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GoPro Firm’s Functioning and External Environment

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GoPro Firm’s Functioning and External Environment
Table of Contents
  1. Threat of New Entrants
  2. Threat of Substitutes
  3. Bargaining Power of Buyers
  4. Bargaining Power of Suppliers
  5. Industry Rivalry
  6. Strategic Recommendations
  7. Limitations
  8. Reference List

Porter’s five forces theory will be employed to analyse GoPro and the external environment that impacts its functioning and preconditions selection of an appropriate strategy. The selected tool is an effective framework for researching the most important external factors and concluding about the possible opportunities for further evolution (Porter, 1998). Graphically, it can be represented in the following form:

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 Industry rivalry
Figure 1. Industry rivalry

The combination of these factors is vital for the functioning of any company as it affects strategic decision making and helps to forecast the further evolution of the brand. Applying the given model go GoPro, it is possible to conduct a strategic analysis of the firm, its current state, and opportunities.

Threat of New Entrants

Threat of New Entrants
Figure 2. Threat of New Entrants

GoPro operates in the highly competitive market segment characterised by the presence of giant corporations such as Sony and Apple. The fierce rivalry might become one of the factors that might distract new companies from entering the same industry and trying to offer their products to attract GoPro’s target audience. At the same time, for brands’ mentioned above, can benefit from low entry barriers as they have enough resources to enter the market with new offerings and attract clients, which increases the chance for the appearance of new active players in the industry. There are already attempts to create motion cameras and provide customers with products they might need, which means that GoPro can lose its position. Finally, the positive brand image helps the brand to remain attractive for individuals; however, the appearance of such iconic giants as Apple can change the balance. It means that the threat of a new entry is at the medium level.

Threat of Substitutes

Possible Substitutes:
Smartphones, unmanned aerial vehicles, similar devices.
Smartphones become an integral part of people’s lifestyles and acquire new functions, including improved cameras and the ability to record HD video. For this reason, they might raise the level of the threat. At the same time, there is a tendency towards the increase in the use of unmanned aerial vehicles and their popularity among users. Finally, there are devices similar to GoPro. However, they might demand additional equipment. Threat
High
Price Smartphones that can compete with GoPro usually belong to premium class and are more expensive. Unmanned aerial vehicles are also costly and demand additional equipment to function appropriately. Low
Attractiveness All mentioned substitutes require a high level of skills to make high-quality shots, which decreases their attractiveness among customers. Additionally, GoPro is a known brand that occupies a specific niche and is known for its convenience. It helps to hold an advantageous position if to compare with rivals. However, GoPro also lacks some important functions that help to monitor the current state of the health, heart and respiratory rates, which might limit the company. Low

Bargaining Power of Buyers

Bargaining Power of Buyers
Figure 3. Bargaining Power of Buyers

Buyers are mostly satisfied with the services and products offered by GoPro. It is evidenced by the fact that the company remains one of the leaders in the industry of action cameras. Additionally, at the moment, there are no alternatives or other brands that have similar offerings, which results in GoPro’s dominance and its ability to precondition the evolution of the sphere. The absence of claims related to the product, the overall high level of clients’ satisfaction, and their loyalty to the brand reduce their bargaining power (David, David and David, 2016). It means that the company becomes more flexible in its decision-making and strategy selection (Baye and Prince, 2016). GoPro can benefit from the given situation as it also creates the basis for the introduction of new devices and the increased level of sales (Hoyer, Maclnnis and Pieters, 2017). The weak strength of buyers can also demonstrate the effectiveness of the current strategy and its ability to affect the industry.

Bargaining Power of Suppliers

GoPro remains critically dependent on its suppliers as at the moment the company does not produce the core technology needed for the functioning of its action cameras. For this reason, it relies on other companies that can provide the brand with the demanded hardware. The adherence to this pattern introduces a certain vulnerability and increases the bargaining power of suppliers, such as Ambarella and Qualcomm (Jarzabkowski and Wolf, 2015). They can place additional demands to the company or insist on the increased payments for their products. The high bargaining power of suppliers introduces the need for specific solutions to minimise the risk of failures and inability to provide clients with demanded products (Easterby-Smith, Thorpe and Jackson, 2018). For GoPro, it means the need for extra suppliers to guarantee the effective supply chain management and the absence of pauses preconditioned by the suppliers’ inability to provide the needed item.

Industry Rivalry

The investigation of the external environment shows that GoPro operates in a competitive environment because of the attractive nature of technologies and their increased popularity in the modern world. The rivalry between competitors remain high as such brands as Sony, Apply, Panasonic, Canon, Nikon, and Samsung also offer individuals with cameras. Considering their potential entry to action cameras’ segment, it is possible to conclude that the industry rivalry will become high, and there will be the need for additional competitive advantage.

Strategic Recommendations

Regarding the results of the analysis, it is possible to offer two basic recommendations. First of all, GoPro will benefit from cooperation with more suppliers or the establishment of its own production to guarantee the uninterrupted supply of the core technology and improve its supply chain management. In accordance with the modern approach to strategic planning, delays on a certain stage might precondition the overall failure of the company because of its inability to provide needed products in time (Jarzabkowski, 2005). For this reason, for GoPro, it is fundamental to reconsider its approach to working with suppliers and master the technology to improve logistics and supply chain management. Additionally, it will help to reduce the bargaining power of suppliers as at the moment they might affect the work of the company because of the lack of alternatives to their products.

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The second recommendation presupposes the improvement of products that are offered to clients at the moment with the primary goal to introduce new functions, such as the ability to monitor the athletic performance and health status. The previous analysis shows that smartphones dominate the high-tech industry, and they provide multiple functions to their owners. Additionally, as in the case with Apple or Samsung, they might be supported by electronic watches that offer information mentioned above. Other sports cameras can also have this function. For this reason, to minimise the threat of substitution and ensure that stable level of customers’ interest to their brand, GoPro has to launch a new line of action cameras that offer clients an opportunity to monitor their successes or collect other information important to them.

Limitations

The analysis rests on the central assumption that the external environment is fundamental for the selection of business strategy. At the same time, its research will help to improve the understanding of the company and help to conclude about its performance. Regarding this framework, Porter’s Five Forces analysis was selected as sufficient analysis tool. However, one of the main limitations of the approach is the disregard of internal factors peculiar to a company (Paroutis, Heracleous and Angwin, 2016). The model acknowledges the power of external influences; however, no attention is devoted to operations and a climate within a company, which is also vital for the improved understanding of perspectives and opportunities for the further evolution. For instance, the resource-based view (RBV) accepts the idea that the competitive advantage can be generated only due to specific internal capabilities, which means that their enhanced comprehending is vital for outcomes. However, Porter’s model focuses on other aspects, avoiding consideration of the internal environment.

Moreover, the model adheres to the idea that relations between organisations within the same industry can always be determined as a rivalry. It ignores the idea that there are some examples of cooperation between brands that might help to generate a competitive advantage and dominate the segment (Cooper and Schindler, 2013). The paradigm presupposes that companies always occupy resources and market niches of rivals, while the opportunity for long-term partnership is underestimated (Smets, Greenwood and Lounsbury, 2015). In such a way, the selected tool has several limits that might impact the relevance of data and recommendations provided regarding the acquired information.

Altogether, the strategic analysis of GoPro shows that the brand enjoys a stable position in the market. There is a moderate threat of new entrants and substitutes, which provides the brand with opportunities for further evolution. However, the outstanding bargaining power of suppliers and the overall high level of rivalry peculiar to the market might limit GoPro in its choice of future strategies. It is vital to solve the problem with suppliers to guarantee a high level of independence and avoid the collapse caused by the problematic logistics of supply chain management failures.

The fierce rivalry peculiar to the modern business world preconditions the need for competitive advantage. For this reason, there are multiple approaches to its generation and, at the same time, there are several frameworks that explain factors vital for the achievement of the desired goal and dominance (Hitt, Ireland and Hoskisson, 2013). For the resource-based view, the capabilities of the company are a fundamental aspect of the company’s functioning as they guarantee the existence of multiple options for the future evolution and strategies that can be selected to ensure the further dominance in the market and the ability to compete with direct rivals.

The RBV differentiates two types of assets, such as tangible and intangible. The first category includes physical objects that can be bought on the market, and which are less important for the generation of competitive advantage (Wernerfelt, 2016). Intangible assets do not have physical value and may include reputation, trademarks, intellectual property; they are fundamental for the achievement of success and the ability to struggle with other companies (Kotler and Keller, 2015). The RBV also assumes that all resources are heterogeneous, or they vary across organisations, which preconditions difference in used strategies (Wernerfelt, 2016). Moreover, they are immobile or cannot move from one firm to another in short periods (Wernerfelt, 2016). These central views determine the paradigm and can be used to evaluate the functioning of companies and their potential.

Critically discussing the RBV, it is possible to accept its idea of the critical role of capabilities and resources in the modern business world. The dominance of giant multinational corporations with almost limitless resources can prove the idea that capabilities determine the competitive advantage and the ability to succeed (Regner, 2015). For instance, Apple is the iconic leader of the smartphone industry with high sales in different regions. The company possesses significant tangible and intangible resources as it has multiple factories, over 500 retail stores, and, at the same time, owns many patents, intellectual property, and has skilled personnel. That is why it manages to respond to the newest trends or threats by mobilising its resources and selecting the best possible strategy, that is unavailable to other, smaller brands. The course might also presuppose the acquisition of promising start-ups by using available financial resources to benefit from new technology and, at the same time, eliminate a potential rival. Siri was firstly an app owned by other developers, was bought by the brand, same as other technologies and patents. In this case, the availability of significant physical resources contributed to the empowerment of Apple’s position in the market and generation of competitive advantage via the introduction of a new technology that can be attractive for potential users.

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In such a way, RBV can be applied to modern giant corporations that dominate the global market as they utilise their resources to guarantee that competitive advantage will be generated. The available capabilities impact the choice of strategy and decision-making as they offer more options. RBV also includes such concepts as value, rareness, inimitability, and organisational support meaning that resources should enable a firm to implement desired strategies, be limited and available only for few actors, remain hard to substitute, and supported by the correct organisation (Regner, 2015). They help to evaluate the firm’s functioning and its ability to achieve success. This task can be accomplished by using a specific VRIO framework that is considered a potent tool for the evaluation of the internal environment of the organisation.

The possession of the resources mentioned above is crucial for the organisational success and the further rise of the brand. For this reason, the employment of VRIO analysis is vital for the correct understanding of the current state of the firm, determination of the existing advantage, and selection of possible strategies for further evolution. The VRIO research presupposes that a researcher checks if a resource is valuable, rare, costly to imitate and organised to capture value (Wernerfelt, 2016). If all these qualities are present, it is possible to conclude about the existence of a substantial competitive advantage that serves as the guarantee of the firm’s success. At the same time, if some of these are absent, the competitive parity exists. In such a way, the VRIO framework becomes a continuation of a research-based view presupposing that companies with significant resources and capabilities dominate the market and have outstanding opportunities for future evolution.

However, RBV also has some limits as it has no managerial implications or disregard the role of unique strategy or offering in generating resources needed to evolve (Johnson et al., 2007). For this reason, this applicability remains situational and depends on the case. For instance, VRIO paradigm can be employed as a part of SWOT analysis to investigate the internal aspects of the company’s functioning and determine its strengths and weaknesses regarding the resource-based view. It will demonstrate the relevant state of a selected firm, its capabilities, and factors that can be employed to preserve leading positions. At the same time, the complete image of the up-to-date business environment can be acquired only by utilising some other tools, such as PESTEL or Porter’s forces to collect data about the external factors affecting the organisation at the moment (Wernerfelt, 2016). It means that RBV and VRIO possess limited effectiveness in terms of the in-depth strategic analysis as this sort of data is not sufficient to make conclusions.

Altogether, RBV can be considered an effective approach to evaluate the internal environment of a company and conclude about its capabilities and available resources. VRIO analysis is a potent investigation tool that can be employed to determine if there is a competitive advantage that is achieved due to physical or other factors. However, the major limitation of RBV is its reduced practical utility and the inability to consider external factors, which reduces its value. To acquire the complete image of the existing environment, it should be supported by other frameworks that are focused on external factors and contribute to the enhanced understanding of relevant market conditions.

Reference List

  1. Baye, M. and Prince, J. (2016) Managerial economics & business strategy. 9th edn. London: Mcgraw-Hill Education.
  2. Cooper, D. and Schindler, P. (2013) Business research methods. 12th edn. New York, NY: McGraw-Hill Education.
  3. David, F., David, F. and David, M. (2016) Strategic management: a competitive advantage approach, concepts and cases. 16th edn. New York, NY: Pearson.
  4. Easterby-Smith, M., Thorpe, R. and Jackson, P. (2018) Management and business research. 6th edn. Thousand Oaks, CA: Sage Publications Ltd.
  5. Hitt, M., Ireland, D. and Hoskisson, R (2013) Strategic managment: competitiveness and globalization. 10th edn. Thousand Oaks, CA: Cengage Learning.
  6. Hoyer, W., Maclnnis, D. and Pieters, R. (2017) Consumer behavior. 7th edn. Thousand Oaks, CA: Cengage Learning.
  7. Jarzabkowski, P. (2005) Strategy as practice: an activity based approach. London: SAGE Publications Ltd.
  8. Jarzabkowski, P. and Wolf, C. (2015) ‘An activity theory approach to strategy as practice’, in Golsorkhi, D. et al. (eds.) Cambridge handbook of strategy as practice. 2nd edn. Cambridge: Cambridge University Press, pp. 165-184.
  9. Johnson, G. et al. (2007) Strategy as practice: research directions and resources. New York, NY: Cambridge University Press.
  10. Kotler, P. and Keller, K. (2015) Marketing management. 15th edn. New York, NY: Pearson.
  11. Paroutis, S., Heracleous, L. and Angwin, D. (2016) Practicing strategy: text and cases. 2nd edn. London: SAGE Publications Ltd.
  12. Porter, M. (1998) Competitive advantage: creating and sustaining superior performance. New York, NY: Free Press.
  13. Regner, P. (2015) ‘Relating strategy as practice to the resource-based view, capabilities perspectives and the micro-foundations approach’, in Golsorkhi, D. et al. (eds.) Cambridge handbook of strategy as practice. 2nd edn. Cambridge: Cambridge University Press, pp. 301-317.
  14. Smets, M., Greenwood, R. and Lounsbury, M. (2015) ‘An institutional perspective on strategy as practice’, in Golsorkhi, D. et al. (eds.) Cambridge handbook of strategy as practice. 2nd edn. Cambridge: Cambridge University Press, pp. 283-301.
  15. Wernerfelt, B. (2016) Adaptation, specialization, and the theory of the firm: foundations of the resource-based view. New York, NY: Cambridge University Press.

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