31-1
CASE 31
TomTom: New Competition Everywhere!
I. CASE ABSTRACT
TomTom, an Amsterdam-based company that provides navigation services
and devices, leads the navigation systems market in Europe and is second in
the United States. Its most popular products include TomTom Go and TomTom
One for cars, TomTom Rider for bikes, TomTom Navigator (digital maps), and
TomTom for iPhone—its most recent release.
The company attributes its market leadership to its technology, large
customer base, distribution power, and prominent brand image. But as the U.S.
Decision Date: 2009 FY Sales: 1,480,000 Euros
FY Net Income: 231 million Euros
II. CASE SUBJECTS AND ISSUES
Situation Analysis Environmental Scanning
Strategy Formulation Competitive Advantage
Strategy Implementation Threat of Substitutes
III. STEPS COVERED IN STRATEGIC DECISION–MAKING PROCESS
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TomTom: New Competition Everywhere!
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IV. CASE OBJECTIVES
1. To discuss the future of the Personal Navigation Device Industry.
2. To discuss the growth of navigation devices in cell phones.
V. SUGGESTED CLASSROOM APPROACHES TO THE CASE
1. This is an excellent case for instructor–led discussion.
2. This is an excellent case for an exam or written case analysis.
VI. DISCUSSION QUESTIONS
1. How important was TomTom’s acquisition of Tele Atlas to their long–
term strategy?
2. How important is it for TomTom to grow their built–in automobile
navigation business?
3. If Google offers free navigation systems with their Android phone
operating system, will demand for PNDs decline?
CASE 31
TomTom: New Competition Everywhere!
VII. CASE AUTHOR’S TEACHING NOTE—Not Available
VIII. STUDENT STRATEGIC AUDIT
TomTom: Student Strategic Audit
I. Current Situation
A. Current Performance
1. One of the largest producers of satellite navigation
systems (i.e. personal navigation devices, or “PND”).
2. Revenues have grown from €8 million to €1.674 million
between 2002 and 2008.
B. Strategic Posture
1. Mission (clearly stated, appropriate to the company):
navigation based information services and devices; competes
in navigation industry.
2. Objectives (clearly stated, aligned with the mission):
focuses around radical advances in three key areas:
C. Strategies (consistent with the mission and objectives)
1. Maintain the industry–leading position through Research and
Development (R&D) innovations.
2. Add value to products by mergers and acquisitions.
D. Policies (not explicitly mentioned in the case; consistent with
the mission, objectives, and strategies)
1. Committed to innovation.
2. Concern for user–friendly navigation experience.
II. Corporate Governance
A. Board of Directors
1. Publicly traded on the Amsterdam Stock Exchange; majority
of shares owned by the four partners.
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TomTom: New Competition Everywhere!
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2. Information directly related to the BOD is unavailable in
the case.
B. Top Management
1. Peter–Frans Pauwels and Pieter Geelen, founders (1991)
a. Educated at Amsterdam University.
b. Started company as software development for handheld
computers.
2. Corinne Vigreaux, Managing Director/3rd partner (1996)
3. Harold Goddijn, 4th partner (2001)
a. Former CEO of Psion.
4. Mark Gretton, Hardware Team Head (2003)
8. Strategic management approach
a. Key acquisitions and partnerships.
b. Increasing revenue base through geographical
expansion.
c. Diversifying its product and service portfolio.
d. Ensuring products and services are easy to use and of
high quality.
III. External Environment: Opportunities and Threats
A. Societal Environment
1. Economy
a. Worldwide economic downturn (T).
b. Mature U.S. and European PND market (T).
I. Decreasing sales growth rate for PND, 2005–
2008(T).
II. U.S. and European sales rate decreased, but
worldwide sales rate increased (O).
2. Technology
a. Competition from devices using different platforms
are adopting GPS technology (T).
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TomTom: New Competition Everywhere!
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c. Advanced in–house routing algorithm (O).
d. Creation of digital maps for developing countries
(T).
3. Political—Legal
a. FCC regulation requires all cell phones to have GPS
receivers, 2005 (O/T).
b. Proposed Australian legislation bans all automobile
navigation devices (T).
c. Proposed Canadian legislation would only allow built–
in automobile navigation devices (T).
d. Create PDN lobbying group, similar to the
countries (T).
4. Sociocultural
a. Consumers preferences heading towards all–in–one
devices (O/T)
B. Task Environment (Industry)
1. Threat of new entrants: Moderate
a. Strategic acquisitions of key players hinder new
competition (O).
2. Bargaining power of buyers: Strong
a. Wide array of customers increase product demands and
customization (T).
b. Large customer base (O).
3. Threat of substitute products or services: Strong
a. Smart phones and cell phones incorporate similar GPS
navigation systems (T).
b. Online and built–in navigation services (T).
4. Bargaining power of suppliers: Strong
a. Supply chain and distribution is outsourced to
CASE 31
TomTom: New Competition Everywhere!
b. TomTom and top two competitors account for 85 percent
of total market (T).
6. Relative power of unions, governments, special interest
groups, etc.: Moderate
C. Summary of External Factors—see EFAS table, Exhibit 1.
IV. Internal Environment: Strengths and Weaknesses
A. Corporate Structure (not explicitly stated)
1. Business Units: supported by two shared development centers
a. TomTom
b. Tele Atlas
c. Work
d. Automotive
2. Regions:
a. North America
b. Europe
B. Corporate Culture
1. Based on: success of a business means success for the
individual employee.
2. Talent development programs built around culture.
C. Corporate Resources
1. Marketing
a. Strategy: high quality and ease of use solutions.
I. Consistent with clearly stated fundamentals of
navigation, mapping, routing algorithm, and
dynamic information (S).
b. Focus on prominent brand image and diversifying into
different market segments to continue focus on brand
name (S).
CASE 31
TomTom: New Competition Everywhere!
• Trusted brand and long–time supplier in
digital mapping with thirty years of
III. Partnership with Renault and Avis to increase
visibility (S).
IV. Range of PND offerings and prices (S).
• Devices: TomTom One, TomTomXL, and TomTom
GO Series.
V. B2B advertising direct to retailers and
distributors (S).
• Investment in official blog and search
optimization (S).
VI. No B2C advertising
• Lower overhead expenses (S).
• Only 21 percent of U.S. adults own PNDs
while 65 percent U.S. adults neither own
or use PNDs.
c. Targeting focus changed from early adopters to early
majority (W).
I. Loses early adopter competitive advantage (W).
d. Improves product performance and innovation by
working with customer to share updates and future
improvements (S).
I. Sees effective customer interaction essential
to long–term goal of innovation (S).
e. Strategically placed to gain first–mover advantage
created by rapid expansion of geographical coverage
(S).
I. Geographic expansion is key to increasing
global market share (S).
2. Finance
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TomTom: New Competition Everywhere!
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a. Objective: diversify and become a broader revenue–
based company.
I. Goal to increase revenue base, in terms of
geographical expansion, but also to diversify
product and service portfolio.
II. Goal to reduce operating expenses through:
• Staff reductions.
b. Sales
I. Yearly growth in sales revenue and net income
in 2005, 2006, and 2007 (S).
II. Net loss in 2008 due to economic downturn and
increase of term debt and costs related to
acquisition of Tele Atlas (W).
III. Quarterly growth reveals seasonal trend, with
highest sales in last quarter and lowest in the
first quarter.
• 2008 sales in Q1 were lower compared to
2007 (W).
c. Revenue per segment divided into PND, services, and
content.
Q1’09 Q1’08 Q4’08
Revenue (in € millions)
PNDs
172 264 473
I. Decreasing revenues of 40 percent in PNDs—1st
quarter of 2008 compared to last quarter of
2009 and down 68 percent sequentially quarter
over quarter (W).
• Due to the compounding effect of the
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TomTom: New Competition Everywhere!
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• However, competing on price is part of
doing business in a highly competitive
and dynamic marketplace (S/W).
d. Operating Margin decreasing in 2007 and 2008 after
increase between 2005 and 2006 (W).
e. Revenue per region divided into Europe, North
America, and rest of the world.
Q1’09 Q1’08
Revenue (In € Millions)
I. Revenues declining in Europe 22 percent and 52
percent in North America in Q1 2009, compared
to Q1 2008 (W).
II. Revenue from rest of the world up 90 percent in
Q1 2009 over Q1 2008 (S).
f. Debt and Liquidity
I. Long–term debt increased between 2005–2009.
• Steady increase yearly between 2005 and
II. Cash Assets
• Cash rich and increase in cash assets
between 2005 and 2007 (S).
III. Borrowings
• No borrowings between 2005 and 2007 (S).
• Emergence of borrowings in 2008 (W).
3. Research and Development
a. Structural and strategic investment (S).
CASE 31
TomTom: New Competition Everywhere!
I. Resulting in new and better products and
services (S).
II. Remaining cutting edge (S).
b. Focus on centralizing R&D resources to create scale
4. Operations and Logistics
a. Clear focus always on innovation (S).
b. Operational objective: to channel all resources and
core capabilities to create economies of scale (S).
I. Aligned with long–term strategy (S).
c. Supply chain and distribution model outsourced.
I. Decreases CapEx risks (S).
5. Human Resources Management
a. Focus on individual employee’s success (S).
b. Emphasis on employee competency via talent
development programs (S).
6. Information systems
a. None mentioned
D. Summary of Internal Factors—see IFAS Table, Exhibit 2.
V. Analysis of Strategic Factors (SWOT)
A. Situational Analysis—see SFAS table, Exhibit 3.
B. Review of Mission and Objectives
1. Current mission is limited in scope.
2. New mission should focus on algorithm based information
products and services.
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TomTom: New Competition Everywhere!
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VI. Strategic Alternatives and Recommended Strategy
A. Strategic Alternatives
1. R&D
a. Experiment with cellular towers for GPS capabilities,
potentially eliminating satellite dependency.
b. Push innovation on core products to include voice
control and real–time intuitive directions (i.e. to
avoid accidents and heavy traffic).
2. International Expansion
a. Explore new markets.
b. Explore emerging markets.
c. Pros:
I. Overcomes the U.S. and European maturing
markets.
3. Licensing Agreements
a. Partner with Droid, Apple, and RIMM to develop
integrated navigation system preinstalled in phones.
b. Pros:
I. Growth in market share.
B. Recommended Strategy
1. Greater push for R&D
a. International Expansion and Licensing are short–term
solutions with little innovation.
VII. Evaluation/Control—see Exhibit 4.
IX. EFAS, IFAS, and SFAS EXHIBITS
CASE 31
TomTom: New Competition Everywhere!
Exhibit 1: EFAS (External Factor Analysis Summary)
Key External
Factors
Weight
Rating
Weighted
Score
Comments
Opportunities
International
Expansion
0.15
4
0.60
TomTom’s acquisition of Tele Atlas
provides the necessary
technological knowledge to expand
to international markets.
Increasing international revenues
allows the company to invest in
developing countries.
Concerns
promote the usability of
navigational devices. The GREEN
technology as a smart and
environmental safe tool. TomTom has
not taken advantage of the GREEN
Movement as a marketing tool.
Campaigning for
Favorable
Legislation
0.05
2
0.10
TomTom understands the value of
creating a lobbying group to act on
behalf of the PDN industry. A PDN
council may discourage government
from passing laws that may threaten
the industry.
Platforms
platform shift to maintain a
competitive advantage.
Threats
Increasing
Governmental
Regulations
0.10
2
0.20
Proposed legislations may prevent
the usage of PDN devices on
automobiles. There are increasing
legal and political concerns that
PNDs may assist terrorism.
System
Reliability
0.10
1
0.10
Industry reliance on potential
outdated satellite for system
reliability; an alternate
technology has not been proposed.
TomTom has no control over
satellite technology and
maintenance.
The US and European markets are
mature and provide declining
financial health.
The Age of
Convergence, All–
in–one Devices
Consumers are requesting the
convenience of all–in–one devices.
GPS technology must be incorporated
CASE 31
TomTom: New Competition Everywhere!
31–13
into other platforms.
Dependence on
Third Parties and
Sole Suppliers
0.10
1
0.10
TomTom has a strong dependence on
sole suppliers and third parties
for all products.
Total Score
1.00
2.95
*Weights and ratings scale have been created according to the Strategic Audit
Guide.
Exhibit 2: IFAS (Internal Factor Analysis Summary)
Key Internal Factors
Weight
Rating
Weighted
Score
Comments
Strengths
Corporate Culture
0.05
2
0.10
through its green
headquarters.
segments and geographical
markets.
Sees effective customer
interaction as essential
TomTom’s culture is based
on the idea that in order
to succeed, employees
need to succeed;
underlines devotion to
social responsibility
Service
0.10
3
0.30
recognized by J.D. power
and Associates for this
in 2008.
invested in R&D and
Development (R&D)
0.15
4
0.60
Centralizing R&D to
acquired several patents
to protect itself against
competitors and
strategically placed to
gain first–mover
advantage.
partnerships with Renault
Strategic Partnerships and
Supply chain is
outsourced, which
CASE 31
TomTom: New Competition Everywhere!
and Avis to increase its
market presence.
Weaknesses
shares, long–term debt,
and borrowings.
Finance: Revenues,
Profitability, & Liquidity
Decline, Increased Debt &
0.15
3
0.45
Due to maturing market,
the strategy of competing
on price and the
acquisition of Tele
Atlas, which was funded
Marketing Expenditures
0.10
2
0.20
hinder innovation and
market share.
No B2C Presence
0.05
2
0.10
Loses opportunity to
attract first–tier
noncustomers and insight
from second–tier
noncustomers.
hinder market share.
Outsourced Distribution
Model
0.10
3
0.30
Increases dependency on
third–parties.
To Garmin in market share
and customer service;
seeing a shift in target
customers from early
Total Scores
1.00
3.20
*Weights and ratings scale have been created according to the Strategic Audit
Guide.
Exhibit 3: Strategic Factor Analysis Summary (SFAS)
Duration
Key Strategic
Factors
Weight
Rating
Weighted
Score
Short–
term
Intermediate
Long–
term
Comments
evolving
rapidly.
International
Developing
Research &
0.30
4
1.20
x
Technology
in this
industry is
Expansion
0.25
4
1.00
x
x
markets.
Alternate
Navigational
0.15
4
0.60
x
x
New
hardware
International
Expansion
Business
development in
other countries.
Anne
Louise
Hanstad,
Marketing
Corinne
Vigreaux
,
Managing
ly
Revenue
growth
in new
markets.
Alternate
Navigational
Platforms
Business
development via
strategic
partnerships.
Anne
Louise
Hanstad,
Marketing
Head
Corinne
Vigreaux
,
Managing
Director
ly
New
partners
hips,
revenues
, and
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TomTom: New Competition Everywhere!
31–15
Platforms
software
products.
and
Market
0.10
5
0.50
x
x
and U.S.
markets are
maturing.
Losing Core
Product
Market Share
0.10
4
0.40
x
x
Loss in
revenues in
core
segment:
PNDs.
debt due to
acquisition
for Tele
Atlas.
Declining
sales and
increased
*Weights and ratings scale have been created according to the Strategic Audit
Guide.
Exhibit 4: Evaluation and Control
Strategic
Factor
Action Plan
Priority
System
(1-5)
Who will
implement?
Who will
review?
How
often
review?
What
Criteria
Reviewed
? (EPS,
Quality)
Research &
Development
Invest more
resources to
develop new
products.
1
Mark
Gretton,
Hardware
Team Head;
Software
Team Head
Peter-
Frans
Pauwels
and
Pieter
Geelan,
founders
Quarter
ly
Create
new
products
for
markets
across
industry
CASE 31
TomTom: New Competition Everywhere!
gained
from new
partners
hips.
Maturing
Market
Software
Team Head
ors.
differentiation
Goddijn,
share
Reduce cost
structure where
appropriate and
develop
differentiation
4
Anne
Louise
Hanstad,
Marketing
Head; Mark
Gretton,
Hardware
Harold
Goddijn,
4th
partner,
former
CEO of
Monthly
Increase
in
market
share
relative
to
Product
Market Share
other
industries.
Team Head
CEO of
Psion
products
in other
es.
Finance
Reduce costs,
spinning-off low
Corinne
Vigreaux
,
develop
algorithms for
1
Product
Sales
partner,
former
Monthly
create
new
margin products.
Head
Managing
Director
ly
profit
margins.
*Weights and ratings scale have been created according to the Strategic Audit
Guide
X. FINANCIAL ANALYSIS
Was inappropriate for this case.