The big news today was not the launch of “Droid”, the new iPhone competitor from Verizon and Motorola, but the  free Google Navigation App that runs on it.  Shares of  TomTom fell 20.8% to EUR8.11, setting a new 52-week low of EUR8.06 in the day and those of Garmin Ltd. (GRMN) fell 16.4% to $31.59 today.

This is probably the best example of disruption we’d ever see. However, although this was expected all along (Read my post “The convergence of handheld gadgets and what it means to you“), to see the stock market react so much in a day is amazing.

Does this mean the end of Garmin, TomTom and traditional GPS as we know it?


Maybe not immediately and it will depend on what strategy these companies adopt.

What can they do?

There are three strategic paths GPS companies can take…

  1. Move from hardware to software and innovate in that space (Which TomTom has started doing – See video below)
  2. Move into the smartphone business and compete with Google, Nokia, Microsoft, Apple and RIM headon (Which Garmin has started doing – See video below)
  3. Move into the Bottom of the Pyramid markets by cutting on prices of GPS devices

The third strategy is probably what I’d recommend. Smartphones today make a very tiny percentage of cell phone sales globally. Even in the US, according to NPD research feature phones make up 72% of the market with smartphones making up the rest i.e. 28%. In countries like India and China, the smartphone percentage would be much much lower.

So there is still a huge segment of the market that cannot afford a smartphone and the expensive 2 yr contract-based data plans from Wireless carriers and therefore, will not have access to something like Google Maps. Obviously to tap into these markets, GPS companies have to be innovative in figuring out the use case scenarios and the pricing.

Here are videos that show the strategic paths each of these companies are taking:

Google Maps Navigation (Pure software approach)

TomTom iPhone App (Taking the software route)

Garmin Nuviphone (Moving into Smartphones)

Nokia Maps (Moving into maps and location based advertising – Competing with GYM)

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