“The company plans to end all internal hardware development and will outsource that function to partners.”
John Chen, CEO Blackberry
Blackberry, formerly known as Research in Motion (RIM), a leading Canadian telecommunication and wireless equipment company, has recently announced the halt of its internal manufacturing business including smartphones and will move onto software development, utilising core technologies in the intensive environment.
Although glory still exists in the software division, the hardware segment as a portion of the entire business is performing way worse compared to decades ago when it had just started. The stock price has been plummeting for a long time and even after the CEO’s announcement the price dropped slightly due to low investor confidence in the hardware field.
Early Years And Growth
Blackberry was founded in 1984 by Mike Lazaridis and Douglas Fregin and was the first data technology developer in North America. Back then, it was financed by some venture capital firms with outstanding reputations. After some 15 years of development and research, smartphone models such as the Blackberry 850 Pager came out with basic mobile functions.
By further customising and developing functions, Blackberry invented smartphones with an enhanced design and services with excellent data safety technology. The company successfully built a platform that could fulfil customers’ expectations and needs and attracted an enormous amount of smartphone users, including enterprise clients, to its market. The entire development process took 17 years, from 1984 to 2001.
After acquiring the real-time operating system QNX, Blackberry stepped onto the magnificence stage of its cycle with a way above-industry-average stability and liquidity. The company’s net income peaked in 2011 at $3.4bn and began to slump afterwards.
However, changes in time and the appearance of various uncertainties brought Blackberry challenges of a new era. Competitors and conditions became difficult. The number of clients declined significantly after 2013, hinting booming challenges in the market.
Below is a brief previous Porter’s Five Forces analysis of Blackberry.
- Threats of new entrants – Moderate, although the industry is attractive to many startups and those firms have the intention to take part in, the barrier is high. Also, it takes a long time for a company to build its own unique platform and develop technologies to differentiate itself. Attracting enough clients in a certain time frame can be a tough issue. Moderate threats from new entrants are good news for Blackberry, giving it more time to focus on self-improvement.
- Bargaining power of suppliers – High; the demand in the market is high which causes suppliers to have more options and will not limit to only one company such as Blackberry.
- Bargaining power of buyers – High; buyers definitely have more choice nowadays since new brands and devices continuously come out. Parallel competitors such as Apple and Android devices have also posted a threat to Blackberry in terms of market share.
- Threats of substitutes – Intensive; customers can find substitutes for specific products including Blackberry with similar functions easily within a short period.
- Competitions among rivals – Intense, with Apple and Samsung together controlling more than 50% of the market. Other firms which have already successfully overcome barriers and are in their growth stage could stimulate more competition.
New Age, New Game
Uncertainties have forced Blackberry to change its stance by outsourcing its hardware manufacturing to overseas countries where mass amount of cheap labour is available. Moreover, it is necessary for Blackberry to reinforce its software technology as a core competency for data encryption and protection expertise.
According to Reuters, Blackberry teamed up with Samsung for a “spy-proof” tablet for Germany, signifying the potential for further cooperation on the data privacy technology and competing with other giants in the market such as Apple.
The trend has lead Blackberry on a more software-focused path and the possibility of reversing the game is high. Last but not least, it will not be a lonely battle for Blackberry in search of a bright future, especially after the kickoff of the cooperation with other industry leaders.
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