BMO2002 Final exam Extended Business Case Study 1 Can BlackBerry Bounce Back? Conducting a SWOT to Guide Strategy (Source: David C. Kimball. 2017. SAGE Publications: SAGE Business Cases Originals, Online ISBN: 9781473996564) The Case Jamal Obu had been working at BlackBerry Limited for five years as a marketing analyst when he was asked to conduct a strategic environmental assessment for BlackBerry by the vice president of Marketing. Although BlackBerry once enjoyed the bulk of the mobile phone market, by 2015 BlackBerry was struggling. The competitive advantage that BlackBerry enjoyed was due in large part to their small phone with little buttons that looked like blackberries. However, Apple and Samsung developed cell phones with touchscreens and digital keyboards that made the BlackBerry cell phones appear ancient. Jamal's boss wanted a strategic environmental assessment in order to guide the company in their strategic planning. BlackBerrywas caught completely off-guard by the rise of Apple's iPhone and they needed to devise a strategic plan to recapture market share. Jamal and his fellow workers were going to need to develop a vision for the future of the company if they expected to compete. Jamal decided to use a SWOT (Strengths, Weaknesses, Opportunities, and Threats) as a framework to evaluate BlackBerry's situation because he knew that format would allow him to organize the quantitative and qualitative data necessary to help him understand the external and internal factors at play. Jamal had learned about SWOTs in his MBA and knew the assessment tool was created by Albert Humphrey, who led a research project at Stanford University in the 1960s and 1970s using data from many top companies. Humphrey's goal was to identify why corporate planning failed. He identified areas of strategic importance that he called SOFT: "What is good in the present is Satisfactory, good in the future is an Opportunity, bad in the present is a Fault, and bad in the future is a Threat" (Humphrey, 2005). "F" was subsequently changed o "W to better reflect the weaknesses that existed within the company. The elements of the first SWOT were published in 1965 in Business Policy, Text and Cases by Learned, Christensen, Andrews and Guth (Morrison, 2016). That text became the most popular textbook in the academic study of strategic management, and Jamal knew from completing strategic cases from that book that a properly conducted SWOT could lead to finding new opportunities (such as entering a new industry) that matched the strengths of their organization. He knew that SWOTs were valuable tools that could be used to stay abreast of changing industry factors. As such, Jamal knew that such an assessment could help inform BlackBerry's strategic planning, but he was unsure what direction his SWOT might lead the company in their current dire situation. Identifying Internal Factors with SWOT To prepare for his SWOT, Jamal set out to gather internal information regarding BlackBerry's strengths and weaknesses. Jamal knew that separate SWOTs could be brought together from areas such as marketing, finance, operations, research and development, andcustomer service to develop a single unified SWOT for the entire company. Jamal called upon various departments to offer SWOT analyses because he wanted to collaborate in order to pull together more detailed information. He reminded each department to be honest in their assessment of their part of the company. Each department offered information about their inner workings. The marketing department brought Jamal a SWOT that analyzed product sales, pricing, advertising, and distribution. The finance department brought Jamal the fiscal results from different products and areas of the company. The research and development department reported on patents and product development. The operations department brought statistics on how much fixed and operating capacity BlackBerry was utilizing, and the customer service department reported on customer satisfaction levels with the company's products and services. Strengths When Jamal analyzed the departmental SWOTs he was able to identify several of BlackBerry's strengths. BlackBerry was once the most respected name in the mobile communications industry, and the brand continued to be very well known. The brand remained well liked by its supporters and still retained some popularity in its local market of Canada. According to Barker (2011), "Throughout early decades of the twenty-first century, the BlackBerry was synonymous with business connectivity. Its strong support for email, messaging, global roaming, and mobile document editing made it the best in class among the other fledgling smartphone platforms." Add in the fact that BlackBerry was a "cute" phone with the little blackberry-shaped buttons, and BlackBerry had an easy time marketing their product. BlackBerry had 595 million dollars in revenue in 2004, and revenues rose to a high of almost 20 billion dollars in 2011. Unfortunately, revenue decreased to 2.1 billion dollars by 2016 BlackBerry's net income also peaked in 2011 at 3.4 billion dollars. By 2016, their net income was a loss of 200 million dollars. Unfortunately, like many strengths at BlackBerry, their financial strength weakened as strong competitors such as Apple entered the cell phone market. Despite this reduction in financial strength, Blackberry remains a billion dollar company trusted by business people to provide secure, cellular phone service BlackBerry's major strength continues to lie in the 44,000 extremely valuable patents they own. According to Decker (2015), "Their security patents are desired by many companies within the mobile communications industry. Their patents are mostly related to security and basic wireless technologies. The company has a combination of older patents on the basic functioning of a mobile phone, as well as newer ones on security and on consumer-friendly features such as predictive typing on a keyboard." Weaknesses When Jamal analyzed the SWOTs, he saw that BlackBerry had significant weaknesses according to all of the departments. Marketing and finance both reported that BlackBerry subscribers dropped from 85 million subscribers in 2013 to 46 million in 2014. This number is expected to drop further in 2015 and 2016. The BlackBerry QWERTY physical keyboard used to be the envy of the industry, but BlackBerry's operations department reported that the small blackberry-button keyboard they were so proficient at manufacturing was being replaced by touchscreen and virtual keyboards. Consumers had clearly switched their preference from small physical keyboard buttons to the touchscreen and virtual keyboards 2used in Android and Apple phones. This shift meant operations had the fixed capacity to build more mobile phones than they could sell Marketing and finance also noted another weakness that BlackBerry had experienced: the lack of any real, recent success in marketing their new smartphones and tablets. The marketing department reported to Jamal that BlackBerry reached their high point in sales revenue in 2011. Since that time, the marketing department had experienced trouble marketing and selling their Playbook tablets (even though they were well designed) in the face of stiff competition from other tablets, such as the Apple iPad. They also reported difficulty in marketing and selling the PRIV in 2015. The PRIV, a secured smartphone powered by Android failed to gain market traction. Another weakness cited by BlackBerry operations occurred in October of 2011. At that time, BlackBerry (then known as RIM) experienced a glitch in their software that created an email outage that started in Europe and spread to the United States. Although the outage only lasted a few days, it was surprising since the company prided itself on their secure networks (Ulanoff, 2011). Identifying External Factors with SWOT After reviewing the SWOTs from the different departments, Jamal conducted research to help him identify and understand the external forces affecting BlackBerry's performance. As Porter's Five Force Model (1998) predicts, there are at least five major external forces management leaders need to assess: the entry of new competitors, the potential for substitute products, the strength of their suppliers, the ability of consumers to switch to competitor products, and the nature of the ring itself where the companies fight for market share. In the case of BlackBerry, they were an early leader in the cellular phone industry and had faced each of these external forces since their inception. In the beginning, their high market share allowed them to have control over their suppliers, since the suppliers did not have many other companies to sell to in the mobile phone industry. The customers loved the little keyboard and they respected BlackBerry for the high security measures associated with their phones. Unfortunately, BlackBerry was vulnerable in regards to substitute products and the threat of newentrants-they could not block other companies from entering their mobile phone market. Companies like Samsung and Apple were able to develop their own software to make smartphones with larger, well-lit screens, and faster software to make and send emails and text messages, and to stream video. Within the decade of the 2000s, the BlackBerry went from the coolest product on the planet to an outdated technology when compared to the Apple and Android lines of smartphones. Jamal understood this experience in terms of Porter's (1998) Model of Competitive Advantage: BlackBerry had lost most of their competitive advantage as it struggled to survive the rivalry in the mobile technology industry. Companies like Apple had strengthened their position by developing and diversifying (with products such as tablets, laptops, and watches), which would have been equally good for BlackBerry to have tried as business strategies. Opportunities In reviewing the SWOTs from marketing, finance, operations, and research and development, Jamal drew together a list of BlackBerry's opportunities. He was relieved to see that BlackBerry had several opportunities that they could take advantage of before it 3was too late to save the company. The first opportunity BlackBerry had was to make their products available in different formats-including Android, iOS, and Windows Phone-which they had been working with since 2013. BlackBerry had started to market their first Android smartphone, the PRIV, with a slider keyboard and a curved screen. Although BlackBerry was in the position to sell a business-friendly Android phone with the services needed to make it safe, the PRIV was priced too high. It was priced at the level of Samsung and Apple phones, and did not do as well as expected. BlackBerry has an opportunity to offer a lower priced PRIV, which is be expected to do well in emerging markets and with cost-conscious American consumers. Would the reduction in the PRIV price be enough to capitalize on BlackBerry's security strengths and compete against its industry rivals? Another opportunity for BlackBerry is the potential sale of the company, or parts of it. Cellular phone companies such as Samsung have been interested in acquiring BlackBerry - especially for their patents. BlackBerry's high level of security measures still makes it a preferred supplier for government users. BlackBerry also has an opportunity to be more aggressive in the cell phone market. Under current CEO, John S. Chen, they purchased Good Technology in September of 2015. BlackBerry acquired Good Technology for $425 million, giving it one of the better-known names involved in making smartphones work-friendly. Good Technology is well-known for helping corporations and governments keep tabs on non-BlackBerry platforms, especially iOS. According to Lopes (2015), the acquisition of Good Technology indicates BlackBerry is moving towards services to protect phones. Threats Jamal applied Porter's Five Force Model to better understand the external forces affecting BlackBerry's business strategy. Porter's Five Force Model predicted the middle box (the competitive ring) as being the strongest of the five forces in most industries, and Jamal found this to be true in BlackBerry's case. BlackBerry is still facing major threats in the cellular phone industry as a result of competitive rivalry. Although once considered the leader in the cellular industry, BlackBerry has lost its market share and is threatened by the huge success of companies such as Apple, Samsung, and Google. These companies have been extremely successful in their entrance and expansion in the cellular phone market and their technology offerings and marketing techniques appeal to a large portion of mobile consumers. As a result of these and other factors, BlackBerry's stock price dropped from about $60 a share in 2010 down to about $7 a share in 2016. The financial market has not been supportive of a turnaround at BlackBerry. BlackBerry will have to work closely with suppliers to get lower prices (despite their reduced market share) to compete in this market. BlackBerry also has to be creative and develop interesting marketing techniques and newhi- tech products to attract customers. The rapid change in technology will be present in the cell phone industry for many years to come, with the threat of new entrants and substitute products ever present in addition to the competitive rivalry issues. However, Blackberry should also be aware of employee morale and keeping spirits high. Unfortunately, Blackberry laid-off 40% of their workforce in 2011, and further employee reductions occurred in 2015. The CEO in 2011, Mike Lazaridis, was targeted as the man at the BlackBerry helm when the company collapsed (Hicks, 2012). For BlackBerry to rebound, it is important to put that period of low morale in the past. The telecommunications industry has new opportunities in the cellular phone and security fields. Keeping spirits high, looking for newopportunities to form alliances with competitors in their 4industry, and keeping creativity flowing so new products can be manufactured and marketed is more critical than ever at BlackBerry. Analyzing a SWOT In his research and analysis, Jamal came to realize that conducting a SWOT analysis is as much about the process as it is about what is listed in the strength, weaknesses, opportunities, and threats sections. For BlackBerry, Jamal focused on the importance of identifying and addressing the significant problems they faced in their external environment. It was clear that BlackBerry was going to have the address their internal weaknesses and external threats and develop some future strategies to overcome these problems. Jamal hoped that his multi-departmental SWOT would help BlackBerry conduct a strategic environmental assessment in order to guide the company in their strategic planning. In his analysis of the current SWOT, Jamal realized that BlackBerry would need to develop strategies to keep ahead of changing industry factors, but what strategies would help the company emerge from its downward trend and recapture its market share? Should Jamal suggest market penetration, market development, diversification in new businesses, forward integration into the distribution channel, backward integration into the distribution channel, or even divesting certain lines of businesses? Despite the breadth of information he had collected from multiple departments, Jamal realized multiple SWOTs and analyses would be necessary to guide BlackBerry in the design, implementation, and refinement of its corporate strategies as it attempted to bounce back from its market decline. 5