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Research in Motion Limited

  1. 1. Diversified Communication Services By: Kelsey Andersen Ryan Bildtt Eva Collins Tyler McCurry Colin Swanson 2nd Industry Report Pacific Lutheran University School of Business BUSA 499 - Capstone Spring 2009 Industry Value Chain 5. 2.
  2. 2. 9. 1. Research & Development: This is where the starting point is. New ideas are thought up in this phase and from here they are put into action. 2. Metal, plastic, and chips are the starting point for a new phone being created. These materials are necessary to make the basic phone in itself. 3. Different parties are consulted on what they think of the idea and how the phone can best be developed. 4. Companies supply these raw materials to the organization 5. The technology behind these is developed. Programmers enable the phone to have software and it is decided whether the phone has is an open or closed source. The phone is designed. 6. The raw materials are then produced into the physical phone. 7. The phone is marketed to the public. 8. The carriers distribute their phone either through their retail stores or online. 9. The product is delivered to the customer. Research in Motion Limited (Eva Collins)
  3. 3. Resources Identification The company Research In Motion (RIM) is known for their BlackBerry devices that allow users to be connected to time sensitive materials. RIM is organized and managed as a single reportable business segment, which is categorized into four divisions: devices, service, software, and other (Datamonitor, 2008). RIM holds both tangible and intangible resources that are important to their capability to provide quality products to their consumers. Located in Waterloo, Ontario, RIM’s corporate headquarters sits on approximately 1,141,685 square feet, which houses a multitude of operations and departments (Annual Information Form, 2008). They are not solely located in Canada, but lease facilities throughout America and Europe. Within RIM they must have the financial stability to pay for their incurred expenses such as cost of goods sold, labor, and these facilities. The first of March in 2008, RIM recorded that they had a net gross of $412,501, which was 21.9% of the Revenue made from sales (Annual Information Form, 2008). With this being said, RIM was able to pay all of their current expenses and investment activities in the year of 2008. In order to continue their success, “RIM has sought to protect the technology that it has developed through a combination of patent, copyright and trade secret protection as well as through contractual arrangements” (Annual Information Form, 2008). Along with these tangible resources, there needs to be intangible resources to complete RIM’s assets. For any research and development company, it is important to have the best knowledge to produce products such as the BlackBerry. “The Company’s success is largely dependent on its continuing ability to identify, attract, develop, motivate and retain skilled employees” (Annual Information Form, 2008). With approximately 2,900 employees there has to be key players to ensure that they are continuously motivating and retaining these skilled employees. This ensures that their knowledge and abilities are used to create value for the company when developing new products. “As President and Co-Chief Executive Officer of Research In Motion (RIM), a company Mr. Lazaridis founded while a student at the University of Waterloo, he is responsible for product strategy, research and development, product development, and manufacturing” (Datamonitor, 2008). The other Co-Chief Executive Officer, Jim Balsillie, is more in charge of the internal business strategy and departmental functions. RIM also has six Non-Executive Board Directors, as well as, six Officers in Senior Management. These directors and managers have a strict focus on either a department or an aspect of the product development and branding (Datamonitor, 2008). In order to obtain these key employees and others, it is important to look at their Human Resource practices. Human Resource is the source for creating a corporate culture and preserving and developing employees’ skills. In 2006, RIM was awarded Canada’s Most Admired Corporate Culture (RIM, 2009). It is present in the rewards and benefits they provide to their employees why they would be awarded this from their free BlackBerry device, pay and incentive program, training and development programs, and even a work environment that offers wellness programs (RIM, 2009). Along with this training, a code of ethics is available to all employees to ensure that financial regulations, confidentiality, and protection of RIM’s assets are upheld. The employees’ responsibility includes helping to create and maintain a culture of ethical standards and commitment to compliance, and, in the case of directors and officers, maintaining a work environment that encourages employees to raise concerns to the attention of management, and promptly addressing employee compliance concerns (RIM, 2009). Intellectual property is also directed in the code of ethics, ensuring that employees are responsible for protecting them. Innovation is the key to any technological company. “Through the development of integrated hardware, software and services that support multiple wireless network standards, RIM provides platforms and solutions for seamless access to time-sensitive information including email, phone, SMS messaging, Internet and intranet-based applications” (Annual Information Form, 2008). RIM is known for their strong development capabilities, which is visible in their increase of their research and
  4. 4. development expense from 2006 to 2007 (Datamonitor, 2008). The research and development expense has continued to increase in 2008 from $236,173 in 2007 to $359,828. “RIM technology also enables a broad array of third party developers and manufacturers to enhance their products and services with wireless connectivity to data” (Annual Information Form, 2008). Reputation and branding is incredibly important for a company to market their products. RIM “has had a stellar run with the BlackBerry family” (Carey, 2006). In today’s phone market, “BlackBerrys have garnered an almost mythic stature as the phone for email and messaging” (Topoisky, 2008). This passion for all-time connection is the reason why people love their BlackBerry. “The degree to which government relies on such tools was recently highlighted when President Barack Obama fought to keep his Blackberry after he took office (albeit with high-tech government security tools installed)” (Rosen, 2009). The BlackBerry has become an asset to any company or person who uses it to stay connected at all times, depending on its efficiency to communicate with others quickly. “RIM intends to maintain its position as a market leader by focusing its sales and marketing efforts on the continued use of strategic alliances and relationships to promote the sale of its products, as well as utilizing indirect sales and marketing teams” (Annual Information Form, 2008). With marketing costs of $74,034, this has steadily increased over the years to ensure that consumers are aware of the products and services RIM provides in the market. Capabilities Identification Offering over 25 different models of the BlackBerry, consumers can pick and choose to their hearts content. “BlackBerry smartphones are available from over 200 carriers and are designed to operate on a variety of carrier network types, including GSM/GPRS/EDGE, CDMA/Ev-DO, iDEN, UMTS and Mobitex” (Datamonitor, 2008). The newest editions to the line include the BlackBerry Curve, Storm, and Bold. Each allows users different capabilities, as well as a unique look. The BlackBerry Curve “is the smallest and lightest full- QWERTY Blackberry available to date. As compact as a cell phone, it has a wider body and a full keyboard for fast messaging. Cutting edge multi-media capabilities separate the Curve from earlier models” (Caster, 2009). Sadly, the most anticipated BlackBerry, BlackBerry Storm has received some poor reviews. The Storm’s main difference to any other BlackBerry is its touch screen, which clicks with its SurePress technology. Yet this same technology is not helpful in the way the software reacts to navigating with your finger and typing has become a tedious process (Topoisky, 2008). But, “When it comes to sound quality and reception for making actual phone calls, you can't beat this combination. RIM phones generally have loud and clear earpieces and speakerphones, and Verizon -- love it or hate it -- has a great network” (Topoisky, 2008). The most related to the old models of BlackBerry, the BlackBerry Bold “works and plays just like every other BlackBerry, but with a load of small-to- medium improvements, updates and tweaks that add up to a richer, more refined phone that also looks far better than the rest while doing its thing” (Buchanan, 2008). The BlackBerry bold at its manufacturing cost and the $169.41 BOM, appeals to both corporate and consumer users (Cellular News, 2008). Their models all come with a basic setup that includes a full text keyboard, camera, phone, email, messaging, instant messaging, GPS and music. BlackBerry also allows “access to files in Microsoft Word, Excel and PowerPoint” (Smartphone Technology, 2009). The BlackBerry is not solely for the PC user, but can be synchronized to a Mac and allows applications to be uploaded. RIM provides this application software to allow synchronization to a computer or laptop. Along with application software and the BlackBerry devices, Rim offers; BlackBerry wireless platform, Smart cards, embedded radio modems, and software development tools (Datamonitor, 2008). Research In Motion Limited Value Chain
  5. 5. Infrastructure Human Resource Management Technological Development Procurement Exemplary Activities Inbound Operations Outbound Marketing Service Research In Motion Core Competencies Based on these resources and capabilities, RIM has been able to place themselves as the second largest supplier of smartphones. Comparing RIM to their competitors, such as Nokia who holds 1st place as the largest supplier of smartphones, and Apple’s iPhone consumer popularity, they have a few core competencies that make them a strong designer, marketer, and manufacturer. Carriers V RIM is able to sell their BlackBerry devices to over 200 carriers, which can run on a multitude of networks. R The Verizon network has the largest 3G network enabling the ability of the BlackBerry Storm to excel in time sensitive materials. I Gaining contracts into these carriers may be costly for competitors, allowing RIM to have a strong hold on Verizon. O Marketing is a large part of the RIM. Having the ability to advertise their products across different networks allows larger brand recognition around the world. Business Popularity V Other businesses and the government have a huge buying power. They are able to afford
  6. 6. BlackBerrys in bulk and the cost of joining a network. R RIM’s software is customizable for each business, allowing a complete package with the BlackBerry provided to employees. I A Business’ relationship is already built with RIM, making it harder for competitors to enter. If a business choose to switch to a different smartphone provider, the switching cost would be high. O Employees being connected to their business at all times allows for effective and efficient communication. Models V Consumers have the opportunity to choose from a large selection of BlackBerry models. R Other competitors offering smartphones only have one type of model. I Their competitors could easily imitate BlackBerry’s models. O RIM can market these different models to all types of consumers, which can lead to a bigger market share. Google (Kelsey Andersen) Resources Identification Google has a wide variety of resources both tangible and intangible. One of their tangible resources has to do with their financial situation. The company has a great amount of equity to keep them afloat in hard times. They have a significant net income of over four billion dollars (Yahoo Finance). According to Google’s website, they make most of their money from advertising. Companies of all sizes call upon the services of Google to help their business get more attention. Google has hundreds of thousands of customers who pay for their advertising services. They offer this service through their AdWords program (Google, 2009). Google also offers such services as Google Analytics which offer companies help with Marketing Research. As a result of the hundreds of thousands of customers Google has, they have lots of resources to generate internal funds through. Google’s largest tangible resources consist of their technological capabilities. The technology they have created regarding search engines and their technological infrastructure is said to be their key strength (Datamonitor, 2008). The companies PageRank technology is what makes their search engine work. Also, their Googlebots crawl over the web to help find information for the search engine. According to Datamonitors, Google company profile, Google is “believed to have the largest searchable index among all search engines.” (2008) Also, Google has been able to secure rights to their PageRank technology which gives them a competitive advantage. Google’s technological infrastructure also is one of their key strengths. Google has “an estimated 450,000 servers” that are
  7. 7. “arranged in racks located in clusters in cities around the world”. Through this they are able to deliver superior service world wide (Datamonitor, 2008). Through their technological infrastructure they have been able to continually expand and create more resources such as Google Maps and Google Earth. Google has been able to place themselves all over the world both through both their physical locations their servers. Google has locations all over the world. They have 15 locations in the United States including their main headquarters in Mountain View California. They also have locations globally in Canada, India, Japan, Australia, Ireland, Great Britain, Brazil, Denmark, Finland, France, Germany, South Korea, the Netherlands, Spain, Switzerland, Italy, Mexico, Norway, Sweden, and Turkey (Datamonitor, 2008). Google has a very relevant and important advantage by having locations all over the world. Because of the fact that the world of business is operating on a global scale as opposed to each country operating independently, this is a very pertinent physical resource that Google has. Google has many intangible resources that work in their favor and help give them the competitive advantage. One intangible resource that they have has to do with their organizational culture. The last two years they have been listed on Fortune as the number one best company to work for (Levering & Moskowitz, 2008). Google strives to have a culture that emphasizes teamwork, communication, creativity, and innovation (Schmidt & Varian, 2009). One way in which they do this is through making sure to higher the exact right type of employees. Google is willing to wait for as along as it takes to find the right employee to fit the job qualifications and company culture (Logan, 2008). Google also makes sure to give employees enough flexibility in their work schedule that they have opportunities to think of new ideas and focus on areas that they prefer (Logan, 2008). As a result, they have a very talented and innovative group of people which helps them develop more technology and gain a competitive edge. Google’s company culture helps to foster innovation, another intangible resource. Google’s employees are encouraged to think outside of the box and come up with new ideas. Also, because of the technological resources that Google has, they have already have a platform that helps them continue to innovate and come up with new and different kinds of technology. Google’s corporation contains some brilliant minds. They have a significant resource when it comes to some of the knowledgeable people that work there. This includes their founders Larry Page and Sergey Brin along with their CEO Eric Schmidt. Page, in 2002, had the honor of being named World Economic Forum Global Leader for Tomorrow, Brin has a specific interest in research and Schmidt “led the development of Java.” (Google, 2009) Great companies are generally made up of great people. Google is definitely an example of that. Another very significant intangible resource that Google has is their reputation. Google is widely known and used all over the world. According to an article in Advertising Age, Google was ranked as being perceived as the most reputable by consumers. (Bush, 2008) Having consumers trust is very important because that is what will motivate them to continue using their services. Also, if people perceive your company as reputable and trustworthy they will be more willing to try out new technology that is created. Having a good reputation is especially important when it comes to the kind of business that Google is in. With privacy concerns as well as concerns about downloading specific applications onto a personal computer, it is important to have the trust of your customers. Google appears to have a grasp of the importance of keeping up their good reputation. According to an article on, “Google understands that its two most important assets are the attention and trust of its users” (Hammonds, 2007). It is clear that Google’s reputation is one of their most important intangible resources.
  8. 8. Capabilities Identification Clearly, Google has a lot of resources to help them have a range of capabilities. Many of these capabilities will be implemented into their new Smartphone, the Android. Because of the wide range of technological capabilities, their phone will be unique which will help give them a competitive advantage in the Smartphone industry. Google has used their technological resources to input many applications on their phone. For example, they have used their in search capability technology to create a “One-Touch Google Search” which is continually at the top of the screen of the phone and allows the user to get a quick answer to any question they have. It even allows people to search within their phone for information or media files (Feature Details, 2009). They have also implemented their technology into this phone by having superior web browsing technology. The phone contains a QWERTY keyboard, a touch screen, and a trackball which make it easier to surf the web. They also say that the web that you see on the screen is the “real web, not the mobile version” and that the phone was specifically “built to browse the web” (Feature Details, 2009). Google has used their technology to make the phone extremely fast. The phone offers a “high-speed 3G network” and can “connect to open Wi-Fi networks automatically” along with offering instant access to Google applications such as GoogleMaps and GoogleTalk (Feature Details, 2009). Google also has very significant competencies in Web2.0. This can be seen in the recent release of Google’s Chrome browser. Chrome is open-source and is said to be extremely fast (Haque, 2008). In time, this new browser will most likely be implemented into their phone. Given the culture of Google which fosters innovation and new technology, we will continue to see more capabilities emerge from Google. Google’s Value Chain Infrastructure Human Resource Management Technological Development Procurement Exemplary Activities
  9. 9. Inbound Operations Outbound Marketing Service Google’s Core Competencies Company Culture V Google only hires the best and the brightest. They focus on hiring people who want to work as a team with other Google employees in order to help bring their company new ideas and value. R Google’s culture is rare in that they allow many perks and benefits to being a part of their company that other places do not offer in order to help foster innovation. I This is difficult to imitate simply because Google’s culture is very unique and a company’s current culture is difficult to change. Google has made number one on Fortunes best companies to work for twice. O Google works hard to use their culture to the best of their advantage. They offer an environment where everyone’s ideas are welcomed, encouraged, and at many times put to use. Technological Resources V Google’s PageRank technology and Googlebots are very valuable. This technology is what makes Google’s search engine more powerful and accurate than others. R Google’s PageRank technology is their intellectual property that no other company has access to. I Their technology is difficult to imitate because no one else has access to how it is done because it is Google’s intellectual property. It is also difficult to imitate simply because of the number of locations that
  10. 10. Google has servers. O Google has used this technology to their advantage. They have used it to make their search engine of the best. They have also used it to help them create other technologies such as GoogleMaps. Consumer Confidence: V Google has been ranked the highest in the amount of consumer confidence is put in their company. This is important in this industry as a result of privacy concerns as well as concerns regarding downloading applications. R In today’s world, with scandals in such corporations as Enron, an organization having high consumer confidence is relatively rare and is something that can be capitalized on. I Gaining consumer confidence is something that is not done easily and is done over a long period of time. This is not something that can be easily imitated by other companies O This competency is going to work to Google’s advantage because consumers will be more willing and interested to try Google’s new products. In particular, this may come to their great advantage with their new Android phone. Nokia (Ryan Billdt) Resources Identification R&D/Innovation/Technology Nokia is very heavily invested in R&D and considers this one of their most important success factors. They have R&D centers in 10 countries and have approximately 14,500 (32% of their whole workforce) employees dedicated to R&D. They spend about 9.5% of revenues on R&D (these are 2007 figures) Nokia also maintains global contacts to monitor and influence developments in technology. These global contacts include universities, research institutes and other companies. Nokia also has ten
  11. 11. Nokia Research Centers around the World (All descriptions of NRC’s are from source, Nokia, Nokia Research Centers Locations and descriptions of NRC’s). NRC India, Bangalore The NRC India team focuses on emerging market services for both urban and rural India. They collaborate with Universities such as Srishti School of Art, Design and Technology in Bangalore and the MIT Media Lab in Cambridge USA. The goal of NRC India is to explore user centered technologies for the purpose of creating opportunities for Nokia in India and other emerging markets. Research focus: New User Interface NRC China, Beijing Set up to best take advantage of the largest mobile market, and the fastest growing economy, China. They work with Tsinghua University in a joint effort to research topics of context computing architectures, context data modeling and management, and mobile social networks. Research focus: Rich Context Modeling, New User Interface NRC Cambridge, UK This NRC libratory is located in the University of Cambridge. They develop nanotechnologies for wireless communication and ambient intelligence. To be more specific they “[Study the] physical, chemical and biological phenomena and manipulation of matter at the nanoscale [which] enables generation of knowledge for enhancing human capabilities.” Research Focus: High performance mobile platforms NRC Cambridge, USA This NRC works closely with MIT to develop new technologies for rich context modeling and new user interfaces. Research focus: Rich Context Modeling, New User Interface NRC Helsinki, Finland They work closely with the Helsinki University of Technology. They study the fields of fields of user experience, mobile security, power management and computing architectures, as well as intelligent context-aware radio or “cognitive radio.” Research focus: New User Interface, High Performance Mobile Platform, Cognitive Radio NRC Hollywood, USA They are located in the center of the media industry. They work with members of the Media and new technology companies, as well as universities such as University of California at Los Angeles and the University of Southern California. Their research activities focus on activities in context aware social media, mixed reality experiences, user interaction models, and the convergence of the Internet and mobility. Research Focus: Rich Context Modeling, New User Interface NRC Lausanne, Switzerland They work with the Ecole Polytechnique Fédérale de Lausanne (EPFL) and ETH Zürich to research the field of pervasive sensing and computing. Research Focus: Rich Context Modeling NRC Niarobi, Kenya
  12. 12. They focus on understanding the unique needs of the African mobile phone user and create concepts and visions to fulfill these needs. They work closely with groups such as UNECA, Plan International, Slum Code, Makerere University (Uganda), University of Nairobi (Kenya), University of Cape Town (South Africa) to solve the unique African languages, cultural, educational and infrastructure challenges which can be improved by mobile technologies. Focus: User Interfaces NRC Palo Alto This NRC is located in Silicon Valley and Collaborates closely with Stanford University and the University of California at Berkeley. Their research focus consists of mobile Internet services systems, mobile business solutions, context-specific content, visual computing and ubiquitous imaging to enhance user friendly technologies. Focus: Rich Context Modeling, New User Interface NRC Tampere, Finland Their research focus is on Rich Context Modeling, New User Interface, and High Performance Mobile Platform. Brand Name Nokia is the largest phone manufacturer in the World. In 2007 Nokia’s market share broke 40% which was mostly feed by their sales growth in emerging countries such as India and China (Poropudas, 2008). In India alone, 125 million phones were produced between 2006 and 2008(Niyaz, 2008). Nokia controlling 40% of the global market for Mobiles gives them huge customer recognition that other companies might not have. There market power also gives us hints to many of their capabilities that I will delve into in the capabilities section. Production Facilities Nokia has production facilities that focus on Mobile devices in most continents around the globe. Their locations are: Brazil, China, Finland, Great Britain, Hungary, India, Mexico, Romania, and South Korea. In addition to these production facilities they also have factories dedicated to making network technologies in China, Finland, Germany, and India. Structure The Devices unit is responsible for developing and managing Nokia’s mobile device portfolio, including the sourcing of components. Nokia is focusing on increasing consumer Internet services, in five areas—music, maps, media, messaging and games—along with delivering these in a quickly to consumers. The Services unit is responsible for developing this part of Nokia’s business (Nokia, Connecting People, structure). The Markets unit is responsible for the management of Nokia’s supply chains, sales channels, brand and marketing activities (Nokia, Connecting People, structure). Nokia Siemens Networks (NSN) provides wireless and fixed network infrastructure, communications and networks service platforms, as well as professional services to operators and service providers (Nokia, Connecting People, structure). NAVTEQ is a leading provider of comprehensive digital map data for automotive navigation systems, mobile navigation devices, Internet-based mapping applications, and government and business
  13. 13. solutions. NAVTEQ’s map data will be crucial to Nokia Maps service that brings downloadable maps, voice-guided navigation and other context-aware web services to phones (Nokia, Connecting People, structure). Nokia’s Capabilities Huge capacity: Being the world’s number one supplier of mobile phones, it would be safe to assume that their capacity to produce mobiles is larger relative to that of the competitions. With their numerous factories around the world, they are in a great position to meet world demand. They have also been focusing on increasing capacity of their factories in emerging countries such as China and India to meet the growing demand there (Niyaz, 2008). Cost considerations: Having the largest market share in the mobile phone market also gives us hints to how cost effective Nokia’s production is. For example, it is likely that Nokia is experiencing huge cost savings for economies of scale through serving over 40 percent of the market. Human Capital: Nokia has numerous research centers around the world that work closely in conjunction with Universities in those geographies (see R&D in resources section). These research facilities have a focus on studying new technologies to better prepare the company to compete well into the future. These research facilities and Universities will provide large pools of capable individuals who have a focus of technology and innovation. These NRC does also give Nokia the ability to mold the future with innovative ideas. The diversity of these locations will allow Nokia to benefit from a more global perspective. Nokia’s Value Chain Infrastructure HRM Tech Procurement Activities Inbound Operations Outbound Marketing Sales Nokia’s Core Competencies One core competency is Nokia’s ability to mass produce products quickly and cheaply to meet world demand. We can see that they have captured almost half of the total market share for Mobile phones. This is astounding and not easily replicable for existing players and possible new entrants. Innovation: Nokia has ample research centers around the world working closely with top prestigious universities. The research facilities all have focuses on specific subjects and technologies. Since the mobile phone industry is very technologically intensive, having these facilities will help Nokia compete well into the future by creating new products and services for customers. Microsoft (Tyler McCurry) This internal analysis of Microsoft will focus on their operations in the Diversified Communication Services industry. The following sections will identify and discuss Microsoft’s resources, capabilities, value chain, and core competencies that relate to their ability to compete and
  14. 14. operate in the Diversified Communication Services industry. Microsoft’s main product line allowing them to compete in this industry is their Windows Mobile operating system. Resources One of Microsoft’s most meaningful resources is their highly developed network of research facilities located around the world. Microsoft operates a number of research labs located in Beijing, Cambridge, Bangalore, New England, Washington, and Silicon Valley. Microsoft’s research lab in Beijing, China was founded on November 5, 1998. The goal of this facility is to, “attract the most talented researchers in the field of computing and become one of the best computer science laboratories in the world”. Researchers from this facility have published more than 3,000 scientific papers for a number of prestigious international journals and conferences. This facility has produced more than 260 research discoveries that have been used in a variety of Microsoft’s products. This research facility has more than 350 research scientists and engineers and host more than 400 additional scientist and students from china and around the world (Microsoft Research Asia, 2009). The Cambridge, England research facility was founded in July of 1997 and was Microsoft’s first research facility located outside the United States. Today, this facility employs more than 100 researchers and works in collaboration with a large number of research partners throughout the UK, Europe, and other surrounding areas. The Cambridge facility focuses its research on, “advancing computer science and developing novel computational approaches to further scientific research in areas as diverse as machine learning and abstract programming techniques and models through to computer- mediated living at home and at work, and biological, ecological and environmental sciences.” Another focus of this location is collaborative research with various universities, governments, and commercial institutions located throughout Europe (Microsoft Research Cambridge, 2009). Microsoft’s third foreign research facility is located in Bangalore, India and was founded on January 12, 2005. This location employs more than 850 scientists and strives to be among the best computer science laboratories in the world by continuing to attract the most talented researchers in the field of computing. This location’s primary objective is to, “to conduct long-term research in both basic and applied areas; collaborate with Indian research institutions and universities as part of Microsoft’s ongoing commitment to accelerating innovation in computer science and software engineering; and engage with partners in industry, academia and government to open new opportunities for economic growth and consumer choice” (Microsoft Research India, 2009). Microsoft’s Cambridge, Massachusetts facility was founded in July of 2008 and currently employs over 850 scientists. The Massachusetts research facility’s mission is, “to become a leader in the interdisciplinary approach to basic research by uniting the more mathematical sciences such as theoretical computer science, physics, and mathematics itself with other sciences, including social sciences such as economics, sociology and psychology, and the biological and biomedical sciences” (Microsoft Research New England, 2009). The Redmond, Washington research facility was established in 1991 as a part of Microsoft’s main campus and corporate headquarters. Researchers at the Redmond lab focus on a wide variety of research topics including new hardware designs, artificial intelligence, HIV vaccine development, and the theoretical mathematical underpinnings of computer science (Microsoft Research Redmond, 2009). Microsoft’s final research facility is located in California’s Silicon Valley. It was founded in August of 2001 and focuses on, “advancing the state of the art in distributed computing and related fields, while strengthening the architecture and technology of Microsoft products.” The scientists and engineers at this location also work in collaboration with a number of nearby universities including Stanford University, the University of California at Berkeley, the University of California at Santa Cruz, and others (Microsoft Research Silicon Valley, 2009). Another valuable resource for Microsoft is their high degree of brand recognition among consumers. This is due to the company’s long standing position as a dominant player in the computer
  15. 15. software market and the great success of their Windows operating system. Evidence of this can be found in an article by PC Magazine published on March 2, 2009. This article reported that Microsoft’s Windows operating system is the most commonly used operating system with 88.42% market share (PC Magazine, 2009). Capabilities One of Microsoft’s major capabilities is their ability to develop new products and to improve existing ones. This is made possible by Microsoft’s highly developed network of research facilities located around the world and the diverse staff of scientist and researchers working at these locations. Another capability of Microsoft is their ability to obtain new talent. This ability comes from Microsoft’s reputation as a good employer and their close work with educational institutions. In 2008 Microsoft was named the 86th best place to work by Fortune magazine (Fortune, 2008). Microsoft’s collaborative work with educational institutions and the high number of internship positions they offer have also aided Microsoft in the identification and hiring of new talent. Microsoft also has a highly developed product distribution network, with their products being offered at virtually all electronics retailers and at the newly created online Microsoft Store. Microsoft is also preparing to open a chain of brick and mortar stores that will be owned and operated by Microsoft. They have chosen to do this in order to compete with the highly successful Apple Store (Holwerda, 2009). Company Value Chain Infrastructure Financial Accounting Legal Matter Management Human Resource Management Technological Development Procurement Primary Activities Inbound Operations Outbound Marketing Service Core Competencies Software Development V The majority of Microsoft’s operating income comes from the sale of their software. R Microsoft’s highly developed network of programmers and researchers gives them the rare ability to develop complex and high
  16. 16. quality programs and operating systems. I Although this ability is somewhat uncommon, it is not unreasonable to expect that other companies, such as Apple, are able to develop similar products of comparable quality. O Software development is Microsoft’s main business process contributing to revenues. Brand Recognition V The dominance of Microsoft’s Windows operating system and other programs such as Office has given the company a high degree of brand recognition among consumers. R Microsoft’s Windows operating system is the most common operating system used in the world, with a reported market share of 88.42% on March 2, 2009. I Competitors such as Apple have been regularly eating away at this lead in market share in recent years (PC Magazine, 2009). This demonstrates that Microsoft’s ability to develop a strong brand reputation can be imitated over time. O Microsoft has positioned themselves as the absolute leader in the development of operating systems. Apple (Colin Swanson) Apple Inc. is a major competitor of Research in Motion (RIM). The product that Apple markets against the Blackberry is the iPhone. To compete against the blackberry, Apple requires their products to be innovative, creative and unique. Apple’s main vision for its product is “man is the creator of change in this world. As such he should be above systems and structures, and not subordinate to them.” (Than, 4) They believe that they shouldn’t follow the trends of other products and differentiate to get create their own market niche. As the blackberry dominates the sales in business world, Apple has move away from RIM’s customers and focus their iPhone as a personal phone. Similarly with other American corporations, Apple outsourced most of their value chain abroad to foreign countries. Most of the assembly of the iPhone takes place in Taiwan with a company called Foxconn (Who is the Real Manufacturer, 1). The major components of the iPhone are created by other foreign companies before then are shipped to Foxconn to be assembled. For example in Taiwan: The chip manufacture is produced by Taiwan Semiconductor Manufacturing Co (TSMC), display driver chip is produced by National Semi, camera lens are produced by Largan Precision, battery charger is produced by Delta Electronics and passive components are produced by Cyntec. In the United States, the CMOS chip is produced by Micron, NOR Flash IC is produced by Intel, WiFi chip is produced by Marvell and the touch screen is produced by Broadcom (Who is the Real Manufacturer, 2). They also outsourced their information systems and transportation to other foreign and domestic companies
  17. 17. (Apple 10K, 37). They outsourced these parts of the values chain because they are more cost-effective to have a foreign company manufacture and transfer the product, while Apple can specialize and focus on their market niches and core competencies. Apple also sells applications (a tangible resource) on their iPhone. With their research and marketing team, they try to create unique applications that they believe their customers will use and spend their money on (Apple 10K, 7). They will make applications that are free and primitive to their customers, that don’t want to spend the extra money for these applications. With the customers that are willing to spend their money on applications, they will add more useful and sophisticated applications for variety amounts of customers. For example they will have applications for sports, news, finance, business, fun applications like games, etc. Apple also has their iPhone compatible with their competitor’s applications like Google and Yahoo and Microsoft (e.g. Google Maps, Yahoo Mail, Seadragon). As well as other 3rd Party developers create applications for their iPhone. Apple does create some of their own applications but since Apple wants to diversified their customers and meet their demands, they will have applications from 3rd party developers including their competitors. Since they outsourced most of their tangible resources, Apple is more focused on non-tangible resources. Once the tangible resources of the iPhone are assembled in Taiwan, they are shipped to Apple, where Apple must established Inventory Management System to make sure that they don’t have an excess or a shortage of iPhones. Then they will then distribute the iPhone to other resellers, retailers, wholesalers. Most of their iPhone are distributed to their own store called the Apple Store. This is a key core competency key non-tangible resource for the company. It’s established a centralized store for just Apple products and established a competitive advantage over their competitors that doesn’t have a centralized store. So when they are selling the iPhone, they can provide quality customer service and a personal touch for their customers. Apple also has set up a Supplier Diversity Program which established suppliers that have the fundamentals of being social and environmental responsible. For example they categorized their suppliers as Minority-Owned, Women-Owned, Veteran-Owned, and Service-Disabled Veteran-Owned Small Businesses, as well as businesses located in Historically Underutilized Business regions (HUBZone) and Small Disadvantaged Businesses (SDB) (Apple: Procurement, 1) Apple also has a contract with AT&T to provide phone services with their phone in the United States. With the explosion of globalization, their iPhone is sold in over 70 countries and have other foreign companies to provide the phone carrier (Apple 10K, 25). Apple also has a Sale Consulting Program which is a non-tangible resource. They invest heavily in marketing and research by hiring on consultants to bring new innovated ideas to Apple products. They really focused on the idea of being creative and thinking out side of the box. Since Steve Jobs is having health issues, the companies is searching for a new CEO that will need to bring the same creative ideas that Steve Job has been able to established for his company . The consulting team has been talking about introducing the iPhone into the business world to compete against the blackberry customers to enter into RIM’s market niche. This could be a new strategy by Apple with Steve Jobs out as CEO. However, as of right now, their hiring process is mostly consisting of hiring and rehiring marketers, consultants, and executive operatives to bring new ideas and innovations to Apple. Since they outsource all the manufacturing to other companies, this saves them money to invest into research and development to promote this creativity. In 2008 research and development increased 42%, which tells their customers, that Apple is putting a lot of money and effort to making their iPhone and other Apple products the most creative, innovative and updated products on the market (Apple 10k, 66). This research and development has created a competitive advantage of having the fastest wireless connectivity in the smartphone industry. Currently their research and developing team is trying to figure out how to make a longer lasting and more environmental friendly battery (Phan, 17). Apple has also established brand and product quality from their previous successful products like the iPod, Macbooks and Mac Desktops. This capability has helped with the success the iPhone
  18. 18. sales and most recently has had the highest customer satisfaction rating of all smartphone (Phan, 18). With this product quality, they have established long time customers who are the main customers of the iPhone. During the 90s many of these users left Apple products when Jobs was fired. When Steve Jobs was rehired in the late 1990s (Young, 42), he helped rebuild old time Apple users and reestablished their brand loyalty. Apple has also established patents, trademarks and copyrights for the iPhone (and other Apple products) (Apple 10k, 11) to help protect their ownership. Since they rely heavily on innovation skill, technical competence and marketing abilities (Apple 10k, 12), they need to protect their intellectual property. This gives their consultants, executive and marketers the incentive to strive for more innovations and advancements of their products. The last part of their value chain is: what happens to the old smartphone when a customer buys a new smartphone? Since the iPhone is a recent product, this ending part of a value chain hasn’t been a large concern for Apple. However with newer iPhones being established, Apple will take old iPhones from their customers and utilized a special recycling program. This program will help keep their company environmentally friendly and help customers get rid of their old iPhones. Since customers are being more environmentally conscious, Apple wants to have the competitive advantage is being the more sustainable and environmental friendly company in the market. This program is set up by their Environment Management Team who strives for new innovations of making their product last longer, more sustainable and more environmentally friendly. This team also devotes most of their time on keeping track of their emissions and making their product life cycles as energy efficient as possible (iPhone Environment Report, 1). Even though their company outsourced all the logistics and manufacturing of the iPhone, Apple does specialized in creativity, marketing, innovations and having their own Apple store to create their own market niches and core competencies. These core competencies helped the company compete with Research and Motion and have given Americans another alternative to the Blackberry with the iPhone. Company Value Chain Infrastructure Financial Accounting Legal Matter Management Human Resource Management Technological Development Procurement Primary Core Competencies Creativity V Creativity has been the company’s core competency since Steve Jobs founded the
  19. 19. company. Since Jobs has been in control of the company, his strive for creativity and new innovations has create the Macintosh, iPod, iPhone, iTunes, Macbook, etc R Apple has the first mover advantage: every time they create a new market niche, other companies follow in their footsteps I Since Apple specializes in creativity, they used a lot of patents, trademarks to protect their intellectual property O Creativity can be substitutable with mass production and focusing on quantity rather then quality. However it is not an improvement since Apple continues to be a major leader in all the markets of their products. Apple Store V The Apple Store has help create brand reputation with their customer service and helped with their increased revenues sales since they introduce the Apple store R The only company within the industry that has its own store I Competitors are uncertain if they make their own store will earn them more profits, so their competitors will avoid this strategy of making their own store O Even with the emergence of buying products online, creating a substitute that could be a improvement of the Apple store, would only stifle progress of a company.
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  23. 23. HYPERLINK "" Who is the Real Manufacturer?. (2007, June 27). Retrieved March 16, 2009, from HYPERLINK "" (2008). Apple Inc 10K. New York: Wizard. Young, Jeffery and Simon, William. iCon Steve Jobs: The Greatest Second Act in the History of Business. John Wiley and Sons, Inc: Hoboken, New Jersey; 2005. PAGE PAGE 24 Financial Accounting Legal Matter Management Personnel Recruiting Benefits, compensation, rewards Code of Ethics Development & Training Research and Development Communication processor, display module, MCP, camera module, battery, GPS, WLAN, 10-Layer, MicroSD Card, Power Management IC, Carrying Case, USB Charger, Enclose Main Top Cover, Keypad Assembly, BlueCore4Rom (Cellular News, 2008). Receiving, Warehousing Production Transport
  24. 24. Carriers Advertising, Business Focus Warranties, Customer service Patent, copyright, contractual agreement 1.Research & Development Research and Development: ten NRC around the world working closely with Universities around their locals. 3.Consulting Software/ Applications Smartphone Programmers Open/Closed Source 6.Production/ Assembly 4.Suppliers Metal Plastic Chips 8.Carriers Network Owners Store Web Benefits, compensation Company culture
  25. 25. Fostering innovation Finances Accounting Legal Matters Management Customer 7.Marketing Warranties, Customer service Advertising, Business Focus, Marketing arm Transport Carriers Production-10 plants around the world Receiving, Warehousing They currently outsource: HP- IT infrastructure, IBM-help desk operations and desktop IT environment, and HCL-Global deliveries. Development & Training Code of Ethics Benefits, compensation, rewards Personnel Recruiting Financial Accounting Legal Matter Management Hiring Process Research & Developing New Implementing New Development Technology Technology Billing Customers Credit Evaluations Collections (Hedger, 2004) Customer Service Transport Production
  26. 26. Warehouse Marketing and Advertising Development & Training Code of Ethics Benefits, compensation, rewards Personnel Recruiting Research and Development, Software Development Programmers, researchers, engineers, product packaging, Blank Compact Disk and Digital Video Disk Customer service support Shipping to distributors Research and Development, Programming, manufacturing Receiving, Warehousing Advertising Development & Training Code of Ethics Benefits, Equity rewards Personnel Recruiting Research and Development: Applications, Apple Store Protection of Intellectual Property Outsource: Manufacturing
  27. 27. Focus on Marketing, R&D, Creativity, Being Environmentally Friendly, Supplier Diversity Program Customer Service Support/ Apple Store Sales Consulting Program Research and Development Inventory Management Warehousing Marketing/ Advertising