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.
The most common problem associated with integration is the “low-powered incentives” due to conflicting incentives and lost flexibility of the two joining entities. If BlackBerry is to gain the most from this integration, it must carefully decide what is integrated and what remains separated from Lenovo. First, BlackBerry must keep its brand name; with Interbrand listing the Blackberry brand worth at $3.9 billion (nearly half of its current market cap), future sales rely on the trust BBRY has earned with its customer base. While manufacturing could be shared (increasing both companies’ buyer power when ordering components), BlackBerry will want to keep management autonomous where possible, to avoid the politicization of decision-making with the acquirers, Lenovo. BlackBerry’s managers will also want to incentivize and keep its best talent to maximize its value-add. The more BlackBerry acts like a separate organization, the more BlackBerry’s top management, brand, and firm-attributable profits will be enriched. However, because of Blackberry current status as a failing company in need of resources, it would probably not get to maintain such autonomy at its current form, and would likely become a business with less competitive advantage as it gets harvested for parts (if it fails once again). Impacts on Current Competitive Advantages
After merging with Lenovo, we expect BlackBerry’s advantage in security and manageability to strengthen. Lenovo has a long-term partnership with IBM, who’s Global Technology Services End User and Data Security Services highlight security and manageability in the business PC sector.1 BlackBerry and Lenovo/IBM could strive for technological synergies to improve each other’s security architecture to create a more sustainable advantage in security than Lenovo or BlackBerry alone. Apple and Windows both have integrated bundles, but focus on different areas such as consumer features or user-friendly software, and would not be able to match...
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