Business Environment and Strategic Management: Strategic Analysis of Research in Motion - Essay Example

? Business Environment and Strategic Management: STRATEGIC ANALYSIS OF RESEARCH IN MOTION BY YOU YOUR SCHOOL INFO HERE HERE TABLE OF CONTENTS 0 Introduction................................................................................................ 2.0 Industry Analysis........................................................................................ 2.1 The Economics of the competitive industry.................................. 2.2 The social environment................................................................. 2.3 The technological environment..................................................... 2.4 Porter’s Five Forces analysis......................................................... 2.5 The most significant strengths and weaknesses of analyses.......... 3.0 Analysis of strategic capabilities at RIM................................................ 4.0 Evaluation of future strategies for the organization.............................. 5.0 Implementation of strategic change........................................................ 6.0 Conclusion................................................................................................ References Bibliography 1.0 Introduction 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 organisation in 1984. These individuals retained leadership of the organisation 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 organisation released the first version of the BlackBerry Smartphone (Sweeny, 2009, p. 9). This device would come to be the organisation’s cornerstone product through to the present day. The organisation gained a solid reputation for offering the industry’s best security and project manageability. Indeed, President Obama is even a recognised BlackBerry user who follows the platform’s high security standards (McQueen, 2010, p. 3). Today, however, the organisation 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). Research in Motion also competes with Motorola, Nokia and Samsung, a competitive industry where market share is difficult to increase as new competitive innovations continue to be released regularly. Research in Motion hopes to improve some of its recent losses of profit and market share with the release of the Blackberry 10 in January 2013. Because many of the product conceptions offered by competition are homogenous in that they maintain many similar features and benefits, differentiation through marketing becomes critical to obtaining new target market attention and subsequent long-term brand loyalty. Offers the current CEO of the organization, “If we (RIM) want to serve the consumer market effectively, we can’t do it on a me-too approach” (Reed 2012, p.2). Thus, to obtain the desired target market interest, differentiation through marketing function is one critical opportunity to achieve competitive advantage among homogenous technology competition. Utilising the BCG Matrix, Research in Motion’s SBU would be considered a dog, whereby there is low market share and little margin for growth in a highly saturated and mature market environment. Again, this reinforces the necessity of utilising marketing effectively to gain market share since like product offerings from major competitors conflict establishing a differentiated and unique brand conception in the minds of desired target consumers. 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 of the BlackBerry Smartphones include multimedia facilities that consist of music, playback, video recording, camera, 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 Smartphones and the larger-scale laptop. 2.0 Industry Analysis This section describes the important dimensions of the industry in which Research in Motion operates, utilising the PEST model of analysis and Porter’s Five Forces model to explain what drives competitive action at the business and what external forces influence business strategy and direction. The potential political factors impacting business strategy have been negated from the analysis, as mitigating political forces in most markets support capitalistic business modelling and support business through a variety of incentives to lure foreign direct investment. Research did not uncover any legitimate political hindrances that would impact market success in key target markets both domestic and foreign. 2.1 The Economics of the competitive industry 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 globalisation, US and Canadian companies have starting entering emerging economies and benefit from the lower tax rate in those regions in addition to access to their unexplored markets. Though this represents significant cost savings for Research in Motion and the ability to introduce a brand conception into foreign markets to gain international market attention, it removes some focus from proven home markets where brand loyalty and brand equity have been established through credibility and expertise (as well as innovation). In terms of the macro-level concerns for achieving better profitability, more emphasis on home market advantages and opportunities should be considered to make the business more sustainable and profitable. There are significant risks of entering new markets, even though tax incentives make it operationally favourable, which must be considered to achieve economic advantages long-term. It is much more viable for a company that requires marketing differentiation to attempt market expansion in the home market, rather than pursuing risky foreign market entry, especially in a mature market where the life cycle of technological innovations are relatively short as imposed by competitive product offerings. 2.2 The social environment Social issues address cultural facets and include population growth rate, age allocation, alterations in tastes, buying behaviour and so on (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’s 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 that RIM has faced in recent years occurred because the managers and professionals that long-constituted the backbone of the company’s consumer base increasingly embraced the trendier and more app-friendly Apple and Android devices (‘BlackBerry’, 2012). Marketing theory teaches that consumers will be more loyal to a brand if it provides opportunities for self-expansion (Greenwald et al. 2002). RIM is heavily reliant on the leveraging power of the applications associated with consumer lifestyle, including gaming and entertainment as only two viable application developments. In order to produce concurrent applications for RIM’s main product, the Blackberry, considerable, recurring market research must be conducted both qualitative or quantitative to determine market characteristics and needs associated with supplementary service offerings that, too, have limited life cycles based on changing consumer trends and attitudes related to lifestyle. 2.3 The technological environment The technological issues pertain to R&D activity, mechanisation, technology benefits and the speed of technological transformation (Wheelen et al., 2008, p. 58). One of the greatest challenges the organisation has 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, signalled large-scale organisational problems. Furthermore, 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, which allows for higher standards of wireless communication, has increasingly become a necessity for tablet suppliers (Moscorito, 2012). 2.4 Porter’s Five Forces Analysis The bargaining power of suppliers in the wireless communication industry is comparatively low. This is due to the elevated standard of the requirements that have been 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. Switching costs for suppliers are significantly high. On the other hand, the buyers have significant power in this industry and sales depend on the discretion of their customers. Nevertheless, the rigid attributes of Smartphone contracts compel the users to involve themselves with long duration contracts, thereby confining their overall control (Trinity University, 2011, p. 13; Enqvist, 2010, pp. 25-27). There is always the potential risk present that consumers will defect to another competitive brand that has differentiated itself (marketing positioning) that creates a favourable perception of quality, pricing, or any other factor utilized to distinguish the brand from competition. Switching costs for brand defection by consumer markets are quite low as there are homogenous products available at similar pricing structures and the high volume of competing products make variety and selection significant in the retail sales environment both bricks-and-mortar and virtually. 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. Subsequently, 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). Apple maintains a significant competitive advantage over Research in Motion, as the company has managed to establish brand equity and long-term brand loyalty in desired markets. Apple is positioned according to quality and consumers believe that Apple innovations are worth a higher pricing structure associated with expertise and credibility. It cannot be stressed enough the viability of a well-constructed positioning strategy through marketing under premiumisation models that continue to pervade the competitive rivalries of major players in this market. There are significant threats of substitutes in this industry, as many different mobile and pc-based systems, applications and software are available in key markets that do not rely on mobile technologies for utilisation. This forces a large type of transparency in business operations and public marketing in order to gain market attention and loyalty as consumers have many substitute options that are designed to support similar lifestyle or professional needs. 2.5 The most significant strengths and weaknesses of analyses Competitive rivalry and marketing function are the most significant weaknesses for Research in Motion. In markets where consumers have very strong beliefs and conceptions about certain marketed brands, RIM has difficulty establishing a long-standing, differentiated market position that is sustainable. Even the CEO acknowledges that differentiation among competition is substantially difficult due to the success of well-versed marketing entities such as Apple and Samsung. The major strength for RIM is the ability to establish barriers that prevent leveraging power within the supply chain. By maintaining control over procurement, cost savings can be experienced through allied networking agreements that can be re-allocated to more critical areas of business, such as marketing that requires a more substantial investment to obtain higher market share and long-term consumer loyalty to the brand. 3.0 Analysis of strategic capabilities at RIM 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, pp. 12-14). Maintaining a secure network maintains competitive advantages and also the ability to sustain risk-averse consumers concerned about issues of network privacy and integrity. With the supplementary ability of the Blackberry cloud infrastructure to provide new market opportunities, revenue gains can be achieved through cloud architecture development and innovation. Even though it was mentioned previously that this market is mature with little opportunity for growth, Research in Motion devotes considerable capital and labour investment into appropriate areas critical for achieving growth among homogenous competition. The RBV model of analysis relevant to Research in Motion Source: Finntrack. (2012). http://finntrack.co.uk/learners/busmodels.html To fully understand the strategic capabilities of the firm, dimensions provided in the RBV model identify a need for reputation development (largely achievable through marketing function and promotion) which are critical to gaining market attention and loyalty. Without adequate human capital and knowledge transfer occurring between tacit knowledge holders in the organisation, the ability to translate strategy into tangible operational imperatives is increasingly difficult. Research did not uncover any evidence of a culturally-sensitive model of organisational development at Research in Motion, which could potentially be considered a weakness that does not allow the business to take advantage of the many competitive advantages that can be achieved through human capital development and establishment of a team-focused culture focused on sustaining vision and mission conceptions. There is a recognition that RIM has failed in nearly all of its recent product offerings. The BlackBerry, which had once been heralded by corporate managers as the 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 organisation believed its QNX operating system, which would allow the updating of Smartphones at any time, would constitute a potential strategic advantage, the release of these products was again 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. Thus, a missing strategic capability is understanding, concretely, the mitigating factors of what drives consumer adoption or rejection of certain product or service offerings. Since brand defection is a constant risk to this business model, the strategic capabilities of Research in Motion require development in areas of market research and in establishing legitimate relationships with consumers through promotional function. Thus, reputation and the intangibles of strategic advantage are inter-dependent, relying on significant labour and capital expenditures in the marketing process. Though the tangible architecture of technology and product innovation launches into the market are strengths, the relevant application of these conceptions is lacking which could be a mitigating factor for why Research in Motion has been unsuccessful in recent years with new product offerings. Even though the products maintain potential for gaining market share, the ability to effectively promote them utilising appropriate strategies and methodologies is clearly lacking in the RIM business model. 4.0 Evaluation of future strategies for the organization One potential strategy for the company would be for RIM to focus on its existing customer base rather than attempting to expand immediately, which was iterated previously in this report. As noted, RIM’s subscriber base has grown by 35% from a year ago (Cheng, 2012). Despite its considerable loss in market share, the organisation remains profitable. 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 recognition that management and organisational setbacks at RIM will perpetually position the organisation at a disadvantage to their more innovative and lean competitors. A secondary strategy is for RIM is to benchmark the success of Apple’s cloud computing architecture by placing more labour and capital investment into expanding this service. Cloud computing is a profitable industry, especially for SMEs requiring opportunities to remove cost dependency on information technology support teams. Should RIM decide to forego future renditions of the Blackberry product, diversification in this area (or other areas with new market potential) could give the business a new brand visibility in desired markets to achieve greater customer satisfaction and perception of quality which often justifies establishing a higher-than-industry-average pricing model. This strategy would likely have more success since it was established that the Blackberry and its many product changes are not meeting with market attention and profit success. 5.0 Implementation of strategic change To successfully pursue cloud computing as a major business direction or other diversification strategies, the business will require multiple stakeholder assistance. Market research must be conducted about the characteristics and preferences of desired markets interested in mobile cloud computing opportunities. The business would need to consult with marketing and sales representatives and strategic leadership to determine a new positioning strategy to give the business a new market personality. Repositioning from pricing to one of quality, as one example, would change the brand conception in the minds of important new and existing markets as a flexible and innovative company. Placing more emphasis on the promotional and advertising processes related to brand personality development would give the business opportunities to express its commitment to meeting ever-changing consumer needs. Rather than investing the current capital and labour into making incremental changes to a rather homogenous Blackberry product, the branding strategy would change the business reputation and illustrate a new consumer-centric focus for relationship development which ultimately leads to brand loyalty. Research evidence did not suggest that executive level leadership at RIM maintain the knowledge and capacity to make a radical branding change for repositioning, however by assessing best practice benchmarks by Apple and Samsung, success factors can be included into a new marketing model that gives the business a better brand position amongst competitors. 6.0 Conclusion It would not be recommended that an individual make an investment into the future of this company. Failure to adapt to changing consumer characteristics, and inability to set up barriers that prevent consumers from holding considerable buying power or forcing backward integration into the business model. Recent failures to gain market attention using the same homogenous product strategy and lack of appropriate branding focus instil too many risks into the business and there is little evidence that current practices are leading to increased market share. The business relies heavily on its Blackberry, but this is not sustainable under current practice. References NASDAQ. (2012). Research in Motion. [online] Available at: http://www.google.com/finance?q=NASDAQ%3ARIMM (accessed 12 July 2012). ‘BlackBerry’ (2012). Available from: http://www.economist.com/topics/blackberry [Accessed: Jul 12, 2012]. Cheng, R. (2012). There's still a lot to like about RIM seriously. Available from: http://news.cnet.com/8301-1035_3-57351500-94/theres-still-a-lot-to-like-about-rim-seriously/ (accessed 12 July 2012). De la Merced, M. (2012). For struggling RIM, sale prospects appear tough. [online] Available at: 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_industry_change [Accessed: Jul 12, 2012]. Greenwald, A.G., Banaji, M.R., Rudman, L.A., et al. (2002). A unified theory of implicit attitudes, stereotypes, self-esteem and self-concept, Psychological Review, 109(1), pp.3-25. 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]. 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]. 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_costs.html [Accessed: Jul 12, 2012]. 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 Sweeny, A. (2009). BlackBerry Planet: The Story of Research in Motion and the Little Device that Took the World by Storm. New York: Wiley. Trinity University. (2011). Qualitative Analysis. [PDF] Available at: http://www.trinity.edu/smf/inc/reports/fl2010/rimm.pdf [Accessed: 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]. 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. (2009). 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. Read More