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Glo-bus Report Industry 14 GalaxyMotion

Arsh Vij (500828726) Chantel Neubert (500757947) Jamie McMahon (500830636) Kenneth Kalu GMS 200 - 031 April 12th, 2018

Table of Contents

Financial Performance ……………………………………………………………

pg. 2

Strategic Vision ……………………………………………………………………

pg. 6

Performance Target Forecasting ………………………………………………...

pg. 7

Competitive Strategy in Action-Capture (AC) Cameras ………………………

pg. 9

Competitive Strategy in Unmanned Aerial View (UAV) Drone ……………….

pg. 10

Competitors Analysis …………………………………………………………….

pg. 12

Strategy to Out-Compete Closest Competitors ………………………………..

pg. 13

Lessons Learned ………………………………………………………………….

pg. 15

References ………………………………………………………………………....

pg. 17

GalaxyMotion is a globalized, international company that prides itself in the production of both Action Capture (AC) Cameras and Unmanned Aerial View (UAV) Drones. As a company we strive to continuously improve our products while catering to the needs of our customers in various regions who possess different objectives. Our strong passion and contributions with regards to our Corporate Social Responsibility is another aspect that separates GalaxyMotion from our competition. Following is an industry report that covers various aspects of

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GalaxyMotion’s operations over the past six years, as well as, our forecasts for the future of our company.

Financial Performance:

Total Annual Revenue Trends: The net revenue chart below shows that GalaxyMotion’s UAV Drone resulted in increased revenues in comparison to the AC Camera. We feel that the increased advertising budget for the UAV Drone was a major contributing factor to the greater revenues from the UAV Drone. Our AC Camera revenues started to decline after year eight which may be due to the high selling price and minimal advertising budget of the AC Camera. The AC Camera revenues had been relatively stagnant in revenues over the past six years. An increased advertising budget and product improvement of the AC Camera may have achieved greater revenues. Along with this, a more competitive price of the camera may have been a better strategy to gain more sales.

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Annual Earnings Per Share Trends: We feel the increase in earnings per share was a result of the increase in price for consumers to purchase our AC Camera and UAV Drone. During year seven, GalaxyMotion greatly increased the prices of both the camera and drone, resulting in a much greater profit margin. Although the earnings per share at GalaxyMotion are very high, this also reduced the number of consumers purchasing our drones and cameras. Consumers would most likely be able to find cheaper, more reasonably priced drones and cameras similar to GalaxyMotion’s.

Trends in Annual Return on Equity Investment: After year nine, GalaxyMotion failed to achieve the expectations of investors. Since GalaxyMotion did not meet the expectations of the investors, the company may have not been utilizing shareholder’s capital. This decline in the return on equity is not good for the company and reflects that there are less assets going into GalaxyMotion as a company. This may be due to the decrease in sales volumes in result of the price increase. This decrease results in a lower return on assets.

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Trends in Annual Credit Rating: The annual Credit Rating at GalaxyMotion was very successful due in part to the fact that operating income was used to fund expansion of the company in most situations. Therefore, in future years due to this excellent credit rating, it will not be difficult for GalaxyMotion to receive loans when the company eventually decides to expand at a larger and faster rate than it has been in these previous six years.

Trends in Year End Stock Price: The decline in stock prices after the ninth year of operations at GalaxyMotion may have been due to a decrease in demand for our products. GalaxyMotion had constantly been altering

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its business practices and operations to in an effort to improve efficiency and profitability. The company may have not been stable enough for investors to want to invest in GalaxyMotion if they did not want to take a risk; reducing the stock price of GalaxyMotion. Another possibility for the decline in stock price at GalaxyMotion may have been a result of the increase in product price; less consumers began to purchase cameras and drones from GalaxyMotion. The company may have still gained more profits per unit sold; there were just less consumers purchasing our products due to the increase in prices.

Trends in Annual Image Rating: Over the previous six years of operations at GalaxyMotion, the quality of both cameras and drones was altered to find which quality rating would result in the greatest sales and revenues. Unfortunately, GalaxyMotion did not exceed the image rating that had been expected by the investor which may be a reason why the image rating of GalaxyMotion was generally lower in comparison to other companies within the industry. The tremendous amount of corporate social responsibility that GalaxyMotion took on also had a positive impact on the

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increase of the image rating of the company. For example, after year nine, GalaxyMotion became dedicated to promoting “green” initiatives the better the environment which made a positive impact on corporate social responsibility within the industry. Due to this high level of corporate social responsibility at GalaxyMotion, the company was ranked second out of nine companies within the industry.

Strategic Vision: The strategic vision at GalaxyMotion is to aim “to be the fastest growing, quality driven, camera and drone company working towards improving the overall image of the world. At GalaxyMotion, we aim to not only sell products, but to make an impact on the world through charitable contributions one camera at a time. We aim to change the image of the world not only through a high quality lens but also by helping those in need”. The overall aim of our company is to have a strong corporate responsibility structure so that customers feel that their purchase leads to a greater purpose than just their sole benefit. We want customers to feel that they are

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contributing to something bigger and better and are positively impacting those in need through their purchase. It is not only our goal to sell quality cameras and drones, but to also ensure consumers are satisfied post-purchase. We aim to be a globalized company that is popular and known worldwide. We aim to ensure employees enjoy their time at work, feel valued, and work together as a team. We do so by improving working conditions, and by promoting fair and safe employment practices each and every year of company operations.

Performance Target Forecasting: If the Globus Simulation continued for another two years, GalaxyMotion would do its best to try to expand the business greater than it has throughout the previous years. For year twelve, our target earnings per share is 8.18. It has been recognized that the differences between year six and seven, eight and nine, and ten and eleven all have similar increases in the earnings per share, whereas other years were outliers. The average difference between the three most similar increases was 0.88, therefore this number has been used to estimate the earnings per share for the next two years. The return on equity that GalaxyMotion would aim to achieve for year twelve is 21.7. This is the same percentage of return on equity as year eleven. This is the GalaxyMotion’s year twelve goal because after year eight return on equity decreased, and it is the company's goal in year twelve to stop that decline. GalaxyMotion plans to stop this decline by reducing the price at which we sell our AC Camera and UAV Drone. The forecasted credit rating for year twelve is an A+ considering that the credit rating at GalaxyMotion has been an A+ for the previous three years and the company would not take out a major loan this year. The forecasted image rating for year twelve is a seventy-five. Over the two most previous years, the image rating at GalaxyMotion had increased by four points;

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GalaxyMotion plans to keep this consistent for year twelve through the continuation of corporate social responsibility along with the overall quality of the products in which we are selling. Finally, the goal year-end stock price that would be forecasted by the managers of GalaxyMotion is 168.43. GalaxyMotion plans to stop the decline in stock prices that has occured in the past three years by reducing the price at which we sell the AC Camera and UAV Drone; similar strategy to reaching the year twelve target for return on equity. For year thirteen, the managers would set a performance target of 9.11. This goal continues adding the 0.88 from the target number of year twelve with an additional 0.05 added to slightly increase the growth rate of the earnings per share from year twelve to year thirteen. The target goal for return on equity for year thirteen is 23. Our targeted goal for credit rating in year thirteen will be the same as estimated for year twelve which is an A+. The reason behind this is the availability of funds in abundance and a good cash flow which would not result in GalaxyMotion not acquiring a loan eliminating the uncertainty of a lower credit rating. At GalaxyMotion, we set our objectives for the image rating to go up in a quicker fashion; i.e. by at least 5-6 points. To achieve this, GalaxyMotion will try and new features and improve the quality of the existing ones in both the AC Camera and Drone segment. Not only will this increase our image rating but will also add value for the consumers of our products at the same price. Lastly, in year thirteen, we aim to reach a year-end stock price of 173.50. We expect for the price decrease for consumers to purchase our products to be more recognized by year thirteen after making the change in price in year twelve. Due to this, it is targeted that in year thirteen, GalaxyMotion surpass’ the financial performance in the past two years and increases its year-end stock price.

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Competitive Strategy in Action-Capture Cameras: While GalaxyMotion prides itself in both Action Capture (AC) Cameras and Unmanned Aerial View (UAV) Drones, as a company, we decided that our main focus would be the development and advertisement of our drones. That being said, we still pride ourselves in the quality of our cameras, focusing especially on the product enhancements, including the camera housing, editing/sharing capabilities and included accessories. With these added enhancements, we strive to separate ourselves from the competition by offering our customers different enrichments compared to some other brands. With our cameras, we focused our strategy on cost efficiency, whereby we tried to minimize our operating costs while still maintaining competitive pricing. We feel that our efforts can be seen in our ability to achieve a 50.2% profit margin in our North American market as well as a 49.2% profit margin in out Europe-Africa market.

With regards to our differentiating marketing strategies for our various geographic locations, we decided to invest a bigger advertising budget in North America and Europe-Africa in comparison to Asia-Pacific and Latin America. Our reasoning behind this was due to the fact that the North American camera industry is already saturated with various different camera brands, and therefore we felt that we needed to advertise our camera more in order to keep up with our competition and reach our target audience. As well, we decided to provide a longer warranty for our Asia-Pacific and Latin American customers as 9

an added incentive for their business as we felt that with lower advertising costs in these regions we could distribute the costs in other ways that will still attract customers. Another aspect that we focused on throughout the production of both our products was achieving and maintaining a good credit rating. We feel that this is a very essential and valuable part of our company’s competitive strategy because in the future, if and when we may choose to expand, we will be in good conditions to negotiate loans with the bank, should we feel this to be necessary. A good credit rating, would likely aids us in being approved for bigger loans at lower interest rates, as well as, adding to our company value by demonstrating out reliability and ability to deal with our finances.

Competitive Strategy in Unmanned Aerial View Drone: Our strategy for our UAV drones was centered around the idea of producing high quality drones made out of advanced materials, while simultaneously ensuring that design was in accord with our target costs, allowing us to sell our drones for a competitive, yet feasible price. We decided to budget a much larger portion of our funds in advertising our drones, as this is our primary product. Since drones are still fairly new in the market, we wanted to actively work towards ensuring that people are exposed to our brand, so that when people think about drones, they think about GalaxyMotion. We focused our advertising budget on North America as this market is growing at a fast rate with new competitors trying to enter the market. According to the research firm Gartner, as highlighted in an article on Recode.net, the US drone industry grew by 60% in 2016 with its strongest company being DJI, a Chinese drone company (Glaser, 2017). With this growth margin we, as a company, want to ensure that our brand and products gain increased exposure and acceptance within this market. As well, with the strong competitor of DJI

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dominating the market we feel the necessity to aggressively advertise our drones while strategically focusing on providing high quality products with features such as its carbon fiber housing and best quality Wi-Fi. At the same time because of the smaller drone industry in our remaining markets, we decided to reduce their marketing budgets. For our pricing strategy, we priced our drones at a fair price, ensuring that our customers receive a high-quality product while still ensure positive net revenue for our company. We decided to offer higher retailer discounts for our drones, to hopefully add an added incentive for our customers to purchase our drones when they do go on sale. As a global, innovative company, we believe that giving back to our community and taking care of our plant are vital aspect of our brand and values. Therefore, another aspect of our company’s competitive strategy is focusing on corporate social responsibility, whereby we actively demonstrate to our clients that we are a socially and environmentally aware company. We have strived to achieve this by contributed to our community by making the highest charitable contributions available, being 10% of our operating profit, as well as investing in green initiatives and renewable energy programs. We also want the best for our employees, so we have continuously improved our working conditions, as well as, demonstrating a dedicated effort to ensure their safety in the workplace. These initiatives can be seen in the graphic below, showing how we have made an increasing effort to contribute to charity more every year, as well as, continuing our green initiatives, improved working conditions and supplier code of conduct. We are very proud of our companies dedication to the communities surrounding our business and the effort we have put in towards our sustainable practices and overall Corporate Social Responsibility and we plan to actively continue these efforts into the future.

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Competitors Analysis: At GalaxyMotion, the company we consider our biggest competitor in the AC Camera department in Harmonious Inc. We believe so because this company is performing impressively and has been very close in the annual leaderboards standings. The Net Sales Revenues and profits of both the companies have been identical throughout the previous financial year. Harmonious Inc.’s operations in the North American and the Asia-Pacific region has been neck-neck to with GalaxyMotion in terms of brand reputation, market share and the demand for the camera units which have proven to be the two most significant factors in running of a business. A good brand reputation and a demand for its product gives organisations a competitive advantage and is great for getting and retaining customers.

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The companies we consider to be our strongest/closest competitor in the UAV drones segment are Acorn Inc. and Innovation Inc. Both the companies have been performing extremely well and have finished on top of us in leaderboards for the last two years. Both of these companies have huge numbers in terms of sales and also have maintained their costs in respect to their revenues. Offering lower prices than ours and consistent sales have give these companies an edge over us in the last few years but this is due to the fact that the main focus of GalaxyMotion is to provide high quality product at a slightly higher costs. GalaxyMotion can definitely overcome these key points which give an edge to other companies and attain a higher position than Acorn Inc and Innovation Inc.

Strategy to Out-Compete Closest Competitors:

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Over the next two years, the company will make sure to focus more on the AC camera department as in the past several year revenues have not been increasing for this product and we want to ensure that this is changed so that our cameras continue to remain an asset for our company rather than becoming a liability. We plan to do this by looking at potentially reducing costs or analyzing the market to see if we would be able to charge more for our cameras while still remaining affordable for our customers. With regards to our drones, we want to continue to foster continued growth and revenues with this product as it has been doing well over the past several years and we want to maintain this momentum. Ways that we could do this may be to add new features or other benefits that would continue to separate us from our competition.

Our main aim would be to keep on improving our company’s image by putting in more efforts towards Corporate Social Responsibility. This would portray our image as a company which targets to satisfy the needs of the consumers while simultaneously fulfilling social responsibility and having a positive impact on the community. As we continue our production and potentially expand our operations, it is vital that we continue to ensure that the health and safety of the growing number of our employees. This is vital, along with simultaneously

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ensuring that we are doing our part to protect the environment and partake in sustainable practices. On the more financial side of improvements, GalaxyMotion will mark its objective as to focus more on sales promotion and advertising which was not given enough attention in the previous years. More promotions would help the company to extend it market area and expand its demand to the Latin American regions, where the demand for drones has started to increase. Apart from that, the company will employ a global differentiation strategy that sets our AC Cameras apart from rival brands based on attributes such as a higher P/Q rating, more models, more advertising, longer warranties, retailer support, sales promotions, or website displays. The company will also try and give their customers more value for their money either by offering discounts or by adding more features to the existing product lines. By undertaking the aforementioned steps successfully, we believe that our company is bound to out-compete its closest and strongest competitors and emerge as a top performer in this market.

Lessons L...