The Role of Information Technology in Influencing a Firms Business Strategy - Research Paper Example

THE ROLE OF INFORMATION TECHNOLOGY IN INFLUENCING A FIRMS BUSINESS STRATEGY Executive Summary In this report, the role of information technology in helping BlackBerry Ltd engage in the best of business strategy has been reviewed. More specifically, the current position of the company where it has lost its market position to key competitors has been found to have its solution in the pragmatic use of e-business. Already, the company has been engaged in e-business but has failed to take total control and advantage of its people, marketing and business partnership variables of its service support for e-business. This situation has been noted to be the major weakness of the company as greater part of its market revenues and turnovers depend directly on how well the company is able to understand its customers and the market behavior of today’s competitive global environment. Even though it remains a fact that not much has been done in the last five years to take advantage of e-business opportunities, there is still room for improvement for BlackBerry in becoming a market leader. To do this, it is recommended for the company to focus on the differentiation cost leadership strategic option in launching its e-business strategies. This is because with this strategic option, it will become possible for the company to compete with its market leaders by presenting both what the consumer finds to be different and affordable as compared to what competitors offer. Contents Executive Summary 1 1.0 Introduction 3 2.0 Overview of the Company 3 2.1 Length of time in business 3 2.2 Number of Employees 3 2.3 Products and Services 4 2.4 Target Markets 4 2.5 Distribution Channels 4 2.6 Market share 4 2.7 Main competitors 5 3.0 Engagement in e-Business 5 3.1 Support for e-Business 5 3.2 Internet Business Model of BlackBerry 7 4.0 How the Internet has impacted the competitive strategies of BlackBerry 8 5.0 BlackBerry from Carr’s Perspective 9 6.0 BlackBerry’s future competitive environment. 10 7.0 Conclusion and Recommendations 10 References 12 Appendices 14 Appendix A 14 Appendix B 14 Appendix C 15 Appendix D 15 Appendix E 16 1.0 Introduction The kind of business strategy used by a company is an important determinant of market performance. This is because business strategies must be made in a way that rightly identifies the opportunities of the company on the market and how the company can take advantage of these. In today’s competitive global environment, information technology (IT) has become so important in the conduct of business that doing business without IT is virtually something that cannot happen (Nicholas Carr, 2003). But as companies engage in the use of IT, it is important that the right targets of business engagement be done. In the case of BlackBerry, the company is seen to have a lot of potential when it comes to e-business. This is because apart from the fact that the company operates in the IT industry, it is currently challenged in terms of market competition. Meanwhile, when IT is used to influence a firm’s business strategy, it is possible to come out with precise business plan that addresses the specific market needs of the company and what needs to be done right within the company to ensure growth (Day, Fein and Rubbersberger, 2003). This report therefore seeks to deliver insights to both the internal and external strategic planning of BlackBerry. This will be done by relating the business information systems of the company to its strategy to find how well these two fit. 2.0 Overview of the Company 2.1 Length of time in business What is now known as BlackBerry Ltd was actually founded as Research In Motion (RIM) in 1984 by two people known as Mike Lazaridis and Douglas Fregin. Both people were engineering students but in different universities in Canada. In its initial days, RIM was mainly financed by Canadian institutional and venture capital investors as the company was privately held (Julianne, 2013). In appendix A, the logo of RIM is showed as compared to its current logo as BlackBerry. In 1998, a pre-initial public offer saw the company raise a total of C$30,000,000,000 under the symbol of RIM. Major expansions that were met with stiff competition was met from 2001-2011. 2.2 Number of Employees BlackBerry has believed in the place of an effective and efficient human resource base to its growth and development agenda. Because of this, there continues to emphasis on the expansion of employee base to meet the growth pattern of the company. To this end, as of the end of 2013, the company had a total of 7260 employees who worked in various departments, portfolios and management positions across the globe. This number has however been threatened to be slashed following declining market performance (Connors, 2013). 2.3 Products and Services Located in Waterloo, Ontario Canada, BlackBerry Ltd has been engaged in the manufacturing, sales and after sales services of telecommunication and wireless equipment. Over the years, the company has specialized and focused the production and development of the BlackBerry brand of smartphones and tablets (McQueen, 2010). There are also telecommunication services given to corporate institutes and individuals. Currently, the company’s line of products includes BlackBerry, BlackBerry Enterprise Server, BlackBerry Internet Service, QNX, Ripple Emulator, BlackBerry PlayBook and the BlackBerry 10 (Reed, 2013). 2.4 Target Markets With the massive information technology revolution that the world is experiencing which has made the use of smartphones, tablets and other communication devices unlimited to demographic boundaries, it can be said that BlackBerry Ltd’s target market is unlimited. It is not surprising that from the beginning of 2007 when the Apple iPhone was first released to the end of 2012, the company saw an increase in the number of BlackBerry subscription from 8 million people to 80 million people globally (Staff writer, 2013). However, the company continues to make the younger generation aged between 18 and 40 its major target, as well as corporate institutions (Julianne, 2013). 2.5 Distribution Channels BlackBerry has taken total advantage of electronic commerce (e-commerce) in influencing almost everything it does, including its distribution channel. This is because the company has a very strong online distribution representation that makes it possible for people to make purchases online and get their products shipped to them by the use of distribution and shipping firms recognized by the company. Some of these include DHL, FedEx, American Express, and EMS. The same line of distribution made up of the use of third party distributors happens with offline distribution in almost all countries that the company has an opening (Miller, 2013). 2.6 Market share BlackBerry’s market share has been experiencing price instability and falls for some time now. Most analysts blame this on lack of competition on the part of the company in terms of weathering the storm against some of its key competitors, particularly Apple and Google Android (Reed, 2013). The current share price of the company is quoted at 7.2800 USD by Bloomberg, which is a decline of 0.3900, representing 5.08% fall. From the chart presented in appendix B, one would see that the fall in market share is a situation the company has been dealing with since 2011. 2.7 Main competitors Since 2001, BlackBerry has had to deal with three major competitors which are Apple iPhone, Google Android, and Microsoft Windows Phone (Miller, 2013). From the declines in market share recorded by the company, it is very obvious that the company has not competed very well with its competitors and thus needs a paradigm shift based on which it can become more viable than it currently is. E-commerce will be noted though this report as one of the best remedies to make BlackBerry more competitive. 3.0 Engagement in e-Business 3.1 Support for e-Business The fact that BlackBerry Ltd is in the IT industry has served as a major motivation for the company in engaging in e-Business. This is because the company is not only a manufacturer of IT tools that enhance e-business but also a developer of it. From the BlackBerry perspective, there are two major paradigms of e-business engagement that can be identified. These are support services for e-business and infrastructure support for e-business as proposed in Turban et al. (2005). Under the support service for e-business, BlackBerry has focused on all five areas recommended in Turban et al. (2005). These areas, as showed in figure 1 are people, public policy, marketing, support services and service partnership. Figure 1: E-Business Application Source: Turban et al. (2005) From the perspective of BlackBerry Ltd however, not all of these aspects of the e-business application has been followed in exactly the same way. Generally, some of these areas come as the strength for the company whiles others come as a weakness for the company. In a critical analysis of BlackBerry Ltd, McQueen (2010) observed that BlackBerry’s strength in support services for e-business has been the areas of public policy and support services. In a very disturbing situation, all remaining three areas namely people, marketing and business partnership have been considered as the company’s weakness in e-business even though these areas are directly related to market performance outcome (Sweeny, 2009). Public policy is considered the company’s strength because it hardly comes to the news of BlackBerry having major legal scores to settle either with government or its stakeholders including employees (Hamblen, 2013). In terms of support services, the company has been proactive in the usage of electronic based supply chain management, which influences its logistics, payments, content and security system development (Sweeny, 2009). Unfortunately, BlackBerry has been criticized as not being proactive with people and marketing because the company has refused to interpret marketing trends and the customized needs of its consumers to offer tailored service (Sweeny, 2009). This is a major competitive disadvantage of the company in its support service for e-business, which has made most of its competitors the market leaders. A typical example of the company’s failure to engage in sufficient market research was exhibited with the introduction of the introduction of the PlayBook, which produced a write down value of $485 million as a result of rush market introduction (Warren, 2011). In terms of infrastructure of e-business, BlackBerry has been praise to have taken total advantage, control and dominion of the e-commerce concept in attaining a global e-commerce status that is the envy of most other competitors. Very particularly is the emphasis that the company gives to security, authentication and electronic payment systems, which makes its customers trust the existing e-commerce platform of the company. In effect, BlackBerry gives a lot of emphasis to e-business priorities as recommended in Afuah and Tucci (2003) and Bocij et al. (2006). 3.2 Internet Business Model of BlackBerry Over the year, BlackBerry has moved from the use of an infomediary model to an advertisement and community model, all of which have been endorsed by Rappa (2010). Generally, the internet business model can be described as a method by which companies plan to be sustainable through the unique properties of the internet (McNurlin and Sprague, 2006). Based on this understanding BlackBerry has rightly identified its revenue generation potential from the internet, as well as cost saving mechanisms by choosing the advertisement and community business model on the web. Initially, the company was merely using the infomediary model, where it focused largely on the market information about its consumers and based on this information to make production based decisions (Rappa, 2010). Today, by the use of the community model, the company has rightly incorporated the roles that the infomediary model played and added to its advantage an interactive platform where the consumer and for that matter customer is made a personal part of the company’s e-business experience. This is because through the community mode, there are open sources, open content, public broadcasting, and social networking services offered to consumers and the general public. In the snapshot of the company’s website produced in appendix C, one would see that there are platforms given on the company’s website to make its community model workable. Using the same website of BlackBerry, provisions have been made to make the advertisement model proposed by Rappa (2010) also workable. This is because the company uses its website to give publicity to most of its products. This is done by displaying products from the company in very catchy and attractive manner as can be seen in appendix D. Whiles doing this, the company draws the attention of the public and its potential customers on what the company has to offer, as well as why the company’s products must be preferred to what is on the market. Meanwhile, advertisement and promotion has been noted to be one of the most important marketing mix with which companies are able to interact with the public and make revenues by convincing them to make purchases from the company (Sawhney and Parikh, 2000). 4.0 How the Internet has impacted the competitive strategies of BlackBerry BlackBerry has taken the new dimension of competitive strategy by focusing on the theory of the three emerging forces proposed by Downes (1997). These three areas are digitization, globalization and deregulation. The rationale for selecting these three over Porter’s Five Forces is because of how directly these three emerging forces are directly linked with the internet and for that matter information technology (Downes, 1997). As far as digitization is concerned, the company has strived to move from what used to be a state of analogue, manual and offline shopping to a concentrated state of electronic shopping. The influence of digitization has also been felt in terms of how the company interacts in general with its stakeholders as it puts a lot of premium on online interactivity through the use of support systems on its website. In terms of globalization also, BlackBerry has created the avenue for customers to shop around globally as the company has improved its distribution logistics and communications (Hamblen, 2013). Meanwhile, the company continues to be criticized for overly depending on its traditional markets as against the need to expand its globalised opportunities to new and emerging markets where the presence of its competitors are not heavily felt (Gartner, 2013). With respect to deregulation, BlackBerry can be said to have lacked the strategic planning that would have made it take advantage of government’s shrinking influence in the IT industry. This is because up to now, the company has not readily identified specific agencies that it can engage in partnership business with who are in mainstream leverage from where the government left off. The effect of BlackBerry’ reaction to the three emerging forces has been a mixed market performance that has not been very dominant over the years. From the figure below, it will be noted that even though the company has not always recorded losses in its revenue, net income and profit margin, its financial performance has been declining steadily in these last first years. This means that the company has not adequately taken charge of its competitive advantage that makes it outperform its competitors (Afuah and Tucci, 2003). Over the years, BlackBerry’s competitive advantage was in the use of differentiation strategy, which made it produce smartphones that were totally different from other competitors such as Nokia, Samsung and Motorola. With the introduction of Android operating systems however, that has come to prove a more powerful differentiation than what BlackBerry presented. Figure 2: Cash Flow of BlackBerry from 2010 Source: Google Finance (2014) The graph above shows a declining trend of BlackBerry’s operating margin from 2010 due to a weak linkage between its business information systems and its business strategy. In appendix E, a table showing the details of BlackBerry’s financial statement is given. 5.0 BlackBerry from Carr’s Perspective Carr (2003) readily identifies a relationship between IT and competitive advantage but claims that “technologies can create a strategic advantage only early in their life cycle when few firms have them, and using them is expensive and risky” (p. 245). In the case of BlackBerry however, this claim cannot be said to be wholly right. This is because the relevance of IT has not been seen only in the early parts of the life cycle of BlackBerry. As a matter of fact, even though the company is currently seeing declines in sales, it is only as a result of the use and emphasis on e-business that the company has not done worse than it has currently done (Staff writer, 2013). This is because e-commerce sales platform alone continues to contribute over a quarter of the company’s total annual sales (Day et al. 2003). Meanwhile, most of these online sales are made in places where the company has no physical presence in terms of stores and offices. In effect, should such revenues that are being produced close to 30 years of the company’s operations had been taken out the company would have done worse. What is more, the fact that through e-commerce, BlackBerry has not had the need to opening offices and stores in every corner of the globe before becoming part of the globalization benefits means that IT has not been as expensive to BlackBerry as Carr (2003) claimed. It may be true from the context of Carr (2003) and in relation that innovation can help promote strategic advantage but such strategic advantage needs the wheels of IT to ride. Most certainly, with a lot of market innovation, BlackBerry will be better placed to reclaiming its competitive edge over its key competitors. 6.0 BlackBerry’s future competitive environment. Into the future, it must be said that any changes in the IT environment that is towards a progressive change will benefit BlackBerry rather than harm the company. This is because of the enormous benefits the company has derived from IT and continues to derive from it. Such emerging technologies such as robotics, drones and virtual reality that have been proposed in literature will only enhance the company’s chances of growing. This is because these emerging technologies have the potential of enhancing manufacturing by ensuring continuous process improvement (Day, Fein and Rubbersberger, 2003). On the other hand, there is the issue of how the company’s competitors will also take advantage of these emerging technologies. In effect, BlackBerry’s future competitive environment is dependent on the company’s ability to be strategic in its competition. Once the company will be able to lock horns with current competitors some of which like Google are key initiators of the emerging technologies, then the company will be better placed to compete. As it has been outlined by McNurlin, Sprague and Bui (2008), going into the future, it is important for BlackBerry Ltd to focus on a networked organizational environment. This is because with such an environment, it will be possible to tap the benefits of knowledge spread across the global divide and also position the company for the type of complexity that awaits it in the future. 7.0 Conclusion and Recommendations The discussion in the report has sought to measure out BlackBerry’s business information systems with its business strategy to find how well they fit. Based on findings from the report, it can be concluded that there has not been a very perfect fit between these two variables, a reason the company has not been able to be as productive as it envisioned to be. For example even though the company has a very strong e-business model that recognizes the place of support services for e-business, the most crucial components of these support services such as people, marketing and business partnership has not been given much attention in the company’s business strategy. The result of this is the declining nature of the company’s market share and net income. Going into the future, there is the need for a pragmatic approach to e-business and business strategy that combines differentiation with cost leadership must be taken. With such a strategic option, BlackBerry can overtake its competitors by giving consumers exactly the same products that competitors have but in a different manner. At the same time, the company will be well positioned to cut down on the cost of production so that its income and expenditure balance can give a positive figure that is favorable for gaining a good market share. References Afuah A. & Tucci K. (2003). Internet Business Models and Strategies. McGraw Hill: New York Bloomberg (2014). BlackBerry Ltd. [Online] Available at http://www.bloomberg.com/quote/BBRY:US [11th April, 2014] Bocij et al. (2006). Business Information Systems. 3rd Ed. Prentice Hall: New York Connors, W. (2013). "Blackberry to slash workforce by 40%". 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"BlackBerrys valuable patents could spark a bidding war". CNN Money. [Online] Available at http://money.cnn.com/2013/09/24/technology/enterprise/blackberry-patents/ [10th April, 2014] McNurlin F. & Sprague A (2006). Information Systems Management in Practice. Prentice Hall: New York. McNurlin F., Sprague A. & Bui A. (2008). Information Systems Management in Practice. Pearson: London McQueen, R. (2010). BlackBerry. Key Porter Books: Texas. Miller, H. (2013). "RIM Changes Company Name to BlackBerry". Bloomberg News. Vol. 3213 No. 12, p. 32. Nicholas Carr (2003). “IT Doesn’t Matter”, Harvard Business Review. Vol. 81 No. 5, pp. 242-250 Rappa Michael (2010). Business Models on the Web. [Online] Available at http://digitalenterprise.org/models/models.html [11th April, 2014] Reed, B. (2013) BlackBerry Fairfax Financial buyout: $4.7 billion. BGR. Vol. 312 No. 13 Sawhney M. and Parikh D. (2000). "Break Your Boundaries, BMxmesj Vol. 2 No. 1 pp.198-207 Staff writer (2013). Press release: BlackBerry Charts New Course by Officially Adopting its Iconic Brand Name. BlackBerry Limited: Ontario. Sweeny, A. (2009). BlackBerry planet : the story of Research in Motion and the little device that took the world by storm. John Wiley & Sons Canada. Turban et al. (2005). Electronic Commerce. Pearson: London Warren, C. (2011). "BlackBerry Bust: RIM Takes a $485 Million Hit on the Ailing PlayBook". Mashable. Vol. 2223 No. 43, p. 43. Appendices Appendix A Logos of RIM and BlackBerry Source: Fone Arena Appendix B Share Price Performance of BlackBerry Source: Bloomberg (2014) Appendix C Using BlackBerry’s Website to engage in Community Model Source: BlackBerry Official Website Appendix D Using BlackBerry’s Website to engage in Advertising Model Source: BlackBerry Official Website Appendix E Financial Statement of BlackBerry Source: Bloomberg (2014) Read More