March 24th 2010

Surviving competitive
landscape
Blackberry – Scenario Analysis

Professor:  Remzi  Gozubuyuk   Deepak  Agarwal  

Anoud  Hussein  Alotaibi  
Gustavo  Andres  Alvarado  
Carol  Eid  
Murali  Erraguntala  
Rafael  Gomez  
Bing  Van  Der  Lande  
Contents  
RIM ................................................................................................................................................. 3  
Description of Company ............................................................................................................ 3  
Blackberry .................................................................................................................................. 3  
BlackBerry Enterprise Server..................................................................................................... 3  
Blue Ocean Strategy................................................................................................................... 4  
SWOT Analysis.......................................................................................................................... 5  
Focus of the document .................................................................................................................... 5  
Smartphone ..................................................................................................................................... 5  
Introduction ................................................................................................................................ 5  
Industry Analysis – Porter’s 5 Forces ........................................................................................ 5  
Scenario Analysis............................................................................................................................ 7  
Stakeholders ............................................................................................................................... 7  
Basic Trends............................................................................................................................... 7  
Uncertainties............................................................................................................................. 10  
Scenario Framework ................................................................................................................ 11  
Conclusion .................................................................................................................................... 14  

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RIM
Description of Company1
Research In Motion (RIM) is a leader in the worldwide mobile communications market and the
company behind the award-winning BlackBerry® solution. The innovative and award-winning
BlackBerry product line includes best-in-class smartphones, as well as software for both
enterprises and small businesses.
The integration of BlackBerry smartphones and software provides mobile access to email,
applications and more. It also allows virtual real-time communication, so you can stay in touch
and up-to-date with the people and things that matter most.

Blackberry1
Blackberry is a wireless handheld device introduced in 1999 by the Canadian company Research
in Motion (RIM); it delivers information over the wireless data networks of mobile phone service
companies.

Figure 1 Blackberry Architecture

BlackBerry Enterprise Server

BlackBerry enterprise server software is the link between BlackBerry smartphones, enterprise
applications and wireless networks that extends communications and corporate data to your
mobile users. With BlackBerry® Enterprise Server software, your employees can access their
Microsoft® Exchange, IBM® Lotus® Domino® or Novell® GroupWise® email on-the-go on
a BlackBerry smartphone. They’ll also have access to calendar, contacts, tasks, notes, instant
messaging, web-based and enterprise applications.

1 www.rim.net

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2
Figure 2: Blackberry Enterprise Server

Blue Ocean Strategy

RIM's BlackBerry launch was a Blue Ocean strategic move because the company not only
created technology innovation but also created superior buyer value innovation as well. Breaking
away from traditional cell phone and pager competition, Blackberry offered a new type of
wireless handheld solution for companies. It created a new market space focused on delivering
secure company email access to roaming employees. Blackberries facilitated employees to send
and receive emails practically anywhere and anytime without physical presence in the office. So
Companies that adopted Blackberries saved time and money. Also, there was no need to install
remote client software because RIM offered a turnkey, centralized enterprise server and software
solution. Since Blackberries were easy to use and had simple user interfaces and a limited
number of contextualized options to choose from, companies also saved training and support
costs.
Most importantly, the Blackberry created a highly secure offering for companies because all
emails and their contents could be protected behind their corporate firewalls. If a single device
was lost or stolen, the company could easily disable it from its central control server.
Finally through Blackberry and blue ocean strategy, RIM entered a niche market and continued
its dominance until now.

2 Source: RIM

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SWOT Analysis
Strengths Weakness
• RIM’s unique offering and strategy • Scalability and global coverage
• RIM’s software is well designed • The blackberry architecture
• RIM’s brand is now very powerful • High total cost of ownership
• RIM’s offering is carrier-friendly • RIM’s business model is not carrier-friendly
Opportunities Threats
• Differentiated offerings • Tougher competition
• Extend third party applications • New technology

There is a bit or irony in the SWOT analysis with regard to blackberry’s architecture. It is both a
boon and bane to RIM. Blackberry enterprise service is the USP of RIM and it facilitates RIM to
offer unique services, however it also adds cost. Operators are happy that they are able to
leverage the architecture of blackberry to offer additional services, while they are also worried
that the architecture of blackberry is increasing the bargaining power of RIM.

Focus of the document

The focus of the document is to use scenario analysis to identify possible threats to dominant
position of Blackberry and also devise strategies for RIM to counteract those threats. Since this is
a fast changing industry, we are looking for a time frame of 3-5 years. Various scenarios will be
identified to construct the scenario framework after thoroughly evaluating the uncertainties
surrounding smartphone industry. Uncertainties are ascertained after careful examination of all
the macro economic factors such as political, economical, social, technological, environmental
and legal.

Smartphone
Introduction3
A smartphone is a mobile phone offering advanced capabilities, often with PC-like
functionality. There is no industry standard definition of a smartphone. For some, a smartphone
is a phone that runs complete operating system software providing a standardized interface and
platform for application developers. For others, a smartphone is simply a phone with advanced
features like e-mail, Internet and e-book reader capabilities, and/or a built-in full keyboard or
external USB keyboard and VGA connector.

Industry Analysis – Porter’s 5 Forces

Porter’s 5 forces analysis is done to understand the industry attractiveness of the smartphone
industry.

i. Threat of Entry - Low

• Huge capital requirements: High manufacturing cost, high R & D cost. Constant push
to innovate and launch new products.
• Economies of scale: Fixed cost is high, so economies of scale has to be achieved to
increase profit margins

3 Source: http://en.wikipedia.org/wiki/Smartphone

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 • Product differentiation: Smartphone will become a commodity unless they are
differentiated from its competitors. Moreover the bargaining power of the buyer is
high, so product differentiation is an ideal way to add value to the buyer.
• Distribution channel: In most of the countries, smartphones are sold through mobile
operators and hence they exert more bargaining power. Alliance with mobile
operators is an essential factor for product success in smartphones segment.
• Governmental and legal barriers: Mobile industry is heavily regulated.
• Retaliation: All leading players are fighting a fierce battle to gain more market share,
so there will be a heavy retaliation against any new entry. Existing players have
sufficient financial clout to block new players.
• Brand: Strong brand recognition is required to sell smartphones.

ii. Supplier Power - Moderate

• Software provider: There are so many open sources mobile operating system
providers, options are plenty and hence the bargaining power of software providers is
moderate.
• Hardware provider: There are too many suppliers for hardware components
(Qualcomm, TI & Intel) and hence the bargaining power of hardware providers is
also moderate

iii. Substitutes - Moderate

• The power of substitutes is moderate and it actually depends on the impact of
substitute products.
• Smart phones do wide variety of functions, so any product that specializes in one of
those individual functions can also be termed as a substitute. Other formidable
substitute products are notebooks (with smaller screens), PDAs, tablet PCs.

iv. Buyer power - High

Buyers bargaining power is high because of the following reasons:
• More choice of products and very limited differentiation of those products.
• Elastic demand –Demand is highly sensitive to economy.
• Less asymmetric information – Buyers have all the required information.
• Less switching costs: This depends on the country and type of mobile plans provided
by the service provider.

v. Rivalry - High
• Rivalry is intense among existing players.
• There is not much differentiation in the product features; however players
differentiate their products in terms of applications and services offered.
• Exit barriers have to be evaluated in correlation with value chain analysis. Exit
barriers are low for manufacturers that occupy only part of the value chain against the
manufacturer that occupy most of the value chain.
vi. Complements - Moderate
Complements are critical for product differentiation and they have a huge bargaining
power. However the power of few complementary products (Applications) will be
subsidized with increasing network externalities.

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 Some complements include:
• Email
• Maps & GPS
• Applications
 Music & other media related applications
 Utility applications
 Internet based etc.

Scenario Analysis
Stakeholders
1. New entrants (OEM players like Dell & HP)
2. Smartphone manufacturers like Nokia, RIM, Apple etc
3. Government
4. Hardware/Software suppliers
5. Application developers
6. Telecom Companies
7. R & D centers of Telcos and Smartphone manufacturers
8. Smarthphone Users

Basic Trends
Mobile devices have grown in number more significantly in recent years than computers and
televisions combined. With feature phones being the primary market of recent years,
smartphones are emerging as the dominant device in the mobile industry.
Key predictable trends of smartphones are
• Feature-rich smartphones will be the driving force behind successful smartphone
products, camera/video, wi-fi and location based services will become mandatory.
• Location awareness and augmented reality will lead to several other innovative
applications.
Mobile Augmented Reality Apps Download4
Year No of App Downloads
2009 1 Million
2014 400 Million

• Number of app stores are increasing at an astronomical rate

Total Application Stores5
Year No of App Stores
Before 2008 3
2008 8
2009 38
2010 (Until Feb) 48

4 Source: http://techcrunchies.com/?s=augmented+
5 Source: http://techcrunchies.com/number-of-mobile-app-stores/

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 • The iPhone has no doubt revolutionized the mobile phone industry and the app economy.
Spurred by the addition of thousands of new mobile apps everyday to the various app
stores, the mobile application market is booming.
Revenue from Mobile Applications6
Year Revenue (In Billion) No of App Downloads
(In Billion)
2009 $4.23 2.5
2010 $6.77 4.5
2013 $29.47 21.6

• Cloud based mobile applications is a fledgling industry already set to take off – There are
rumors of Apple introducing a cloud based iTunes and Google following suit with a
competitor product. However, the major chunk of growth; nearly 75% is expected to
come from Enterprise customers.
A recent report from Juniper estimated the total value of the market as follows:
Year Market Size
2009 $400 Million
2014 $9.5 billion
This is approximately a growth of 88%.

• Telecom companies are experiencing declining voice ARPU, while data ARPU is
increasing.

ARPU of USA Telecom Comapanies7

Year Voice ARPU Data ARPU
2004 $50 $4.00
2005 $47 $5.50
2006 $44 $8.00
2007 $41 $10.50
2008 $37 $13.00
2009 $35 $15.00

• Smartphones will make up a large portion of the growth in the overall mobile device
market

6 Source: Gartner
7 Source: http://techcrunchies.com/data-arpu-voice/

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Figure 3: Smartphone Growth Projections

• Symbian and Nokia are expected to continue losing market share to Android and iPhone
OS, and companies like HTC, Samsung and LG who will likely be putting marketing
muscle behind the Android OS and a new line of smartphone products.
• RIM will continue to hold the number 2 spot in the global smartphone market and the top
spot in the North American smartphone market.
• Android is expected to grow exponentially through 2014, gaining the 3rd largest share of
the smartphone OS market globally, and the 2nd largest share in the North American
smartphone market.

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Figure 4: North America Smartphone OS Market Share

• Open source is gaining more prominence with Android

8 Source: Morgan Stanley

9 Source: Frost & Sullivan

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Uncertainties
1. Market Players
Because the characteristics of the industry the competition is growing, new entrants with
deep pockets like computer manufacturers such as Acer and Dell are rushing to get into
the market, some others like Apple are already in the battle and while other giant tech
companies such as Google and Microsoft are pouring resources into the smartphone
market where Research in Motion and Apple currently dominates.
Arrival of open source such as Android has led to the emergence of more players in
smartphone industry. So there is a larger uncertainty regarding how market will take
shape with so many players. The market uncertainty with respect to players also depends
upon factors like sale of smartphones, degree of convergence, consumers etc.

2. Consumer Expectations
Consumer’s expectations about Smartphones are evolving rapidly, consumers want
applications, and some competitor like Apple offer more than 80,000 choices in its App
Store from different prices, by contrast, RIM offers less than 5,000. Whereas RIM led the
mobile-phone industry into e-mail, it is now a follower in the race to build a dominant
ecosystem for handheld computing, and it seems that the future is not clear in this fast
evolving industry, making it tough for all the players to remain competitive. Consumers
are also asking more convergence and it is leading for innovative applications. Nowadays
there is an increasing trend for location based services; augmented reality is also fast
catching. But do those technologies has the ability to play a prominent role in day-to-day
life or are those technologies are just fad. So the larger question is what would be the
limits of convergence that customers will embrace.

3. Technology
Smartphones are in a way driving the digital convergence, but we are not yet sure how
much of convergence will happen in future. However it is difficult to predict the next
BIG technology that might supersede smartphones and erode the market of smartphones.
So the larger question still remains? What NEXT?
Also with cloud gaining more prominence, there is a need for higher computing power.
Will smartphones be able to deliver the expectations or do the limitations of smartphones
would give raise to a new device. Probably no one knows.

4. Infrastructure (Telecom Companies)

The larger issue for telecom companies is declining voice ARPU. Though revenue is
increasing in data ARPU, telecom companies are not very clear about how to make
money with data services. Providing data services have never been the core strength of
telecom companies, so they are struggling to mint money with data services. Already
there is huge uproar that smart phone companies are making lots of money with
applications and lots of new mobile application companies are cropping everyday to
capture that market. Also net neutrality is gaining more prominence and it has polarized
the mobile and internet players. There is larger uncertainty about net neutrality and its
impact on telecom companies. There is also a larger uncertainty regarding how Google
Voice will erode the revenues of telecom companies. Since telecom companies and

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 smartphone manufacturers are part of the same value chain, any impact on telecom
companies will impact the entire value chain.

Scenario Framework
Of all the uncertainties, uncertainty about market, consumers and degree of convergence
is critical for RIM. So based on the trends, critical uncertainties the initial scenario framework is
as follow:

DEGREE  OF  
CONVERGENCE  
High  

1. After the boom 2. The playground

Few players – high level of convergence Many players – High level of convergence

• Few companies drive innovation • Common standards

• No common standards • Low prices
• End-to-end integrated players will rule • Innovation is key
• Open platforms have advantage • Specialized players
• Revenue increase, due to convergence • Revenue increase depends on ability to
adapt to convergence
Low   High  
NUMBER OF PLAYERS
3. Cost cutting 4. Overcrowded garden pond
Few players – low level of convergence Many players – Low level of convergence

• High level competition amongst few big • Push for innovation

players • High competition
• Less innovation • Differentiation through niche markets
• Survival depends on operation efficiency • Not very profitable
• Saturated market • Cost differentiation (risk of price wars)
• Profits are around 4-5% • Consolidation of players (Mergers,
Partnership, Alliance, Acquisition etc)

Low  

Scenario 1 -”Few players – high level of convergence”

After a troubled period with many players coming to the market but also exiting at the same pace
because of lack of innovation, the craziness in the market has settled down. Only a handful of
strong companies survive and those companies control the whole value chain involving
smartphones. The vast majority of hardware and software is supplied by only four players, Nokia
operating with Symbian and Maemo, Apple has the iPhone series with its own operating system,
RIM also offers the hardware with its own software, while Google and HTC have joined forces
supplying open source Android on HTC handhelds. While Apple and RIM stick to their closed

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platforms, Google/HTC and Nokia have taken a more open approach. The openness has proven
to be very effective in consumer markets as they tend to get segmented to smaller groups with
more tailored options, making it very difficult for the two closed platforms to serve their broadly
segmented customer base. The option for closed platforms is to target a nice customer base.
Because of increasing digitalization of life, people rely more and more on the functionality of
their mobile devices, increasing the bargaining power of the limited amount of suppliers.

Warning bells
-­‐ Lots of companies entering and exiting at the same pace due to lack of innovation
-­‐ Market highly receptive to new technology
-­‐ New apps like location based service and augmented reality gains prominence in day-to-
day activities.

Strategy
The implication of this scenario for RIM is to increase its capabilities to develop innovative
solutions not only for enterprise market but also for customer market. RIM’s core strength lies in
enterprise market, but it has already attempted to target consumer segment through Blackberry
models like Pearl and Bold. Under this scenario consumers are receptive to advanced
technology, so RIM has to push it to offer innovate solutions to consumers. For instance RIM
can offer solutions like digitized home. Nowadays every consumer has plethora of electronic
gadgets in their homes, digitized home should offer a solution to control all the devices through
blackberry. We have just provided a sample innovative offering that can be delivered to the
customers; RIM has to focus more on such solution(s) that would push the limits of convergence.
Under this scenario, we believe that RIM’s core market is not threatened and we don’t see any
big players entering that market. The target of Apple is always consumers and enterprise market
has never been their expertise. Google’s strategy of NexusOne is to dominate mobile advertising
and entering enterprise market is not their strategy. Since consumer segment is pushing for
higher convergence, we can happily presume that both Google and Apple do not entertain
enterprise market and they push themselves to make revenue targeting consumers. However
Nokia and Windows had always an eye on enterprise market, so RIM has to watch for those two
players. Whether those two players are real threat has to be assessed at that point in time. We are
not stating that RIM should not focus on enterprise market; we only assert that in this scenario
RIM should prioritize consumer market over enterprise market. Though open platforms have the
advantage being first to market and respond to any rapid changes in the market. End-to-end
integrated players are better poised to serve a niche segment and offer more quality. The
difference between open and closed platforms is analogous to Windows and Apple.

Scenario 2 - “Many players – High level of convergence”

Due to a highly diversified market with many suppliers for both hardware and applications, the
market cannot support the wide range of smartphone operating systems (Apple’s iPhone OS,
Google’s Android, Nokia´s Symbian and Maemo OS, RIM’s Blackberry OS, Palm Web OS and
many other small OS´s) for much longer. There is a need for a common element: the standards.
After a battle for common standards, separate players might emerge for hardware, software and
applications. Open source platforms such as Android and Symbian will drive the standards.
However we don’t say that there will not be native platforms, end-to-end integrated platforms
like Apple and RIM still exist but their priorities changes. In this scenario, continuous

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technology changes keep shifting the range of available customer solutions. Application
developers gain the roost as the trend is inclined towards innovative applications. Convergence is
at its peak and it has created a big opportunity for a various players especially application
developers and service providers. Because of the crowded market, the opportunity to
differentiate between players and gain a competitive advantage relies on specialization. So
innovation is key element for survival. Bearing in mind that competition is very high, so the
success of big players like Nokia´s, Apple´s, RIM´s depends on their ability to adapt to the
digital convergence and meet the needs of specific customer segments.

Warning bells
-­‐ Many new players entering
-­‐ Everyone makes profit, there is sufficient space for every player
-­‐ Highly segmented market

Strategy
In this scenario, RIM has to focus on protecting its core market through offering customized
enterprise solutions. RIM has earlier offered customized solutions to enterprise10, Robert
Transport operating in Canada is one of the best examples. RIM has to push itself to offer more
such customizable solutions across a wide range of industries. The key success factor is in this
scenario is keenly study various industry and study how wireless mobile can change their
business models, the essential factor is not to sell smartphones but to sell services that cannot be
replicated by its competitors.

Scenario 3 -“Few players – low level of convergence”

The market of smartphones reached an unexpected mature stage. Social networks, micro-
blogging, and location based services have turned out to be hype of the first decade of the 20th
century. The mobile device has a much smaller impact on the lives of people than expected. The
number of companies involved in Smartphones has decreased a lot and innovation is not having
the anticipated impact. The competition between RIM, Nokia, Apple and Google is fierce. There
are no standards but at the same time, the level of convergence is lower, so the opportunity to
differentiate themselves and achieve greater benefits lies in the ability to cut costs. Operational
efficiency is the key factor for companies to operate at the margins and to ultimately survive.
Differentiation is also done by building strong brands. There would be broader focus on making
the mobile phone not as a tool, but as a (fashion) statement as done by Apple.

Warning bells
-­‐ Companies are either spun-off or sold.
-­‐ New promising technologies are turning out to be a fad
-­‐ Companies start focusing on operational efficiency

Strategy
This is not ideal scenario for any smartphone manufacturer. In this scenario, RIM should reduce
its focus on customer market and drive all its resources towards enterprise markets. Enterprise
markets offer a steady income and churn rate is much lesser than the consumer market. In the

10 Source: www.blackberry.com/go/success

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SWOT analysis, we have indicated that BES architecture is increasing the costs of RIM, so RIM
should try to reduce the cost of BES architecture while keeping its core capabilities intact.
Emphasis can either be on offering customized enterprise solutions or standard depending on the
requirements on enterprise customers. However if Blackberry can demonstrate a cost
advantage/competitive advantage to enterprise customer(s) through its customized solutions then
enterprise customer(s) will be receptive to such customized solutions. RIM don’t make out of
selling services they make money out of benefits derived by the enterprise through using the
customized solutions of RIM. So RIM is basically sharing the risk and benefits of its customized
solutions. The difference between the offerings in scenario 2 & 3 is the change in business
model.

Scenario 4 -“Many players – Low level of convergence”

In this scenario, rivals compete highly in a constant market. The market is too small for the large
amount of players to be active. Besides the well known brands, many smaller brands are
struggling to get a pie of the market. The most widely used strategy to get a share of the market
is to target niche customer segments. Rivalry is now intense as the number of rivals has
increased and the niche customer segments will also be flooded with lots of players. The
profitability is low and cost efficiency plays a big role. Even though companies are trying to find
a way of differentiating by targeting niche segments; price war is inevitably. Only players with
sufficient backup funds or firms with significant advantages like a loyal customer base can
survive.

Warning bells
-­‐ High level of competition
-­‐ Price wars
-­‐ Specialization on niche segments
-­‐ Consolidation of players

Strategy
In this scenario, high competition leads to price wars and smartphones prices start falling. So
none of the players make money and they start consolidating. For instance Nokia has already
joined hands with Intel to make MID (Mobile Internet Devices). If there are more players
entering the markets and if Nokia’s market share starts plummeting, it might join hands with
Windows to form “WINTELOKIA”. Nokia is good at H/W and it might ally with Microsoft to
obtain a better S/W provided both the open source software Symbian and Maemo fails. Aligning
with Microsoft is also a good move the capture large pie of the enterprise markets for which both
the players are looking yearning for. If such alliance materialized then the prospects of RIM
making big is doomed and it is left with no option other than aligning with other major player.
For RIM, the perfect ally would be either IBM or SUN. Both their expertise in server platforms
will be key for offering much better enterprise solutions. IBM is better because of its sheer size
and both of them should join together to form “RIMBM”

Conclusion
Scenario 1 & 2 are the most ideal for RIM, scenario 3 is the worst for any player including
Blackberry. All this scenarios are formulated taking into consideration the basic trends and a

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time frame of 5 years. Most of the scenarios are plausible and the occurrence of each scenario is
depended on lots of factors. It is not easy to predict those factors, however we have listed the
market signals that would acts a warning bells for each of the scenarios. Overall the key to RIM
is to innovate consistently and seek advantage of its end-to-end integration to fullest extent;
however they have to seek ways to reduce cost incurred because of BES and keep its competitors
at bay without giving them enough leverage to enter the enterprise market.

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