Introduction: Issue Identification
The mobile phone business sector is one of the fastest growing industries not only in the United States but in the rest of the world. Industry experts have previously released reports suggesting that the industry grew by at least 7.3 percent in the year 2013 , which was actually a sharp rebound from the mediocre growth rate the mobile phone market industry got a year before. The market growth rate in 2012 was 1.2%. Some of the most prominent names in the said industry are Samsung Electronics, Apple, Sony Electronics, Lenovo, and Blackberry, just to name a few. The two biggest players are currently Apple Inc. and Samsung Ltd. This paper will focus on the two mobile phone companies: Samsung Electronics and Blackberry. The objective is to present a case analysis comparing the two company’s mobile phone departments. Evidences will be obtained from performance indicators such as market share, average product ratings, sales figures, and etc. The author has written the paper under the assumption that Samsung Electronics’ mobile phone department is superior to that of Blackberry. Therefore, the objective of the analysis would be to identify and explain the reasons why the former’s mobile phone department is superior to that of the latter.
Issue Analysis: Samsung Electronics vs. Blackberry Ltd.
Samsung Electronics
Samsung is one of the giants in the mobile phone manufacturing and distribution industry, thanks to the rapid and sharp increase in the demand for smartphones in the past years. The company was founded in 1938 in South Korea’s capital, Seoul. Samsung initially started as a trading company. However, over the next few years after its establishment, it quickly diversified into other industries such as industrial food processing, insurance, securities and retail, textile manufacturing. It was not until the late 1960s that the company entered the electronics industry. Only few of the company’s ventures became successful. Nonetheless, thanks to its construction and ship-building departments, both of which were opened in mid 1970s, the company was able to offset its losses. By the end of 1990, the Korean electronics group had already finalized its plans and proposals to enter the global stage, with the electronics—particularly the mobile phone department and semiconductors industry ventures as its main sources of income.
Samsung electronics has in the past years experienced a continuous increase in financial performance, thanks to its highly successful line of mobile phone products, the Samsung Galaxy line, with the Samsung Galaxy S4 being its current flagship mobile phone device. The average 2005-2012 revenue of the Samsung Group subsidiary was at 80,629,510 (in Millions of Korean Won, KRW); 85,834,604 in 2006-12; 98,507,817 in 2007-12; 121,294,319 in 2008-12; 136,323,670 in 2009-12; 154,630,328 in 2010-12; 165,001,771 in 2011-12; and a revenue of 201,103,613 in 2012, all in millions of KRW . The continuous upward movement of the average revenue over a period of time that Samsung Electronics exhibits only shows that the company is yet to experience a slowdown. It can also be asserted that the upward trend since the past decade experienced by the subsidiary is a sign that the market is yet to be fully saturated by its products as explained by the principles of the product life cycle.
Currently, Samsung is the leading company in terms of the total volume of smartphones shipped in 2013. The following table summarizes some of the biggest players in the smartphone market’s smartphone sales volume. From the following, the respective market shares of the mentioned companies can be obtained by dividing the volume that a particular smartphone got for a particular quarter to the total volume of smartphones shipped for the same quarter.
What can be inferred from these tables is that Samsung Electronics has been the leading manufacturer and distributor of smartphones since the 4th quarter of 2012, beating every single competitor in the market and being a close second to the Others category (group of local and smaller international smartphone manufacturers and distributors). In the year 2012 alone, Samsung Electronics held at least 30.4 percent of the entire global smartphone market which again is the highest share in the pie. For the year 2013 on the other hand, its share in the smartphone market increased slightly but still significantly by around 2 percent, making its outstanding market share to 32.30 percent, which again, is still the highest in its category, except for the collection of domestic and smaller international smartphone manufacturer and distributor. Also, the reason why Blackberry was not on the list is because it is currently not included in the top five lists of smartphone manufacturers and distributors, at least in terms of the total volumes shipped. The fact that Samsung has still managed to increase its market share despite analyst speculations that suggest that the smartphone market would soon be saturated is actually a good sign. This breaks such kind of speculations and can actually be a good sign for Samsung and its investors.
Blackberry Ltd.
Blackberry Limited is a Canadian company that is formerly known as Research In Motion Limited or RIM. It was established in 1984 in Ontario, Canada. Its business operations are rooted in the research, development, manufacture, and distribution of telecommunications and wireless tools and equipment. Blackberry Limited is the company behind the Blackberry brand that is in turn famous for its line of feature phones and smartphones. It cannot be denied that Blackberry has had its share of the limelight not only I the U.S. smartphone and feature phone industry but also in the international arena. However, almost every business and technological analyst would certainly agree that the U.S. smartphone and feature phone market has been one of the most profitable venues for Blackberry. In 2010, the company held 43% market share in the U.S. smartphone industry, side by side with Google’s line of Android devices—manufactured by different companies, and Apple’s iPhones .
Just like what was done with Samsung Electronics, Blackberry’s financial performance will also be analyzed. Blackberry’s average revenue for 2004-12 was 2004 (in millions of U.S. Dollars, USD); 1,350 in 2005-12; 2,062 in 2006-12; 3,307 in 2007-12; 6,028 in 2008-12; 11,065 in 2009-12; 14,953 in 2010-12; 19,907 in 2011-12; and 18,435 in 2012-12; and 11,073 in 2013-12, all in millions of USD . These figures were obtained from Blackberry’s official financial and cash flow reports. What we can see here is a consistently upward trend from 2004 until 2011. Blackberry Ltd.’s revenue started to experience a decline starting in 2011 and continuing well until 2011. The company’s revenue declined by at least 7.4 percent in 2011 and further by a staggering 40 percent in 2012. This was primarily due to the fact that their line of devices has been overshadowed by the continuously increasing streams of more affordable and higher performing android devices from competitor companies like Samsung Electronics, Sony, HTC, Huawei, LG, and etc. . A 40 percent loss in revenue is a huge loss. The huge loss in revenues should also be one of the reasons why its stock prices sharply plummeted in 2011 and 2012, after a period of record-breaking highs in the preceding years. The issue for both Samsung and Blackberry here is the changes in their revenues—a key indicator that is greatly affected by a lot of factors such as product quality, affordability, market behavior, and consumer preferences, among others.
It would be beneficial to review Blackberry’s market share. Since Blackberry is the sole manufacturer of mobile and smartphones that come with a Blackberry Operating System, analyzing the smartphone market composition in terms of the Operating System used would be possible. Below is a table that outlines Blackberry’s market share against its competitors for the years 2012 and 2013.
Based on this chart, Blackberry owned a meager 4.1 percent of the smartphone market in 2012 and in 2013, that market share was slightly increased to 1.7 percent. The smartphone market actually grew significantly from year 2012 to 2013 which indicates should tell that a competitive smartphone industry player should at least be able to experience an increase in market share. Clearly, this was not the case for Blackberry. Their market share is dwindling. The formerly poorly performing Windows Phones are experiencing an upward trend when it comes to demand as opposed to the market consumers’ loss of interest in buying smartphones that were coupled with an official Blackberry operating system.
The table above clearly shows how considerably fewer Blackberry has spent for research and development in general compared to Samsung. This may be the key as to why Blackberry has been left out by its competitors, not just by Samsung, in the Smartphone market when it comes to sales, which unfortunately, has a directly proportional effect on revenues.
Below is a table that outlines the Strengths, Weaknesses, Opportunities, and Threats that Blackberry Ltd.’s management should consider in making solutions to the current issue and making plans for the future.
Alternatives Considered
Based on all the information gathered, it clearly appears that Blackberry Limited Is the one that needs some help. Based on their financial reports, their share in the global smartphone market is dwindling every year which prompted some analysts to say that for now, Blackberry has to fend for itself and forget competition first . Their annual revenues are also taking a hit. Their growth as a for-profit organization is obviously taking a hit. If things like these continue for them, then that could only mean one thing—that they are doing something wrong. Blackberry used to be so dominant in the smartphone industry, especially in the U.S. market. They held some 43 percent of the total U.S. smartphone market in 2010, which was by far their most triumphant year before they started slowing down and being devoured by the Android, iPhone, and Windows Phone makers. Below are three main things that Blackberry’s management could do to turn the problem around:
- Focus more on Research and Development
- Continuously Invest in Product Marketing
- Actually Deliver Products that would be competitive Hardware and Software-wise
Recommendation and Rationale
Research and Development is an integral part of selling a product. In fact, it can be asserted that the R and D part is where all things that could be turned into money starts . A product that has been carefully and successfully researched and developed has higher chances to capture that market’s attention than a poorly researched and developed product. Most of the time, it all boils down to the budget allocation for R&D. Naturally, a company that has a larger budget allocation for R&D is more likely to actually deliver products that are competitively attractive to the market. Our main recommendation for Blackberry Limited is to increase their R&D budget allocation and improve the aesthetics and features of their products up to a point that consumers would think twice before buying smartphones from competitors like Apple and Samsung, something which does not really happen these days, or even in 2013.
Implementation Plan
The following Implementation Plan for the Short, Medium, and Long Term was made in the form of milestones. Meaning, the company would not be able to start accomplishing the medium term goal if it continuously fails on accomplishing the short term goal and the same principle applies to the long term goal.
Long Term Goal
- Boost the Global Smartphone Market Share to 10% within the Next 3 Years
Medium Term Goal
- Boost the Global Smartphone Market Share to 7% within the Next 2 Years
Short Term Goal
- Boost Current Global Smartphone Market Share to 4% within the Next 1 Year
Action Plan for the Short term, Medium Term, and Long Term Goals
- Improve partnerships with Application and Game Developers for Mobile
- Release Hardware and Software-Competitive Products
- Implement More Aggressive Product Marketing and Advertising Efforts
References
Blackberry Ltd. "Financial Report 2012." Blackberry Ltd. (2013).
Gupta, J. "Blackberry Deal Bolsters Foxconn's Makeover Gambit." Reuters (2013).
Hopp, W. and M. Spearman. "Factory Physics." Waveland Press (2011).
Reed, B. "Windows Phone is Surging at Blackberry's Expense." BGR LLC (2013).
Restivo, K. "Worldwide Mobile Phone Market Forecast to Grow 7.3% in 2013 Driven by 1 Billion Smartphone Shipments." IDC (2013).
RIM. "RIM Press Release 2012." Research in Motion (2012).
Samsung . "Financial Report 2012." Samsung (2013).
