Business Environment And Strategic Management. (RIM) - Essay Example

?BUSINESS ENVIRONMENT AND STRATEGIC MANAGEMENT Table of Contents Introduction 4 1. Company Overview 4 2. The Wireless Communication Industry 52. Analysis of the Current Business Environment Affecting the Industry 6 2.1. PEST Analysis 6 2.2. Five Forces Analysis 8 3. Analysis of the Company’s Strategic Capabilities 10 3.1. Value Chain Analysis 10 3.2. Resource Based View Analysis 12 3.3. Core Competencies 13 4. Evaluation of Possible Future Strategies for Research in Motion (RIM) 14 4.1. Key Strategic Issues Facing Research in Motion (RIM) 14 4.2. Possible Future Strategies for Research in Motion (RIM) 14 5. Implementation of Strategic Change in Research in Motion (RIM) 15 6. Conclusion 16 References 17 Bibliography 19 Appendices 20 1. PESTEL Analysis 20 2. Porter’s Five Forces Analysis 21 1. Introduction 1.1. Company Overview Research in Motion (RIM) is a principal creator, producer and dealer of wireless solutions for the wide-reaching global mobile communication marketplace. It is also one of the major suppliers of Smartphone, and is second only to Nokia. RIM is considered to be the foremost organization in the wireless data communications sector. RIM designs and develops the wireless email services for BlackBerry Phones. In the year 1999, RIM had transformed the global mobile industry with the beginning of BlackBerry solution (Research in Motion (a), 2012, p.9). RIM aims to sustain its position in the telecommunication industry by emphasising on the advancement of two-way wireless technologies as well as by enabling applications. RIM was instituted in the year 1984 and is headquartered in Canada. The common shares of RIM are traded in the NASDAQ as well as the Toronto Stock Exchange. As of March 2012, the company employs around 16,500 employees and has around 524 million shares outstanding (Research in Motion (b), 2012). As on March, 2012, RIM has a fortified balance sheet consisting of around $2.1 billion of cash, cash equivalents and investments and only a small percentage of debt. For the financial year 2012, the annual revenue of RIM was of $18.4 billion, while its net profit was $1.2 billion. Therefore, the earnings per share of Rim for 2012 were $2.22 per share. Around 40% of the company’s sales take place in the UK, UK and Canada (Research in Motion (a), 2012, p.13). With the help of BlackBerry platform, RIM provides a superior wireless communications service by means of push-based connectivity, in addition to offering industry’s best security and project manageability. The company provides outstanding radio performance and also enables distinguished social applications like BBM that endow the users with propinquity, efficiency and association (Research in Motion (a), 2012, p. 11; Research in Motion (c), 2012.). The major competitors of RIM in the segment of mobile operating system platforms comprise of Nokia Corporation (Symbian), Apple Inc (iOS), Microsoft Corporation (Windows Phone), HTC Corporation, Google Inc (Android) and Motorola (Research in Motion (a), 2012,p.9). 1.2. The Wireless Communication Industry The wireless communications business sector engages in the conditioning of wireless voice as well as data services by means of radio frequency technologies on an array of rivalling wireless systems. These systems characteristically consist of a distinctive voice layer as a result of which the data transmission layers have been deployed consequently. The most extensively installed wireless voice as well as data networks consist of CDMA/1xRTT/EVDO and GSM/GPRS/EDGE/HSPA (Research in Motion (a), 2012, p. 10). GSM/GPRS/EDGE/HSPA and CDMA/EVDO, the two key global voice and data systems persist to be advanced to provide superior speeds as well as augmented abilities to sustain the concentration of subscribers in the same as well as fresh radio frequency spectrums. The rollout of these technologies is well underway and commercially available in many markets around the world (Research in Motion (a), 2012, p.10). In the financial year 2011, the next generation systems (4G) like HSPA+, WiMax and LTE were commercially introduced for the first time. These systems present various enhancements in comparison to that of the preceding generations. The most extensively endorsed enhancements of the new generation system are superior download as well as upload speeds. Companies under the data communication industry, particularly those in the United States are insistently setting up and marketing these next generation systems or networks (4G). It has been noticed that the setting up of these new systems have been restricted internationally, however companies in many global markets are anticipated to deploy these new networks in the upcoming period (Research in Motion (a), 2012, p.10). Besides developments in the voice and data communications, the wireless communication industry is also observing the union of computing with personal entertainment competences on wireless communications gadgets throughout the world. In the present day market, almost all the BlackBerry Smartphone include multimedia facilities that consist of music, playback, video recording, camera, and entree to content, games and other applications (Research in Motion (a), 2012, p.10). 2. Analysis of the Current Business Environment Affecting the Industry 2.1. PEST Analysis The PEST analysis of any particular industry examines the imperative issues that are having an effect on the industry as a whole and impacting the organizations operating in that industry. The PEST Analysis would assist in examining the forces that are impelling the wireless communication industry and how these factors would impact RIM’s business operations (Lorat, 2009, p. 48). PEST is an ellipsis for political, economic, social, and technological analysis. The political issues in the analysis generally comprise of government policies pertaining to the industry, tax regulations, laws and policies, trade limitations and duties among others (Wheelen et al, 2008, p. 58). In comparison to other industrialised countries, the United States has the maximum corporate tax rate. The tax rates pertaining in the developing countries are much lower than that of the US, where RIM predominantly operates. A deduction in the tax rate would have enabled the management of RIM to have more cash to pay out dividends or reinvest. The economic issues consist of alterations in the global economy, for instance economic development, interest rates, inflation rate and exchange rates (Wheelen et al, 2008, p.58). Following the latest financial crisis and the economic downturn, the government across the world have reduced the interest rates. Owing to these lowered rates of interest and inflation, there has been a consequent surge in the demand for communication devices like Smartphone; as a result the economic expansion of this industry has also enhanced. Moreover, with the passage of time Owing to globalization, US and Canadian companies have starting entering the emerging economies and benefit from the lower tax rate in those region in addition to accessing their unexplored markets. Social issues address the cultural facets and include population growth rate, age allocation, alterations in tastes and buying behaviour, etc (Wheelen et al, 2008, p.58). The wireless data communication industry is strongly influence by social factors. Smartphone, instant messaging games and such other applications are highly popular amongst the youth. Hence the population growth and rising percentage of youth population would provide wireless operators like RIM with abundant opportunities. However, the services provided by RIM are considered as style statements, hence it is important for such companies to continuously update and advance its offerings as per the tastes and requirements of the young consumers as well as the corporate world, which is a major consumer segment of this industry. The technological issues pertain to the R&D activity, mechanization, technology benefits and the speed of technological transformation (Wheelen et al, 2008, p.58). Research and development activities are very important for wireless operators as there is a persistent competition to be the first to introduce services and platforms with the latest technology. This can be demonstrated by the fact that innovative devices introduced by companies like Apple, Android etc had put a negative impact on the demand of BlackBerry devices. There exists a need for constant technological up-gradation in the wireless communication industry. 2.2. Five Forces Analysis There are number of entry barriers to the wireless communication industry. Some of them are need for proprietary technology platform, integrating the hardware, software and service skill; intellectual property rights; current strategic associations and relationships; current customer and channel associations; entry to components as well as recognized supplier relations; dearth of exceedingly competent human resources; considerable capital needs; huge development expenses as well as time; manufacturing capability; regulatory hurdles, for instance Government approval and network certification; and fortified market presence and brand acknowledgment of the big players in the industry (Research in Motion (a), 2012, p.11). The bargaining power of suppliers in the wireless communication industry is comparatively low. This is due to the elevated standard requirements set in the wireless industry. RIM sets out specific requirements and guidelines regarding packaging, quality, conduct and ethics to its suppliers. Moreover, the participants in this industry are relatively concentrated and hence the suppliers do not have much power. On the other hand, the buyer’s have significant power in this industry and the sales depend on the discretion of the customers. Nevertheless, the rigid attribute of Smartphone contracts compel the users to involve themselves into long duration contracts, thereby confining their overall control (Trinity University, 2011, p13; Enqvist, 2010, pp. 25-27). The wireless communication industry is highly competitive and the companies in this industry follow intrinsic business trends. The Smartphone segment involves the utmost level of rivalry among the firms. The threat of substitutes in this industry is relatively high as the service contracts are the only element that prevents replacement in this industry. The choice of products solely depends on the choice and discretion of the users. The evolution of iPad has made the Smartphone obsolete (Trinity University, 2011, p.13; Enqvist, 2010, pp. 25-27). Porter’s five forces analysis implies that the wireless data communication industry is a competitive and profitable industry. However, the major threat to the industry is owing to the intense rivalry involved in this industry. The companies in this industry require continuous monitoring and upgrading of its product offerings; failure to do so leads a company to lose its market position and competitive advantage. Thus, the major concern for RIM is its sustainability of its inventive and competitive position in the market. 3. Analysis of the Company’s Strategic Capabilities 3.1. Value Chain Analysis The Value Chain is a methodical tool that was formulated by Michael Porter in the year 1985. It methodically accentuates which business or operational activities within as well as around a company deliver value, and hence add to the strategic potential of the business (Porter, 1985, p. 56). The following figure represents the value chain of RIM: Figure 1: Value Chain of Research in Motion. (Source: Value, Supply, Chain Analysis, n.d.) The value chain of RIM is complicated because its business is no longer vertically integrated. RIM’s value chain initiates with procurement of building blocks and incorporating them into equipments and facilities to be purchased by the user (Lucky & Eisenberg, 2006, pp. 10-12). Figure 1 illustrates a set of functions in RIM that are taking place sequentially in time. The outlook is that once R&D has been conducted and mass congregation is about to start the company sources its raw materials and other inputs. The company then focuses towards assembly as well as distribution to the suitable channels. On the whole, RIM has a suitable incorporated value chain. The extensive inbound and outbound logistics of the company are supported by the comprehensive R & D activities as well as product and process designing. This in combination with the marketing and sales as well as service segment of RIM constitute the core competencies of the organization (Research in Motion (d), 2012). However, of late it had been observed that the product offerings of RIM have not been up to the mark, leading to the decline in the demand for the same. Hence the company needs to accentuate on their research and development activities and improve the designs of their process and products for the development of better products. 3.2. Resource Based View Analysis The Resource Based View Analysis was developed on the basis of the notion that an organization derives a competitive benefit from the uniqueness of its resources as well as capabilities (Barney, 1991, p. 43). For the assessment of the distinctiveness of the resources of RIM, we would utilise the VRIO (Value, Rarity, Imitability, Organisation) framework, which is a four question structure related to the determination of the competitive potential of a company’s resources and proficiencies (Enqvist, 2010, p. 76). Resources Identification RIM possesses tangible as well as intangible resources, which are crucial for their ability to make available quality products to the end users. RIM’s success is principally reliant on the company’s progressing capability to recognize, attract, upgrade, inspire and preserve skilled workforces. This is because it is very important for a company like RIM to continuously innovate and come up with latest products and features in order to sustain its position amongst the consumers. RIM’s reputation and branding, which is an integral intangible asset, is quite influential owing to its association with Blackberry. The Company offers platforms as well as solutions that enable the users to get access to information that is time-sensitive in nature, for instance, emails, SMS service, instant messaging, voice, internet and intranet-based applications. RIM provides these solutions and platforms by building up incorporated software, hardware, as well as services (Yahoo Finance, 2012). RIM follows an integrated approach, backed by extensive R & D activities while developing its products. RIM holds a leading position in the wireless communication industry. However, the company is fast losing its market share to its competitors. This is because some of its rivals are larger brands with wider consumer base and considerably greater resources in the form of finance, technology, sales and marketing, distribution and public relations among others. 3.3. Core Competencies The core competencies of RIM that gives it a competitive edge over its rivals are as follows: 1. BlackBerry Cloud Infrastructure 2. Balancing IT and Consumer Demands 3. Intellectual Property Rights 4. The influence BlackBerry Brand and Market Acknowledgement 5. Growth of the BlackBerry App Ecosystem and Developer Community (Research in Motion (a), 2012, p.12-14). 4. Evaluation of Possible Future Strategies for Research in Motion (RIM) 4.1. Key Strategic Issues Facing Research in Motion (RIM) Of late the Company have not been able to improve its existing products and services, or build up innovative products and services, in an efficient manner as well as at competitive prices. The intense rivalry and rapid change in the industry, and major strategic alliances within the wireless communication industry, including prospective upcoming strategic transactions by RIM’s rivals or carrier partners, could weaken the Company’s competitive position or may necessitate RIM to cut down on its prices to compete efficiently. RIM has required and would continue to require considerable amount of investment in the tablet segment of the industry. In this context, the associated risk is that the investments made by RIM might not result in acceptable technologies, products as well as services that are preferred by the customers, application developers and content providers on the whole. 4.2. Possible Future Strategies for Research in Motion (RIM) There are number of possible strategies that RIM could take up so as to address the key issues that it has been facing. A change in the top Management has been one of the most recommended strategies to enhance the position of RIM. This is because it is widely believed that the Management of RIM are letting the organization’s well-built franchise in Smartphone segment slide out of their hands, and as a result companies like Apple and Android are eating away its market share (Forbes, 2011). The other crucial strategy to be evaluated is an approach of radical shift in business strategy. The management of RIM could allow the key wireless firms in North America as well as Europe to offer service for non-BlackBerry devices by means of RIM's proprietary system. Till date, since the setting up of RIM, the company had consistently followed the strategy of BlackBerry-only (Reuters, 2011). Additionally RIM could also follow the strategy of focussing on its existing customer base rather than attempting to expand its base immediately. The assessment of the mentioned strategies reveals that it would be advisable for RIM to follow the later two strategies instead of going for a change in top management. This is because the company had reached the leading position in the industry under the leadership of this management and there is no reason that it would not be able to regain its prior market position again under the same management. However, there should be more involvement from the Board in the considered implementation of the upcoming strategies. 5. Implementation of Strategic Change in Research in Motion (RIM) In order to allow the key wireless firms across the world to offer service for non-BlackBerry devices, RIM would have to let the carriers make use of its network to provide reasonably priced data plans restricted to social media as well as instant messaging. Such a strategy would be beneficial in to attracting low-tier customers who use no-frills phones to upgrade to Smartphone. For the fortification of its existing market base, RIM would have to discontinue its research and development activities on its non-core target markets. It should rather focus its research activities on its core customers so as to add value to its niche market. Additional, RIM should manufacture the next generation of its Smartphone and Tablet products in such a way that it optimises their exercise of business applications. They should be the finest apparatus to operate spreadsheets, compose PowerPoint presentations, and pool resources on documents. Building up such features would differentiate the devices, such as RIM BlackBerry Smartphone and BlackBerry PlayBook tablet from the devices manufactured by other rival organizations. RIM could even consider installing applications that necessitate very secure, guaranteed-delivery settings, so as to rebuild its exclusiveness in the whole financial services as well as government segment. 6. Conclusion The large sized organizations in the wireless communication industry are eating away the market share of RIM’s Smartphone by means of their innovative products in the tablet segment. The analysis reveals that RIM would require huge investments to establish its position in the tablet segment. Furthermore, the intense rivalry in the industry in addition to the instable economic condition might require the company to cut down the prices of its products, resulting in reduced margins mad reduced cash generation. Hence it would be advisable not to make any immediate investments in RIM and rather one should wait till the company repositions itself again as an industry leader. References Barney, J. 1991. Firm Resources and Sustained Competitive Advantage. Journal of Management, Vol. 17 (1), pp. 99-120. BA Resources, 2012. PESTLE Analysis for a telecommunication company. [Online] Available at: http://ba-resources.co.uk/strategic-analysis-and-implementation.php [Accessed on April 24, 2012]. Enqvist, H., 2010. Mobile Communications Industry Scenarios and Strategic Implications for Network Equipment Vendors. Department of Communications and Networking, Aalto University. Forbes, 2011. Research in Motion: Time has come For a Change at the Top [Online] Available at: http://www.forbes.com/sites/ericsavitz/2011/05/04/research-in-motion-time-has-come-for-a-change-at-the-top/ [Accessed on April 24, 2012]. Lorat, N., 2009. Market Audit and Analysis, GRIN Verlag. Lucky, R. W., & Eisenberg, J., 2006. Renewing U.S. Telecommunications Research, National Academies Press. Porter, M. 1985. Competitive Advantage: Creating and Sustaining Superior Performance, New York: Free Press. Research in Motion (a), 2012. Narrative Description of the Business [Pdf] Available at: http://www.rim.com/investors/documents/pdf/annual/2012rim_ar_40F.pdf [Accessed on April 24, 2012]. Research in Motion (b), 2012. Investor FAQ [Online] Available at: http://www.rim.com/investors/faqs/ [Accessed on April 24, 2012]. Research in Motion (c), 2012. The company behind the BlackBerry product line [Online] Available at: http://www.rim.com/company/ [Accessed on April 24, 2012]. Research in Motion (d), 2012. Leading innovation [Online] Available at: http://www.rim.com/company/ [Accessed on April 24, 2012]. Reuters, 2012. Exclusive: Former RIM boss sought strategy shift before he quit. [Online] Available at: http://www.reuters.com/article/2012/04/19/us-rim-boss-idUSBRE83H0TM20120419 [Accessed on April 24, 2012]. Trinity University, 2011. Qualitative Analysis [Pdf] Available at: http://www.trinity.edu/smf/inc/reports/fl2010/rimm.pdf [Accessed on April 24, 2012]. Value, Supply, Chain Analysis, No Date. Research in Motion Value Chain [Online] Available at: http://www.va1ue-chain.com/1/RESEARCH-IN-MOTION-VALUE-CHAIN/ [Accessed on April 24, 2012]. Wheelen, T. L. et al, 2008. Concepts in Strategic Management and Business Policy, Pearson Education India. Yahoo Finance, 2012. Research in Motion Limited (RIMM) [Online] Available at: http://finance.yahoo.com/q/pr?s=RIMM+Profile [Accessed on April 24, 2012]. Bibliography Barney, J. B., 2007. Gaining And Sustaining Competitive Advantage. Pearson Prentice Hall. Harrison, J. S., & Caron, J. H., 2009. Foundations in Strategic Management. Cengage Learning. Hill, C., & Jones, G., Strategic Management Theory: An Integrated Approach. Cengage Learning. Tyndall, G. R., et al., 1990. Strategic Planning and Management Guidelines for Transportation Agencies. Transportation Research Board. Appendices 1. PESTEL Analysis (Source: BA Resources, 2012) 2. Porter’s Five Forces Analysis (Source: BA Resources, 2012) Read More