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Adobe Systems Incorporated Case Solution & Answer

Adobe Systems Incorporated Case Solution

Case Background

In 1982, the Adobe systems was incorporated by PhD Scientists John Warlock and Charles Geschke. The company was formulated to provide the software in order to facilitate the graphics and integrated text printing. The company was named “Adobe” under the name of a creek. The first product launched by Adobe was Postscript which had 3 key ingredients and became a de facto standard, making the company most profitable and reach penetration levels in the professionals, software developers, printer manufacturers, and computer manufacturers market (Tripsas, 2000).

As the advancement of internet began, Adobe shifted its strategy by reaching out to the internet users and making its products like PDF, Acrobat free with full product packages or subscription fee. The company made relationships with AOL and several other computer vendors, the company became a popular and most used source for the exchange of documents over the Internet. Adobe used a whole product strategy, whereby it offered products initially at prices and later by made the product free over the internet and used the product halo services and full products offers and subscriptions, as a medium of achieving substantial profits.

Looking at the splendid growth of the e-book market during 1990s; the company became the first mover and launched its Acrobat product in 1993. Despite being a first mover in the e-book market, Adobe faced strong competition and aggressive-marketing and acquisition strategies by Microsoft.Microsoft developed its foot print in the mainstream consumer market, however, Adobe was focused on professional market. Now Adobe’s management has to decide upon continuing within the same market, with same de facto standard, focus on edocx or e-books and how to remain profitable in fierce competition from Microsoft and potential new entrants.

1.Postscript as a De Facto Standard

The first product by Adobe i.e. Postscript revolutionized the publishing industry. It provided an interface between the computer and the output device. The key ingredients of Post scrip included: page description language (open and free), an interpreter (which was licensed out to the output device producers) and the fonts (sold to end consumers). Postscript became a de-facto standard in the market because of the following reasons:

  • Adobe’s whole product strategy made the product a standard in the market. Adobe kept the Postscript as an open standard product but not an open sourced product(Jon Siegel, 2008), which was not allowed for any modifications and creating documents etc.Instead, the company offered products subscriptions to third parties or sold full products at high rates for customers who wanted to created or modify their documents.
  • Postscript revolutionized the publishing industry by providing the optimal solutions in compliance with the exploding demand of the target market.
  • The company’s strategic alliances for the launch of the Postscript, made it clearly a standard. The strategic alliance were carried with Apple Incorporation and Aldus, by providing the Aldus page maker software, which ran on the Macintosh systems and required a postscript device in printing and Linotype, which licensed its well –known fonts to Adobe to make an alliance with the Postscript format.
  • The company made the product free for the programmers as it was a crucial requirement for their needs. The company sustained the profits because it provided a complete technical support with the documented-language for programmers called as “The Red Book”.
  • Adobe introduced the high quality fonts with its strategic alliance and offered font solutions for the professionals, which served their needs in their best regard.
  • The company introduced its own-user application in order to expand the product penetration in the market by launching an end user, Adobe Illustrator Application in 1987.
  • The company acquired products including Photoshop in 1989 and Aldus Page Maker in 1983. These products proved to be profitable for the company, with Photoshop capturing the 90% of the market share.
  • Adobe made huge investments in the Postscript product i.e. it invested to develop a font library for the product, which required 16% of the total sales amount in the development of the fonts.
  • The company’s strategy to target early adopters of the product also helped in the standardization of the product.

2.Money on Open Standard Postscript

The crucial point to understand is that the company made the product as an open standard product not an open sourced product, which was not allowed for any modifications, creating documents etc. The money on Postscript was made through the following strategies adopted by Adobe.

  • Adobe charged the licensing or the subscription fee from the third partied or the end users for the usage of product over a period of time. Even though the product was made open standard, but it had some locked features, such as: editing, adding signature, creating or marking PDFs etc. These features were usually availed by the third parties, who served end consumers by taking a license from Adobe or directly by the end consumers through purchase of the full product and services tailored by Adobe.
  • It offered the product on royalty basis to the customers and it charged a royalty of around $210 million in 1998.
  • The company developed its own application software, which required the usage of Postscript as a complementary product, further boosting up the sale of the mainstream product.
  • The company had revolutionized the print publishing through its product and it generated 35% of the total sales revenue form the particular industry.
  • The company’s investment in the development of Postscript fonts made it more value driven and attractive to the customers, ultimately establishing the product as de facto standard to be followed.
  • The strategic alliances also provided a stream of revenues for the company. For instance, Aldus Page Maker ran on the Macintosh systems by Apple Incorporation, which required Postscript language by Adobe………………..
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