Possible Future Strategies for Research in Motion - Essay Example

Possible Future Strategies for Research in Motion 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. Mike Lazaridis and Jim Balsillie founded the organization in 1984. These individuals retained leadership of the organization until recently, when on January 22, 2012 Thorstein Heins replaced them as CEO (‘Thorstein Heins’ 2012). 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. This marks a startling decrease from the 2008, $132 per share high (Nasdaq: Rimm, 2012). In 1999 the organization released the first version of the BlackBerry Smartphone (Sweeny 2009, p. 9). This device would come to be the organization’s cornerstone product through the present day. The organization gained a solid reputation for offering the industry’s best security and project manageability. Indeed, President Obama is even a recognized BlackBerry user following the platforms high security standards (McQueen 2010, p. 3). Today, however, the organization finds itself in a critical struggle to maintain market share in an increasingly competitive Smartphone industry, where Apple’s iPhone and Google’s Android platform have emerged as primary players (De la Merced 2012). 1.2. The Wireless Communication Industry 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). This is a highly competitive market and in recent years RIM has experienced a progressively declining market share that has led the organization to a current crisis situation. Currently, the organization is tasked with making large-scale strategic changes or even potentially prepare for sale or takeover (De la Merced 2012). In terms of recent developments, the next generation systems (4G) like HSPA+, WiMax and LTE were commercially introduced for the first time in 2011 (Research in Motion (a), 2012, p.10).. 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 Smartphones include multimedia facilities that consist of music, playback, video recording, camera, and entrée to content, games and other applications (Research in Motion (a), 2012, p.10). Increasingly, however, tablet technology has come to dominate the wireless market. The tablet, as originally released through Apple’s iPad, operates as a medium between handheld Smartphone’s and the larger-scale laptop. 2. Analysis of the Current Business Environment Affecting the Industry 2.1. PEST Analysis 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 (Wheelen et al, 2008, p.58). While the current global industry is expansive, position growth is estimated to reach nearly $341.4 billion by 2015 (‘Wireless Smartphone,’ 2012). Currently, Smartphone revenues account for 75.8% of the mobile handset market (‘Wireless Smartphone,’ 2012). 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. To a large extent RIM’s BlackBerry can be considered to suffer too stringently from its reputation as a product solely for business professionals. Conversely, the Apple iPhone and Google Android platform have been able to further leverage consumer support through the inclusion of applications that position the product as fun and entertaining (Lev-ram, 2012). Indeed, a major challenge RIM faced in recent years occurred as the managers and professionals that long-constituted the backbone of the company’s consumer based increasingly embraced the trendier and ap friendly Apple and Android devices (‘BlackBerry’, 2012). The technological issues pertain to the R&D activity, mechanization, technology benefits and the speed of technological transformation (Wheelen et al, 2008, p.58). One of the greatest challenges the organization faced in recent years were delays that occurred in the release of new product lines, as well as outages of service (‘BlackBerry’, 2012). These outages and delays, while impactful to profit margins, signaled large-scale organizational problems. Increasingly cloud technology linking information throughout a variety of product lines has been integrated into the wireless communication industry. The Apple iCloud constitutes one of the most pressing technological developments in this arena (Newman 2011). Additionally 4G LTE technology, allowing for higher standards of wireless communication, has increasingly become a necessity for tablet suppliers (Moscorito 2012). 2.2. Five Forces Analysis There are number of entry barriers to the wireless communication industry. Some of them are the need for proprietary technology platforms, 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 attributes 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. Undoubtedly Apple, Inc. constitutes the industry leader and the competitive environment has largely conformed to their practices. Currently, Apple controls 55% of the market (Evans 2012). In addition, to branding and marketing Apple’s success has been contingent on developing consistently high quality products. Additionally, Apple’s products are constructed in a way that they encourage the consumer to buy into the entire Apple product line. This has resulted in a market of consumers that has increasingly attenuated itself to the Apple brand, resulting in a significant market decline for the BlackBerry (Evans 2012). This will only become a further challenge with the upcoming release of the iCloud further linking Apple products (Evans 2012). While Apple has been successful in the sale of personal and laptop computers, as well as iPod music devices, the organization’s introduction of the iPad tablet technology has had the greatest impact on the BlackBerry. The evolution of iPad has increasingly made the Smartphone obsolete (Trinity University, 2011, p.13; Enqvist, 2010, pp. 25-27). Research in Motion has recently released the PlayBook tablet as an effort to compete in the tablet market (Madway 2010). While in 2010 RIM entered the tablet market through the release of its PlayBook, this venture has largely been hampered by inefficient product releases and lackluster sales. Indeed, it was noted that the PlayBook resulted in over $365 million unsold units (Hockney 2011). In the first quarter of the PlayBook’s release only 500,000 products were shipped (‘BlackBerry’, 2012). This number decreased to 200,000 in the second quarter (‘BlackBerry’, 2012). One recognizes this is a miniscule figure compared to the 46 million iPads and 11 million Android-based devices that were shipped (‘BlackBerry’, 2012). 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 tool that 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) Figure 1 illustrates a set of functions in RIM that are taking place sequentially in time. 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). Resources Identification Perhaps the organization’s greatest strategic resource is its networking capabilities. This network is recognized as constituting a spidery, data-crunching network that is able to extend beyond corporate firewalls and reach networks globally (Jordan 2012). Additionally, there are no middle-men to intercept corporate secrets. While Apple, Inc. and Android devices have functional networks, it’s recognized that RIM’s network retains a strong amount of competitive advantage. RIM possesses tangible as well as intangible resources, which are crucial for their ability to make available quality products to the end users. Indeed, a prominent strategic capability the organization maintains is a large array of patents and intellectual property. Indeed, MDB PatentVest notes that RIM has the largest portfolio out of all the major technology companies (Cheng 2012). There is the recognition that Google recently agreed to purchase Motorola Mobility for $12.5 billion, predominantly for the company patent portfolio (Cheng 2012). Estimates then place RIM’s patent portfolio at between $3 and $4 billion. RIM’s success is also 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. Another prominent consideration is that while the organization has faced considerable financial setbacks in recent years, it still remains on solid financial footing (Cheng 2012). One recognizes that this is still a company that is able to generate more than $5 billion in revenue and $900 million in cash flow in a single quarter. Additionally, the balance sheet is held down by minimal debt (Cheng 2012). In emerging markets the organization has been successful in capitalizing on the lower end of the market through users more concerned with texting than heavy data transfer. Additionally, RIM’s subscriber base has actually grown in recent years. While much public attention has been given to the surge of Apple and Android, the BlackBerry subscribers grew by 35% from a year ago (Cheng 2012). 3.3. Core Competencies The core competencies of RIM that gives it a competitive edge over its rivals are as follows: 1. Secure Network 2. Patents and Intellectual Property 3. BlackBerry Cloud Infrastructure 4. Human Resources 5. The influence BlackBerry Brand and Market Acknowledgement 6. 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) There is the recognition that RIM has failed in nearly all of its recent product offerings. The BlackBerry which had once been heralded by corporate managers has long-lost market share to Apple, Inc. and Google’s Android devices, and the PlayBook tablet has proved inefficient in gaining any significant market progress. While the organization believed its QNX operating system, that would allow the updating of Smartphones on the fly, would constitute a potential strategic advantage, again the release of these products was delayed with a release not scheduled until late 2012. Even while RIM plans on releasing the PlayBook 4G LTE next week, it seems unlikely that the company will make a large-scale comeback. 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) Despite the recent management changes, RIM has prominently been considered as a sale or takeover candidate in recent years. The organization’s considerable patent and intellectual property could are estimated at $3 - $4 billion (Cheng 2012). While Microsoft has been rumoured to be a potential buyer, recent reports have considered the potential of Amazon buying the company out (Cheng 2011). Still, Research In Motion has rebuffed Another crucial strategy to be evaluated is an approach of radical shift in business strategy that would involve ditching its BlackBerry. The main recognition in these regards begins with the recognition of company’s secure and highly respected network as a major strength (Jordan 2012). 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). It’s estimated that leveraging RIM’s network to non-BlackBerry users would expand its research by as much as six times (Jordan 2012). Another potential strategy would be for RIM to focus on its existing customer base rather than attempting to expand immediately. As noted, RIM’s subscriber base grew by 35% from a year ago (Cheng 2012). Despite considerable loss in market share, the organization also remains profitable. Additionally, the organization has increasingly had success in emerging markets. There is the potential then that the company could shift focus from the United States towards carving out a firm competitive advantage in emerging markets. One of the challenges of concentrating on emerging markets is the increasing focus they have received from Google’s Android platform. In this way there is the recognition that management and organizational setbacks at RIM will perpetually position the organization at a disadvantage to their more innovative and lean competitors. 5. Implementation of Strategic Change in Research in Motion (RIM) It’s clear that the organization has reached a period of crisis. This report argues that RIM’s strategic failures are a result of too broadly attempting to compete in the wireless market. One recognizes a slight parallel between RIM’s current situation and the situation Apple found itself in upon Steve Jobs early return. Namely, both companies had become removed from their greatest competitive strengths for a strategy that too broadly positioned their products. RIM’s BlackBerry platform gained prominence among business professionals concerned with network security. RIM’s failure is linked to misguided supply chain management practices, as well as the incursion of Apple and Android platforms on its market share. With the recent management change there is the hope that the organization will increasingly establish more efficient production and innovation practices. While RIM has experienced declining market share and equity valuations, the organization has enough strategic advantages that capitulating to a takeover or fire sale is inadvisable. In order to allow the key wireless firms across the world to offer service for non-BlackBerry devices, RIM should 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, as well as implementing its core strategic capability to its greatest potential. Additional, rather than attempting to compete with Apple, Inc. and Android in terms of market share, RIM must concentrate on manufacturing the next generation of its Smartphone and Tablet products in such a way that it optimizes their exercise of business applications. They must 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 should also applications that necessitate very secure, guaranteed-delivery settings, so as to rebuild its exclusiveness in the whole financial services as well as government segment. This strategy would allow RIM to claim a foothold within this market segment, leverage its product base by establishing loyal consumers, and capture the upcoming cloud revolution. 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. 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 April 24, 2012]. ‘BlackBerry’. (2012). Available from: http://www.economist.com/topics/blackberry [Accessed Jul 12, 2012]. Bode, K. (2012). AT&T, Verizon Have Plenty of LTE Spectrum. Available from: http://www.dslreports.com/shownews/ATT-Verizon-Have-Plenty-of-LTE- Spectrum-118015 [Accessed: Jul 12, 2012]. Cheng, R. (2012). There's still a lot to like about RIM seriously. Available from: http://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&ved= 0CF0QFjAA&url=http%3A%2F%2Fnews.cnet.com%2F8301-1035_3-57351500- 94%2Ftheres-still-a-lot-to-like-about-rim-seriously Cheng, R. (2012). Why anyone would want to buy RIM. Available from: http://news.cnet.com/8301-1035_3-57414850-94/why-anyone-would-want-to-buy- rim/ [Accessed: Jul 12, 2012]. De la Merced, M. (2012). For Struggling RIM, Sale Prospects Appear Tough. Available from:http://dealbook.nytimes.com/2012/03/30/for-struggling-rim-sale- prospects-appear-tough/ [Accessed: Jul 12, 2012]. Evans, J. (2012). Apple's iPhone forcing Smartphone industry change. Available from: http://blogs.computerworld.com/18713/apples_iphone_forcing_smartphone_indu stry_change [Accessed: Jul 12, 2012]. 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]. Hockney, S. (2011). RIM. Available from: http://www.telegraph.co.uk/technology/blackberry/8990548/RIM-slashes- Will BlackBerry survive 2012? [Accessed: Jul 12, 2012]. Jordan, P. (2011). Could RIM's survival mean ditching the BlackBerry? Available from: http://www.reuters.com/article/2011/12/19/uk-rim-blackberry- idUSLNE7BI01W20111219 [Accessed: Jul 12, 2012]. Lev-ram, M. (2012). RIM: What the hell happened? Available from: http://tech.fortune.cnn.com/2012/05/30/rim-2/ [Accessed: Jul 12, 2012]. Madway, G. (2010). RIM unveils PlayBook tablet to compete with iPad. Available from: http://www.reuters.com/article/2010/09/27/us-rim- idUSTRE68Q59U20100927 [Accessed: Jul 12, 2012]. McQueen, R. (2010). BlackBerry: The Inside Story of Research in Motion. New York: Key Porter Books. Moscorito, A. (2012). 4G LTE BlackBerry PlayBook Coming Next Week? Available from: http://www.pcmag.com/article2/0,2817,2407620,00.asp [Accessed: Jul 12, 2012]. NASDAQ: RIMM. (2012). Available from: http://www.google.com/finance?q=NASDAQ%3ARIMM [Accessed: Jul 12, 2012]. Newman, J. (2011). Apple iCloud: What it is, and What it Costs. Available from: http://www.pcworld.com/article/237086/apple_icloud_what_it_is_and_what_it_c osts.htmlApple iCloud: What it is, and What it Costs [Accessed: Jul 12, 2012]. 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]. Sweeny, A. (2009). BlackBerry Planet: The Story of Research in Motion and the Little Device that Took the World by Storm. New York: Wiley. ‘Thorsten Heins replaces Lazaridis and Balsillie as RIM's new CEO’. (2012). Available from: http://www.gsmarena.com/thorsten_heins_replaces_lazaridis_and_balsillie_as_ri ms_new_ceo-news-3701.php [Accessed: Jul 12, 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. ‘Wireless Smartphone Strategies’. (2012). Available from: http://blogs.strategyanalytics.com/wss/ [Accessed: Jul 12, 2012]. 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