Tom Tom is facing significant difficulties as a shift in technology has threatened its major revenue streams. Smartphones are basically giving away for free what TomTom has been charging people a lot of money for, and to nobody's surprise this has resulted in the company losing revenue and taking a loss last year. If TomTom lost money in the first year of the smartphone era, when they were still a niche technology, the writing is on the wall for what will happen when smartphones become saturated in the market.
An examination of the company's strengths, weaknesses, opportunities and threats reveals that all is not hopeless for TomTom, however. There are opportunities within the market that the company can leverage. While its strengths are losing their ability to generate competitive advantage, TomTom is still strong enough to develop new market opportunities for itself. Three different strategic options are presented, based on careful consideration of the marketplace and its future direction, and then recommendations are given as to what the best option might be for TomTom going forward.
Introduction
TomTom, the satellite navigation company, is facing declining revenues in 2009, the time period in which this case is set. The company's investors are rightfully worried about a downturn in revenues, which has come at a time of increased competition and declining growth rates. The company's major markets are saturated, but emerging markets still offer potential. The company's 2008 revenues were just over €1.5 billion, a slight decline over 2007 levels. The declining revenue trend has continued in the first quarters of 2009. Net income gained slowly until FY2007 but the company lost nearly €1 billion in FY 2008. Management at TomTom needs to correctly analyze the causes of these declines, and shift the company's strategy to restore profitability and develop a long-term vision for the company.
Mandate
TomTom has to this point in its history been driven by a mandate to "improve people's lives by transforming navigation that gets people from one place to another safer, faster, cheaper and better informed." The company still maintains this vision, but realistically the vision is one of the biggest problems that the company faces, because this is no longer something that TomTom alone can provide -- it is one of the many companies to deliver this basic benefit.
The objectives that TomTom has set for its business are as follows. The first is it should have better maps, something that its recent acquisition of TeleAtlas should help with, for example. Having better maps is a clear source of competitive advantage when seeking to help people find their way more efficiently. The second objective is better routing, something that also reflects the company's vision, and would provide a source of competitive advantage. This is also an area where TomTom has started to really lose ground to the competition. The third objective is better traffic information. This actually ties into the second objective of better routing, since the optimal route is in part dependent on prevailing traffic conditions. Again, this is very much a potential source of competitive advantage, should TomTom outperform the competition.
The case does not appear to state a mission for TomTom, but the company's current website states a mission to "reduce traffic congestion for all," something that ties into the third objective, but would appear to be different from what the company was pursuing back in 2009. The case also does not say anything about core values, but the company's website today focuses on three: "community giving," environmental impact, and supply chain management. Environmental impact ties into the company's focus on traffic and supply chain management hints at the company having a role in logistics solutions, which would be a creative use of their base technology.
There are a number of stakeholders for TomTom. Internal stakeholders include employees, management and shareholders. External stakeholders include the general public (especially given the traffic mandate), governments (for the same), competitors, suppliers and customers. The stakeholder of most concern right now is the shareholder, as the company is no longer profitable and its revenues are declining. Should this trend continue, internal stakeholders will also be affected. Furthermore, TomTom needs to consider the customer, because identifying and meeting customer needs will be essential to reversing the negative financial trends the company is facing.
Internal Analysis
The internal analysis of TomTom will focus on the company's strengths and weaknesses. The company has listed several of its strengths, the factors to which it attributes...
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