As TomTom, one of the largest producers of satellite navigation devices in the world, entered 2010 it faced stiff competition from its traditional rivals such as Garmin and from new competition from cell phones. Although its sales reached an all time high of €1.74 billion in 2007 by 2008 sales had slipped to €1.67 billion. That year the company posted a loss of €872 million. The decline in sales continued with 2009 sales slipping to €1.48 billion, although the company managed to post net income of €86 million that year. TomTom employed over 3,000 employees in 40 countries. Since its founding in 1991, the Netherlands-based company experienced steady growth. It offered an array of information services and devices aimed at the consumer and business markets. It led the navigation market in Europe, and was second to Garmin in the United States. In 2007, it outbid Garmin to acquire Tele Atlas in a vertical integration strategy to control the map creation process. TomTom paid €2.9 billion for Tele Atlas. As 2009 came to a close, Google announced it would offer turn-by-turn navigation within cell phones. Google said the product, initially limited to driving directions in the U.S. would be free to consumers. As the U.S. and European markets for navigation devices matured, TomTom was faced with decisions related to the relative emphasis it should place on its stand-alone navigation devices, built-in navigational units for automobiles and aviation, and business devices and services aimed at companies with large mobile workforces.
Suggestions for Using the Case
Students should find the TomTom case interesting since many of them probably own a GPS unit or use a smartphone- based GPS application. The Nintendo case is excellent for drilling students in applying the concepts and analytical tools covered in Chapters 4 and 5. The case provides sufficient information to allow students to fully examine the competitive forces at play in the personal navigation industry, consider the industry’s driving forces and key success factors, and examine TomTom’s internal situation. In addition, the case’s decision focus allows students to consider what TomTom must do to survive in an increasingly competitive environment. To give students guidance in what to do and think about in preparing the TomTom case for class discussion, we strongly recommend providing class members with a set of study questions and insisting that they prepare good notes/answers to these questions in preparing for class discussion of the case. You may also find it beneficial to have your class read the Guide to Case Analysis that is posted in the student section of the Online Learning Center for the 18th edition at www.mhhe.com/thompson. Students will find the content of this Guide particularly helpful if this is their first experience with cases and they are unsure about the mechanics of how to prepare a case for class discussion, oral presentation, or written analysis. TomTom: New Competition
*This teaching note was prepared by Professor Woody Richardson, Mississippi State University. We are most grateful for his insight, analysis and contributions to how the case can be taught successfully. *
In our experience, it is quite difficult to have an insightful and constructive class discussion of an assigned case unless students have conscientiously have made use of pertinent core concepts and analytical tools in preparing substantive answers to a set of well-conceived study questions before they come to class. In our classes, we expect students to bring their notes to the study questions to use/refer to in responding to the questions that we pose. Moreover, students often find having a set of study questions is useful in helping them prepare oral team presentations and written case assignments—in addition to whatever directive questions you supply for these assignments. Hence, we urge that you insist students spend quality time preparing...
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