2.2 Industry Analysis
(i) Threat of new entrants
Based on case analysis, we indicate that the threat of new entrants for TomTom is considered as medium or moderate. Although new entrants coming into same industry with TomTom was brings a smaller impact of their sales and revenue growth, but TomTom still able to sustain it. For example, the rapidly growth in the industry of smart phones and cell phones, it is causes many new entrants coming it and affected a little of sales and revenue growth of TomTom.
With the size of its customers and technology base, distribution power and prominent brand image and recognition, TomTom was still able to achieve the competitive advantages and compete with new entrants. Additionally, the use of strategic alliances also enables TomTom to strengthen their competitive advantages and compete with the new entrants. Apart from that, the wide range of products that offering by TomTom also enables them to compete with new entrants since new entrants has lack of resources and new products offerings. Thus, it can be said the threats of new entrants for TomTom is medium or moderate.
(ii) Bargaining power of suppliers
Secondly, the bargaining power of suppliers for TomTom was considered as moderate. TomTom has outsources 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. Nevertheless, TomTom only depend on limited number of third parties and in certain instances sole suppliers for the component supply and manufacturing, thus it increases TomTom’s dependency on these suppliers and increases the powerful of suppliers. For instance, many innovative products that created by TomTom only available from specific leading technology organisations. Therefore, it can be said the bargaining power of suppliers for TomTom is considered as moderate.
(iii) Bargaining power of buyers
Next, the bargaining power of buyers for TomTom is considered as high. TomTom has a wide array of customer and can be classified into different groups which are consumers who buy standalone portable navigation devices and services, automobile manufactures, the aviation industry and pilots with personal planes, business enterprise, coast guards and others. But, each customer has its own needs and desired and tends to influence TomTom to provide more quality of products at a lower price.
In order to meet the needs and desired of customers, TomTom was offering wide variety of products with different price range, features, design and quality. Sometimes, in order to meet the demand of buyers, TomTom would tend to lower prices of the products. For instances, TomTom was offering built-in-car navigation devices at a significantly lower prices. Additionally, with the rapidly growing of the trends of smart phones and cell phones, TomTom tend to lower prices of the products to meet the demands. Thus, it can be said the bargaining power for TomTom is high. (iv) Threat of substitute products
Based on case analysis, we indicate the threat of substitute products for TomTom is considered as high. It is shows that the sales of portable navigation system for TomTom were dropping when the smart phone or cell phone was rapidly growing. Especially for Generation X and Generation Y, they are preferred to choose smart phone or cell phone because it enables them to do everything and free of charge such as GPS navigation services. Because of the free services or application that provided by smart phones or cell phones, thus many consumers are prefer to buy smart phones or cell phones rather than purchase only GPS devices which is only few functions and features and highly cost. Thus, it is shows TomTom has a high threat of substitute products.
(v) Intensity of rivalry among competitor
In this case, it is indicates that TomTom has a strong intensity of rivalry among competitors. This is because we found that TomTom has over 15 competitors and facing competition in several different industries such as satellite and broadcast network equipment, computer hardware, handheld computers and accessories, computer software, database and file management services and engineering, scientific and computer-aided design or computer-aided manufacturing software.
For example, we found that TomTom was facing increasing competition from smart phones which all of them offer a virtually same features and services and also facing the composition with maps, services and built- in systems in cars with others. Besides, we found there are 2 major competitors of TomTom which included Garmin and Magellan. Based on the case, we able to indicate that TomTom are always compete with them and have a price war exist between them. Thus, the intensity of rivalry among competitors for TomTom is considered high.