Strategic Management Assignment

HANOI UNIVERSITY FACULTY OF MANAGEMENT AND TOURISM —————-o0o—————- INTERNAL ENVIRONMENT ANALYSIS Research in Motion Ltd. Tutor: Mr. Nguy? n Anh Quan Students: Ph? m Thanh H? ng M? u Minh Tuy? n Vu Ng? c Anh Class: Tutorial 3 Course: Strategic Management Date: 16/09/2009 Word count: 3, 261 words I. INTRODUCTION Besides external environment analysis, in order to craft a plausible strategy, the company has to understand itself as well, or in other words, to carefully evaluate its resources and competitive position. In this report, we look into the case of Research in Motion Ltd. RIM) to illustrate this point. Firstly, we will provide readers with background knowledge of the company, following by assessment of the company’s current strategy. Then, the SWOT analysis is executed, and the weighted competitive strength assessments is considered. Lastly, from the analysis, we provide the list of issues and problems t hat merit front-burner managerial attention. II. BODY 1. Company’s background: RIM was founded in 1984 by Mike Lazardis. Based in Waterloo, Ontario, the company also has offices in North America, Europe and Asia Pacific. RIM provides platforms and solutions for access to time-sensitive information, including email, phone, Instant Messaging (IM), short message service (SMS) messaging, Global Positioning System (GPS), Internet and intranet-based applications. RIM is known primarily as the maker and provider of Blackberry wireless devices and e-mail services. It can provide users with a wireless extension of their work and personal email accounts, including Microsoft Outlook, IBM Lotus Notes, Novell GroupWise and many Internet service provider (ISP) email services. RIM has recently reached 14 million subscribers worldwide and had just over $6 billion in revenue. In early 2008, RIM was one of Canada’s largest companies with a market capitalization of $69. 4 billion. RIM had more than 100,000 enterprise customers and an estimated 42% market share of converged devices. Revenues were contributed mainly by handheld sales (73%), followed by service (18%), software (6%) and other revenues (3%). In 2007, 57. 9% of RIM’s revenues were derived from the US, 7. 3% from Canada and the remaining 34. % from other countries. RIM had over 270 carrier partnerships in more than 110 countries. In terms of product innovation, RIM has a wide range of product design and innovation awards, including recognition from Computerworld as one of the Top 10 Products of the Past 40 Years. 2. Assessment of company’s current strategy 2. 1 Company’s strategic approach: RIM’s strategy focuses mainly on differentiating its products from those of competitors in order to serve a niche market for business class. In terms of differentiation, the BlackBerry wireless platform and line of handhelds include e-mail, phone, IM, SMS, internet, music, camera, video, radio, organizer, GPS and a variety of other applications. BlackBerry’s small size, long battery life, and ease of use, made the product extremely popular with busy executives who valued the safe and secure delivery of corporate mail. In fact, organizations that relied on sensitive information, such as the U. S. government and large financial institutions, were early and loyal adopters of BlackBerry and RIM’s largest customers. RIM’s enterprise e-mail servers, which were attached to the customer’s e-mail and IM servers behind company firewalls, encrypted and redirected e-mail and other data before forwarding the information to end consumers through wireless service providers (see Exhibit 3). RIM had more than 100,000 enterprise customers and an estimated 42 per cent market share of converged devices as mentioned above. 2. 2 Firm’s competitive scope: RIM has a quite narrow geographic market coverage, mainly in the region of North America, with the US market contributing 57. % of RIM’s revenues, 7. 3% from Canada and the rest 34. 8% from other countries. The company competes in several industries, including wireless devices, software and service. In terms of revenue distribution, as mentioned above, handheld sales is in the first rank 73%, followed by service 18%, software 6% and other revenues 3%. 2. 3 Recent move position and performance: In terms of competing against rivals, RIM ’s strengths firstly lie in the ability to improve its products both in design and technology. For example, RIM had recently introduced the award-winning Blackberry Pearl and Blackberry Curve, which were a significant design from previous models and for the first time targeted both normal consumer and business professionals. RIM had a variety of product designs and innovation awards, including one of the â€Å"Top 10 Products† from Computerworld in the Past 40 Years. Recently, RIM has stepped up in advertising its product, like images from celebrities like Madonna and Paris Hilton holding Blackberry in their hands. Especially, US President Obama were sighting using Blackberry device. Also, RIM is very brave to open their target market to younger consumers instead of their usual business consumers by launching Facebook, partnerships with software developers to bring popular games such as Guitar Hero II to the Blackberry mobile platform. Another illustration is that just six months after launching Facebook for BlackBerry, downloads of the popular social networking software application had topped one million, indicating that younger consumers were gravitating towards the popular handhelds. All these actions suggest a more aggressive move to the consumer, or at least prosumer, smartphone space. What’s more, RIM is expanding the number of product and technology development facilities in locations such as Fort Lauderdale. Geographic expansion is an essential strategy, but it has its trade-off. We will talk more about this in the SWOT analysis. One of the key factor for RIM to win over competitors is in the field of R&D. RIM employed just over 2,100 people with different R&D areas of expertise: radio frequency engineering, hardware and software design,audio and display improvement, antenna design, circuit board design, power management, industrial design, and manufacturing engineering, among others. R&D efforts focused on improving the functionality, security and performance of the BlackBerry solution, as well as developing new devices for current and emerging network technologies and market segments. R&D had increased significantly both in terms of the total number of employees as well as the geographic scope of its operations. Since 2000, the R&D group had grown more than tenfold, from 200 to 2,100 people and expanded to two more locations in Canada. Additionally, by merging with competitors, RIM had over 270 carrier partnerships in more than 110 countries around the world. Through the Blackberry Connect licensing program other leading device manufacturers such as Motorola, Nokia, Samsung and Sony Ericsson could also equip their handsets with Blackberry functionality and other technologies. 2. 4. Evaluating the strategy: 2. 4. 1 From quantitative standpoint: †¢ In 2007 revenue increased by 98% from the previous year. †¢ Reached 14 million subscribers worldwide and had just over $6 billion in revenue (see Exhibits 1 and 2). †¢ Since 2000, the R&D group had grown more than tenfold, from 200 to 2,100 people, made up about 35 per cent of RIM’s 6,254 employees. Total headcount had also been growing in double digits over the last five years (see Exhibit 7). †¢ Low employee turnover rate and received â€Å"Canada’s 10 most admired corporate culture†. 2. 4. 2 Key indicators of how well the strategy is working †¢ Firm’s sale, market share and customers: 14 million subscribers in 2008, nearly double than in 200 7 with 8 million subscribers worldwide. †¢ $6 billion in revenue, doubling of that in 2007 (see Exhibits 1 and 2) †¢ 1/6 of the market share (Exhibits 8). RIM revenue compared with others: For 4 years RIM revenue increased 10 times more from $595 million to $6,009 million, while the leader Nokia almost double ( $46,606 million to $80,672 million), Motorola from $23,155 million to $36,622 million. Apple from $6,207 million to 24,006 mil and Palm from $838 million to $1,561 million. Overall, RIM had the fastest growing rate (Exhibits 6). †¢ As one of the first to market with two-way messaging, over the years RIM has continuously improve its design and technology with award-winning models like Blackberry Pearl and Blackberry Curve. Also, good money is being spent on investment in R&D to keep up with the change of the mobile industry. This creates a good image and reputation of the company to customers. 3. SWOT Analysis: 3. 1 Strengths: †¢ Product innovation: (a competence) The rationale of R & D Department at RIM is: â€Å"Communication Through Innovation†. ? Products that attract the attention of both consumers and business professionals. Originally built for busy professionals, BlackBerry had made considerable headway in the consumer market and become something of a social phenomenon. CO-OP program with the University of Waterloo. CO-OP supplies business and industry with experience and contacts, as well as the opportunities to apply and refine what is learned in class. †¢ World leader in Business Mobile Communications market: ? One of the only trusted phones for the business-class mobile e-mail. As mentioned above, BlackBerry integrate e-mail, phone, IM, SMS, internet, GPS and a variety of o ther, in addition to small size, long battery life, and ease of use; making the product extremely popular with busy entrepreuners. Accumulated wide range of product design and innovation awards, recognition by Computerworld as Top 10 products of the past 40 Years. RIM had more than 100,000 enterprise customers and an estimated 42 per cent market share of converged devices, and significantly higher market share of data-only devices, in North America. †¢ Secure delivery: ? Source code is one of their few technical assets which is highly protected and is a key role in the success of the company, delivering the safe and secure voice and data transmission on which the BlackBerry reputation was built. This can be considered as a distinctive competence of RIM. †¢ Strong working culture: RIM’s core competence. ? Company culture has contributed towards a lower turnover rate compared to larger companies, and more happy employees. They have flexibility, adaptability and the ability to work collaboratively. There are not a lot of process or the kind of bureaucracy. 3. 2 Weaknesses: †¢ Shortage of physical space at RIM’s Waterloo campus. It is considered as a hazard of a growing company since it is not going to be conducive for expansion. †¢ Internal resistance to expand R&D to locations outside of Waterloo. There are people here, even leaders and senior people, who said: â€Å"What? Products being built elsewhere? No! We can’t do that! Then we won’t have any control! † So, some of it is a cultural shift and a mind shift for the people that have been there and it is hard for them to let go and to be part of a really big company. 3. 3 Oppo rtunities: †¢ Economic situation: ? Many smaller firms and technology start ups are struggling financially. ? In light of the dynamic market situation, RIM needs to ensure that its investment in R&D keeps up with the pace of change in the mobile industry. Analysts predict an immense opportunity for smart phones starting in 2008-2009, which shipments reaching the billions by 2012. †¢ There are not many trusted alternatives for business-class mobile e-mail. RIM could be one of the world’s biggest handset manufacturers in the future. 3. 4 Threats: †¢ Global economic downturn recently caused a lot of difficulties for all companies, and RIM is not taken into the exception. †¢ Explosive growth and increased competition on the R&D team to develop new solutions in the global smartphones market. In 2007, Symbian Operating System designed for mobile devices held an estimation of 65 percent worldwide share of the converged devices, shipping 77. 3 million smartphones. The second position was given to Microsoft’s Windows Mobile OS with 12 percent while RIM Blackberry OS at 11 percent. †¢ Apple announced that it would be pursuing the business segment, as Microsoft and Google were also both trying. Apple’s innovation in its mobile user interface and new technology (thermal touch screen) has created a new trend in mobile phone usage. This prompted a lot of design activities among competitors. Key competitors have already expanded globally while RIM is just on the way to be a global player. As can be seen from the SWOT above, RIM has a lot of strengths compared with its weaknesses. Its main problems that need solving currently are the expansion of the head quarter in Waterloo and the frightful competitiveness between competitors since there are day-by-day changes in technology that is considered as the matter of life and death for every player in mobile industry. When RIM becomes a global cell-phone producer, it has to face with th e competition from giants such as NOKIA, Motorola, Apple, Palm, etc. . Weighted competitive strength assessment To do the weighted competitive strength assessment of RIM, we take 2 main competitors namely Apple and Nokia. In order to have a precise view, we would like to consider the competitive assessment merely in the biggest industry of RIM – smart phones. The 8 key success factors that most affect industry’s members to prosper in the marketplace are identified. Among them, qualified human resource and quality of the products are considered the most important, thus get the weight of 0. 2. These are followed by the innovation to create new product, which is given 0. 15 weight. Reputation/image, financial resources, technological skills and product security are all rated as of medium importance, hence having 0. 1 weight. Last comes the customer service capability with the weight of 0. 05. [pic] From the assessments, it is seen that RIM ranks higher than its two competitors in terms of product quality and product security. However, the company is not as good as rivals in other aspects. Therefore, all things considered, the firm has a net competitive disadvantage versus major competitors, with the weighted overall strength rating of only 6. 9 compared to Apple’s 7. 4 rate and Nokia’s 8. 5. 5. Strategic issues and problems that merit front-burner managerial attention After careful consideration of both industry and competitive analysis, as well as the evaluations of the company’s own competitiveness, we have come to the â€Å"worry list† that is further discussed below. This list points out strategic issues that the managers of Rese arch in Motion need to address and resolve so that the company can be more financially and competitively successful in the years ahead. ? How to recruit and retain qualified engineers: As mentioned above, R&D and engineering were the heart and soul of RIM. Therefore, the growth of the company is in close relationship with the development of its technological human resource. With the explosive growth of the firm, since 2000, the R&D group had grown more than tenfold, from 200 to 2,100 people. However, the industry is experiencing a scarcity in the labor market, especially for high-skilled workers, leading to fierce competition to attract talented individuals. †¢ In the specific situation of RIM, because of its centralization in Waterloo, the company relies heavily on the labor supply of the region. However, this resource is strictly limited. On the other hand, the enterprise also faces threats from other companies, such as Microsoft or Google, as Waterloo is regarded as â€Å" an incredible pool of talent†. †¢ Attracting outside talent to Waterloo was difficult given the competitive nature of the global software development industry. The city of 115,000 people might not be perceived by some candicates to be as attractive as other high-tech centers which were more cosmopolitan, for instance Silicon Valley, or Taipei, Mitaka, Glasgow. †¢ In software, breakthrough innovations often came from small teams led by a visionary. In other words, although new graduates were essential, to be ahead of the game, a good proportion of the incoming employees for RIM was going to have to be senior hires. In the dynamic wireless communications market, exceptional software developers were scarce. †¢ From another perspective, similar to other players in the telecommunication industry, it is RIM’s policy to maintain its R&D spending as a consistent percentage of total sales. R&D expenses are seen as a proxy for new product or service development, therefore used as a key indicator of future revenue potential. Human capital represented the bulk of R&D dollars and in fact, this rate is decreasing from 10. 59% in 2004 to 5. 99% in 2008. This is significantly low compared to rivals’ rate: Palm with 12. 24%, Motorola with 12. 09% and Nokia with 10. 20%. As a result, the need to increase the R&D employees is crucial to the development of the corporation. ? How to solve the shortage of physical space at RIM’s Waterloo: This is another problem that needs attention from managers of RIM. The expansion of physical space is essential to satisfy the current demand of organization’s people as well as facilitate the growing human resource. Whether to remain centered in Waterloo or expand existing geographies: Maintaining the centralization in its headquarter brings about various benefits, such as the nurturing of the corporate culture, or the control of technology together with core activities. In fact, the cryptographic and software source code of Blackberry on which the brand repu tation was built is considered uncompromised by the corporation. It is said by Chris Wormald, vice president of strategic alliences, that â€Å"Our source code is really among our few enduring technical assets. We have gone through extraordinary measures to protect it. We don’t give anyone any access under any circumstances. This vertical integration of technology makes geographic expansion and outsourcing of software development very difficult. † Therefore, intellectual property rights is strategically managed through a strategy that divided core platform development from product and technology development, with most of the core work still occuring in Waterloo. However, it is also concerned that without geographical expansion, the company can be left behind in its competition. How to maintain the unique culture while expanding the company: The culture at RIM headquarters was seen as one of its differentiators and was a key factor in RIM’s low employee turnover rate. The company has recently been recognized as one of â€Å" Canada’s 10 Most Admired Corporate Cultures†. This culture is described as flexible, adaptable and supportive, leading to the ability t o respond quickly to market opportunities of the firm. Compared to its competitors, RIM has a nice and dynamic environment, a place engineers like to work. Nevertheless, this unique culture is being challenged. The exponential growth of the company means the dramatic increase in human resource, and how to integrate the newcomers into RIM’s culture becomes an alarming question. Furthermore, when expansion of R&D is brought into consideration, internal resistance is also heard. People complained about changing in the strategy. So here a cultural shift for the people is required. ? How to compete with rivals in markets other than the North America: In terms of operating system, RIM Blackberry is ranked the third worldwide, with 11% market share in 2007, and the first in North America. In the same year, 57. % of RIM’s revenues were derived from the United States, 7. 3% from Canada and the remaining 34. 8% from other countries. Currently RIM had offices in North America, Europe and Asia Pacific, however, it had only three wholly owned subsidiaries — two in Delaware and one in England. From this statistics, it can be seen that the main market of Blackberry is still North Amer ica. To compete successfully, RIM has to enhance its appearance and market share in other major markets as well. Expanding the global reach of Blackberry solutions is therefore a fundamental part of RIM’s strategy. III. CONCLUSION From the internal environment analysis, we draw a conclusion that RIM is pursuing a reasonable strategy of focus differentiation. Its trend to move toward the consumer market is wise, promising to bring more market share and profits for the company. However, because of its small size and limited resources compared to big players in the industry, it is somehow having a net competitive disadvantage. To further itself in the future, the company should enhance its strengths, minimize the weaknesses together with catching opportunities as well as eliminating threats. The worry list above should be considered carefully so that the company can be compete more successfully in the coming years. REFERENCE 1. Company Histories. â€Å"Research in Motion Ltd. † [Online] Available at: http://www. fundinguniverse. com/company-histories/Research-in-Motion-Ltd-Company-History. html [Accessed 20 August 2009]. 2. Pkaasish, 2008. â€Å"Research in Motion Ltd. Always on, always connected†. [Online] Available at: http://www. oppapers. com/essays/Blackbberry/132559 [Accessed 22 August 2009]. 3. 2008. â€Å"RIM Reviews in Waterloo, ON (Canada)†. [Online] Available at: http://www. lassdoor. com/Reviews/RIM-Waterloo-Company-Reviews-EI_IE9091. 0,3_IL. 4,12_IC2280158_IP4. htm [Accessed 30 August 2009]. 4. PATRICIA BOW, 2008. â€Å"BUSINESS†¦ not as usual†. 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[Online] Available at: http://blackberrynationbook. om/index. php/BlackBerry_Nation_Sample_Chapter#Financing_The_BlackBerry [Accessed 2 September 2009]. 10. Damian Francis, 2009. â€Å"Screw You Economic Downturn, We’re BlackBerry! †. [Online] Available at: http://www. popsci. com/gear-amp-gadgets/article/2009-02/screw-you-economic-downturn-we%E2%80%99re-blackberry [Accessed 6 September 2009]. Exhibit 1 Note: RIM Fiscal year ends in March (Fiscal 2008 is the year ending March 31, 2008) Source: RIM Fiscal 2007 Annual Report and Fiscal 2008 Press Release (April 2, 2008) Exhibit 2 [pic][pic] Exhibit 3 [pic] 1. BlackBerry ® Enterprise Server : Robust software that acts as the centralized link between wireless devices, wireless networks and enterprise applications. The server integrates with enterprise messaging and collaboration systems to provide mobile users with access to email, enterprise instant messaging and personal information management tools. All data between applications and BlackBerry ® smartphones flows centrally through the server. 2. BlackBerry ® Mobile Data System (BlackBerry MDS): An optimized framework for creating, deploying and managing applications for the BlackBerry Enterprise Solution. It provides essential components that enable applications beyond email to be deployed to mobile users, including developer tools, administrative services and BlackBerry ® Device Software. It also uses the same proven BlackBerry push delivery model and advanced security features used for BlackBerry email. 3. BlackBerry Smartphones: Integrated wireless voice and data devices that are optimized to work with the BlackBerry Enterprise Solution. They provide push-based access to email and data from enterprise applications and systems in addition to web, MMS, SMS and organizer applications. . BlackBerry ® Connectâ„ ¢ Devices: Devices available from leading manufacturers that feature BlackBerry push delivery technology and connect to the BlackBerry Enterprise Server. 5. BlackBerry ® Alliance Program: A large community of independent software vendors, system integrators and solution providers that offer applications, services and solutions for the BlackBerry Enterprise Solution. It i s designed to help organizations make the most of the BlackBerry Enterprise Solution when mobilizing their enterprises. 6. BlackBerry Solution Services: A group of services that include: BlackBerry ® Technical Support Services, BlackBerry ® Training, RIM ® Professional Services and the Corporate Development Program. These tools and programs are designed to help organizations deploy, manage and extend their wireless solution. Source: http://na. blackberry. com/eng/ataglance/solutions/architecture. jsp Exhibit 4 [pic][pic] Source: http://www. rim. com/newsroom/media/gallery/index. shtml and Fortune, â€Å"BlackBerry: Evolution of an icon,† Jon Fortt, Sept 21, 2007, accessed April 7, 2008: http://bigtech. blogs. fortune. cnn. om/blackberry-evolution-of-an-icon-photos-610/ Exhibit 5 MOBILE TELEPHONE USERS WORLDWIDE (IN MILLIONS) [pic] Source: Created from data accessed from the Global Market Information Database, April 4, 2008, http://www. portal. euromonitor. com. proxy1. lib. uwo. ca:2048/portal/server. pt? control=SetCommunity&CommunityID=207&PageID=720&cached=false&space=CommunityPage Exhibi t 6 [pic] [pic] Note: Nokia 2007 includes Nokia Siemens. Source: Company Annual Reports. Exhibit 7 [pic] Source: RIM Annual Reports. Exhibit 8 Market share of mobile operating system 2008 [pic] Source: Wikipedia, the free encyclopedia