Strategic Management Analysis

Tom Tom as a Case Study

By

Mohamed Ahmed Desouky Ibrahim

MBA- Gov 06- A

Supervised by:

Dr. Khaled Bekhet

2020
Table of Contents
Serial Title Page
Executive summary………………………………………………………….… 5
1 Introduction……………………………………………………………………… 6
1.1 The Vision ……………………………………………………………………… 7
1.2 Values………………………………..…………………………………………. 7
1.3 The Culture…………………………………………………………………….. 7
1.4 Mission Statement……………………………………………………..………. 8
1.5 The Goals ……………………………………………………………………… 8
1.6 The Products ……………………………………………………………………. 9
1.7 The Customer …………………………………………………………………. 9
1.8 The Current Strategy ………………………………………………………….. 10

2 Internal Analysis ……………………………………………………………… 11

2.1 SWOT analysis …………………………………………………………………. 11
2.2 Internal Factors Evaluation Matrix (IFE) ……………………………………... 16
2.3 Value Chain Analysis ………………………………………………………….. 16
2.4 The Resource- Based View (RBV) ……………………………………………. 19
2.5 VRIO ………………………………………………………………………….. 20

3 External Analysis …………………………………………………………….. 21

3.1 MACRO Environment Analysis (PESTEL) ………………………………….. 21
3.2 External Factors Evaluation Matrix (EFE) ………………….………………… 23
3.3 Porter’s Five Forces Model ……………….…………………………………… 23
3.4 Competitive Profile Matrix (CPM) ……….…………………………………… 28

1
3.5 SWOT Matrix ………………………………………………………………….. 29

3.6 The Strategic Position and Action Evaluation (SPACE) Matrix ……….…… 30
3.7 Portofolio analysis: BCG Matrix ……………………………………………… 31
3.8 Internal External Matrix ………………………………………………………. 35
3.9 Grand Matrix …………………………………………………………………. 36
3.10 The Quantitative Strategic Planning Matrix (QSPM) ………………………….. 37

4 The Finance/ Accounting ……………………………………………………… 38

4.1 The Profit Ratios ……………………………………………………………….. 38
4.2 The Effeciency Ratios ………………………………………………………… 41
4.3 The Liquidity Ratios ………………………………………………………….. 41
4.4 The Price Ratios ……………………………………………………………….. 41

5 Recommendations …………………….……………………………………..… 43
6 References ……………………………………………………………………… 45
Table of Figures
Figure Page
Figure (1): Porter's Value Chain 16
Figure (2) Market Shares in the GPS Navigation Industry 24
Figure (3): Market shares PNDs 25
Figure (4): Tomtom SPACE Matrix 31
Figure (5): TomTom Return on Equity 39
Figure (6): TomTom Return on Assets 39
Figure (7): TomTom Return on Invested capital 39
Figure (8): TomTom Earnoing Per Share 40
Figure (9): TomTom Operating Margin 40
Figure (10): TomTom Assets Turnover 41
Figure (11): TomTom Inventory Turnover 41
Figure (12): TomTom Liquidity Ratio 41
Figure (13): TomTom Price to Earning P/E Ratio 42
Figure (14): TomTom Price to Sale P/S Ratio 42
List of Abbreviations & Terms:
API Application Programming Interface

ADAS Advanced driver assistance systems " data describes where traffic signs are located
along the road and what their meaning is "

HD Maps High Defifntion Maps

LPS Location-based services

OEM Original Equipment Manufacturers

PND Protable Navaigation Device

PDA Personal Digital Assistance.

POI Point of Interest.

SD Smart Devices " Type of maps which is offered for the Grid control to provide an
elegant way for the display of locations using a map and interacting with them.

SDK Software Development Kit "for maps"

Tier 1 head-unit vendors
Supplier
Executive Summary:
TomTom N.V. is a Dutch multinational developer & creator of location technology and
consumer electronics. It was founded as Palmtop in 1991 and headquartered in Amsterdam by
Harold Goddijn, Peter-Frans Pauwels and Pieter Geelen. Then in 2001 it was renamed TomTom.
In 1996, it launched its first navigation software for PDAs with a strong vision of being "The
leading independent location technology specialist" which has been reflected in many of its
agressive and fast growing strategies like rapid expansion in more than 40 countries and the
vertical backward integration it made by acquiring 3 compannies: Datafactory AG which was
acquired to power TomTom WORK through WEBfleet technology; Applied Generics which was
acquired to give its technology for Mobility Solutions Services; and Tele Atlas, a digital map
maker, which is considered the most importnat aquisition as helped TomTom controlling the
map creation process and establish itself as an integrated content, service, and technology
business.

The navigation market has a severe competition by its biggest market share holder , Garmin,
followed by TomTomn then Magellan. What intensified the competition were the smart phones
and the free nagivation application. This made TomTom tends to the prodcut developement
startegy by not only producing PNDs but also services and softwares, all related to navigation.
This was backed by the independent nature of the company which enabled it collaborating with
many other corporations. With the opportunities in Autonoanous driving "self-driving cars" and
the cloud mapping, and with is strong R&D, TomTom has the pentials to achieve it is mission
which is " to create the technologies that help shape tomorrow’s mobility"

With its last and costly acquisition "€ 2.9 billion" of Tele Atals and the economic downturn in
2008, the company has become a cause of concern for investors. It affected its ability to generate
sufficient cash flow to support its investment activities. It used to be arich in cash asssets till 2007
with more than € 463 million, which decreased in 2008 to € 321 million but with debts over € 1.2
billion together with a fall of 61% in its net income at the end of the second quarter of 2009.

Many matrices have been implemented in this study, such as SWOT Matrix , BCG Matrix, Internal
External Matrix, , Grand Matrix and SPACE Matrix, all of which supported the agressive and
growing strategies for TomTom, then finally the QSPM Matrix has suggested the best proposed
strategy which is the product development which utilizes most of TomTom's strengths, magnifies
its opportunties and avoided or mitigated most of its weaknesses and threats. Investing in product
development would cause TomTom to lead the new cloud mapping world and self-driving cars
technologies. Some more recommedation is to develop the markets for its PNDs to avoid the
saturated European markets. This can be backed by avoiding it is low B2C marketing budgets
and oppening more branded stores in these new markets.
1- Introduction:
TomTom N.V. is a Dutch multinational developer & creator of location technology and
consumer electronics. Founded as Palmtop in 1991 and headquartered in Amsterdam by Harold
Goddijn, Peter-Frans Pauwels and Pieter Geelen, since then it is a supplier of navigation systems,
fleet management solutions and other related products that is based in the Netherlands. It operates
through four segments: Consumer, Automotive, Licensing and Telematics:

 The Customer segment focuses on the development and production of navigation systems.
 The Automotive segment provides components, such as maps, traffic and software to car
manufacturers.
 The Licensing business provides map, traffic and navigation content and services.
 The Telematics segment is active within the field of fleet management and vehicle
telematics.

The Company operates in approximately 40 countries, and through numerous subsidiaries,

including Finder SA, a Poland-based fleet management services provider, and Autonomos
GmbH, a Germany-based developer of software and services for autonomous driving.

In 1996, it launched its first navigation software for PDAs, EnRoute and RouteFinder, then in
2001 Palmtop was renamed TomTom. Harold Goddijn joins TomTom as CEO. In 2002 the first
GPS-linked car navigation product for PDAs. In 2003 NavCore Software Architecture was
developed, on which all TomTom products are still based. In 2004 the first PND portable
navigation device shipped, the TomTom GO. In 2005 TomTom listed on the Amsterdam Stock
Exchange, valuing the company at nearly € 500 m. In 2006, TomTom acquired the UK company
Applied Generics, forming TomTom Traffic. TomTom WORK and TomTom Mobility Solutions
were launched. In 2007 TomTom makes offer for acquiring Tele Atlas and TomTom HD Traffic
and TomTom Map Share were launched. Then in 2008 TomTom acquired Tele Atlas, a digital
map maker, for €2.9 billion

The company was founded in 1991 and, until 1996, developed business-to-business applications
such as meter reading and bar-code reading. Subsequently, the company moved its focus to PDA
software for the consumer market.

In January 2018 the company faced criticism for announcing that it would no longer be providing
map updates for some devices. As of 2018 the company has 5,077 employees worldwide and
operations in 42 offices in 30 countries throughout Europe, Asia-Pacific, and the Americas.

Crisis:
With its last and costly acquisition "€ 2.9 billion" of Tele Atals and the economic downturn in
2008, the company has become a cause of concern for investors. It affected its ability to generate
sufficient cash flow to support its investment activities. It used to be arich in cash asssets till 2007
with more than € 463 million, which decreased in 2008 to € 321 million but with debts over € 1.2
billion together with a fall of 61% in its net income at the end of the second quarter of 2009.

1.1 The Vision

"The leading independent location technology specialist which is committed to create a safe,
connected, autonomous world that is free of congestion and emissions."

The vision is inspiring & motivating, paint a clear picture for the future and success, desirable "as
it provides interest to stakeholders to be the leader", focused in that it provides guidance for
making decisions, feasible that in can be achieved, unique but not easy to communicate as it is a
bit long.

This vision of beeing the leading location technology specialists has been reflected in many of the
company's strategies. For example The company had been investing structurally and strategically
in research and development to bring new and better products and services to its customers. The
backward vertical integration it made by acquiring Tele Atlas, a digital map maker, for €2.9
billion has been a major a step on this path. After acquiring Tele Atlas, it was strategically placed
to gain the first mover advantage created by its rapid expansion of geographical coverage. This
was of key importance when it came to increasing its global market share. Also by employing a
workforce of 9,600 employees from 80 countries. The diverse workforce enabled the company to
compete in international markets. In order to support this vision of beeing the leader, TomTom
made product diversification but not only by producing PNDs but aslo services and softwares, all
related to navigation.

The vision of TomTom’s management was to improve people’s lives by transforming navigation
from a ―don’t-get-lost solution‖ into a true travel companion that gets people from one place to
another safer, faster, cheaper, and better informed. This vision helped the company become a
market leader in every marketplace in the satellite navigation information services market.

1.2 The Values:

 To care.
 To build trust.
 To create.
 To be confident.
 To keep it simple.
 To have fun.

1.3 The Culture:

 Diversity, Inclusion and Belonging: thrive on people’s differences, encourage
individuality and embrace self-expression.
 Innovation
  Employee Experience
 Leadership
 Competitive Hiring.
All these items will be explained when talking about the HR management.

1.4 The Mission

―Our mission is to create the technologies that help shape tomorrow’s mobility. We are creating
a safer, cleaner, congestion-free world through innovative and easy-to-use location technologies.
We license maps, navigation software and online services as components for applications,
offering tailor-made solutions to meet customers’ specific needs."

According to 9 components' criteria of the mission statements, TomTom mission statement

included the technology, the products & services it offers, the self concept "competitive
advantage" which is the innovative and easy-to-use technology, the public image " social
responsibility" of providing the safer and cleaner world, the market which is the whole world, the
customer by offering tailor made solutions. The mission statement ignored the profitability, the
employees and philosophy which are the basic believes & values.

This mission statement has been translated into strategies and action plans. For instance, in order
to emphasis the social responsibilty, TomTom made a very good use of the GREEN movement,
that aimed to reduce any activities that will endanger the environment. This movement was a
great opportunity for TomTom to tout its technology as the smarter and more environmentally
safe tool if driving is an absolute necessity. Not only can individuals tout this improved
efficiency, but more importantly on a larger scale, businesses that require large amounts of
materials to be transported across long stretches can show activists that they too are working to
becoming a green company.

Another exmaple, in order to target "the world" as the geographical location for its operation, it
has opend 42 offices throughout Europe, Asia-Pacific, and the Americas.

Although employees were not mentioned in the mission statement, but they are a of great focus in
TomTom as it goes to great lengths to make sure they hire the right talents, and ensure they retain
them through training and by advancing their careers within TomTom organization.

1.5 The Goals:

Based on the previuosly mentioned vision & mission , TomTom formulated the following goals
focused around radical advances in three key areas:

 Better maps: This goal was achieved by maintaining TomTom’s high-quality map
database, which was continuously kept up-to-date by a large community of active users
who provided corrections, verifications, and updates to TomTom. This was supplemented
by inputs from TomTom’s extensive fleet of surveying vehicles. This was translated into
actions by acquiring Tele Atlas as an example.
  Better routing: TomTom had the world’s largest historical speed profile database IQ
Routes™ facilitated by TomTom HOME, the company’s user portal.
 Better traffic information: TomTom possessed a unique, real-time traffic information
service called TomTom HD traffic™ which provided users with high-quality, real-time
traffic updates. These three goals formed the base of satellite navigation, working in
conjunction to help TomTom achieve its mission.
 TomTom’s financial goals:
 Diversify and become a broader revenue-based company. The company not only
sought to increase the revenue base in terms of geographical expansion but also
wanted to diversify its product and service portfolio.
 Reducing its operating expenses.

1.6 The Products:

As a location technology company, maps are central to all thier products and services. They have
built a leading mapmaking platform and have transitioned over the years into a software
engineering company.

1.7 Customers:
The core Location Technology business consists of Automotive and Enterprise, while they
continue to capitalize on their consumer business, as it is an important source for consumer
insight and cash flow. So , more specifically , we can say that TomTom's customers can be
classified into 5 main groups as follows:
1. The individual consumers: who bought stand-alone portable navigation devices and
services.
2. The automobile manufacturers: TomTom teamed with companies such as Renault to
develop built-in navigational units to install as an option in cars.
3. The aviation industry and pilots with personal planes: TomTom produced navigational
devices for air travel at affordable prices.
4. The business enterprises: companies such as Wal-Mart, Target, or Home Depot; huge
companies with large mobile workforces. To focus on these customers, TomTom formed
a strategic partnership with a technology company called Advanced Integrated Solutions
to ―optimize business fleet organization and itinerary planning on the TomTom pro series
of navigation devices.‖ This new advanced feature on PNDs offered ways for fleet
managers and route dispatchers to organize, plan, and optimize routes and to provide
detailed mapping information about the final destination. The Enterprise business unit
licenses to some of the world’s most innovative companies, such as web and mobile
application developers, on-demand service providers, location intelligence platforms,
cloud providers, and fleet and logistics management suppliers. It licenses uncompiled
maps, traffic data and Maps APIs for location-enabled applications. Customers include
Alteryx, Apple, Microsoft, Pitney Bowes, Uber and Verizon, among others.
 5. The coast guards: were able to use TomTom’s marine navigational devices for its
everyday responsibilities.

1.8 Current Strategy:

It is to grow its core Location Technology business by providing its customers and users with the
most up-to-date and relevant content for their applications. To achieve this, it will further develop
its proprietary transactional mapmaking platform and strengthen and expand its product portfolio,
allowing the company to capture value from the opportunities shaping its industry in the
following areas: mapping ecosystem, connected in-vehicle navigation, autonomous driving and
Maps APIs.
2- Internal Analysis:
2.1 SWOT Analysis
Strengthes:
1. The Independence of the Company: TomTom is one of the few independent location
technology companies in the market, uniquely positioned to collaborate with its customers
and partners. In other words, the data they collect are used exclusively to improve their
products, and not to feed alternative business models. That, in short, makes TomTom a
trusted and noncompeting partner at the heart of the alternative mapping community. In
other words, they are not competing with their customers. As a result, they have close
relationships with top technology companies and most of the top 25 automakers and tier 1
suppliers.

2. Extensive market expertise in location data: TomTom has been relentlessly innovating
to stay ahead of the game. This allowed it to further build on its expertise and offer better
products and services related to connected driver navigation, ADAS and HD Maps and
Maps APIs.

3. Multiple collaborations in complex ecosystems: Being independent and with its

extensive market experience, have paved the way for significant collaborations with
leading technology and automotive companies. For example: Apple, Baidu, Bosch,
Delphi, Denso, Microsoft, NVIDIA, Qualcomm, Uber and Zenuity. Also with R&D
departments of OEMs such as Groupe PSA and FCA for advanced use cases including
ADAS and electric vehicles. Over the years, TomTom has built very strong relationships
with cutting edge technology companies, OEMs and Tier-1 suppliers, allowing the
company access to a magnitude of data. TomTom then process and aggregate value,
developing better products at lower costs for everyone. This is a very important flywheel
effect that TomTom will continue to encourage for years to come, as they are at the center
of location information sharing around innovation in new mobility concepts and
developments in smart, safe and sustainable transport solutions.

4. Strong data governance: The long-term success depends on capturing data to

continuously improve their products and services. User trust is therefore paramount and to
ensure it, TomTom adheres to the strictest data protection laws and apply a privacy-by-
design approach that ensures that the full life-cycle of the products and services are
designed to enable user privacy and control over their personal data.

5. Strong technology brand, associated with driver user interface: TomTom disrupted
the industry and created a new market category when it introduced the portable navigation
device – one of the most influential products of all time – establishing in the process a
powerful technology brand with strong user experience knowledge.
 6. Reliable satellite navigation technology: As a location technology specialist, maps are
central to all the company's products and services. Over the years, TomTom has built a
leading mapmaking platform, constantly increasing its efficiency and capabilities. This is
a significant competitive advantage and explains, among other factors, why they are a
credible and leading player in the mapping world

7. R&D , efficiency and manufacturing capabilities:The efficiency of the mapmaking

capabilities is a significant competitive advantage for TomTom.

8. Playful character with unique voice navigation and POI information: the celebrity
voice packs also remain big draws although both are extra cost in apps purchase, ―by far
the best IOS nav app compared to Garmin, copilot , motion X, apple maps , and google
maps Nav‖ Itunes customer reviews.

Weaknesses:
1. Narrower product range when compared to Garmin.

2. Increasing Operating expenses in 2008.

3. Weak B2C marketing: which restricts the possibility of sales to non- current customers.
Rely mainly on PND’s with limited back-up opportunities.

4. Cutting Cost Program: in order to reduce operating expenses and strengthen the balance
sheet, heavy emphasis had been placed on the cost-cutting program. In 2009, the cost
reductions were made up of reducing staff, restructuring and integration of Tele Atlas,
reduced discretionary spending, and reduction in the number of contractors and marketing
expenditures. However, if not executed wisely, it could hamper TomTom’s long-term
objective of being a market leader. For example, one of the core capabilities of any
technology company was its staff; reducing it could hinder future innovative projects.
This may also occur when reducing the marketing expenditures in the markets which still
held rich prospects of high growth like the emerging economies.

5. Weak Distribution: it has not branded stores and depend only on online B2C sales.
Though it works in more than 40 countries but it has a limited number of stores. Opening
their own stores- exclusively to sell only their products could almost guarantee them a
sale if they do their job. At retailers' stores where TomTom products are offered, they are
competing with their competitors such as Garmin which currently has more offices than
TomTom and also employs almost 4x the amount of people.

6. Decreasing sales values for the first and second quarter for three years running year after
year from 2007 to 2009 revenue from both the main markets, Europe and North America,
are on the decline with a decrease of 22% and 52% respectively from 2009 to 2008
respectively.
Opportunities:

1. Autonomous driving: Autonomous driving technology is generating significant interest

in new, detailed maps that will help transform the way TomTom thinks about driving. The
journey to fully autonomous driving is developing along a six-level scale, evolving from
level 0, where the driver is in full control, to level 5, where the vehicle is in full control.
Across all levels, vehicles require maps that are significantly different from the maps used
for driver navigation. As the driving task shifts from the driver to the vehicle, the map
must shift to serve a machine instead of a human. ADAS, or advanced driver assistance
systems, enables vehicles to help make driving simpler and safer for people through
adaptive cruise control or lane guidance systems. As it becomes mainstream, it will play a
crucial role in preparing the technology for higher degrees of automation, eventually
leading to autonomous vehicles. OEMs are progressing rapidly in adopting ADAS
features, with numerous manufacturers having already launched level 1- and level 2-
enabled vehicles. TomTom's ADAS maps already power more than 1.5 million vehicles
on the road today, and it expects this number to continuously increase over the next few
years. The medium-term opportunities for TomTom lie in ADAS maps, while HD Maps
will drive long-term value. Current market expectation is that by 2025, highly automated
vehicles will be ready for the roads, with HD Maps essential for the safety and comfort of
autonomous vehicles. To achieve this timeline, automakers are already sourcing HD Map
deals. As TomTom moves into a more autonomous driving experience, SD Maps,
navigation and online services, such as traffic information, will continue to be sourced by
OEMs. It is expeected that even at Level 4 or 5, where the vehicle will drive itself, there
will be opportunities to continue to provide TomTom's current portfolio of maps,
navigation and online services, as the passengers will continue to need to locate
themselves and interact with the machine responsible for driving.

2. Cloud Maping APIs : Maps APIs "Application Programming Interface" are increasingly
becoming mainstream for the company's customers and developers, which are accessing
more and more maps, navigation software and other location-based applications in the
cloud. As the reliability of cloud computing increases and the costs associated with
connectivity decreases, location-as-a-service via APIs transforms from a virtual accessory
into an industry standard. Instead of accessing uncompiled maps and having to manage
large databases, companies with smaller engineering teams and developers of startups can
access bits and pieces of content as needed, gaining speed to launch their applications.
Such rapid change in the location APIs market has created a significant area of growth for
TomTom, as many start-ups and businesses are looking for providers. In 2019, TomTom
took critical steps to advance the adoption of TomTom Maps APIs, which included not
only enhancing the product offering, but also building its own developer community via
Developer Portal, where users can easily access TomTom's APIs and SDKs for its entire
product line. A variety of enterprises and start-ups, from mobile and web application
 development to fleet management, vehicle tracking and logistics already use TomTom's
Maps APIs and SDKs. TomTom strategy to grow market reach also includes offering its
location technology in third-party cloud platforms.

3. Connected digital life to in-vehicle navigation : Enabling drivers to expand their

connected digital life to their vehicles through in-vehicle navigation and infotainment
systems. More than a quarter of new car sales today are from connected vehicles – with
close to 100 million new cars produced every year, 40 million in Europe and North
America alone. There is a continued growth in connected in-vehicle navigation, as
TomTom continues innovating to position itself as a trusted full-stack navigation system
provider with the best end user experience across all geographic regions. TomTom
navigation solutions work across brands, models and geographies while meeting stringent
demands for costs, speed, quality and simplicity. More and more, drivers demand
connected, online in-vehicle services that are on par with smartphones and apps. The
market is shifting in response with connectivity enabling TomTom to further capitalize on
its software, over-the-air map updates and sensor data as it monetizes new services.

4. Expansion in emerging economies markets: with increase global footprints and

penetration of these markets , for example by creating digital maps for developing
countries and creating navigational services—can either be piggybacked or can be taken
in independent paths. The first-mover advantage for these opportunities will erect a high
barrier of entry for any companies that do not have large amounts of resources to invest in
the developing country.

5. Partnerships with mobile networks and new car manufacturers.

6. Green movement: It is a trend that aimed to reduce any activities that will endanger the
environment. This movement is a great opportunity for TomTom to tout its technology as
the smarter and more environmentally safe tool if driving is an absolute necessity. Not
only can individuals tout this improved efficiency, but more importantly on a larger scale,
businesses that require large amounts of materials to be transported across long stretches
can show activists that they too are working to becoming a green company.

Threats:

1. Increasing competition especially by smart phone, and online navigation applications:

It is ironic that the core technology used in TomTom’s navigation system, the GPS
system, has proliferated into other electronic devices at such a rapid pace that it has
caused serious competition to the PND industry. GPS functionality was a basic
requirement for all new smart phones that entered the market became a basic functionality
in regular cellular phones.
2. All-in-one device trend: the world seems to be heading toward a culture where
consumers wanted an all-in-one device such as a cell phone or smart phone that would do
everything needed, including offering GPS navigation services. This might due to the Gen
Y and Gen X customers who were increasingly reliant on their mobile phone and who
will demand that social networking and other connected services be integrated into their
navigation experience

3. Potential adverse legislation and restrictions on the use of PND’s all navigational
devices from automobiles: In Australia & Canada , there was growing concern over the
distraction caused by PNDs so the legislature took steps toward banning these devices
entirely from automobiles.

4. Privacy protection with the threat of GPS devices tracking: Currently, law
enforcement agents were allowed to use their own GPS devices to track the movements
and locations of individuals they deemed suspicious. However, if budget cuts reduced the
access to these GPS devices, then the simple solution will be to use the PND devices
already installed in many automobiles. The threat of having every consumer’s GPS
information at the fingertips of either the government or surveillance company will most
certainly stunt or even completely halt any growth within the PND industry.

5. PND Saturation of EU and US market: which leads to a decreasing growth rate – down
21% in European market.

6. The rise in PND thefts around the country: With the prices for PNDs at a relatively
high level, thieves were targeting vehicles that had visible docking stations for PNDs
either on the dashboard or the windshield. The onus will be on TomTom to create new
designs that will not only hide PNDs from would-be thieves but also deter them from
trying to steal one. Consumers who were scared to purchase PNDs because of this rise in
crime will become an issue if this problem is not resolved.

7. Aging satellites that support the GPS system: Analysts predicted that these satellites
will be either replaced or fixed before there are any issues, but this issue was unsettling
due to the fact that TomTom had no control over it.
2.3 Internal Factors Evaluation (IFE)
Key Internal Factors Weight Rating Weighted Score
Strengths
1. The Independence of the Company 0.14 4 0.56
2. Extensive market expertise in location data 0.13 4 0.52
3. Multiple collaborations 0.13 4 0.52
4- Brand recognition & Reliability 0.09 4 0.36
5- Strong R&D & innvoation 0.1 4 0.4

Weaknesses
1. Narrower product range 0.11 2 0.22
2. Increasing Operating expenses 0.1 2 0.2
3. Weak B2C marketing 0.09 2 0.18
4. Weak distribution 0.11 1 0.11
Total 1 3.07

2.3 Value Chain Analysis

Figure (1): Porter's Value Chain

Primary Activities

 Inbound Logistics & Procurement:

TomTom outsources the manufacturing of all its products, logistics, also part of the
customer cares and product contents. Its contract manufacturers order the required
component parts from their suppliers on the basis of the number of units TomTom
require. Additionally, TomTom was able to mitigate their supply distribution risk of the
 high volume products while maintaining dual-sourcing production from two different
manufacturing partners. It reduced the suppliers' power by the backward vertical
integration by acquiring content companies such as Tele Atlas.
 Operation:
TomTom has practiced a Mobile defense & Market Broadening strategies: In mobile
defense, the leader stretches its domain over new territories through market broadening
and market diversification. Market broadening shifts the company’s focus from the
current product to the underlying generic need. After having many competitors such as
mobiles and as a leader in the industry TomTom stretched its domain over new territories
through market broadening and market diversification by focusing on the navigation
systems more than on the PNDs, which increased the added value. The result is that its
current core Location Technology business, consists of automotive and enterprise, but
TomTom will still continue to capitalize on their consumer business, as it is an important
source for consumer insight and cash flow.
In order to increase the added value operation, TomTom has backward vertical integration
by buying companies like:
 Tele Atlas which makes maps. With the acquisition of Tele Atlas, TomTom became
vertically integrated and also controlled the map creation process. This helped
TomTom establish itself as an integrated content, service, and technology business
 Datafactory AG was acquired to power TomTom WORK through WEBfleet
technology.
 Applied Generics was acquired to give its technology for Mobility Solutions Services.
 Outbound Logistics:
Regarding the devices, TomTom has outsourced its supply chain and distribution model
which enables TomTom to increase their ability to scale up or down the supply chain and
limiting capital expenditure risk. Though Tomtom works in 40 countries, but it lacks the
presence of its own branded shops specially in the US market. TomTom currently
doesn’t have any physical stores for buyers to purchase their products, instead they offer
online sales and have their products sold at other stores for users to purchases physically.
 Marketing and sales
 One of the weaknesses of TomTom is the weak B2C marketing activities and presence. It
focus more on B2B activities through collaboration and long term contracts. Talking
about B2C products like the PNDs, TomTom has not many branded shops and depends
more on online sales
 In 2012 , it has decreased its marketing expenses by 27% year-on-year from €78 million
to €57 million . While it also scaled down its marketing spend this year in line with
Consumer revenue development (PNDs), it focused on campaigns on increasing
awareness of the quality of its maps and traffic information.
 In 2019, Marketing expenses were roughly flat year on year, while selling, general and
administrative (SG&A) expenses increased to €133 million from €115 million in 2018,
explained by the €22 million one-off gain from litigation in 2018.
 Service
TomTom provides online simple problem shooting for customers, and with the product
serial number registration customer can easily know about the details of warranty and
where is the nearest repair center to them.

Support value Activities:

 Firm Infrastructure:
 42 offices in 40 countries throughout Europe, Asia-Pacific, and the Americas.
 According to its official website, since the company completed the acquisition of Tele
Atlas and transforming into a broader navigation Service Company in 2008, a new
structure has been introduced in order to provide complete navigation and mapping
solutions for car drivers across different platforms and to the wider markets for digital
maps. The structure consists of four customer-facing business units which are TomTom,
Tele Atlas, WORK and Automotive. Each business unit has a clear focus on a specific
customer group and they are supported by two shared development centers.
 The TomTom business unit sells PNDs to consumers via retailers and distributors. Tele
Atlas sells digital maps and related content and services to various industries. WORK
offers professional solutions for commercial fleets. Automotive develops and sells
navigation systems and services to car manufacturers and OEMs worldwide. Handset
manufacturers and network operators are serviced with mobile navigation solutions, map
content and services by the business units TomTom and Tele Atlas.
 Serving the business units are the two shared development centers. They are responsible
for the development of the next generation of fundamental navigation technologies,
services and content, which are tailored to all navigation markets through the business
units. Dynamic Content & Publishing (DC&P) is responsible for the creation and
publishing of content and services on robust and scalable delivery platforms. It acquires,
validates and assembles dynamic content that is relevant to motorists and publishes this
information in real-time to its customers and partners. Shared Technologies develops and
maintains the 6 technology components of the Group. It develops the routing algorithms,
navigation software and user interfaces.
 Human Resources management:
The diverse workforce, 9,600 employees from 80 countries, enabled the company to
compete in international markets.TomTom has some of the best recruiting policies and
cultures exhibits in the following:
 Diversity, Inclusion and Belonging: thrive on people’s differences, encourage
individuality and embrace self-expression. This was translated into:
 Hiring and representation targets: gender & age balanced organization.
  Leadership acceleration program : to accelerate female participants’ entry into senior
leadership roles.
 Support diversity activities aimed to champion employees’ growth and empowerment
in line with the company values.
 Diversifying the local tech talent pool to bring 50,000 people from unrepresented
groups into the workforce.
 Innovation: By encouraging a continuous learning culture, by implementing innovation-
focused initiatives for the engineers like TomTalks & TomTom Lab
 Employee Experience: launched initiatives to help better understand the needs and
drivers of employees and created decentralized action plans for greater impact. for
example by Enboarder, a new on-boarding tool, partnership programs , Giving back to the
local communities by gave employees paid time off to volunteer for causes they care
about, and finally by continuous communication
 Leadership: Leadership program drive development of five leadership pillars which is
helping to achieve the mission: (i) drive high performance; (ii) dare to lead; (iii) create an
autonomous environment; (iv) unleash talent; and (v) connect.
 Competitive Hiring :Engineering roles account for 65% of the total hiring numbers. The
hiring strategy is aimed at attracting the best people in the talent pool. As well as finding
innovative ways to build an engineering talent pipeline; for example by Summer School
programs, Competitive rewards programs and Long-term incentives for senior
management and key individuals
At TomTom, the human resources function is organized centrally. All its staff worldwide
is serviced by the Human Resources department based in Amsterdam. However, there are
also dedicated Human Resources staff in the US and Taiwan; while London, Paris,
Leipzig and North Ryde (Australia) sites each have staff who combine human resources
work with other functions. In order to attract the best people and maintain the quality of
its human force, TomTom serves its HR management with three competencies: Open
Spirit, Passion for Results and Innovative Thinking. These core competencies, combined
with role-specific competencies, are at the heart of its Human Resources strategy. They
are used as the basis for recruiting, training, developing and compensating employees,
and form the backbone of the General Performance Scheme (GPS), its performance
appraisal scheme.
 Technology:
TomTom uses cutting edge technology.

2.4 Resource Based View (RBV)

 Physical Resources:
 Efficient 42 offices in 30 countries throughout Europe, Asia-Pacific, and the Americas
 Very Modern and innovative technology such as IQ Routes technology.
 Owned maps supplier Tele Atlas.
  Centralized R&D resources.
 Accurate real-time information technologies.
 Human Resources
 Diverse labour force.
 Talented workforce.
 Highly motivated.
 Many talent, skills & capabilities development programs.
 Organizational Resources
 Independent nature
 Powerful information system.
 Well known Brand.
 Strict corporate governance.
 Registered innovation trademarks such as IQ Routes technology.
 Four business units: The structure consists of four customer-facing business units which
are TomTom, Tele Atlas, WORK and Automotive. Each business unit has a clear focus
on a specific customer group and they are supported by two shared development centers.
 Strategic partnership with many industry leaders like car manufactures and software
developers.

2.5 VRIO Analysis of TomTom:

Inimitab Organized to
Resource/Capability Valuable Rare
le Capture value
Efficient offices Yes No No Yes
Very modern innovative Technology Yes Somewhat Somewhat Yes
Owned maps supplier Yes Yes No Yes
Centralized R&D resources Yes No No Yes
Accurate real-time information technologies Yes Somewhat Somewhat Yes
Diverse labour force. Yes Somewhat No Yes
Talented workforce. Yes No No Yes
Highly motivated. Yes No No Yes
Talent, skills & capabilities development Yes No No Yes
programs.
Independence nature Yes Yes Somewhat Yes
Powerful information system. Yes Somewhat Somewhat Yes
Well known Brand. Yes No Somewhat Yes
Strict corporate governance. Yes Somewhat No Yes
Registered innovation trade marks Yes No No Yes
Focused business units Yes No No Yes
Strategic partnership Yes Yes Somewhat Yes
3- External Analysis:

3.1 MACRO Environment Analysis (PESTEL)

POLITICAL:
 Restriction of certain capabilities for all of TomTom’s products. Due to security and
terrorism concerns, GPS devices have not been allowed in some countries like Egypt
since 2003. In times of global terrorism, TomTom must be vigilant of the growing trend
for countries to become overly protective of foreign companies and their technologies.
 Satellite navigation systems are managed by governments

ECONOMIC:
 Global economic crisis context: the economic crisis of 2008 has affected the purchasing
power of consumers, which is an important determinant of the size of a market.

SOCIODEMOGRAPHIC :
 All-in-one-device Trend: The Gen Y and Gen X customers are increasingly reliant on
their mobile phone and demand that social networking and other connected services to be
integrated into their navigation experience. This increases the trend where consumers
wanted an all-in-one device such as a cell phone or smart phone that would do everything
needed, including offering GPS navigation services. This will lead to increasing
competition especially with smart phone and online navigation applications.
 The rise in PND thefts around the country: With the prices for PNDs at a relatively high
level, thieves were targeting vehicles that had visible docking stations for PNDs either on
the dashboard or the windshield. The onus will be on TomTom to create new designs that
will not only hide PNDs from would-be thieves but also deter them from trying to steal
one. Consumers who were scared to purchase PNDs because of this rise in crime will
become an issue if this problem is not resolved.
 PNDs saturation of mature U.S and European markets: Huge opportunities lie in other
countries which need to be expanded in countries such as Asia, Middle East and Africa

TECHNOLOGICAL:
 Rural areas have the challenge that most of its population is not technological educated
and might not want or need satellite navigation devices. There is potential for growth of
Tomtom IOS and Android navigation applications with more smartphones inroad to rural
areas.
 Aging satellites are becoming a huge concern and none of the companies have any control
over this. This could cause the failure of the GPS system globally.
 GPS functionality is becoming a standard feature on all new mobile smart phones
entering the market and will soon become a standard feature on any cellular phone which
could cripple the portable navigation device market.
ENVIRONMENTAL:
 Green movement: It is a trend that aimed to reduce any activities that will endanger the
environment. This movement is a great opportunity for TomTom to tout its technology as the
smarter and more environmentally safe tool if driving is an absolute necessity. Not only can
individuals tout this improved efficiency, but more importantly on a larger scale, businesses that
require large amounts of materials to be transported across long stretches can show activists that
they too are working to becoming a green company.

LEGAL
 FCC mandates that all cellphones must be located when they call 911, manufacturers
included GPS receiver.
 Potential adverse legislation and restrictions on the use of PND’s all navigational devices
from automobiles: In Australia & Canada , there was growing concern over the distraction
caused by PNDs so the legislature took steps toward banning these devices entirely from
automobiles.
 The growing use of GPS devices as tracking devices. Currently, law enforcement agents
were allowed to use their own GPS devices to track the movements and locations of
individuals they deemed suspicious. However, if budget cuts reduced the access to these
GPS devices, then the simple solution will be to use the PND devices already installed in
many automobiles. The threat of having every consumer’s GPS information at the
fingertips of either the government or surveillance company will most certainly stunt or
even completely halt any growth within the PND industry.
3.2 External Factors Evaluation Matrix(EFE)

Key external Factors Weight Rating Weighted Score

Opportunities
1. Autonomous driving 0.1 4 0.4
2. Cloud Maping APIs 0.15 4 0.6
3. Connected digital life to in-vehicle navigation 0.15 3 0.45
4. Expansion in emerging economies markets 0.1 2 0.2
5. Partnerships with mobile networks & new car
manufacturers. 0.05 3 0.15

Threats
1. Increasing competition especially in smart phone, and
online navigation applications. 0.1 2 0.2
2. All-in-one device trend. 0.1 2 0.2
3. Potential adverse legislation. 0.05 2 0.1
4- Privacy protection with the threat of GPS devices
tracking. 0.05 4 0.2
5. PND Saturation of EU and US market 0.1 1 0.1
6. The rise in PND thefts around the country 0.05 1 0.05

Total 1 2.65

3.3 Porter’s Five Forces – Overview

The Threat of Rivalry: High
 A consolidataed PND Indusrty: In global market share, Garmin is the leader followed by
Tom Tom, while in in Europe Tomtom is the leader and Garmin second but lagging far
behind.
 Product Range: Garmin still has the widest range of products with Tomtom following short.
However with additional partnerships lined up this could change.
 Low B2C switching costs: Consumers can switch from one brand to another easily.
 Although the main players have been identified and market share is mostly set , it seems that
a price war has started between these companies. An example of the high rivalry power is
what happened when TomTom wanted to acquire Tele Atlas. In July of 2007, TomTom bid
for Tele Atlas, a company specializing in digital maps. The original bid price of €2 billion
was countered by a €2.3 billion offer from Garmin. When TomTom raised its bid price to
€2.9 billion, the two companies initiated a bidding war for Tele Atlas. Although there was
speculation that Garmin would further increase its bid price, in the end management decided
 not to pursue Tele Atlas any further. Rather, Garmin struck a content agreement and a long-
term deal with its current supplier, Navteq.
 Competition can be classified into 2 groups : Traditional Competitors and New Competitors.
 Traditional Competitors:
TomTom faced competition from two main companies. The first of these was Garmin,
which held 45% of the market share, by far the largest and double TomTom’s market
share (24%). At the end of 2008, Garmin reported annual sales of $3.49 billion.
The second direct competitor was Magellan, which held 15% of the market share.
Magellan was part of a privately held company under the name of MiTac Digital
Corporation. Similar to Garmin, Magellan products used Navteq-based maps. Magellan
was the creator of Magellan NAV 100, the world’s first commercial handheld GPS
receiver, which was created in 1989.
Together these three dominant players accounted for about 85% of the total market.
Other competitors in the personal navigation device market were Navigon, Nextar, and
Nokia. Navigon and Nextar competed in the personal navigation devices with TomTom,
Magellan, and Garmin, who were the top three in the industry. But Navigon competed
in the high-end segment which retailed for more than any of the competitors but offered
a few extra features in its PNDs. Nextar competed in the low-end market and its
strategy was low cost. Finally, Nokia was mentioned as a competitor in this industry
because the company acquired Navteq, a major supplier of map services in this industry.
Along with that, Nokia had a big market share in the cell phone industry and planned on
incorporating GPS technology in every phone, making it a potential key player to look
for in the GPS navigation industry.

Navigation Systems Market Shares

Others
16%

Magellan 15% Garmin

45%

TomTom
24%

Figure (2) Market Shares in the GPS Navigation Industry

 Figure (3): Market shares PNDs

 New Competitors:
 Cell Phones : with GPS
 AT&T Navigator.
 Online Navigation Applications:Online navigation websites like MapQuest, Google
Maps, and Yahoo Maps. Users are able to use these free sites to get detailed directions
 Built-In Car Navigation Devices: In-car navigation devices first came about in luxury,
high-end vehicles. Currently, it had become more mainstream and was now being
offered in mid- to lower-tier vehicles.
 Physical Maps:it is an alternative for people who are not technically savvy or for
whom a navigation device was an unnecessary luxury.

The Threat of Entry: Medium

TomTom has a competitive advantage in terms of its global footprint. There is a large increase in
GPS application on smart phones and cellular phones. The PND market is consolidated and as a
standalone product or service it is preventing companies from entering the market, but rather
causing the exit of smaller companies.

Although there are new entrants coming into same industry, for example, the rapidly growth in
the industry of smart phones and cell phones, this affected a little of sales and revenue growth of
TomTom which is still able to sustain its revenue and growth due to the size of its customers and
technology base, distribution power and prominent brand image and recognition, use of strategic
alliances, the wide range of products and finally moving to navigation software and services. All
these enabled TomTom to achieve and strengthen their competitive advantages and compete with
new entrants since new entrants lacks resources and new products offerings. Thus, it can be said
the threats of new entrants for TomTom is medium or moderate specially with high required
investment capital.
Threat of Suppliers: Low- Medium
Regrading the services, TomTom has come over the suppliers power by backward vertical
integration by buying companies like:
 Tele Atlas which makes maps. With the acquisition of Tele Atlas, TomTom became
vertically integrated and also controlled the map creation process. This helped TomTom
establish itself as an integrated content, service, and technology business
 Datafactory AG was acquired to power TomTom WORK through WEBfleet technology.
 Applied Generics was acquired to give its technology for Mobility Solutions Services.

Regarding the devices, TomTom has outsourced its supply chain and distribution model which
enables TomTom to increase their ability to scale up or down the supply chain and limiting
capital expenditure risk. Additionally, TomTom was able to mitigate their supply distribution risk
of the high volume products while maintaining dual-sourcing production from two different
manufacturing partners.

Threat of Buyers: Moderate to High

 When it comes to B2B like car integrated system , TomTom has made good strategic
partnership with cars makers. The high quality of TomTom services puts in a good
bargaining position.
 TomTom’ distribution model is outsourced, it depends on limited number of third parties.
Many innovative products in the market are only available from specific leading technology
organizations.
 When it comes to B2C and PNDs consumer, buyers now have varieties of different devices
to reach the destination, apart from the PNDs, they also could obtain the trip information by
the use of smartphones or anyplace with public internet. But Tomtom lacks its own branded
outlets and epend on retailers and distributors.
 In built-in car navigation systems, they are chosen by the manufacturer and the consumers
do not have a say in this. Software application for mobile phones and cars are mostly chosen
by the manufacture and not the actual consumer. Buyers are fragmented and do not have
bargaining power.

Threat of Substitutes: High Power

There are many substitutes such as :
 Cell Phones : with GPS.
 AT&T Navigator.
 Online Navigation Applications:Online navigation websites like MapQuest, Google
Maps, and Yahoo Maps. Users are able to use these free sites to get detailed
directions. for cheap, or if possible free. These online websites offered the use of free
mapping and navigation information that will allow them to get what they needed at
no additional cost. However, there were downsides to these programs: they have poor
visualization designs (such as vague image, or text-based)
  Built-In Car Navigation Devices: In-car navigation devices first came about in luxury,
high-end vehicles. Currently, it had become more mainstream and was now being
offered in mid- to lower-tier vehicles. TomTom has come over this power by
collaboration with car manufacturers.
 Physical Maps:it is an alternative for people who are not technically savvy or for
whom a navigation device was an unnecessary luxury.

Summary of Porter’s Five Forces

Threat Threat Comments/ Reasons

Level
Rivalry High A consolidataed PND Indusrty
Competitors' wide Product Range
Low B2C switching costs
Traditional Competitors: Garmin 45% of the market share,
TomTom 25%, Magellan 15% , Navigon (high-end segment) ,
Nextar (low-end market) , and Nokia (acquired Navteq and cell
phone produces)
Entry Medium  Due to the size of its customers and technology base, distribution
power and prominent brand image and recognition, use of strategic
alliances, the wide range of products.
 High required investment capital.
Suppliers Low Due to backward vertical integration by buying companies like:
 Tele Atlas
 Datafactory AG
 Applied Generics
Buyers Moderate-  B2B TomTom has made good strategic partnership with cars
to-High makers. The high quality of TomTom services puts in a good
bargaining position.
 B2C and PNDs consumer, buyers now have varieties of different
devices to reach the destination, as well as smart phones & free
GPS apps.
Substitutes High Many substitutes such as :
 Cell Phones : with GPS.
 AT&T Navigator.
 Free Online Navigation Applications: like MapQuest, Google
Maps, and Yahoo Maps. programs.
 Built-In Car Navigation Devices: In most modern car.
 Physical Maps: for people who are not technically savvy
3.4 Competitive Profile Matrix (CPM)
Key competitors of the company include TomTom, Garmin and Magellan who control 85% of
the market share. Some of these competitors have a longer operating history, greater brand
recognition, established customer and supplier relationships and greater financial resources than
the company. Rising competition will also force the company to reduce its prices, which in turn
may adversely affect its margins.

The Competitive Profile Matrix (CPM) identifies a firm’s major competitors and its particular
strengthes and weaknesses in relation to a sample firm’s strategic position. As shown below
TomTom comes second in the totla CPM after Garmin.

TomTom Garmin Magellan

Critical success factors weight rati score rati score rati score
ng ng ng
The Independence of the Company 0.08 4 0.32 3 0.24 3 0.24
Multiple collaborations 0.08 4 0.32 4 0.32 3 0.24
Brand recognition & Reliability 0.07 4 0.28 4 0.28 4 0.28
Strong R&D & innvoation 0.08 4 0.32 4 0.32 4 0.32
Narrower product range 0.06 3 0.18 4 0.24 3 0.18
Weak B2C marketing 0.05 2 0.1 3 0.15 3 0.15
Weak distribution 0.06 2 0.12 4 0.24 3 0.18
Autonomous driving 0.08 4 0.32 4 0.32 3 0.24
Cloud Maping APIs 0.08 4 0.32 4 0.32 3 0.24
Expansion in emerging economies markets 0.08 2 0.16 3 0.24 2 0.16
Partnerships with mobile networks and new car 0.08 4 0.32 3 0.24 3 0.24
manufacturers.
Increasing competition especially in smart 0.1 1 0.1 1 0.1 1 0.1
phone, and online navigation applications
Potential adverse legislation 0.02 2 0.04 2 0.04 2 0.04
PND Saturation of EU and US market 0.08 2 0.16 3 0.24 2 0.16

Total 1 2.9 3.05 2.61

 3.5 SWOT Matrix
Strengths Weaknesses
1. The Independence of the 1. Narrower product range.
Company 2. Increasing Operating expenses.
2. Extensive market expertise. 3. Weak B2C marketing.
3. Multiple collaborations 4. Weak distribution
4. Brand recognition & Reliability 5. Cutting Cost Program
5. Strong R&D, innovation & 6. Decreasing sales values
efficiency.
6. Strong data governance
7. Playful character with unique
voice navigation and POI
information
Opportunities SO Strategies WO Strategies
1. Autonomous driving Cloud S1O4- Use independence to make W1O1- Widen prodcut range by
Maping APIs partnerships with mobile networks introducing autonomous driving
2. Connected digital life to in- & manufactures. with navigation systems.
vehicle navigation S2O3- Use experience & reliability W3O4- Partnership would
3. Expansion in emerging to develop new markets. compensate the weak B2C
economies markets S4O1 Use its reliability, R&D to marketing
4. Partnerships with mobile develop autonomous drive W6O3- Market development can
networks and new cars' navigation software. increase sales revenue.
manufacturers. S5O2- Use R&D to innovate and W6O1,2,4- Prodcut development
5. Green movement. lead the connected digital life to in- for Autonomous and digital life
vehicle navigation. connections to in-vehicle
naviagation & the partnership
would increase sales.

Threats ST Strategies WT Strategies

1.Increasing competition S1,2,5T1- Independence, W1T1- Product development by
especially in smart phone, and experience & R&D enable focus on cutting edge technologies
online navigation applications partnership with competitros like autonomous driving will
2.All-in-one device trend specially in smart phones industry. mitigate compeition with smart
3.Potential adverse legislation S6T4- Stress its strong data phones and widen product rage.
4.Privacy protection with the governance would reduce cleints W4T5- Open more branded stored
threat of GPS devices tracking. fear ragarding privace protection. at emerging economies countries.
5.PND Saturation of EU and US S2,4T5- Market development in W6T3,5- Market development in
market other emerging economies. emerging economies will increase
6.The rise in PND thefts around S5T6- Innovation to hide and sales revenue and reduce
the country. protect against being stolen and probability of adverse legislation
7.Aging satellites that support the tracking them if stolen. and overcome markets saturation.
GPS system.
3.6 The Strategic Position and Action Evaluation (SPACE) Matrix
Note: numerical values range from +1 (worst) to +7 (best) to each of the variables that make up
the FP and IP dimensions. Numerical values range from –1 (best) to –7 (worst) to each of the
variables that make up the SP and CP dimensions.

Internal Strategy Position External Strategy Position

X Axis
CP (Competitive Position) IP (Industry Position)
# Factor Valaue # Factor Valaue

1 Product Quality -1 1 Barriers to Entry 3

2 Market Share -2 2 Growth Potential 5
3 Brand Image -2 3 Access to Finance 3
4 Product Life Cycle -4 4 Consolidation 4
5 Customer Service -1 5 Profit 3
6 Customer Loyalty -3
Total -13 18
CP Average -2.2 3.6
Sum of X Averages 1.4

Y Axis
FP (Financial Position) SP (Stability Position)
# Factor Valaue # Factor Valaue

1 Earning Per Share 4 1 Price of Competive Product -3

2 Revenue Increase 4 2 Competitive Presseure -3
3 Return on Assets 3 3 Global Economics -3
4 Leverage 3 4 Technology Change -1
5 Liquidity 3 5 Demand Elasticity -4
6 Cash Flow 3 6 Inflation Rate -3
Total 20 -16
FP Average 3.3 -2.7
Sum of Y Averages 0.6
 Figure(4): Tomtom SPACE Matrix

According to the SPACE Matrix, TomTom falls in the 1st quadart which best suits the aggressive
strategies such as:
 Product Development.
 Market Development.
 Market Penetration.
 Vertical Integration (Backward & Forward)

3.7 Portofolio Analysis: BCG Matrix

Diversified Product Portfolio: TomTom offers a strong product portfolio in the navigation
industry, which helps it cater to the needs of a diversified customer base. TomTom offers a wide
variety of products ranging from portable navigation devices to software navigation applications
and digital maps. The unique features in each of these products made them the smart choice in
personal navigation. Some of these products are described are:
 PNDs Navigation devices
 Maps APIs & SDKs
 Traffic and travel live information & services
 Maps: sd, ADAS and hd maps
 Autonomous driving: Autonomous driving technology is generating significant
interest in new, detailed maps that will help transform the way TomTom thinks about
driving. The journey to fully autonomous driving is developing along a six-level scale,
evolving from level 0, where the driver is in full control, to level 5, where the vehicle
is in full control. Across all levels, vehicles require maps that are significantly
different from the maps used for driver navigation. As the driving task shifts from the
driver to the vehicle, the map must shift to serve a machine instead of a human.
ADAS, or advanced driver assistance systems, enables vehicles to help make driving
simpler and safer for people through adaptive cruise control or lane guidance systems.
As it becomes mainstream, it will play a crucial role in preparing the technology for
higher degrees of automation, eventually leading to autonomous vehicles. OEMs are
progressing rapidly in adopting ADAS features, with numerous manufacturers having
already launched level 1- and level 2-enabled vehicles. TomTom's ADAS maps
already power more than 1.5 million vehicles on the road today, and it expects this
number to continuously increase over the next few years. The medium-term
opportunities for TomTom lie in ADAS maps, while HD Maps will drive long-term
value. Current market expectation is that by 2025, highly automated vehicles will be
ready for the roads, with HD Maps essential for the safety and comfort of autonomous
vehicles. To achieve this timeline, automakers are already sourcing HD Map deals. As
TomTom moves into a more autonomous driving experience, SD Maps, navigation
and online services, such as traffic information, will continue to be sourced by OEMs.
Our expectation is that even at Level 4 or 5, where the vehicle will drive itself, there
will be opportunities to continue to provide TomTom's current portfolio of maps,
navigation and online services, as the passengers will continue to need to locate
themselves and interact with the machine responsible for driving.

 Cloud Maping APIs : Maps APIs "Application Programming Interface" are

increasingly becoming mainstream for the company's customers and developers,
which are accessing more and more maps, navigation software and other location-
based applications in the cloud. As the reliability of cloud computing increases and
the costs associated with connectivity decreases, location-as-a-service via APIs
transforms from a virtual accessory into an industry standard. Instead of accessing
uncompiled maps and having to manage large databases, companies with smaller
engineering teams and developers of startups can access bits and pieces of content as
needed, gaining speed to launch their applications. Such rapid change in the location
APIs market has created a significant area of growth for TomTom, as many start-ups
and businesses are looking for providers. In 2019, TomTom took critical steps to
advance the adoption of TomTom Maps APIs, which included not only enhancing the
product offering, but also building its own developer community via Developer
Portal, where users can easily access TomTom's APIs and SDKs for its entire product
line. A variety of enterprises and start-ups, from mobile and web application
 development to fleet management, vehicle tracking and logistics already use our Maps
APIs and SDKs. TomTom strategy to grow market reach also includes offering our
location technology in third-party cloud platforms.

 Connected digital life to in-vehicle navigation : Enabling drivers to expand their

connected digital life to their vehicles through in-vehicle navigation and infotainment
systems. More than a quarter of new car sales today are from connected vehicles –
with close to 100 million new cars produced every year, 40 million in Europe and
North America alone. There is a continued growth in connected in-vehicle
navigation, as TomTom continues innovating to position itself as a trusted full-stack
navigation system provider with the best end user experience across all geographic
regions. TomTom navigation solutions work across brands, models and geographies
while meeting stringent demands for costs, speed, quality and simplicity. More and
more, drivers demand connected, online in-vehicle services that are on par with
smartphones and apps. The market is shifting in response with connectivity enabling
TomTom to further capitalize on its software, over-the-air map updates and sensor
data as it monetizes new services.

Revenue per Region: TomTom (Dollar amount in millions of €)

Quarter 1 of 2009 Quarter 1 of 2009 Difference
Europe 178,114 146,549 –22%
North America 84,641 55,558 –52%
Rest of world 1,087 10,976 90%
Total 263,842 213,083 –24%

Revenue per Segment: TomTom (Dollar amount in million of €)

Q 1'09 Q 1'08 y.o.y Q 4'08 q.o.q.
Revenue 172 264 –35% 473 –64%
PNDs 141 234 –40% 444 –68%
Others 31 29 5% 29 5%
# of PNDs sold (in thousands) 1,419 1,997 –29% 4,443 –68%
Average Selling Price (€) 99 117 –15% 100 –1%

According to the previuos revenue tables, it can be obviuosly noticed that Europe & US markets
are highly saturated, Also that the revenue from the PNDs is declining while the revenues from
the others (services and content) is growing.

According to the BCG Matrix, most of TomTom's products fall in the 2nd qudrat "Stars", which
best suits the aggressive strategies, while a few fall in the 3rd quadart "Cash Cow" which best
suits the diversification and product development.
Quadrant 2 Stars Products:

 Maps : Autonomous Driving System, Cloud Mapping, Connected digital life to in-vehicle
navigation
Strategy:
 Product Development.
 Market Development.
 Market Penetration
 Vertical Integration (Backward & Forward)
These products are very new and have a great potential and needs high investment in order to turn
them in the future into cash cow.

Quadrant 3 Cash Cow Products:

Navigation devices PNDs in Europ & USA

Strategy:
 Product Development.
 Diversification.
As long as Europe & US markets are saturated with PNDs, there is a chance still by developing
other features and services at the PNDs and diversify the product ranges in order to generate
more sales.

Relative Market Share

H L
Q2 Stars Q1 Question Mark
Market Growth Rate

H
Products:
 Maps : Autonomous Driving System, Cloud
Mapping, Connected digital life to in-
Products:
?
vehicle navigation Strategy:
Strategy:
 Product Development.
 Market Development.
 Market Penetration
Q3 Cash Cow Q4 Dog
Products: Navigation devices PNDs Products:
in Europ & USA.
L
Strategy:
Strategy:
  Product Development.
 Diversification.

3.8 Internal External Matrix:

The IFE Total Weighted Scores (3.07)
4 3 2 1
Strong (3-4) Average (2-2.9) Weak (1-1.9)
I II III
High (3-4)
1234The EFE Total Weighted Scores (2.65)

IV V VI
Medium (2-2.9)

Market Development.
Product Development.
Market Penetration.
Vertical Integration.

VII VIII IX
Low (1-1.9)

The IFE is 3.07 & the EFE is 2.65, so TomTom falls at the " IV" which belongs to the "grow &
build" region and which best suit agressive strategies such as:
 Product Development.
 Market Development.
 Market Penetration
 Vertical Integration (Backward & Forward.
3.9 Grand Strategy Martix
Strong Market Growth

Products of Rapid Growth Markets: Maps/Services/ Softwares/ Autonomous Driving/ cloud Mapping/ P
Suitable Strategies:
Product Development.
Market Development.
Market Penetration
Vertical Integration (Backward & Forward.

Weak Competivie Position Strong Competivie Position

Products of Slow Market Growth: PNDs in Europe & US

Suitable Strategies:
Related Diversification: More features
Joint Ventures: more strategic alliance & collaboration with car manufacturers

Weak Market Growth

 3.10 Quantitative Strategic Planning Matrix (QSPM)
Market Product
Development Development
Weight AS TAS AS Tas
Opportunities
1. Autonomous driving 0.1 3 0.3 4 0.4
2. Cloud Mapping APIs 0.15 3 0.45 4 0.6
3. Connected digital life to in-vehicle navigation 0.15 3 0.45 4 0.6
4. Expansion in emerging economies markets 0.1 4 0.4 3 0.3
5. Partnerships with mobile networks and new car manufacturers. 0.05 4 0.2 4 0.2
Threats
1. Increasing competition especially in smart phone, and online
navigation applications 0.1 2 0.2 4 0.4
2. All-in-one device trend 0.1 2 0.2 4 0.4
3. Potential adverse legislation 0.05 3 0.15 2 0.1
4- Privacy protection with the threat of GPS devices tracking. 0.05 3 0.15 2 0.1
5. PND Saturation of EU and US market 0.1 4 0.4 4 0.4
6. The rise in PND thefts around the country 0.05 2 0.1 4 0.2
Total 1 3 3.7

Strengths
1. The Independence of the Company 0.14 3 0.42 4 0.56
2. Extensive market expertise in location data 0.13 4 0.52 4 0.52
3. Multiple collaborations 0.13 3 0.39 4 0.52
4- Brand recognition & Reliability 0.09 4 0.36 4 0.36
5- Strong R&D & innovation 0.1 3 0.3 4 0.4
Weaknesses
1. Narrower product range 0.11 4 0.44 4 0.44
2. Increasing Operating expenses 0.1 2 0.2 3 0.3
3. Weak B2C marketing 0.09 2 0.18 3 0.27
4. Weak distribution 0.11 3 0.33 3 0.33
Total 1 3.14 3.7

Sum Total Attractiveness Score 6.14 7.4

QSPM suggests that product development has a stronger potential than market development
because of the following:
 Maximizing the opportunities: The product development can maximize the future
opportunities trends like self-driving and cloud mapping, which would appeal to Eurpean
 and American markets who have the purchase power to buy such cars. It will also serve
well in the future when other markets are approached.
 Utililizing the Strengthes: The product development can utilize most of TomTom
strengths such as the company's independence, the brand reliability , experience & the
strong relation TomTom has with cars manufacturers ; all can help with integrating
TomTom's systems in the self-driving cars. The strong R&D can push this stratgey
forward.
 Mitigating the Weaknesses : Product development strategy "like cloud mapping and
self-driving cars" tends towards the B2B more than B2C. So it will compensate and avoid
TomTom's weaknesses points such as the low B2C marketing budget, weak distribution
and the lack of branded stores. It will also widen the product range, which will generate
more sales that will outweigh the increasing operation expenses.
 Avoiding the Threats: Product development strategy will also overcomes the
competition with the smart phones as self-driving cars and cloud mapping will all be built
in the cars, which will also make It avoid the rise in PNDs thefts. more important that It
will re-vitalize the saturated markets of Europe & the US and re-produce another life
cycle for navigation systems industry.
4- Financial Analysis:

4.1- Profitability Ratios

Return on Equity: Figure (5) TomTom Return on Equity

Return on Equity R/E Ratio

100.00%

50.00%
Tom Tom
0.00%
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Garmin
-50.00%
Magellan
-100.00%

Return on Assets: Figure (6) TomTom Return on Assets

Return on Assets R/A Ratio

20.00%
10.00%
0.00%

Tom Tom
-10.00% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Garmin
-20.00%
Magellan
-30.00%

Return on Invested capital: Figure (7) TomTom Return on Invested capital

Return on Invested Capitals Ratios

40.00%
30.00%
20.00%
10.00% Tom Tom
0.00% Garmin Magellan
-10.00%
-20.00% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
-30.00%
-40.00%
Earnoing Per Share: Figure (8) TomTom Earnoing Per Share

Earning per Share Ratio (EPS)

6

4
TomTom
2
Garmin Magellan

0
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
-2

-4

Operating Margin: Figure (9) TomTom Operating Margin

Operating Margin Ratios

50.00%
40.00%
30.00%
20.00% Tom Tom
10.00% Garmin Magellan
0.00%
-10.00%
-20.00%
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
 4.2 Efficiency Ratios

Assets Turnver 2019: Inventory Turnover 2019:

Figure (10) TomTom Assets Turnover Figure (11) TomTom Inventory Turnover

Assets Turnver 2019 Inventory Turnover

0.7 0.65 2019
0.6 0.5 7.18
0.5 8 6.7
0.4 0.35 6
0.3 4 2.3
0.2
0.1 2
0 0

TomTom Garmin Magellan TomTom Garmin Magellan

4.3 Liquidity Ratios: Figure (12) TomTom Liquidity Ratio

TomTom Liquidity Ratios

(Debt, Equity, Current)
250
200
150 Debt Ratio
100 Equity Ratio Current Ratio
50
0

2009201020182019
4.4 Price Ratios
Price to Earning P/E Ratio: Figure (13) TomTom Price to Earning P/E Ratio

P/E Ratios
800

600

400 Tom Tom

Garmin
200
Magellan
0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Price to Sale Ratio (P/S): Figure (14) TomTom Price to Sale P/S Ratio

Price to Sale P/S Ratios

10
8
6
4
2
0

2010201120122013201420152016201720182019

Tom Tom Garmin Magellan

5- Recommendation:
We can classify the products of TomTom into 2 major categories: Tangible products, like the
PNDs, and intangible products like the software, apps and systems. So 3 groups of
recommendation can be developed. General ones, others for the intangible product units and
some for PNDs units.

General Recommendation:

1. Pay greater attatention to the intangible products: As it has more added value and have
better potential because the PNDs face a severe copmetition from the smart phones and
the free navigation apps as well as the saturation of Europe and the US..
2. Lobbying with other navigation systems companies : To create a coordinated and united
effort to stem any expected legal wave of PNDs or GPS systems restrictions as well as
provide reassurance to the public that the companies were also concerned with the safe
use of their products. In other words, the threat of having every consumer’s GPS
information at the fingertips of either the government or surveillance company require the
industry as a whole to proactively work with the consumers and the government to come
to an amicable resolution
3. Utilize the Green movement in its marketing activities: It is a trend that aimed to reduce
any activities that will endanger the environment. This movement is a great opportunity
for TomTom to tout its technology as the smarter and more environmentally safe tool if
driving is an absolute necessity. Not only can individuals tout this improved efficiency,
but more importantly on a larger scale, businesses that require large amounts of materials
to be transported across long stretches can show activists that they too are working to
becoming a green company.
4. Wisely Implementing the Cutting Cost Program: in order to reduce operating expenses
and strengthen the balance sheet, heavy emphasis had been placed on the cost-cutting
program. In 2009, the cost reductions were made up of reduction of staff, restructuring
and integration of Tele Atlas, reduced discretionary spending, and reduction in the
number of contractors and marketing expenditures. However, if not executed wisely, it
could hamper TomTom’s long-term objective of being a market leader. For example, one
of the core capabilities of any technology company is its staff; reducing it could hinder
future innovative projects.

Recommendation for the software, apps and systems units:

1. Product Development Strategy: This is highly recommended to cope with the future
trends like the ADAS or self-driving cars, cloud mapping and life digitalization. TomTom
has strong R&D which can be utilized to gain the first mover advantage in this field.
 2. More partnerships with mobile networks and new car manufacturers : This is one of the
tools to catch up the opportunities for the future self-driving cars as well as the car built-in
navigation systems in general.

Recommendation for the PNDs units:

1. Market Development: By entering new markets in Asia and Africa like the BRIC
countries in order to mitigate the saturation of Europe and US markets by creating digital
maps for developing countries and creating navigational services—can either be
piggybacked or can be taken in independent paths. The first-mover advantage for these
opportunities will erect a high barrier of entry for any companies that do not have large
amounts of resources to invest in the developing country.
2. Product Development: Adding more features, offering a wider collection will suit more
segments attracting more people to use them specially in the emerging countries.
3. Develop the PNDs with anti theft systems: The onus will be on TomTom to create new
designs that will not only hide PNDs from would-be thieves but also deter them from
trying to steal one. Consumers who were scared to purchase PNDs because of this rise in
crime will become an issue if this problem is not resolved.
4. Increase B2C marketing budget: The current B2C marketing budget is quite low.
Increasing such a budget will be essential when entering the new markets to spread
awareness and raise desire which would lead to more sales and revenue that outweigh
such expenses.
5. Launch more branded stores & outlets: Though TomTom works in a more than 40
countries but it has a limited number of stores. Opening their own branded stores
exclusively to sell only their products could almost guarantee a revenue. At retailers' stores,
where TomTom products are offered, they are competing with their competitors such as Garmin
which currently has more offices than TomTom and also employs almost 4x the amount of
people.
References:
https://www.tomtom.com

https://www.facebook.com/TomTom/

Tom Tom Annual report & accounts 2019.

https://www.reuters.com/companies/TOM2.AS

https://www.macroaxis.com/invest/ratio/TOM2.AS--Number-of-Employees

https://www.termpaperwarehouse.com/essay-on/Tomtom-Strategic-Managment/216602

http://investors.tomtom.com/overview.cfm. TomTom, ―TomTom, Portable GPS Car Navigation

Systems,

https://en.wikipedia.org/wiki/TomTom

https://markets.businessinsider.com/stocks/tomtom/financials

https://ycharts.com/companies/TMOAF/valuation

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