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TomTom Case Audit

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on 13 April 2015

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Transcript of TomTom Case Audit

Agenda
Current Situation
Corporate Governance
External Environment
Internal Environment
Strategic Factors (SWOT) Analysis
Strategic Alternatives & Recommendations
Implementation
Evaluation & Control
Conclusion
Current Mission/Objectives
Supplies electronic navigation systems in order to provide a growing customer base with the quickest, safest, and most efficient routes to desired destinations.
Decrease operating expenses
Increase market share
New market breaching (horizontal growth)
Expansion of services

Current Situation
Financial:
Sales down 22% in Europe
Sales down 52% in the U.S.
Operating margin down almost 24%
Net income down 136% (negative) from 2009-2011
Net income now only $24m

External Environment: Threats
Economic downturn
Aging GPS satellites
Legislation
Use as tracking devices
Theft
2005 FCC mandate (smartphones)
Threat of substitutes
Terrorism
First mover advantages among competitors
Large capital investment
Rivalry among competitors

EFAS
Table
Questions?
TomTom Case Audit
Group 3 Consulting Firm:
Caitlin Cannon, Kevin Harty, Tracy Kaplan, Brendan McGeehan, Franco Napoletano, Chad Stimpson

Current Situation cont.
Revenue consistently shifting downward
Corporate Governance
Board of Directors
Provides strategic advice to Mgt. board
Not directly in control
Supervisory but not controlling the direction of the business
Environmental sustainability highly important
All external members, no insiders
7 members
Board members hold no ownership stake in company
Founders hold 57% ownership
42% free float (available for exchange)

Members of Board of Directors
Peter Wakkie,
Chairman (2009-2017): Background in law
Doug Dunn,
Deputy Chairman (2005-2015): Background in tech industry (Motorola); Past CEO of Philips semiconductor; US & UK
Guy Demuynck
(2005-2016): Background in applied economics and marketing; commercial and marketing roles in Europe, US, East Asia
Ben van der Veer
(2008-2016); Background in accountancy; Chairman of KPMG 1989-2008
Toine van Laack
(2013-2017); 25 years working for Ernst & Young (advisory services & audit) in the Netherlands.
Jacqueline Bakker
(2014-2018); Worked as a consultant for McKinsey; Directed Gigaport for several years; transportation and aviation regulation industry
Anita Elberse
(2014-2018); Professor at the Harvard School of Business; MBA courses to business executives

Members of Management Board
Harold Goddijn
: CEO
Joined company in 2001; pushed TomTom to enter the sat-nav market
Led company in profitable strategic direction
Focusing efforts on expanding and improving sat-nav technology and its efficiency/affordability
International experience as director of Psion Computers (Netherlands).
Marina Wyatt
: CFO
Strong background in accountancy
worked as a director at Symbian and has held several CFO positions
Alain De Taeye
Previous director of Tele Atlas; Brought over after its acquisition by TomTom in 2009
Extensive experience in digital mapping field
Expert in databases and routing
Executives from acquisitions considered part of top mgt. (shown by Alain’s position)

Approach to Strategic Management
Non-operational approach
Strategy: make acquisitions and take opportunities when possible
Management’s level of involvement: High (acquisition of TeleAtlas)
BOD and lower managerial Interactions: integrated approach
Top mgt. keeps managers informed/involved in strategic direction
Board of Directors: advisory role in decisions of top management
Ethics and social responsibility
Possible regulations will ban PND devices (GPS) from vehicles
Efforts to reassure public that safety in device usage is top priority
Strives to be environmentally conscious
GREEN Movement
Significant Executive stock holdings; Only the CEO: 12%

External Environment: Opportunities
GREEN movement
Digital maps for developing countries
2005 FCC mandate (smartphones)

Internal Environment
Corporate structure centered around 4 majority shareholders
Corporation designed around its products
TomTom’s differential advantage centered around technological advances
Recently merged with TeleAtlas

Structure Comparison
Garmin
Founded by Gary Burrell and Min H. Ko
Both companies attempting to out-innovate eachother
Recently merged with Navteq


Corporate Culture
Do business efficiently, profitably, and responsibly
Company success should also mean employee success

Environmental Sustainability
One of the most energy efficient factories in the world
Navigation systems encourage the most fuel efficient routes as possible
TomTom worksmart eco

Employee Diversity
Workforce made up of over 50 nationalities
Encourages different outlooks, religion and diversity amongst the workplace
Operations & Logistics
Focus on innovation to remain competitive with frequent technological advances
Economies of scale to align with long-term
Distribution and supply chain model outsourced to increase the ability to scale up and down the supply chain without risking large capital expenditures.
Internal quality control standards and procedures exist to mitigate risks.
2011: assessed environmental impact associated with operations, products and services.

Human Resource Management
“Main objective to have great place to work: building high performance, effectively developing and managing Talent and L&D programs, driving internal communications…”
Recruits best/brightest people with ultimate goal of growth and retention
45% employees have been there 10 years or more
Various programs offered, including Young Talent Development Program
43% employees are women; paid $16,000 more than men on average
End of 2013: 31% of employees were based in the Netherlands, compared to 35% at the end of 2012
Information Technology
3 things that differentiate and give advantage to TomTom:
Routing algorithms
Digital mapping technology
Automotive partnerships
Acquiring TeleAtlas helped gain new technology and improve existing technology
Very active internet presence because the products rely on internet and global positioning systems to make the technology what it is
IT manager must understand needs of consumers to develop the necessary technologies to compete and to gain market share in PND industry

Corporate Resources: Marketing
Positioned as leader of location and navigation services, through its physical units, mobile phone and car platform devices
Ultimately, dedication to accurate data has led to success with the product differentiation.
Sends customers updates, which in turn leads to future purchases.
Competitors like Magellan and Garmin have had more success marketing to consumers in North America
Means that TomTom has huge potential to make a larger dent in the North America market.

Corporate Resources: Finance
Financial objectives: to diversify their revenue streams in terms of geographical expansion, as well as expansion of it’s product and service portfolio.
Revenue nearly half of what it was 6 years ago
Gross Profit (%) has risen
Free cash flow has also been taking a huge hit, dropping from nearly $400MM to $29MM.
As a technology company they need to have the ability to invest in R&D

TomTom Metrics Breakdown
Corporate Resources: R&D
Maps are best on the market, but method of delivering those maps has flaws in changing technological environment
Many business segments have seen successes solely from R&D; without it the company would be stagnant
Navigation relies heavily on technology; crucial to the success of the company as a whole.
“Smart” efficient mapping has the potential to make a difference from an environmental standpoint

IFAS
Table
SFAS
Table
Strategic Alternatives
Stability, growth, or
retrenchment
?
Business strategy must be developed keeping in mind customers' needs and firm's capabilities
In market with rigid competition, each with lower a cost basis, TomTom needs a lot of R&D and innovation
This requires cash - They have none

Recommended Strategy
Retrenchment
TomTom should sell out to a larger firm that has more expendable cash in order to continue their business model

Implementation
Implementation cont.
Buyout is financially feasible if both companies agree
Management must realize that financial success with new products may not happen for a couple years
New skilled employees will be needed for new products
Price of new products is essential
Standard Operating Procedures must be changed

Evaluation & Control

Make current employees aware of potential acquisition as early as possible
Determine which employees/departments to keep/lay off
Determine new geographical location of offices, if applicable
Develop severance packages
Align mission/objectives/goals

Must consider buyout from Google, Apple, or Microsoft
Only way they can compete with these bigger and more profitable innovation companies
Continue to grow horizontally and vertically
The introduction of new products is essential for success
R&D Management would be in charge of this project
Full transcript