'Questions: Mobile Phone and Personal Navigation Devices Essay\r'

'Overview\r\nAs TomTom, one of the gravidst producers of major pla straighten kayoed glide devices in the world, entered 2010 it faced stiff competition from its conventional rivals such as Garmin and from sore competition from jail carrell phones. Although its gross revenue enhancement reached an all time high of €1.74 jillion in 2007 by 2008 sales had slipped to €1.67 billion. That year the high society posted a loss of €872 million. The reduce in sales saved with 2009 sales slipping to €1.48 billion, although the community managed to post net income of €86 million that year. TomTom diligent over 3,000 employees in 40 countries. Since its founding in 1991, the Netherlands- ground smartness set experienced steady taketh. It cracked an array of instruction services and devices aimed at the consumer and line of reasoning commercialises. It led the soaring trade in atomic number 63, and was second to Garmin in the get together Sta tes.\r\nIn 2007, it outbid Garmin to acquire Tele Atlas in a vertical integration schema to throw the occasion substructure process. TomTom paid €2.9 billion for Tele Atlas. As 2009 came to a close, Google announced it would offer turn-by-turn pilotage inside cell phones. Google said the convergence, initially restrain to c angstrom unitaign directions in the U.S. would be free to consumers. As the U.S. and European grocery stores for soaring devices matured, TomTom was faced with decisions related to the relative wildness it should place on its stand-alone navigation devices, constitutive(a) navigational units for automobiles and aviation, and business devices and services aimed at companies with large mobile workforces.\r\nSuggestions for Using the Case\r\nStudents should keep the TomTom cheek interesting since many of them probably own a GPS unit or subprogram a smartphone- based GPS application. The Nintendo case is excellent for drilling assimilators in a pplying the concepts and uninflected tools covered in Chapters 4 and 5. The case provides suit able-bodied information to allow students to fully examine the rivalrous forces at play in the person-to-person navigation patience, meditate the industry’s private road forces and underlying success factors, and examine TomTom’s internal shoes. In addition, the case’s decision focus allows students to consider what TomTom must do to survive in an more and more competitive environment.\r\nTo give students guidance in what to do and theorize about in preparing the TomTom case for tier discussion, we satisfyingly recommend providing disunite members with a flock of worsenion questions and importuneing that they prep be devout pla simple machineds/answers to these questions in preparing for class discussion of the case. You may alike find it beneficial to pee your class read the communicate to Case Analysis that is posted in the student section of the Online Learning Center for the 18th fluctuation at www.mhhe.com/thompson. Students leave behind find the content of this legislate particularly helpful if this is their foremost experience with cases and they ar unsure about the mechanics of how to prep ar a case for class discussion, literal examination presentation, or pen abstract. TomTom: New Competition\r\nEverywhere!\r\n*This teaching note was prepared by Professor Woody Richardson, multiple sclerosis State University. We are most grateful for his insight, analysis and contri preciselyions to how the case can be taught successfully. *\r\nIn our experience, it is quite a difficult to have an insightful and constructive class discussion of an assigned case unless students have religiously have made use of pertinent result concepts and analytical tools in preparing substantive answers to a decide of well-conceived study questions before they come to class. In our classes, we bet students to bring their notes to the study questions to use/refer to in responding to the questions that we pose. Moreover, students often find having a set of study questions is useful in helping them prepare oral team presentations and written case assignmentsâ€in addition to whatever directive questions you supply for these assignments.\r\nHence, we urge that you insist students spend quality time preparing answers to study questions†both those we have provided or a set of your own questions. The case can be used efficaciously for a written assignment or oral presentation. Our recommended questions for written assignments are as follows: You have tardily been hired by TomTom as a late securities industry analyst and have been asked to assess the drawing card of the face-to-face navigation industry and determine TomTom’s competitive strength. Please prepare a 5-6 pageboy report that evaluates competition in the industry, assesses industry driving forces, and lists industry key success facto rs. Your report should also include an assessment of TomTom’s internal situation and fills specific dodge recommendations that ordain allow TomTom to advance its grocery place and monetary performance.\r\nAssignment Questions\r\n1. What strategy is TomTom act? 2. How well is the strategy working? 3. Does the satellite navigation industry offer attractive opportunities for growth? What cordial of competitive forces are industry members facing and how do the forces influence the scout for industry advantageousness? 4. What are the strengths and weaknesses of TomTom? What are the threats and opportunities facing the corporation? 5. Do you think TomTom’s shift to value-added services and making own(prenominal) glide Devices a smaller helping of original revenue will be enough to bring forth it in the near future? Is this strategy legitimate with the needs of markets outside North America and Europe? 6. What recommendations would you pass water to TomTo m forethought to improve its competitive institutionalize in the satellite navigation industry, take improvement of market opportunities, and defend against external threats?\r\nTeaching enlist and Analysis\r\n1. What strategy is TomTom pursuing?\r\nFor the most part, TomTom has followed harvest-home evolution and market development strategies with clear focus on differentiating its increase. Its 2007 encyclopedism of Tele Atlas was clearly informatory of vertical integration. Through the years its acquisitions and patent development display elements of an offensive basis of competitive lash out based on pursuing continuous product innovation to draw sales and market serving away from less innovative rivals. A good use of the history section of the case is to have students classify or label TomTom’s diachronic actions related to products and markets into product development or market development. The results ability look like the following table.\r\n duration A ction Described in Case strategy\r\nEarly 1990s\r\nSoftware development for hold computers to commercial applications.\r\nProduct reading & securities industry Development\r\n1996 Announced first navigation bundle Market Development\r\n2001 Entered Mobile car satellite navigation market Market Development 2006-2008\r\nAcquired Datafactory AG to power TomTom Work\r\nAcquired Applied Generics for Mobility Solutions.\r\nAcquired Tele Atlas for map creation\r\nProduct Development\r\nProduct Development\r\nVertical Integration\r\n2009 TomTom for the iPhone released Market Development\r\nThe TomTom gathering consisted of TomTom (Business to Consumer), Tele Atlas (Business to Business), WORK (Commercial Fleets), and self-propelled (Auto Manufacturers & Suppliers). In response to the economic downturn that began in 2007, form magnitude competitive threats, and growth declines in the U.S. and Europe, the company shifted its business mix toward value-added services. The poten tial results of this attempt to make personal navigation devices (PNDs) a smaller proportion of gist revenue were at best uncertain.\r\n2. How well is the strategy working?\r\nThe short answer is that up until the world-wide economic downturn beginning in 2007 and continuing in 2008, TomTom’s strategy had produced outstanding results. However, as the losses in 2008 indicate, the strategy bears scrutiny. The downward closet on expenses due to competition and the slowing of discretionary expenditures due to the global recession produced a financial strain on TomTom. An examination of Case Exhibits 3 and 4 reveals the following trends from the first Quarter of 2008 to the first quarter of 2009: ν European Revenue Down 22%\r\nν North America Revenue Down 52%\r\nν Global PNDs sold Down 29%.\r\nAt the same time, the selling price and overall operational margins had been decreasing since 2007.\r\nThe gross profit margins from 2006-2009 were as follows: 2009 2008 2007 2006\r\n50.6% 53.3% 56.0% 57.6%\r\nThis caused net income to declivity overmuch more precipitously than the decline in sales. Couple this information with a debt clog over €1 billion due to the acquisition of Tele Atlas and the company appeared to be in a financial bind. For all of 2008, the company posted a loss of €872 million.\r\n3. Does the satellite navigation industry offer attractive opportunities for growth? What mannikin of competitive forces are industry members facing and how do the forces influence the outlook for industry profitability?\r\nThe outlook for industry profitability is not what it was 5 years ago. Students should be able to develop an outlook by using ostiary’s Model of Industry Attractiveness as discussed in Chapter 3 of the text.\r\nRivalry among Competing Sellers\r\nRivalry will intensify as industry growth in US &\r\nEurope slows. Margins will continue to decline. Firms will fight to utilize capacity through and through furth er price cuts. Growth in mainland China & India would mitigate the rivalry intensity.\r\nBuyers\r\nBig loge stores exert strong pressure on price, terms & delivery. Car makers also exert strong influence owing to their purchasing power.\r\nSuppliers\r\nVery limited influence as all key components are controlled through vertical integration.\r\nThreat from Substitute Products\r\n major\r\nThreat †Cell phones for PNDs predicted to dominate by 2013. slight Threat †Fleet management & Automotive markets.\r\n electric potential New Entrants\r\nNokia’s acquisition of Navteq signals their mantled to integrate phone and navigation services. Google’s announcement also signals its entry into the market. Up until recently the industry was much more attractive. Physical maps were not much of a threat as a substitute, but by 2009 the industry was undergoing a sea change regarding cell phones as substitutes. For the younger consumers who have neer not know n cell phones, the expectation that navigation be a common feature will be a strong force in the market just as many in this generation only wear watches as air ornaments because they are never without their cell phone. These tech-saavy consumers may ostracise separate devices for navigation.\r\n4. What are the strengths and weaknesses of TomTom? What are the threats and opportunities facing the company?\r\nStrengths Weaknesses\r\n• Brand Name Recognition\r\n• Map creation capabilities\r\n• Innovative features\r\n†Map mete out\r\n†Points of Interest\r\n†Traffic updates\r\n• Automotive partnerships\r\n• European market share\r\n• Sales declines\r\n• Shrinking margins\r\n• Debt laden since Tele Atlas acquisition\r\n• Relative weak sales outside Europe & the\r\nUnited States\r\n• refuse alone (separate) products\r\nThreats Opportunities\r\n• PND unit sales decline\r\n• Multifunctional devices (cell phones/smart phones) popularity is growing • Strong Competition from Traditional competitors †Garmin & Magellan • Strong Competition from new competitors †Nokia & Google • Potential legislation to restrict/ban navigational devices from autos • maturement satellites that support GPS\r\n• Growth of India & China\r\n• 65% of U.S. adults don’t own any kind of navigation device of any kind • exalted fuel prices boost better drop dead management & fuel efficiency for consumers • Environmental concerns encourage better breathe management & consumer style to be â€Å"green”\r\n5. Do you think TomTom’s shift to value-added services and making Personal Navigation Devices a smaller portion of total revenue will be enough to sustain it in the near future? Is this strategy consistent with the needs of markets outside North America and Europe?\r\nThis is a difficult question. Certainly the move to reduce the company’s reliance on PNDs, a product category with declining sales, prices, and margins seemed a prudent measure. The efficacy of this strategy will depend on at least two key questions.\r\nν How fast will the PND market continue to shift to cell phones? If the analysts are correct and the cell phones will dominate the delivery for personal navigation devices then TomTom may need to race its plans to reduce its dependency on this category. Students should recognize that as the demand for stand-alone PNDs declines the price will drop even more precipitously.\r\nν How fast can TomTom grow its non-PND business lines?\r\nOne burnished potential bright spot for TomTom could be the demand for more partnerships with car makers. Car makers will likely offer navigational devices as standard features rather than luxury options. TomTom could be well positioned (if it chooses to do so) to garner a share of this market similar to its deal announced at the e nd of 2008 with Renault. Of course, the car makers would continue the downward price pressure, but would represent a sizable market opportunity.\r\nOf course, should legislation be introduced to ban navigational devices in automobiles this would have a profound effect on TomTom and its competitors. Some students will be quick to point out that the markets in China and India would be follow the U.S. and Europe and would therefore be ripe for market penetration without any significant outlay for new product development. However, better students will point out that China and India both have significant cell phone penetration and they may actually be more desirous of product integration and multi-bfunctionality.\r\n6. What recommendations would you make to TomTom management to improve its competitive position in the satellite navigation industry, take advantage of market opportunities, and defend against external threats?\r\nFirst, there appears to be no â€Å"magic bullet” capa ble of taking a strong #2 player such as TomTom to number one in the industry unless Garmin were to make a major misstep. The diffi culty of making a recommendation is further exacerbated by the move to cell phones for PNDs. However, TomTom might consider some of the following actions.\r\nν Focus on information solutions, specifically the â€Å" come apart Routing” & â€Å"Better Traffic” information goals mentioned in the case. Provide these solutions careless(predicate) of type of device. ν Defend and Develop markets not pendent on cell phone devices (e.g. coast guard, maritime, aviation, and fleet management markets.) ν Seek more automotive partnerships †use the Renault and Avis experiences to ramp up sales in this area. ν pass away product life †attempt to recoup R&D efforts by seeking markets in developing countries where the disposable income may be arrival the threshold to adopt PNDs. ν Aggressively market fleet management so lutions.\r\nν Develop more applications/partnerships similar to the iPhone experience. line up a way to â€Å"ride the dragon.” Find a way to participate in the growth in multifunctional cell phones. Even a small portion of this huge market would be extremely lucrative.\r\n epilog\r\nImmediately following Google’s October 28, 2009 announcement mentioned at the end of the case, TomTom and Garmin offered Black Friday discounts of 25% up to 40% on some units. In 2010, the company generated sales of €1.521 billion with a net income of €108 million. TomTom announced in a February 25, 2011 Reuters report by Roberta B. Cowan that it faces â€Å"such a rapid decline in its key market for personal navigation devices (PNDs) that its shift into new businesses may not be fast enough to compensate.” The company forecasted that the overall PND market would decline by 10 to 15 percent in 2011 and that its earnings would not grow.\r\n'