Navigation solution providers are facing business challenges as growing competition, device platform diversity and undifferentiated value propositions are accelerating commoditisation trends, according to Gartner, Inc. These factors are impacting navigation solution providers' and automakers' revenue opportunities and will lead to further market consolidation and margin decline.
In the first quarter of 2009, Gartner conducted surveys of 2,000 consumers in the US and Germany and found that navigation is the most-desired vehicle IT application among consumers — even more important than safety- and security-centric in-vehicle applications.
"US and German consumers show more interest in navigation solutions than in any other in-vehicle technology," said Thilo Koslowski, research vice president at Gartner. "This is partly due to companies' aggressive marketing efforts, but it's also due to cost-conscious consumers' desire to leverage navigation offerings to minimise fuel consumption, as well as reduce driving-related pollution."
Despite the growth in use of navigation solutions, many providers are experiencing business challenges. Portable navigation device (PND) manufacturers in particular are facing increased commoditisation. This trend is further compounded by the weak global economy and growing number of available device platforms in the consumer electronics industry that offer navigation add-ons or downloadable applications. Gartner predicts that this will lead to further price declines and lower profit margins for PNDs over the next two years.
"Retail prices for an entry-level, unconnected PND product may be as low as $49 by 2012. That's around 10 per cent of the average retail price of a standard PND device in 2004," said Mr Koslowski. Some low-end niche PNDs may be priced even lower by offering only limited map data, smaller point-of-interest databases and basic displays.
Mr Koslowski said that to protect future viability, navigation solution providers have two general strategic directions to choose from. The first is to achieve cost, price and distribution leadership in order to succeed with high sales volumes. However, by definition, only very few companies will be able to execute this strategy successfully.
The second strategy open to providers is to transform the current device-centric value proposition into a service-centric one. The service will be device-platform-agnostic and will be wirelessly accessible from any device and offered with a variety of billing options that consumers can choose from. This approach will give companies the opportunity to become personal-navigation-service providers and create a foundation for continuous innovation and delivery of new location-aware features.
Additional information is available in the Gartner report “The Navigation Industry's Identity Crisis, and the Strategies to Overcome It.” The report is on Gartner’s website at http://www.gartner.com/....
In the first quarter of 2009, Gartner conducted surveys of 2,000 consumers in the US and Germany and found that navigation is the most-desired vehicle IT application among consumers — even more important than safety- and security-centric in-vehicle applications.
"US and German consumers show more interest in navigation solutions than in any other in-vehicle technology," said Thilo Koslowski, research vice president at Gartner. "This is partly due to companies' aggressive marketing efforts, but it's also due to cost-conscious consumers' desire to leverage navigation offerings to minimise fuel consumption, as well as reduce driving-related pollution."
Despite the growth in use of navigation solutions, many providers are experiencing business challenges. Portable navigation device (PND) manufacturers in particular are facing increased commoditisation. This trend is further compounded by the weak global economy and growing number of available device platforms in the consumer electronics industry that offer navigation add-ons or downloadable applications. Gartner predicts that this will lead to further price declines and lower profit margins for PNDs over the next two years.
"Retail prices for an entry-level, unconnected PND product may be as low as $49 by 2012. That's around 10 per cent of the average retail price of a standard PND device in 2004," said Mr Koslowski. Some low-end niche PNDs may be priced even lower by offering only limited map data, smaller point-of-interest databases and basic displays.
Mr Koslowski said that to protect future viability, navigation solution providers have two general strategic directions to choose from. The first is to achieve cost, price and distribution leadership in order to succeed with high sales volumes. However, by definition, only very few companies will be able to execute this strategy successfully.
The second strategy open to providers is to transform the current device-centric value proposition into a service-centric one. The service will be device-platform-agnostic and will be wirelessly accessible from any device and offered with a variety of billing options that consumers can choose from. This approach will give companies the opportunity to become personal-navigation-service providers and create a foundation for continuous innovation and delivery of new location-aware features.
Additional information is available in the Gartner report “The Navigation Industry's Identity Crisis, and the Strategies to Overcome It.” The report is on Gartner’s website at http://www.gartner.com/....
