Tài liệu SM0495 BUSINESS ENVIRONMENT AND STRATEGIC MANAGEMENT ppt

External analysis of the Smartphone IndustryFiscal 2011 has the strong financial performance of exceptional growth and accomplishment with consistent, further expansion of global market

SM0495 BUSINESS ENVIRONMENT AND

STRATEGIC MANAGEMENT

Tutor: Dr Gregory Ludwig

A MANAGEMENT REPORT OF RESEARCH IN

MOTION (RIM) LTD.

Words count: 3,296 words

PROGRAMME: MSc of Business with Hospitality and Tourism Management

Table of Contents

CONTENTS 2

1 Introduction 2

1.1 Company overview – Research in Motion Ltd 2

1.2 Strategic Business Unit – SBU of Research in Motion Ltd 3

1.3 Smartphone Industry 3

1.4 Geographical Region 3

2 External analysis of the Smartphone Industry 4

2.1 Analysis of the Macro-Environment – PESTEL Analysis 4

2.2 Analysis of the Micro-Environment – Porter Five Forces Analysis 5

3 Internal analysis of RIM Ltd., Smartphone Division 6

3.1 Value Chain analysis 6

3.2 Resource Based View 7

3.3 Dynamic Capabilities 8

3.4 Core Competencies 9

3.5 SWOT analysis 11

4 Evaluation of possible future strategies for the company 12

4.1 Key strategic issues facing RIM in 2012: 12

4.2 Evaluation the strategy of launching BlackBerry 10 Platform unveiled in May 2012……… 13

5 Implementation of strategic change 15

6 Conclusion 16

APPENDICES 17

Appendix 1: PESTEL Analysis 17

Appendix 2: Porter Five Forces Analysis 18

Appendix 3: Value Chain Analysis 19

Appendix 4: VRIO Analysis 22

REFERENCES 23

1 Introduction

1.1 Company overview – Research in Motion Ltd

Research In Motion (RIM) Ltd was incorporated in 1984 by Michael Lazaridis and Douglas Fregin in Waterloo, Ontario, Canada under the Ontario BusinessCorporations Act RIM is engaged in the research, design, manufacture and sale of wireless and is a global leader in wireless innovation, revolutionized the mobile industry with the introduction of the BlackBerry solution in 1999 (Euromonitor, 2011)

The company is now operating three strategic business units (SBUs) are: smartphone, tablets, and apps and software (RIM, 2012) The company

recorded revenues till end of February in financial year 2011 was $19,907 million with the largest geographic market is US accounted by 39.3% of the total revenues In this geographical market, the financial year 2011, revenues reached $7,823 million compare to the two biggest markets are UK ($2,218 million) and Canada ($1,408 million)

1.2 Strategic Business Unit – SBU of Research in Motion Ltd.

Johnson et al (2008) defined Strategic Business Unit (SBU) as a part of an organization which has a different external market with other SBUs RIM has

different SBUs such as services, software, smartphones, tablet, etc with the various

in targeted market and customers Smartphones will be chosen as the core SBU for this report because it’s the second pioneer strategic unit of RIM

1.3 Smartphone Industry

Euromonitor (2012) stated that the mobile business intelligence has

suggested that handheld devices such as such as smartphone will be consumed 33% of business intelligence functionality by 2013 ad smartphone industry also be predicted grow critically in 2010 – 2015 which provide opportunities for the

manufacturer However, according to Euromonitor (2011), there is a threat for

smartphone manufacturers like they have to reduce the cost in the growth stage

2012 – 2015 due to facing with the prolonged financial problems by the pre-paid price with phone contacts

1.4 Geographical Region

USA is the second largest geographical revenue of RIM In 2010, the mobile phone category grows by 13% in current value terms to reach US$13 billion and volume sales of mobile phones are expected to increase by 5% over the forecast period with growth exclusively emerging from the smartphone category

(Euromonitor, 2011) Thus, USA is chosen as the market to analyse

2 External analysis of the Smartphone Industry

Fiscal 2011 has the strong financial performance of exceptional growth and accomplishment with consistent, further expansion of global market share The

US is the largest geographical revenue mix of RIM with 39.3% along with the record shipments of over 52 million BlackBerry Smartphones Therefore, the report will be narrowed to analysis the macro and micro environment of

smartphone industry in US region to examine the opportunities and threats within the industry on the time frame is 5 years (2012 – 2017)

2.1 Analysis of the Macro-Environment – PESTEL Analysis

Appendix 1: PESTEL analysis

To analyse the factors and trends of the macro environment, PESTEL

framework is considered as the good one which is also the traditional analytical tool

to investigate the factors affect on the outside organization in big scale and also to identify and explain the future’s opportunities and threats of an industry However, this framework is considered that have some limitations as Burt et al (2006)

discussed that the six categories included in PESTEL such as the categories of Political – Economic – Socio Cultural – Technological – Environment and Legal are broad and not generic or specific applicable to the analysis of the environment

outside the organization Furthermore, in personally, I find PESTEL simply as a list making exercise, hard to predict future, outcome not really accurate, it should be more than 6 categories and much date need to be consider, the requirements of selecting the key issues from threats/ opportunities to conclude the analysis with the continuously changing of macro – environment The alternative frameworks for PESTEL can be a scenario planning and SPENT according to the suggestion of Campbell (2002)

The critical factors influence mostly on smartphone industry is technology, with software and data service advances which is considered as the competitive advantages in short term At the moment, the 3G is the popular technology while the 4G is considered as a mix blessing for the smartphone manufacturers As the

smartphone market matures in developed markets the 4G switchover is the likely next revenue driver with hardware upgrades although cloud computing potentially threatens post-sale revenue (Euromonitor International, 2011)

4G is the main long term growth prospect for smartphones and a key value sales driver in short run However, the value of data processing and connectivity in smartphones is likely to decline sharply as netbooks, tablet computers, and hybrid devices become primary channels by which consumers’ access mobile online

content

4G threatens the revenue stream from platform-specific content as increased speeds will facilitate growth in mobile cloud computing, specifically browser-based, platform-independent applications

2.2 Analysis of the Micro-Environment – Porter Five Forces Analysis

Appendix 2: Porter Five Forces Analysis

The Five Forces Framework was developed by Micheal Porter in 1985 has used to assess and define the attractiveness of industries and sectors to identify their potential for change and threats from outside the present set of competitors; state of competition; competitive rivalry; shapes industry competitions (McGahan, 2000; Porter, 1998)

However, the framework still contains some drawbacks as the framework has strongly concerned about macro analysis but lack of emphasis on analysing specific products – micro analysis, because of devised and developed in 1980s so it is

considered as out of date (Grundy, 2006) Personally, I find some limitations of the framework as no dynamic changes; no statement on competition; no static for

comparison; out of date, thus, it will not give any solutions for problems

Because of those limitations, in order to analyse the micro-environment, somealternative frameworks could be used with different analytical tools such as: The Toulmin Method (Toulmin, 1958); The Competitor Analysis (Chen, 1996); The

Growth Drivers and Porter’s strategic group analysis (Jeffs, 2010); and The Porter’s Generic Strategies (Porter, 1980)

The smartphone industry is considered as the profitable and rapidly growing industry The threat of rivalry is the main threat to profitability and sustaining growth

of the manufacturer because of the numerous firms in this industry and the fact of innovative technologies are often rapidly duplicated

3 Internal analysis of RIM Ltd., Smartphone Division

3.1 Value Chain analysis

Appendix 3: Value Chain analysis

Value Chain framework was developed by Michael Porter in the book

‘Competitive Advantage: Creating and sustaining superior performance’ in 1985 Theframework is suggested as a tool to analyse and highlight the activities within and around an organization deliver value, identify the value-added processes internally, asequential process of value-creating activities Therefore, the company would

understand their building block competitive advantage and its sources in order to contribute the strategic capabilities (Partovi, 1994; Porter, 1985 and Dess et al., 2007) Moreover, in personally, I find the Value Chain framework as the purpose of identifying the strengths and weaknesses of the business

However, as the two frameworks in external analysis, the Value Chain is also claimed that it is short of the essential focus which is provided by the diversity of sources of literature (Pitta and Laric, 2004) In personally, I find this framework is quite out of date to apply to the current business environment in term of not relative and reality to the business

The alternative framework for the Value Chain could be Network Value

Analysis, Added Value Chain and the Resource Based View (McPhee and Wheeler, 2006)

The Value Chain system at RIM is strong in term of the large inbound and outbound logistics network with the strong investment in marketing strategies and the sales division According to RIM annual report (2011), the Company’s sales and marketing efforts include collaboration with strategic partners and distribution

channels, as well as its own supporting sales and marketing teams, to promote the sale of its products and services Furthermore, the company shipment across the world of RIM in 2011 is 52 million Blackberry smartphone (Euromonitor International,2011)

However, the Value Chain analysis also provided the two potential areas could be considered as the blockages (as well as weaknesses) of RIM is Firm

Infrastructure and Technology Development Despite of the global operations

infrastructure are needed to expanded associated to the increasing demand of people over the world towards the Blackberry smartphone, but, the cost for maintain the infrastructure is too expensive which leads to the high expenses Moreover, at the heart of BlackBerry’s problems lies its troubled transition to a new operating system in order to compete with the Iphone and Google’s Android, the company has had to rebuild its software from the ground up

3.2 Resource Based View

Appendix 4: VRIO analysis

Barney (1991) purposed the aim of how to sustain the competitive advantagesfrom the capabilities for a long time The RBV is a framework for gaining insights as

to why some competitors are more profitable than others Furthermore, RBV is also encouraging the development strategies for individual business and help them to understand whether the firms will gain competitive advantages, how sustainable these competitive advantages are likely to be, and what the sources of these

competitive advantages to reveal how core competencies embedded in a firm can help it exploit new product and market opportunities (Dess et al, 2007; Barney, 2007)

The RBV as well as the VRIO framework is the powerful tool for analysing a firm’s internal organizational strengths and weaknesses but still contains some limitations Three main limitations of this approach: the effect of unanticipated

changes in a firm’s environment; limited managerial effect on performance; and data challenges associated with the unit of analysis (Dess et al, 2007; Lockett and

Thompson, 2001) Moreover, the RBV analysis fails to take into the high effect and the new changing trends of the business environment to gain the competitive

survival advantage because it is more important than just focus on the sustainable competitive advantage itself (Lockett and Thompson, 2001) In personally, I find that the RBV is out of date and must focus on capabilities more than resources

The alternative analysis for improving the Resource Based View analysis can

be the Dynamic Capabilities analysis

In case of RIM, the company has many tangible and intangible resources which are discussed through the VRIO analysis (Appendix 4) In tangible resources,

RIM has the strong manufacturing plants, global leader in innovation wireless,

technology RIM is not just solely located in Canada but lease facilities throughout America, Europe, and Asia which proves that RIM has stable financial sources to pay for their incurred expenses Besides, RIM with the fame and reputation,

experiences in wireless innovation and hardware, software production, RIM is prove itself as the second largest smartphone manufacturing company in USA

Additionally, intangible resources such experiences, the strong financial performance, innovation in technology and strong research and development are considered as the best knowledge for RIM to produce and develop the BlackBerry products Moreover, RIM success is largely dependent on its continuing ability to identify, attract, develop, motivate and retain skilled employees, including members

of its executive team even though the there is a problem in structure of top

management in fiscal year 2011 (RIM Fiscal Annual Financial Information, 2012) Moreover, Barney (1991) stated that the firm’s culture, which is generally viewed as

a strong unique intangible resource In RIM, Human Resource is the source for creating a corporate culture and preserving and developing employees’ skills as RIMwas awarded Canada’s Most Admired Corporate Culture (RIM, 2009)

In conclusion, the intangible resource is likely more critical implication towardsthe success of the company as strong threshold resources (expertise in skills and innovation technology to manufacture a high quality smartphones, generation in supporting the applications and services) which can contribute to the achievement ofcompetitive advantage RIM has a strong corporate brand and reputation as a global leader wireless innovation and the second largest smartphone providers in the world which help it to neutralise the threats and utilize the opportunities to compete with other competitors

3.3 Dynamic Capabilities

Teece et al (1997) posited the dynamic capabilities approach to address the gap

of the highly dynamic business environment challenged the original assumptions of the RBV and dynamic capabilities are now considered to be an extension of the RBV Dynamic capabilities focus on the firm’s ability to face rapidly changing

environments, in order to create and renew resources, and change the resources mix

However, like other frameworks, DCV still has its limitations Collis (1994) stated that DCV is not usually reliable sources for competitive advantages of the company Moreover, the relationship between knowledge acquisition and DCV sometimes not clearly understandable (De Toni and Tonchia, 2003)

RIM has the core dynamic capability especially in relation to product research and development (R&D) Technology base is the strong competitive advantage of the company, thus, RIM invest in the R&D strategy seeks to provide broad market applications for products derived from its technology base As of March 3, 2012, RIM’s research and development team consisted of approximately 6,100 full time employees Research and development expense was approximately $1.6 billion in fiscal 2012, compared to $1.4 billion in fiscal 2011 The development and support of RIM’s products require several key areas of expertise within RIM to be closely

integrated RIM has recruited and developed teams with expertise in these required areas and the Company believes that the integration and focus of these teams provides RIM with a significant competitive advantage (RIM, 2012)

3.4 Core Competencies

Core competencies are evaluated as the most critical factors to the success

or failure of the organization Core competencies give firm the strategic capabilities and competitive advantage which are not imitated by competitors According to Prahalad and Hamel (1990), core competencies are communication, involvement, and a deep commitment to working across organizational boundaries, it involves many levels of people and all functions Moreover, core competencies are about harmonizing streams of technology, also about the organization of work and delivery value In order to identify the potentially that the core competencies are created, it might envision the future market and industry as well as stake them out ahead of the competition (Thierauf, 2001) Moreover, the core competencies also gives firm the strategic capabilities and competitive advantage to compete with others but cannot apply to the SBU level

In case of RIM, it has some key core competencies which are Research and Development, Network Operations Centre and the core assets BlackBerry

Messenger

Due to the strong Research and Development, RIM has create some success factors as it states in the Annual Information Form 2011 and updates to the Fiscal

2012 Annual Financial Information: multi-network support; connectivity to enterprise

email and applications; connectivity to personal messaging, social networking,

multimedia and other applications; and access to third party applications

Network Operation Centre (NOC) is a key aspect of competitive differentiationamong industry participants, RIM pioneered the use of a sophisticated multi-node centralized architecture responsible for the routing of message to and from devices The key benefits of NOC are message delivery reliability, network utilization

efficiency and security

3.5 SWOT analysis

Internal environment  Growing brand loyalty

together with strong brand image and recognition, financial performance

 Strong Research and Development

 Business relationship adpartners (dependence

on a small customers belong to business and Government segments)

 Losing market share

External environment  The rapidly innovation

technology and a rising consumer expected for speed, convenience and attractive design in the smartphones

 Expanding portfolio and applications

 Fastest growing company

in the world with the innovation technology

 The threats of substitutes are medium/high, so, the emerging technology for tablets and other portable computers will cause thegreat threats to the growth of smartphones

 Short life cycle due to the rapidly changing andduplicated technologies

 Declining in the average selling price

4 Evaluation of possible future strategies for the company

4.1 Key strategic issues facing RIM in 2012:

The SWOT analysis which had mentioned in part 3.6 above highlights three key issues influencing RIM’s future survival competitive strategy as:

 How can RIM adopt/develop a new operating system called QNX in BlackBerry 10 to provide exceptional performance, high scalability and support a better service and catch the trends of end-users’

expectations in the future?

 How will RIM use its strengths to expand its leadership in the

Smartphone market and innovative technologies to get new products tomarket continuously?

 How can RIM implement the cost reduction project to drive the price smartphone to gain the market share as a competitive

lower-advantage?

The problems of RIM are service outage experienced user in Europe, the Middle East, Africa and other parts of the world; and RIM has been slow to get new products to market These key strategic issues are orientated based on the high threats of rivalry facing the company In order of differentiating the product portfolios/services and innovating technology while reducing the manufacturer costs to supply the lower-price smartphone to stay strong in the industry but also reach the further customers’ expectations whilst increasing profitability and market share

4.2 Evaluation the strategy of launching BlackBerry 10 Platform unveiled

in May 2012

4.2.1 Strategic Logic

By launching BlackBerry 10 Platform, RIM implies the strategic logic focus

on product development strategy which is identified using Ansoff Matrix tool (Ansoff, 1957) As the critical problems had been discussed in this report is the failure service outage and slow to get new products to market by the delay

of launching BlackBerry 10 in fiscal year 2011 The question for RIM is how it gains again the market share to survive in the smartphone market without the survival and competitive capabilities and the launching of BlackBerry 10 is theanswer

The launching of BlackBerry 10 will address the new operating system called QNX which RIM had acquired QNX software system in April 2010 to apply the strengthen QNX penetration in the automotive market and foster innovation for markets served by all parties (RIM Press Release, 2010) This strategic move is looking at enhancing the user experience between

smartphones and in-vehicle audio and infotainment systems

Besides, by using the Porter’s Generic Strategies, the cost leadership is also considered as a good method for addressing the cost reduction project ofRIM aims to generate the lower-cost smartphone to target the broaden market

to increase the market share

4.2.2 Strategy Evaluation

 Feasibility:

The main barrier to the launching new product with the well-prepared operating system is whether the firm resources and capabilities of it is utilised or not As the strength of RIM is research and development as wellthe strong financial performance status, and the successful acquisition with QNX software systems in 2010 They are distinctive capabilities of RIM and all obtained/ integrated in the company strategy