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TomTom: New Competition Everywhere!
TEACHING NOTE
By
Alan N. Hoffman
Bentley University
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Overview
TomTom is one of the largest producers of satellite navigation systems in the world,
With the acquisition of Tele Atlas, TomTom has become vertically integrated and also
The objectives of the company focus around radical advances in three key areas:
Better Maps: This objective is achieved by maintaining TomTom’s high quality map data
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Better Routing :TomTom has the world’s largest historical speed profile data base IQ
Better Traffic Information: TomTom possesses unique real time traffic information
TomTom achieve its mission.
TomTom’s Products
TomTom offers a wide variety of products ranging from portable navigation devices to
TomTom Go and TomTom One
devices. 3
TomTom Rider
These are portable models especially for bikers. The equipment consists of an integrated
TomTom Navigator and TomTom Mobile
These applications provide navigation software along with digital maps. Both of these
TomTom for iPhone
On August 17, 2009, TomTom released TomTom for the iPhone. “With TomTom for
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iPhone, millions of iPhone users can now benefit from the same easy-to-use and intuitive
The TomTom app for iPhone 3G and 3GS users includes a map of the US and Canada
from Tele Atlas, and is available for $99.99 USD.
The TomTom app for iPhone includes the exclusive IQ Routes™ technology. Instead of
Financial Analysis
expenses.
1. Sales Revenue and Net Income – In exhibit 2 it can be observed that from 2005 to 2007
negative totaling –€37 million. The decrease in sales can be accounted by the downturn in the
Tele Atlas, which was funded by both cash assets and debt.
2. Quarterly sales – In second quarter of 2009 TomTom received sales revenue of €368
million compared to €213 million in first quarter and €453 million in the same quarter last
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apparent that the sales do follow a seasonal trend in TomTom. With highest sales in last quarter
segment and geographic location.
Revenue per segment: TomTom’s per segment revenue stream can be divided into PNDs
the average selling price of PNDs has also been decreasing consistently. In a technology
Revenue per region: TomTom’s per region revenue stream can be further divided into
navigation industry.
3. Long term debt and Cash Assets – In 2005 TomTom was cash-rich company as is
evident from it cash versus long term debt ratio (178, 377,000/ 301,000 = 592.6). And there was
to €2.9 billion and was funded by cash, release of new shares as well as long term debt, which is
in this case a borrowing of €1.2 billion. Currently, TomTom’s debt is €1,006 million.
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4. Operating Margin – Operating margin of any company gives an idea how much a
company makes on each dollar of sales. TomTom saw a consistent increase in operating margin
trend, decreasing operating costs have become one of the firm’s highest concerns in the current
quarter. Corporation wide initiatives are taken to reduce the operating expenses under cost
5. A/R and Inventory to Sales – Exhibit 8 shows that from 2005 to 2008 A/R and
up by 10%. This inconsistency is a clear indicator of operational inefficiency at TomTom.
6. Operating Costs – As reduction in operating expenses is one their most important
financial objectives this year it becomes imperative to look at the historical trend of the same.
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Core Competencies and Competitive Advantages
TomTom’s core competencies and competitive advantage can be segmented into 3 areas:
1. Brand Name – TomTom is currently #1 in Europe in terms of market share and #2 in the
2. Strong Relationship & Long Term Contracts – TomTom’s automotive business unit
affordable navigation solutions in 2009 onwards. TomTom also has contracts with
3. Innovation – TomTom has been able to quickly develop new products and quickly bring
them to market. Some of the more recent products/services that TomTom has introduced
are:
Homer Simpson Voice – an additional feature for $12.95 that allows you to have the
TomTom Go Live – with a paid subscription allows you real-time access to traffic
Key Weaknesses
In 2008 under a competitive bidding war with Garmin, TomTom acquired Tele-Atlas for
With the economy falling into a recession in late 2008, TomTom’s sales were also
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TomTom’s growth momentum.
Lastly, our analysis leads us to believe that though the company believes in radical
innovation and has launched various successful innovative products, TomTom has become an
incremental innovator when it comes to their personal navigation devices. If you look at the
history of TomTom’s product from the roll-out of the original navigation device TomTom One
market.
Central Problem
TomTom’s central problem can be described in two-folds. First, TomTom is facing
increasing competition from other platforms using GPS technology. Two main areas that come
to mind are cell phones and smart phones. In the cell phone industry, Nokia is leading the charge
in smart phones these days are applications. Because of the ease of developing software on
platforms for smart phones, more and more competitors are coming to the forefront and
developing GPS navigation application.
For TomTom, both of these sectors might signal major change is in the horizon and that
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industry. And the reason is due to Gen Y and Gen X customers who are increasingly reliant on
their mobile phone and who will demand social networking and other connected services
integrated into their navigation experience. (Forrester Research)
market. Although, TomTom experiences some growth in the US market for 2008, they are
noticing the growth rate has not been as good as the prior years.