Free Essay

Tomtom Strategic Managment

In: Business and Management

Submitted By shawnkwk86
Words 1748
Pages 7
ABOUT TOMTOM: TOMTOM business units sell PNDs to consumers via retailers and distributors. Tele Atlas sells digital maps and related content and services to various industries. WORK offers professional solution for commercial fleets. AUTOMATIVE develops and sells navigation systems and services to car manufacturers and OEMs worldwide. Handset manufacturers and network operations are services with mobile navigation solution , map content and services by the business units TOMTOM and TELE ATLAS.TOMTOM financial performance: looking at profitability and financial strength. From 2005 to 2007, the company had a consistent growth in revenue sales with a corresponding increase in net income. This changed from 2008 with a decline in sales revenue of 3.7% and a net income decrease of 136%. This can be accounted by the downturn of the economy but also indicates that TOMTOM did not change its strategy quick enough to absorb the changes in the economy. Sales revenue further decreased in 2009. Also look at competitive strength, TOMTOM is suffering from continuous pressure from competition and decrease in retail prices of GPS units. GARMIN is still the leader with market share of 45% while TOMTOM has a market share of 24%. Based on the above, TOMTOM has a competitive strategy but not a total winning strategy. They need to look at the industry and be more pro-active at market changes and other threats which they identified. TRENDS: Demand for portable navigation devices have declined as traffic and mapping functions are becoming an almost standard feature in cars and mobiles. It will thus look like these device’s market has reached its saturation point. It would seem that more focused is placed on fleet tracking in the satellite navigation industry and companies need to shift focus and adjust their strategies accordingly. Other market which is still available is that of aviation and marine navigation devices. PEST ANALYSIS: POLITICAL - other issues within the legal and political spectrum are the growing use of these devices as tracking devices, this holds a threat to consumer privacy. Theft is also a concern as it is on the increase and companies need to be innovative on how to hide these devices. FCC mandates that all cellphones must be located when they call 911, manufacturers included GPS receiver. ECONOMIC: the economic environment has still not fully recovered after the huge recession in 2009. This will still have an effect on revenues. These devices are still seen as luxury and not a necessity. There is an opportunity of growth when a global economy restored. SOCIAL: rural areas have the challenge that most of its population is not technological educated and might not want or need satellite navigation devices. There is potential for growth of TOMTOM IOS and Android navigation applications with more smartphones inroad to rural areas. DEMOGRAPHICS: mature U.S and European personal navigation device markets with small potential to grow. Huge opportunities lie in other countries which need to be expanded in countries such as Asia, Middle East and Africa. TECHNOLOGY: aging satellites are becoming a huge concern and none of the companies have any control over this. This could cause the failure of the GPS system globally. GPS functionality is becoming a standard feature on all new mobile smart phones entering the market and will soon become a standard feature on any cellular phone which could cripple the portable navigation device market. SWOT ANALYSIS: STRENGTH – TOMTOM iphone app ($49.99) continues to offer highly accurate navigation and the most informative display on the market, the company’s HD traffic plug-in and celebrity voice packs also remain big draws although both are extra cost in apps purchase, “by far the best IOS nav app compared to Garmin, copilot , motion X, apple maps , and google maps Nav” Itunes customer reviews 1.reliable satellite navigation technology, 2.R&D and manufacturing capabilities, 3.reliable, well known and established brand, 4 .playful character with unique voice navigation and POI information, 5. real time traffic information and alternative routes. 6. Market leader in portable navigation devices and satellite navigation information services market in Europe. OPPORTUNITIES – 1.emerging economies with increase global footprints and penetration of these markets. 2. In-dash GPS devices. 3. Creating digital maps for developing countries. 4. Partnerships with mobile networks and car manufacturers. 5.Growing use of GPS devices such as tracking devices .6. Green movement , 7. Expansion of TOMTOM HD traffic’s footprints. WEAKNESS – 1. Products are very generic , 2. Unique selling proposition heavily technical perceived more as a feature than a benefit. 3. Devices do not have an established self-identity. 4. Marketing , it is mainly done on-line on the website. 5. Lack of distribution . 6. Operating expenses increased in 2008. 7. Saturation of EU and US market: decreasing growth rate – down 21% in European market, growth rate not as high in US in recent years. THREATS – 1. Increasing completion especially in smart phone , mobile phone market and online navigation applications. LBS APPS: LBS expected to crowd mobile devices. Price war . Free google map navigation online. 5. Changing Legislation and aging satellites that support the GPS system. PORTER 5 forces: CURRENT RIVALRY: HIGH. In the PND industry , the market has consolidated .Garmin is the leader in global market share with TOMTOM coming in second while TOMTOM is the leader in Europe and Garmin second but lagging far behind. Garmin still has the widest range of products with TOMTOM following short. However with additional partnerships lined up this could change. Although the main players have been identified and market share is mostly set , it seems that a price war has started between these companies. Base on this , it seems that it has not affected the revenue, however it is affecting the bottom line of TOMTOM. Differentiation between the products is becoming less and comparison of products is available on the web. BARGAINING POWER OF BUYERS: LOW - this is considered to be low as buyers will test different navigation systems before deciding on one. A lot of websites are dedicated to compare various navigation devices on behalf of the user and recommend accordingly. In built navigation systems are chosen by the manufacturer and the consumer does not have a say in this. Software application for mobile phones and cares are mostly chosen by the manufacture and not the actual consumer. Buyers are fragmented and do not have bargaining power , consume one unit at a time. THREAT OF SUBSITUTUES: LOW – it depends on the definition of the industry. If the industry is defined as GPS navigation products and service industry , then the substitute would be none of the GPS navigation products or services. These are: printed street directory, online map on desktop pc, tourist map brochures , public location map signage (at bus stop, train station , buildings) bus and taxi drivers , information counters. THREAT OF NEW ENTRANTS: MEDIUM- Although new entrants coming into same industry with TomTom was brings a smaller impact of their sales and revenue growth, but TomTom still able to sustain it. For example, the rapidly growth in the industry of smart phones and cell phones, it is causes many new entrants coming it and affected a little of sales and revenue growth of TomTom. With the size of its customers and technology base, distribution power and prominent brand image and recognition, TomTom was still able to achieve the competitive advantages and compete with new entrants. Additionally, the use of strategic alliances also enables TomTom to strengthen their competitive advantages and compete with the new entrants. Apart from that, the wide range of products that offering by TomTom also enables them to compete with new entrants since new entrants has lack of resources and new products offerings. Thus, it can be said the threats of new entrants for TomTom is medium or moderate. BARGAINING POWER OF SUPPLIERS: MEDIUM: A low concentration of suppliers means there are many suppliers with limited bargaining power. Low concentration of suppliers positively affects TOMTOM. This qualitative factor will lead to a decrease in costs. "Low Concentration Of Suppliers (TOMTOM)" will have a long-term negative impact on this entity, which subtracts from the entity's value. TomTom has outsources its supply chain and distribution model which enables TomTom to increase their ability to scale up or down the supply chain and limiting capital expenditure risk. Additionally, TomTom was able to mitigate their supply distribution risk of the high volume products while maintaining dual-sourcing production from two different manufacturing partners. Nevertheless, TomTom only depend on limited number of third parties and in certain instances sole suppliers for the component supply and manufacturing, thus it increases TomTom’s dependency on these suppliers and increases the powerful of suppliers.

CORE COMPETENCIES: Better maps and better routing capabilities than competitors .leading position in the European market and they are selling their product in over 40 countries .TOMTOM have various different price ranges that they offer, focusing on different customer segments. Large distribution network selling their PNDS’s to customers through retailers and distributors., continuously being innovative and signing new partnerships to increase their own market share in other countries. Pre-installed in the vehicles, partnering with many car manufacturers. R&D part in the value chain – digital mapping, routing algorithm, dynamic information. Marketing – the TOMTOM brand, variety of products and services. Operations – supplier chain partnerships and strategic contracts, vertically integrated and owning key assets. SUPPORT ACTIVITIES HRM: good HR practices ● Technology development: activities related to managing and processing information, minimizing technology costs, staying current etc ●Procurement: purchasing needs to operate includes finding vendors and negotiation best prices PRIMARY ACTIVITIES Inbound logistics: processes related to receiving, storing and distributing inputs internally (supplier relation’s key factor in creating value) ●Operations: transformation activities that change inputs to outputs sold to customers (operational system creates value) ●Outbound logistics: activities to deliver product/service to customer (collection, storage, distribution systems; internal or external of organization) ●Marketing and sales: processes used to persuade clients (benefits offered etc) ●Service: activities related to maintaining the value of product/service, after purchase

Strategic recommendations –REC 1. Diversification (concentrated growth) :Focus more on the B2B segments: - aviation industry with pilots and personal planes , business enterprise (Walmart , target , home depot) , coast guard , marine , navigation devices . REC 2. Partnership with Apple to have TOMTOM pre-install to increase core competencies of TOMTOM and sociocultural opportunity: cellphone now operates as a navigation devices. REC 3. Concentrate growth for international countries: create digital maps for developing countries and create navigation devices to expand their global market outreach and increase revenues to grow the company

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