MARKET STRUCTURE AND CHARACTERISTICS
Research in motion is the manufacturer of Blackberry products, which include hardware and software. The company has received mixed results in the recent years due to the type of market structure that it operates in as well other factors that affect its demand and supply. This has seen the company shift positions from being the market leader to the third position it now occupies in terms of market share. To understand these changes, it is important to examine the demand and supply of its products as well as the market structure and its production costs (Ribeiro, P. 1).
Factors affecting demand
One of the factors that affect demand of blackberry is the change in consumer tastes and preferences, whereby consumers want phones with more applications. This increased the demand of blackberry smart phones because it was among the first phones that had many applications in one handset. The second factor is prices of substitute products, such as iphones produced by Apple Inc. If substitute products are introduced in the market at a relatively low price, prices of blackberry will go down. However, if the substitute products have a higher price then the demand for blackberry will be increase. Apple introduced an iphone at lower price than the blackberry. This led to a decrease in demand for blackberry, because consumers prefer to have more value at a cheaper price (Cellan-Jones, para. 7-10).
Thirdly, there is awareness of the consumers, whereby if consumers are aware of the benefits of the products then their demand will be high. However, if customers are not informed of the benefits they will purchase any product and this will affect the potential demand of the better products negatively. When blackberry was launched it performed well in the market until Apple introduced their iphone, then its demand went down. Although Apple’s iphone was not as magical as it was popularized most customers were lured and shifted to Apple. This shows Apple’s ability in building customer demand. Accessibility is another factor that affects the demand of blackberry products. The more accessible the products are the more demand will be created, because customers will be able to see the products and evaluated them against competitor’s products. Blackberry products are distributed through registered suppliers who are few especially in developing countries. Hence, this has resulted in a decrease in demand for blackberry (Lowson, p. 183-189).
Factors affecting supply
One factor that affects the supply of blackberry products is government regulations especially in foreign markets. Government can implement rules that promote smooth business operations or it can set up regulations that frustrate business activities. As a result, businesses will be reluctant to sell their products in markets with unfair laws. This will lead to a decrease in supply of the products (American Book Company & Dorn, p. 130-135). A case in point is the Indian Government that implemented laws, whereby all mobile operators are required to provide access to their systems as and when asked for by the government. The CEO of RIM, the manufacturer of blackberry saw this as discriminatory law, because it mostly affected his company’s products than it affected competitor’s products. The company therefore, stopped its operations in India for a while until it got an assurance from the Government that the law will be revised to include other operators. For the period the company stopped its operations, the supply for its products in India went down (Ribeiro, P. 1).
Market trend is another factor that affects supply, whereby a company will supply products according to consumer tastes and preferences. This means that a company will reduce the supply of a product that is no longer preferred by customers and increase the supply of products that have a high preference. Therefore, the supply will depend on market trends, whereby if it changes in favour of a product its supply increases. For instance, most companies in the gadget industry realized market tastes were change in favour of tablets, after Apple launched ipad. Other companies including RIM, the manufacturer of blackberry were not left behind. RIM launched its blackberry playbook, which led to an increase in its supply while the company’s supply of smart phones went down (Tarrant, para. 10-13).
Blackberry operates in a market that has oligopoly characteristics, which has few firms dominating the largest share of the market (Tucker, p. 178-179). The major actors in this market structure include Apple, Google and Research in Motion (RIM), the manufacturer of blackberry in the software sector. In the hardware sector Apple, Samsung, Nokia and RIM dominate the market. Profit maximization is not always a priority, but they always strive to gain market share. For instance, Apple is currently leading in the tablet market with a market share of over 37%. The firms also operate on a differentiated product strategy, whereby each is striving to have a product with the greatest attributes (Siwicki, para. 1-3).
There is interdependence of firms, whereby the actions of one firm affects the others. This explains the basis of price decisions, whereby if one firm reduces prices others will follow almost immediately. For instance, when Apple Inc. introduced ipad in to the market, its rivals followed almost immediately with their versions. Samsung had Galaxy tabs, Motorola launched the Xoom and Blackberry introduced Blackberry playbook. All these were within the same price range. When Apple introduced an improved version of ipad (ipad2), it was forced to sell it at the same price as the earlier version so that it could maintain is market share or increase it. Another characteristic of this market structure is that there are barriers to entry. The start up capital needed in this market is huge. Hence, this bars potential investors from entering the market, which explains the few firms that are dominating (Tarrant, para. 10-13).
Firms in the electronic industry invest heavily in research and development, which explains why their fixed costs are always high. This is necessitated by the need to be innovative, because the companies produce within similar product categories, but differentiated. Therefore, each of them will strive to have the most innovative product. The variable costs are always reduced after a product has been developed, because the firms are able to mass-produce. This helps them to enjoy the economies of scale. For instance, the CEO of Apple stated that developing the ipad had cost the company so many resources. He added that the company had however, met their target profits by selling 15 million ipads within nine months (Siwicki, para. 3-5).
Every firm would like to see the demand of its products grow to meet its potential supplying capacity. However, the growth of demand is subject to some factors within the business environment. They include price of substitute products, change in tastes and references and customer awareness as well as product accessibility. There are also factors that affect supply of a company’s products and services. These include government rules and regulations and change in market trends. Blackberry operates in a market that has few firms that are dominating, which is referred to as an oligopoly. In this market structure, firms are interdependent. Therefore, the actions of one firm will attract a response from the other players.
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