Business and Financial Analysis of GoPro: Strategies for Future Development

This study analyzes the business and financial performance of GoPro, a technology company. It examines the company's market situation, competitive strategy, key resources, and financial performance over the past three years. The study also provides recommendations for future development.

ACCOUNTING CAPSTONE
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Table of Contents
Introduction:...............................................................................................................................3
1. Strategically relevant factors in GoPro’s macro environment:..............................................3
1.1 PESTEL analysis about action camera in 2016:...............................................................3
1.2 Opportunities of external environment to GoPro:............................................................4
2. GoPro’s business model and competitive strategy:...............................................................5
2.1 Approach to deliver customer value to sustainable competitive advantage:....................6
3. GoPro’s key resources and competitive strategy:..................................................................6
3.1 Competitive strategy of its competitive assets:................................................................7
4. GoPro’s financial performance the past 3 years (Using financial ratios):.............................7
5. Evaluating GoPro’s business situation in 2016:.....................................................................8
6. Strategic actions to re-establish GoPro’s financial and market performance:.......................9
Conclusion:................................................................................................................................9
Reference list:...........................................................................................................................10
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Introduction:
Technology companies are rapidly growing worldwide and due to this the completion level is
also growing. This study has focused on business and financial analysis of an American
technology company GoPro, which was founded in 2002. This study has covered the business
performance and market situation of the company. Throughout the study, many ups and
downs were found, which had a great impact on company’s market share. Based on the
financial statement analysis, relevant strategies have recommended for future development of
the company.
1. Strategically relevant factors in GoPro’s macro environment:
The global market of action camera has grown-up in last few years. Therefore, the
competition level also grown. In this regard, the market situation was competitive and
favourable for all technology companies. In the words of Ogneva et al. (2018, p.125),
external environment are useful to know the market situation and that is necessary for
developing strategic implementation of the companies. In this case, the company GoPro has
gained market competitive advantage in some extent. However, due to the high market
leverage the company could not touch the competition level which was required.
For being competitive, the company has launched channel and fire TV Stick with
collaboration of Amazon. Along with this, the company has developed play station as per
customer demand, which indicates a favourable macro environment for the company. In the
middle of 2015, GoPro Company has conquered the camera market, which accelerated
company’s market share (Investor.gopro.com, 2019).
1.1 PESTEL analysis about action camera in 2016:
Political (a) Political support for market stability (b) Military risk incursion (c) the
corruption level in nation somehow disrupt the market share of the
company (d) in maximum cases national government has captured the
market of equipment supply (e) Wages are controlled by labour union,
which has great impact (d) employee benefits are changeable due to
union impact
Economical (a) This business helps in employment in nation (b) fluctuation of
exchange rate has impact on company’s economic condition (c) market
share of the company has increased due to great demand of camera (d)
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interest rates of banks and other financial institution has affect on product
price (e) the increased demand of camera has accelerated the growth of
company
Social (a) skilled labour in business for development and innovation (b) cross-
cultural impact can be seen in company’s workplace (c) high education
level also has impact on development of camera and that leads to
company’s market development
Technological (a) current technology of GoPro has developed (b) technological impact
on product and service development
Environmental (a) product labelling are eco-friendly as per company and government
law (b) the entire business process does not affect the environment (c)
change of climate has impact in business and supply of product in market
(d) company’s waste management is helpful for making a eco-friendly
business process
Legal (a) Legal structure for business contract (b) logical fortification of
property (c) different anti-trust legal structures are involved in equipment
supply (d) Price regulation are controlled by the government
Table 1: PESTEL analysis
1.2 Opportunities of external environment to GoPro:
The external environment of drone industry has developed with the development technology
in market. It has been seen that the drone technology has emerged for security purpose and
customer service as well. In this case, the companies should use the drone concept for
introducing new business process. For example, Amazon is using drone service for delivering
goods to their local customers (Schaltegger and Burritt, 2017, p.51). However, in opposed to
that Carenys and Moya (2016, p.611) stated the drone concept might be useful for security
purpose, but there might be complex situation if the drone places wrong deliver in wrong
destination due to technical error. However, for the company GoPro the drone industry might
bring advantage as they have action camera already in market.
2. GoPro’s business model and competitive strategy:
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The business model canvas of GoPro is structured here:
Figure 1: Business model of GoPro
(Source: Investor.gopro.com, 2019)
The above business model of the company has shown a competitive nature of GoPro. The
company has developed a well structure business process to compete the market situation and
has support of different global leaders like Google, YouTube etcetera. The diversified
business process and service process are company’s competitive strategy, which have
showcased through the business model. According to Macve (2015, p.139), diversified
competitive strategy is helpful for surviving in competitive market. Here the company will be
able to attract their customers in different ways.
On the other hand Busco and Quattrone (2018, p.17) have commented that competitive
strategy will complete with product and service development at customer’s perceived level.
Therefore, it is necessary for the companies to have developed products with advanced
technology so that customers can have their priority level. However, market analysis is also
necessary for checking about any up gradation in technology.
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BusinesspartnersYoutube,Xbox,Live,VirginAmericaGoogle,VislinkBusinessactivitiesProductdevelopmentBusinesstransitionResourcesActioncamera,videoeditingsoftwareVR,dronesPropositionSharingoflifestyleHDqualityvideoadsCustomersegmentsIndividualusersMarketers

2.1 Approach to deliver customer value to sustainable competitive advantage:
Towards the development with up graded technology, the company GoPro has introduced a
next generation capturing device named HERO5 and drone. These can be considered as an
approach to deliver customer value to sustainable competitive advantage, because there could
be fewer competitors present in market. According to Tsitsianis et al. (2015, p.125), less
competitive position in market might increase the profitability of the company, but in this
case, the company should not use competitive pricing strategy; otherwise, customers will not
be constant for longer time.
In this case, the company GoPro has introduced direct sales to reach their customers in USA,
Europe, the Middle East and Africa. The e-commerce business process has enlarged with
business expansion in different areas like Amazon, different sales channels, sports goods,
hunting, fishing and motor races. Along with this, GoPro has more than 50 distributors for
their product distribution.
3. GoPro’s key resources and competitive strategy:
As it has been stated that GoPro has implemented direct sales method to reach to their
customers, the company has also targeted large retailers like Amazon, Wal-Mart as their
retail partners. Choosing the partners for business expansion is very important strategy.
According to Yuan et al. (2017, p.411), a successful business can run with equal contribution
of the stakeholders of a company. Along with this, investment is also required to run a
smooth business activity. In this case, the company GoPro has used different advertisement
techniques like television ads, magazine ads, billboards etcetera.
On the other hand, GoPro has used different social media partners like face book, pinterest,
instagram, twitter, YouTube. For brand awareness, the company has used lifestyle marketing
and they engaged customers through direct relationship. Therefore, the competitive strategy
of direct sales has worked for the company. According to Kuznetsova and Kuznetsov (2017,
p.178), competitive strategy is necessary to survive in a competitive market and the company
should have knowledge about competitors.
3.1 Competitive strategy of its competitive assets:
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Company’s goodwill is an important asset for the company and it is necessary to have a good
or positive image of the company in market to have a strong goodwill (Di Fabio and
Avallone, 2018, p.28). In this case, company’s goodwill and brands are the important assets,
which emerged the market situation in a competitive manner. Here, the company has
developed several strategies to promote their brands in international market. As it has stated
that the company has developed a well structure business process to compete the market
situation and has support of different global leaders like Google, YouTube etcetera, the
goodwill and brand image of the company has developed and that can be considered as
company’s important assets. Towards the market development, the company has framed
more than 24000 displays in different outlets; this was company’s one of the most aggressive
competitive strategy (Investor.gopro.com, 2019).
4. GoPro’s financial performance the past 3 years (Using financial ratios):
Different financial scenarios have been allocated in past three years of the company. In the
words of Burstow (2015, p.44), financial analysis displays the internal and external situation
of the company and it shows whether the company is capable to survive in market or not. The
financial performance over the past 3 years of GoPro has shown below:
Profitability ratios:
Gross profit ratio= Sales−COGS
Sales
FY 2015 FY 2014 FY 2013
(1619971 – 946757) /
1619971 = 0.41
(1394205 - 766970) /
1394205 = 0.45
(985737 - 623953) / 985737
= 0.38
Operating profit ratio= Sales−operating profit
Sales
FY 2015 FY 2014 FY 2013
(1619971 – 54748) /
1619971 = 0.97
(1394205 - 187035) /
1394205 = 0.87
(985737 - 98703) / 985737 =
0.90
Net profit ratio= Profit after taxes
Sales
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FY 2015 FY 2014 FY 2013
36131 / 1619971 = 0.02 128088 / 1394205 = 0.09 60578 / 985737 = 0.06
Liquidity ratios:
Current ratio= Current assets
Current liabilities
FY 2015 FY 2014
833243 / 295177 = 2.82 823043 / 258769 = 3.18
Leverage ratio:
Debt ¿ assets ratio= Total debt
Total assets
FY 2015 FY 2014
296431 / 1102976 = 0.27 249199 / 917691 = 0.27
Debt ¿ equity ratio= Total debt
Shareholde r' s equity
FY 2015 FY 2014
296431 / 772033 = 0.38 249199 / 641204 = 0.39
The financial ratios have stated that the company used less of its assets and that can be shown
with current ratio. That means the working capital was not used appropriately. The working
capital should be used for business and product development. However, the company has
maintained a profitable figure from revenue and shareholders’ equity level also increased.
5. Evaluating GoPro’s business situation in 2016:
During the financial year 2016, it has found that the company GoPro has many competitors in
global market like Tom-Tom, Active-On, 360fly, Sony, Kodak, Nikon, Polaroid etcetera.
Along with this, all the competitors have invented latest version of action camera and
launched in global market. That means a perfect competition market has been created during
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FY 2016. However, GoPro has faced difficulties with its product line; therefore, the company
has reduced its product line and Karma drone introduced as alternate. That means the
company wanted to narrow the business process and focus on that.
6. Strategic actions to re-establish GoPro’s financial and market performance:
a) The company would need to expand their product line, because multiple product line
would create extra space for profit. For example, if the company faces loss in one
product line, other product lines can create profit and maintain the market share.
b) The company should develop their all existing products and make them competitive
enough, but launching new product is also necessary.
c) The company should focus on shareholder’s ROI and provide them as per their
perceived level. This will encourage them for more investment in next financial years.
Conclusion:
Throughout the study, it has found that GoPro has enough market space to become
competitive. However, the company would need to utilise its assets and inventory as well so
that maximum return can be earned. Apart from this, existing product development is
necessary along with new product launch. Therefore, it could be concluded that this study
would be helpful for business development in next financial years.
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