GoPro Case Study: Assessing the 2017 Turnaround for Profitability

This case study examines GoPro's business strategy and its attempt to restore profitability in 2017. It begins by highlighting GoPro's history, from its initial success to its subsequent decline after its 2014 listing. The analysis includes a calculation of the current ratio and gross profit margin for 2015 a...Read More

BUSINESS STRATEGY
Go Pro, as popularly known as Action Camera Company, started its operation and business under the
able guidance of Mr. Woodman. The company is also known as result of business failures of Mr. Nick
Woodman. The company has diversified itself from an action camera company to software and
drones. The company has seen its golden era with 100% growth from 2011 and 2013 and declining
thereafter. The company was listed in 2014 and was valued at $2.7 Billion.
Current Ratio and Gross Profit Margin
The Current Ratio symbolise the liquidity position of the company and is an indicator of working
capital position. It is computed by taking current asset total and current liability total of the
organisation. The idle ratio is 2:1. The formula of current ratio is detailed here-in-below:
Current Ratio=Current Asset/ Current Liability
Sl No Particular Current Asset (A) Current Liabilities (B) Current Ratio (A/B)
1 2016 587813 430739 1.365
2 2015 833243 295177 2.823
On perusal of the above, it may be seen that working capital security has removed from 2015 to 206
and liability has seen a robust increase compared to previous year and assets have declined.
Gross Profit Margin symbolise the profit earned by the company from selling the goods. The formula
for computation has been detailed here-in-below:
Gross Profit Margin: Gross Profit/ Sales
Sl No Particular Gross Profit (A) Sales (B) Gross Profit Margin (A/B)
1 2016 461920 1185481 38.96%
2 2015 673214 1619971 41.56%
Trend
The trend of the market is downward as Go Pro revenue which was doubling every year has seen a
negative growth in 2016 on account of changing technologies and market expectations. The change
is technology in recent year has driven away the demand for physical cameras and the market is
seeing a downward trend which is visible from the sales figure of the company. The sales figure for
the last 5 years have been detailed here-in-below:
Sl No Year Sales Change
1 2012 526016 124.6%
2 2013 985737 87.40%
3 2014 1394205 41.44%
4 2015 1619971 16.19%
5 2016 1185481 -26.82%
Thus, it shall be seen from above that situation has worsened since its listing and growth of 100%
has sloped down to negative 27% in 2016 impacting profits and revenue of Go Pro.

Reason for Such Downward Trend
There are multiple reasons for the downward trend of Go Pro some of which has been detailed here-
in-below:
(a) Declining Market for Action Cameras;
(b) The brand and reputation of Go Pro as hardware company and creating the name as software
company is difficult;
(c) Overcrowded content field creation;
(d) No clear way to monetise its software;
(e) Problems in Karma drone launched later in November, 2016 and withdrawn on account of
technical problems;
(f) Increased competition in the industry with many players competing and reducing margin on
sale of product;
(g) Increase global supply and corresponding decline in price per unit;
(h) Increasing use of smartphone cameras among youth compared to traditional action camera.