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  • Subject area(s): Marketing
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  • Published on: 14th September 2019
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Introduction

For a business to be profitable, it needs to have a clear image of the market and it must meet the needs of the target audience. When the company achieves these two goals, it will occupy a large part of the sector market in which it belongs. However, if the company wishes to ignore these two simple tasks, it will most probably lose its place in the market. A perfect example of that is BlackBerry, a multinational company that used to specialize in the manufacturing of mobile devices, though it has switched to software engineering due to its failure in this sector of the market. In recent years, starting with the year 2008, BlackBerry had a large share of the market and was considered to be a very strong competitor in this segment of the market, competing with Samsung and Apple. The Canadian business started to lose market share gradually and their revenues began to decline in 2011. In the first two quarters in 2016, BlackBerry had only less than 1% of the cell phone market compared to about 20% in 2009. For these clear reasons, the company decided to stop the production of mobile phones and transitioned its focus on other sectors. Nevertheless, there are several factors that can affect BlackBerry's regression. These factors include the loss of market share to competitors and the failure of BlackBerry to correctly analyze the market for consumer's needs. This has led BlackBerry to abandon the mobile device market and transition to a completely different market, which is the software market. Thus, how did BlackBerry lose its global mobile devices market share before stopping its production in 2016?

Market

First of all, one of the reasons that BlackBerry has lost market share is these competitors who develop these products to meet the needs of customers. Due to these reasons, customers sought out other companies to provide them they types of mobile devices that they desire. Consequently, this has decreased BlackBerry's market share and increased the competition's market share. For example, in the fourth quarter of 2009, BlackBerry had 19.9% of the mobile phone market. However, in the first quarter of 2016, BlackBerry had 0.2% of the mobile phone sector in the market (See annex 1). On the other hand, the other competing companies started to increase their market share. Especially Samsung, which, in the fourth quarter of the year 2009, had 3.3% of the market, but in the first quarter of the year 2016, Samsung owned 24.5% of the competing mobile phone market (see annex 2). These statistics and percentages show how BlackBerry's market share has increased drastically through the years. Furthermore, it also compares it to the rest of BlackBerry's competitors, that sought the opportunity of BlackBerry's failure to increase their market share as well. J

Analysis

Second of all, unlike BlackBerry, which has lost most of its market shares, its competitors thrived in the mobile devices market due to the fact that they took macro environmental factors into consideration when creating their new mobile devices.  This has strengthened the competitor's position in the market, which has increased their strength and opportunities, while increasing BlackBerry's weaknesses and threats. Furthermore, the best way to compare both companies is by using SWOT. This is an analytical tool that allows to compare the external analysis of the environment with the internal analysis of the resources of the company by analyzing the strength, weaknesses, opportunities and threats of the company. A comparison between the two SWOTs of BlackBerry and Samsung may show the difference between a company that is losing market share and a company that is increasing its market share (see annexes 3 and 4).

This comparison proves that the obstacles that BlackBerry faces are more numerous than that of Samsung. Sine BlackBerry's weaknesses and threats involves internal conflicts from within the company. However, for Samsung, their weaknesses include their weak efforts to stop other competitors from gaining their market shares. So in comparison, the threats and weaknesses of BlackBerry are caused by the internal policies of the BlackBerry company, but for Samsung, it's the competition with the competitors. This establishes that the reason that BlackBerry lost its market share to the competitors is that BlackBerry does not meet the needs of the market like other companies in this sector. Thus, other mobile phone vendors have taken this opportunity to expand their market share.

In addition, according to BlackBerry's Porter Five Forces (see annex 4), it is very hard for BlackBerry to re-establish itself as a strong competitor in this specific market that is growing and expanding at a very rapid pace. Although, BlackBerry might have adequate bargaining powers of suppliers and buyers, the threats coming from new entrants and from substitute products will affect greatly the firm's profitability. Also, the competitive rivalry in this segment of the market will also affect its profit revenue, due to the fact that the consumers prefer to spend money in the competitive companies instead of BlackBerry.

Finally, the reason behind BlackBerry's loss of market share is their failure to analyze macro environmental factors and consumer needs. These external factors can be evaluated with PESTLE, which is an analytical tool divided into six categories of macro environmental influence that can influence an industry or its decision making (see annex 6). According to the PESTLE, it is very evident that the macro environmental influences on BlackBerry are the reasons BlackBerry lost its market share. For starters, the economic factors are affecting its profit due to the fact that the target audience is choosing other companies for their higher quality or cheap price, for which BlackBerry does not fall in any of these categories. Then, the social factors include customer service or support, to which BlackBerry does not offer through social media. Also, they do not offer customer support in person, such as Apple that have Apple stores worldwide, so customers find it very hard to ask or fix their products. In addition, BlackBerry does not seem to be taking the technological factors into consideration when creating their new mobile devices, such as cloud storage. Thus, the consumers choose other companies because they offer the technological aspects that the audience is demanding.   

Finance

Third of all, the loss of market share of BlackBerry has affected its net profit as well as its key ratios. Also, according to Porter's Five Forces, BlackBerry's profits should get affected heavily. This is evident through the decrease of net profits, and the presence of net losses of the company (see annex 7). In such a growing market, its net profits should be increasing due to the increase of demand from the market. Thus, if we compare its net profits with Samsung, it is very clear that Samsung is taking advantage of the growing market by increasing its net profits, which means that its Porter's Five Forces is in its favor (see annex 8).

In addition, BlackBerry's ratios are dropping drastically due to its low income of profits, and the fact that it does not generate the same amount of money that it spends in production through sales (see annex 9). Since ratios are used to analyze the operating and financial performance, with all the statistics used, it is evident that BlackBerry's performance is dropping. For example, the percentage of profit margin is a profitability ratio that determines the how much profit is made in relation to the money invested by BlackBerry. As seen in the first graph, the profit margin in decreasing which means that BlackBerry is not investing their cash flow effectively. In addition, the second graph represents the net assets turnover. This is a ratio that calculates how efficiently the company is using its assets to create sales. Thus, it is evident that BlackBerry did not was not able to properly use its resources in marketing or production to attract the target audience. Finally, the last graph represents the shareholder's liquidity ratio, which shows how much a shareholder would receive if a company goes through liquidation. The graph shows that the ratio is increasing, which means that BlackBerry is edging closer to company-wide liquidation or bankruptcy. For these reasons, it is possible to say that BlackBerry did not invest correctly its money or resources which has led to the company to lose its market share, as well as being financially incompetent.  

Conclusion and recommendations

In conclusion, all of the factors stated above have contributed to BlackBerry's loss of market share. This includes BlackBerry's failure to respond to the audience's demands in their new products, raising their prices while maintain low quality devices and not taking advantage of the growth of the market in recent years. BlackBerry has neglected to modernize itself when it comes to new technologies and new competitors. Thus, BlackBerry has fallen behind in considering the demands of the target audience. Also, BlackBerry did not use its financial resources appropriately to make good investments that would at least help salvage the company. For this, today it is very difficult for BlackBerry to regain its market share. So, the best recommendation to this company is to focus on the software market and neglect completely the mobile devices market. This might give it a chance to rise to the top gain, however in a different segment of the market. In addition, BlackBerry should use different financial strategies to try to invest its money and assets in profitable operations that would help with its cash flow and profits. Nevertheless, given that in 2017, BlackBerry has switched from a company that specializes in the production of mobile phones to a company that specializes in software engineering. Thus, this means that they are on the right track to restoring their image and name.

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