Analysis of Tomtom free essay sample

Analysis of TomTom Several years ago, it was so difficult for people to reach a place that they never got. The traditional paper maps were the useful tools for people travel. However, it is so dangerous for drivers look at the map while they drive. Also, if the road is being fixed, it is hard to plan another way to destinations. Over the society develops, there are more and more new technologies coming out. A great innovation gets into our life—the personal GPS. It gives many conveniences to us. In this assignment, we will launch the analysis of a well-known GPS company with the management knowledge. In this paper, we will discuss TomTom in the following topics: the summary of TomTom base on the case, the problems of TomTom face in the market, the SWOT of TomTom have, the recommendation of TomTom in my opinions, and the questions of TomTom’s presentation team. We will write a custom essay sample on Analysis of Tomtom or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page Summary of the TomTom’s Case By reading the case â€Å"TomTom New Competition Everywhere! † by Alan N. Hoffman, it discusses TomTom in several topics. First of all, it briefly discusses about TomTom. It tells us that TomTom is an Amsterdam-Based company that majorly produces navigation services and devices. TomTom Go and TomTom One for cars, TomTom Rider for bikes, TomTom Navigator (digital maps), and TomTom for iPhone are their major product’s lines. It has a large market share in U. S. and European markets. Next, it talks about what TomTom recently did such as acquisition of Tele Atlas. After that, Hoffman explains TomTom’s five major products in details. Then, he states TomTom’s background such as its history, customers’ groups, resources and capabilities. He highlights the acquisition of Tele Atlas, which is a digital mapping company. In addition, Hoffman points out that the competitions of TomTom. He divides those competitions in the two groups, which are the new and traditional competitions. And the new competitions are majorly from cell phones, ATT Navigator, Online Navigation App, Build-in car navigation, and physical maps. Another section is TomTom’s Internal Environment. There are three aspects he mentions. They are finance, marketing and human resources. Finally, he indicates the issues that TomTom concerns. Problems of TomTom faced Based on the case, even through TomTom is one of the most successful GPS companies in the world, there are several problems TomTom has to face. First of all, the demand of personal navigation systems gets saturated. In the past few years, many people have got their personal GPSs in American and European markets. It causes that sales growth rate declines. In the management views, the personal navigation system industry has got into mature stage, which the market is saturated, demand is limited to replacement demand, and growth is low or zero. As the case states, TomTom’s sale growth rate has decreased since 2008. Furthermore, by researching, the revenue of TomTom falls to 1,273,217 from 1,521,083 in Euro dollars by the end of 2011. From the annual report, we can find that 74% of revenue was contributed by EMEA region (2010: 70%) while North America and Rest of World (mainly Asia Pacific) accounted for 20% (2010: 25%) and 6% (2010: 5%) respectively. Compared to 2010, revenue in the EMEA region and North America decreased by â‚ ¬133 million and â‚ ¬124 million respectively. Second, as mention above, TomTom is at the maturity phase within its industry. Competition for market share develops, Garmin, which has 45% of the market share while TomTom only has 24%, and Magellan has 15% of the market share. These two major competitors have their own superiorities to against TomTom, and drive TomTom has to work better and increase its cost to maintain or develop its market share. Therefore, the threat of competitive rivalry within the current industry is very high. In addition to new technology, there are more and more drivers have the navigation function. As the case states, cell phones are one of new competition for PND. Most cell phones especially smart phones can be used as a GPS. The telecommunication services companies such as ATamp;T, also provide the navigation services. Furthermore, we can get the navigation service from other ways such as Google maps, and the car manufacturers have put GPS into their vehicles. They lead the high threat of substitutes. Third, the uncertain issues in the legal area, which mean that PNDs might be limited or restricted to use in the future. As the case mentions, the NPD will be banned by legislation because it has the negative effects on driving safety. The reason of legislative banning of PND on the automobiles is the navigational systems make drivers distractive during they are driving. Some ountries such as Australia are worried about the effects of GPS on driving increasingly, so it has a high possibility that navigational systems is banned by law in the future. Another legal issue caused by GPS is using navigational devices as tracking tools inappropriately. The other issue TomTom faces is their satellites need to be replaced or fixed before they have problems but it is uncontrollable for TomTom. Therefore, these legal issues that TomTom have to face might lead TomTom changes their business strategies or develops the new technologies in the future. In short, by reading he case, there are three major issues TomTom has to face. They are decrease in sales growth rate, high threat from substitutes and current competitive rivalry, and uncertain issues in the legal area. SWOT Analysis of TomTom Strengths Based on the case, TomTom is one of the largest PND companies in the world. It has large market share in both of European and American market within the navigational industry. As a market leader, TomTom has a powerful customer and technology base. It does well in distribution. Also, TomTom has an outstanding brand image and recognition. As Hoffman highlights, the acquisition of Tele Atlas had significant improvements of TomTom. It made TomTom different from its major competitor, Garmin, which its executives decided to have a long-term partnership with its supplies rather than acquiring Tele Atlas because they thought the acquisition of Tele Atlas was too expense. By acquiring Tele Atlas, TomTom decreased its dependency on supplier. TomTom could control the producing process more easily. In the corporate-level strategy, TomTom chose the strategy of vertical integration. It helped the TomTom in enhancing product quality and improved scheduling. Moreover, the powerful workforce of 3300 employees from 40 countries gives TomTom has more opportunities and competitive power in global market. The case points out that the revenues of TomTom have grown from â‚ ¬8 million in 2002 to â‚ ¬1. 674 billion in 2008. And then, TomTom has multiple products lines that have a wide coverage to meet customers’ needs of navigational hardware and services. It keeps developing on not only the traditional navigational devices, nut also the application on other devices, such as cell phones and tablets. It does well in monitoring the movement of market and reacting on time. As people increase the demand of all-in-one devices, TomTom makes their navigational software as applications that can be compatible with other devices. As Corinne Vigreux, Managing Director of TomTom, said, With TomTom for iPhone, millions of iPhone users can now benefit from the same easy- to-use and intuitive interface, turn-by-turn spoken navigation and unique routing technology that our 30 million portable navigation device users rely on every day. In addition, Hoffman mentioned there were three unique resources of TomTom by 2008. They were routing algorithms, digital mapping technology, and automotive partnerships. Today, TomTom have more strength. For example, it extended its relationships with its existing partners Renault, Fiat and Mazda. It means that TomTom became a supplier of built-in navigational system for these manufacturers. TomTom provided the modified navigational systems to meet these car manu facturers. Weaknesses Even though there were many benefits from the acquisition of Tele Atlas, it had some negative effects. For example, long-term debt, TomTom had enough cash in account before the acquisition of Tele Atlas. In order to acquiring Tele Atlas, TomTom had to release of new shares as well as long term debt, which was a borrowing of â‚ ¬ 1. 2 billion. It was not good for financial structure. It increased the operating risks. Since TomTom choose the strategy of vertical integration, disadvantages that arise when demand is unpredictable. In TomTom’s case, sales revenue decreased by 3. 7% and the net income decreased by l36% in 2008. The acquisition of Tele Atlas increased cost structure. The high operating expense decreased operating margin. As the case states, it came down to 13% by the end of 2008 compared to 26% in 2006. Opportunities Since TomTom stands second in the market share of America, it has a large potential sales growth rate. Also, as the increased demand in vehicles in developing countries, such as China, it is a great opportunities for TomTom to extent its business in those areas. The large demand in those countries can make TomTom more profitable. Within the navigational industry, TomTom, as one of dominant player, has large amounts of resources to invest in the developing country. It helps TomTom build the block for the potential new entries, so creating digital maps for developing countries and creating navigational services can be a great opportunity for TomTom. Then, the increasing demands on the applications of navigation on the iOS and Android platforms, it also is a opportunity for TomTom. In the current market, customers trend to use their own mobile phones as a navigational device. Since TomTom has launch Tom-Tom for iPhone on 2009, it has a great experience on this type of application, it allows TomTom to develop application on other platforms. Another opportunity is to diversify its business structure that based on its current business. For example, they entered the car lease industry. TomTom provides the services, which are called TomTom Business Solutions, can help protecting environment based on the driver’s driving behavior and fuel efficiency, then giving suggestion to drivers. This is the opportunity for TomTom move their business from a navigational devices manufacturer to a navigational relevant service. Threats In Hoffman’s views, the threats for TomTom are majorly from two ways. The first threat is from the legal restriction. For example, Egypt, which restricted the usage of GPS since 2003, was worried about the security problems. Since security and terrorism concerns are increasing in the world, the navigational devices can be used as a tool for terrorists. In the global market, there are more and more countries limit or restricted the navigational devices. Otherwise, some countries, such as China, is limited the navigational relevant information for foreign companies due to the security concerns or countries’ secrets. It is hard for TomTom get into such those kinds of countries. How the policies change in global market can be a threat for TomTom. Moreover, the environmental protection is also a threat for TomTom. In fact, it affects on not only TomTom, but also the navigational industry as a whole. It is a trend that to encourage reducing to use of vehicles in order to reducing the CO2 emissions. The public transmissions will be more popular. It means that the demand of PNDs trends to decrease in the future. Recommendation By reading the case and doing further researches, TomTom is a great navigational devices manufacturer, but there are issues TomTom has to face. In my opinion, I recommend TomTom should invest in more areas other than navigational manufacturing industry. As I mentioned before, the navigational industry has got into mature stage in American and European market, so there is a little space for TomTom expanding. Based on this, I think TomTom should move its business to providing navigational service. For example, providing navigational information for people how they can get the public transmissions. Next, to against the other two major competitors, TomTom should be focus on the customers’ groups who will replace their PND soon. As the new features come out and the navigational information updates, customers who have had their GPSs for a while plan to change their current one. Therefore, TomTom should spend more resources on Ramp;D to find out what this group of customers’ needs in order to gaining the market shares. For example, the real-road view, it likes the Google street view. Driver can see the real street view within 0. 1 miles. It can help drivers avoid accidents. The third recommendation is to avoid uncertain issues from legal areas. TomTom should make a good prediction. TomTom should pay attention on the movement of policy changes and make correct reaction on time. Questions for Presentation Team of TomTom 1. How will TomTom change its business strategies in the future? 2. What are kind of business strategies suitable for TomTom in the future? 3. How does TomTom avoid the potential adverse legislation and restrictions?