Environmental Scan:

Research in motion
(2010 – 2012)

Spring 2010
Marketing Strategy
Table of Contents
Introduction……………………………………………………………………………………………………..3

Product Market Structure and Justification………………………………………………………4

Macro-Environment Trends……………………………………………………………………………. 6

Micro Environment Trends…………………………………………………………………………….. 11

Implications of Macro/Micro Environment Trends…………………………………………. 15

Conclusion……………………………………………………………………………………………………… 18

Appendices………………………………………………………………………………………………………19

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Introduction
The purpose of this paper is to present a detailed Environmental scan, covering the next three years
(2010-2012), for Research in Motion (RIM), the company whose portfolio is comprised of a single brand:
BlackBerry, and all the services that revolve around it. Rather than focusing on a particular device under
the BlackBerry hierarchy, the Strategy encompasses the entire BlackBerry “Umbrella Brand”. The
methodology for this paper will be to first present the Product Market structure & define the Relevant
Market, followed by a detailed analysis of the major macro and micro environmental trends, the
strategic implications of those trends in terms of the Product Market Structure, Primary & Secondary
Demand, Segmentation, Competitive Analysis and finally a conclusion.

Prior to presenting the strategy, it is first important to get a sense of the BlackBerry brand’s background
and history. BlackBerry is a line of smartphones which was initially launched by the Canadian company
Research In Motion (RIM) which first developed a two-way pager in 1999. The major features of
BlackBerry devices include various wireless services such as “push e-mail, mobile telephone, text
messaging, internet faxing and web browsing”. Because of its multi-functionality it is sometimes referred
to as a “convergent device” [ CITATION Bla09 \l 1033 ].

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Product Market Structure and
Justification
Figure 1

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There are two factors to consider when identifying the relevant market for a particular brand/product.
The first is the “managerial perspective” and the second is competition or the “degree of
substitutability”.

At the first level of our Product Market Structure as illustrated above is the need for “communication
devices for the consumer (B2C) market in the USA”, consequently we are taking a country specific
approach to the entire BlackBerry Umbrella (rather than a particular model). Both of these factors mean
that we are taking an Upper-management perspective. At the next level comes the product class which
divides communication devices into “Wired” and “Wireless”, which are further broken down into the
Product Form, Sub Product Forms and Brand Supply Levels.

In order to identify our relevant market, we also looked at the degree of substitutability between the
product classes and forms. Starting from the Product Class level, it is clear that “Wired” communication
devices can’t be considered as direct substitutes to the “Wireless” devices. Further down to the Product
Form level, “Mobile Phones” have different functions than “Laptops” “PDA’s” etc… which also aren’t
substitutes to mobile phones.

At the Sub Product form level, we needed to identify whether smartphones are a ‘stand-alone’ market
or whether consumers consider “non-smart phones” when making their purchasing decision. In order to
determine the level of substitutability, we carried out preliminary primary research through a poll of 20
people (10 current iPhone users and 10 BlackBerry users who bought their phone in the past 4 months).
The result indicated that customers who made the decision to purchase a smartphone specifically, did
not consider non-smartphones as a viable alternative (refer to Appendix 4 for the questions and
summary results). As for the SSPF level of “touch” and “non-touch” smartphones, since the Blackberry
Umbrella consists of models that fall into each of the two categories, we are considering both in our
relevant market.

Based on this information we identified the relevant market at the “smartphones” level and all that
comes under this category of the sub-product-form level (The framed area of our product market
structure).

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Macro-Environment Trends
Economic Environment
GDP Forecast
According to forecasts by the IMF the GDP of the United States is expected to grow by 2.494% in 2013 to
approximately USD 16,729.38 Billion [ CITATION Eco091 \l 1033 ]. The forecasts on GDP Per Capita are
also optimistic as they are expected to increase to 52,342.63 in 2013, from 46,442.64 in 2009 [ CITATION
Eco09 \l 1033 ].

Emerging from the economic recession, or not?

Economic analysts are divided in terms of whether or not the US (and indeed the world) economy is on
the road to recovery. There are certainly signs that the US economy is beginning to improve, particularly
as world stock markets have steadily improved and many companies have posted improved earnings.
According to a Fox News market report citing stock market analyst: “the good news is that this deep and
long recession appears to be over, and with improving credit markets, the U.S. economy can return to
solid growth next year” [ CITATION Lie09 \l 1033 ].

Social Environment
The “Greening” of technology
The pressure to create more eco-friendly goods/services is certainly not a brand new trend. However we
believe that the push for greener technology will become far more pronounced in the next 3 years than
it ever has been. Aside from the legal pressures to produce more environmentally friendly technology,
social pressure is also likely to heighten as consumers become more and more aware and concerned
about environmental issues/threats. This trend will also be reinforced by the efforts of special interest
groups and NGOs like Greenpeace. Greenpeace has recently released a global survey of the most
environmentally friendly tech companies (with Toshiba and Samsung being among the top ranked). In
addition, “manufacturers like Sony Ericsson have already declared their plans to make all their mobile
phones green by 2011”[ CITATION Mob10 \l 1033 ]

In its report, Greenpeace stresses the pivotal role of electronics companies in “cleaning up their act”
because of the toxic nature of many of their components. The report states that “the presence of toxic
substances in electronics perpetuates the toxic cycle – during reprocessing of electronic waste and by
using contaminated secondary materials to make new products” [ CITATION Gre08 \l 1033 ]. This is likely
to raise particularly high pressure on companies such as RIM (Research in Motion) because of the need
to responsibly deal with these issues. In particular it is likely to lead to massive overhauls in design

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because “Design can and should be a major contributor to achieving green objectives, given its key role
in product development and specification” [ CITATION Adh08 \l 1033 ].

Security threats
Although the issue of viruses, spyware and other malicious files stems from technology, their
implications are far more significant in terms of their social impact. As the decision to “go virtual” in
almost all areas that have traditionally been physical (including banking, shopping etc.) has become
more and more widespread and less of a fringe option & more of a necessity, cyber criminals have taken
advantage of the new landscape that has emerged. According to a statement by Google’s Head of
Android Security, “[cyber] attackers can already hit millions of victims with a smartphone attack, and
soon that number will be even larger” [ CITATION McM09 \l 1033 ]. The article also states that
“[although] hackers have generally steered clear of mobile devices [in the past]…because mobile phones
haven't traditionally stored a lot of sensitive data…this is set to change” [ CITATION McM09 \l 1033 ].

More Educated Workforce

According to the findings of the Pew Research Center, enrollment in tertiary education institutions in the
US has peaked to reach “an all time high” in October of 2008 [ CITATION Fry09 \l 1033 ]. Their report
cites the economic recession as the major reason because it has driven many young people to
strengthen their credentials due to there being fewer jobs in the market. Many older people have also
returned to pursue post-graduate studies for the same reasons [ CITATION Fry09 \l 1033 ]. The impact of
this for the next 3 years is that it is likely to create a more educated workforce. Since traditional
smartphone buyers tend to be educated professionals (e.g. BlackBerry), this is quite a relevant trend to
the smartphone market.

Technological Environment
Complete mobile convergence?
Among the jargon used by people in the telecom industry, “convergence” is among the most popular
and widely used. Essentially it means that mobile devices are fast becoming a tool for all electronic
needs (much like an electronic “Swiss knife” of sorts [ CITATION ZTE10 \l 1033 ]). According to T3, a
prominent UK-based tech magazine:

“Smartphones will be able to replace traditional media, such as television and newspapers, enabling the
users to access the latest information anytime. In addition… [users] can also use their phones as an
electronic wallet” [ CITATION ZTE10 \l 1033 ].

This statement represents convergence at an even more extreme level, which is likely to occur in the
next 3 years. The advent of the “mobile wallet”, mentioned as a subsequent trend, which is already
operational in the Far East (namely Japan) is a prime example of what convergence may bring to the US
market in the next 3 years.

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Death of the non-smartphone
Will there still be a place for the simple no frills non-smart phone, essentially a device that is meant for
just making and receiving calls? This will remain to be seen, however based on the current research
evidence, we expect that the non-smartphone will eventually be phased out completely to make way for
smartphones. This is apparent from the websites of major mobile phone OEMS such as Nokia,
BlackBerry, Samsung and HTC. With all their newly released phones, and new releases for the past year
or so, being smartphones non-smartphones seem to be on their way out. Already the boundaries have
become increasingly blurred in terms of being able to distinguish smartphones from non-smartphones.
Where does the line for non-smartphones end and the line for smartphones begin? We realized this
when searching for a standard definition of a smartphone.

Internet on the go
This particular “trend” may raise some eyebrows! Surely the spread of internet on the go is not a new
trend for the next 3 years because it seems to have already become the norm in this age of BlackBerrys
and iPhones. The reason it is included as a trend is because it is set to become much more pervasive and
expand considerably over the next 3 years. According to research firm IDC, “[despite the fact that] PC is
[currently] the dominant means of gaining access to the internet, IDC expects the number of mobile
devices accessing the internet will surpass the number of online PCs by 2012” [ CITATION Mar08 \l
1033 ]. This clearly represents a new paradigm shift in how the internet will be used and where the
content will primarily be targeted. The internet has not simply migrated as is to the mobile world, but
rather has, and will continue to, adapted considerably. Nearly all major websites have now created a
‘mobile version’ (adapted to fit the smaller screen). We see this trend continuing and perhaps becoming
even more extreme.

Mobile payment technologies

There has been intense debate over whether mobile payment really is the trend of the future. While
many industry analysts feel mobile payment solutions are set to grow rapidly, many are skeptical and
believe issues with security and consumer adoption will hinder this new technology.

Over the past few years, many different mobile payment solutions have cropped up in the Far East and
in some parts of Western Europe (see Appendix 2 for a brief case study from Japan). The convenience of
being able to use one’s mobile phone for payment on-the-go to pay bills, purchase digital goods and
even physical goods seems to be a promising concept. We believe it represents the next step in mobile
convergence (see earlier trend) as mobile phones are fast becoming a one-stop source of all personal
and business needs. The next step in this convergence may very well be mobile phones functioning as
virtual wallets.

According to research firm Juniper Research, “the gross transaction value of payments made via mobile
phone for digital goods and physical goods will exceed $300 billion within next 5 years” [ CITATION
Wil08 \l 1033 ]. In other words the monetary value of purchases made via mobile payment technologies

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is expected to grow five-fold by the year 2013.Their report, entitled “Mobile Payment Markets: Digital &
Physical Goods 2008 – 2013” predicts that mobile payment will gain prominence over the next five
years. Report author, Howard Wilcox states that, “North America and Western Europe are just starting
to realize the potential of a mobile web presence as a fourth channel to market” [ CITATION Wil08 \l
1033 ]. The highlights of the report are:

 “Global annual gross transaction value will grow over 5 times by 2013” [ CITATION Wil08 \l
1033 ].

 “The ticketing segment will be driven by consumer usage on rail, air and bus networks as well as
sports and entertainment events, representing over 40% of the global transaction value by
2013” [ CITATION Wil08 \l 1033 ]

 “The top 2 regions, Far East and Western Europe, will represent over 60% of the $300 billion per
annum global mobile payment gross transaction value by 2013 for digital and physical goods”
[ CITATION Wil08 \l 1033 ].

 “While Western Europe is currently dominated by digital goods and services sold via SMS, Far
East and China region (specifically Japan) is already well established in physical goods sales over
the mobile web” [ CITATION Wil08 \l 1033 ].

Advancements in touch-screen technologies

The introduction of the Apple iPhone redefined the world of smartphones and more specifically had a
profound effect on touch-screen technology. The iPhone’s touch-screen is arguably the most robust in
the market. Most other major smartphone manufacturers raced to launch their own touch-screen
phones, with varying degrees of success. The trend for the next 3 years is likely to be a continued
development and incremental (or radical?) enhancements in touch-screen technologies. A few weeks
back, a Yorkshire (England) based firm developed a new material for touch screens called Quantum
Tunneling Composite (QTC). This proprietary technology is designed to allow devices to have “pressure-
sensitive touch-screens and keys” [ CITATION Pal10 \l 1033 ].This technique was developed through the
use of quantum physics and sophisticated technology. The implications are “that the pressure-sensitivity
could lead to a "third dimension" in touchscreens” [ CITATION Pal10 \l 1033 ], in other words rather than
just controlling the interface through which direction you scroll, you also control it through how hard
you actually press/scroll.

The direct impact of this QTC is that several smartphone manufacturers will utilize this technology
including Samsung and a Japan based company called Nissha [ CITATION Pal10 \l 1033 ]. In the longer
term this suggests the continuation of a trend towards advancing touch-screen-technologies.

“Cloud” Computing
According to one source; ““Cloud computing” is a technology based on the rapid development of the
Internet; the cloud is a computing architecture characterized by a large number of interconnected

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identical computing devices, which greatly reduce users’ dependence on the performance of the
terminal facilities” [ CITATION ZTE10 \l 1033 ]. Essentially, the concept of cloud computing is that
electronic data is no longer restricted by being on a single stand-alone device (e.g. a desktop computer).
Google has already taken strides in developing this concept with plans to launch an operating system
that completely relies on storing data online.

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Micro-Environment Trends
Market/Customer (end-user Environment) Changes
Consumer confidence
According to a recent New York Times monthly poll, “consumers’ confidence [in the US] took a
surprisingly sharp fall in February amid rising job worries” [ CITATION Ass10 \l 1033 ]. Despite past
figures that have shown three consecutive months of progress, suggesting that consumer confidence
was beginning to return to pre-recession state, this research highlights that the negative consequences
of the downturn may continue to impede consumer confidence, possibly for the next 3 years.

Green consumers
In relation to the social trend towards the “greening of technology”, consumer behavior (at the more
personal level) is likely to transform. Green consumers are likely to emerge in the context of the
smartphone industry in the US. As pressures mount for companies to become more environmentally
friendly, consumers may take this into consideration when purchasing a smartphone (e.g. the company’s
track record, components and materials that do less damage to the environment).

Discretionary thrift
According to an article in the Harvard Business Review, one of the major “trends and trajectories” likely
to impact buyer behavior in the aftermath of the recession is the emergence of more significant
“discretionary thrift” [ CITATION Wil09 \l 1033 ]. This essentially means that consumers are likely to be
more careful (thrifty) in their expenditures and spend more “wisely”. This particular trend is significant
because it suggests that consumers may not be willing, or able, to return to their pre-recession purchase
behavior, favoring more calculated and prudent purchases.

Mercurial consumption
The same article in the Harvard Business Review discusses a trend that existed “In the prerecession
boom” whereas consumers “became agile -- and fickle – shoppers”[ CITATION Wil09 \l 1033 ]. The
article states that this trend is likely to continue, and become ever more present, in the post-recession
climate. Consumers are more likely to “quickly abandon any choices that somehow fall short”[ CITATION
Wil09 \l 1033 ] and this has serious implications for brand loyalty.

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Distribution Channel (intermediary customers) Changes
The relationship between smartphone OEMs (such as RIM, Nokia & Samsung) and Telecom operators (or
carriers) has undergone massive changes and is in constant flux. One likely trend in this relationship for
the next 3 years is likely to be a shift towards “unlocked” devices as opposed to carrier-specific deals.
Carrier specific deals involve exclusive agreements between OEMs to provide a new smartphone device
that only functions for a specific carrier, under a specific payment plan. An example of this is “Apple
provid[ing] exclusivity for the iPhone to AT&T… and over-subsidiz[ing] the cost of the iPhone” and a
similar agreement between “Sprint and Palm” [ CITATION The09 \l 1033 ]. The trend towards “unlocked”
devices that can operate on any and all networks is likely to be spearheaded by Google’s “open handset
alliance” and the movement towards open source mobile phones (see the subsequent competitive
trends section under Micro-environment). Operating on the basis of a closed agreement is also unlikely
to be a feasible long-term strategy as competition and the drive for market share become more
pronounced.

A general trend for the next 3 years in terms of physical distribution is likely to be an even wider
proliferation and availability of smartphone devices through more retailers and channels of distribution.
This trend has already taken off in the market, the prime example being BlackBerry which was initially
only available to purchase directly from a telecom operator (such as AT&T) but is now increasingly
available in retail stores and through new channels (e.g. online through e-tailers like Amazon.com).

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Competitive Environment Changes
Google Android
One of the most significant developments in the competitive environment for smartphones is the entry
of Google’s Android operating system and the subsequent development of what has been dubbed the
“Open Handset Alliance”. Google acquired a small start-up firm in 2007 that had developed a new open
source operating system for smartphones. This was taken further as Google worked to enhance the
interface, and more recently in the development in the “Open Handset Alliance”, “a consortium of
47 hardware, software, and telecom companies devoted to advancing open standards for mobile
devices” [ CITATION And10 \l 1033 ]. Some notable members are mobile phone OEMS like HTC, Samsung
and Sony Ericsson, as well as carriers such as T-Mobile, Vodafone and US based Sprint [ CITATION Ope10
\l 1033 ].

Although this development has technically occurred in the past, its impact will certainly be quite
profound for the next 3 years. It represents a shift towards open source software.  Open source software
is defined as “software for which the source code is freely available” [ CITATION And10 \l 1033 ], thus
allowing any developers or tech enthusiasts to constantly add features and enhance/customize the
system. Aside from representing this trend towards open source, it also represents a clear example of
“co-opetion”; competitors actually cooperating with one another to further a certain trend or open up
standards to one another.

The central role of “Apps”

One of the key differentiating features of a smartphone is the ability to download third party “apps”
(applications) that function seamlessly with the device. There has been a massive proliferation of third
party content for phones since the release of Apple’s iPhone, paving the way for a plethora of other
online “stores” such as BlackBerry’s “App World”, Nokia’s “Ovi” and Google’s “Android Store”
[ CITATION IGr10 \l 1033 ]. Apple has done for mobile apps what it had done several years earlier for
digital music downloads, establishing a robust and powerful user interface and a sound business model
for digital content. This trend is set to continue for the next three years, however it is expected that the
rate of transformation in this area will become even more rapid.

As OEMs (Original Equipment Manufacturers) such as BlackBerry and Nokia have realized, establishing a
presence in the lucrative apps market is a “do or die” decision, they have started to expand in this field.
It has become more than just a luxury as the presence of certain apps has become monumental in the
success of many devices (such as the iPhone). Apps can be divided in terms of 1) Communication
(includes social networking, instant messaging etc.) 2) Gaming (even major video game publishers such
as Capcom have realized the value of this platform and have begun to break new ground) and 3)
Novelties (these include one-hit wonders such as “virtual lighters” or flashlights). A massive explosion in
terms of the number and variety of new apps flooding the virtual marketplace is expected, and a a
robust applications store is likely to be a vital prerequisite in purchasing a smartphone.

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Degree of Competition
As we have said before, the SmartPhone market is an example of a Consolidated Industry market.
Meaning there are few dominating companies within the market. However, since the market is a
relatively new one, more companies are expected to emerge. The reason behind this is the fact that
other cell-phone manufacturers such as Sony-Ericsson, Motorola, Sagem, LG, Samsung and the wide
array of Chinese manufacturers are likely to jump on the bandwagon in an attempt to have a piece of
this market and the profit it is generating. This has already occurred with Nokia, which has been
successful in the fact that it has the highest market share world-wide (however this is not the case in the
US market).

This has been reflected upon in an article by Reuters titled “Smartphone competition to bite in 2010
after Q4 boom”. The author acknowledges the large increase in market size and states that the
Smartphone market will witness fierce competition as new entrants will flood the market. Analyst Geoff
Barber states "An influx of new players, an oversupply of devices and aggressive pricing will strain profit
margins," however he also states that "Those with a tightly integrated device and service offering -- like
Apple and RIM -- will be the winners in 2010” [ CITATION Vir10 \l 1033 ]

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Implications of Macro/Micro
Environment Trends
Implications on Product-Market Structure
One of our major predictions in the technological section of our environmental scan is the “Death of the
non-smartphone”. If this does indeed come about in the next 3 years, it would completely alter the
Product Market Structure we defined earlier. Rather than having a division based upon “smart” and
“non-smart” phones, the SPF would be divided into “Higher-end smartphones” and “Lower-end
smartphones” (see Figure 4 in Appendix 5 for a visual presentation of the ‘new’ PMS that would emerge
as a result). The boundaries of our Relevant Market would also broaden significantly; although the level
of sophistication in every device will still raise important distinctions between available choices,
ultimately everyone purchasing a mobile phone would be in the market for a smartphone. Also the
number of competitors in the Brand Supply level will increase and will be explained further in the
“Implications on Competitor Analysis” section.

As more Americans attend and complete their tertiary education, the overall level of ‘professionals’ in
the US is likely to increase over the next 3 years. This is likely to Increase the size of the relevant market,
since more potential customers would be going into the market for smartphones either because of the
nature of their jobs, or simply because they are more attune to new technology now that they are better
educated. Although this trend is likely to come about in the longer term, it will cause some reasonable
changes over the next 3 years.

Implications on Primary Demand

One of the predictions for the next 3 years in terms of social changes was that the push for greener
technology is likely to become more pronounced (as part of a wider push towards being more
environmentally friendly). Willingness to buy is likely to be influenced by the “green factor” more
profoundly as a result of this development. It is foreseeable that a new type of buyer, specifically of tech
products such as smartphones, will emerge. This new buyer will weigh the “green factor” much more
heavily in their purchase decision. For instance; when confronted with a device that is known to contain
environmentally hazardous materials or is manufactured by a company that does not use best practice
environmental standards, this buyer may decide not to purchase the product altogether. It may go even
further in terms of boycotts, damaging publicity etc. On the other hand it is important to note that it is
probably unlikely that all consumers will feel the same way about this issue (see the following section on
selective demand).

Based on our environmental scan, competition within the smartphone industry is expected to increase
significantly. This competition is likely to lead to a price war sometime in the next 3 years, making it

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possible for more customers to purchase smartphones (even those who are traditionally price sensitive)
[ CITATION Reu10 \l 1033 ][ CITATION Sma10 \l 1033 ]. The implication in this case is on buyer’s ability to
buy. Technically, more users would be capable of purchasing a smartphone. This trend goes hand in
hand with the “death of the non-smartphone” implication mentioned under the “Product Market
Structure” section (see above) because if non-smartphones are indeed phased out, customers will have
no choice but to purchase a smartphone and therefore there will be appropriate price points for all
mobile users.

The perceived risk of owning and operating a smartphone is likely to increase substantially over the next
3 years. The primary driver of this risk is likely to be the “Security risk” trend outlined under social
changes (in the macro-environment), essentially the risk of being a victim of cyber crime, identity theft
etc. This risk is likely to be amplified by the mobile payments trend outlined under technological
developments. This is essentially because of the fact that more mobile users will have sensitive financial
information (e.g. credit card numbers, account information), and therefore the security risk is likely to
carry a much heavier weight in customer’s purchase decision. However developments in security and
preventative technologies are also likely to ‘keep-up’ thus counterbalancing this trend to some extent.

Implications on Selective Demand

Perhaps the factor of environmentally friendly smartphones, “zero emission, zero waste” in production,
may become a determinant attribute in the next 3 years (for some buyers). The reason we are arguing
that it would not become a determinant attribute is because the issue has certainly not gained wide
acceptance in the context of mobile phones. Other products such as home appliances on the other hand
have had a different outcome (e.g. refrigerators required to be “CFC free”, an optional attribute which
later became a defensive attribute). Perhaps in the longer term (longer than 3 years), the green factor
may become a determinant factor.

It is likely that having preloaded anti-virus/malware programs on smartphones will become a defensive
attribute (rather than an optional attribute) over the next 3 years. In order to even be considered by
customers, OEMS may need to provide protection from the growing cyber threats as smartphones
become one of the major gateways to the internet. The trend of the smartphone becoming the primary
web device also goes hand in hand with this development in pressuring all OEMs to include this vital
feature.

The trend whereby smartphones will become the primary device used to access the internet is likely to
influence selective demand. As internet-based functionality becomes a must for all smartphones, factors
such as push email functionality (of the same standard as BlackBerry) will shift from being a determinant
attribute to become a defensive attribute. This particular change is already beginning to take hold as
direct email functionality is no longer just a function for a few smartphones.

Having a dedicated “App” (applications) store is likely to shift from being an optional factor to being a
competitive factor, as most major competitors are now entering this arena (android store, ovi etc.).

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It is likely that the decision-making process will be even more information intensive and involve a great
deal more “problem solving”. When people purchase a smartphone they would be purchasing more
than just a device for communication and/or entertainment, they would be purchasing a tool without
which they could not function in a day and age that depends on it for almost all transactions (e.g. for
using the subway, for purchasing groceries, for completing a bank transaction, for paying bills etc.).

Implications on Segmentation
The technological trend towards mobile convergence is quite likely to lead to a far higher number of
“catch-all” consumers (see Appendix for segmentation variables). Rather than primarily focusing on one
particular function (e.g. entertainment), this segment of users would need their smartphones to be an
all-inclusive tool, capable of providing functionality in all areas (e.g. in communicating effectively and in
a variety of ways, in securing personal information, in providing entertainment).

Implications on Competitor Analysis

The development of the open handset alliance, and the continuation of Android’s progress (as well as
the general progress of the open source movement) is likely to have a significant influence on the level
and nature of competition in the smartphone industry.

The “phasing out of non smart-phones” described by our report is likely to fuel competition to an even
greater extent. This is mainly because most of the players in the non-smart phone industry also compete
in the smartphone industry and are likely to ramp up their efforts when non-smartphones are phased
out. The unmet capacity for smartphones will be met by a surge of smartphone manufacturing and a
hurried attempt to gain a foothold with new customers upgrading to more advanced devices.

Based on the projected trends, the basis for competitive advantage for the next 3 years is likely to differ
substantially. Firstly competition will be primarily on the basis of price (given the price war likely to
occur). New innovations in technology, particularly relating to the trend of mobile convergence, (e.g.
mobile payment technologies) are likely to become the basis for competitive advantage in the next 3
years.

Implications on Market Measurement

Despite the lack of solid figures, it is clear that the aforementioned trends will have implications on
Market Measurement. It is expected that both the level of industry sales and company sales are set to
rise over the next 3 years. Industry sales for smartphones are set to rise as the non-smartphone SPF is
phased out. Put simply, the volume of sales for smartphones will increase in order to accommodate the
needs of buyers who have traditionally purchased non-smartphones.

The impact of the trends on company sales is not as clear-cut. Although the increase in industry sales is
likely to bring about healthy growth in BlackBerry sales, the level and intensity of competition is likely to
raise significant uncertainties in terms of BlackBerry’s market share and competitive position. The

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overall effect on company sales however is likely to be growth, by virtue of the significant growth that
will occur in terms of industry sales.

Conclusion
The commentary and analysis provided thus far have generally indicated that the market for
smartphones is as dynamic and progressive as it is uncertain. The Product Market Structure and
Relevant Market have been identified and illustrated. The environmental trends explored, relating to
economic, social and technological factors have provided some valuable insights into how the macro
environment is set to change over the next 3 years. The major trends in terms of BlackBerry’s task
environment have also been identified under the micro-environmental analysis. In general the most
significant macro-factors are technological, which is understandable given the high-tech nature of the
product. More specifically, the trends of mobile convergence, the disappearance of the non-smartphone
and the growth in mobile payment technologies are considered the dominant trends in terms of
likelihood but also in terms of potential impact. In terms of micro-trends, the most significant category is
the competitive environment, in particular the emergence of Android and the open handset alliance.

The implications we have identified will primarily influence the definition of the relevant market,
primary demand and selective demand. The disappearance of the non-smartphone sub-product form
and the emergence of the “high-end” versus “low-end” distinction are the primary developments in
terms of the Product-market structure. Primary demand will be influenced primarily by the “greening of
technology”, competitive pressures and perceived risk which all directly influence both the willingness
and ability to buy smartphones. Selective demand will undergo changes in terms of the decision-making
process as well as the importance of smartphone attributes.

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Appendix 1

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Primary Demand

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1. Buyer Identification
o Buyer Characteristics

o
 Location: USA
 Demographics: Middle to high income, not gender specific, the average
Smartphone user is a 35-year-old, educated person with a family. 54% have a
college degree, while 61% have children. [ CITATION joh09 \l 1033 ]
o Buying Center
 Influencer: Peers, Carriers, family members
 Gatekeeper: Carriers
 Deciders: end-user
 Buyers: end-users, gift giver

Customer Turnover: From our primary research we found that people are not moving
out of the relevant market because none of the smart phone owners considered buying
non-smart phones during their purchasing process. The number of people moving into
the relevant market has increased from 11% in 2008 to 17% in 2009 (Percent of U.S.
Phone subscribers). [ CITATION Len10 \l 1033 ]
2. Willingness to buy
o Related products/services: The choice to buy a smartphone is highly dependent on the
carriers compatible with it. Signal strength and performance of each carrier varies for
different locations, and so people tend to purchase smartphones based on the strength

Page | 19
 of the phone/carrier combination in the area that they live, work and commute most
in. [ CITATION Mil09 \l 1033 ]

o Usage problems:
 Product features: According to the J.D. Power and Associates 2010 Wireless
Call Quality Performance Study, the increase in number of smartphone
customers leads to a decline in the overall carrier performance. With the rapid
increase of smartphone users in the USA, people have been facing more
dropped calls, voice distortion static/interference, failed call connection on the
first try, echoes, no immediate text message notifications and no immediate
voicemail notifications. [ CITATION Cal10 \l 1033 ]

o Perceived Risk
 Physical Risk: Smartphones are known for their extraordinary features but
people are also gaining awareness of the health risks associated with these
phones’ radio frequency emissions. According the the EWG (Environmental
Working Group) “newer smartphones tend to have higher radio emission levels
than older phones.”[ CITATION Lob10 \l 1033 ]
 Security Risk: People have become more aware of the security risks associated
with using smartphones. Since they are run using similar operating systems as
computers, they therefore face the same security risks of identity theft,
spyware, viruses and malicious software. [ CITATION Placeholder1 \l 1033 ]
 Economic/Financial risk: Even though the prices of smartphones have been
decreasing, they are still more expensive than the regular cellular phones and
are considered an investment.
3. Ability to buy
o Cost: Smartphone prices are being driven down and are much lower than they used to
be. This is not solely because of the short lifecycle of the fast paced tech industry, but
also because of many manufacturers’ aim to diversify into the personal users segment in
addition to their original corporate users segment. [ CITATION Sma101 \l 1033 ]

o Spatial availability: Smartphones are highly available and can be purchased from any
electronics store or telecommunications service provider, as well as several online and
conventional retail stores across the USA.

Selective Demand
Decision-making process
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e
t
S
1
2
3
4
5
6
7
p
The decision to purchase a smartphone is significantly complex and information intensive. The process
can be characterized as extensive problem solving because of 2 major factors:

1. Highly technical: because of the high-tech nature of smartphones, potential buyers are unlikely
to have detailed knowledge of certain features (e.g. processer speed or display quality)
2. High involvement: for the most part, smartphones are not a regular purchase and usually
relatively expensive. Therefore the customer is often engaged in making sure they make the
right choice (related to the concept of perceived risk)

The danger of presenting a single decision-making sequence that applies to all smartphone buyers is
that it is unlikely to capture or represent their diverse needs. The following sequential model presents a
highly rational, highly active decision-making process. One major shortcoming of the model is that it
assumes that the decision to purchase a smartphone is primarily rational.

Figure 2: Smartphone decision-making process

Step 1: A “Trigger event” is any factor which leads a customer to consider purchasing a new
smartphone. The “event” does not necessarily need to be something extreme or noteworthy (e.g. the
old phone breaking), it can simply be a decision to ‘update’ to a newer phone, the testimony of a peer,
the requirements of a new job etc. The trigger event may not necessarily mean replacing the old phone;
it may simply be to purchase an additional one.

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Step 2: The “primary function” is the essential tool a customer is looking for in their new smartphone.
According to Michael Mace, former VP of Product Planning at smartphone maker Palm, customers make
a conscious (or subconscious) decision as to what the primary use of their smartphone will be. This can
be one of three broad uses (but it is important to stress they are not mutually exclusive):

1. Pure Communication: this function is centered on the communications aspect of the device. This
is supported by “advanced phone feature that’ll help [users] communicate better [such as] E-
mail, short messaging, IM [and] video calls” [ CITATION Mac07 \l 1033 ]
2. Information: this function is based on office-like features and is supported by features such as
“databases, larger screens, reading PC documents, word processing” [ CITATION Mac07 \l 1033 ]
etc.
3. Entertainment: this function relates to the capacity of the device for entertainment features
and/or applications. It includes features such as support for “music, games and video” as well as
support for 3rd party applications [ CITATION Mac07 \l 1033 ]

The reason for including step 2 in the process is that it significantly influences the sources of information
used in the following step as well as the actual choice-set.

Step 3: Seeking information on alternative devices to purchase. It is important to note that this step may
be precluded if the customer already knows which phone he/she will purchase (because of peer
testimonies, experience with a particular device etc.). This step is often carried out with the support of
online “review websites” (such as cnet.com) and online customer testimonials.

Step 4: It is difficult to pinpoint when “setting a budget” actually occurs in the purchase decision. That is
why this step is presented in the middle of the process. A customer may have some idea of how much
they are willing to pay before looking at alternatives, or perhaps after they have seen the choices
available.

Step 5: Alternatives are compared/contrasted and the customer weighs their value relative to the prices
charged for them. There is no ‘set’ way in which this actually occurs and can vary considerably between
customers.

Step 6: The physical purchase is made.

Step 7: The customer evaluates the smartphone as they are using it and interacting with its various
functions.

As mentioned throughout the model, the steps are in no way prescriptive or necessarily sequential. It
would be valid to say that a person may make a much simpler decision based on the views of their
peers, essentially going from the “trigger event” immediately to the purchase decision.

Product Attributes
Determinant attributes:

Page | 22
Built-in IM (instant messaging) program

High mega-pixel camera

Multi-touch touch screen

Style (aesthetic appeal)

Defensive attributes

Push-Email functionality

Reputation of company

Large high-color display

Reasonable price of data plan (e.g. BlackBerry service unlimited)

Size (slim, not bulky in pockets)

Full Web browser

Speed of applications (loading, standby time etc.)

Digital music player

Weight (lightweight)

Standard issue applications (e.g. phonebook, organizer, alarm clock)

Optional attributes:

Environmental reputation of manufacturer

Loaded-on anti-spyware/malware program

Applications store – downloadable “Apps”

Motion/proximity sensors

Complimentary products (e.g. carrying case, straps)

Extra loaded-on applications (e.g. games, social networking)

Segmentation

Page | 23
Assigning specific demographic characteristics to smartphone buyers would be unrealistic and unlikely
to add any useful information to better understanding the market. Instead, we chose to use behavioral
variables to segment our market in terms of the primary benefits sought by buyers. The segmentation
bases we present have been generally agreed upon by more than one industry source. The different
segments also correspond with the “primary functions” outlined by our decision-making progress (step
2). The 4 major segments of smartphone buyers are:

1. “Communication enthusiasts”: “These are extroverts who live to communicate with other
human beings, and they’re often in people-facing jobs like sales and business development.
These people are willing to pay for any advanced phone feature that’ll help them communicate
better. E-mail, short messaging, IM and video calls” [ CITATION Mac07 \l 1033 ]. These users are
identified as those most likely to purchase a BlackBerry or Palm smartphone.
2. “Entertainment enthusiasts”: “These users are younger people (late teens and twenties) who
want to keep their fun lifestyles even as they enter the workforce. They’ll pay extra for
enhanced entertainment features -- music, games, video, fun messaging”[ CITATION Mac07 \l
1033 ]. These users are more likely to purchase an Apple iPhone or a Nokie N90
3. “Information enthusiasts”: “The information enthusiasts will pay extra for features that extend
their memory and help them work with information. Databases, larger screens, reading PC
documents, and running lots of third party apps”[ CITATION Mac07 \l 1033 ]. These users are
most likely to purchase a Nokia E90 smartphone.
4. Catch-all users: The reason we chose to include a 4 th category is because of the increasing need
for “mobile convergence” (mentioned under technological developments in the environmental
scanning section).

The likelihood of leakage, overlap and blurring boundaries is quite significant for these variables
however the insight they provide us into the differing benefits sought by different buyers in the
smartphone market offer a robust and progressive view of segmenting the market.

Page | 24
Competitors Analysis
The main competitor to Blackberry phones is Apple’s iPhone and this is essentially because of market
share (Apple and RIM are the market leaders). Other brands like Nokia also compete at this level for
example the model N70 has been competing fiercely with Blackberry Storm & iPhone.

The degree of competition in the smartphone industry can be characterized as “high Rivalry among
industry firms”. Under this level of competition, companies desperately need to keep up with
competitors, particularly when it comes to technological innovations and breakthroughs. A recent
example of this is the almost ‘mad flurry’ of mobile OEMs trying to develop a touch-screen phone to be
an “iPhone killer”, immediately after Apple’s release.

Market Profiling (Porters Five Forces applied to the “Smartphone” industry)

We will begin by defining Porters five forces and then apply it to Smartphone’s market, Porters five
forces are:

1. Threat of New Entry

2. Rivalry Among Existing firms

3. Pressure from Substitutes

4. Bargaining Power of Buyers

5. Bargaining Power of Suppliers

 Threat of New Entrants (Barriers to entry)

1) Product differentiation – In the market of Smartphone’s’ there is a low level of product

differentiation because all brands nearly come up with the same functionality. Example: iPhone
is a touch phone with internet, email and applications. From a technical standpoint, Blackberry
Storm essentially has the same capabilities.

2) Pace of Industry Growth and Profit Potential – Based on statistics and graphs you have seen in
the paper you can see that there is a high pace of growth in the industry and as well as a high
potential for profitability.

3) Capital requirements – the capital requirements to enter the market are relatively high because
of the manufacturing facilities and equipment you need to produce the sophisticated internal
components of smartphones (for the majority of OEMs, most of the technology is in-house and
proprietary e.g. Apple’s iPhone).

4) Required expenditures in R&D – A great deal is spent on R&D in tech industries in general,
smartphones are certainly no exception. Companies need to constantly keep up with new
innovations.

Page | 25
 Rivalry Among Existing Firms

1) Number of Competitors – The number of competitors in the smartphone industry is quite high,
particularly with OEMs who have not traditionally produced smartphones also entering the
arena (e.g. Samsung)

2) Rate of Industry Growth – There is a high rate of industry growth which greatly amplifies the
level of rivalry as competitors vie for a greater share of the growing market.

 Pressure from Substitutes

Although we have identified earlier that the degree of substitutability between smartphones and other
communications devices (e.g. laptops) is not high enough to warrant including them in the relevant
market; it is important to look at their potential for substitutability. Substitutes can “satisfy the same
need” so for smartphones they may include:

1) Netbook/Tablet PC – this is a device which is smaller than a normal laptop, it can perform as
well as any laptop and also has most of the characteristics of a smartphone. Apple’s iPad is a
prime example of a tablet PC bordering on smartphone convenience and functionality.

2) Laptops– Laptops can act as a substitute for a smartphone because of the availability of internet
everywhere (portable internet modem which uses 3G, so literally any place where you can use
your smartphone you can also use internet on your laptops

 Bargaining power of Buyers

1) High Number of suppliers – Customers have more choice than ever before in terms of which
brand of smartphone to purchase. This means that buyers (consumers) hold almost all the
power.

2) High switching power – Buyers may have the flexibility to switch to a new make/brand of
smartphones, however it is also important to consider the switching costs of needing to learn
the interface and functionality of a new phone. For many users, the decision to stick with what is
familiar is what drives them to purchase the same brand.

3) Integration – This varies significantly from one OEM to another. Apple for instance is known for
producing most of its parts in-house (proprietary technologies), by combining both hardware
and software components.

 Bargaining power of Suppliers

1) Characteristics of supplied product – The suppliers of core components (e.g. Intel providing the
processer chip for a Nokia device) normally have high bargaining power because of the
uniqueness and importance of the compoenent.

Page | 26
 2) Large number of suppliers – The number of suppliers offering certain core components (e.g.
processer chips) is generally quite low, which raises their relative bargaining power.

3) Buyer not important – Most of the large OEMs (such as Nokia or Samsung) are critical buyers for
their suppliers, mainly because of the volume and regularity of their purchases.

Competitors Profile

Apple

Apple, the current market leader in smartphones in the US market, has made a massively successful
debut into the smartphone industry. It has leveraged its reputation of user-friendliness and youthfulness
built up by its Mac and iPod brands and managed to achieve massive success in the market with its
innovative touch screen phone, the iPhone.

Nokia

Nokia is the oldest, and still the most dominant, player in the global mobile phone market. This Finnish
giant has released phones at every conceivable price point and has made a successful foray into the
smartphone market with many successful models such as the N series and the business-oriented E-
series. Nokia has lost significant ground to Apple and BlackBerry because of sluggish competitive
reactions and sub-par product releases.

HTC

This brand has always competed with Blackberry, HTC makes the devices and then puts different
operating systems on it from which it can be Windows Mobile. Lately, HTC has been at the forefront of
taking the new Android operating system on board (developed by Google). HTC also produced the new
“Google Phone”, the Nexus One which is considered by analysts to be a serious contender in the
smartphone market.

Competitors Strength Grid

Here are Strengths and weaknesses based on the current competing models in the market and these
comparisons and reviews are based on major tech-review website cnet.com

Smart Phone Strengths Weaknesses

Blackberry Bold  Cheapest Among  No touch function

competing phones
 Smaller screen than other
 Best messaging based competing phones
on AT&T lineup
 Low battery life time
 High in number of
features

Page | 27
  Easy to function

 A lot of applications

 High performance

 Lightest in weight

 Blackberry Messenger

Apple iPhone 3GS 32GB  32GB memory  Heavy

 Many applications  Biggest phone in

dimension
 High quality screen
 No messenger software
 High performance like “Blackberry
 High battery life time Messenger”

 iPod

HTC Nexus Google  Has AD2P Bluetooth  No wireless Lan

function for “wireless
 Lack of Features
headset music”

 Strong operating system  Heavy

 Large dimensions
 High battery life time

 Good at web browsing

Nokia N79  Keyboard & touch  High price

function
 Complicated interface
 All functions needed
 Heavy
 High price

 Slim

[ CITATION Cha10 \l 1033 ]

[ CITATION Ger10 \l 1033 ]
[ CITATION Cha09 \t \l 1033 ]

Page | 28
The competitor strength grid is done using the scores from Cnet and these reviews and scores are done
by people who have used the phone which means they are very accurate. These scores are also relative
to the “strengths and weaknesses” of each product.

Unfavourable Favourable

1 2 3 4 5 6 7 8 9 10

Features NK IP-HT BB

Design NK BB-HT IP

Price HT NK IP BB

Performance BB-IP-NK HT

Overall score NK IP-BB-HT

BB=Blackberry IP=iPhone NK=Nokia HT=HTC (BB-IP: this means they are on the same score
exactly)

Perceptual Mapping

Page | 29
 High Price   Low Price

           

    BB  
     
NK IP
HT

     
High Features

   

     

     

     

           

       

     

     

     

     
Low Features

     

     

     

           

BB=Blackberry IP=iPhone NK=Nokia HT=HTC

Low Cost Differentiation

Page | 30
Broad  Nokia(not smart phones)  BlackBerry

 Apple

 Vertu
Narrow

 Dior

Competitor’s actions:

The next step that competitors are willing to take is to “improve” upon their weaknesses. For instance
Apple may improve their product by including an “Apple messenger” software which is like “Blackberry
Messenger” that is associated with the phone’s serial number; this is where RIM’s advantage is.

Research in Motion’s actions:

Based on the above variables, RIM may take steps towards improving their offering, compared to their
competitors. For example the battery life, a feature which is currently lacking relative to competitiors,
may be extended. Pricing is another area of major concern, perhaps efforts should be taken to provide
the same or better features than competitors whilst maintaining the same price level.

Appendix 2
Page | 31
Mobile Payment Technologies – Case Study in Japan
Note: Most mobile payment solutions are in the Far East.

Japanese Telecom Operator KDDI:

The following description of the service is taken directly from their website
(http://www.au.kddi.com/english/ezweb/index.html):

“Osaifu-Keitai® offers e-money, credit card and point card features”:

 “e-Money”
 “Credit cards”
 “Train & air tickets”
 “Point cards”
 “Special coupons”

All the other information

about the service is only in Japanese, so unfortunately the details cannot be provided.

Page | 32
Appendix 3
This appendix details some information regarding the supply of BlackBerry smartphones in the market
with projections for the next few years.

Below is a graph detailing the change in market shares between September and December 2009 in the
market for Smartphones.
http://arstechnica.com/gadgets/news/2010/02/google-makes-biggest-gain-in-smartphone-market-
share.ars

This graph shows that RIM (RIM) has a massive share of the market and is followed by its biggest
competitor (Apple) in a comfortable 16.3% margin. The graph also shows, however, that while Apple’s
share has grown by 1.2%, RIM’s share has shrunk by 1%.

The SmartPhone market is an example of a consolidated industry market, which basically means that it
is dominated by a few large firms which work hard at differentiating their products from their

Page | 33
competitors. Therefore, even a small change in market share such as Google’s 2.7% increase is viewed as
a big step towards a more dominant market share. Likewise a small drop is not viewed as a small matter.

It is in our view that supply shortages would be an unlikely incident to come up on RIM’s records for
three reasons:

1- Market Dominance: It is clear from the graph above that RIM enjoys a significant share over the
market which enables it to produce at high quantities with a high probability of selling out its
products

2- Specialization: The BlackBerry brand takes up large focus from the company. Since apart from
‘Interactive Pager’ (a relatively small brand) it is the only other brand supplied by the company.

3- Young Market: The market for SmartPhones is a relatively new market, which influences the
ease of predicting the direction and magnitude of changes in demand (which are ultimately the
determinants of changes in supply). This is exact reason why we differentiate between this case
and the case of PS3 and Xbox in the gaming industry. The two market leaders did have a large
share, however the market was not young, which resulted in supply shortages as a result of the
global crisis.

Page | 34
Appendix 4
10 The
primary
9

6
Consider Non-Smartphone
Don’t Consider Non-
5 Smartphone

1
Iphone Blackberry

research carried out for the purpose of identifying the relevant market was essentially a one question
poll. Smartphone owners who had purchased their devices in the last 3-4 months were asked whether
or not they also considered non-smartphones (as an alternative) in their purchase decision. This was to
help gauge the degree of substitutability between the two sub-product forms (smart and non-smart
phones).

The two leading smartphones on the market, iPhone and BlackBerry, a total of 20 respondents were
asked (10 who owned a BlackBerry and 10 an iPhone). The results indicate that out of all respondents,
only 1 person also considered a non-smartphone as an alternative.

Figure 3

Page | 35
Page | 36
Appendix 5
Figure 4

Page | 37
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