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What is GoPro's Business Model from Case 7 Pages 307 to 321 in the textbook Essentials...

What is GoPro's Business Model from Case 7 Pages 307 to 321 in the textbook Essentials of Strategic Management, the Quest for Competitive Advantage, the 6th edition?



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director, Brad Schmidt, joined the vacation, worked on. Financial Summary for GoPro Inc. 2011 2016 thousands, except per shar
Case 7 GoPro in 2017: WWI Turnaround Strategy Restore Profit with the camera strap, and observed that Woodman da camera that
shares of GoPro stock into the Jill and Nick Wood- man Foundation. A press release about the found blamed the company for cre
Case 7 GoPro in 2017. Ws Turnaround Strategy Restore Proty? litary 2017. GoPro announced a new 360-degree amera, Fusion, but
312 and numerous accessories) to increase demand for cameras and accessories. Bundle packaging increase demand by offering co
Source: The NPD Group Retail Tracking Service, 12 months ending April 2017 313 GoPros Business Model and Strategy Case 7 GoP
from 48 percent in 2015 to 45 percent in 2016 malumber of distributors and retailers account for a large portion of GoPros r
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Case 7 GoPro in 2017: Will its Turnaround Strategy Restore Profitability? cutting would make it difficult for GoPro to compet
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director, Brad Schmidt, joined the vacation, worked on. Financial Summary for GoPro Inc. 2011 2016 thousands, except per share disposable Kodak camera to his wrist while on the water. Woodman's friend and current GoPro creative os Part 2 Cases in Crafting and Executing Strategy mounts 2013 2012 2011 2010 2015 $234.218 122.555 Comodated stets of operations de Beve Gross pro Grossman Operating income Netice $161.971 6737 $ 1,185,481 461,920 390 (372,9691 419.003 2014 $194205 627 235 50% 187.035 12.08 $385.737 351.784 352 38.703 50.578 5 526,016 227.486 43.2% 53,617 32,262 54670 36,13 24512 Netcome persh Basic Duted $0.54 52.00 $13.01 5027 50.25 5107 $0.92 $0.07 $0.07 $0.47 50.24 Sourch Gotta, the 2016 10x EXHIBIT 2 GoPro's Stock Performance, June 2014-July 2017 $100 90 80 70 60 50 E 40 30 20 10 0 છું J JASON D 15 F HAMJ JASON D 16 F M A M J J Year had yet to reverse the company's downward trend in its stock price performance as of mid-2017. Company History GoPro began as the result of business failures. GoPro's founder, Nick Woodman, grew up in Silicon Valley, the son of wealthy parents (his father bro- kered the purchase of Taco Bell by Pepsi). Woodman started an online electronics store, EmpowerAll.com, which failed, and subsequently started an online game ing service, Funbug, that failed in the dot-com crash of 2001, costing investors $3.9 million. Woodman consoled himself after the failure of Funbug with an extended surfing vacation in Indonesia and Australia. While on vacation, he fashioned a wrist strap from a broken surfboard leash and rubber bands to attach a
Case 7 GoPro in 2017: WWI Turnaround Strategy Restore Profit with the camera strap, and observed that Woodman da camera that could withstand the sea. After his vacation, Woodman returned home and company) which enabled Woodman, his family. and some GoPro executives to take cash from the used on developing a comprehensive camera, cas company. Also in 2011. GoPro acquired CineForm. and strap package for surfers. Originally incor a small company that had developed a proprietary ding business in 2004 as GoPro, Woodman found codex that quickly and easily converted digital video files among different formats. CineForm had used mm camera made in China that cost $3.05. und sent his homemade plastic case and $5,000 to unknown company. Hotax. A few months later, badman received his renderings and a 3-D model from the company, and sold his first GoPro camera September 2004, at an action sports trade show. Also that year, GoPro hired its first employee, Neil Dana, who was Woodman's college roommate. products, which was a clear indication that the com- pany was accepted in the market. investments from five venture capital firms (includ. ing Steamboat Ventures-Disney's venture capital 309 pued as Woodman Labs, the company began tinued and in 2010, Best Buy began carrying GoPro The two-man company grossed $350,000 in 2005, the first full year of operation. Woodman wanted to keep the company private as long as possible: he invested $30,000 personally, his mother contributed 535,000, and his father added $200,000. In a for- tunate coincidence for GoPro, in fall 2006 Google purchased a then-small company, YouTube, and in spring 2007 the GoPro HERO3 with VGA video was launched. According to Woodman, the competing name-brand cameras available at the time did not have good video quality. The combination of GoPro's HERO3 video quality and the increasing popularity of YouTube caused GoPro's sales to triple in 2007. In 2007, although the company had revenues in the low seven figures, Woodman began to question his ability to take the firm further. He negotiated a deal to turn the company over to a group of outside investors, but before the deal was finalized (which was at the beginning of the 2008 financial crisis), the investors wanted to lower the valuation of the com- pany. GoPro was profitable, and Woodman did not believe that the company was having any ill effects from the economy. He refused to negotiate the com pany's value down, and the company's sales were over $8 million that year. The company's growth con- this codex in several movies including Need for Speed and Slumdog Millionaire. As part of GoPro, Cine Form altered its 3-D footage tool into an editing program that became the company's first desktop application, GoPro Studio In December 2012 a Taiwanese manufacturing company. Foxconn (trading as Hone Hai Precision Industry Co.), bought 8.8 percent of GoPro for $200 million, which brought the value of the pri- vately held company to about $2.25 billion, and Forbes reported Woodman's personal net worth to be about $1.73 billion. GoPro sold 2.3 million cameras and grossed $531 million in 2012, and in December of that year, GoPro replaced Sony as the highest- selling camera brand at Best Buy. Sales of GoPro cameras at snow-sports retailers increased by 50 percent for the 2012-2013 ski sea- son. GoPro almost doubled its revenues in each of three consecutive years, from $234.2 million in 2011, to $S25 million in 2012, and $985 million in 2013, according to the U.S. Securities and Exchange Commission (SEC). Although revenues increased 87 percent in 2013, in that year the decrease in rev- enue growth became obvious. According its IPO filing, as of December 2013 the company had not derived any revenue from the distribution of its con- tent on the GoPro Network; however, it announced plans to pursue new streams of revenue from the distribution of GoPro content. GoPro formed a new software division in 2013. Also in that year, the National Academy of Television Arts and Sciences recognized the company with a Technology and Engineering Emmy Award in the Inexpensive Small Rugged HD Camera category. In June 2014, GoPro went public at an IPO price of $24.00 which valued the company at $2.7 billion. The IPO included a lockup agreement that prevented the Woodmans from selling any shares of GoPro stock for six months; four months later on October 2, 2014, the Woodmans made a donation of 5.8 million In May 2011, GoPro received $88 million in
shares of GoPro stock into the Jill and Nick Wood- man Foundation. A press release about the found blamed the company for creating the problem by people don't even watch their GoPro footage. We tion stated that details about its mission would be announced at a later date, according to CNN, Share In April 2016, the investment bank Piper la reported that GoPro was gaining market shartin declining market and that action camera ership declined to 28 percent among teenage cos sumers, down from 31 percent a year previous 40 percent in 2013. This trend clearly indicated the need for GoPro to transform into something mot than an action camera company. The GoPro brand and reputation had been made as a hardware com pany, and moving that reputation to a new market (i.e., software) would be difficult. Although GoPro market for wearable cameras, it found the solving the capture side but leaving customers ing in postproduction. content creation software field crowded. Plus, The Verge (June 2, 2016) pointed out that the company had no clear way to monetize its software. Accord been the most time-consuming project the company Karma's sales had come from being bundled with the HERO5 camera. According to McGee, GoPro made more money from the sale of a camera than from the 310 Part 2 Cases in Crafting and Executing Strategy prices dropped 14 percent after the announcement and angered investors. Also, GoPro failed to meet investors' expectations when it released its first carn- ings report in August 2014 GoPro increased emphasis on software and video sharing in 2015. In that year, GoPro tied with Apple on the Google Brand Leaderboard, which measures the most popular brands on YouTube. According to Google, more than 4.6 years of content was uploaded to You Tube in 2015 with GoPro in the title, an increase of 22 percent from 2014. Also in 2015, the company launched the GoPro Channel on Amazon Fire TV created and Fire TV Stick with a custom-designed streaming channel that was a one stop destination for delivering on-demand GoPro videos to Amazon customers. Another 2015 development was the GoPro Chan- ing to Woodman, building the software team had nel on the PlayStation Network which allowed PlaySta- tion owners to stream GoPro content on demand, and had undertaken. He believed that the benefits of browse GoPro cameras and accessories. PlayStation success would be large because the amount of video joined GoPro's growing roster of distribution partners being consumed was huge, and the market research including Amazon Fire TV. Roku, Comcast Watch company NPD Group reported that more than able, Sky, Vessel Entertainment, Xbox, LG, and Virgin 80 percent of smartphone users stream video America. The GoPro Mobile App was downloaded Woodman also believed in the potential of Karma 2.75 million times in the fourth quarter, totaling GoPro's camera drone, scheduled for release in almost 24 million cumulative downloads: 04 installs early 2016. of GoPro Studio totaled nearly 1.7 million, totaling GoPro's third quarter 2016 performance produced over 15 million cumulative installs, with average daily large losses, with Woodman firing 15 percent of his video exports of over 49,000 in the fourth quarter. workforce. The company's president, Tony Bates, GoPro purchased Kolor, a French company announced plans to leave the company at year end with experience making software for capturing after little more than two years with the company and displaying virtual reality in 2016, and acquired The Karma drone, which had been postponed several Replay and Splice, two leading mobile video edit times, was eventually released in November 2016. ing apps. Replay was video editing software that Problems quickly became apparent with the drone- GoPro rebranded as Quik, and Splice was an app it stopped flying and crashed-that required GoPro that promised desktop-level performance for editing to issue a recall and discontinue selling the product video on an iPhone. The Kolor group assisted in the until February 2017. Shortly after sales resumed. launch of a virtual reality social media platform that Woodman claimed that the drone was "exceeding functioned both on the web and as an app. Accord- our expectations" (Fortune, April 27, 2017). However, ing to The Verge (June 2, 2016), Woodman under- GoPro CFO, Brian McGee, said that the bulk of stood that "the hardware-first chapter of GoPro" was coming to the end. He recognized that market saturation had created the problem, explaining it as "content guilt." According to Woodman, "Most sale of a drone.
Case 7 GoPro in 2017. Ws Turnaround Strategy Restore Proty? litary 2017. GoPro announced a new 360-degree amera, Fusion, but provided few details. The com- planned a pilot release of Fusion in summer and a launch with a limited release at the end 2017. According to Woodman, professional users wo be the main market for Fusion, which was a much smaller market than the traditional consumers that had bought GoPro's other cameras. Sales in the global action camera industry grew #percent in 2014. reaching 7.6 million units, and retail value of $3.2 billion. Camera unit sales increased by 38 percent in North America in 2014. Action Camera Producer June 2017 ity (higher), and features (more). A list of produc 311 EXHIBIT 3 De innovation Garmin Key Brands Roll GoPro Sony Conto Braun ON Other Brands Amlov Casio JVC Kenwood Ricoh Panasonic Ordro Polaroid Xiaomi Kodak Toshiba Veho from 2014 to 2017 O Technology Decathlon HTC Source: Market Publishers Report Detobose, June 2017 The Action Camera Industry However, the largest growth came from the Asia ing rapid growth and attracted many new entrants, Pacific region, which was up by 114 percent. Sales of action cameras worldwide reached 10.5 million in 2017, up from 8.4 million in 2015. Although the action camera market was expected to enjoy contin- aed sales growth through at least 2019, several fac- tors, including lengthening replacement cycles, were expected to slow the growth rate. Consumer sales, primarily for extreme sports, had accounted for the largest part of global demand up to mid-2015, but professional sales, primarily driven by TV production, security, and law enforce ment, were expected to increase. In 2014, consum- ers were responsible for 86 percent of action camera sales, with the remainder coming from professional uses. Although GoPro dominated the action cam- tra industry in mid-2015, there was increased competition from other companies, including Gar- min, Tom Tom, Canon, JVC, Ion America, Polaroid, and Sony. Other competitors were focusing on the adjacent market of wearable cameras for security and police officers. A defining characteristic of the action camera industry in 2015 was the increase in the number of competitors. In early 2015, the market was experienc- Another 2015 industry trend was price polariza- tion. Sales of low-end camera models priced under $200.00 and high-end models (including GoPro's $499.00 HERO4 Black) experienced increasing growth. The action camera industry experienced significant change in early 2015. A Futuresource analyst reported that the 360-degree capture that had recently become available would drive virtual reality applications over the coming months, espe. cially for sports broadcasting. The company envi. sioned the percentage of 360-degree video action cameras growing from 1 percent in 2015 to 14 per- cent by 2019. In 2014, 95 percent of action cam- eras sold could take high-definition video with at least 720p resolution, and approximately 85 percent of action cameras could take HD video in 1080p. About half of cameras sold could record video in ultra-high-definition 2160p, or 4K In 2016, the action camera industry experienced adjustments in usage: The demand for action cam eras for professional applications had grown expo- nentially due to the focus on better viewing of sports events. Action cameras were increasingly being used for TV production and to record closer details of sports. The National Hockey League and Fishing League Worldwide had signed major contracts with iON, GoPro, and other vendors, and that profes- sional segment of the industry was expected to have which had the expected effect on price (lower), qual- es of action cameras in June 2017 is presented in
312 and numerous accessories) to increase demand for cameras and accessories. Bundle packaging increase demand by offering cost-effectiveness to custom ers because the bundling reduced or eliminated the need to purchase additional equipment. Other indus try trends in 2017 were increasing numbers of new entrants, which reduced prices, and increasing signi icance of the smartphone with enhanced quality and features which depressed demand. The saturation of the action camera market niche and the decis ing prices contributed to the June 2017 bankruptcy gas sectors. However, emerging technologies such as collision avoidance and geo-fencing would make drone flying safer, and make regulators feel more comfort able with larger numbers of drones taking to the skies The military sector was expected to continue to lead all other sectors in drone spending through 2024, dur to the high cost of military drones and the increasing Part 2 Cases in Crafting and executing Strategy a high growth rate. Also, Global Market Insights pointed out increasing popularity of action cameras among all age groups and advanced product features as other factors providing massive growth potential The security industry was also finding increasing usage for action cameras in 2016, which added more fuel to the industry growth. Action cameras and espe cially drono-mounted action cameras were expected to be used increasingly in security applications glob ally. A leading vendor in the action camera-drones. Lifeline Response, had developed a smartphone app that could fly a drone to a needed location in emce filing of iON Worldwide, a major competitor in the gencies. According to Technavio Research, profes industry sional use of action cameras would exceed casual usage by 2020. In addition to increased demand for action cam- eras for professional applications, the industry was The Drone Industry in 2017 expanding also due to demand from developing According to Gartner, the personal and commercial countries, with the largest growth in the Asia Pacific drone industry as measured by revenue increased region. Increasing disposable income, an increase by 35.6 percent between 2015 and 2016 to reach in social networking, and rapid growth in adven- $4.5 billion. Gartner projected industry revenue to ture sport tourism were factors increasing sales in increase an additional 34.3 percent between 2016 emerging countries. Several action camera vendors and 2017. Unit shipments in the industry increased sponsored extreme sporting events in various emerg by 60.3 percent in 2016 when compared to 2015 ship ing economies to promote their camera brands. ments and was projected to increase by 39.0 percent Although European growth was predicted to be between 2016 and 2017. The industry was expected to stable from 2016 to 2023, the global action camera grow to $11 billion in revenues by 2021. market was projected to grow at an annual rate of The majority of personal drones were purchased 14.6 percent between 2017 and 2021. for video and photography, while commercial drones The revenue growth rate in the action camera tended to be used for geographic information sys industry was expected to be lower than the growth tem (GIS) mapping or delivery. The civilian drone rate in unit sales, due to a general price decline. The fleet was expected to grow from approximately one average action camera price is expected to decline million in 2016 to more than 3.5 million by 2011 to $226.00 by 2020, depressed primarily by a global while the commercial drone fleet to increase from increase in supply. In the first quarter 2016, Tech- about 40,000 units in 2016 to 420,000 in 2021. navio forecast that the value, by revenue, of the global FAA regulations in 2017 limited commercial action camera industry, which was $2.35 billion drones to a select few industries and uses such as In 2015, was expected to reach about $6 billion by ial surveying in the agriculture, mining, and oil and 2020. However, young consumers were increasingly -hoosing smartphone cameras over traditional, which meant they were less likely to purchase an ction camera The popularity of social networking sites was a major driver of the action camera industry in 2017 od price polarization continued as a crucial trend. endors began "bundling their products (cameras number of countries seeking to acquire them.
Source: The NPD Group Retail Tracking Service, 12 months ending April 2017 313 GoPro's Business Model and Strategy Case 7 GoPro 2017: Ws Turnaround Strategy Restore Profitability? while holiday sales of drones priced $50 to $100 A drive unit sales, drones priced over $300 xuntod for 84 percent of Industry Tevenues and percent of unit volume sales between 2016 and 2017. Drones with premium features such as por capabilities sold nearly five times more The action camera industry was a relatively young quickly than basic feature drones. Among the most and evolving industry, and GoPro evolved within the industry. Although the company began as an carallowed the drone to follow the user, with sales pular drone features was autopilot functionality action camera company, it had rapidly evolved into of such devices selling 19 times more quickly than revel drones. The average sales price for a de was more than $550 in April, which gave them one of the highest average retail prices of all technol- Several of the prominent early drone manufac surers were emerging from outside the U.S. mar ld. Among the foreign manufacturers were the Canadian firm Acryon, Switzerland-based senseFly (owned by France-based Parrot), publicly traded Swedish firm CybAero, Shenzhen, China-based DJI. and Korea-based Gryphon. DJI had become the number-one selling drone brand through its commit- ment to innovation and partnerships with Sony for camera components and Apple for distribution in Apple Stores. Parrot abandoned drone manufactur- ing in mid-2017 to focus on drone software. Exhibit 4 presents the drone industry's leading brands in units sold in April 2017 a categories a diversified lifestyle company. The company's busi ness focus, as set out in its 2015 annual report, was to develop product solutions that enabled consumers to capture, manage, share, and enjoy some of the most important moments in their lives. In addition to sell- ing action cameras to capture live events, the com- pany developed GoPro Entertainment, and planned to diversify into a number of related businesses. including software and drones. Reflecting awareness of the problems facing the company and opportunities on the horizon. GoPro set out its business strategy in its 2016 Annual Report. The core of the business was help ing consumers capture and share experiences, and it was committed to developing solutions that cre- ated an easy experience for consumers to capture. create, and enjoy personal content. The company believed that when consumers used GoPro products and services, they enabled authentic content that increased awareness for the company, and drove a self-reinforcing demand for its products. Revenue growth was expected to be driven by the introduc tion of new cameras, drones, accessories, and soft- ware applications Key components of GoPro's growth strategy for 2017 and beyond included the following: EXHIBIT 4 Top-Selling Drone Brands Ranked by Percentage of Shipments, April 2017 Rank Market Share 36% 19% 78 1 1. Drive profitability through improved efficiency. lower costs, and better execution. The company pointed out that it had incurred material operat- ing losses in 2016 and future success depended in part upon its ability to manage operating expenses effectively. 2. Make the smartphone central to the GoPro experience. The company sought to eliminate the pain point of managing content, and make it a near automatic process for its users to stay engaged in an activity without having to pause to document their experience. Brand Name DJI 3D Robotics Parrot Yuneec Others Total 2 3 31% 100%
from 48 percent in 2015 to 45 percent in 2016 malumber of distributors and retailers account for a large portion of GoPro's revenue: the la est customers (by revenue) contributed 50.52 52 percent of revenues in fiscal 2016, 2015. root 314 Part 2 vertice provid tors mere order prod Me ang Gol pur no on sc 29 се Direct Sales GoPro sold directly to large small retailers in the United States, Europe, the Me East and Africa and directly to consumers throughout the world through its e-commerce channels. The panty believed that diverse direct sales channels wat Ley dicentiator for the company and it Segregatets products among those channels. GoPro used indepen over 50 distributors who resold its products to retail ers in international markets and to some mid- market Cases in Crafting and executing Strategy 3. Market the improved GoPro experience to their extended community. The company believed that the global market for enabling people to self-capture compelling photo and video content of their everyday life was large 4. Grow the business internationally. GoPro believed 2014, respectively that international markets represented a signifi- cant growth opportunity 5. Expand the GoPro experience for advanced users. The company intended to continue pursu ing its goal of developing the world's most versa tile cameras, drones, and stabilization products GoPro also increased its focus on solutions designed to simplify organizing, editing, and sharing dent specialty retailers who generally carried higher content, and planned release of a content manage end products, and targeted its customers who were ment platform for 2017-the GoPro for Desktop believed to be the early adopters of new technology. Big which would facilitate offloading, accessing, and box retailers with a national presence such as Amazon, editing content. The company focused on product Walmart. Target, and Best Buy were a second compo leadership and innovation in its cameras, and also in nent of the direct sales channel. These retailers carried mounts, accessories, and batteries a variety of GoPro products and targeted its particular GoPro's management envisioned the company end user. GoPro felt that this allowed the company to as an entertainment brand. The distribution of con maintain in-store product differentiation between its tent originally produced by GoPro was referred to as sales channels and protected its brand image in the GoPro Entertainment, and the company attempted specialty retail markets. Amazon accounted for 11 per to leverage the sale of its cameras through GoPro cent and 12 percent of GoPro's total revenues in 2016 Entertainment. The company continued to invest in and 2015, respectively, compared to Best Buy with GoPro Entertainment by developing, distributing. 17 percent and 14 percent of GoPro's sales in 2016 and and promoting GoPro Entertainment programming 2015, respectively, on its own and partner platforms. Mid-market retailers with a large regional or New products for 2017 included the company's national presence were also part of GoPro's direct next-generation capture device, the HEROS, the GoPro sales channel. Retailers focusing on sporting goods drone Karma, and devices to enable virtual reality consumer electronics, hunting, fishing, and motor content capture. In April 2017, NPD Group reported sports carried a small subset of GoPro products tar that the Karma was the second best-selling drone over geted toward its end users. The full line of GoPro $1,000 in the United States based upon unit sales. products were sold directly to consumers through the company's online store, gopro.com. The company marketed its e-commerce channel through online and Sales Channels offline advertising. GoPro felt that its e-commerce At the end of 2016, GoPro products were sold sales provided insight into its customers' shopping through direct sales channels in over 100 coun behavior and provided a platform from which the tries and over 40,000 retail outlets. The company company could inform and educate its customers on also sold indirectly through its distribution chan- the GoPro brand, products, and services. nel. The direct sales channel had gained slightly in 2016, providing 55 percent of revenue, compared to Indirect Sales/Distributors GoPro sold 10 52 percent in 2015. GoPro distributors accounted for the difference, with indirect sales decreasing b
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hold on to the top four spots in C Mag 2017 best 317 suckholders' equity Dec 11, 2011 December 31, 2015 757.225 663,311 05.513) 274.668 135.613) 144,335 7727033 $1,102.976 So Go, Inc. 2016 10-K $927640 web. 2015 10K ECHIBIT GoPro. Inc. Revenues by Geographic Region, 2014-2016 Year ended December 31 2016 vs. 2015 2015 vs. 2014 Case 7 GoProin 2017: wins Tond Strategy Restore Profetity? Pred stock. 50.0001 par value, 5,000 shares word, ond Canon stock and additional paid in capital, 50.000 per value 500.000 ecovery. 150.000 Class B shares wuthorized, 36,712 and 35.005 shares A shares authored, 104,647 and 100.596 Shares ved and out Turystock, cost, 1.545 and 1.545 shares, respectively und and outstanding, respectively ined canings (accumulated deficit) Poses and stoc holders equity Were more than 50 percent of fiscal 2015 revenue, and combined Asian and European revenue increased 49 percent from 2014. China remained a top 10 market Despite GoPro's struggles, its camera managed to To stockholders' equity in thousands) 2016 Units shipped 4.762 Anericas $ 619.784 Percentage of revenue 52.3% Europe, Middle East & Africa 366,352 Percentage of revenue 30.9% Asia Pacific region 199,345 Percentage of revenue 16.8% Total revenue $1,185,481 Source: GoPro, Inc. 2016 10 K for GoPro in the fourth quarter. Change 028% (29% Change 27% 2015 6,584 $ 868,772 53.6% 535 262 33.0% 215,939 13.4% $1,619,971 2014 5,180 $ 890,352 63.9% 371,197 26.6% 132.656 32% 187 63% 9.5% $1,394,205 02776 16% According to NPD market research, in 2015, on a dollar sales basis, GoPro held 6 of the top 10 products, including the number one spot, in the digital camera/ camcorder category, and was number one in accessory unit sales with 6 of the top 10 selling accessories. In the fourth quarter 2015, on a unit sales basis, GoPro had 6 of the top 10 action cameras in Europe, includ- ing all of the top five spots in December. Global sales action camera list. Also, GoPro reported in April 2017 that NPD data indicated that the HERO line of cam- eras occupied the top three of the top five spots, on a unit basis, in the digital image industry in the United States in the first quarter of 2017. Non-U.S. markets generated 60 percent of GoPro's first quarter revenue. Between 70 and 90 percent of the HEROS camera users in China, Germany, Spain, Italy, France, and Japan were using their cameras in their local language. GoPro Product Offerings in 2017 In 2017, GoPro's action camera offerings comprised three models: HERO Session, HEROS Session, and
non 318 in 10 10 th 3 Other products in the GoPro line in 2017 inch GoPro Plus: a cloud-based storage solution the enabled subscribers to access, edit, and that content. HEROS cameras could automatically upload new photos and videos to subscribers • Oulk: GoPro's primary mobile editing app the preview and play back shots, control their GoPro cameras and share content using smartphone Camera giant Nikon announced in January 2016 that it was entering the action camera market. The company's first in its line of action cameras was the Key Mission 360, which recorded 360-degree video Part 2 Cases in Crafting and Executing Strategy HEROS Black. The HERO Session had one button controls, was waterproof to 10 meters without a sepa- rate housing, and would automatically capture video and photos right-side up even if mounted upside down. The HERO Session was small, the lightest of all GoPro cameras, and could record up to two hours GoPro cloud accounts. on a charged battery. The Session was ranked as the fourth of the 10 ranked) best action camera by PC simplified smartphone edits. Magazine in 2017 and sold for $149.99 in mid-2017. The HEROS Session was a very small camera Capture: a mobile app that allowed users to that could be operated with simple voice commands. It could record in 4K video, with IOMP photos in single, burst, or time lapse modes. The HERO5 Ses • Karma Grip: a handheld or body-mountable sion was waterproof to 10 meters, featured advanced camera stabilizer that helped achieve zero-shake video stabilization, and had one-button control. Own video, ers could purchase a GoPro Plus subscription and • Accessories: GoPro offered a large line of our upload their photos and videos directly to the cloud able, wearable, and voiceactivated accessories and review, edit, and share their content on the go. The HEROS Session placed third on PC Magazines 2017 list and sold for $299.99 in mid-2017. GoPro's HEROS Black was the company's most Profiles of Select Rivals advanced camera. The HERO5 Black had advanced in the Action Camera Industry video stabilization, was waterproof to 10 meters, had time-lapse capability, built-in Wi-Fi and Bluetooth, a in 2017 smart remote that allowed multiple camera control Sony up to 600 feet, enhanced low-light capability, and Sony competed in the action camera market with a could capture high-fidelity sound. The HERO5 Black lineup of nine cameras ranging in price from $199.99 sold for $399.99 to $599.99. The Sony X1000VR was the company's The Karma drone went on sale in October 2016 after numerous delays. Purchasers immediately top of the line and was a 4K camera with a 170 wide-angle lens and professional quality output. The noticed that the drone experienced battery overheat- ing and flight failure. Two and a half weeks after camera recorded at a high rate to give better resolu tion and better low-light pictures. Sony's AS20 and GoPro began selling the Karma, the company halted sales and announced a recall of the drone. Purchas- ASSO were the company's entry-level products and ers were given full refunds, plus, as an apology, produced high-definition video and still images, and GoPro provided purchasers a HERO5 Black camera. included SteadyShot stabilization, low-light capabili According to Nick Woodman, a defective battery was ties, and a panoramic lens. Other models included not secured in its hanger. The problem was corrected built-in stereo microphones, high-speed data transfer and Karma was released again in February 2017 to capture fast action, HDMI output for sharing video In mid-2017, the Karma was priced at $799.99 or on TVs, and wireless uploading to smartphones tablets. $1,099.99 with a HEROS included. GoPro's Omni was a virtual reality system, oper- ated with six cameras. Video footage from the cam Nikon eras could be put together to create a 360-degree video. The Omni was priced at $4,999.00 (which included 6 HERO4 Black cameras), or $1,199.99 for purchasers who already owned the cameras.
Case 7 GoPro in 2017: WW Turnbound they are Pro Polaroid entered the action camera market in 2012 cameras ranged from $149.99 to $199.99 Polaroid kwa-high-definition. The camera was dust. and temperature resistant waterproof to and included electronic vibration reduction $129.99. The company's 360-degree 1080p action de produce sharp video. Technowice reported Camera was iced at $299.99 and its 360-degree 4K dhe Key Mission 360 had the best audio quality y action camera on the market. The Key Mission was the parent camera in Nikon's family of A cameras. The Key Mission 360 captured the position on C Magazine's Best Action Cam of 2017 and was priced at $499,95. Nikon offered the Key Mission 80 at $279.95 and the Ko Mission 170 at 399.95 in mid-2017. Garmin International was far better known as a Abal leader in GPS navigation than for its action cameras however, in 2013 the company released of 2017 rankings. The PixPro had a waterproof case, produced high-quality video, could withstand drops from six feet, had an integrated display for framing shots, stereo microphones, image stabilization, a Zoom lens, built-in Wi-Fi, and could be paired with Kodak extended its line to include three 360-degree models and waterproof and shockproof SPZI. The SPZI was Kodak's lowest priced action camera at 319 d: with a line of three low priced cameras manufac tured by C&A Marketing (a Polaroid license), but sold under the Polaroid name. The first Polaroid action cameras were the XS7, priced at $69.00, the XS20. priced at $99.00, and the XS100, priced at $199.00. The Polaroid CUBE was added to the Pola- Garmin International rold action camera line in 2014. The CUBE recorded up to 90 minutes of video in HD 1080p quality. In 2015, Polaroid upgraded the CUBE to the CUBE+ which included Wi-Fi, image stabilization, is first action camera, the VIRB. The VIRB had a HD 1440p video, and an 8 megapixel still capture fea color display and was manufactured in a waterproof ture. The CUBE+ was splash-resistant, shockproof, housing so an extra protective case was unnecessary. and included a microphone, numerous mountings The success of the VIRB led to two new Garmin were available for applications ranging from bikes to helmets to dogs. The CUBE+ could stream footage action cameras in 2015-the VIRB X and the VIRB in real time and was compatible with both iOS and XE, the VIRB Ultra 30 in 2016, and the VIRB 360 Android. A Wi-Fi enabled CUBE+ could pair with in 2017. All models had GPS, Wi-Fi, and full sensor a smartphone for real-time view controls and shot support. The new models had support for Bluetooth framing. There was one control on the CUBE for data streams that allowed the use of a microphone on/off and to switch from video to still. The CUBE+ to narrate action in real time, plus a Garmin app was priced at $129.99 in mid-2017. that enabled transfer of video and photos from the camera to a smartphone and then to social media. Gauges such as altitude and speed could be applied GoPro's Declining to the video. The VIRB X was priced at $299.99, the Financial Performance in VIRB XE and Ultra 30 were priced at $399.99, and 2015 and 2016 the VIRB 360 was priced at 799.99. GoPro's expected sales for the fourth quarter of Kodak 2015 were $511 million. However, actual sales were $436 million, representing a 31 percent drop year over Kodak's PixPro SP1.priced at $199.00, was ranked year. Fourth quarter sales were negatively affected by tumber five in PC Magazine's Best Action Cameras the poor market acceptance of the HERO4 camera. Retailers cut prices on the HERO4 and the com- pany announced the end of the entry-level HERO. The results of the product realignment were charges of about $57 million to revenue, and the company expected sales revenue to drop by over 50 percent in iOS and Android smartphones. the first quarter of 2016, Compounding the company's financial problems was its increasing costs. Even though fourth quarter 2015
which indicated the seriousness of the sales and ings downturn. The company's managers failed is reverse the downturn with fiscal 2016 revenues go in 2015. The company also recorded a net loss of on to decline 27 percent to $ 1.2 billion from $1.6 Wilon $419 million in fiscal 2016 and saw its share price GoPro's operations produced mixed results in cathy 2017. While first quarter 2017 gross revenue was up 320 Part 2 Cases in Crafting and Executing Strategy decline to less than $9.00 in December 2016 GoPro's Performance in Mid-2017 sales were down 31 percent from the same period the prior year, costs of revenue decreased only 7 percent. Consequently, gross profit dropped by 58 percent from the fourth quarter 2015, resulting in a fourth quarter 2015 operating loss of $41.3 million Net loss for the fourth quarter of 2015 was $34.5 million. After the fourth quarter results were released, afterhours trading in GoPro stock was halted. When trading resumed, share prices fell by more than 20 percent. The stock price decline left GoPro's shares worth about 10 percent of their peak value of $98.47, which was reached in October 2014 GoPro faced further problems in 2015 as the man- ufacturer of Polaroid's CUBE action camera, C&A Marketing, sued GoPro for patent violation. The suit alleges that GoPro infringed on C&A Marketing's patent for its Polaroid CUBE, which was almost two years old when GoPro released its HERO4 Ses- sion. C&A Marketing asked for a halt on all GoPro HERO4 Session cameras, plus monetary damages, and all of GoPro's profit on the camera. GoPro's management provided warning guidance for investors for the first quarter and full year of 2016, by 19.1 percent year-over year, gross margin dropped to 31.4 percent from 32.5 percent in the same period in 2016. Operating income was down by 27 percent and net income decreased by 3.4 percent from the same period in 2016. The first quarter carnings release did not provide encouragement to investors with GoPro's shares closing down 8 percent to its seventh-lowest close of $8.25. Exhibit 8 presents GoPro's quarterly Statements of Operations for the first quarter of 2016 and the first quarter of 2017. EXHIBITS GoPro, Inc., Statement of Operations, First Quarter 2017 Versus First Quarter 2016 (in thousands, except per share amounts) Three Months Ended March 31, 2017 2016 % Change $ 218,614 $ 183,536 (19.11 31.4% 32.3% 32.5% 33.0% (110) bps (70) bps $ 188,215) $ 160,287) Revenue Gross margin GAAP Non-GAAP Operating loss GAAP Non-GAAP Net loss GAAP Non-GAAP Diluted net loss per share GAAP Non-GAAP Adjusted EBITDA (121.435) $ 196,798) (27.4% (37.71% $(111,150) $ (62,783) $(107.459) $ (86,740) 3.45 (27.6% $ 10.78) $ 10.44) $ (45,669) 10.78) 10.63) $ 86,771 (30.218 are: GoPro 10-0. April 28, 2017
Case 7 GoPro in 2017: Will its Turnaround Strategy Restore Profitability? cutting would make it difficult for GoPro to compete The NPD Group's Retail ried that in the United States, in the first quarter upee spots-on a unit basis in the digital image W GoPro had three of the top five-including the gory. The HERO5 Black was the top-selling tal image camera in the United States in the first curter on both a unit and dollar basis. According NPD, in March 2017, the Karma drone with a HERO5 camera, was the second best-selling drone er $1,000 in the United States on a unit basis. Although the Karma drone was achieving early mar- Se success in mid-2017, analysts were cautious about what contribution its sales would make to GoPro's verall financial situation. Although the hobby market GoPro offered guidance for the second quarter 321 Tracking Service given its cost structure and poor financial condition. of 2017, which included revenue of $270 million. +/- $10 million and gross margins of 33.5 percent. +/- 1 percent. The company intended to continue to focus on expense reduction, and forecast second quarter operating expenses at $122 million to $126 million. The adjusted EBITDA was forecast to range from a -$15 million to -$5 million. Despite the financial weaknesses, GoPro remained the leader in the action camera industry in mid-2017. The ability of its top management to craft and execute strategies to sustain its market leadership in action cameras, gain market share in drone applications, and develop future innovations would determine the success of its turnaround. ir drones was large, Chinese DJI had a commanding ad in the industry and was known to aggressively but its prices to defend its market position. Such price
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ReportAnswer #1

GoPro. Inc is a company which develops and sells small cameras and camera accesories both with in the country (United states) and internationally. Main uniqueness of their cameras was waterproof, smaller and virtually indestructible.

Business Model Analysis of GoPro:

[1] Revenue Model: (Shows the growth opportunities of GoPro)

  • Offerings: Both new and existing offerings
  • Transactions
  • Customers: Both new and existing customers
  • Price: Free, Competitive, Premium, Fremium

Lets look at the performance of GoPro:

  1. Growth of Revenue: 26.8% of growth Year on Year for GoPro
  2. COGS share of revenue: 61% of its total revenues are spending on COGS by GoPro
  3. Inventory Share of revenue: 14.1% of its total revenues are spend on inventory by GoPro
  4. Net Margins: Net margins in the year were 35.3%

[2] Business Analysis: (It is As Is Analysis)

New age business models in the Industry are transforming both customers and businesses. The starting point of business model analysis of Go Pro. Inc is Benchmarking. It can be done in the following levels:

  • Industry Benchmarking
  • Peer Benchmarking
  • Disruptors Benchmarking

Benchmarking:

Benchmarking is the contineous systematic process of measuring one's output and / work processes against the toughest competitors or those referred toughest in the industry.

In simply it can be defined as "A process where you measure your company's success against competitors to discover how to improve your performance."

The main competitive advantage of GoPro Inc by Benchmarking is:

  • In the highly competitive market there should be a contineous improvement for the company.
  • It reveals the strength and weakness in the company.
  • GoPro can measure themselves against the best industry practices.
  • Promotes superior performance by providing an organizational framework through which GoPro learn how the "best in class" do things
  • Intensive studies of GoPro lead to the identification of non-value added plans and activities for process improvement.
  • It Inspire GoPro to compete.
  • GoPro can borrow ideas, refine and adopt them to gain a competitive advantages.
  • It should be a basis for providing training to the Human Resources (HR)

[3] Operating Model: (It should be a cost optimization Opportunities for GoPro)

  • Expenses: CGS (Cost of Goods Sold), SG&A expenses, R&D expenses and other expenses
  • Assets: Both tangible and intangible Assets
  • Capabilities: Core and Adjacent

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