Research in Motion

Free Essay Sample on Research in Motion

Industry Trends

Research in Motion (RIM) debuted in the mobile communications industry in 1984. Headquartered in Waterloo, Ontario, Canada and founded by Mike Laziridis, RIM penetrated the market through its paging technology developed for Motorola’s SkyTel (Angelina et al., n.d.). The release of its Blackberry Bold Smartphone marked the beginning of RIM’s journey in the volatile and tumultuous mobile technology industry. In the beginning, the Blackberry device was riding the crest of the telecom wave. Its unparalleled and proprietary encryption technology made it the most preferred smartphone among government agencies and the corporate world. This dominance eventually made it enter the consumer market.

Later on, the company’s fortunes took a turn for the worst due to innovative technologies and intense rivalry as competitors such as Samsung and Apple entered the market in 2007. The corporation’s market share and share price dropped severely and its shareholders lost almost 80% of their wealth in 2011 (Carmi, 2011). The same year saw the company’s popular encrypted network experiencing power outages that affected millions of customers for several days. After changes in the top management and a rebranding under the name of its signature device Blackberry, the firm has continued to re-build its subscriber base to almost 80 million (RIM, 2012). The market reception of its recent Blackberry Z10 smartphone has been encouraging, and the appreciation of the share price reflects the company’s improved fortunes.

The mobile industry has huge sustainable opportunities for growth. The three top global mobile device subscribers are China, the US, and India with over 80% of their total populations using a mobile device (Central Intelligence Agency, n.d.). It then becomes imperative that mobile device providers focus their product distribution on these markets. Most regions in the world have a competitive industry structure that allows some mobile providers to compete in a specific marketplace (Industry Report, 2012). The environment in which Blackberry operates is very competitive. The mobile industry is not immune to negative factors such as high-interest rates, trade barriers, and inflation. The recent global economic crisis reduced consumer spending leading to the fall of Blackberry’s share price (CBCNews, 2013). This process is an indicator of the industry’s volatility and relation to global economic changes.

The mobile communications industry has captured the attention of consumers who have shown a preference for multi-functional smartphones that enable them work and conduct personal tasks. This trend has forced mobile device manufacturers to be innovative and produce devices that meet the ever-changing demands of people. The need for constant innovation has set a stage for a highly competitive environment that demands short product life cycles that requires competitors to keep pace with technological advances (Angelina et al., n.d.). Additionally, a particular technology can become obsolete and undesirable before its total costs are covered. The trick in this industry is to exploit the advantages of being the first to implement innovations before competitors. Availability of communications infrastructure in different countries is another factor that mobile companies depend on to expand into new markets. Globally, many governments are engaging in deregulation and elimination of trade barriers in their telecommunication industries thereby providing the opportunities and environment for mobile communication firms to expand into new markets.

RIM Competencies

Strategic decisions depend on a company’s ability to achieve appropriate positioning based on its competencies and internal resources that help it gain a competitive advantage (Johnson et al., 2005). RIM was the market pioneer in wireless communications that combined the mobile phone with access to secured email services. It channeled its resources and internal competencies to serve the enterprise market resulting in a paradigm shift in corporate communication. The corporation’s core competencies revolve around security, simplified user experience, and innovative technology. The competitive advantage arises when companies can translate skills and technologies into competencies that change opportunities when adapted (Prahalad & Hamel, 1990). RIM exploited this approach resulting in an increase of its base to nine million subscribers by mid-2007 (Topolsky, 2012).

The four criteria of the resource-based view on a firm state that the resources have to be valuable, rare, imperfectly imitable and non-substitutable (Carmi, 2011). A company is said to have a sustainable competitive advantage if it meets these four criteria. The firm will have an advantage in the marketplace that will last until the full fulfillment of the criteria. The four criteria test on RIM reveals its email encryption service as a key competence that gives it an upper edge over its competitors. This email service is particularly valuable to corporate clients who prefer reliable and secure communication. It is because of this reason that RIM concentrated most of its products on the corporate segment of the mobile market industry.

RIM WCSA Analysis

RIM’s strength lies in its dedication to serving a limited corporate market segment with a narrow target base. During its formative years, RIM started off by positioning Blackberry as an enterprise resource tool targeting corporate customers (Johnson et al., 2011). Its uniqueness lies in secure “push-based” email technology that works by notifying a subscriber of email without having to access it. This innovation, coupled with its radical changes in the product design through the introduction of distinctive features like the “Navigation Ball” and “QWERTY” keyboard gave Blackberry a breakthrough. RIM worked on novel design ideas based on aspects such as battery life, size and bandwidth giving it a strong eminence in the marketplace. The success of these design ideas did not last long as a result of the launch of the Apple iPhone in 2007. Apple broke RIM’s design limitations and re-defined the idea of a smartphone with the introduction of the touch screen with a large screen size.

The once divided wireless sector into enterprise and consumer segments underwent a huge shift due to evolving market conditions. These segments have overlapped allowing competitors like Apple to enter easily into the once RIM-dominated corporate segment. RIM’s main pitfall was its unsuccessful foray into the consumer segment. Porter (1997) states that it is highly risky for a firm to go outside a specified market segment. Products customized for one specific group may appear inappropriate to the new target customers. An example is the email encryption feature that may not be appealing to the customer category. RIM’s failure to stick to one generic strategy is one of the reasons that led to its decline. Consistency within the generic strategy is a key parameter for decision making and success. The other mistake made by RIM in its strategy was its late reaction to the threats posed by Apple. It was not until the year 2009 that RIM introduced its first touch screen, two years after Apple launched its version. Mobile companies embarked on revamping their operating systems after the iPhone launch. Surprisingly, RIM remained oblivious to this strategy, thereby lagging behind its competitors. RIM remained blindside to the obvious warning signs it got from its competitors and delayed its response. The result was a sharp decline in its market capitalization.

Blackberry Financial Performance (2013-2015)

The following figures represent the three-year financial ratios of Blackberry. Though still struggling, the earnings for 2015 underscore the fact that Blackberry is on the path to recovery. The company is entering a time of stability with earnings, especially gross margins, revenue and costs, becoming much more predictable. Blackberry started the 2015 fiscal year with a smaller loss that demonstrates the positive effects of its devices-to-services transition plan. It also comes amidst a continuing and deep decline in handset sales. Gross margins moved by 0.4 percent from 48.1 to 48.33. Gross margin represents a key sign of improvement or failure over a financial period.

Key Profitability Ratios        
Margins % of Sales 2013-02 2014-02 2015-02 TTM
Revenue 100 100 100 100
COGS 68.99 100.63 51.9 51.67
Gross Margin 31.01 -0.63 48.1 48.33
SG&A 19.06 30.87 28.13 23.52
R&D 13.63 18.88 21.32 20.25
Other 9.47 54.76 11.33 16.25
Operating Margin -11.15 -105.14 -12.68 -11.69
Net Int Inc & Other 0.14 -0.31 1.14 1.59
EBT Margin -11.02 -105.45 -11.54 -10.11
Profitability 2013-02 2014-02 2015-02 TTM
Tax Rate %        
Net Margin % -5.83 -86.2 -9.12 -8.56
Asset Turnover (Average) 0.82 0.66 0.47 0.47
Return on Assets % -4.8 -56.7 -4.31 -3.98
Financial Leverage (Average) 1.39 2.08 1.91 1.76
Return on Equity % -6.61 -89.77 -8.62 -7.21
Return on Invested Capital % -6.61 -71.89 -5.85 -5.14


It is evident that the task of Blackberry, which is recovering from its plummeting devices sales, is a huge one. Profitability will only become possible if the company comes up with the ways of shoring up its sales volumes. The corporation also has to expedite the process of upgrading or up-scaling its mobile devices. It is worth to note that the company still sells devices that run the old Blackberry OS 7 (BB7). The entry of the company into the server segment with its BlackBerry Enterprise Server (BES) provides the greatest opportunity for it to emerge from the doldrums. Blackberry was once the market leader in the enterprise segment and it is not impossible for it to regain its footing and claim significant market share. The best advice to the management is to encourage it to put more energy into the enterprise segment due to the fair competition in that area.

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