Adobe Systems

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Industry Environment – Adobe’s Strong Position

Adobe comes from a background of technological superiority in the graphic arts and the publishing industry. Success with Postscript - the technology and its marketing has positioned Adobe as the leading supplier to the publishing industry with a large market share. Having leveraged its technological competence in print and publishing to the Internet space, Adobe is poised with commanding market shares here as well. 91% of websites in the world have used Photoshop for their creation and 74% of web design and animation is done with Adobe’s product Illustrator.

Adobe’s Acrobat commands the lion’s share in the e-document segment allowing the creation and exchange of documents created in multiple applications to be viewed, exchanged and printed freely without requirement of native application or platform. The acrobat product can easily be extended from e-document to e-book software. Currently Acrobat is the default standard on the web for online document exchange and the 200 million downloads of the free reader stand testament to that. Acrobat has achieved what you may call the position of DSIR and the main driver for that has been the proliferation of the internet and the value the acrobat product provides in terms of compatibility by allowing free exchange between platforms and applications.

The competitive landscape

The biggest competitor to Adobe looming in the horizon is the 800 pound gorilla called Microsoft. Microsoft has created its own proprietary e-book reader called “Microsoft reader”. Microsoft realizes Adobe’s advantages in that Adobe is the software provider of choice for content packaging to the print and publishing industry – the primary creators of e-book content. They are also well aware of the DSIR advantage Adobe has gained in the e-document space for online document exchange.

Being a company that has thrived on creating DSIR for its products Microsoft is very sharp to the game. Their main strategy will stem on trying to take the DSIR advantage away from Adobe by leveraging on the strong market position enjoyed by their Operating System and the suite of productivity tools – Microsoft Office. However there is one major technical disadvantage that Microsoft faces. They have not been able to get their “Reader” to print documents. This makes it pretty much a low second choice in the online business document space. Thus, the push for the retail consumer e-book reading market seems to be Microsoft’s game plan.

The other players in the market have relatively low shares and market power and are approaching the problem from a hardware standpoint with a very strong focus on the retail segment. We do not believe that they form a sufficiently credible threat to Adobe at this stage.

Strategy

The e-book reading market like all such similar markets is looking for a standard. The more people adopt a certain technology, the more will be the content that will be created for it, more devices will be built compatible to the standard and this will in-turn bring in more people to adopt it. This cycle will thus create the DSIR advantage. But there is one caveat to it. To get this advantage, the technology has to be filling a definite need gap and it should be compatible across networks or ecosystems.

Evaluating the e-book market segment characteristics (Exhibit 7) we see that the largest value in the benefits offered by digitized documents seems to be perceived by the professional and technical audience, the business audience and the reference material audience. In the retail consumer segment, other than the travel book niche, there does not seem to be a major perception of utility in the consumer’s mind. This assumption or inference will form the cornerstone of our strategy for Adobe.

Of the digital content market we can divide up the constituents into Content creation, layout and design, digital file creation, distribution, content viewing and...
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