European automotive and consumer device manufacturers can be credited with inventing or developing a huge range of technologies. However, few device introductions rival the unveiling of the Portable Navigation Device (PND) platform by Tom-Tom back in 2003/2004. From humble beginnings, the ?rst PND devices shipped by the Dutch startup TomTom back in 2004 transformed automotive navigation from a high margin and premium-vehicle feature into the highly dynamic, mass-market, near-commodity product we see today.
Indeed, it took just three years before the term Tom-Tom was elevated to the hallowed status of companies that are synonymous with their products, such as Hoover in the 60’s and 70’s and more recently Apple’s iPod for MP3 music players. In the common parlance of the average consumer in Europe, “Will you be using your Tom-Tom?” is now an accepted figure of speech.
This not to say the company has had it all its own way. Tom-Tom’s 2007 purchase of European map provider Teleatlas for 2.9 billion Euros, after raising the offer price after a counter bid from arch rival Garmin, stretched the company’s finances just as the world went off the financial cliff at the end of 2008. However, Tom-Tom is not only still up-and-running, but in the opinion of many, has upstaged its bigger American cousin Garmin with a series of strategic moves designed to lessen its exposure to the PND market, which iSuppli believes has entered a period of stagnation.
Staving Off Competition
A brief SWOT analysis on Tom-Tom reveals that its current reliance on the PND platform is a significant weakness; however, the company plans to play to its strengths, leveraging its excellent brand image to further its opportunities in the growing mobile handset—with the iPhone—and in-dash spaces, with Renault & Fiat.
As for threats, the company is entering the “maps and apps” market for smart-phone navigation content and software against a growing list of turn-by-turn navigation providers, and so it will be up to the Tom-Tom marketers to re-demonstrate their entrepreneurial spirit in the development of their new software-based product. Selling maps and apps is the ultimate just-in-time sales process, and at a stroke, the company will be able to offload the messy process of PND manufacturing, testing, shipping and marketing; a practice that is fraught with issues, such as inventory holds and low margins.
Indeed, Tom-Tom’s shift in focus away from the PND platform could be timely, based on iSuppli’s latest market share forecast splits for navigation across all platforms, which foresees handset-based smart phones and features phones jointly taking up to 80 percent market share of the navigation units shipped in 2014. By that time, the share taken by PNDs will be down to just 10 percent, while the in-dash market will be around 6 percent.
The key question for PND manufacturers in the European Union and elsewhere is will they go “low-ball” and take on the growing smart phone phenomenon head-on with low-cost devices that provide a basic service, or will they move upscale by providing a truly differentiated product that is all about the user experience on a connected, dedicated device?
It would seem the middle ground, which is where most PND device manufacturer are today, will be the most dangerous battle ground between the platforms.
The Next Chapter
Ironically, it might well be U.S.-based Apple that writes the next chapter in the Tom-Tom success story, with iSuppli forecasting that Tom-Tom will pick up as much as 20 percent to 25 percent market share in the high-margin smart-phone navigation market. In a recently-released special report, iSuppli’s analyst team provides in-depth analysis and forecasts for each navigation platform from PNDs to smart phones as well as OEM in-dash and traditional after-market devices. The analysis includes strategic information down to the semiconductor level.