14-Garmin Tail Wags the Dog

Garmin is having big trouble these days. As one of the leaders in the personal-navigational device business, Garmin is besieged by much larger competitors from an adjacent industry. In particular, the cell phone hand set makers are doing the same thing to GPS functions that they did to the PDA market a few years ago. They are turning GPS into one of the functions on smart phones. In 2007, 18% of mobile phones already had the GPS function embedded in them. That percentage may double within a couple of years.

But Garmin has come with an answer to this challenge: it plans to enter the cell phone hand-set market itself. This is equivalent to Goodyear entering the automobile industry. Were Goodyear to do that, it would fly in the face of the facts that the tires are a modest part of the total cost of the automobile and that there is virtually no overlap in the channels of distribution in the two industries. What would Goodyear bring to the automobile industry?

You have to ask the same question of Garmin. It is leaving a market of several hundred million dollars to enter a market where competitors are established with sales of several billion dollars, and a market that is turning competitively ugly itself. Motorola bears witness to that.

How likely is success for Garmin in the cell phone industry? How well do you think Goodyear would do in automobiles?

Posted 4/21/08

Update:

As predicted this initiative failed. Garmin could not compete with entrenched competitors. Garmin teamed up with Taiwan’s Asus to unveil the nuvifone G60 in February 2009 and it was released in the U.S. in October 2009 on AT&T. The device was powered by a proprietary version of Linux.  The Garmin-Asus combination really didn’t succeed with U.S. consumers.  Better phones were available.

Garmin was in the GPS business, selling GPS hardware and software to customers seeking those products and competing against other companies offering the same types of products. It sought to enter a smart phone business selling sophisticated smart phones and their software to customers seeking smart phone products and competing against companies who had established businesses concentrating on the smart phone market. Garmin was entering an entirely new business as a complete unknown in that business. See HERE for the definition of a business. A company who would enter a new business should consider all three aspects of the business: customers, products and competition.

Garmin’s phones were not likely to gain a great deal of share. It was also highly unlikely that they could have achieved a low-cost position in a tough market. See why HERE.

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