FGV Strategic Management Research in Motion Blackberry Analysis Discussion strategic management:term paper. And need to analyze the caseRemember pass throu

FGV Strategic Management Research in Motion Blackberry Analysis Discussion strategic management:term paper. And need to analyze the caseRemember pass through grammarly and send me the report of turnitin A08-17-0005
The Rise and Fall of BlackBerry
The launch of the BlackBerry by Research in Motion (RIM) in 1999 laid the foundation for the development of
smartphones. The next decade was a period of spectacular growth for RIM, making its two co-CEOs billionaires.
At the end of 2007, the company had a market capitalization of more than $60 billion. Sales peaked at almost
$20 billion in 2011. In 2016, sales were $2.2 billion and the company had lost money for four straight years.
Market capitalization was $4 billion in August 2016. The future of BlackBerry (the company changed its name
from RIM to BlackBerry) as a hardware company was uncertain.
Company History
RIM was founded in 1984 by Michael Lazaridis, an engineering student at the University of Waterloo. The
company’s first product was an electronic sign system for an auto plant. The company later developed a barcode
reader for film editing that won Lazaridis an Emmy and an Oscar for technical innovation.1 The company
was also involved in designing, building, and selling interactive pagers, radios that other manufacturers could
incorporate in their wireless products, and wireless modems for laptop computers.2 In 1992, RIM hired Jim
Balsillie, a Harvard MBA, to run RIM’s business operations. Balsillie was appointed co-CEO with Lazaridis in
1992 and, like Lazaridis, became a billionaire from his RIM shares.
After struggling for years to develop an email device, RIM launched its first BlackBerry product in 1999
and listed its shares on the NASDAQ. BlackBerry was the first always-on mobile email product with a keyboard.
RIM contracted with phone companies to manage the customer interface in return for 10-20% of the monthly
fee charged by the companies. RIM managed the email traffic and provided technical support. RIM described
the BlackBerry:
RIM’s objective with BlackBerry was to create the first complete solution for accessing corporate
email and PIM [personal information management] from a single handheld. BlackBerry is the first
complete, wireless email solution designed specifically for corporate environments using Microsoft
Exchange. In addition to simplifying remote email access, it addresses crucial corporate requirements
regarding performance, reliability, security, functionality and support. BlackBerry combines industryleading wireless device technology, innovative software, and advanced wireless networks to deliver
a major breakthrough in mobility.
The user benefits from a complete solution with a simple, flat-rate monthly bill and a single point of
contact for support on all aspects of the mobile email solution—including desktop software, handheld,
billing, and the wireless network. IT departments benefit since they do not have to piece together a
solution for their mobile users and are given a secure, easy-to-support, complete solution. BlackBerry
features an innovation in mobile email connectivity and a breakthrough in handheld technology.3
Within a year, the product was a huge success. BlackBerry was “the gizmo du jour in corporate North
America, with companies such as Intel Corp., Credit Suisse First Boston, and Merrill Lynch ordering thousands
for their employees.”4 RIM’s market capitalization soared to $18.6 billion on the Toronto Stock Exchange in
2000. The stock was $10 a share in March 1999 and $260 in March 2000. The stock collapsed to $35 with the
bursting of the dot-com bubble but then start climbing again, reaching $90 by January 2001. The company was
aggressively adding U.S. channel partners and was planning to launch in Europe.
Copyright © 2017 Thunderbird School of Global Management, a unit of the Arizona State University Knowledge Enterprise.
This case was written by Deborah Himsel and Andrew Inkpen for the sole purpose of providing material for class discussion. It is
not intended to illustrate either effective or ineffective handling of a managerial situation. Any reproduction, in any form, of the
material in this case is prohibited unless permission is obtained from the copyright holder.
Authorized for use only by XUEFENG SUN in Strategic Management at Saint Mary’s University from Mar 01, 2020 to Apr 30, 2020.
Use outside these parameters is a copyright violation.
Deborah Himsel
Andrew Inkpen
The Technology Landscape in the Early 2000s
Mobile wireless was possible with phones, PDAs, and BlackBerry, but the BlackBerry was by far the most
useful for email. At that time, email on a mobile phone used the phone keyboard. Phones and PDAs also had
cumbersome email connections, typically requiring the user to dial their provider, connect to a website, or call a
special phone number. BlackBerry was always connected to a wireless network and used software for corporate
e-mail servers that “pushed” incoming messages from an existing email address to the BlackBerry.
Whereas Palm and a few other companies were targeting consumers with PDAs that could access email
accounts, RIM was focused on the corporate market and did not see a huge opportunity in the consumer segment.
The company’s grassroots marketing campaign included email “wireless email evangelists” to visit Fortune 500
companies. RIM made a special effort to penetrate Wall Street firms. RIM set up pilot programs inside companies
and provided Blackberries on a trial basis. By mid-2001, about 800,000 Blackberries had been sold for $349 and
up plus a $40 monthly fee.5 A new BlackBerry was introduced—the 957 was bigger than the original version
and shaped like a Palm device. RIM established a number of marketing partnerships that included co-branding,
bundling, and reselling arrangements with companies such as Compaq, AOL, and Nortel Networks.
Which Way Forward?
In the early 2000s, BlackBerry was well established as a corporate tool. Looking forward, the company was faced
with various questions. Should RIM stick to an email-only device or add new features? RIM executives maintained
that their primary goal was to create technology that met customer needs. The mobile phone companies were
adding new features, and some BlackBerry customers were using third-party software to add new capabilities.
Should BlackBerry go after the consumer market or should it heed the advice of a Palm executive who said,
“How many soccer moms need to stay on top of email all the time.”6
To keep growing, RIM would have to upgrade BlackBerry’s access to wireless networks. Blackberries did
not work well outside of major cities, and global coverage was weak. Should the company partner with the
major mobile phone companies that operated their own networks or go it alone and negotiate network access?
RIM was also considering licensing its email redirecting technology to other companies and was looking for
new partnership opportunities.7
By October 2001, the company had 1,600 employees, a new research center, and a second manufacturing
plant that would increase annual production capacity to six million devices. Some analysts were questioning the
decision to do in-house manufacturing when demand was uncertain. Forbes Magazine named BlackBerry as one
of seven cult brands (including Nike and Ben & Jerry’s) that successfully evolved into a national brand name.
2005–2007: Competitors and New Entrants
In 2005, there were 100 wireless carriers selling Blackberries, and RIM expected to add 80 more during the year.
RIM was also pushing the electronics companies, such as Motorola, to include BlackBerry software on their
phones and other devices but only a few companies had signed up. One of RIM’s key selling points was the
security of its network. That same year, BlackBerry launched BlackBerry Messenger (BBM), an instant message
system. BBM was popular because of its encryption and privacy, not going through government servers. Because
of the security, it was a choice for government leaders such as U.S. President Obama, as well as purported drug
lord, Joaquín (El Chapo) Guzmán.
More than 42,000 organizations had BlackBerry servers to support 2.5 million individual subscribers. Most
subscribers were employees of large companies. BlackBerry was also targeting professional consumers (prosumers)
through retail channels. Customers could purchase a BlackBerry device in over 50,000 retail points of presence
around the world.
2
A08-17-0005
Authorized for use only by XUEFENG SUN in Strategic Management at Saint Mary’s University from Mar 01, 2020 to Apr 30, 2020.
Use outside these parameters is a copyright violation.
In addition to BlackBerry, there were many different personal technology products on the market: laptops, personal
digital assistants or PDAs (such as Palm), pagers, mobile phones, MP3 music players, and digital cameras. Some
astute industry analysts were predicting that consolidation of devices was going to happen.
For the fiscal year ending February 26, 2005, RIM had net income of $213 million and revenue of $1.35
billion, six times the 2001 figure.8 Almost 70% of sales were in the U.S. and 70% represented sales of devices.
In 2006, RIM introduced its first device specifically targeting the consumer market, as described in the RIM
Annual Report:
During the past year, we also began a substantial effort to extend the reach of BlackBerry smartphones
beyond the enterprise market. These efforts have included channel expansion, encouragement of
lower carrier service pricing programs, introduction of consumer-friendly applications, and the
launch of new hardware platforms. The BlackBerry Pearl smartphone attracted many new users to
the BlackBerry platform and received wide recognition for its unique blend of size, functionality, and
style. The BlackBerry Pearl, which is available in three colors, offers a camera, media player, and
all the renowned BlackBerry smartphone functionality in an amazingly small and stylish design.9
As of March 2007, 27% of the BlackBerry subscriber account base was non-enterprise users. BlackBerry
phones were available on over 270 networks in 110 countries.
Apple Launches iPhone in 2007
In January 2007, Apple announced at the MacWorld Expo that it would introduce a phone, called the iPhone,
that would be controlled by touch, play music, and surf the internet. Apple’s CEO, Steve Jobs, said in his keynote
speech that the phone would be much more user-friendly than other smart phones on the market.10 Jobs said
that current smartphones with keypads and fixed control buttons had limited flexibility. The iPhone would have
a patented control surface operated by a user’s fingers—“the best pointing device in the world.” Apple planned
to have the phone available by June 2007. RIM shares dropped about 10% after the iPhone announcement.
The iPhone started selling on June 29, and many customers lined up hours in advance. The phone was
available in the United States only through AT&T Wireless. Goldman Sachs analysts said sales during the first
weekend of sales “blew through our expectations” and were at least twice that of their previous estimates.11 Apple
sold more than four million iPhones in the six months from launch date to January 2008, and was second to
BlackBerry in unit sales.
Despite its strong debut, the iPhone struggled to gain traction with corporate users. The iPhone had
compatibility issues with corporate email systems, and many businesses prohibited their employees from using
the phones because of security concerns. Apple was working to solve these issues. Apple was also making available
a software development kit to independent software developers who could develop applications (apps) for the
iPhone. In 2008, the Apple App Store was launched with 500 apps at a price point of free or $0.99 with payment
through iTunes. As an app distributor, Apple kept 30% of the revenue. Apple also updated its software with
additional security and several other features designed to make the phone more attractive to corporate users.
When asked in an interview about the iPhone, RIM co-CEO Lazaridis said, “How much presence does
Apple have in business? It’s vanishingly small.”12 He also questioned the battery longevity in the iPhone, asking
why anyone would want to use a phone with a battery that died after a few hours. Lazaridis expected that
BlackBerry’s keyboard would continue to be a competitive advantage. Referring to the iPhone, he commented,
“I couldn’t type on it and I still can’t type on it, and a lot of my friends can’t type on it…It’s hard to type on a
piece of glass.”13 Internally, Lazardis acknowledged that the iPhone could change the industry, saying, “If that
thing catches on, we’re competing with a Mac, not a Nokia.”14
A08-17-0005
3
Authorized for use only by XUEFENG SUN in Strategic Management at Saint Mary’s University from Mar 01, 2020 to Apr 30, 2020.
Use outside these parameters is a copyright violation.
Competition was heating up in the so-called smartphone segment, which were phones that included an
advanced operating system and combined phone and email capabilities with other features such as cameras, video
games, and media players. Nokia, Samsung, Siemens, Motorola, and HP had also launched, or were planning to
launch, wireless email devices. PalmOne had sold about a million devices called the Palm Treo, which included an
MP3 player and camera. Microsoft was adding mobile email software to its servers and offering it at no charge to
service providers. Microsoft had also developed a version of Windows OS for handheld devices, which PalmOne
was considering. Apple was rumored to be working on a mobile phone, dubbed the iPhone by some analysts.
Another new entrant on the horizon was Google, which was trying to get phone makers to adopt its Android
operating system for smartphones. The Android business model was unique. The base Android operating system
(including some applications) was open-source software. Handset manufacturers and wireless carriers licensed
the Android trademark from Google under individual contracts. Proprietary software, such as Google Mobile
Services, which included applications such as Google Play Store and Google Search, were also licensed from Google.
The evolution of wireless carriers in the U.S. and their relationship with cell and then smartphone makers was a
journey of network expansion and a rebalancing of power. Before the arrival of the smartphone, the carriers were
king. Handsets with specifications dictated by the carriers were inexpensive hardware devices subsidized to link
customers with networks. Aggressive carrier price competition eroded the margins for voice calls and messaging,
leading to industry consolidation and the need for additional growth avenues. In the early 2000s, the carriers
were benefitting from expanding BlackBerry data traffic and the growth in RIM’s worldwide corporate customer
base, although RIM’s $10 monthly service fee was a source of friction with the carriers.
The dynamics between carriers and manufacturers shifted with the launch of the iPhone. Verizon, one
of the largest U.S. carriers, rebuffed Apple’s offer of partnership due to Apple’s requirement for total control
over the phone’s specifications. Verizon was fearful of losing control of their network before seeing a prototype
device.15 Cingular (subsequently merged with AT&T), willing to bet on the iPhone’s potential to increase data
traffic and revenue, acquiesced on design control, granted unlimited bandwidth to develop services for internet
browsing, maps, and other internet services (previously denied to BlackBerry), and relinquished a portion of each
customer’s AT&T bill (around $10 a month) to Apple—in exchange for an exclusive five-year contract. AT&T
did not even see an initial iPhone prototype until just before launch.
When RIM interacted with the carriers, it was usually to provide them with an education in how their
networks operated and what device would or would not work on their network. “Lazaradis often knew better than
they did—or explaining how ‘new’ and ‘more expensive’ rarely translated into better performance.”16 With iPhone
sales soaring, Verizon executives wanted a competitive touchscreen device and allocated a substantial marketing
budget to the BlackBerry Storm, launched in 2008. After problems with the Storm, Verizon decided they needed
a backup plan with Android and heavily marketed an Android launch in 2009. Android sales continued to rise
and BlackBerry’s sales decreased. Verizon, seeing the need to increase its network performance to meet consumer
demands and iPhone requirements in 2011when the AT&T contract expired, invested in upgrading to a 4G
network. RIM, unconvinced about effectiveness of 4G technology networks, had no RIM products that could
meet the newer technology requirements and still be cost effective. In 2011, Verizon reallocated resources away
from RIM products to those that were 4G compatible.17
RIM Launches New Products
RIM launched several new products in 2008, including the Bold and the Storm. The Bold was a continuation of
BlackBerry’s smartphone with a physical keyboard. The product received a good reception and was considered a
solid evolution in the traditional BlackBerry style. Co-CEOs Lazaridis and Balsillie continued to say in public that
they were designing products with chief technology officers in mind. The number of new products and products
customized for different carriers was adding a lot of complexity to manufacturing and supply chain management.
Under pressure to launch a touchscreen phone to compete with the iPhone, RIM launched the Storm,
the first RIM smartphone without a physical keyboard. About 500,000 units were sold in the first month.
Unfortunately, the Storm reviews were mostly negative. One reviewer said it was “the Edsel of smartphones, an
absolute smeller from top to bottom.”18 The Storm had a number of technical glitches and Verizon eventually
had to replace about one million phones at a cost of as much as $500 million. The product was the first major
technical failure from RIM. Some years later, co-CEO Balsillie said:
With Storm we tried to do too much. It was a touch display, it was a clickable display, it had new
applications, and it was all done in an incredibly short period of time, and it blew up on us. That
was the time I knew we couldn’t compete on high-end hardware.19
4
A08-17-0005
Authorized for use only by XUEFENG SUN in Strategic Management at Saint Mary’s University from Mar 01, 2020 to Apr 30, 2020.
Use outside these parameters is a copyright violation.
Wireless Carriers and Smartphone Companies
The evolution of wireless carriers in the U.S. and their relationship with cell and then smartphone makers was a journey
of network expansion and a rebalancing of power. Before the arrival of the smartphone, the carriers were king. Handsets
with specifications dictated by the carriers were inexpensive hardware devices subsidized to link customers with networks.
Aggressive carrier price competition eroded the margins for voice calls and messaging, leading to industry consolidation
and the need for additional growth avenues. In the early 2000s, the carriers were benefitting from expanding BlackBerry
data traffic and the growth in RIM’s worldwide corporate customer base, although RIM’s $10 monthly service fee was
a source of friction with the carriers.
The dynamics between carriers and manufacturers shifted with the launch of the iPhone. Verizon, one of the largest U.S.
carriers, rebuffed Apple’s offer of partnership due to Apple’s requirement for total control over the phone’s specifications.
Verizon was fearful of losing control of their network before seeing a prototype device. Cingular (subsequently merged
with AT&T), willing to bet on the iPhone’s potential to increase data traffic and revenue, acquiesced on design control,
granted unlimited bandwidth to develop services for internet browsing, maps, and other internet services (previously
denied…
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