In 2009, Blackberry, then known as Research in Motion was a leading player in the Smartphone industry (Palenchar, 2013). The company had a 20% stake of the Smartphone market and had a near monopoly in the business service sector with its business solutions. At that time, the company was valued at over US$ 83 billion (Blackberry Still in a Jam, 2013). However, three years later in 2012, the stake of the company in the Smartphone market had reduced to only 5%. Besides, it was experiencing financial turmoil. This was a great decline for a company that had displayed dominant performance a few years ago.
This report will analyze the reasons behind the poor performance of Blackberry and the subsequent financial problems that the company faced.
According to Downes and Nunes (2014), the big bang disruption which refers to a new kind of innovation, can significantly interfere with stable business within a short span of time. Big bang disruption has a dramatic effect on technology companies because it is the result of better and cheaper disruptive technologies being introduced into the market (Downes and Nunes 2014). Owing to the availability of cheap internet, consumers are able to know about the big bang disruptors. If the disruptors prove popular, they can impact the growth of new organization at the expense of the operating technologies.
The touch screen phones were introduced in the market by the unveiling of Apple’s iPhone in 2007. However, the Blackberry executives still maintained that ‘they had such a dominant market position that was so profitable.’’ They did not want to be seen as undermining their monopolistic position by unveiling products that are radically different (Hessman, 2013). The touch screen had become a big bang disruptor. Blackberry did not release any innovative products or solutions, but stuck to doing what they considered to be working at that time, thereby losing a significant share of the market.
Poor sales of products have led to the financial problems faced by Blackberry. The company released the Playbook tablet computer to rival the iPad introduced by Apple (Blackberry Still in a Jam, 2013). However, the sale of Blackberry’s Playbook was quite disappointing since it was unable to deliver good sales. The latest Smartphone product of the company is Z10 which has also faced low sales that were even much less than what was expected by the company (Blackberry Still in a Jam, 2013).
The enterprise market is among the main revenue drivers of Blackberry. However, it has been under serious pressure from competing companies. Many have chosen Blackberry for enterprise business solutions because of the security features that it is enhanced with. Companies that use the enterprise business solution had to acquire Blackberry phones for their employees, thereby enabling the company to command a larger market share in this area. However, a new movement has surfaced, the Bring Your Own Device (BYOD) (Company Profile, 2013). The trend of organizations using Blackberry phones is swiftly coming to an end. Employees can now use the same Smartphone for work and also personal needs. This is an indication that Blackberry is losing its position as the business phone of choice in addition to also losing its consumer base. These loses have negatively impacted the revenues of Blackberry.
Blackberry is faced with serious cash flow problems. The company reported $965 million quarterly loss. The company’s revenue reduced by 45% in 2013, while its cash position at the end of the third quarter went down from $3.2 billion to $2.6 billion in 2013 (Connors, 2013). Besides, Blackberry also had to write down its inventory valued at $960 million (Blackberry Still in a Jam, 2013). This was influenced by poor sales of the Z10. Blackberry’s cash is therefore tied up in stock that it is unable to sell. As a result of the poor cash flow, the company introduced a rationalization program that saw the cutting of about 4,500 jobs that represented 40% of the workforce. The cash flow hitches came up as a result of the failure of the company to switch its stock of Z10 Smartphones.
The profits forecasts of the company were negatively impacted by flight delays in the launch of its flagship product. The launching of the Z10 smartphones came up after several delays (Hessman, 2013). The technology market is quite dynamic and under constant flux. The delay in the launch of the product significantly reduced the profitability of Blackberry (Blackberry Still in a Jam, 2013). The operating system for Blackberry also appears to be out of date compared to Apple’s iOS and Google’s Android. This has placed Blackberry at a very disadvantaged position in the market.
Blackberry lost track of the shifting user preferences in smartphones. It pioneered the use of keyboards on phones. People who wanted to type from their phones preferred using the phone because it made typing to be much easier. However, ‘’many Smartphone users have moved to touch screen models’’ in the recent past (Austen, 2013) Even though touch screen phones have their demerits when it comes to typing due to many typing mistakes, the enhanced screen size and better user experience account for this. The Smartphones manufactured by Blackberry, which maintained the physical keyboard were no longer attractive to customers. This resulted into the substantial loss of Blackberry’s market share to the touch screen smartphones.
The poor performance demonstrated by Blackberry was as a result of many reasons. The company had poor innovative skills and failed to deliver desirable solutions. Besides, it also had poor revenue streams owing to the competition in the enterprise market. Poor sales of the flagship product Z10 Smartphone had a multiplier impact of reducing the profitability of the company, thereby hampering cash flow. The connections between all these factors contributed to the poor performance of Blackberry.
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Austen, I. (27 September 2013). Blackberry’s future in doubt, keyboard lovers bemoans their own. NYT
Connors, W. (27 September 2013). Blackberry posts loss as phones go unsold. Inventory buildup prompts charge of about $1 billion. The Wall Street Journal
Downes, L & Nunes P. (2014). Big bang disruption: strategy in the age of devastating innovations. New York: Penguin
Hessman, T. (2013). A Long Fail from the Top. Retrieved from www.industryweek.com
Blackberry still in a jam. Going private will not solve the company’s problems. (28 September 2013). The Economist.
Company profile: Research In Motion Limited. (2013). MarketLine.
Palenchar, J. (11 February 2013). Analysts: BlackBerry Facing Tough Battle. Retrieved from www.twice.com