1. Running Head: THE FALL OF BLACKBERRY 1
The Fall of Blackberry
Christina Cecil, Kent Tieber, and Sawsan Alali
National University
2. THE FALL OF BLACKBERRY 2
Table of Contents
Abstract…………………………………………………………………………………………... 3
Introduction…………………….………………………………………………………………… 4
Discussion…………………………………………….………………………….…….………… 4
Conclusion……………………………………………………………………………………….. 7
References…………………………………………………………………………………...…… 8
Appendix………………………………………………………………………………………… 9
3. THE FALL OF BLACKBERRY 3
Abstract
In the last eight years the major companies of smartphone has changed. Consumer
preference has drastically changed. The Advances in technology have enabled competing firms
to produce ever more hi-tech feature devices. In addition, the global market, both in terms of the
major companies involved, and the types of devices that are sold, is quite different from the U.S.
market. The market has evolved considerably in the last eight years, and it has become ever more
complex. BlackBerry was a leader in telecommunication wireless; they had a market value of
over $80 billion back in 2008. As of now, it’s only $4.3 billion. In fact, over the past three years,
the company’s market share in North America falls from about 70% to 5% (according to IDC).
The demand shift is the most important for the firms, this shift according to significant threat of
Substitutions. This paper briefly discusses how Blackberry’s target market had shifted quickly,
and as a result Blackberry is no longer a consideration in this market space.
4. THE FALL OF BLACKBERRY 4
Introduction
According to Forbes (2014), “iSheep” is being coined for iPhone owners for their blind
loyalty and 59% of the owners admitted to this. Creating an inelastic demand is a huge part of
the cell phone business. Prior to June 2011, most people were very familiar with Blackberry
Limited, a global leader in telecommunication wireless innovation, formally known as Research
in Motion. A company that appeared to understand the market process very well, and who was
the creator of the once very popular cell phone, the Blackberry. According to Forbes (2010)
“We expect Apple’s market share to overtake that of RIM by 2011, and for Apple and RIM to
have 11% and 8% market share”. This would be an analysis that would ultimately be off target.
Subsequently, in 2013 RIM was stated as having 1.5% of the market share and recently it was
stated “BlackBerry’s global smartphone market share is now barely a blip on the radar” (Epstein,
2013). Understanding the economics of business and associated business risks are key
responsibilities of firms. What Economics and managerial decisions occurred from 2010 to
present that caused RIM to loose so much ground?
Discussion
Understanding demand shift is very important. Being able to respond is even more
critical to remain profitable. Keats 2012 seventh edition states, “Changes in the nonprice
determinants result in changes in demand, (i.e. shifts in the demand curve.)” For example,
Blackberry’s, its consumers had changed from once selling to corporate consumers quickly
changed into selling to retail consumers. The market place was shifting as more and more
people were accustomed to getting information very quickly and easily. The ease of information
and how you get is more and more of a cultural phenomenon in the United States shaping
consumers behavior. This set the stage for creating challenges with understanding the client,
5. THE FALL OF BLACKBERRY 5
demand and an effective corporate culture which is discussed below. Appendix #1 shows a drastic
drop in Blackberry’s stock. Seeing it drop from $60 a share down to almost $10 in 2011. If
stock price is related to consumer confidence then this is a clear indicator of what the consumer
thought of Blackberry. If one correlates confidence to demand then one can conclude that
demand was dropping significantly. This dynamic of supply and demand is the most important
for firms to understand about stock prices. While investors may want to assign a value to a stock,
such as declining EPS or revenue, it is the market and the relationship between supply and
demand that sets the price. While consumer confidence was dropping the demand for the
blackberry cell phone also shifted. Firms having the ability to address this is essential to stay
relevant and in the market. For this reason having the right team to understand Managerial
Economics is key.
The significant threat to smartphone manufacturers is Substitution. The market is
characterized by constant product introductions, quickly evolving technology and designs, short
product life cycles, aggressive pricing, rapid imitation of product and technological
advancements, a high price sensitivity of consumers. Although the technological innovation is
rapid in the smartphone market, any edge a particular firm might obtain, whether it be
technological or industrial, is diminished by rapid imitation. With some exceptions, smartphones
from most manufacturers at any given time have relative feature parity in many respects, making
substitution relatively easy from the consumer’s perspective. Although no specific numbers are
available, the evidence points to relatively high self-elasticity of demand. Smartphone
manufacturers compete heavily on price, and small changes in price often result in increases in
sales (Cromar, 2010).
The feature phone is the primary competitor outside of the smartphone market.
6. THE FALL OF BLACKBERRY 6
The price of the phone is the main reason that drive consumers choose to going with feature
phone instead of smartphone. A consumer who just requires basic functionality (voice calls,
texting, etc.) and they doesn't need for addition feature of smartphone will choose feature phone.
In addition, the smartphone requires higher cost for ongoing and upfront for data plan which is
not exist in feature phone.
Feature phone buyers also may not see the added functionality of a smartphone as being
valuable enough, when they already own dedicated devices that provide the functionality
(cameras, GPS devices, laptops, etc.). Thus, the highly elastic demand for smartphones makes
substitution a large risk (Cromar, 2010).
Managerial economics is very important especially in the world of mobile devices.
According to Bernoff (2013) his article on marketing strategy for the mobile mind shift states
that “The Mobile Mind Shift is the expectation that any desired information or service is
available, on any appropriate device, at a person’s moment of need” (p. 20). This refers to how
the mobile market is shifting and the need for quick information on a device that can do it all is
very important. Blackberry’s consumer and enterprise marketing apparently fought over strategy.
Additionally the executives did not realize how the shift in demand to smartphones would affect
their business. The introduction of the iPhone would create a strong demand for fun over
function which Blackberry had done very well. Companies like Forrester Research, measures the
changes in consumer attitudes toward different mobile devices. Blackberry is aware of the
changes in consumer attitudes as the want for more affordable cellular devices no one wants to
pay $600 for a cell phone anymore. Consumers are now demanding cheaper phones that still
meet the needs of problem solving.
7. THE FALL OF BLACKBERRY 7
By using customer analytics along with managerial economics companies like Blackberry
can try to stay ahead of the game. To do this management has to keep a close eye on the patterns
and changes in the environment that can affect customer behavior. Have a backup plan or other
options are important since no one can be prepared for everything it is important to have a
second plan in case the economy does not do what is expected. According to Dow (2013),
“Analytics helps marketers increase their knowledge of the customer, enabling improved
personalization of marketing to help build trust with the customer, which is important to the
success of mobile marketing. It also assists in breaking though marketing barriers with location-based,
hyper-personal marketing that is best able to reach the customer and be impactful” (p.27).
Blackberry’s corporate culture was centered on engineers. In fact their co-founder Mike
Lazaridis was an engineering and physics wiz that was deeply involved in the technical and
strategic decisions. As a result there was a lack of understanding with the people inside and the
client.
Conclusion
Identifying Risks and how they relate to demand is essential, which resulted in
Blackberry’s initial issues with remaining relevant in the marketplace. This became apparent for
Blackberry with the introduction of smart phones, specifically the iPhone. This paper discussed
how Blackberry’s target market had shifted quickly, which set the stage for creating challenges
with understanding the client, market demand and an effective corporate culture. As a result
Blackberry is no longer a consideration in this market space (Dvorak & Weinberg, 2011).
8. THE FALL OF BLACKBERRY 8
References
Bernoff, J., (2013).“Marketing Strategy for the Mobile Mind Shift”. Retrieved from
http://publications.ama.org/Marketing_News/MN-jul13/index.html
Cameron, D., (2013). Mobile marketing and the value of customer analytics. Retrieved from
http://connection.ebscohost.com/c/articles/89412799/mobile-marketing-value-customer-analytics
Cromar, S., (2010). Smartphones in the United States. Retrieved from
https://ideals.illinois.edu/bitstream/handle/2142/18484/Cromar,%20Scott%20-
%20U.S.%20Smartphone%20Market%20Report.pdf?sequence=2
Dvorak, P., & Weinberg, S. (2011). Misfires in Marketing at Blackberry. Retrieved from
http://online.wsj.com/news/articles/SB10001424052702303339904576406062012367334
Epstein, Z., (2013). BlackBerry market share falls to just 1.5%. Retrieved from:
http://bgr.com/2013/10/30/blackberry-market-share-q3-2013/
Forbes, (2010). iPhone Could Overtake BlackBerry Market Share in 2011. Retrieved from:
http://www.forbes.com/sites/greatspeculations/2010/03/05/iphone-could-overtake-blackberry-
market-share- in-2011/
Kelly, G. (2014). The Majority of iPhone users Admit to “Blind Loyalty”. Retrieved from
http://www.forbes.com/sites/gordonkelly/2014/03/21/the-majority-of- iphone-users-admit-
to-blind- loyalty-why-this-a-problem-for-apple/
