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First-mover advantage, as defined by Lieberman and Montgomery, endogenously arises within a pioneering firm when some asymmetry is created, potentially enabling the pioneering firm to gain advantage over rivals. Research in Motion Limited is a designer, manufacturer, and marketer of wireless solutions for the world wide mobile communications market. The company rose to fame by being the first to offer its corporate customers access to their corporate e-mail using their BlackBerry devices and thereby doing away with the need for a separate, wireless-only e-mail account. From then, the company has had its ups and down and today, it is staring at its grave with alarming speed. This paper tries to look at the reasons for the state of affairs that the company now finds itself in, assessing the market share prices, the reasons that drove it at the pinnacle of innovation, the internal and external factors surrounding its circumstances and gives suggestions and the lessons learned.
Research in Motion is a Canadian manufacturer of BlackBerry smart phones and playbook tablets, which was established in 1984 and is headquartered in Ontario, Canada. When the company introduced mobility into the digital equation, it brought the BlackBerry brand into the daily lives of millions of people. The company moved strategically to utilized the fast-mover advantage and stake its claim on the market and literally acquiring a fanatical following. It won itself a tribe of supporters who then could not see their lives without the new technology. The company grew to become a leading provider of enterprise mobile services and smart phones.
RIM is largely identified with the manufacture of smart phones and other devices which combine the functions of the personal digital assistant (PDA) with those of regular mobile phones. These devices, together with the smart phones make the hardware segment Of RIM’s business which generates a sub-total of 73% revenue in sales. However, the company is most famous for its BlackBerry wireless device, which has become one of the leading smart phones for corporate customers. It is this sector of the business that brought RIM into the public domain, turning it from a mere entrepreneurial company, to a leading corporate entity in the field of innovation and research (Leo, 2013). The company gained its fame from its BlackBerry brand and thus grew to control the corporate market, and in the process acquiring dominance in the smart phone industry.
However, it is the same source of its success that seems to be bringing it to its knees. The emergence of other players in the smart phone industry has greatly affected the market share prices of its BlackBerry devices. Increased competition from other players such as Apple and Google have caused BlackBerry shares in the market to state declining at an alarming rate; the sales have been declining at an annual rate of 17%. This has been the reason as to why its stock performance has stagnated. The introduction of the iphone has shifted the market dynamics fundamentally completely changing the dominance enjoyed by RIM. The iphone has established a dominant position in the consumer segment of the market with one eye trailed on the corporate sector where BlackBerry continues to enjoy support. Similarly, the introduction into the market Google’s android operating system has also eaten into BlackBerry’s share market. Today, RIM is hardly recognized as a dominant player as it once was. Its performance on the stock market has been dropping and continues to drop with every new day (The Associated Press, 2012). The market share price has remained unsteady, increasing marginally, but dropping spectacularly. The chart from the 2001 stock exchange perhaps can paint the picture more clearly.
From these charts, it was clear the company could no longer enjoy the confidence of its followers as its sales continued to be unpredictable. Consumer and shareholder confidence in the company was slipping as the company’s financials continued to disappoint. In 2001, the quarterly earnings report indicated that unit sales had dropped on almost every product that the company manufactures. The company sold 3 million less BlackBerry phones than in the previous quarter, while the sales of the playbook dropped from over 500,000 to a comparatively scant 200,000. Today, the market shares have not improved at all despite the company’s best efforts to turn around its fortunes. It has launched new devices, cut the prices of the playbook device and even introduced a better operating system, the QNX. All these efforts have come too little too late, as its competitors have established themselves on the market and RIM is just another market player (Rod, Jim & Mike 2012).
Businesses entering a new market usually need to conduct a multitude of tasks to prepare them for the dive into the untested waters. The companies must choose a site, coordinate construction of facilities; source needed inputs, hire workers, set up logistic networks, and gain an understanding of the idiosyncrasies of local consumers. This is because; very early entrants face a market that may yet to be fully developed and a lack of examples to follow. With limited information and precedents, pioneers must make decisions related to the process of entry with high uncertainty in market conditions and operational effectiveness. Consequently, the very early entrants face a high probability of making irreversible and costly mistakes in choosing production sites, ramping up production facilities, sourcing inputs and workers, among others (Mehdi, 1995). These mistakes may result in non-competitive positioning, high-operating costs and low sales opportunities. However, where everything is perfectly timed, the first entrant enjoys unprecedented market power and dominance.
Research in motion, being an entrepreneurial company in the mobile telecommunications industry discovered the need to satisfy customer’s thirst for new technology through making the bold decision of entering into a market that was neither tried nor tested. The company had to study consumer preferences in the specific environmental context in order to properly gauge the timing of its move into the market. The mobile telecommunications industry was at the time one of the industries requiring significant technological innovations to keep up with the rapidly globalizing world. The industry thus had perfect conditions for the growth and development of RIM. Firstly, the telecommunications industry allowed for a clear definition of first movers. The market structure in mobile markets was typically determined by granting licenses to a limited number of operators, other companies could be granted licenses to operate as additional companies. This provided a clear distinction between first movers and latecomers within a single technological generation. This immensely favored RIM. Similarly, there was also a clear definition of firms with in-country telecommunication experience. This is because, though they may or may not have possessed experience in 2G, it had a brand name that they could extend to mobile services. Finally, the entry process in the mobile telecommunications market was fairly regulated. To operate a 2G network, operators needed a spectrum license, which was issued by the respective domestic governments (General Books LLC, 2010). Governments issued between two and four licenses after determining permissible technological standards. Thus the test for meeting licensing criteria for the government was simply the introduction of new and better technologies. These conditions facilitated the move by Research in Motion to enter the market and become a successful company. The company thus, upon entering the new market, enjoyed a number of fats-mover advantages which drove to the pinnacle of innovation in the mobile telecommunications industry.
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Firstly, Research in Motion provided sustainable technological leadership through the provision of technological advanced wireless BlackBerry devices to the corporate market. By introducing the new technologies into the market, which were perfectly timed due to the prevailing circumstances of the evolving world, the company took advantage of the learning-curve to maximize output while minimizing production costs. This is because, through the standard learning-curve model, unit production costs usually tell with cumulative output thus generating a sustainable cost advantage for the company as an early entrant (Tencer, 2011). The firm thus took advantage of the learning-curve to maximize its profits thus propelling it to the top of the market. Similarly, the company gained advantage through the patenting of its devices as a trade secret thus providing technological leadership in the field of wireless BlackBerry smart phones. In this way, RIM took the direction of preemptive patenting, in which, having an early head-start in innovation; it deterred rivals from entering the patent race.
Secondly, RIM enjoyed first-mover advantages through the preemption of rivals in the acquisition of scarce assets necessary for the growth of the company. The company was ably to quickly identify input factors, probable and viable locations, the necessary geographic space for industry location and other important assets vital to the growth of the company, and purchase them at a favorable cost. The cost of purchasing this assets is usually lower than it would have been had there been competition from other firms. Thus Research in Motion was able to identify proper resources that were critical to its growth in the industry. The company also took enjoyed the fast-mover advantages through the preemption of input factors. This is based on the fact that most fast-mover companies enjoy the monopoly of having superior market information which enables it to purchase assets at market prices below those that may prevail in the market as it continues to evolve. Therefore, RIM by being a fast-mover in the wireless telecommunication industry, was able to use its access to superior information, which was not available to its existing rivals to acquire economic assets, this economic assets refer to assets such as prime retailing or manufacturing locations (Karen 1999). The firm was able to gain returns in terms of economic rent due to its role in the market as a fast-mover. This advantage greatly propelled the company to great heights and into achieving market dominance. This is because, a first-mover with superior information is able to collect economic rent earned on non-mobile assets such as revenue deposits and real estate. Thus, the ability of RIM to preempt input factors allowed it to manage its stock thereby increasing its market dominance.
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Another fast-mover advantage that RIM utilized to climb to the top of the world of innovation was the preemption of locations in geographic and product characteristics space. The determination of a specific market need that need service was critical to the success of the company. Thus Research in Motion company was able to correctly identify and serve the corporate market niche. Through this identification, the company was able to invent and innovate products which could address the specific needs of the corporate market. The company thus was able to deter entry through the strategies of spatial preemption. This is because, in most markets, there is little room for only a limited number of profitable companies; thus the first-mover can often identify the most profitable and attractive niches and consequently come up with strategies that protect these niches and limit the amount of space available for entry. It is the corporate space that RIM curved for itself, introducing smart phone BlackBerry devices that could attend to the particular needs of that market (Maureen, 2000). With continued research and innovation, the customers of the company were able to use new inventions that helped them cope with their lives at work. The company thus made sure that it controlled the amount of space available in the market for exploitation by the firm. Under the theory of spatial preemption, a first-mover company moves to establish and completely occupy strategic market positions in the geographic or product space thereby making it completely unprofitable for latecomers to occupy interstices. The idea here is that the first-mover company has the opportunity to select a market space that seems to be most profitable without facing any competition and then after this selection, the company then ensures that it completely dominates this market space leaving no room for other companies to crop in with new inventions that could reduce its market shares (Ravi, 2013).
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Similarly, where the market is growing, the evolving niches are usually occupied by the incumbent companies controlling the industry, therefore, a first-mover is able to detect any new upcoming market niche and quickly occupy it before other players can come in. therefore, through this preemption, entry into the market is prevented and consequently repelled through the fear by competitors of price warfare, which could have detrimental effects on the latecomers in the market. It is this through this preemption that made RIM remain such a dominant player in the mobile telephone industry as it was always one step ahead. The company was also able to prevent entry into the market through-preemptive investment in plant and equipment. As the company grew, it continued to increase its production capacity there maintaining greater output of its devices accompanied with price cuts on some of the products. These price cuts and the ability to produce output in large quantities made competitors fearful of entering the market. The company was thus able to maintain a death grip on the market (Cynthia & Michael, 1991).
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First-mover advantages may also arise from buyer switching costs. The concept of buyer switching costs usually makes it more expensive for new entrants when entering the market. This is simply because, the new entrants must invest heavily and more resources in order to pull customers away from the first-mover firm. In this case, RIM remained strong in the market as its competitors did not have the financial muscles to invest large sums of money and thus attract its customers. The cost of switching may range from the time and resources used in finding the supplier, the cost of ancillary products such as software for new computer, and the time, disruption, and financial burdens of training employees (John, 2002).
External and Internal Factors That Contributed To the State Of Rim
The continued ailing of RIM can be attributed to many factors that have played a role in its state of affairs. These factors are both internal and external and perhaps they may help in understanding just how such a dominant player in the market, literally dropped from the top of the world to the near bottom of the sea. One of the external factors that may help in understanding this trend must be the arrival of real competition. For almost over a decade, RIM’s BlackBerry phone was continuously ranked as the handset of choice in the corporate environment. The BlackBerry phone was the device that drove RIM to the pinnacle of innovation and was its major statement of success in the smart phone market. Indeed BlackBerry gave birth to the smart phone revolution. This was the phone that propelled the company to be valued at a staggering $70 billion subsequently making the company Canada’s most valued company (Karen, 2001). However, with increased completion in the smart phone industry, its fortunes begun to dwindle; the arrival of new players such as Apple’s iphone and Google’s android platform completely shifted the scales as more people shifted their allegiance from the BlackBerry device to the new smart phones in the industry. The company was completely unable to introduce further inventions that could compete with the iphone and the android platform was becoming ever more appealing to the general public. The failure of the company to follow up on the BlackBerry that took the market by storm, gave its competitors more playing ground as they ate up its market share, thus the valuation of the company’s valuation dropped from the $70 billion to just worth $12 billion. This was has been a steep fall as the competitors have eaten on the market share of the company.
Another external factor that perhaps has accelerated the failure of RIM as a leading player in the market must have been the recent great recession that hit the market, even the company was already experiencing tough times, the recession ultimately killed it. During this period, the company’s share price dipped and never rose again and has not risen to date. Its grip on the smart phone industry was never recovered and it can no longer claim this status.
The management of the company is an example of internal factor that has greatly facilitated its fall. The company is lead by two individuals who are its co-founders. These owners hold the position of co-chief executive, creating a management structure that is complicated and difficult to sustain. Additionally, the owners have surrounded themselves with the top engineering minds alive; indeed this management team has served the company greatly in the period s where there was no completion (Michael 1983). However, with the emergence of stiff competition from market players who have the brains and the financial power to innovate with great speed, the management capability of RIM was brought into question. The management failed to adjust properly upon the arrival of new completion and thus failing to adjust its priorities. This greatly affected the company’s shares and total income. The quality of management is critical to the success of the company.
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Lessons to Be Learnt
The story of Research in Motion Limited is indeed a classic case of a pioneering company that has failed to sustain its fast mover advantages. Indeed the first lesson that must be noted is that RIM is an isolated case of a failed enterprise that moved into the market first with an innovative concept and eventually overtaken by competition. There many other examples of companies that have failed after having a good head-start into the market. These companies are littered all over other industries and thus it can happen to anyone.
Secondly, it is also a lesson that once a company has established in the market, it must continue to innovate in order to keep up with the changing trends of the market. A company must not rest on its laurels after achieving dominance in the market. It must continue to carry out research into the market with clear objective of being ahead of the competition
Thirdly, quality management is critical to the survival of the company in the industry. The type of management that a company has must be the kind that is responsive to the needs of the customers and must have almost a telepathic understanding with the customers. This is critical in the advent of competition, because a firm that is most likely to survive is the one that understands its customers well.