Market failure implies a situation where the quantity, pricing or the quality of a product supplied by the suppliers does not equate to that demanded by consumers (Aldridge, 2005). It can also imply a situation where free markets fail to allocate resources sufficiently, there are missing markets, information failures, unstable markets among other issues that influence the supply and purchase of goods and services (Aldridge, 2005). Aldridge (2005) asserts that failure to conduct adequate and relevant research prior to the release of a given product in the market often leads to market failure. The recent decline of mobile devices maker, Blackberry is a classic example of a market failure where marketing research never addressed some pertinent issues and hence the decline of the company and massive financial losses.
Blackberry failed to research and forecast properly and strategically for the future of mobile telephony. Blackberry released its first device in 1999 (Kao & Sarigumba, 2011). The most recent devices, Blackberry Z30, Q10, Z10 and the Q5 were released in January 2013. However, the Canada’s once most valuable firm has recently been hit by some massive marketing failures that have seen the number of blackberry users decline from 80 million in December 2012 to 72 million in June 2013 (Gustin, 2013). Blackberry reported a financial loss of $935m for the second quarter of 2013 which it blamed on the market failure of its Z10 Smartphone (Gustin, 2013).
The market research that was done prior to Blackberry’s release into the market failed in several areas. First, the company failed to anticipate that consumers and not corporate customers would drive the Smartphone revolution. The company grew steadily and dominated the corporate market early on but the introduction of Apple’s iphones and Samsung’s Galaxy series compelled the company to restructure and come up with models such as the Z10 which it targeted to sell to individual consumers. The marketing research failed to discover that the corporate market is limited and gets easily saturated as compared to that of individual consumers (Gustin, 2013). Gustin (2013) notes that the research failed to realize that individual consumers would drive the Smartphone revolution and that advanced mobile devices would be used more for social interaction as compared to business purposes. Apple mobile devices such as the ipad and the iphone are tailored to suit social interactions as much as they are to serve business people. Blackberry on the other hand were tailored to lean more to corporate service and this has contributed to massive market failure as attested by the decline in sales volumes of blackberry devices.
Marketing research by Blackberry failed to realize that smart phones would become fully-fledged mobile entertainment hubs and cease being used merely for communication (Gustin, 2013). Research done recommended that Blackberry phones be made with full keyboards. However, it soon became clear that consumers preferred touchscreen phones. Unlike the former, touchscreen phones allow for better navigation and better video viewing (Gustin, 2013). Blackberry eventually released the Z-series touch screen phones, many consumers saw the devices as poor imitations of the iphone. At the point of releasing the phones, Blackberry thought that they had matched customers’ expectations of e-mail-enabled mobile devices. This was not the case because their competitor, Apple had worked on powerful devices such as the iphone and the ipad which have highly computerized capabilities. The user-friendliness of the blackberry devices was also lower as compared to that of Apple’s products. As such, Blackberry had not done adequate and effective research on the tastes and preferences of their potential customers.
Blackberry also never conducted adequate research into the “applications economy”. The company was blindsided by the emergence of the “app economy” which was the niche market for android-based devices and iphones (Gustin, 2013). The company had not researched adequately into the ramifications of altering its devices to compete with other high-tech and app-based devices. More so, the company had not anticipated for the emergence of the iphones and android-based devices. The company rushed to make devices such as the Blackberry Z10 which performed disastrously in the market. Customers were accustomed to the Blackberry phones that have a QWERTY keyboard and the introduction of a touchscreen phone without the keyboard seemed to take clients off guard with many terming the phone “unlike Blackberry”. While consumers wanted a Smartphone that runs on advanced operating system, the Z10 ran on the Blackberry 7 which is an old OS that is outdated in the market and this was another blow for the new phones.
Market research by Blackberry also failed to reveal the potential of different markets in different regions. As such the company got overzealous in shipping handsets leading to lots of unsold stock leading to a multimillion dollar inventory charge. This occurrence led to company failing to break even with the Z10 (Gustin, 2013).
Blackberry failed in terms of the acquisition and usage of competitive intelligence. Considerable Competitive Intelligence (CI) gathered before the launch of the Blackberry smart phones specifically the Z10 established that indeed the corporate market could not sustain the market for smart phones and that the individual consumers would provide the biggest and most sustainable market. Consequently, Blackberry launched the Blackberry Z30, Q10, Z10 and the Q5 in January 2013. The Company did away with the keyboard and introduced a sizeable touchscreen and also gave the new devices more navigability and internet capabilities to match up to the features of other smart phones. However, the CI gathered never revealed that in order for Blackberry to compete with Apple, Samsung and Nokia which had made significant strides in the making of highly advanced mobile devices, they needed to come up with a device with equal of not higher computing capabilities. Following the research failures by Blackberry, the importance of CI can be highlighted as giving a business the ability to compete on an equal footing with other industry player (Kao & Sarigumba, 2011). Businesses are able to keep pace with technology as well as customer tastes and preferences, make accurate financial forecasting, price their products favorably, manage their inventory better, source for quality and cheaper materials, advertise and promote their business more uniquely and in a customer-oriented manner among other issues that make them relevant in the industry (Kao & Sarigumba, 2011).
Blackberry was once a very enviable company due to its trademark phones that had QWERTY keyboard and appreciable computing capabilities. However, the company has faced some massive financial and market losses because their target market was unsustainable in the long term. Their narrow focus on the corporate market at the expense of individual consumers in the mass market was misguided and unsustainable. Moreover, the original devices made by the company (based on the QWERTY keyboard) had created a perception among customers on the kind of devices associated with blackberry as a company. Blackberry’s market failure underscores the importance of competitive intelligence. Competitive intelligence aids businesses to keep pace with their competitors in terms of pricing, advertising, inventory management, level of technology among other issues. As such, proper market research and competitive intelligence are key issues that can help a company maintain its relevance and market shares in a competitive industry.
Aldridge, A. (2005). The market. Cambridge: Polity.
Gustin, S. (2013, September 14). Business & Money. Business Money The Fatal Mistake That Doomed BlackBerry Comments. Retrieved January 13, 2014, from http://business.time.com/2013/09/24/the-fatal-mistake-that-doomed-blackberry/
Kao, R., & Sarigumba, D. (2011). Beginning Blackberry 7 development. New York: Apress.