Blackberry
Group Analysis 3: Competitive Effects of Strategic Change
Impacts on Appropriability and Sustainability of BlackBerry's Position The precise nature of the Lenovo-BlackBerry M&A (see appendix for description) will determine whether this integration will lead to great benefits that outweigh the additional costs and risks. BlackBerry could immediately benefit from the transfer of complete ownership, as opposed to a mere contract or joint venture, signals confidence to BBRY stock investors (whose presumable stock would convert) and customers hesitant to buy the struggling company’s products, as well as the resources and attention that Lenovo would devote to an alleged purchase of $10 billion. Lenovo’s many capabilities (e.g., software, hardware, and experience) could be leveraged to improve BBRY phones. However, the size of this competitive advantage (and which company or companies reap(s) the rewards) relies on the terms negotiated between the two firms and a resolution of BlackBerry’s competitive disadvantages described later on. The first issue to resolve is the compatibility between Lenovo’s Android OS and the BlackBerry 10 OS in its respective smartphones. BlackBerry sold 33.2 million phones in 2012, and Lenovo passed BBRY in global share in 2013. Lenovo currently creates phones using the Android OS, leaving them with the financial and technical decision of trading off between its current Google smartphone OS or continuing to develop BlackBerry’s newest OS. If Lenovo adopts the BB10 operating system, and allows users to download the OS in stores, BlackBerry would double Lenovo’s sales as a defensive move against Google (OS makers currently retain the highest margins), leading to more sustainable profits, as BBRY cannot acquire as many new customers alone. If Lenovo focuses on continuing to make Android phones and only uses BlackBerry’s hardware brand, security features, and other services, BlackBerry’s share of profit would be significantly reduced.
Impacts on Appropriability and Sustainability of BlackBerry's Position The precise nature of the Lenovo-BlackBerry M&A (see appendix for description) will determine whether this integration will lead to great benefits that outweigh the additional costs and risks. BlackBerry could immediately benefit from the transfer of complete ownership, as opposed to a mere contract or joint venture, signals confidence to BBRY stock investors (whose presumable stock would convert) and customers hesitant to buy the struggling company’s products, as well as the resources and attention that Lenovo would devote to an alleged purchase of $10 billion. Lenovo’s many capabilities (e.g., software, hardware, and experience) could be leveraged to improve BBRY phones. However, the size of this competitive advantage (and which company or companies reap(s) the rewards) relies on the terms negotiated between the two firms and a resolution of BlackBerry’s competitive disadvantages described later on. The first issue to resolve is the compatibility between Lenovo’s Android OS and the BlackBerry 10 OS in its respective smartphones. BlackBerry sold 33.2 million phones in 2012, and Lenovo passed BBRY in global share in 2013. Lenovo currently creates phones using the Android OS, leaving them with the financial and technical decision of trading off between its current Google smartphone OS or continuing to develop BlackBerry’s newest OS. If Lenovo adopts the BB10 operating system, and allows users to download the OS in stores, BlackBerry would double Lenovo’s sales as a defensive move against Google (OS makers currently retain the highest margins), leading to more sustainable profits, as BBRY cannot acquire as many new customers alone. If Lenovo focuses on continuing to make Android phones and only uses BlackBerry’s hardware brand, security features, and other services, BlackBerry’s share of profit would be significantly reduced.