tom tom

TomTom: New Competition Everywhere!

C A S E 7

Alan N. Hoffman Rotterdam School of Management, Management, Erasmus University and Bentley University omTom is one of the largest producers of satellite navigation systems in the world, comprised of both standalone devices and applications. It leads the navigation systems market in Europe while it stands second in the United States. TomTom attributes its position as a market leader to the following factors: the size of its customer and technology base; its distribution power; and its  prominent brand image and and recognition.1 With the acquisition of Tele Atlas, TomTom has  become vertically vertically integrated integrated and also controls the map creation process now. This has helped TomTom establish itself as an integrated content, service and technology business. The company is Dutch by origin and has its headquarters based in Amsterdam,  Netherlands. In terms of geogra phy, the company’s operations span from Europe to Asia Pacific, covering  North America, Middle East East and Africa.1 TomTom is supported by a workforce of 3,300 employees from 40 countries. The diverse workforce enables the company to compete in international markets.2 The company’s revenues have grown from  €8 million in 2002 to €1.674 billion in 2008. However, However, more recently, because of the Tele Atlas acquisition and the current economic downturn the Company has  become a cause of concern for investors. TomTom reported a net loss of €37 million in the first quarter of 2009.3 TomTom is in the business of navigation based information services and devices. The company has  been investing structurally and

strategically in Research and Development to bring new and better products and services to its customers. The company’s belief in radical inno vation has helped it remain at the cutting edge of innovation within the navigation industry. The vision of TomTom is to improve people’s transforming navigation from a don’t- get-lost lives by transforming solution into a true travel companion that gets people from one place to another safer, faster, cheaper and  better informed. This vision has helped the company to be a market leader in every market place in the satellite navigation information services market. The objectives of the company focus around radical advances in three key areas:4  Better Maps:  This objective is achieved by maintaining TomTom’s high quality map data base that is continuously kept up to date by a large community of active users who provide corrections, verifications and updates to TomTom. This is supplemented by inputs from TomTom’s extensive fleet of surveying vehicles.  Better Routing: TomTom has the world’s largest historical speed profile data base IQ Routes™ facilitated by TomTom HOME, the company’s user  portal. The author would like to thank Will Hoffman, Mansi Asthana, Aakashi Ganveer, Hing Lin, and Che Yii for their research. Printed by permission of Dr. Alan N. Hoffman and www.ecch.com www.ecch.com.. Copyright © 2010 Alan N. Hoffman. No part of this publication may be copied, stored, transmitted, reproduced or distributed in any form or medium whatsoever without the  permission of the copyright copyright owner.

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Part 2 Cases in Crafting and Executing Strategy

 Better Traffic Information:  TomTom possesses unique real time traffic information service TomTom HD traffic™ which provides users with high quality, realtime traffic updates.4 These three objectives form the base of satellite navigation, working in conjunction to help TomTom achieve its mission.

spoken navigation and unique routing technology that our 30 million portable navigation device users rely on every day,” said Corinne Vigreux, Manag ing Director of TomTom. “As the world’s leading provider of navigation solutions and digital maps, TomTom is the most natural fit for an advanced navigation application on the iPhone.”4 The TomTom app for iPhone 3G and 3GS users includes a map of the U.S. and Canada from Tele Atlas, and is available for $99.99 USD. TomTom offers a wide variety of products ranging The TomTom app for iPhone includes the from portable navigation devices to software navi- exclusive IQ Routes™ technology. Instead of using gation applications and digital maps. The unique travel time assumptions, IQ Routes bases its routes on features in each of these products make them truly the actual experience of millions of TomTom drivers “the smart choice in personal navigation.” 1  Some of to calculate the fastest route and generate the most these products are described below. accurate arrival times in the industry. TomTom IQ Routes empowers drivers to reach their destination faster up to 35% of the time. TomTom Go and TomTom One These devices come with a LCD screen that makes it easy to use with fingertips while driving. They provide 1,000 Points of Interests (POI) that help in locating petrol stations, restaurants and places of importance. A number of other POIs can also be downloaded. Company History Precise, up to minute traffic information, jam alerts and road condition alerts are provided by both these TomTom was founded as Palmtop in 1991 by Peter-Frans Pauwels and Pieter Geelen, two graduates devices.5 from Amsterdam University, Netherlands. Palmtop started out as a software development company and TomTom Rider These are portable models was involved in producing software for handheld especially for bikers. The equipment consists of an computers, one of the most popular devices of the 90s. integrated GPS receiver that can be mounted on any In the following few years the company diversified  bike and a wireless headset inside the helmet. Similar into producing commercial applications including to the car Portable Navigation Devices (PNDs), the software for personal finance, games, a dictionary and TomTom Rider models have a number of POI maps. In the year 1996, Corinne Vigreux joined applications. The interfaces used in TomTom Rider Palmtop as the third partner. In the same year, the are user friendly and come in a variety of languages.5 company announced the launch of Enroute and RouteFinder, the first navigation software titles. As more and more people using PCs adopted Micro soft’s TomTom Navigator and TomTom operating system, the company developed Mobile These applications provide navigation applications which were compatible with it. This software along with digital maps. Both of these helped the company increase its market share. The applications are compatible with most mobiles and year 2001 marks the turning point in the history of PDAs, provided by companies like Sony, Nokia, Acer, Dell and HP. These applications come with TomTom HOME which can be used to upgrade to the most recent digital maps and application versions.3

TOMTOM’S PRODUCTS

COMPANY BACKGROUND

TomTom for iPhone On August 17, 2009, TomTom released TomTom for the iPhone. “With TomTom for iPhone, millions of iPhone users can now benefit from the same easy-to-use and intuitive interface, turn-by-turn

Case 7 TomTom: New Competition Everywhere!

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TomTom. It was in this year that Harold Goddijn, the former top marketing official looked after sales of new former Chief Executive of Psion joined the company  products introduced by the company. as the fourth partner. Not only did Palmtop get TomTom Go, an all-in-one car navigation sysrenamed to TomTom, but it also entered the satellite tem, was the next major launch of the company. With navigation market. TomTom launched TomTom its useful and easy to use features TomTom Go was  Navigator, the first mobile car satnav system. Since included in the list of successful products of 2004. In then, as can be seen in Exhibit 1, the company has the same year, the company launched TomTom celebrated the successful launch of at least a product Mobile, a navigation system which sat on top of smart each year. 3  phones.3 In 2002, the company generated revenu e of €8 TomTom completed its IPO on the Amsterdam million by selling the first GPS-linked car navigator, Stock Exchange in May 2005. It raised €469 million the TomTom Navigator to PDAs. The upgraded ($587 million) from this offer. The net worth of the version, Navigator 2 was released in early 2003. company was nearly €2 billion after the IPO. A Meanwhile, the company made efforts to gain majority of the shares were with the four partners. 6 technical and marketing personnel. TomTom took From the years 2006 to 2008, TomTom strengthened strategic steps to grow its sales. The former CTO of itself by making three key strategic acquisitions. Psion, Mark Gretton, led the hardware team while Datafactory AG was acquired to power TomTom Alexander Ribbink, a WORK through WEBfleet

Exhibit  Year

1 Company history Historical Event Event

HDTraffic & Founded Renamed Navcore

1991 1994 1996 2001 2002 2003

IPO MapShare

2004

Palmtop founded by Harold Goddijn, Peter-Frans Pauwels and Pieter Geelen. Corinne Vigreux joined the Company to sell Palmtop applications in Europe. First navigation software for PDAs, EnRoute and RouteFinder launched. Palmtop renamed TomTom. Harold Goddijn joins TomTom as CEO. Number of employees 30. First GPS-linked GPS-linked car navigation product for PDAs, TomTom NAVIGATOR shipped. €8 million revenue. NavCore Software Architecture developed, on which all TomTom products are still based. Number of employees 90. First portable navigation device shipped, the TomTom GO. 248,000 PND units sold.

2005

TomTom listed on Euronext Amsterdam.€720 million revenue.

2006 2007

TomTom WORK and TomTom Mobility Solutions launched. Number of employees 818. TomTom makes offer for Tele Atlas. TomTom HD Traffic and TomTom MapShare launched. 9.6 million PND units sold. TomTom acquired Tele Atlas.

2008

Source: http://invest http://investors.tomtom. ors.tomtom.com/overview.cfm com/overview.cfm