13 September 2014
Research in Motion: The Mobile OS Platform War
Darrell W. Kent, Jr.
Greetings to the Research in Motion (RIM) Board of Directors, Shareholders, Company Executives, Employees, and Financial Analysts. As the newly appointed CEO of RIM I am pleased to address you through this letter to present my ideas, strategies, and recommendations for our company going forward. I write this letter full of enthusiasm and optimism as a result of the positive opportunities which our company is about to embark upon in the very near future. The purpose of this letter is to provide each of you with my vision for RIM over the next five years. In order to do so, this letter will present (1) a situational assessment of the company, (2) my personal interpretation of this situation utilizing the Porter’s 5 Forces Analysis, (3) the translation of the interpretation into proposed strategies utilizing a strategy diamond, (4) the plan for communicating recommendations to the board, and (5) the plan for executing the proposed strategies and recommendations.
Our company sells mobile data solutions through our brand name business BlackBerry. This includes proprietary software built exclusively for our handheld devices. Our company has three core divisions: hardware device production, software development, and maintenance of Business Enter Server (BES). Currently, we are losing in the U.S. market to Apple, Microsoft, and Google. Our devices are lacking in terms of technology and an application store. Apple and Google have invested a lot into R&D and in order for us to stay competitive, we need to reinvest in our core (the U.S. Federal, State, and Local Governments and private sector companies) and internally develop our own technology. Our main competitive advantage in our Operating System (OS) is in our network and our high security system, both perfectly aligned to fit the ideal public and private sector wireless needs. We must leverage these main features to remain competitive in the market. In order to remain competitive, we must overcome (1) lag in technological advances for both hardware and software, (2) losing market share in the U.S. (3) tablet market failure, and (4) collapse of BlackBerry Messenger (BBM) service.
Porter’s 5 Forces Analysis (Exhibit 1)
1. Rivalry is high. The mobile device and data solutions industry is highly concentrated by a few large competitors and numerous small competitors. As a result, the industry rivalry is higher. Firms in our industry compete on product differentiation, not just price. For instance, Apple wants to be revolutionary in user experience and friendliness, while Microsoft wants to be extremely functional. In addition, there are other areas where incumbents can differentiate themselves, included application markets and phone designs. Switching costs in this industry are quite high as people need to learn the different interfaces and usually have to pay high disconnection fees for switching carriers.
2. Threat of entrants is low. The smartphone industry is very capital intensive due to high R&D costs and expensive manufacturing facilities. This raises the barrier of entry and makes it difficult for smaller companies to enter. Many of the firms that compete in this industry have existing long-term contractual relationships with mobile carriers and benefit from their significant brand equity. These companies also have a great deal of knowledge through the experience curve, which gives them a major cost advantage over smaller entrants. New entrants will have difficulty getting carriers to adopt their phones as many carriers are already in profitable deals with the large mobile phone manufacturers. In order to achieve scale in this industry, new entrants would need to invest a substantial amount of resources into supply chains and distribution channels.
3. Threat of substitutes is low. Mobile phones…