business environment and strategic management: strategic analysis of rimm

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Business Environment and Strategic Management Strategic Analysis of RIM WORD COUNT: 3000 (excluding references and appendices)

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Page 1: Business Environment and Strategic Management: Strategic Analysis of RIMM

Business Environment and Strategic Management

Strategic Analysis of RIM WORD COUNT: 3000 (excluding references and appendices)

Page 2: Business Environment and Strategic Management: Strategic Analysis of RIMM

Contents

1. Introduction....................................................................................................2

2. Analysis of the current business environment affecting the industry............4

2.1. Analysis of industry’s macro-environment: PESTEL analysis...................4

2.2. Analysis of industry’s micro-environment: 5 Forces..................................5

2.3. Opportunities and Threats...........................................................................6

3. Analysis of the company’s strategic capabilities...........................................7

3.1. Value chain..................................................................................................7

3.2. Resource based view and dynamic capabilities..........................................8

3.3. Strengths and Weaknesses...........................................................................8

4. SWOT analysis and key issues.......................................................................9

5. Evaluation of possible future strategies for the company...............................10

6. Implementation of strategic change................................................................11

7. Conclusion…..................................................................................................11

Appendices ….....................................................................................................13

1. PESTEL….......................................................................................................13

2. Porter’s Five Forces….....................................................................................14

3. Value Chain………………………………………………………………….15

4. SWOT…..........................................................................................................15

References …......................................................................................................16

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1. INTRODUCTION

Founded by Mihalis "Mike" Lazaridis, Jim Balsillie, and Douglas Fregin in 1984, Research

in Motion (RIM) is a telecommunication and wireless equipment company. RIM’s current CEO

is Thorsten Heins who took this position after the stepping down of its former co-CEO’s Mike

Lazaridis and Jim Balsillie in January 2012. RIM is currently a Canadian-based engineer,

producer and advertiser of solutions and wireless devices for the global mobile communications

exchange, headquartered in Waterloo, Ontario, Canada. RIM has offices in various locations

such as Latin America, Europe, North America, and Asia Pacific. Investors can find RIM listed

on the Toronto Stock Exchange (TSX: RIM) and the NASDAQ (NASDAQ:RIMM).

Throughout the growth of services, software and unified hardware, RIM renders solutions

and platforms for continuous connection to information, comprising short message service

(SMS), voice, Internet and intranet-based applications and browsing, e-mail, and instant

messaging. RIM technology also enables an array of third party developers and manufacturers to

enhance their products and services through software development kits, wireless connectivity to

data and third-party support programs. (CrunchBase, 2012) The company is divided into three

fundamental strategic business units (SBUs): Software & Other, Services, and Hardware. RIM

sales to an assortment of customers, but RIM’s main customers are the wireless carriers (i.e.

AT&T, Sprint, and so on). RIM sells software, HSPA+ and iDEN devices, UMTS/HSPA,

CDMA/Ev-DO/Ev-DO Rev A, and GSM/GPRS/EDGE, to these wireless carriers. Rim also sales

tablet devices, which are furnished with proprietary software to wireless carriers.

RIM falls in around third place behind Samsung and Apple in the Wireless Communications

Industry. The customer segment has many competitors and customers require high quality

devices and an extensive amount of apps that RIM does not currently have. While RIM targets

business professionals, high income earners, and innovators Samsung and Apple appear to target

everyone regardless of the consumer’s profession and income capacity. RIM is far behind when

it comes to the mobile communications arena whether it is design, or sales.

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The major products for RIM’s three strategic business units are BlackBerry wireless solution,

billings, non-warranty repairs, sales of accessories, and non-recurring engineering development

contracts.

Because RIM is an international company, although its

headquarters is based in Canada, it assembles and sells its

products and services around the globe. RIM’s primary

markets are, sequentially, outside of United States, United

Kingdom and Canada, the United States, United Kingdom,

and Canada. (RIM, 2012)(Table 1)

The majority of Rim’s primary revenue streams come

from their hardware business unit, which are sales from their

BlackBerry wireless solution that embodies sales of

BlackBerry Play Book tablets, BlackBerry handheld

devices, and software and services. The top earner for RIM

is still sales from their hardware unit, which makes more than half of the total revenue. (RIM,

2012)(Table 2) The main customers in RIM’s order book for the mobile phone industry are

wireless carriers and end-users.

As of the end of the second quarter of the financial year

2012 closed, RIM’s revenues were $4.2 billion, a reduction

of $453 million in comparison to $4.6 billion in the second

quarter of the year 2011. With net income of $329 million, a

reduction of $468 million in comparison to $797 million in

the second quarter of the year 2011. However, prefatory

results for 2012 show that the augmentation of $232 million

embodied $105 million of fees in relation to the employment

of the RIM’s cost optimization program in the second

quarter. This decrease primarily reflects an increase in the

Company’s operating expenses in the amount of $232

million as well as a decrease of $443 million in the Company’s gross margin, partially offset by a

decrease of $206 million in the provision for income taxes. (RIM, 2012) This report will view

3

Research In Motion Ltd. 2012 Sales-

geographical distribution

% of total

Sales outside of United

States, United Kingdom

and Canada

56

United States 27

United Kingdom 10

Canada 7Table 1. Distribution by geographical sector (from RIM

at

http://www.rim.com/investors/documents/pdf/financial/2

012/Q2_FY2012_Financial_Information.pdf)

Research In Motion Ltd. 2012

Sales-geographical distribution

% of totals

Hardware 72.6

Services 24.1

Software 9.9

Other 1.4

Table 2. Distribution by industry (from

RIM at

http://www.rim.com/investors/documents/p

df/financial/2012/Q2_FY2012_Financial_In

formation.pdf)

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data from 2009-2012 and will try to sum up the preeminent factors persuading survival of the

company’s hardware unit in years 2012 - 2015. This report will also assess strategies that RIM

could impose in the next three years and feasible employment techniques.

2. ANALYSIS OF THE CURRENT BUSINESS ENVIRONMENT AFFECTING THE

INDUSTRY

The organization started manufacturing for the mobile industry in the late 1980s giving up

some of their earlier work in industry automation activities and digital wireless devices became

RIM’s primary source of revenue. Due to the fact that the sales and competition within the

wireless mobile industry are global, this report is not going to be limited to the analysis of just

one specific locale. The only way to scrutinize the threats and opportunities within an industry,

an analysis of micro and macro environment has to be employed. A macro-environment connotes

every force and agency that is independent to a business itself. (Lancaster, n.d.) A micro-

environment connotes many components that an organization has governance or that which the

organization may utilize to accumulate intelligence that can help an organization in its

operations. (Lancaster, n.d.) RIM has problems but support from one of the world’s most

powerful people who is a steadfast BlackBerry aficionado, the President of The United States

Mr. Barack Obama. (Hartley, 2012)

2.1. Analysis of industry’s macro-environment: PESTEL analysis

Tax changes, new laws, trade barriers, demographic change and government policy changes

are all examples of macro change. (Gillespie, 2007) When a macro environment analysis is

implemented management may be pursuing to retort the inquiries of “the growth of this sector as

a whole will be affected by what” and “is the growth of this sector likely to be impacted by

everything that affects it?” (What Makes a Good Leader, n.d.)

PESTEL analysis (Appendix 1) is an extremely good technique in evaluating the trends and

factors that influence the macro environment, which has been transformed and developed over

the years since the middle of the 1970s. The PESTLE analysis is in result an analysis of a

company’s environmental persuasions with the objective of utilizing this intelligence to help lead

management’s crucial decision making. (CIPD, 2012) The procedure, though not perfect because

all the trends cannot be put into these classes: legal category, socio-cultural, economic, political,

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technological, or environmental. Now and then these groups are also too straightforward and too

unrestricted (could be visualized retroactively rather than in present positions) and do not exhibit

connections amid interrelationships between these groups. Though, as stated earlier, PESTEL

analysis is straightforward so it can be employed to perceive significant factors on a much larger

scale.

Within the international telecommunications industry, political controversies are significant

as governments in different countries respond differently to multinational organizations entering

their country. Regardless of present economic turmoil, many governments are trying to clutch

any possible prospects to aid in the regrowth of their nation’s economy.

On top of that, due to the present financial recession coming to its end, this industry is

forecasted to rise by over 36% an increase of 16% from its 2008 projections by the year 2015. In

spite of the fact that it is more difficult to elude uncertainty and to battle for market share, if

more channels to strategic partnerships open up this may make investments lower uncertainty.

Although, oscillating currency exchange rates position international organizations in risk of

squandering capital on their global transactions.

As to socio-cultural factors, there is a cultivating trend for structural upgrade (infrastructure).

Other trends are emerging like embedded SIMs, machine-to-machine (M2M) connectivity, and

multiple SIMs and devices per person. This means that because the world’s population is

growing larger there is a growing necessity for more new technologies and discoveries of better

ways to communicate quickly.

After analyzing the macro-environment of the telecommunications industry, this report shall

now view the micro-environment.

2.2. Analysis of industry’s micro-environment: 5 Forces

To analyze the micro-environment a number of different frameworks could be used,

nonetheless, the five forces framework is the one mostly used. This model attempts to analyze

the attractiveness of an industry by considering five forces within a market. (Gillespie, 2012)

When using this model knowing no model is perfect consideration has to be taken due to certain

situations this model cannot be altered equivalently. When a company has a conspicuous

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understanding of where the power is, the company could take an unprejudiced preference of a

position of vigor, ameliorate a stance of fragility, and elude engaging in reprehensible

maneuvers. (Mind Tools, 2012)

The Five Forces analysis implemented (Appendix 2) reveals that the combative opposition

within the telecommunications industry is high. This industry has extensive amount of

competition, all having vast amounts of experience and long industry existence.

The threat of entry for this industry is extremely low due to the quality of current companies.

As stated above, Samsung, Apple, and RIM are very established and have extensive track

records. Thus gaining entrance into this industry would necessitate plenty of unwarranted

competence in the field of mobile engineering and so on. Over the last few years there has been a

flooding of new mobile phone developers hitting the markets with newer and better mobile

devices.

The threat of substitutes is kind of medium because there are very few substitutes for the

mobile phone industry. Some substitutes for this industry are email, Skype, land lines, and

computer connections etc... Another substitute is a 2-way radio (walkie-talkie) which is still

preferred when it comes to the work place and communicating to more than one person at a time.

The bargaining power of buyers is high, because there are many buyers within the mobile

industry. The products are highly extraordinary and every company is extremely qualified to

provide the buyers in the adequate quality and quantity the buyers want.

The bargaining power of suppliers are low because there is a large number of suppliers and

the buying company has the choice of choosing which supplier they want to work with.

After analyzing the micro-environment of the telecommunications industry this report shall

now view the opportunities and threats within the telecommunications industry.

2.3. Opportunities and Threats

The primary opportunities for RIM’s hardware unit in the anticipated future encompasses

several issues. One of the issues is the eminent demand for more technologically advanced smart

phones: with new designs, bigger screens, better cameras, better screen interactions, faster

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connection speeds, less dropped calls, normal updates, and so on, which would bring RIM up to

speed with the rest of the mobile industry. Rim has other opportunities to expand their brand to

other countries for they are only in a few countries to date. The expansion into developing

market is developing countries will expand RIM’s brand.

The primary threats for RIM are that the industry is expanding quickly and the demand for

engineers for telecom is also expanding. RIM will struggle to discover unparalleled talent when

these engineers become very limited. RIM is only targeting a few key customers, while

competition is augmenting at the same time; additional combatants are entering in the smart

phones industry. This alone will hurt Rim because these new competitors will have to grasp hold

of someone’s customers so why not that of a company who is already declining. Another threat

for RIM is their lack of products and their dependency on a few key products. These few key

products are not bringing in enough to offset the decreases in other areas and they have no

backup cash cow products.

3. Analysis of the company’s strategic capabilities

This is the part of the report where internal analysis will be employed to scrutinize the

company. Every kind of analysis has its own limits for the simple fact that an analyst might see

evolutions that have a positive impression on a company’s operations, but the analyst might not

conceive why it happened. The best way to probably analyze strategic capabilities is to identify

core competencies, which embodies the whole organization and not just the SBU. This analysis

will incorporate an inspection of the value chain of RIM and then the report will view the

capabilities and resources that can be distinguished from this analysis. This analysis will also

reveal RIM’s strengths and weaknesses to give a better understanding of their position and what

can possible be done to better help RIM.

3.1. Value chain

With all the resources RIM has it can exploit them to earn an advantage competitively.

Inherently, the resources that RIM has will be used in this VRIO analysis (Appendix 3) and

categorized into four groups, technical resources, operational, business, and marketing.

Many of RIM’s resources originate from the simple fact that RIM was the first force in

the mobile smartphone market, and ergo has important capabilities and resources due to its

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familiarity in this industry, its organized relationships with its large customer base, corporate

customers, and as well as its carriers and distributers. One could say that RIM is a pioneer in the

mobile smartphone market. (Hamad, Lawson, & Radi, 2002) The brand of RIM is also a

leveragable and valuable resource that aids RIM in selling to both prosumer users and business.

In this industry the BlackBerry system is perceived as the most secure mobile smartphone

system. Rim charges license fees per subscriber as a source of revenue for RIM’s Blackberry

Enterprise Server software. Rim created this software, which also provides RIM with a

competitive recognition because it was fitted specifically for BlackBerry devices.

Ultimately, RIM has other resources that encompass the closeness of its headquarters to a

Research Center called Davis Computer, rendering RIM with an unwavering flow of interns. The

closeness of this research center renders Rim with entrance to research, an illustrious academic

faculty, and RIM’s organizational culture that inspires innovation, creativeness and hard work.

3.2. Resource based view and dynamic capabilities

A company that is fighting for a competitive advantage or for their survival as it is since the

economic crisis would use the Resource Based View (RBV). This model assesses the internal

environment quite well, but the framework presupposes that if these components are described

and registered, RIM can execute competitive advantage by just knowing the components.

Set on the basis of the value chain analysis, the following characteristic capabilities could be

renowned. Firstly, RIM combines joint distribution and internal development. RIM has the upper

hand on its competitors by having their own enterprise server which produces the most secure

mobile system in the industry. RIM went up a notch from just delivering smartphones. RIM’s

ability to deliver mobile information sharing fast and quicker than their competitors is permitted

because of exceptional R&D. However, Samsung and Apple are not able to imitate this because

the knowledge rolling out from RIM is implied that leads to distinctive fortuitous vagueness for

them.

3.3. Strengths and Weaknesses

One of RIM’s strengths is that it has strong assets within and that is why they are producing high

technology products. Rim is an established brand in a few advanced countries. RIM’s products are

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unique, innovative and have great qualities that aid them in retaining their current customers and

attracting new ones. RIM has a strong culture that makes their employees happy to be working

for RIM. RIM has a brand that has loyalty behind it and RIM prevails at having the securest way

for companies to utilize mobile information sharing. RIM’s financial statements illustrate that

their exceptionally healthy and can afford to employ new strategies and establishing new

acquisitions. RIM’s BlackBerry has a longer than average battery life cycle that RIM’s rivals

does not have as of yet. With an uncomplicated keyboard the BlackBerry comes in a smaller

form than that of its rivals. RIM’s BlackBerry possesses patents for QWERTY keyboard and the

thumbwheel it displays on its device. RIM’s BlackBerry has a major reach in a vast amount of

countries. In the mobile atmosphere RIM’s BlackBerry is a leader in e-mail management.

RIM is concerned more with research and development which is accountable for high

expenditures. This is not good for any company. RIM only targets a select few customers which

is risky because as the competition increases this may lose RIM’s customers to their competitors.

RIM aims at niche market so their products are priced very high. The business model for RIM

(utterly vending by operators) denotes that RIM is subservient on the company’s operators when

launching the services for BlackBerry. (Team Zebra, 2009) This way of doing business is very

timely and the expenditure of the launch can be very expensive for operators of a small capacity.

RIM’s products are high-end products particularly the BlackBerry that is extremely expensive

for business firms that need to equip email for their whole organization(s). BlackBerry’s rivals

already market a lower price in comparison to RIM’s BlackBerry. On the topic of carping

applications, RIM’s BlackBerry products struggle. Third-party software is where RIM’s

BlackBerry is lacking an extensive amount of storage and for many people RIM’s BlackBerry’s

e-mail utility is its main feature.

4. SWOT analysis and key issues

The SWOT table (Appendix 4) sums up strengths, weaknesses, opportunities and threats

around RIM’s hardware unit and defines key issues to contemplate on for their survival among

competitors within their industry:

Is RIM able to develop new hardware to address the feedback from customers

complaining about newer device models?

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How can RIM stop competitors from moving in on their market share?

How can the hardware unit expand with the industry in order to recoup some of their

market share?

5. Evaluation of possible future strategies for the company

One way to address the issues located above attained from the internal and external analysis

that were employed, so a few options will be drafted and examined. This part of the report will

go on the basis of Ansoff’s Matrix (Ansoff, 1957) and Porter’s Generic Strategies.(Porter, 1980)

Neither framework is perfect, i.e. Ansoff’s Matrix does not tell the analyst what steps are needed

to undertake to complete the strategy and it is all about growth, which some companies might not

be able to achieve at the time.(Richardson and Evans, 2007) The generic strategies model does

not illustrate the dexterity of RIM to unite its resources and capabilities in order to go through

with the rendered strategies. The options will also be assessed whether they meet the suitability,

acceptability and feasibility criteria. (Johnson, Scholes and Whittington, 2005)

Recommendations

RIM should integrate touch devices in their product line to keep up with the masses that are

already employing this tactic. RIM is playing catch up but not moving at this point due to their

low end device design that has not changed in multiple years. Rim has to come up with a new

design to be able to play in the market with its competitors since technology is an industry of

innovation. On top of a new design RIM should employ a policy of releasing OS and new

hardware once a year because their competitors are releasing hardware once or twice a year and

RIM is missing in action. RIM’s loyal customers have not enjoyed a good release in a while

now; this release would bring them joy.

RIM has an app store but it is not up to par with the majors in the industry such as Apple and

Android’s Google Play. RIM should take advantage of their Android emulator since they will

play catch up in the evolution of the app store trend. App developers will flock to a familiar

place where they can make money so RIM is not that place currently and for a while to come. So

instead of playing catch up RIM should just join Android’s Google Play Store and have

developer’s creating apps for BlackBerries.

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RIM should think of marketing in other countries to gain a leadership role in the production

of smartphones for professionals. RIM should invest in advertisements in other countries to

display their products in the language of that country. The ads should cater to the professionals in

that country specifically.

RIM should continue to make strategic changes to RIM’s senior management team

The recommendation that should be chosen by Rim is the integration of the touch screen with

the new design. This is to keep BlackBerry in the game with its competitors.

6. Implementation of strategic change

The first step for RIM should be branding. If RIM positions itself to be the leader in

smartphones for professionals in different nations like Indonesia, China, and India by

advertisement investing. The following step would be to partner with phone service providers in

those nations for helpful and less costly promotion. RIM will gain more global recognition and

divulgement, and would ultimately lead to plausible prosperity. The final step would be for RIM

to achieve operational superiority. RIM should also stay on the path of changing up management

for the best fit for the organization and their new strategic direction of growth. (Heins, 2012)

RIM has to rid itself of unnecessary heads that cannot aid in the future direction of the company,

such as management that have no new ideas. This change will make RIM’s loyal customers

happy and loyal. RIM will gain market share back from its competitors who have constantly

been grasping more and more market share since the first iPhone. With these new

recommendations cost could be cut from many different directions and put to more designs and

Bonuses to employees for new ideas. As of now RIM seems to be stuck in the past. With these

changes RIM would see changes throughout the media and they would become the new kids on

the block all over again. With the implementation of strategic change RIM could attract a much

larger share of the market (Team Zebra, 2009) Many of these implementations of strategic

change can and will aid in RIM’s independence from leaning directly on distributors and carrier

partners. RIM’s implementation of strategic change could aid them in reaching a broader

customer base instead of the usual professionals they target. (Team Zebra, 2009) To gain more

market share RIM has to think outside the box and view things with a broader perspective.

7. CONCLUSION

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In conclusion viewing the performance of RIM in their most recent years, their forecast and

the internal analysis for the telecommunications industry, it implies that RIM has room for

flexibility and can adapt to changes if needed. RIM has enough experience in creating

acquisitions and partnerships in order to set them up for success as well as using what they have

internally. The capabilities, resources, and consciousness of the necessities for continuous

improvement RIM is able to surmount any obstacles to fight for their survival against

competitors in the mobile phone industry. So an organization like RIM is worth investing for the

future because they have a strong background.

APPENDICES

Appendix 1. PESTEL analysis of mobile telecommunications industry.

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Political

The governments in different countries are trying to be extremely helpful towards

organizations that want to do business in their economy, thus, bringing more jobs to the locals of

that country. Governments change laws to accommodate those businesses who want to expand in

their country.

Economic

Since the world’s economic crisis the demand on products and services lowered a little

bit. This crisis has also brought upon the world high unemployment rates and a reduction in the

amount of disposable income.

It is also forecasted that this industry will rise by over 36% an increase of 16% from its 2008

projections by the year 2015.

Socio-cultural

This factor is slightly created by the trends in the mobile communications industry. If

there would be a decline in this industry there would be a definite decrease in purchases devices.

Even though, there is an expected rise in mobile phone usage, thee wrong devices will not get

increase in market share.

Technological and Environmental

Both of these factors are strongly intertwined because of the overriding trend to become

environmental friendly. Everyone is asked to contribute to making the earth more greener so

technology has to be enhanced and developments have to take place to do this.

Legal

The legal factors are compounded with the environmental, political, and technological factors

(i.e. government and environmental laws)

Appendix 2. Porter’s 5 Forces analysis of telecommunications industry.

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Threat of competition- high, because there are many competitors, they are experienced and have

been around for a while.

Threat of entry- extremely low, due to the quality of current companies and their expertise in the

telecommunications industry. Thus gaining entrance into this industry would necessitate plenty

of unwarranted competence in the field of mobile engineering and so on.

Threat of substitutes- medium, because there are very few substitutes for the mobile phone

industry. Some substitutes for this industry are email, Skype, land lines, and computer

connections etc...

Bargaining power of suppliers- are low because there is a large number of suppliers and the

buying company has the choice of choosing which supplier they want to work with.

Bargaining power of buyers- is high, because there are many buyers within the mobile industry.

The products are highly extraordinary and every company is extremely qualified to provide the

buyers in the adequate quality and quantity the buyers want.

Appendix 3: Value Chain

14

Primary Activities

Support Activities

(Cox, et al., 2011)

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Appendix 4: SWOT Analysis

Strengths Weaknesses

Growing brand image

Comprehensive offerings

Robust financials

Dependence on few

Customers

Issues with product supply

Opportunities Threats

Positive outlook for

smartphones

Expanding brand more internationally

Increasing competition

Involvement in legal issues

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