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Strategic Analysis – Blackberry

Recently I created a strategic analysis of Blackberry – struggling Canadian mobile developer and service provider. Here is some information that I collected that might help in bringing the organization back to profitability.

Strategic Analysis – BlackBerry

by Andre Kaminski


Executive Summary


The target audience of this document is BlackBerry’s senior management. The objective is to assess current competitive position of the organization and to provide recommendations for the future.

BlackBerry, founded in 1984, was once leader in wireless innovation that revolutionized the term “Smartphone”. After period of exceptional growth in revenues from $85M (2000) to $20B (2008), for last three years it is in constant decline with revenues of $11B in 2013. The Net Income during the same period dropped from $3B profit (2011) to $0.6B loss (2013) (see figure 1).

During this analysis, there were several tools used. Five Forces and Environmental Analysis were used to examine the current industry structure. Both of the tools give different perspectives on the competitors and market segments, allowing to predict future movements. SWOT and VRIN tools were used to analyze current capabilities and competitive positions of the organization. Other tools like Competitive Lifecycle and Capability Analysis diagrams were not found suitable due to nature of the business and the purpose of this document.

Industry Analysis

The current situation of smartphone industry could be described as ‘Red Ocean’ (see figure 2), with high level of fierce competition. Although there are high entry barriers, there is already large number of competitors that saturated the market (according to IDC report – over 150 vendors). The industry is in early maturity phase, with well-established competitors with strong brands and excess capacity. In November 2013, IDC found that smartphone shipments grew 40%, while average pricing declined by 12%. Over last few years, more and more organizations allow employees to bring their own devices to work (BYOD) which changed the market landscape. There is no more clear differentiation between enterprise and consumer market segments, but rather an overlap. Another strategic group with fierce competition is middleware area – software that connects disparate mobile applications, programs and systems (Fig. 5).

In order to keep the costs down, many competitors buy standard components provided often by the same suppliers, which is increasing companies’ vulnerability to any changes in the relationships or new alliances. Most of the vendors are able to relatively quickly imitate new features, and currently there is little differentiation among offered devices. Apple’s introduction of iPhone in 2007 was a good example, currently almost all vendors offer the touch screens, including BlackBerry. There are high risks of substitution as voice and data services could be used on several types of devices like tablets, smartphones or laptops. Due to continuing difficult economic situation, end users are sensitive to pricing, leading to high cross price elasticity. Since handsets are sold through resellers who add data services on top of voice, relatively small number of resellers in given geographic market segments provides them with high bargaining power when negotiating pricing. Another important aspect in the industry is the need of complementing the hardware devices with software offering. Without large number of applications, it is almost impossible to sell products to consumer segment. This led to consolidation of operating systems – Google’s Android and Windows Phone OS are used on several vendors’ devices across the market space, with only two used on proprietary handsets – Apple’s iOS and BlackBerry’s QNX. Ability to attract good software development companies is directly linked to number of sold devices, which currently unfavorably positions BlackBerry (see figure 3 and figure 4).

The industry is very dynamic, with constant changes – clearly an example of Schumpeterian rents, where timing and adoption are critical to success. Blackberry lost its dominant position when it failed to recognize threat from Apple’s iPhone in 2007. Inability to quickly respond, with several misses of deadlines for delivery of new generation of devices by as much as 18 months (model Z10), only deepened the crisis for Blackberry. Key factors that will drive the industry over next few years will be related to security and privacy protection (driven by NSA scandal), data consuming and social networking shifting to mobile devices due to changing demographics, and feature rich operational systems, supporting large number of applications (figure 6).

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