Over the years RIM’s Blackberry brand has been a powerful contender in the IT industry. It was one of the pioneers which drove the smart phone revolution in 2007 but as per our research we found out that while Blackberry’s revenue and gross profit have been improving between the years 2007 to 2011, the rate at which they have been increasing has been deteriorating. There are many factors to consider in the stagnation of the company’s growth.
These can be attributed to the world economy with financial crisis at bay, aggressive competitors such as Apple, Android and Windows consuming the Blackberry market and/ or problems with regards to the saturation of the market with an abundant number of players in the industry. In terms of net marketing contributions, our findings show that year on year percentage change has been decreasing.
Packaging the company’s sales, marketing and administration cost over the given years of 2007 to 2011 under the “marketing cost”, column we have observed that the 2011 marketing cost is two times that of 2010 which is more or less a 50% increase while revenue for 2011 has only increased by 33%.
Such occurrence may had been a result of the growing number of aggressive competitors of Blackberry namely Apple’s iPhone series, Google’s massive android franchises and Microsoft’s Windows Mobile smart phones to name a few. According to Iain Mackenzie of BBC New “For at least a decade, besuited city types spent every spare minute twirling their way through corporate emails and pecking out responses.
But then the iPhone arrived, after spending a year or so turning the consumer market upside down, it went after the office inbox” (Mackenzie, 2011). When the iPhone was first released in 2007, Apple improved its iOS’s exchange server compatibility and provided additional security which not only attracted graphic designers and artists whom are the target market of Apple as a company but also captured Blackberry’s middle-aged gentlemen from the finance departments market.
Along came Google’s Android which collaborated with other brands such as HTC, Samsung, LG and other mobile phones to house its operating system. With Android’s wide budget range it captured most of the markets of the smart phone industry from the high end ones to the lower end consumers. Lastly Microsoft’s Windows Mobile phones constant innovation and marketing has won a fair share of loyal followers in the corporate scene.
With these growing competitors RIM had been having difficulties addressing concerns with regards to Blackberry’s competiveness. Another theory of Blackberry’s declining sales can be attributed to the recent problems encountered by its marketing department. On October 2011, the Blackberry service in its largest markets had been disrupted causing its users to have problems accessing data services.
According to RIM the service problem was caused by a core switch failure within its infrastructure and the backup switch which was designed to carry over the functions of the system failed to perform resulting to a large backlog of data (Dipaola & Miller 2010). The data crash has affected the company’s brand image and positioning which also lead its users to question RIM’s capability in providing good service and products.
Last October 2011, social networking sites such as Twitter and Facebook have shown customers’ complaints, disappointments and anger towards Blackberry’s services (Dvorak & Weinberg 2011). Lastly, the departure of top executives and senior managers had lead to its shareholders’ belief that RIM’s unusual management structure hinders the company growth. Jaguar Financial which owns 8% of RIM is urging other shareholders to replace co-founders, Mie Lazaridis and Jim Balsillie from their roles as CEO and chairman of the company (Kelion 2011).
The internal conflict between the shareholders and the management team has caused RIM a conflicting vision on how it will proceed in Blackberry’s future which presents as a weakness to its competitors with an unstable support system. Observing the revenue breakdown of RIM for the financial year end of March 2011, 80% of the RIM’s revenue came from sales of devices while only 16% came from services.
A SWOT analysis on the company shows that the strength of RIM lies in its own capability in producing and manufacturing its own operating system (software) and mobile device (hardware). An additional bonus for Blackberry’s customers is the services it provides which is an advantage for its resellers’ because the latter can charge end-users monthly subscriptions.
Currently there are about 50 million Blackberry Messenger (BBM) users around the globe thus the company still has its existing market at the same time third-party developers can create applications for Blackberry. Branding wise it is still the preferred choice of corporate users.
Weaknesses of the Blackberry brand and smart phone are the bad press release it had conveyed through the service outrage last October 2011; the smart phones themselves are pricy and only cater to corporate users. Blackberry is perceived by many as a device for business people thus ordinary consumers may not relate to its features.
It has lags behind with its apps and web browsing experience which are impressively provided by the new Apple, Android and Windows phones and its revenue sources are not diversified. Blackberry is missing out on a potential source of revenue by the absence of a strong app store.
Analysing such strengths and weaknesses opportunities such as Blackberry’s potential in extending its software development to third party companies and its expansion in developing countries can broaden its market provided that it needs to address cost issues as the customers in the said countries are price sensitive.
Threats such as competitors’ branding and pricing might consume RIM’s market share and restrictions from conservative governments (UAE, India, etc.) on security network access may limit its expansion. The poor economic climate brought about by the global financial crisis and recession together with threats of patent lawsuits may challenge its global marketing expansion.
Blackberry lacks diversity in its product base compared to its previous smart phone generations. It failed to constitute innovation in its music and app stores which gives Apple and Google a competitive advantage. The operating systems of Blackberry, which can be provided on other phones present a challenge in terms of where to place it.
On one hand it would increase the number of subscriptions and potential customers for app stores but at the same time it might lead to brand dilution. Analysing the PESTEL of the matter, in the political scene issues on security network may arise especially in the countries of UAE, India and China.
On the economic scene, problems of exchange rate fluctuation affect the brand’s prices deeming them too expensive for the markets of developing countries. This occurrence will slow down the growth of Blackberry in its new markets. Socially smart phones are the trend nowadays with the popularization of social media networks and demand for instant communication may boost RIM’s sales.
Technology wise the impact of 4G, instant messaging and growing demand of apps can be taken advantage of the company in riding the wave. Finally patent infringement lawsuits may post as a threat to the company especially in its venture in new markets.
Overall RIM needs to innovate in order for it to be competitive in the market and win back its market shares. Apple’s iPhone has been gaining much attention with its innovation over the years. Its revenue has been increasing at a faster rate than Blackberry. (Dilger 2011). Blackberry needs to develop a strong app market to catch up with its competitor’s innovations.
Reference
Dilger D., “Apple’s Rivals Battle for iOS Scraps as app Market Sales Grow to $2.2 Billion.”, 2011. Web.
Dipaola, A. and Miller, H., “Blackberry Challenges May Spread as Governments, RIM Collide”, Bloomberg, 2010. Web.
Dvorak P. and Weinberg, S., “Misfires in Marketing at Blackberry”, The Wall Street Journal. Web.
Kelion L., “Black Days for Blackberry as Outage Adss to RIM’s Woes.”, BBC News Technology. Web.
Mackenzie, I., “Will Blackberry crumble?”, BBC News Technology. Web.