In today's generation technological firms have created a niche in the market. Unlike other traditional firms, these firms are operating differently. Since technology is given so much importance in today's era, the company that my group member and I decided to research is, Research in Motion (RIM). In 1984 Mike Lazaridis and Douglas Fregin founded Research in Motion and have been operating ever since (Insightory, 2009). The reason why this particular company was chosen is because in the last few years it has grown at a rapid rate and currently they are the fastest growing company in the world. The organization of RIM focuses on manufacturing, designing, and marketing their wireless strategies to the global wireless market. RIM provided solutions for the products and services such as; phone, email, text messages, and Internet (Insightory, 2009). The success and efficiency of this firm has been profoundly on an increase. One of the products launched by RIM was the device and solution of BlackBerry. The product and services offered by BlackBerry is a handheld product with enhanced software and tools.
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Â The management strategies and system used by RIM have been effective over the years. The company has adopted and implemented the goals from the Balanced Scorecard in order to ensure efficiency. By introducing products such as, BlackBerry, RIM has revolutionized the wireless world in terms of how individuals communicate and interact virtually. Along side with smart technologies and wireless solutions, the company has ensured its success because it has company's goals that cater its employees as well as, customers. In combining the needs and wants of the consumers and employees the success of the company is reflected in their financial statements.
The financial statements are the most important documents for businesses and companies all around the world. They tell us the essence of a company as to how well it is doing and what the worth of a firm is. RIM has very interesting numbers if we look into the financial statements (income statement and balance sheet). Income statement, which is also called a profit and loss statement, shows the revenues from business operations, and expenses of operating the business over a period of time. This information is crucial for the managers in the company as they can see through the performance of the firm. Not only managers but stakeholders and investors can gain a lot of information from this statement and assess accordingly as to how the firm is operating.
We now will be looking into the income statement for RIM and will be comparing it for the past five years as to how it has performed. Â The first thing that appears on the income statement is the total revenue or sales of the company. There was an increase in sales to about 53 percent from the year 2005 to 2006 for RIM which is doubling its sales volume in a span of a year. If we see one of its rival companies Apple INC, they had an increase to about 39 percent. We cannot pass any judgments yet about these two companies as a lot of things still have to be taken into consideration. The next fiscal year 06/07 tell us that there was an increase of sales by 47 percent for RIM, showing a slight decline of 6 percent in sales growth as compared to the year before. The breakthrough for RIM came the following year of 07/08. This is the year when the company took of to an entire new level and picked up sales dramatically at a blistering pace. The sales were $3037(value in millions) in 2007 compared to the year 2008 which was $6009(value in millions). This shows an increase of a staggering 98 percent in sales. Almost double its sales compared to the previous year. Companies would cherish such moments if there is an increase of such kind. Apple Inc on the other hand had around 35 percent increase in its sales volume. Clearly showing that RIM is growing at a rapid pace and gaining market share in the industry. It maintained its sales to some extent from the year 08/09 to an increase of around 84 percent. Although 14 percent drop of sales compared to the previous year (07/08) it still is an enormous increase yet again for RIM. Apple Inc on the other hand had around 12 percent increase in it sales (08/09). This clearly states that RIM swiftly took of in the market for the last couple of years as compared to its competitors. Financial measures look at a lot of things into consideration and just not the total revenue. We now move on to the cost of goods sold which is basically the cost incurred in the production of goods and services sold. This is one of the key components as companies want to keep this cost as low as possible in order to have a greater gross profit. In a company like RIM the cost of goods sold is ranging around 44 to 53 percent of the total revenue. Almost you could say half of the revenue being deducted from the cost of goods sold. The final year of 08/09 was at his highest to around 53 percent of the revenue. It has been pretty consistent for the past five years for RIM in cost of good sold department. On the other hand RIM's competitor Apple Inc has an average ranging 63 percent to 70 percent of cost of goods sold to its revenue. This gives RIM an advantage over its rival firm. The next thing that is the gross profit, which in turn is not the final profit for a firm as there have to be deductions made on the expenses the company has incurred. As RIM is a company where it has to deal in technology and new inventions, research and development is one of the main expenses. Although Apple Inc has spend more in research and development that does not mean it's superior or more productive. These expenses are matched with the gross profit and in turn deducted giving the value of net income. Net income or net profit states the companies profit made when all deductions have taken place. This value is one of the most significant in terms of assessing the performance of firms. The value of net profit will be taken into consideration and compared in ratio analysis. As that is where we get a clear picture in terms of the performance of the company as to how well it is doing in the market and to its competitors. If we look into the past five years of net income earned by RIM it shows that in the year 07/08 it had the most increase in terms of net profit. There was an increase of 105 percent which is astounding. On the other hand its competitor Apple Inc had an increase of only about 38 percent in the same year. This shows RIM improving its business operations and efficiency to an immense extent. As net profit is the last entry in the income statement we now move onto the balance sheet.
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Balance sheet lists the assets the company owns and liabilities what the company owes to others. It's basically the net worth of the firm as to how much is its worth. The most liquid asset would be cash and is one of the most crucial ones. As profitable firms making profit can go out of business because of the reason of not having enough cash. This creates insolvency. It is crucial for the management of the company that they take this in contention seriously. Cash is decreasing and then in turn increasing the year after for RIM. There has been not a lot of stability as if we compare the year 05/06 there is a reduction in cash for the company but the year 06/07 there was an increase in cash. As coming to the next year (07/08) there was an increase in cash substantially by 67 percent, and then a reduction in the final year of 08/09. This asset has to be managed effectively, if not, then the consequences are pretty dramatic. Property plant and equipment in the last five years has grown swiftly. In 2005 the value for it was around $210(value in millions) as compared to $1334(value in millions) in 2009. This shows a very sustainable increase. Now coming to the liabilities section we can see the accumulated retained earnings were in deficit in the year 2006 but RIM recovered well following up the next year eliminating the deficit and increasing its retained earnings the most in the year 07/08. As now we have compared the company using its financial statements we now come to the main assessment and performance of the company by using financial ratios.
We first look into the prospect of growth ratio. Seeing a five year average for sales there has been an increase of almost 80 percent for RIM as compared to the Apple Inc which is around 34 percent. Clearly RIM dominating here in terms of growth in sales for the past five year average. We move on to the profitability ratios, gross margin ratio which is gross profit over sales. It's basically the difference between the revenue and cost of the production. The gross margin ratio for RIM for an average five years is around 50 percent as compared to Apple Inc which is around 33 percent. RIM has a slight edge here as comparing to Apple. If there is a reduction in this ratio then this means that there is stiff competition and a rise in the cost of purchases. The selling prices decline as well. On the other hand if there is an increase in this ratio the company clearly would have a competitive advantage over its rivals and so the selling prices increase eventually. RIM has a competitive advantage over Apple Inc here then. Moving on to the next ratio which is crucial in analyzing the performance of the company in its financial perspective would be return on capital employed. A ratio that indicates the efficiency and profitability of a company's capital investments. (Investopedia, 2009)
Calculated as: EBIT( earnings before interest and tax)
RIM's return on capital employed (ROCE) for an average five year is around 30 percent which is better then its competitor Apple Inc which is 21 percent. Yet again RIM gaining an advantage here over its rival firm. These ratios are very important in terms of analyzing the performance of the company in financial perspective.
Now we will look into an important profitability ratio which is net profit margin. "The profit margin tells you how much profit a company makes for every $1 it generates in revenue or sales. Profit margins vary by industry, but all else being equal, the higher a company's profit margin compared to its competitors, the better.``
It is calculated as:
Net Income after Taxes ÷ Revenue = Net Profit Margin
RIM's average net profit margin ratio is around 18.7 percent. More than double if compared to its industry which is around 8 percent. If we compare RIM's net profit margin to its rival firm Apple it is ahead in this department as well by a marginal 5 percent. Being ahead of a competitor just shows the management efficiency and effectiveness of RIM which is doing great as compared to its rival firms.
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Other ratios on the financial condition of the firm are very crucial as well. This shows whether the business has enough to pay for its liabilities. We are talking about the quick ratio.
It is calculated as:
RIM's quick ratio is 2.1, which indicates that it has enough to pay for its liabilities. Anything more than a one is considered to be acceptable. So RIM has managed this very efficiently.Â Apple Inc is not far behind as its quick ratio is around 1.9. Not much of a difference but again RIM having the slightest of advantage.Â Â This ratio is essential as it determines whether the firm is able to convert its most liquid assets in order to meet the current liabilities.Â
The financialÂ statements for RIM seem to be in excellent shape as it's the fastest growing company in the world presently. For the past three years there has been 77 percent rise in the revenues, 84 percent increaseÂ in profits and a total return of 45 percent. These are staggering numbers which any company would wish to have. As we have mentioned of the quadrants of the balance scorecard we now will move on to the next one which is the customer or market aspect. (Mobile Burn, 2009)
Research in Motion is the fastest growing company in the world.
Research in Motion is a company that provides products to customers all over the world. The main objective of the managers is to increase profits and have a larger market share by customer satisfaction. Some of the important measures of performance are development of new innovation and products, customer satisfaction of products, and buying related products.
The importance of RIM introducing new products and innovation which satisfies the changing demands of customers is very vital to the success of the company. It is an important indicator to measure the performance of customers in the market because the company can get a sense that customers are satisfied with the products when they re-purchase products. Managers find that it is very useful and important to develop products according to the rapid change in the environment. There are many competitors in the market, which are able to enhance and integrate their products to fascinate customers. Research in Motion, which introduced Blackberry to customers, allowed businessmen to interact with their data from companies at a secure and safe way. I-phone launched by Apple. Inc, posed a threat to Blackberry`s market share, and was able to extract customers and market power from RIM. Having a constant development in products and innovation will increase customer satisfaction, thus leading customers to return for more products, which will eventually generate profits for the company. Development of product and innovation are an important measure of performance, in relevance to customer`s perspective.
As competition continues to rise in the communication world, Research in Motion launched its new product Blackberry Curve 8520. This new product launched by RIM enhances the multimedia features offered by Blackberry. ``It gives mobile users the ease of access to email, messaging (IM, SMS, MMS) and popular social networking sites including FacebookÂ® and MySpace.`` (Marketwire, 2009) This new smart-phone also includes the newly innovative track-pad for smooth navigation, and also includes multimedia keys for users. By launching this new product RIM was able to continue its dominance in the market, by attracting more customers to its products and as well keeping existing customers to continue purchasing their products. RIM was able to introduce new features in the Blackberry Curve 8520, which is an upgrade to Blackberry Curve 8900. RIM is able to overcome drastic changes that are taking place in the environment and continue to grow customers from year to year. ``38% of the company's subscriber base are individuals or other non-enterprise users. `` (Creativity and Innovation Driving Business, 2009) Research in Motion has been able to expand its line of products to broad scope of customers, from business users to individuals that use their mobile on a regular basis. This shows that RIM is adapting to the rapid change in the technological environment where customers feel they need to be connected to their friends and family whether it is business related or being able to communicate in general.
(Creativity and Innovation Driving Business, 2009)
By looking at this graph, RIM has increased its revenue because of rapid innovation of products. Research in Motion Ltd. is one of the top 20 Innovators. (Creativity and Innovation Driving Business, 2009)
Another important performance measure for Research in Motion is customer satisfaction of products. Managers have to ensure that their product, such as the Blackberry smart phone is giving customers a good outcome for their money being spent on the product. The amount of operating costs RIM puts into its products has to be done efficiently and effectively, to gain profits, and ensure customer satisfaction. If the customers are not satisfied with the products, then there is no point spending money on marketing products. One of the main reasons why company fails at satisfying the customers is due to the lack of knowledge of customer attitude and behaviour. The purpose of any organization or company is to meet the needs of its customers, the revenue and profits that need to be generated for the company to be successful in the future depends on customers` behaviour and their satisfaction towards the products. Customer satisfaction for products measures how well Research in Motion is focusing on customers in the demanding environment.
Research in Motion Ltd. has been able to penetrate the market by having innovative products, which has led to customer satisfaction. RIM is the highest ranked overall in customer satisfaction among business wireless smart-phone users. (Marketing-Vox, 2009) RIM has been able to efficiently gain profits by innovating products according to customer needs. This has made Blackberry one of the finest products produced by Research in Motion. Having satisfied customers is very vital to business for future sales and profitability for the company. Satisfied customers usually repurchase the same brand of product, thus also leads customers to recommend the same product to more people. Since customers are highly satisfied by the products of RIM, they are most likely to recommend the product to more people, thus leading to more sales overall. Blackberry still poses a threat from many leading competitors such as Apple`s I-phone and the recent launch of Google`s Android powered devices.
Having customers buy related products is also a good measure of performance; it shows how well the company invents different products to keep customers from going to competitors. Customers` attitude and behaviour changes rapidly in the technological environment, customers can behave in different ways which could be beneficial to the company or could leave the company in significant losses. One of the main goals for Research in Motion Ltd. is to have customers for a long period of time, so they can keep spending money on products. Having a wide range of products will give customers more options to buy products and make them loyal to the company.
Research in Motion has a wide variety of products from which customers can choose from; this includes phones from being the most business oriented to multimedia based. Blackberry has started phones with the touch screen, RIM launched Storm2 one of the latest devices to battle competition with Apple`s I-Phone. RIM faces tough competition with its rivals, but it is doing a good job to stay up-to-date on its latest devices, and offering customers various products to compete in the tough markets. Blackberry customers are very loyal to their products and usually try wide range of products. A recent survey shows that current Blackberry users are more likely to buy the new RIM models than the customers of other manufacturers. RIM also has a significant potential to take away customers from other manufacturers, such as Motorola, Samsung and Palm. (PR news, 2009)
As we now look at business processes of Research in Motion, this aspect is the internal process of how managers are able to run the business, able to come up with strategies for customers, and as well, set standards for companies' specific goals in achieving a mission. The internal process of a company is basically the heart of the organization. All the main decisions and strategic planning is carried out from within the organizations` top managers. Research in Motion focuses its business towards product development and manufacturing.
Research in Motion has been able to uphold the value of their customers by product development. The company has been able to launch products according to customer needs and market demand. RIM `s main focus has been to develop products which would continue to meet the needs of individuals of various age groups. Research in Motion`s most infamous product the Blackberry has taken different forms of communication and given people the power to send and receive information of all sorts. RIM was able to come out with client-based software which allows users to access their email from their companies; the impact on e-mail users has been significant. This innovation has given government officials, business executives, and other professionals to change the way they do business.
Product development has been a very important aspect of RIM`s business process. Jim Balsillie, the Co-CEO of Research in Motion stated ``It was the right time for us to do that because the offering and the market opportunity and the value proposition and the uniqueness stood on its own meritâ€¦`` (Insightory, 2009) RIM was basically able to develop Blackberry with the option of giving users to e-mail with one another, just at the time when there was a technological boom. Many people had started to access the internet, and businesses were shifting to web-based. RIM was able to move its strategic plan of product development, to a more consumer based. The company added new application such as the MP3 player, built in camera, multimedia function keys, and other 3rd party applications for various consumer needs. Research in Motion has been able to collaborate and merge with other small companies that specialize in application based software, to enhance the customer experience. ``Open Text and RIM plan to integrate LivelinkÂ® and BlackBerryâ„¢ features so that mobile Livelink users may collaborate dynamically within their organizations and throughout their supply chain communities.`` (Research in Motion Limited, 2009)
Research in Motion has been able to increase its market share in the mobile phone industry, by coming up with various developments in the product. This is a very important process to the success of any company. The company has to keep on innovating its` existing products to keep customers interested and satisfied with the product. This in turn leads to better satisfaction, and creates a positive future for the company.
The key business process for Research in Motion is not only to develop products, to enhance the world with a better experience of mobile phones; RIM is also able to manufacture its products. This is one of the key aspects of RIM`s business process, they are able to invent and create the type of product, they want according to their standards. Blackberry, the product, made Research in Motion known to the whole world. ``BlackBerry is the world's second most popular smartphone platform, capturing 21% of worldwide smartphone sales in Q2, 2009.`` (Wikipedia, 2009) RIM was able to come out with a product, that amazed many businessmen and individuals, with its popular e-mail services, web browsing, and text messaging.
Manufacturing is one of the key processes for Research in Motion; RIM is a multinational company, which has started to take over global markets for smartphones. RIM has many manufacturing plants outside of Canada, where manufacturing is cheap. RIM`s manufacturing consists of many teams, which consists of efficiently and effectively manufacturing the products, repairing, and assembling them. Research in Motion uses a cutting-edge technology and equipment at the Waterloo location in Canada. (Research in Motion Limited, 2009)
The next quadrant that we move on to is the learning and growth aspects of the balance scorecard. When developing measures for the learning and growth perspective we got to look into few considerations. They are information capital, human capital and organization capital, which are essential for future long term success and growth for a firm. Human capital consists of knowledge of the employee. In today's generation knowledge is a key aspect and more specifically for RIM which is mostly focused on knowledgeable workers. As there is immense competition for RIM it is key that the employees' posses skills where they can compete then with other companies in the market. Â Companies have been impacted with technology and RIM is a company which deals in it. So having information (capital) and converting it to knowledge is essential. Then we move on to organization capital, which is having a positive spirit in the firm which will enhance the ability to grow the organization. Â Â
Learning is key and essential to any firm and especially for RIM. Since the ranges of their products are based upon technology and innovation this quadrant is very crucial. ``Training and Development metric includes Learning and Growth Opportunities (percentage of employees who are satisfied with the learning and growth opportunities in the organization). `` (Balanced Scorecard Designer, 2009)
Research in Motion is able to expand its company by recruiting more employees into the business. This is an important aspect for a company to grow, if more employees are hired, then the company will be able to expand more rapidly and deal with the needs of customers efficiently. RIM recently reported, to take 3,000 more employees for 2009, bringing the total employees at Research in Motion to 15,000. (Randstad, 2008) Recruiting more employees shows that RIM is determined to have skilled workers to meet the needs of customers, as well as deal with its competitors.
This is one of the measures that most companies take into consideration. RIM would definitely take this measure and implement it within the organization. Training would improve the performance for the current job and development looks into the future growth of the job.Â It's a decisive metric as this leads to future technological improvements and newer inventions which RIM keeps coming out with. The company's product line, which one of them is a smart phone, Blackberry keeps coming with newer and improved features keeping their competitors in mind. Â RIM managing this metric efficiently will lead to great success and we have seen that in the financial perspective of the firm.
We can state that RIM is definitely a learning organization as they keep researching, improve standards internally. There has to be a clear shared vision set by the management as this leads a firm in one set direction. If this is to be possible there should be mental models within the firm as well as team learning.
Another key aspect of learning and growth aspect for what we can look at is employee turnover. It is basically employees leaving or joining the firm. This is a key attribute as if the employee turnover is high than it will have on effect on the productivity levels. There could be various reasons such as worker not being compensated or discontented with his work or even some other factors like the working conditions or chances of promotion and growth are hardly looked upon. On the other hand if the employee turnover ratio is low this shows the satisfaction that employees are with their work. It shows stability within the organization. RIM in the past few years has increased its workforce globally at phenomenal rates. This to some extent shows that the employee turnover is relatively low.
Finally we will be covering the last point on learning and growth perspective and its metrics. Job satisfaction is when an employee is content with his work and motivated. This is also one of the key components of learning and growth as if the employees for instance are satisfied with their job this will lead to efficiency and growth for the firm as well as increase in profits. So by concentrating on job satisfaction it leads to positive outcomes. We can relate such a scenario for RIM as their profits in the past few years have increased in drastic pace.