Introduction

This report sets out to analyse BlackBerry Limited (BlackBerry) and its failings as a
result of their poor strategic options. The analysis will focus upon the smartphone
business unit, operating within the USA between 2007 and 2013. Several parameters
have been set, and a number of assumptions made in order to conduct a plausible
analysis. An outline of these parameters and assumptions can be found in Appendix
1.

BlackBerry is a telecommunications and wireless equipment company, famously

known for their BlackBerry mobile handset. Although once a very successful
company, they have failed to replicate this success in recent years. They have been
deemed to be failing based on two factors; share price and market share.

Firstly, the share price peaked in Jul’07 at $236.66, at which point the benchmark
NASDAQ was at 2529.66. In Nov’13 BlackBerry was valued at a mere $7.06 (day
high price), over a 97% fall in value. In comparison, the NASDAQ had risen by over
55%, showing BlackBerry had underperformed the market by over a 152%.

Secondly, global market share peaked at 1Q09, holding 20%, and this fell to 0.6% in
4Q13. Within the USA, BlackBerry held 42.6% of the smartphone in 1Q10, which had
fallen to only 3.6% in 4Q13 (see Appendix 2).

As will be discussed later, the differentiation strategy taken was clearly a poor choice.
If market orientation theory (Jaworkshi & Kohli, 1993) is used to analyse BlackBerry,
it is clear they did not effectively match their potential offerings with customer needs.
A key issue was having a business based around two co-CEOs, Mike Lazaridis
(technology focused) and Jim Balsillie (business focused). This did not allow for the
information generation, dissemination and responsiveness required to market
orientate effectively. There are several reasons as to why the company began to fail,
however this disjoint in the company meant that they failed to quickly and effectively
innovate. In such a turbulent, competitive environment, this inability to react quickly
clearly had severe consequences, with FairFax Capital having to recently refinance
BlackBerry due to cash flow issues.

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Critical Analysis
In order to assess BlackBerry’s strategic options, Porter’s Generic Strategic Options
model will be used. As can be seen in Fig.1, this model states that a company can
take only one of four possible strategies, as selecting one instantly eliminates the
other options. For example, it is not possible to both be a cost leader and
differentiate, as differentiation requires investment in R&D, which in turn would
increase prices.

The differentiation
strategy, which
BlackBerry
undertook, entails
providing products
that offer benefits
different from those
of competitors, and
that are widely
valued by buyers
(Sharpe & Dawes,
2001). The aim is to Fig.1: Porter’s Generic Strategic Options Model (1980; 1985)

achieve competitive
advantage by offering better products at the same or a higher price. For example,
this can be seen by BlackBerry retailing their high-end phones, such as the
BlackBerry 8800 for $200 on contract, a similar price to its competitors.

Successful differentiation depends on several factors. Firstly, identifying and

understanding the strategic customer is key. Although in later years BlackBerry sold
many of their devices to non-business users, they had built their business on catering
for business needs. In this case, although the end user (company staff) needs to be
accounted for, the business itself was not seen as a strategic customer. That being
the case, factors such as security and device management become much more
important.

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 Fig. 2 Critical Success Factors

Fig.2 shows a CSF analysis (see Appendix 3 for further analysis) which shows that
BlackBerry clearly had a higher perceived value for business users, as many of the
BlackBerry features, such as the security and always-on push e-mail, were valued
much more highly. In comparison, non-business users place higher value upon
Internet access and applications. The broad differentiation BlackBerry had previously
created was seriously weakened upon the release of the iPhone and Android
handsets, as they offered much more functionality due to the difference in
architecture of their respective operating systems (OS). BlackBerry’s OS was based
on a Java platform, whereas iOS (Apple iPhone) and Android were based upon a
C++ platform, which has greater capabilities, allowing for greater functionality. The
release of development kits by Apple and Google allowed for third parties to also
build apps for their devices. Developers saw this as a great opportunity and began
creating thousand of apps for the respective iOS and Android. The vast variety of
choice added huge improvements in functionality for these handsets in comparison to
BlackBerry’s.

Whether BlackBerry underestimated how important these CSF factors would be for
non-business customers or they could not react quickly enough due to having a Java
based architecture is unknown. Either way, they did not successfully reassess their
relative strengths (see Appendix 4), in order to maintain their differentiation.

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Secondly, the identification of key competitors is crucial. Prior to the iPhone release,
competitors such as Windows and Palm existed, however these rivals had only ever
managed to penetrate the business user market. Smartphones had always been
branded as essential for business users however not so necessary for non-business
users. From 2006 onwards, BlackBerry had begun to penetrate other segments such
as the teenage market, attracting them with the ability to access Facebook and chat
easily via BlackBerry Messenger. Due to these early successes and being the market
leader, the assumption was made that any new entrants would compete on the same
terms. However, as previously mentioned, the landscape completely changed with
the release of the iPhone and looking at the CSF factors, BlackBerry was now
disadvantaged as their differentiation was not as valuable on broad basis. As the
Generic model states, two strategies cannot be followed and as they were no longer
creating value via differentiation and did not compete on price, they were destined to
fail.

Finally, the difficulty of imitation must be carefully assessed. Looking at the CSF
analysis, the factors business-users place high value on were difficult to imitate. For
example, the BlackBerry Enterprise Servers (BES) service offered to companies
allowed for extremely easy device management and ensured very high security. In
addition, BlackBerry having their own push e-mail service meant it was always on so
e-mails were pushed to the users’ device the moment the server received them. In
comparison, competitors such as Apple license Microsoft ActiveSync, which only
checks for e-mails periodically or when the users actively checks. Analysing these
factors should have revealed that these were not marketable to the entire market, as
non-business users do not place the same importance upon them. Their inability to
see these factors were non-imitable lead to them to continue with a broad
differentiation strategy, which eventually lead to failure.

Limitations
Although this analysis is very useful in determining how BlackBerry failed, it has
several limitations.

Firstly, several assumptions have been made in order to create a manageable scope
to analyse. In reality, BlackBerry is a multi- national company with several product

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and service offerings. In order to fully understand their shortcomings, the analysis
scope would have to be broadened to include all the offerings in all countries. This
would involve conducting portfolio analysis, including a BCG Matrix to compare their
market share in different markets and also assessing the Product Life Cycle (PLC) of
each of their offerings. For example, due to the loss in market share in smartphones,
its possibly they were turning into ‘dogs’, in comparison to their BES service and
newly acquired QNX OS, both of which show much more promise as potential future
‘stars’. In addition, looking at the PLC of their handsets, it is likely they are in the
growth stage in Emerging Markets, whereas they are in the maturity stage in
developed markets such as the USA.

Secondly, although Jaworski & Kohli state that an increase in market orientation
leads to increased business performance, they also state that the higher the
technological turbulence, the weaker the relationship is, as new alternatives of
gaining competitive advantage arise very quickly, therefore reducing the effect of
market orientation. Technological turbulence refers to rapid changes in “the entire
process of transforming inputs to outputs and the delivery of those outputs to the end
customer” (Kohli and Jaworski, 1990) Using D’Aveni’s theories of interactive
strategies within hypercompetitive markets allows this to be analysed more closely.

Hypercompetition occurs when the cycles of competition (seen in Fig.3), become

much more intense and fast. Looking at how quick technology has previously
changed, it could be said that hypercompetition exists within the smartphone market.

As the
strategic
options
within the
Generic
model are
based upon
stable market
conditions,
Fig 3. Cycles of competition (D’aveni, 1995)

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possibly none of the strategic options available would have been suitable, in which
case using D’aveni’s interactive strategies (see Fig. 4) could have been more
suitable.

D’aveni states that managers need to rethink their approach to business- level
strategy as it may no longer be possible to plan for sustainable positions of
competitive advantage. Moreover, planning for long- term sustainability may actually
destroy competitive advantage by slowing down response and that mangers have to
learn to be better at doing things faster than competitors (D’aveni, 1995).

Some of these strategies may have been apt for BlackBerry. D’aveni states creating
new strategies may lead to cannibalising old bases of success. Instead of BlackBerry
rushing to release new phones that were not actually market ready, they could have
opened up their BlackBerry Enterprise Server service to accommodate all handsets
in response the to rise of ‘bring your own device’ (BYOD) schemes in many
companies. Although this took away from the USP they had through the compatibility
of using their devices on their servers, it seems sensible for them to create revenue
streams from those who are not using their handsets, as this would have appealed to
Chief Technical Officers as the servers are extremely secure. BlackBerry, in fact has
now done this, although it may now be too late for the ailing company.

Fig. 4 D’Aveni’s Interactive

Strategies (1995)

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Recommendations
Although there are certain limitations of the analysis, it is evident from the analysis
conducted, BlackBerry should have begun to use a focused differentiation strategy
for their handset business instead, focusing primarily on businesses and business
users.

Evaluating the CSF and SWOT analysis, BlackBerry’s handsets clearly have a
relative strength over its competitors. The improved security and privacy, especially
when the rivals were new to the market, were key drivers for businesses as data
compliance is so important for them. In addition, the ability to manage all the devices
easily and securely on BES makes their handsets much more appealing.

In contrast, non-business users clearly value apps and Internet access extremely
highly. Many of the areas BlackBerry excels in are ones which non-business users
expect to be work, but do not see as key drivers for purchase decisions.

If BlackBerry’s organisational structure had been more conducive to market

orientation they may have realised where their relative strengths lay and amended
their strategy accordingly. After the release of the iPhone, Verizon supposedly asked
BlackBerry to create an ‘iPhone killer’. This says a lot about the mind-set of the
BlackBerry executives at this seminal moment in the market. Until then they had
been market leader, and now had to thoroughly re-assess their business going
forward. Therefore, a traditional structure with one CEO would have been much more
conducive to proactively market orientating.

A thorough strategic and marketing audit would have shown that a reduction in their
marketing spend on non- business users would have given them time and money to
re- build their operating system. As it would be more difficult for large institutional
clients to quickly switch allegiances, energy should have been focused on
maintaining their market share within this segment alone, again to buy time to re-
build the architecture so that long term, a broad differentiation strategy could be
taken again once a better product offering was developed.

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Appendix 1: Analysis Parameters & Assumptions
In order to narrow down the scope analysis, a set of parameters and assumptions
have been set and made to allow for a plausible analysis to be conducted. These
have been outlined below.

Dates:
27th June 2007 was the release date for the first iPhone, becoming one of
BlackBerry’s largest competitors. The change the iPhone brought about in the
smartphone market should have lead to BlackBerry reassessing their product offering
much quicker and reacting much more effectively to such strong competition.

4th November 2013 was the date Thorsten Heins was ousted as BlackBerry CEO and
FairFax Capital brought in John Chen as CEO. As with a new CEO came a new
strategy, analysing the company beyond this point would be too complicated, thus it
was deemed an ideal point to end the analysis period.

Market Share Comparison:

As Android is a freeware that several device manufactures use as their OS, e.g.
Samsung, L.G. and HTC, it makes sense to compare the functionalities of the OSs
as they dictate the functionality of the whole device. Moreover, between iOS, Android
and BlackBerry over 98% of the US smartphone market share is accounted for,
allowing for a broad scope of analysis.

Product:
The analysis only covers the handset business, as this is their flagship product and
what they built their success upon. Devices account for 55% of their revenues
therefore a failure to adapt their device offering would clearly affect their overall
success.

USA Smartphone market:

This market was analysed as it is BlackBerry’s largest market and being a developed
market it is less price sensitive. It allows for the analysis of BlackBerry’s
differentiation strategy to be analysed, as obviously different strategies are adopted
for different markets, e.g. cost leadership in Emerging Markets.

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Appendix 2: Market Share & Share Price Charts

BlackBerry share price compared to the NASDAQ benchmark over the analysed
period.

Fig.5 BBRY vs NASDAQ (Jun’07-Nov’13)

Source: Google Finance

Fig.6 U.S. Smartphone Market Share by OS

Source: comScore

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Appendix 3: Market Orientation Theory Explained
Marketing orientation (MO) equates to the implementation of the marketing concept,
which implies that all the activities of an organisation are driven by a desire to satisfy
customer needs (McDonald & Wilson, 2011).

This involves the planning and execution of all aspects and activities of a product so
as to exert optimum influence of the consumer, to result in maximum consumption at
the optimum price and thereby producing the maximum long-term profit.

Doing so creates superior value for consumers (Narver & Slater, 1990). It is arguably
one of the key ingredients of marketing as it places the customer at the heart of the
business (Deshpande and Farley, 1998), essentially this means organisations
produce what the customer wants to buy.

Jaworski & Kohli created 4 dimensions, these being: Intelligence Generation,

Intelligence Dissemination, Design Responsiveness and Design Implementation.
They found that profitability was a consequence of market orientation. Jaworski &
Kohli focus on the specific behaviours required that would facilitate operationalizing
the market orient construct.

It is stated that intelligence generation should be a organization wide activity, so that

all employees should aim to learn about the external environment and what
customers want, both current and future. This information should then be
disseminated across all departments, so that all involved have knowledge about the
wants and needs. This then allows the final components to come into action, as
employees can either respond with designs i.e. potential plans of action to react to
new information or respond with implementation i.e. put into place a new idea that
has been generated from the market intelligence (MI) gathering and dissemination.

Therefore, it can be seen that BlackBerry would have clearly struggled to market
orientate due to the dual structure created by having co-CEOs. Having this partition
between their engineers and sales people increased the difficulty of matching what
they were capable of producing and what the customers wanted. Although they had
clearly succeeded in the past in creating a market and fulfilling the needs of its

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customers, BlackBerry failed to do so when customer wants changed. The
effectiveness of MI gathering and sharing and then responding to that information
quickly, becomes even more critical in a hypercompetitive environment.

Jaworski & Kohli go on to state, that for market orientation to come into effect,
several antecedents must be in place. These can be split into Top Management,
Interdepartmental Dynamics, Organizational Systems and Reward Systems.

It has been seen that it is key for top management to have a strong emphasis on
being market oriented as this feeds down to subordinates, who then ensure the firm
is. They also have to have an appetite for risk to ensure they do not punish attempts
of change to become more market oriented. Interdepartmental conflict must be
limited as this reduces intelligence dissemination, which in turn reduces the capability
to market oriented. Having an equal balance of formal and informal direct contact
between departments also helps the dissemination of information. MI utilization is
shown to increase with a decrease in formalization and centralization of systems as
people have the autonomy to try and offer new suggestions in response to the new
MI. However, it could also be argued that increase formalization and centralization
decreases MI generation, but increases implementation as once people know what to
do, they do it very effectively. Having short-term reward systems can lead to a focus
of short-term profitability and sales, leading to customer satisfaction being neglected.

It is clear that BlackBerry was guilty of not meeting many of these antecedents. For
example, interviews with several executives stated that there was a heavy reliance
upon a man named Mr. Conlee, who effectively worked as a whip-cracker between
engineering and sales, a role more known for politics rather than an innovative,
technology company.

One of the downsides for a firm being market oriented is that it ‘leaves the
organisation open to tyranny of the served market in which managers see the world
only through their current customers’ eyes (Atuhene- Gima et al., 2005). It could be
said that BlackBerry were also too focused on delivering products for today’s
customers. They did not react quickly enough to changes in the market and since

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have spent time catching up with yesterday’s wants, and have unsuccessfully
managed to anticipate what users will want tomorrow.

Appendix 3: Critical Success Factors

The following factors have been deemed to be the critical success factors for
BlackBerry handsets.

Keyboard As the QWERTY keyboard was a key differentiator in the past, it is

symbolic of the BlackBerry brand. For business users, it offers
higher productivity as it is easier to use and very intuitive,
therefore they place a higher value upon it. In comparison, non-
business users have shown to prefer the additional functionality
that comes with multi- touch screen. In addition, the demographics
of the two segments are likely to differ greatly, with business users
being older and less likely to adapt to new technology quickly,
whereas the younger demographic of non- business users are
quicker to adapt as they have not become accustomed to any one
thing for a sustained period of time.

Security BlackBerry has always prided themselves on how secure their

devices and device management systems have been. For
businesses, being assured that confidential information is safe is
very important; therefore they place a high value upon this. Only
recently has it been possible to manage any device on the
BlackBerry Enterprise Server, so it had been a key differentiator
as it allowed changes to be easily made across all devices and
improved security. For non- business users, security is something
that is expected, but not really assessed in a purchase decision. It
would be an issue if it did not work, but would not be praised for
working well, and so a lower value is placed upon it.

Privacy Ensuring the data they hold is appropriately used is essential to

large companies, therefore they place a high value upon this. Non
– business users expect privacy to be upheld, but are unlikely to
take it into account when making purchasing decisions.

E-mail The ability to access e-mail away from the office was the driver
behind the smartphone market. This is still a key driver for
business users as the ease of connectivity and symbiosis with the
incumbent Microsoft Outlook makes it an easy device to use.
Always- on e-mail is attractive to Chief Technical Officers (CTOs)
as it allows their staff to act quicker to urgent messages as they
are received nearly immediately. Obviously, this urgency in not
needed for non-business users, therefore they value it less.

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Internet Although this would add value for business users, it initially was
Access seen as surplus to requirements. In comparison, non-business
users were buying smartphones with Internet access as a large
driving factor. The respective values clearly reflect this.

Apps For business users, apps had been seen surplus to requirement,
however with the ability to gain huge additional functionality with
the access to app stores, it became a strong driving force for non-
business users. Again, the respective values clearly reflect this.

Appendix 4: SWOT Analysis

STRENGTHS
• Always-on push e-mail
• BlackBerry’s have much higher security and
privacy, especially when used in conjunction
with BlackBerry Enterprise Servers
• Tactile keypad allows for in depth e-mails,
messages and notes to be written easily and
quickly, improving productivity
• Strong brand and reputation known for business
productivity, built over time by satisfying
customers. Incumbent market leaders.
WEAKNESSES
• BB OS built on Java; an old architecture, with
fewer capabilities
• Rudimentary Internet browser, with limited data
usage
• Organisational structure; having co-CEOs
created a dual structure which slowed innovation
as it increased the difficulty to gather,
disseminate, and respond to information which
is needed to market orientate effectively

THREATS OPPORTUNITIES
• iOS & Android are based on C++, allowing for • Growing smartphone market, therefore even
apps with higher quality User Interfaces to be maintaining market share would see revenues
developed increase
• Competitors have fully capable Internet • Growing tablet market, would allow innovations
browsers of the OS to be exploited, improving the ROCE
• Competitors have larger, multi- touch screen for the R&D invested
devices
• Synergies between competitor phones and
tablets has a high pull factor
• Apple have immense brand loyalty for simplicity
and innovation; appeals to the broader market
• CTOs have implemented more BYOD schemes
within companies

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