Strategy Common Case Analysis

Blackberry had lost quite a considerable market share since 2008 when its stock was worth 139$ per share to less than 7$ a share in mid-2017. The company has faced stiff competition from rivals where it lost its market position and eventually lost several subscribers and a substantial drop in mobile sales. The main issue with the company is deciding on a strategic policy direction which would turn around the fortunes of the company. Another problem is the company structure which requires restructuring to improve efficiency.

The company lost customers due to the lack of innovative products that would attract new customers.

Porter’s five forces

Porter’s five forces include; the threat of new entrants, bargaining power of buyers, bargaining power of suppliers, threat of substitute products and services and the intensity of rivalry among competitors in an industry (Dess et al.

, 2019, p. 50). The five forces severely influence the ability of a firm to compete in a market.

The Threat of New Entrants

According to (Dess et al., 2019), the threat of new entrants refers to a possible outcome where well-established organizations in a given industry experience reduction in profits because of new rivals. In Blackberry’s case, the threat to new entrants was one of the many reasons that set the stage for its eventual downfall (Taulli, 2013). The introduction of smartphones in the market such as the iPhone and Android smartphones had a significant impact on the profit-making machinery of Blackberry. One key aspect under the threat of new entrants that the iPhone had over Blackberry was economies of scale.

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As the popularity of iPhone spread, so was its sales to the point in 2010 as (Taulli, 2013) puts it for every four-smartphone sold three were iPhones. Currently, the smartphone market has matured, and Blackberry can combat threats of new entrants by innovating new products.

Bargaining Power of Buyers

Here buyers wield more power by forcing down prices through agitating for more quality and pitting consumer against each other (Dess et al., 2019). Initially, Blackberry occupied a unique position in the market industry since it never had any genuine rival based on the services it offered. As such it was able to hold off the force of buyers until the beginning of 2007 when iPhone and Android smartphones joined the market.

Bargaining Power of Suppliers

The bargaining power of suppliers is substantially weakened by the numerous suppliers of mobile phone parts. Organizations that supply cellular phone parts are in stiff competition and is easy for Blackberry to switch from one supplier to the next without incurring significant cost. As such bargaining power its not critical for blackberry.

The threat of substitute products and services

The company also faces a less considerable force under threat for substitute products being that the only substitute product that would be considered is a telephone landline. Telephone landlines occupy a market segment that do not compete with cellular phones.

Industry Competition

Blackberry is in an extremely competitive industry where it faces rivalry from Samsung, Google, Huawei, Apple, Amazon and Hewlett-Packard amongst other upcoming companies.

Environmental Factors affecting the Smartphone Industry

Assessing the environment within which a company operates is essential for its profitability and strategic direction where it includes both external and internal environment.

External environment

Here factors to consider are; industry outlook, factors that will influence future competition, moves rival is likely to make, current market position, the factors driving change and what is the nature of current competition (Dess et al., 2019). Using PESTEL method factors affecting the smartphone industry and Blackberry’s position will be analyzed based on demographic, sociocultural, global, economic, technological and legal aspects.

Demographic; age group and gender of current users.

Sociocultural; cultural beliefs and social attitudes are affecting buyers.

Global; the global marketing trends in the smartphone industry.

Economic; inflation, level of income and consumer price index.

Technological; monitor and keep up with current technological innovations that consumers like.

Legal aspects; these include changes in tax laws and operational guidelines.

Internal Environment

This will involve value chain analysis, the resource-based view of the company and financial ratio analysis.

Value chain analysis; how Blackberry creates value within its products, suppliers and distributors. How can the company maximize the value of its products?

Financial ratio analysis; this will look at how the strategy to turn around and increase the market share of the company is affecting the growth, profits and shareholder value (Dess et al., 2019).

Resource-based view analysis; this will look at the physical resources such as assets and intangible resources such as human resource and how they can be aligned to achieve the overall objectives.

The current strategy of Blackberry (Porter’s three generic strategies).

Overall Cost Leadership

Porter defines this as creating a low-cost position in consideration to other competitors.

Blackberry has come up with plans such as cost reduction by focusing more on its core operations which are software business (Chen, 2018). Chen also outlined that Blackberry is looking to team up with mobile network carriers to create phones that will rival other companies (CBS News, 2014). Besides, the company has been downsizing its staff to limit its costs.

Differentiation Strategy

One strategy is to improve the brand image through innovation and launching of legacy products. Another move that has been made by the company to create innovative technology is to expand its BBM messaging service to include iOS and Android platforms where currently it has 40 million users (Dess et al., 2019).

Focus

The company had launched schemes that target geographic markets such as in 2016 when it introduced six mobile phone brands targeting the Indonesian market (Dess et al., 2019). Another strategy that fits well within focusing on core strengths according to the company’s CEO (Chen, 2018) is the investments made on Data security services which is a market that currently is in the upward trajectory.

Strengths and Weaknesses of Blackberry

BlackBerry Limited has numerous advantages that have enabled it to stay relevant in the industry despite the downturn in its fortunes.

Strengths

Strong brand; over the years Blackberry had built a strong brand around data security that even when its hardware sales dropped it still managed to keep a part of its operations.

Highly skilled human capital; the company’s CEO (Chen, 2018) outlined the investments the company is making in training and developing its workforce to increase professionalism and output.

Strong partnerships with dealers where dealers engage in promoting the company’s products.

An active network of distribution which reaches consumers in several parts of the globe.

Weaknesses

The limited product range offered by the company has left it entirely out of specific markets.

Blackberry’s profitability ratio is below average compared to its rivals.

Unstable Leadership

A rigid organizational structure that is incompatible with some of its objectives (Dess et al., 2019).

Opportunities

The core operations such as Data security can help it expand its market share in the data security arena.

Emerging trends in consumer behavior which quickly adopts disruptors can open up new markets for innovative and unique products.

Threats

Rising labor costs which threatens the profit margins of the company.

Lack of constant innovation which might make the company lose its brand image.

Competitive Advantage

This is the ability of a company to outcompete other rivals because it applies efficient and effective methods when producing goods and services (Dess et al., 2019). Blackberry derives its competitive advantage from using overall cost leadership programs. One strategy is cost reduction techniques such as putting more focus on its core business sections such as data security as it tries to gain entry into new markets and also revive its smartphone sector. Another is to work with various mobile network carrier companies as such as Verizon to in a bid to improve its smartphone sales. The company also enjoys a competitive advantage in its brand differentiation which has an appeal to specific market segments. Another competitive advantage enjoyed by the Company is the highly trained and skilled workforce that the company has.

Recommendations

The company can implement a raft of strategies aimed at improving its market position by adopting policies focused on the threats and opportunities facing them. The following are key recommendations that they need to implement;

Restructure its R&D (Research and development) division and hire fresh talent to improve innovation and creation of new products that will appeal to new customers and enhance the market share.

Focus on its core business operations such as data security. The company will then create strategies for expansion such as an aggressive ad campaign that puts more emphasis on security. Such a move might reap some benefits since currently a lot of companies and people alike are concerned with ways of how to secure their data.

The company should increase its integration with Android which will attract more clients to its products. People have always assumed that Blackberry hardware is purely for business and using the phone operating system is cumbersome. As such integrating its devices with Android will increase its appeal to numerous people, who are accustomed to using Android devices.

The company should also create more product ranges that satisfy the tastes of every potential client.

The company’s structure has often been blamed for inflexibility and lack of compatibility with its strategic objectives (Dess et al., 2019). To address this issue, the company can hire an outside firm and analyze its organizational structure and create concrete recommendations each time Blackberry seeks a new policy direction

Financial Performance Implications

Impact on Stock Price

Based on the changes made the stock price of the company is expected to increase by 18% from 7$ to 8.26$.

Improved Phone Sales

Innovative design and improved product range is bound to enhance the phone sales of the company. The sales are projected to grow by between 15% to 25%. Which will generate revenue of 835 million dollars?

Product Integration With Android

Also, this will boost product sales by an estimated 10% and increase the revenue by 100 million dollars.

Restructuring

This will improve efficiency and help with better service delivery and profit generation with a projected improvement of 5%. This is expected to generate 50 million dollars.

References

1. Arthur, L. (2011, September 16). The Impact of Financial Statements. Retrieved from
2. CBS News. (2014, March 29). BlackBerry CEO John Chen on his turnaround strategy. Retrieved April 18, 2019, from
3. Chen, J. (2018, June 19). BlackBerry CEO: Here’s our new strategy. Retrieved from
4. Dess, G. G., MacNamara, G., Eisner, A. B., & Lee, S. H. (2019). Strategic Management; text & cases (9th ed.). New York, NY: McGraw Hill Education.
5. Taulli, T. (2013, September 24). Lessons From The Fall Of BlackBerry. Retrieved from A.