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BlackBerry’s Indonesian Partnerships Demand Local Components

Necessity is said to be the mother of invention. Arguably it has also been the mother of a more efficient strategy for BlackBerry’s brand in Indonesia.

When you think about popular phone brands today, BlackBerry is not likely the brand that first comes to mind. However, likely it would top the list for anyone in Indonesia. As the company wrote when it announced a new partnership with an Indonesian carrier this past September, “as the country is historically BlackBerry’s largest market for devices and, by far, the most substantial for the BBM messaging software we created.”

Photo courtesy: BlackBerry

Photo courtesy: BlackBerry

Indeed, a Wall Street Journal blog earlier was entitled Why BlackBerry Is a Hit in Indonesia. Its messaging software widely adopted by individuals, and is also favored by businesses for “its secure ecosystem.” That user base amounts to about 60 million out of the 90 million users throughout the world.

Indonesia is promising basket for BlackBerry to plan on laying its eggs in. According to the Wall Street Journal, it is predicted to become the “fourth-largest smartphone market by 2020, with total annual sales of nearly $1 billion.

To keep its hold on Indonesia, BlackBerry has to comply with country’s new regulations adopted and July that are to go into effect in January 2017. They call for a minimum of 30% of domestically sold smartphones be locally sourced. BlackBerry will satisfy that requirement by partnering with Indonesian companies that will manufacture its phones.

It announced a joint venture PT BB Merah Putih, for the production of phones with BlackBerry software and service for the Indonesian market. That involves PT Tiphone Mobile Indonesia Tbk, which has with the largest distribution network and PT Tiphone, an affiliate of PT Telekomunikasi Indonesia Tbk, the largest carrier in Indonesia.

Making a virtue of the necessity of compliance with local sourcing requirements, BlackBerry declared that its partnership also dovetails with its new strategy of transitioning away from manufacturing handsets to further develop software. The brand characterizes the move as its “first significant step toward leading as a software company” in a move that will delegate “internal hardware development” to a partner.

BlackBerry declared: “This is what the future looks like for our business, and it is the right move as we progress towards profitability.” The idea is that the delegation of one part will allow BlackBerry to concentrate on pursuing its new direction, which is “providing state-of-the-art security software for devices and the enterprise of things, as well as” put the rather vaguely defined “other critical areas of the company.”

As John Chen, executive chairman and CEO, BlackBerry, put it in a press release “BlackBerry is no longer just about the smartphone, but the smart in the phone.”

Chen obviously means the software that is to form the new core of BlackBerry. But it is also possible to see another way in which it is smart to delegate production to local companies. As Nigel Southway explained in Lean Thinking for Sustainable Supply Chains, shorter supply chains are more efficient and more sustainable than longer ones.

If BlackBerry’s experience in Indonesia proves successful, perhaps other companies will consider localizing their own electronic supply chains, even when not coerced to do so by regulations. Then the need for transporting raw materials over long distances will be reduced, which translates into less pollution and less consumption of energy entailed by shipping.

There’s also the other component of sustainability to consider: supporting one’s local markets. The impetus behind Indonesia’s demand for local content was concern about bolstering its own industry. Domestic production is good is one of the key sustainers of a country’s economy. For global enterprises that want to sustain their markets as well as themselves, a long term view that takes the strength of the local economy into consideration is good business.

It is also possible if the companies don’t foster local industry of their own volition that they will be compelled to if other countries choose to follow Indonesia’s example in imposing similar regulations.

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