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How Blackberry's Success Led to Its Failure

Essay by   •  January 24, 2018  •  Case Study  •  3,242 Words (13 Pages)  •  857 Views

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Erasmus School of Economics

MSc. Economics and Business

Course: Strategic Marketing

Student: Iulia Cuciuc (455895)

Evidence-Based Strategic Marketing Report

Topic: How BlackBerry's success led to its failure 
(With a little help from Apple and Google)

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Introduction

BlackBerry is a line of smartphones, tablets, and services originally developed by Canadian company BlackBerry Limited (formerly known as Research in Motion - RIM)[1]. In 1999, RIM introduced Interactive Pager 900 as a two-way pager. In 2003, the more commonly known smartphone Blackberry was released, which supported push email, mobile telephone, text messaging, Internet faxing, Web browsing and other wireless information services[2]. Blackberry gained market share in the mobile industry by concentrating on email while providing security which has been difficult to match for its competitors. However, the company has been in continuous decline for many years, at least in terms of its smartphone market share. Therefore, it was not surprising when BlackBerry announced that it will stop manufacturing its own devices and let third-party firms do the job instead. Nevertheless, the reason why BlackBerry is interesting today is that it provides a prime example of an incumbent business being disrupted by sprightlier newcomers[3].

Blackberry positioning:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                “To busy mobile professionals who need to always be in the loop, Blackberry is a wireless connectivity solution that allows you to stay connected to people and resources while on the go more easily and reliably than the competing technologies”.

  1. Situation Analysis at the Time of the Strategic Challenge you Cover

-Customer Analysis: What are the key target customers of your company?

Blackberry targets markets of: business professionals, innovators and high-income people.

They use market segmentation by:
1. Occupation – business professionals.

-Have quick access to organizational and product data in any database

-Doesn’t have the requirement to be at the desktop to view the critical data they need

-Their decision-making is supported with automatic alerts and automatically refreshed data

-Are willing to pay more for the newest products that provide the function they need

2. Behavior – Innovators

-Successful, take-charge people, high self-esteem, very active consumers

-Pursue the most fashionable products with advanced technology

-Appreciate the design and style attributes

-Purchase the products of the leading brand

-Are willing to pay more for the newest innovative products.

3. Income – High-income people

-High salary

-Purchase the expensive personal products

-Pursue fashionable products

However, in 2013, the company announced a change in the target market. They planned to exit consumer market and focus primarily on enterprise consumers and prosumers.

Michael Clewley (director of handheld software product management) elaborated on a new target market defining them as: “Their sole purpose is that this is primarily a communication device and a productivity machine…” The change was being viewed as Blackberry moving back to their heritage and roots[4].©©©

-Company Analysis: What are the strengths and weaknesses of the company?

Strengths:

Weaknesses:

-Has well developed and established brand

-Has strong focus on narrow consumer segment

-Provides highly secure phones

-Brand loyalty among corporate and business consumers

-Inability to market the brand

-Poor presence in the tablet market

-Operational system Blackberry OS

-Losing brand loyalty among non-corporate consumers

-Market perceptions of the devices being for “professionals”

-R&D limited on innovation capabilities

How does it make money (business model)?

The company uses Business to Consumer (B2C) and Business-to-Business (B2B) models to sell its products and services.

Is it a volume or margin business?

Given that, Blackberry is mainly focusing on high-income and enterprise consumers; the company is a margin player.

How healthy are the sales/margins?

There is currently an improvement in Blackberry gross margin. In fiscal 2Q17, BlackBerry reported revenue of $352 million with a non-GAAP gross margin of 62% compared to a gross margin of 53% in fiscal 1Q17. BlackBerry’s improvement in gross margin was driven by strong hardware margins as well as exceptional performance in the software and services segment and revenue mix. The current net profit margin for BlackBerry as of December 18, 2017 is 49.62%[5]. BlackBerry gross, operating and net quarterly profit margin over the last 10 years can be seen in the Appendix (see Table 1).

BlackBerry phone sales have plummeted over the last few quarters. In fiscal 2Q17, BlackBerry sold 400,000 devices compared to 500,000 in fiscal 1Q17 and 600,000 devices in fiscal 2Q16. In June 2016, John Chen (CEO) mentioned that BlackBerry needed to sell at least 3 million handsets in 2016 to break even. The current TTM revenue for BlackBerry as of December 18, 2017 is $1.31B[6] (see Table 2).

-Competition Analysis: Who are the main competitors?

Blackberry’s main competitors are: Nokia, Apple, Google.

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