurels a little bit in 2015. We can see that everywhere on Internet there is site which compare GoPro cameras with its concurrents and there always a model from GoPro.inc better with a good price. Quality of image, time for recharge, autonomous, connectivity, grip, connectivity, resistance … It deals perfectly with all this parameters. Gopro.inc was the really first in all these categories but with the time concurrents become more and more efficient, so, GoPro.inc has to evolute; That is why we know its big project it is to invest in drone technology to become to sell drone-camera GoPro. One of the most important thing for GoPro is the Brand Identity, its reputation, its image: Gopro.inc has many accreditations that shows the quality of the products. The name inspiring every extreme sport goers to GO PRO, meaning becoming pro. The slogan: « become a Hero » it is not about a localisation, a culture, or even a particular sport it touch everybody who want to excel in sport, it provoques excitement. GoPro.inc has a really big advantage on internet too. Indeed the majority of GoPro’s promotion comes through viral videos that are publicized through social media (Twitter, Facebook, and YouTube) and the http://www.gopro.com website.) : It is the consumers who make the advertising when they publish the video of them using the camera. GoPro « is releasing multiples video every day after stumbling on a technique that leads to thousands of hours of free publicity a week »

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Currently about 6000 video a day are posted on Youtube with the word GoPro in the title or description III.

External Strategy

1. The market of GoPro.inc : The market of Gopro is the actioncams and camcorders market. This market is greatly growing thanks to new technologies and innovation.13 The actioncams - all the embedded cameras like Gopro - pull the market upward and the sales of actioncams are more and more increasing.

For instance, on the french market in 2014: -

155 000 camcorders were sold

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370 000 actioncams were sold

On this market, GoPro stays the leader. Because this company owned 68% of the market shares (in value) in 2014. And to compare, Sony owned 8%.14

We can see this dynamics with the three following charts.15

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http://www.leclubdesmanagersdusport.fr/2015/03/la-marque-gopro-est-elle-indetronable-sur-le-marchedes-action-cam-concurrencee-certes-un-peu-tardivement-par-les-grandes-instances-de-lelectronique-digitalela-marque-gopro-qui-a-elle-mem/ 14 http://www.magazinevideo.com/actu/marche-de-l-actioncam-et-du-camescope/32380.htm 15 http://www.lesnumeriques.com/action-cam/2015-bilan-annee-charniere-pour-action-cams-a2515.html

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This chart shows the evolution of the sales of all the video recorders (actioncams and camcorders) and the cameras between 2012 and 2015 on the French market.

We can conclude that: The amount of sales of cameras is decreasing while the amount of sales of video recorders is increasing.

This chart shows the evolution of the sales of actioncams and camcorders between 2012 and 2015 on the French market.

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We can conclude that: The amount of sales of camcorders is decreasing while the amount of sales of actioncams is increasing.

This chart shows the evolution of the prices of actioncams and camcorders between 2012 and 2015 on the French market in €.

We can conclude that: The prices of actioncams are hugely decreasing like the prices of camcorders. Abroad, GoPro owns 80% of the market shares in Europe and in the United States, so Gopro is the leader of actioncam

In 2012, Gopro owned more than 90% of the market shares in

Its international turnover was estimated to be 750 millions of dollars in 2012.

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The californian start-up managed to sell more than 3 million of actionscams between 2009 and 2012 in more than 70 countries.16

2. The competitors of Gopro : We decided to use Porter’s five forces Framework in order to highlight the external environnement of GoPro in the action cameras market. We will explain in details how each components of the external environnement is essential to have a global understanding of the situation of the company now. A). Threat of substitution In the market of the Action cameras traditional cameras don’t seem to be a viable alternative to the GoPro Hero when it comes to filming during sports activities. On the other hand we can highlight the fact that smartphones could be considered as a substitution however even with an increasing quality of their camera technology they coudn’t replace the role of action camera of a brand such as Gopro because they are not meant to be used on extreme situation. Furthermore we can see on the latest features of the Iphone 7 or the Samsung Galaxy 7 that they are waterproof,they are still not meant to be used for sportive activities because these are still fragile devices. Traditional cameras are not used with the same purpose as action camera wich means that custmers of action cameras are not willing to purchase cameras with less features than action cameras such as the ones the company Gopro sells.

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http://www.marketing-etudiant.fr/marques/gopro-marketing.html

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Finally tablets such as the Ipad by Apple or the Samsung Galaxy Tab can’t be taken as serious threat for action cameras. Thus a tablet can’t be used as a substitution of an action camera.

According to BT.com in the first nineamonths of 2014 global camera shipments from Japanese manufacturers dropped by a third because of the use of phone cameras. However the market of action cameras is a growing market with great expectation of growth for the next decade. Thus competitors who originally sell smartphone are now interested in the market of action cameras as Apple is said to be developping their own one. B)Threat of entrants First of all we can see that there are low entry barriers on the market of action cameras. Indeed there is a growing demand for these products. The market of action camera is in expanditure so we can see a lot of new competitors entrances on the market. Those new entrants tend to provide cheaper prices than Gopro. Still the action camera market is very competitive, the major brands operating are GoPro, Garmin, TomTom, Sony and Ion. Action cameras are unlike any other kind of camera. They're designed to be attached to helmets,usurfboards, carsyand other objects, and they're small, tough and simple, with a lens that captures the world in high-definitionavideo in a wide-angleafish-eyeaperspective. The niche market we have here is very attractive to new entrants and also to the competitors already onthe market. Below we can see that GoPro has a dominant position on the market of action cameras but his position is threatened by new entrants and the existing competition. 23

C) Bargaining power of customers The action cameras are a new growing niche market which means that the market is relatively very young and has a lot of potential for the next decades to come. Indeed the bargaining power of customers can be considerated as moderate because of the reasons below. First of all we can say that there is a low dependance on distributors for GoPro The product is important to customers and even if new entrants can offer the same kind of items or equivalent GoPro is well-known in the sports sectors. GoPro build a close relationship with their custumers by showing the experience of the product by launching a smartphone application and a Youtube channel. Thus GoPro has a strong powerful image in the target they are willing to reach. Their marketing strategy take a huge part in the image the company wants to reflect to the public.

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D) Bargaining powers of suppliers The suppliers of GoPro have a low bargaining power of suppliers because of their large number. There is a very large number of suppliers that have the skills to produce Gopro products which creates competion between suppliers in order to provide Gopro better prices than the competition. All of the products of GoPro are manufactured in China in different factories. This is the main reason why there is a low bargaining power of suppliers. Indeed if their suppliers rise their prices it is up to GoPro to hire a new supplier with lower prices. Gopro is not dependant at all to their suppliers.

GoPro make all their suppliers sign their GoPro Supplier Corporate Social Responsibility Code of Conduct in order to respect the ethical values of the brand in of human rights and ecological matters. E) Rivalry among existing competitors GoPro’s niche market is developping which attracts new competitors to the market. The existing competitors are Sony, TomTom, Garmin, Ion… They share the market with GoPro but GoPro manages to keep his leading position for the moment. Indeed this market benefits of a high level of attractiveness since it is a large industry size and it benefits of a fast industry growth rate. Moreover the existing competitors attract custumers with lower budgets by applying lower prices to their products than GoPro. 25

This rivalry affects the profit of GoPro. Thus in order to be more competitive GoPro invests in new technologies and innovation. 3. P.E.S.T.E.L. analysis :

a) Political : -

There is a political stability in countries that Gopro trades with.

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For the moment, there is no government intervention in the actioncams’ market (laws only on private life).

b) Economic : -

Global recession : due to the inflation and the economic crisis, people have less and less purchasing power.

-

Thanks to the growing of population in the world : more people can be potential buyers.

-

Customers are ready to buy more for their hobbies, so they spend more and more money in leisure tools.

-

On the market, there are cheaper rival cameras, like Sony for example.

-

Prices of actioncams are decreasing on the market.

c) Social : -

Gopro permits to connect amateurs & sportsmen together.

-

People like more and more Gopro’s lifestyle : extreme sports, life on edge, adventure…

-

Gopro has a huge corporate culture.

d) Technological : -

Gopro has highly improved the quality of their cameras.

-

Gopro always wants to innovate and update its products to stay the leader on the market. 26

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Gopro has his own Youtube channel : a huge partnership for Gopro.

-

Gopro created a mobile app to be easier to use.

-

Gopro is the most durable & technology advanced tiny high-definition camera today.

-

Electronic components’ prices are rising.

e) Environmental : -

Because of the global warning : companies have to reduce their CO2 emissions. Gopro is trying to take care of the environment.

-

Gopro respects a lot of commitments : the Electronic Industry Code of Conduct, the Social ability International et Ethical Trading Initiative, the UK Modern Slavery Act 2015

-

But Gopro has to work on the environmental respect : like it’s packaging for example.

f) Legal : -

Gopro became a multinational corporation : so it has to respect the legislation for multinational companies.

-

Gopro, in order to stay in a monopolistic situation, owns a lot of licenses & patents.

-

Gopro tries to have an ethical and trade relationship with its customers and employees.

-

Due to the high number of problems with the respect of private life (like in social networks), Gopro is facing all the laws concerning the private life.

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