Escolar Documentos
Profissional Documentos
Cultura Documentos
Author:
Georgi Pavlov
Opponent:
Jacob Weber
Seminar advisor:
Laura Staugaityte
Subject no. 1
The new strategy of Adobe Systems
Aarhus School of Business
2007
Table of Contents
1.0 INTRODUCTION .................................................................................................. 2
2.0 COMPANY BACKGROUND ................................................................................. 3
3.0 PROBLEM STATEMENT ..................................................................................... 4
4.0 MARKETING STRATEGY .................................................................................... 6
5.0 ADOBE’S STRATEGY TYPE ............................................................................... 8
6.0 ADOBE’S STRATEGIC MARKETING DECISIONS............................................ 12
7.0 CURRENT STATE AND FUTURE...................................................................... 15
8.0 CONCLUSION.................................................................................................... 17
9.0 REFERENCES ................................................................................................... 19
1
1.0 Introduction
In the past years, the internet has grown dramatically. Email has
spread faster than any other method of communication. Every hour
over a billion of emails are sent. The world and the way people
communicate have changed significantly. According to recent
statistics 1 , the internet penetration in the world population has
increased to almost 20%. That is more than 1.2 billion people
accessing the web worldwide. It is a huge and still evolving market.
Here is the place to mention the mobile devices which are expected
to play an important role in the near future of the web.
The software sector is on its way of becoming ever more important
to the world economy. This industry basically involves activities of
producing, developing and trading software products, as well as
providing software services. Today, software applications are
hardwired in every business or organization to the extent that doing
everyday operations without them is literally impossible. The number
of players in the market is vast, and they come in all sizes. This
makes the environment extremely competitive, forcing the
companies to focus their efforts on acquiring a higher market share
and using all possible methods for gaining competitive advantage.
The particular firm I am going to focus on in this paper is Adobe
Systems, Inc. 2 It is one of the world’s largest software companies,
1
Source: http://www.internetworldstats.com/
2
In the text I also refer to the company as Adobe for short.
2
taking top places in the rankings of Forbes Global 2000 3 and
Fortune's “100 Best Companies to Work for” list 4 . Adobe offers an
extensive line of creative, business and mobile software products
and services targeting a specific range of users such as designers,
developers, photographers, knowledge workers and OEMs 5 .
I decided to write about this specific company, because I find it an
appropriate base for applying marketing strategy theories. Adobe
plays an important role in the global business as its products find
application in a wide range of organizations, from educational to
governmental. However, compared to its biggest competitors like
Microsoft and Apple, it does not receive the deserved attention. I
also consider the recent events that took place around the company
to be important and worthy of a discussion.
2.0 Company background
Adobe Systems was founded in 1982 by John Warnock and Charles
Geschke. Initially the company was operating only in the graphics
and publishing market. First they introduced PostScript as a desktop
publishing application, followed by Illustrator, Photoshop and
InDesign, all of which turned out to be exceptionally successful. The
next step was introducing Acrobat and the PDF document format,
which also quickly became an industry standard. In the subsequent
3
Source: http://www.forbes.com/
4
Source: http://www.greatplacetowork.com/
5
Original Equipment Manufacturers
3
years Adobe added to its product mix successful products like
PageMaker, After Effects and GoLive by acquisition.
Despite all these achievements, the company experienced
substantial difficulties during 1998. Important product delivery date
was missed, sales declined and the stock price plummeted
encouraging a takeover attempt by one of their direct competitors,
Quark, Inc. Bruce Chizen, who was appointed as a CEO later in
2000, managed to stabilize the situation. This was not an easy task,
as most of Adobe's executive management left the company while he
had to lead a drastic restructuring of the business. Adobe had to
carry out a major reform.
3.0 Problem Statement
Dilemma
Managing a global software corporation is a difficult and challenging
initiative. The business environment is extremely hostile and
competitive. One of the central problems is finding the right strategy
for the company to follow. Several years ago Adobe Systems were
forced to redefine the way they run their business in order to
survive. They had to reinvent their strategy and make several very
important decisions. Now, the company has a clear vision and a well
defined road ahead. I will try to explore these events and discuss
how they helped the company to position itself better on the market
and realize its mission and goals. At last, I will take some time to
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describe the company’s current state and its future plans for
development.
Problem statement
Managing a software company like Adobe in today's business
environment and finding the right marketing strategy to implement
in order to develop and stay competitive.
Research questions
· What is marketing strategy and its role in an organization?
· What marketing strategy is Adobe following?
· What important strategic marketing moves has Adobe realized?
Delimitation
The main goal of this report is to present and explain marketing
strategy theories and issues, and then use the selected company as
an exemplary base for their application. This paper is to be viewed
as a case study. Considering the data collection process, I have
carefully selected my information sources and I believe they are
authentic and reliable. I am not aiming to thoroughly explain the
management, strategy, past or future of Adobe, but just expose and
discuss several of its relevant strategic decisions to the extent I find
appropriate, considering the time and length constraints of the
report. This also applies to the other companies mentioned in this
paper, as I will only use them as a reference point as well as to
better describe the business environment. Furthermore, the paper
5
will not cover the whole range of Adobe products as it is too
extensive.
4.0 Marketing Strategy
First of all, I will start with presenting a few definitions of strategy
by different authors through the years:
“Strategy is characterized by the determination of the basic longterm goals and
objective of an enterprise and the adoption of courses of action and the
allocation of resources necessary for carrying out these goals.”
(Chandler; 1963)
“Strategy is the pattern or plan that integrates an organization’s major goals,
policies and action sequences into a cohesive whole.”
(Quinn; 1980)
“The fundamental issue in strategy is the manner in which firms achieve and
sustain competitive advantage.”
(Teece, Pisano and Shuen; 1997)
“Strategy encompasses the decisions and activities that enable a business in a
firm’s business portfolio to achieve and sustain a competitive advantage and to
maintain or improve its performance.”
(Varadarajan, Jayachandran; 1999)
The definitions above apply to the general strategy of an
organization. This general strategy is divided into three different
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levels: corporate, business and functional. The latter includes
functions such as marketing, production, research and development.
Corporate strategy is concerned with the choice of businesses the
firm is going to be in, and the main goal is maximizing its market
value, so that it meets investors’ expectations. Business strategy is
concerned with how a particular business competes successfully on
the market, and what strategic decisions could be made in order to
achieve and maintain competitive advantage in specific product
market domains. This is possible by mobilizing competences and
resources in order to implement valuecreating strategy, in
coordination with the functional level strategies such as marketing
strategy and R&D strategy.
In Marketing Management (2006), Kotler and Keller write about
marketing strategy representing the first phase of the valuecreation
process: “The formula ‘segmentation, targeting, positioning (STP)’ is
the essence of strategic marketing.” Another standpoint is:
“The focus of marketing strategy is achieving competitive advantage by building
relationships with important constituencies, offering appropriate products,
identifying the timing for changes in relationships and product offerings, and the
deployment of sufficient resources to realize the choice of relationships and
offerings.”
(Sudharshan; 1995)
A much more simple explanation of marketing strategy is given by
Day, Weitz and Wensley (1990). They define it as marketing
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activities and decisions related to generating and sustaining
competitive advantage. Throughout the paper I will refer to
marketing strategy from this point of view. I prefer their definition
mainly because it is clear, concise and less restrictive.
Because of its specific nature, marketing strategy has a central
position in the organization and plays an important role in the
assessment of strategy at the business and corporate levels. This
makes marketing strategy a determining factor in the strategy
formulation process. The part of marketing strategy directly
concerned with the role of marketing at the corporate and business
levels is called strategic market planning.
5.0 Adobe’s strategy type
In this section I will present the Miles and Snow typology of
strategic behavior. This theory represents generic approaches to
marketing strategy and tries to explain the effectiveness of different
strategy types by introducing marketlevel and businessspecific
factors. The model distinguishes between three types of behavior,
each with a different approach to the strategic management of its
productmarkets. These three types are the Prospector, the
Defender and the Analyzer. I will first briefly describe each of the
different types and then try to identify which one best describes
Adobe’s marketing strategy.
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The Prospectors are categorized as proactive as they are always
trying to identify and exploit new opportunities by both product and
market development. Because of it they usually invest in multiple
flexible technologies and utilize product management and
decentralized control. High emphasis is put on new services and
niche markets. Prospector types constantly try to develop new and
innovative products which are the base for their continued growth.
They gain competitive advantage by cost or differentiation based
strategies. They also have the opportunity to achieve a sustainable
cost advantage because of their pioneer approach.
On the other side we have the Defenders. Unlike the Prospectors,
they tend to stick to their productmarket and aggressively protect
it. Because of this “sedentary” approach they usually implement a
functional structure and centralized control in the organization, and
as a rule invest in technological efficiency with which to gain cost
based competitive advantage. They also need a broader market
focus in order to backup their lowcost strategy with the help of
economies of scale. Defenders’ growth strategy consists of focusing
on a stable market and attempting further market penetration,
whereas new product development is rare.
The last type, the Analyzers, is positioned somewhere between the
first two ones. They maintain a stable core of skills, products and
customers. However, they are constantly evaluating new product
and market opportunities. Compared to the Prospectors, Analyzers
act as followers – they hold on their current businesses and enter
new markets or introduce new products only after others have
already proved it to be successful. Stuck in this middle position they
have to invest in both stable technologies (to continue to serve their
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current customers) and flexible technologies (to be able to quickly
enter new markets). Because of it they can not achieve efficiency,
and can only use differentiation as a source of competitive
advantage. Their growth opportunities come from either market
penetration or new product and market development strategies.
Considering the individual performances of each behavioral type,
there is no reason for indicating a superior one. The three strategies
are assumed to be equally successful, as each type has the
opportunity to outperform the other two. The main points about each
type are summarized in Table 1 below.
Table 1
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There is also a fourth type, the Reactor, characterized as “a residual
strategy, arising when one of the three other strategies is
improperly perused” 6 . I skip the explanation this type, because of
the lack of consistent description and support for it.
Classifying Adobe’s marketing strategy in these boundaries is not
that easy. Obviously, the Defender type is not a good fit but there
may be different opinions when it comes to the other two options. I
personally believe that Adobe is following a Prospector approach
because from the founding of the company, they have been always
trying to push the envelope and present new approaches. Over the
years Adobe’s innovations have redefined the industries of Print
(PostScript, PDF), Web (Dreamweaver, Flash), Film & TV (Premiere,
After Effects) and much more. A recent recognition of Adobe’s
innovation and differentiation success is their 2006 Frost & Sullivan
award:
“Frost & Sullivan selected Adobe Systems Incorporated as the recipient of the
2006 Frost & Sullivan Award for Product Differentiation Innovation in recognition
of its ability to meet the demands of a very dynamic market with a product that
not only gives Adobe a competitive advantage but also offers customers a unique
interoperable solution.” 7
(June 19, 2006)
Adobe also manages to keep a competitive price on its products. For
example, one of the biggest direct competitors of Adobe, Quark,
offers QuarkXpress – a perfect substitute for Adobe’s InDesign.
6
European Journal of Marketing 27, 10; p.34
7
Source: http://www.frost.com/
11
However, not only InDesign is cheaper, but you can buy the whole
Adobe Creative Suite (which includes Photoshop, Illustrator, Adobe
Acrobat and GoLove) for the price of QuarkXpress. The market focus
of Adobe is relatively narrow, as the company specializes in
delivering products for specific market niches. They continuously
improve their current products and present new applications on the
market, the most recent of which Adobe Flash Lite 3 8 (released
01.10.2007) and Adobe Thermo 9 (to be released in 2008).
Considering the product success rate, it is very high. Of course,
Adobe has had some bad shots (PageMill for example) but testing
and abandoning new concepts is yet another distinctive
characteristic of the prospector strategy.
6.0 Adobe’s strategic marketing decisions
In the recent years there have been a number of changes at Adobe,
most significantly, the company's $3.4 billion acquisition of
Macromedia, Inc., a multimedia software firm. The deal was
announced in April 18, 2005, and the transaction closed on
December 5, 2005. The shares of Macromedia common stock were
converted into the right to receive 1.38 shares of Adobe common
stock. The name of the combined company remained Adobe Systems
Incorporated.
8
Source: http://www.adobe.com/
9
Source: http://labs.adobe.com/
12
There may be many motives for an acquisition: economies of scale,
financial, marketrelated and much more. An acquisition can built on
core competences and enhance competitive advantages so it is an
important part of the organization’s general strategy. Normally, the
acquisition issues are a part of both corporate and marketing
strategy, but in this text I will only concentrate on the strategic
market planning side. That is, I will view the acquisition as a
strategic marketing decision taken by the company in order to gain
competitive advantage. That narrows down the motives to mainly
product and market related, so in Adobe’s case they could be:
Industry restructuring (removing a competitor like Macromedia
from a target market)
Increased market power (a larger company may have more
control over its prices, customers and competitors)
Access to new markets (effective way of entering a new market
by acquiring an already wellestablished company in it)
Economies of scope (combining both firms’ product ranges may
provide consumers with a more desirable product offering)
Acquisition of new skills (in the fastdeveloping software
industry, Adobe could benefit from the acquired firm’s skills
and develop faster than it may be possible only internally)
Diversification (diversification as well as innovation and growth
by acquisition, instead of internal creation of new activities)
It is hard to evaluate an acquisition after only two years of its
completion, but considering the evidence that only around 50 per
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cent turn out to be successful, the way Adobe and Macromedia are
working together today is rather promising for their shared future.
Acquiring Macromedia was a very important strategic marketing
decision for Adobe. It allowed the company to make a big step
forward by adding another industrydefining technology platform as
Flash to its product offering. This platform is helping Adobe to meet
a broader set of customer needs and expand its current market. The
acquisition opened the doors for significant longterm growth
opportunities, as the Flash platform already has a big influence on
the emerging area of mobility. On an interview, Adobe CEO Bruce
Chizen said: "Clearly, they [Macromedia] have been more aggressive
in mobile than we have. We'll be able to take advantage of that."
Adobe’s move positioned the company in the growing cell phone
market, where Macromedia had been aggressively expanding by
establishing Flash as a core mobile technology. I believe this was
one of the main drives behind Adobe’s acquisition. They already
managed to sell the PDF as an ‘invisible’ platform, which is the stage
when a technology gets so common, that people take it as granted.
Today most computer manufacturers ship their products with the
PDF technology preinstalled. I expect them to do the same with
Flash technology by making it not only an ‘invisible’ technology in
the personal computer area, but also an essential element of every
mobile/ handheld device.
As both companies had similar mission, vision and culture it was not
that hard for them to integrate their products and offerings. They
offered solutions for overlapping market segments and by combining
their product ranges they went one step closer to satisfying all their
customers’ needs. Soon after the acquisition was fact, Adobe
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decided to offer on the market three new product bundles: Adobe
Design Bundle, Adobe Web Bundle and Adobe Video Bundle. The two
companies were not yet fully integrated, so these bundles were just
a combination of Adobe and Macromedia products arranged in a way
to target special consumer profiles. However, this was just the
beginning. The final strategic marketing decision was made during
the fiscal year ended December 1, 2006, when the company
categorized its products and services in six Business Units: Creative
Solutions, Enterprise and Developer Solutions, Knowledge Worker
Solutions, Mobile and Device Solutions, Platform Business Unit, and
Print and Classic Publishing Solutions. I believe this was a very
adequate decision, because Adobe’s product range rapidly expanded,
so they needed a way to organize their products by offering them in
different forms of packages and bundles that are individually tailored
for the needs of each particular customer group. By that way they
also utilized crossselling of their products. I see the segmentation
as part of their marketing strategy and their effort to identify their
“unique role in the marketplace in terms of value to the customer” 10
I also consider the fact that Adobe keeps improving and updating
their segment groups to the current customer needs as one of the
main reasons behind the success of their product bundles.
7.0 Current state and future
One of the arenas Adobe decided to enter with its developer tools is
the interactive/rich web application market. Putting aside the rumors
that Google is also heading towards the same market, the players
10
R. Kalakota and A. B. Whinston, Do or Die: Market Segmentation and Product Positioning on the Internet
15
are well known. Microsoft, trying to market its RIA 11 platform
Silverlight, is one of them. Another one is Sun Microsystems which
hopes for a deeper market penetration with the introduction of the
reinvented Java FX. After that comes Mozilla with its AJAX platform.
And of course, Adobe with three products, namely Flash, AIR and
Flex. Now I believe that one of the competitive advantages of Adobe
in this battle is its specific market focus. The segmentation
marketing strategy I referred to in the previous chapter gives the
company a much better market position, compared to Microsoft, Sun
and Mozilla as they have much broader market focus. The interesting
thing is that all these applications are basically the link between
personal computers and mobile devices. For example using the latest
Adobe product bundle (Adobe Creative Suite) users can create
prototype interfaces for various mobile phone devices. So far
Adobe’s marketing strategy is working and the company has an
undeniable leader position on the market. However, after feeling
that they are loosing control over the situation, some competitors
decided to make defensive moves that may threaten Adobe’s leader
position. Apple, for instance, did not add Flash support to its iPhone,
and then convinced Google’s YouTube to start offering its videos in
Apple H.264 format instead of the current Flash format. Anyway, it
is still very early to make predictions as the battle for the future of
mobile devices is just beginning.
11
RIA stands for Rich Internet Applications software
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8.0 Conclusion
The aim of this paper was to introduce the reader with marketing
strategy theory, and apply it Adobe Systems as an illustration.
Adobe Systems was chosen for the purpose, because the company
operates in an extremely competitive market where it is very
difficult to be successful and have competitive advantage, so
implementing the right marketing strategy is crucial.
I started by presenting some information about the software
industry and Adobe in particular. Then I explained the concept of
strategy. As you can see strategy is divided into three different
levels corporate, business and functional. And it is the interaction
between these three strategic directions that defines the general
strategy of the organization and guides all its strategic decisions.
Marketing strategy is basically part of the functional strategies and
deals with marketing activities and decisions related to generating
and sustaining competitive advantage. However, because of its
specific nature it is also an important factor in the corporate and
business strategies, hence its key position in the general strategy of
the organization.
In the next section of the report I presented the Miles and Snow
typology. This theory tries to identify the marketing strategy of
organizations by dividing them into three behavioral types. After
explaining the three types (the Prospector, the Defender and the
17
Analyzer) I applied the theory by looking at Adobe. Considering the
company’s marketing strategy and examining factors like innovation,
differentiation, market focus, lowcost strategy and newproduct
importance, I came to the conclusion that Adobe is following a
Prospector approach.
The next section of the paper focuses on important strategic
marketing decisions recently taken by the company. After presenting
the theoretical marketing strategy related motives for Adobe’s
acquisition of Macromedia, I discussed the event explaining my
position. I believe that the main reason behind the acquisition was
Adobe’s marketing strategy aimed at exploiting the mobile market
by acquiring the Flash technology. Then I discussed Adobe’s
strategic marketing decisions related to the market and product
range segmentation that took place after the acquisition.
In the last section I presented my thoughts on Adobe’s strategic
marketing decision to enter the rich web application market, which I
believe is dictated by their strategy to take over the mobile market.
However, it is going to be very difficult for Adobe to realize its
strategic goals, competing with companies like Apple and Microsoft.
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9.0 References
Dyson, Robert G. (1990), Strategic Planning: Models and Analytical Techniques.
John Wiley & Sons Ltd.
McGee, J. (2005), Strategy: Analysis and Practice. McGrawHill.
Slater, Stanely F., Narver, John C., “Productmarket Strategy and Performance:
An Analysis of the Miles and Snow Strategy Types”, European Journal of
Marketing, Vol. 27 No. 10, 1993, pp. 3351. MCB University Press.
Thompson, Arthur A. (1999), Crafting and Implementing Strategy: Text and
Readings – 10 th ed. McGrawHill.
Thompson, John L. (1990), Strategic Management: Awareness and Change – 1 st
ed. Chapman and Hall.
Varadarajan, P., Jayachandran, S., “Marketing Strategy: An Assessment of the
State of the Field and Outlook”, Journal of the Academy of Marketing Science
1999; 28; 120. SAGE Publications.
Kalakota, R., Whinston A. B., “Do or Die: Market Segmentation and Product
Positioning on the Internet”.
Web resources:
http://www.adobe.com/aboutadobe/invrelations/adobeandmacromedia_faq.html
http://www.adobe.com/aboutadobe/pressroom/pdfs/acquisitionfacts.pdf
http://www.adobe.com/aboutadobe/pressroom/pdfs/profile.pdf
http://www.adobe.com/aboutadobe/pressroom/pressreleases/200709/100107FlashLite3.html
http://www.forbes.com/technology/2005/12/02/adobeshantaunarayen_cx_dal_1202adobe.html
http://www.forbes.com/lists/2007/18/biz_07forbes2000_TheGlobal2000_IndName_17.html
http://www.frost.com/prod/servlet/press
release.pag?docid=72553835&ctxixpLink=FcmCtx1&ctxixpLabel=FcmCtx2
http://www.greatplacetowork.com/best/listbestusa2007.htm
http://www.internetworldstats.com/
http://knowledge.wharton.upenn.edu/article.cfm?articleid=967
http://labs.adobe.com/wiki/index.php/Thermo
http://www.pdfzone.com/article2/0,1759,1787018,00.asp
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