External Environment of The Company TomTom

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Introduction

Tom Tom is the global leader in developing navigation and mapping products. For decades, the company has dominated the market over time due to the innovative ideas, designs and products developed in the company. However, the external environment in which the company operates in is full of threats and opportunities.

The company has to develop strategies that will enable the company to remain competitive in the global market because technology changes day by day. Hence, the company has to develop new products inspired by technology to ensure that it moves with the current customers’ tastes and preferences. The external environment that surrounds the company is discussed below:

The competitors

The main competitors of the company in the market are Garmin, MITAC and the Navico Company. Garmin is the main competitor in the market as it controls 45% market share. These competitors affect the company’s ability to make more profits on its entire sales (George, 2010). Therefore, the company needs to invest more resources in marketing. This includes massive advertisements on social media platforms and via the internet. This will help the company to market its product globally.

The sales department should come up with new strategies on how to pursue and achieve new markets. This includes training all the staff working in the sales department to ensure that they handle clients professionally. The management of the company should also reward the good job done by the employees as a way of motivating them. The company should also take advantage of its dominance in the market and develop products which are in line with the recent technology to ensure customers’ loyalty. This is because marketing planning determines the success or failure of the company in a competitive market. Finally, the management should develop strategies which will enable the company to remain competitive even in future.

Economic system

The corporate economic system refers to how the company allocates scarce resources to produce various differentiated products and services, within the prevailing and expected economic situations. The global is affected by issues such as the global recession which affected most countries in the world. Most businesses are successful when the economic conditions in a country are favorable. Factors such as inflation affect the exchange rate of foreign currencies as the company sells its products all over the world.

Favorable economic conditions attract many investors in the market. This has a positive impact in the economy as it will lead to creation of employment opportunities thus improving the living conditions of the people living in the country. The nature of the economy is also determined by the role of government towards economic growth. Political stability and peace provides a conducive environment which attracts most investors to invest in the country. This promotes economic growth as the government raises revenue from the company through taxation and from the salaries of the employees of the company (Wright, Kendia & Pingle, 2009).

Economic factors determine how a company pursues a target market. This is because the company has taken into consideration the level of income of its target customers and the exchange rates in the company. Economic factors also affect the number of investors who are planning to invest their funds in the company. When the economy is favorable, most people will be confident that their funds are safe. The value of currency of a given country also determines the decisions of most investors. Level of marketing is also determined by the nature of economic factors. Where the market is saturated and competitive, more marketing is required to ensure that the company wins the largest market share.

Legal issues

Business must operate within the legal frameworks of the national and international laws. The laws govern trade and commerce and how contracts should be enforced. Tom Tom has been faced by some legal challenges. In 2009, the Microsoft v. Tom Tom case filed in the court c by the Microsoft. TomTom was accused of abuse of software patents owned by the Microsoft. Microsoft had patented the FAT32 filing system. Tom Tom was accused of running the navigation products using the Linux kernel, but under the Microsoft’s FAT32 patents. Tom Tom had later filed a countersuit, accusing Microsoft of infringements of its patent rights under the the Streets and Trip product. The dispute was resolved in March 2009, after the company paid fpr the FAT32 file system’s license. The case shows that Tom Tom had not looked into the possible legal implications of its business. The company however, decided to join the Open Invention Network, to avoid future mistakes, share innovations on Linux and operate within the Linux ecosystems legally. The company is required to comply with the legal requirements to enable it to conduct its operations in the country. This includes getting the license to operate business. Further, the company is required to acquire a copyright for its products in the market. This helps to define what it required to produce and where it is supposed to operate.

Social system

This refers to the culture and beliefs of the customers and other stakeholders in the targeted market. This influences the success or failure of the company directly. Proper market research has to be done to determine the needs of the client in that particular market. This is important as it helps to determine consumers’ ideas, attitudes towards the product on sale and finally the behavior pattern.

Research and product development department needs to perform a survey to determine customers’ response toward the products offered in the market. Further, the company will be able to determine the needs of the customers in the market. However, their response is affected by factors such as their culture, level of income and the state of the economy. When proper research and development is done, the company will be able to design and products which satisfies the need of their customers in the market.

In the 21st century, the company is required to take advantage of the recent technology to markets its products and services. This is because most companies are marketing their product and services online via the internet. This can be achieved when a company creates a website and blogs to market its products. Further, it can also use the social media platforms to reach as many clients as possible.

Tom Tom has a good working environment that favors its internal operations. The organization behaviors allow creativity, hard work, team work and good industrial relations. The company has social welfare programs for its employees. There are leaves with pay for employees, health and educational benefits for the employees.

Government policy and regulations

The government has established various agencies which monitor all that revolve around production of products and services. This includes product packaging where the established rules and regulations have to be followed. It aims at protecting the interests of the consumers in the market. Packaging and shipping of these products to the target directly impacts on the cost of the products. This is because the company aims at minimizing the cost of production while maximizing on sales.

Government rules and regulations also affect the ability of the company to enter new markets. This mostly aims at protecting the industries in the economy as they play an important role in economic development of a country (Tom Tom, 2010).

Further, international laws have clearly outlined the process which a company wishes to pursue into foreign markets should follow. This aims at restricting the number of players in the market as well as protecting the interest of the consumers.

Finally, the government should formulate rules and regulations which promote political stability as this attracts investors in a particular country. Rules and regulations governing established of the company or licenses to allow a company to venture into a new market should also be friendly. This has a positive impact on the economy of the country as it will attract more investors into the economy.

Customers

They are the main target of the company as they are the main clients of the products and services produced. The clients are owners of fleets, individuals, governments and other institutions. They are easily influenced via extensive marketing mostly via the internet and on social media platforms. They can also be influenced by strategic release of financial and corporate information. This influence their purchasing pattern and loyalty to the company’s products and services.

The company has a challenge of maintain its customers because of the competitive pricing in the industry. The main competitors could maintain the current levels of prices or decide to begin a price war with Tom Tom. Tom Tom may find it difficult to compete on such a scenario. Starting a price war in this case, for Tom Tom, could be difficult because of the restrictive cost structures. The major competitors have a lower cost based with which allow them to respond to the Tom Tom pricing strategies. To maintain its clients, Tom Tom can respond by looking for market in other areas such as Africa and Asia. Tom Tom can also maintain their current prices but have products’ differentiation.

The company should design and products which move with the customers tastes and preferences. Most consumers in the market today are technology oriented. This requires the company to design and produce products which are up to date with the latest technology. Failure to do this will lead to decrease in sales as consumers will shift to competitors who produce goods and services that satisfy the needs of the customers at that particular moment. Hence, the company should aim at satisfying their needs to achieve customers’ loyalty.

Extensive market research should be conducted to determine the needs of the customers and the effectiveness of their marketing strategies in the market. It also enables the company to determine the changes which are required in order to achieve a larger market share. This also gives important information on how future marketing programs should be conducted to improve the net sales. The company should also offer promotions and off sale services to the customers. This helps to attract and retain new customers in the market. It also boosts the entire sales and customers’ loyalty to the company. This can be done during holidays and during low pick seasons to improve sales. In addition, the prices of the products should also be pocket friendly.

Public opinion

Public perception on the company affects the company sales directly. Positive perception boosts the sales of the company while a negative perception hurts the entire sales. However, the company can influence this by using professionals to release strategic information periodically. Public opinion helps to determine the areas where the company needs to improve (Bloomberg, 2012). Tom Tom needs to invest more in public relations to boost its image. The company has a well-designed website that is used for public relations. The company uses the website to publicize any information that is of public interest such as news briefs, new products and innovations.

Tom Tom should also observe corporate social responsibility by giving back to the community. This can be done by participating and sponsoring a number of community projects. This includes medical camps, clean – ups and recreational services with all and the less fortunate in the community. The company should also promote environmental conservation by coming up with projects which promote environmental conservation.

Technological innovations

In the business world today, technology promotes numerous innovations which promote design of new products which serve the needs of the customers in the market. The company has been very innovative in its business. The Tom Tom company has smart and creative business solutions for competitive edge. The Tom Tom Bridge is one such technology. The innovation allows the users to have seamless and uniform integration of Tom Tom’s technology and its clients. The focus of the technology is to allow one-stop assimilation of systems and efficiency in the operations of the clients. The technology employed by the company thus allows the users to incorporate their systems with that of Tom Tom Company.

The company should therefore adopt the latest to inspire new designs. Most consumers in the market today are technology oriented; hence, the company should offer products that satisfy their tastes and preferences (George, 2010).

Conclusion

The external environment has greatly affected the success of the company in various ways. It has developed new strategies that will enable it to compete effectively with other players in the industry. However, more research and development should be conducted to determine the customers’ tastes and preferences in the market.

The government plays an important role to enhance business in the economy. Proper rules and regulations should be formulated to attract more investors in the economy. This leads to creation of more employment opportunities that improving the living standards in a given country. The company should also move with the latest trends in the world of technology to ensure that it develops products which satisfy the needs of their customers.

References

Bloomberg Businessweek. (2012). TomTom. Bloomberg Businessweek. Retrieved 20 April 2013 from

HYPERLINK “http://investing.businessweek.com/research/stocks/earnings/earnings.asp?ticker=AMZN” http://investing.businessweek.com/research/stocks/earnings/earnings.asp?ticker=AMZN

George, N. R. (2010). Washington Post. Five Components of an Organization’s External Environment , 2-6.

Hoffman, A.N.(2010). TomTom: New Competition Everywhere! RSM Case Development Centre, Erasmus University.

TomTom (2010). Annual Report 2010. Retrieved 20 April 2013 from, HYPERLINK “http://files.shareholders.com” http://files.shareholders.com

Wright, P., Kroll, M., Kedia, B., and Pringle, C. (2009). Strategic Profiles, Market Share, and Business Performance. Industrial Management, May 1, pp23-28.