The Changing Smartphone Industry Marketing Essay

The changing Smart rally assiduity Marketing EssayResearch in feat ( bound) is a Canadian radio set stratagem connection, best kn sustain as the developer of the b wishingberry smart retrieves. The comp any(prenominal), in its proto(prenominal) years, was known for its attempt-focus, quick harvest-time innovation and its commitment to shelter. Its latest smart phone whirl in October, 2010 was a signifi piece of tailt failure. Overall, it wooly 5% commercialise sh be in the US smart phone food merchandise during the period in the midst of October, 2010 and January, 2011. Its latest launchpad nominate, named the Playbook, announced right after orchard apple trees first tablet, iPad1, is yet to be launched, season orchard apple tree is already selling tens of thousands of units of its second tablet, iPad2. And more(prenominal) recently, line decided that its unseasoned tablet, the Playbook, will check applications created by its competitor, Google.Given this background, we analyzed the industry, backtalks system, its proceeds and processes and their alignment with system. In that light, we propose that the firm do the fol let looseinga) sustainment the android Application Platform on its smart phones too (not unsloped the tablet), while setting new rules in the Blackberry Application w arhousing to incentivize developers march on.b) Focus on enterprise- found product offers via strategic acquisitions that allow complementary color product offerings to establish mellow switching costs and product-bundling opportunities.c) spring new piecenerships with unique cloy providers, telecom companies and stain firms to keep the firm unique and differentiated while maintaining its strategic continuity.Mobile Handset IndustryMarket DynamicsThe globose busy handset industry is one of the fastest growing sub-industries in wireless sector. This industry was valued at approximately $133bn in 2009, a decrease of 6.7% over 2008, mostl y owing to the weakness in the global economy. However, as the global economy recovered, this industry saw enormous shipment ripening announcements from vendors in 2010. Based on industry forecasts1, this industry is expected to ship 1.4 gazillion handsets in 2011, up 19.2% from 2009 levels and is forecasted to grow with a CAGR2of 7.8% during the period 2009-14 to r from each one 1.7 billion by 2014 ( confer with Appendix determine 1). This growth is largely driven by the high smart-phone growth rates, declining smart-phone prices, increased adoption of 3G engineering and the high subsidies given by vendors.Product SegmentationThe global handset market consists of ii product elements cavort phones and Smart-phones. Feature phones (or expeditious phones) argon used for basic brisk communications such as voice, text edition messaging and information transfers, over a standard GSM mobile telecom communicate. Smart-phones are handheld devices, offering advanced capabilit ies in addition to those provided by a feature phone such as e-mail, genial networking or Internet access.Based on market research3 entropy, we anticipate that during the period 2009-14, the Feature phone segment will decline at a CAGR of -15.5%, while the Smartphone segment will grow at a CAGR of 37.8%.The tremendous growth in the Smartphone market is in general due to booming consumer demand and the recent industry trend of crossroad in the midst of hardware, software and services. As consumers increasingly prefer technologies that help them to brook in touch with family, friends and their workplace while they are on the move, the demand for smart devices which are content-rich and support features such as e-mail and social networking applications (apps) will also increase.Market DriversMost of the growth in mobile handset industry has been fuelled by developing countries. Apart from this, the increasing Smartphone usage is fuelling mobile handset market growth. An other(a) m ajor driver for the handset industry is the huge growth in mobile broadband tax tax tax revenues and subscriptions. Mobile broadband adoption is increasing due to the strong growth of Smart-phones, connected laptops and tablets, conjugate with the rollout of high speed networks.Current Trends in Smartphone IndustryShift to Applicationsorchard apple tree, marge and Google name transformed the Smartphone market into a software based environment, transferring value from hardware to software and content. In 2010 Apple dominated the Smartphone app market, offering over 225,000 apps (refer Appendix- Figure 2). Its strict control over approval of apps has allowed it to maintain quality. Apple has already change more than 150 apps from which it generated $2.4bn in revenues. Nearly 5bn apps were downloaded from its App Stores. While bound offers 10,000 apps, Symbian offered only a mere 6,118. mechanical man on the other hand offered 140,000 apps to its drug users to take up second position in the apps market. The Android mart does not gull the same kind of restrictions as Apple, and while this allows for a certain amount more freedom for both developers and users, the quality and compatibility of apps flush toiletnot be guaranteed in the same way.Video CommunicationsSmartphones and other mobile devices (e.g. tablets) are transforming the communication industry, resulting in exponential growth in mobile data traffic. Based on an estimate from cisco, nearly 66% of the mobile data traffic will be for photograph employment by 2014 (refer Appendix Figure 4). Mobile video is expected to grow at a CAGR of 131% between 2009 and 2014. appear Markets new growth enginesMany handset manufacturers are turning to emerging markets to drive growth a soak upst the backdrop of the financial crisis in mature markets. In Asia, India and China are considered the fastest growing markets in the world for handsets. Compared to mature markets such as North the States which had only a 2.5% share of global net subscriber additions in 2010, Asia-Pacific takes a more than more significant share, accounting for 68.4% of total subscribers added. belittled cost manufacturers affecting industry dynamicsInspired by the success of established players such as Samsung, many smaller handset vendors are entering the market to take advantage of the low pre moveation barriers. Local handset manufacturers such as ZTE and Huawei in China and Taiwan and Micromax in India are challenging the established players, driving down prices and profits. These local companies have their own research and development divisions and design their own phones.The Value Chain Smartphone IndustryThe underway value-chain of the smart phone industry is highly operator-centric the network operators have a high degree of control over the device manufacturers they collaborate with, the technology operators they employ, and the content lurch entities with which they align (see Appendix Figure 3). Smartphones and intense competition in the mobile handset industry have only emphazised this trend.A snap-shot of the tell apart players in this value chain Network operator Serves as an inter intermediary for de holdry of content and services. Examples Rogers, Bell, Mobilicity. Technology enabler Provides backend technology required for delivering content. These include providing syllabuss and apps. Act as a mediator between operators and content publishers. Examples Apple, Google, RIM. Content Provider Publish content from motley sources or develop first content. Examples iOS, Yahoo, Google. Smartphone manufacturers Manufacture handsets and other related devices. Examples RIM, Apple, Samsung.However, these boundaries are blurring and there are no vast- position any demarcations of roles, with each actor stepping into the others domain. For instance, Apple and RIM are device manufacturers, technology enablers and also content publishers. Similarly, Google is a technolog y enabler and content provider. As roles increasingly overlap, the result could be a radical change in the value-chain and revenue sharing models.In the incumbent production line model, the operator (e.g. Rogers) receives 60-80% of data revenues while technology-enabled receives 10-20%, the content aggregator receives 10-15% while the remaining 5-10% is shared with the content owners as shown in Appendix (Appendix figure 5).Research in MotionBased in Waterloo, Ontario, Research in Motion (RIM) is the most widely recognized Canadian technology success story. RIM has perfected the blackberry bush solution a mobile solution that combines device, wireless data and voice access, a network operating centre and an operating system (OS) into a verti abusey in corporate single offering and now considered the de facto standard for enterprise mobile solutions. Beyond the enterprise, RIM has been making inroads in the highervolume consumer market, most notably with the successful launch of the blackberry Pearl and Curve.RIM has positive the BlackBerry platform with the demand of both end-users and IT managers in mind. End users look for small device sizes, lengthy battery animation, and ease of use (i.e., intuitive user experience, alwayson connectivity, and low latency).On the other hand, IT managers look for security measure, reliability, compatibility, manageability, low cost of ownership, and integration with existing corporate applications. The BlackBerry platform provides IT managers with centralized precaution and provisioning capabilities, giving them full control over all aspects of the platform, including applications and configuration (e.g. mandatory use of a word of honor to gain access to the handset, overtheair locking and erasing of the data on devices, and the capability to disable outcast features such as Bluetooth or cameras). All told, this has made RIM one of the most trusted providers of data communications.RIM has been extremely succe ssful in monetizing its enterprise netmail subscriber base. RIM has positioned its BlackBerry as a carrier-friendly platform that enables content/services to be delivered by the operators. Time will tell if this locating leads to any long lasting preferred vendor status at the carriers because every OEM understands how critical a flexible business model, where carriers share in the revenues/ profits, is to keep them involved.Core Competencies of RIMHighly encrypted and secure email systemRIM has a very strong RD divisionRIM provides the capability for third ships familiarity companies to develop and provide software applications that run on the RIM hand held devices and they do that by supply the application Programming InterfaceStrategic Analysis of RIMThe authentic strategy of RIM focuses primarily on the enterprisingness market with a smaller footprint in the consumer market though low cost smart-phones. The company is also targeting both enterprises as well as consumer mar ket for its upcoming tablet Playbook. The advantages as well as evils of RIMs reliable strategy are mentioned below-Strengths in current strategyRIM has a significant focus on enterprise market which offers a number of advantages to RIM. The enterprise Smartphone market is growing rapidly and it is expected that further growth will be driven by convergence of fixed and mobile telecommunication. Understanding this future technological trend, RIM introduced the BlackBerry Mobile Voice governing body (MVS) as a voice convergence solution which converts desktop phones/cellular phones to Blackberry devices. With MVS and the PBX integration, Blackberry devices are now equipped with all the features of an enterprise desktop phone (5digit calling, call forwarding, visual call management etc.). This strategy helped to increase the penetration of RIM blackberry devices in enterprises.Another advantage for RIM is its strong relationships with many independent software vendors which provid e RIM many enterprise applications beyond email. For instance, RIM enabled SAP applications to run on the BlackBerry platform. This software incorporating SAP support represents a key deflexion for RIM customers and will enable customers to access SAP applications from BlackBerry applications such as the address book, inbox and calendar.The current strategy also focuses on the non-enterprise consumer segment. While Apple and Nokia are delivering applications and content (that operators could also be delivering), RIM has positioned the BlackBerry as a carrier friendly platform that on the one hand drives ARPU (average revenue per user) for the carriers through its BlackBerry email (and pays RIM between $3$5 per subscriber per month) and on the other, provides a high performing platform that helps operators further monetize the consumer opportunity. By optimizing hardware, software and network services in a vertically integrated offering, RIM BlackBerry platform offers the carriers d emonstrable advantages in spectrum efficiency, battery life and latency.Also, RIMs platform is significantly more efficient than competing platforms for email and browsing. This efficiency stems from higher compression rates achieved with the BlackBerry platform. Higher compression reduces download times (lower costs to carriers) and ultimately provides a better experience for users (lower latency, longer battery life and better connection stability). RIM offers its consumer email through its BIS (BlackBerry Internet Service). The BIS provides pushbased email as well as attachment viewing and Web browsing with the same optimized wireless efficiency as that found in the enterprise offering.Weaknesses in current strategyIn the consumer market, Apple is the market leader with its user-friendly interface and application offerings. One of the weaknesses of RIM in this market is the lack of applications offered by its Blackberry App Store. The Blackberry App Store is an online retail stor e where consumers can download certain apps that are targeted at increasing productivity (spreadsheet managers, note-taking applications, social network connectivity, etc) or providing recreation (another aspect of social network connectivity, games, etc). Blackberry apps have been an in-house closed platform operation until now, i.e. RIM and only RIM has been developing these apps for download, and the platform on which these apps are built is closed to external developers. In contrast, the app store for the explosively popular iPhone is return for developers from anywhere in the world to build apps for the general public to download. As a result, iPhone apps number more or less the 350,000 mark, while the Blackberry app store has approximately 7000 apps.These apps often form a key differentiator for the layman looking to invest in a smartphone. As a result, RIM is poised to be move on further out of the market, unless they can take a quantum leap with their app offerings. In ou r recommendations section, we examine the prospect of a partnership that RIM can forge to rival Apples app store.Another weakness in RIMs current strategy is the delay in its entry in handheld tablet computing market through its upcoming tablet -Playbook. The company has announced the launch of this tablet in mid 2010. However, the launch of the device has been detain until mid 2011 following a number of issues in manufacturing, unavailability of touchscreen displays due to absence of any long term contract with manufacturers. The company has also spend considerable amount of time in application development which could have been offered after the launch of the product through the Blackberry App Store. (For more details refer Appendix Figure 6)Competitive LandscapeApple with its twin offerings of the iPhone and the iPad, along with the Apple App Store repugn directly with RIM on all fronts. Google with its Android O/S (operable on multiple handset makers devices) is another (and r apidly growing) player in this landscape, with their open source platform that allows developers to write Apps that users can download, much like Apples model.In separate to perform a competitory analysis, we further divided the market into two categories, that of Enterprise (corporate) users and that of non-Enterprise (consumer) users.Competitive Analysis in Enterprise MarketAs mentioned earlier, RIM took advantage of an early head-start in marketing their devices to large MNCs, many of whom now have deep, entrenched relationships with RIM. This was due in part to a first mover advantage, and also due to the heighten security that RIM offered for email sent to its devices. The easy integration with existing email systems made the Blackberry phone the device of choice for a majority of corporations looking to equip their staff with mobile email units.The cost of switching from RIM for Enterprise users is essentially that of the legacy systems they have invested in (handsets, serv ers, trained personnel) and contractual commitments. With Apple beginning to offer enhanced security and a push towards productive applications for the corporate workforce, several younger corporations are either startle their staff with iPhones (and iPads) or looking to make the switch from their existing RIM contracts.Under the circumstances, there is an pressing need for RIM to offer additional value to keep these customers anchored, while also remaining a relevant option for new enterprise customers looking to decide for a mobile email-phone provider. RIM needs to follow the concept of Strategic Intent4and structure of Ambidextrous Organizations5to be competitive with other players in Smartphone industry.Competitive Analysis in Non-Enterprise MarketThis segment of users includes both the casual consumer as well as the professional consumer. While the former looks at a plethora of criteria for selecting their handsets and tablets, the latter is focused on devices and phone plans that offer enhanced professional productivity minus the baggage (like firewalls, disabled applications, etc) that accompanies enterprise-provided devices.For both sub-segments, two key decision-making criteria are the processing power of the devices, and the choice (as well as usefulness) of the applications available for download. In this regard, as verbalize before, RIMs BlackBerry and Playbook are at a disfavour because they are coupled with the ill-performing, sparsely populated shelves of the BlackBerry App Store. In comparison, the iPhone and iPad, both very competent devices in their own right, are backed by Apples App Store and iTunes websites, the latter offering a large selection of media downloads, such as songs and movies. (For comparative analysis with various manufacturers refer Appendix Figure 7)For RIM to succeed in this segment, it is key for them to compete directly with Apple on their availability and choice of Apps for download.RIM Strategic creamsBased on o ur analysis of RIM and current trends in smart-phone industry, we see the following options for RIMLeverage Android App Platform and Set bare-assed Rules in BlackBerry App WorldDeepen Enterprise Product Range steady Marketing in BRIC NationsForge Tactical PartnershipsAssessment of RIMs Strategic weftsOption 1 Leverage Android App Platform and Set New Rules in BlackBerry App WorldRIMs App Store strategy must be to increase incentives for its rapidly-dwindling Blackberry App -developer community of interests by offering them higher pay-offs. Additionally, it must monetize a pre-approved Android App store on its phones, just as it did on its tablets. If it can open the Playbook to Android, then it should also open up the BlackBerry phones to Android.Advantages of Option 1If RIM is leveraging Android App Platform for its Blackberry Smartphones, then it will allow the company to increase its available application base from 10,000 to a close to 150,000 (Appendix Figure 2). This will mak e the blackberry phones more appealing to Android buyers (i.e. phones based on Android Operating System). Another advantage of this turn up is that the sales of Android applications through Blackberry App world will ensure a guaranteed cash return for RIM coming from application sales.Additionally, this option will free up internal company resources currently involved in the development of Blackberry applications and help the company to concentrate on the companys core expertness build high-quality smart phones and tablets that run on cutting-edge software. This option will also increase harmony between the PlayBook and BlackBerry smart-phones.Disadvantages of Option 1While there are many benefits of this approach, there are few concerns as well in this direction. First of all, the shift to Googles Android applications for Blackberry smart-phones will further increase the market power of Google. This will make RIM vulnerable to Googles business decisions such as introducing a significant charge for offering Android Apps through Blackberry App world. Another source of disadvantage is related to the security of Blackberry smart-phones. Currently, these phones have applications offered by RIM which are tested thoroughly for interoperability and security. The Android based applications qualification compromise the security of Blackberry smart-phones due to their lower security standards.Option 2 Deepen Enterprise Product Range Via Strategic AcquisitionsOne of the biggest barriers to enter the enterprise market segment is the relationships that a firm possesses with enterprises and their corporate clients. If RIM is to retain and expand its enterprise client base- both in the niggling-term and longer time horizons it needs to expand its offering via tactical and strategic acquisitions. Our suggestion is to do so by acquiring and integrating an enterprise video communication company such as Polycom which is a global leader in Enterprise Video communication s, and shaping it around RIMs existing offering via integration and bundling. To beat the Innovators Dilemma that the firm is entrenched in, it has to go after acquisitions that are aligned with its high-altitude strategy and within the same space, those that can be integrated with the company in a short time-span.Advantages of Option 2There are a number of advantages of pursuing the acquisition of an enterprise video communication firm such as Polycom. First of all, this option provides prompt access to technology and creates a high switching cost for enterprises due to deeper penetration of RIM in enterprise video which forms an authoritative part of enterprise communications. It also creates a huge opportunity to cross-sell complementary product offerings to the existing and non-existing customers. Additionally, RIM can leverage various Polycom offerings such as telepresence6in its upcoming playbook. Apart from non-enterprise users, RIM should offer its Playbook initially to th e existing Polycom customers. This will help the company to see adoption by Early Adopters. erstwhile the Polycom customers like the product, the RIM will be able to Cross the Chasm7and reach the Pragmatists. (refer Appendix- Figure 8)The acquisition of Polycom can also create an opportunity to offer video content and generate revenue through live video streaming on Blackberry/Playbook. Based on our financial analysis, we also saw that Polycoms current valuation provides an opportunity for RIM to capture value and to create value through cost and revenue synergies. (refer Appendix-Figure 9, 10)Disadvantages of Option 2One of the feasible disadvantages with this option is related to the risk involved in any acquisition- cultural and management clashes -which can hamper the growth prospects of RIM. The acquisition will involve approval from restrictive bodies which will require major efforts from RIMs management. There is a possibility that competitors of RIM could also provide a c ounter bid to an acquisition (e.g. Polycom) and make it difficult for RIM to acquire the firm.Option 3 Strong Marketing in Emerging MarketsAccording on the smart-phone industry forecast8, Asia-Pacific market will be the largest smart-phone market during 2009-2014, recording a CAGR of 30% in that period. As a result, an option for RIM is to gain a huge market share in emerging markets through strong marketing efforts.Advantages of Option 3If RIM can capture a strong market share in Emerging Markets, then it will allow the company to increase its revenue many-folds. Another advantage of this approach is the competitive advantage RIM will have over Apple since Apple does not have a strong customer base in the emerging markets due to high price of iPhone. RIM on the other hand, offers a variety of smart-phones which satisfies the need of price sensitive users as well as business users. Additionally, the marketing costs are far less in emerging markets as compared to North America and Eu rope.Disadvantages of Option 3First of all, the shift to emerging markets will produce RIM to competitive crush from local handset manufacturers such as Huawei whose generic strategy is cost leadership. Another source of disadvantage is related to the security of Blackberry smart-phones. The secure email facility offered by RIM is encrypted and there has been security concern in many countries regarding the encrypted nature of these mails which can become a method of communication of for terrorists and shepherds crook organizations.Option 4 Forge Tactical PartnershipsJust like RIM has large partners like Microsoft in the enterprise space, it should strive to aggressively partner with other large companies that create content, mobile networks and cloud platforms. For example, it can forge ties with Amazon to get access to valuable content and services like its new cloud player it can tie-up with gaming companies to create exclusive gaming on its tablets and blackberries, that appe al to its user base games that would appeal to its enterprise-oriented clients. Additionally, it must use exclusive contracts with mobile network companies, when appropriate in order to maintain its exclusivity and security.Advantages of Option 4Tie-ups with large partners would be a game-changer, and would set RIM a notch above its competition and allow it access to unique content providers. Additionally, it will also provide quick access to cutting-edge technologies to RIM without diverting its focus from its core competencies.Disadvantages of Option 4One possible disadvantage is that this option exposes RIM to the risk of exposing its intellectual property to partners. As a result, the company might lose its core competencies due to imitation by partners.Future Recommendations for RIMAfter analyzing the firms core competencies, its current product portfolio and resources which are unique and inimitable, future options we recommend that the firm should return its focus on its airplane pilot capabilities within the enterprise markets and corporate customers. The high-level strategy for RIM should be to speed up product development, enhance security and function to appeal better to enterprise/corporate customers and increase its product range through strategic acquisitions and partnerships.RIM possesses a critical mass in its relationships with enterprise segment/corporate clients and the best lever to protect that is enhance its product offering, security and functionalities, and align them to its existing product portfolio and touch on product development. This should be done after the market has been tested enough through small, rapid experiments. In a fast-changing smart-phone market (Figure 6), where the firm virtually had highest market share once, the best bet for the company is to or so change its strategic position by making new trade-offs and make speedier product iterations, to remain differentiated. more specifically, we recommend the fol lowing three key steps to implement the strategy for RIM on a short and long term1) Leverage Android App Platform and Set New Rules in BlackBerry App World2) Deepen Enterprise Product Range via Strategic Acquisitions3) Forge Tactical PartnershipsAdditionally, we analyzed what our strategy would look like in the growing emerging market segments, and we believe that the above strategy of rapid product development, broader product offerings and unique partnerships with content providers/networks would be applicable to those markets as well, where RIMs strategy should maintain exclusivity and security and remain enterprise-oriented. We do not see aggressive marketing in emerging markets (option 3) to be a promising option for RIM going forward.In conclusion, there is still a significant enterprise/corporate market that demands high-quality, sophisticated and secure products. RIM, with its strong commitment to security, loyal user base and dependable partnerships should deepen its foc us on this customer base and remain unique and differentiated.AppendixFigure1. Global mobile handset shipments (m), 2009-14Year200920102011201220132014CAGRUnit Shipments(m)91234137314851602169717967.80%Growth%11.3%8.2%7.9%5.9%5.8%Figure2. Smartphone Apps MarketPlatformSymbianRIMAndroidApple iOS tally of Applications10611810000140000225000Figure3. The Value Chain Smartphone IndustryFigure4. Market Share Video CommunicationSource CiscoFigure5. Revenue sharing modelSource Business InsightsFigure6. RIM SWOT AnalysisStrengthsWeaknessesStrong market presence in the enterprise segment is driven by its flagship BlackBerry device.A weak content strategy coupled with a poor ecosystem is impacting on the companys competitiveness.Robust profits continue to shield the company from competitive threats.RIM derives a substantial 63.1% of its revenues from North America. Concentration of revenues from a single region could expose the company to considerable risk.OpportunitiesThreatsThe company is targeting the youth segments in emerging markets by offering social networking and multimedia featur