In addition to operating below the break-even point, its BB10 ecosystem has been shadowed by Microsoft Corporation (NASDAQ:MSFT)’s growing Windows Phone. An IDC report shows that Windows now controls 3.2% of the global market, compared with BlackBerry Ltd (NASDAQ:BBRY)’s slumping 2.9%. All the red flags are there and it is high time that BlackBerry reversed its strategy.
BlackBerry should go back to the enterprise market
If you could backtrack to the 2007-2010 time frame and ask any business person why he used a BlackBerry Ltd (NASDAQ:BBRY), the answer could be simple and precise: ‘because it does what I want, when I want and how I want’. Business users are not set on getting the Android or iOS experience. If anything, they want a different experience that not only presents real solutions to their problems, but is fundamentally different from what consumers use.
Looking at BlackBerry’s app ecosystem back in the 2007-2010 time frame, it was not clogged with hundreds of thousands of applications like Android is today. It only had a reasonable number of applications that presented strong solutions to varied problems. This is what business users wanted, and what I believe they still do.
However, when Apple Inc. (NASDAQ:AAPL)’s iPhone came into the picture, media attention shifted toward what smartphones could do for the consumer market, rather than what they had already done for the enterprise market. The smartphone industry grew from a mere 15% of the entire mobile market in the 2007-2010 time frame to the current 50% plus smartphone presence. Amid this mind-boggling growth that was primarily skewed toward the consumer market, BlackBerry Ltd (NASDAQ:BBRY) went into panic mode and started losing sight of its core principles.
Google duped BlackBerry
On realizing the immense opportunity in the consumer segment of the smartphone business, Google Inc (NASDAQ:GOOG) ‘politicized’ the landscape and duped BlackBerry that it was all a game of numbers. Close to every news headline read; ‘Google’s Android gaining users amid fierce competition from Apple.’ This was when BlackBerry forgot that the enterprise market was always destined to be smaller than the consumer market. It forgot that mere numbers meant nothing. If anything, the money has been, and always will be, with the enterprise market. Enterprise clients not only pay more for better services, but are also more reliable and present a real risk-free pillar of longevity. We are talking about binding contracts with large organizations and exclusive deals with the government. How can you go wrong? In addition, enterprise clients typically have higher demands relative to consumers. This means that any company providing these services will always have a constant innovative and technological edge.
BlackBerry Ltd (NASDAQ:BBRY)’s aggressive push into the consumer market, coupled with the use of brand ambassadors such as Alicia Keys rather than corporate business leaders, significantly eroded the great business brand. Now, the company is paying the price. Already, Google Inc (NASDAQ:GOOG) has managed to win the trust of the Department of Defense. Soldiers, who could formerly only use BlackBerry, will now able to use secured versions of Android. This comes even as a research report from BlueBox affirms that all versions of Android since 2009 contain a bug that exposes Android users to security threats such as spying, data manipulation, and data theft. Despite the scare, Android still enjoys its customary 75% global market share.
While it’s not too late to retreat and give more, if not all, attention to the enterprise market, BlackBerry will have to fend off new threats presented by Google Inc (NASDAQ:GOOG) and Microsoft. This is something that could have been avoided if the company had focused on what it was good at.
Learning from Apple’s strategy
BlackBerry has revealed that it’s working toward a solid spot in the Indian market. It is targeting the Indian youth market through the Q5, a new mid-range phone. In an interview with The Wall Street Journal, BlackBerry India’s managing director, Sulnil Lalvani, argues that competitive pricing will be the key to success. You don’t need a crystal ball to know that BlackBerry will not be able to hold price wars with Asian manufacturers. Most local competitors are more interested in making sales than they are in maintaining a brand. There is a price level that BlackBerry will not be able to dip below because of margin and image concerns. Local competitors, on the other hand, will not mind going as low as possible, considering their significantly lower assembly and production costs. Considering Asia is a middle-income market where price tops the list of consumer incentives, BlackBerry Ltd (NASDAQ:BBRY)’s strategy is set to fail.
Apple Inc. (NASDAQ:AAPL)’s strategy has always been to present a ‘cool’ product at a premium price. It never dips into the mid-range market and has, on recurrent occasions, ignored hundreds of specialists’ calls to lower prices in view of the growing middle-income Asian market. This is because Apple understands that going back on prices will destroy its brand and push it into the same category as BlackBerry. Even as other handset makers producing mid-range devices in Asia continue to reap, Apple remains contented with its consumers.Its consumers, on the other hand, get exactly what they want from Apple Inc. (NASDAQ:AAPL) – coolness, recognition, and exclusivity. In fact, Apple’s brand remains top in the UK, even in the face of a huge tax-avoidance debacle that revealed the Cupertino-based tech giant gives back very little to the UK in terms of taxes.
Conclusion
The 2.9 % market share BlackBerry commanded at the outset of the year is less than half the share a year ago. However, not all is lost. Its turnaround peer, Nokia, is also in the red and is cutting 400 jobs in view of the $0.06 per share losses it posted in Q2. This could, however, change going by the pace at which Windows Phone is catching on. BlackBerry Ltd (NASDAQ:BBRY) needs to get back to its roots before all is lost. While it will be undeniably hard to rope in some of the enterprise users who lost faith in the company, it will be even harder to stand up against the prevailing forces in the consumer market. If BlackBerry doesn’t turn ship, a takeover or total shutdown is inevitable. That is the reality.
The article Where BlackBerry Went Wrong and Why It Should Reverse Strategy originally appeared on Fool.com and is written by Lennox Yieke.
Lennox Yieke has no position in any stocks mentioned. The Motley Fool recommends Apple and Google. The Motley Fool owns shares of Apple and Google. Lennox is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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