Forces Analysis of Blackberry

– There are plenty of hardware component manufacturers for cellphones but BlackBerry’s operating system is complicated therefore it limits the number of software developers that will work with them. – This problem was most recently seen when BlackBerry struggled to get native applications for the launch of the Z10. – The Bargaining Power of Suppliers for Blackberry has increased, due to Blackberry’s eroding market share. Firms who dominate the mobile communications industry, such as Apple and Samsung, have relatively higher bargaining power, because their larger product orders account for more of the suppliers business.

Bargaining Power of BUYERS: High/Moderately High/
– Large numbers of competitors with simpler products (not very much differentiation between products)
– Switching cost are low-moderate depending on contract
– Bargaining power of buyers is moderately high as carriers, such as Telus or Verizon, tend to buy in massive volume to provide for their subscriber base. If demand for a product declines, such as it did for Blackberry, these vendors enjoy tremendous leverage in buying power. These highly competitive environments offer consumers more options and thus the ability to demand greater price concessions. Although there are governmental barriers to competition amongst carriers in the Canadian market, consumers still have the ability to choose their favorite products and this is reflected in the orders an individual telecom carrier books with suppliers, such as Blackberry.

Threat of new ENTRANTS: Low/Moderate/Low/Low
– Very expensive to enter market ( R&D cost)
– Difficult to negotiate with distribution channels
– Large brand loyalty for existing products
– Economies of scale
– Large Rivalry
– A new entrant that is able to produce a well-differentiated and innovative product can steal market share from existing competitors.
However, the high capital requirements make it difficult for new entrants to generate revenue until they build a loyal clientele base and establish their brand. The short product life cycle in this industry requires competitors to continuously evolve. This continual innovation is difficult for new entrants to achieve. Also, existing products, such as Apple’s iPhone, have built brand loyalty and associated switching costs for consumers, which pose as barriers to entry for new competitors. – The smartphone industry is very capital intensive due to high research and development (R&D) costs and expensive manufacturing facilities. This raises the barrier of entry and makes it difficult for small companies to enter.

Many of the firms that compete in this industry have existing long-term contractual relationships with mobile carriers and benefit from their significant brand equity. These companies also have a great deal of knowledge and experience through economies of learning, which gives them a major cost advantage over smaller entrants. New entrants will have difficulty getting carriers to adopt their phones because many carriers are already in profitable deals with the large mobile phone manufacturers. – Difficult to enter: Smartphone production involves many patents and proprietary knowledge. Even established companies are embroiled in legal battles over patent issues. – Difficult to enter: New entrants lack popular brands, which are important to sales.

Threat of SUBSTITUTES: High/High
– The Threat of Substitutes is high, since mobile product-life cycles are short. For example, Motorola is currently developing a wristwatch that will perform the same functions as a Smartphone, potentially displacing handheld smartphones out of the market. Furthermore, as substitutes and disruptive alternative technologies enter the mobile market, competitors will see a decrease in operating margins. For instance, in 2011 the average cost of a tablet was $423 and it is predicted by 2013 year end it will fall to $300 (“Research”, 2012). Consequently, a market saturated with substitutes, similar to the tablet market scenario, will constrict profit margins and limit the amount of capital available for new product innovations. – While brands differentiate between different Smartphones to an extent, Smartphones in the same price range have mostly the same functions.

COMPETITIVE Rivalry: High/High/Medium
– Huge Rivalry amongst Nokia, Apple, Google & Microsoft
– low product differentiation
– Apple and Samsung have captured more than 50% of the Smartphone market (Bernstein, 2012), and various other competitors are scrambling to increase their market share. High production costs in the early stages of the mobile product life-cycle mean that competitors fiercely pursue speed-to-market production, in order to optimize profit margins and maximize sales of their products before they become outdated and obsolete. Furthermore as rivalries increase, thinning market share translates into reduced revenues and less financial resources for product development. – The mobile device and data solutions industry is highly concentrated, characterized by a few large competitors and numerous smaller competitors. As a result, the industry rivalry is lessened.1,2The growth in this industry has been extremely fast-paced, as Cisco has predicted that global mobile traffic of data will grow 78% over the next five years.

This means that firms can simply keep up with the industry’s growth to keep their respective positions and improve theirrevenues.Although there are numerous fixed cost components to this industry: office space, production facilities, and employees; there has been an increasing trend of firms shifting to just-in-timeproduction.This allows smart phone manufacturers to have relatively low inventory and subsequently low storage costs, which reduces the pressure to fill capacity.Firms in this industry compete on product differentiation, not just price.

For instance, Apple wants to be revolutionary in user experience and friendliness, while Microsoft wants to be extremely functional.In addition, there are other areas where incumbents can differentiate themselves, including application markets and phone designs. Switching cost in this industry is quite high as people need to learn the different interface. (scribd) – Small number of companies develop operating systems (Nokia, RIM, Google, Apple) but more companies develop hardware – Smartphones, are highly perishable products that depreciates quickly in the market. Producers need to sell quickly, which intensifies rivalry. – The industry is still growing.

Sources:

http://daisyjacinto.wordpress.com/2013/04/06/porters-5-forces-analysis-for-rim/ (THIS HAS THE MACRO-ENVIRONMENTAL ANALYSIS) http://www.wikiwealth.com/five-forces:blackberry

http://www.scribd.com/doc/90885823/RIM-Timothy-R-Solichin-Research-in-Motion-Strategy-Analysis-Report http://blogs.ubc.ca/yanggu/2011/11/02/porters-five-forces-on-the-smartphone-industry/ (GREAT REFERENCE FOR THE PORTER 5 FORCES AND THE MACRO – ENVIRONMENTAL ANALYSIS – NOTES NOT INCLUDED ABOVE) http://www.sciencedirect.com/science/article/pii/S1047831012000247