2. Economies of scale: Fixed cost is high, so economies of scale has to be achieved to increase profit margins

3. Product differentiation: Smartphone will become a commodity unless they are differentiated from its competitors. Moreover the bargaining power of the buyer is high, so product differentiation is an ideal way to add value to the buyer.

4. Distribution channel: In most of the countries, smartphones are sold through mobile operators and hence they exert more bargaining power. Alliance with mobile operators is an essential factor for product success in smartphones segment.

5. Retaliation: All leading players are fighting a fierce battle to gain more market share, so there will be a heavy retaliation against any new entry. Existing players have sufficient financial clout to block new players.

8. Elastic demand –Demand is highly sensitive to economy, buyers can delay buying new models.

9. Less asymmetric information – Buyers have all the required information.

11. Maps & GPS

12. Applications

13. Music & other media related applications

14. Utility applications

16. Smartphone manufacturers like Nokia, RIM, Apple etc

17. Government

18. Hardware/Software suppliers

19. Application developers

20. Telecom Companies

21. R & D centers of Telcos and Smartphone manufacturers

23. Location awareness and augmented reality will lead to several other innovative applications.

24. Mobile Augmented Reality Apps DownloadYearNo of App Downloads20091 Million2014400 Million

25. Number of app stores are increasing at an astronomical rate

28. RIM will continue to hold the number 2 spot in the global smartphone market and the top spot in the North American smartphone market.

30. Smartphones are in a way driving the digital convergence, but we are not yet sure how much of convergence will happen in future. However it is difficult to predict the next BIG technology that might supersede smartphones and erode the market of smartphones. So the larger question still remains? What NEXT?

31. Also with cloud gaining more prominence, there is a need for higher computing power. Will smartphones be able to deliver the expectations or do the limitations of smartphones would give raise to a new device. Probably no one knows.

32. Infrastructure (Telecom Companies)

33. The larger issue for telecom companies is declining voice ARPU. Though revenue is increasing in data ARPU, telecom companies are not very clear about how to make money with data services. Providing data services have never been the core strength of telecom companies, so they are struggling to mint money with data services. Already there is huge uproar that smart phone companies are making lots of money with applications and lots of new mobile application companies are cropping everyday to capture that market. Also net neutrality is gaining more prominence and it has polarized the mobile and internet players. There is larger uncertainty about net neutrality and its impact on telecom companies. There is also a larger uncertainty regarding how Google Voice will erode the revenues of telecom companies. Since telecom companies and smartphone manufacturers are part of the same value chain, any impact on telecom companies will impact the entire value chain.Scenario Framework<br />Of all the uncertainties, uncertainty about market, consumers and degree of convergence is critical for RIM. So based on the trends, critical uncertainties the initial scenario framework is as follow:<br />DEGREE OF CONVERGENCE<br />LowHigh<br />1. After the boomFew players – high level of convergenceFew companies drive innovationNo common standardsEnd-to-end integrated players will ruleOpen platforms have advantageLowRevenue increase, due to convergence NUMBER OF 2. The playgroundMany players – High level of convergenceCommon standardsLow pricesInnovation is keySpecialized playersHighRevenue increase depends on ability to adapt to convergencePLAYERS3. Cost cuttingFew players – low level of convergenceHigh level competition amongst few big playersLess innovationSurvival depends on operation efficiencySaturated marketProfits are around 4-5%4. Overcrowded garden pondMany players – Low level of convergencePush for innovationHigh competitionDifferentiation through niche marketsNot very profitableCost differentiation (risk of price wars)Consolidation of players (Mergers, Partnership, Alliance, Acquisition etc)<br />Scenario 1 -”Few players – high level of convergence”<br />After a troubled period with many players coming to the market but also exiting at the same pace because of lack of innovation, the craziness in the market has settled down. Only a handful of strong companies survive and those companies control the whole value chain involving smartphones. The vast majority of hardware and software is supplied by only four players, Nokia operating with Symbian and Maemo, Apple has the iPhone series with its own operating system, RIM also offers the hardware with its own software, while Google and HTC have joined forces supplying open source Android on HTC handhelds. While Apple and RIM stick to their closed platforms, Google/HTC and Nokia have taken a more open approach. The openness has proven to be very effective in consumer markets as they tend to get segmented to smaller groups with more tailored options, making it very difficult for the two closed platforms to serve their broadly segmented customer base. The option for closed platforms is to target a nice customer base.<br />Because of increasing digitalization of life, people rely more and more on the functionality of their mobile devices, increasing the bargaining power of the limited amount of suppliers.<br />Warning bells<br />Lots of companies entering and exiting at the same pace due to lack of innovation<br />Market highly receptive to new technology<br />New apps like location based service and augmented reality gains prominence in day-to-day activities.<br />Strategy<br />The implication of this scenario for RIM is to increase its capabilities to develop innovative solutions not only for enterprise market but also for customer market. RIM’s core strength lies in enterprise market, but it has already attempted to target consumer segment through Blackberry models like Pearl and Bold. Under this scenario consumers are receptive to advanced technology, so RIM has to push it to offer innovate solutions to consumers. For instance RIM can offer solutions like digitized home. Nowadays every consumer has plethora of electronic gadgets in their homes, digitized home should offer a solution to control all the devices through blackberry. We have just provided a sample innovative offering that can be delivered to the customers; RIM has to focus more on such solution(s) that would push the limits of convergence.<br />Under this scenario, we believe that RIM’s core market is not threatened and we don’t see any big players entering that market. The target of Apple is always consumers and enterprise market has never been their expertise. Google’s strategy of NexusOne is to dominate mobile advertising and entering enterprise market is not their strategy. Since consumer segment is pushing for higher convergence, we can happily presume that both Google and Apple do not entertain enterprise market and they push themselves to make revenue targeting consumers. However Nokia and Windows had always an eye on enterprise market, so RIM has to watch for those two players. Whether those two players are real threat has to be assessed at that point in time. We are not stating that RIM should not focus on enterprise market; we only assert that in this scenario RIM should prioritize consumer market over enterprise market. Though open platforms have the advantage being first to market and respond to any rapid changes in the market. End-to-end integrated players are better poised to serve a niche segment and offer more quality. The difference between open and closed platforms is analogous to Windows and Apple. <br />Scenario 2 - “Many players – High level of convergence”<br />Due to a highly diversified market with many suppliers for both hardware and applications, the market cannot support the wide range of smartphone operating systems (Apple’s iPhone OS, Google’s Android, Nokia´s Symbian and Maemo OS, RIM’s Blackberry OS, Palm Web OS and many other small OS´s) for much longer. There is a need for a common element: the standards. After a battle for common standards, separate players might emerge for hardware, software and applications. Open source platforms such as Android and Symbian will drive the standards. However we don’t say that there will not be native platforms, end-to-end integrated platforms like Apple and RIM still exist but their priorities changes. In this scenario, continuous technology changes keep shifting the range of available customer solutions. Application developers gain the roost as the trend is inclined towards innovative applications. Convergence is at its peak and it has created a big opportunity for a various players especially application developers and service providers. Because of the crowded market, the opportunity to differentiate between players and gain a competitive advantage relies on specialization. So innovation is key element for survival. Bearing in mind that competition is very high, so the success of big players like Nokia´s, Apple´s, RIM´s depends on their ability to adapt to the digital convergence and meet the needs of specific customer segments. <br />Warning bells<br />Many new players entering<br />Everyone makes profit, there is sufficient space for every player<br />Highly segmented market<br />Strategy<br />In this scenario, RIM has to focus on protecting its core market through offering customized enterprise solutions. RIM has earlier offered customized solutions to enterprise, Robert Transport operating in Canada is one of the best examples. RIM has to push itself to offer more such customizable solutions across a wide range of industries. The key success factor is in this scenario is keenly study various industry and study how wireless mobile can change their business models, the essential factor is not to sell smartphones but to sell services that cannot be replicated by its competitors.<br />Scenario 3 -“Few players – low level of convergence”<br />The market of smartphones reached an unexpected mature stage. Social networks, micro-blogging, and location based services have turned out to be hype of the first decade of the 20th century. The mobile device has a much smaller impact on the lives of people than expected. The number of companies involved in Smartphones has decreased a lot and innovation is not having the anticipated impact. The competition between RIM, Nokia, Apple and Google is fierce. There are no standards but at the same time, the level of convergence is lower, so the opportunity to differentiate themselves and achieve greater benefits lies in the ability to cut costs. Operational efficiency is the key factor for companies to operate at the margins and to ultimately survive. Differentiation is also done by building strong brands. There would be broader focus on making the mobile phone not as a tool, but as a (fashion) statement as done by Apple.<br />Warning bells<br />Companies are either spun-off or sold.<br />New promising technologies are turning out to be a fad<br />Companies start focusing on operational efficiency<br />Strategy<br />This is not ideal scenario for any smartphone manufacturer. In this scenario, RIM should reduce its focus on customer market and drive all its resources towards enterprise markets. Enterprise markets offer a steady income and churn rate is much lesser than the consumer market. In the SWOT analysis, we have indicated that BES architecture is increasing the costs of RIM, so RIM should try to reduce the cost of BES architecture while keeping its core capabilities intact. Emphasis can either be on offering customized enterprise solutions or standard depending on the requirements on enterprise customers. However if Blackberry can demonstrate a cost advantage/competitive advantage to enterprise customer(s) through its customized solutions then enterprise customer(s) will be receptive to such customized solutions. RIM don’t make out of selling services they make money out of benefits derived by the enterprise through using the customized solutions of RIM. So RIM is basically sharing the risk and benefits of its customized solutions. The difference between the offerings in scenario 2 & 3 is the change in business model. <br />Scenario 4 -“Many players – Low level of convergence”<br />In this scenario, rivals compete highly in a constant market. The market is too small for the large amount of players to be active. Besides the well known brands, many smaller brands are struggling to get a pie of the market. The most widely used strategy to get a share of the market is to target niche customer segments. Rivalry is now intense as the number of rivals has increased and the niche customer segments will also be flooded with lots of players. The profitability is low and cost efficiency plays a big role. Even though companies are trying to find a way of differentiating by targeting niche segments; price war is inevitably. Only players with sufficient backup funds or firms with significant advantages like a loyal customer base can survive. <br />Warning bells<br />High level of competition<br />Price wars<br />Specialization on niche segments<br />Consolidation of players<br />Strategy<br />In this scenario, high competition leads to price wars and smartphones prices start falling. So none of the players make money and they start consolidating. For instance Nokia has already joined hands with Intel to make MID (Mobile Internet Devices). If there are more players entering the markets and if Nokia’s market share starts plummeting, it might join hands with Windows to form “WINTELOKIA”. Nokia is good at H/W and it might ally with Microsoft to obtain a better S/W provided both the open source software Symbian and Maemo fails. Aligning with Microsoft is also a good move the capture large pie of the enterprise markets for which both the players are looking yearning for. If such alliance materialized then the prospects of RIM making big is doomed and it is left with no option other than aligning with other major player. For RIM, the perfect ally would be either IBM or SUN. Both their expertise in server platforms will be key for offering much better enterprise solutions. IBM is better because of its sheer size and both of them should join together to form “RIMBM”<br />Conclusion<br />Scenario 1 & 2 are the most ideal for RIM, scenario 3 is the worst for any player including Blackberry. All this scenarios are formulated taking into consideration the basic trends and a time frame of 5 years. Most of the scenarios are plausible and the occurrence of each scenario is depended on lots of factors. It is not easy to predict those factors, however we have listed the market signals that would acts a warning bells for each of the scenarios. Overall the key to RIM is to innovate consistently and seek advantage of its end-to-end integration to fullest extent; however they have to seek ways to reduce cost incurred because of BES and keep its competitors at bay without giving them enough leverage to enter the enterprise market.<br />