Porter’s Five Forces Analysis of Adobe
Key Facts
| Name | Adobe, Inc. |
| Industry | IT, Internet, Software & Services |
| Founded | 1982 |
| Headquarters | San Jose, California, United States |
| CEOs | Shantanu Narayen |
| Revenues | US$15.79billion,2021
US$17.60 billion,2022(Q1-Q3 actual + reaffirming Q4 targets) |
| Profit | US$4.82billion, 2021
US$4.76 billion, 2022 |
| Competitors | Amazon Web Service, Autodesk |
Company Overview
Digital marketing with media services solutions are offered by Adobe, Inc. Digital Experience, Publishing, and Digital Media are its three main operating divisions. The Creative Cloud services are provided by the Digital Media division and enable customers to download and use the most recent versions of Adobe products, including Photoshop, Illustrator, Premiere Pro, Photoshop Lightroom, and InDesign, as well as other tools like Adobe Acrobat. The Digital Experience division offers solutions for analytics, social marketing, targeting, media optimization, managing digital experiences, managing cross-channel campaigns, and delivering and monetizing premium video.The Publication section consists of archival goods and services for high-end printing, online application development, technical document publishing, and eLearning solutions. Charles M. Geschke and John E. Warnock formed the business, which has its headquarters in San Jose, California, in the United States. It is placed 339 on the Fortune500 list of companies and 377 on the Forbes Global2000 list.
Porter’s Five Forces Analysis of Adobe
Following is the analysis of Adobe as per Porter’s Five Forces Analysis:
Adobe Rivalry among Existing Competitor
- Adobe Inc: The Company Adobe provides digital marketing and media services solutions. From US$1.67 billion in 2004 to US$15.79 billion in 2021, its revenue grew steadily. With sales exceeding US$11 billion in the company’s fiscal year 2021, Adobe Inc.’s largest business division is digital media. Solutions like the creative and document cloud services are examples of digital media. Adobe is the software provider with the largest net profit margin, with a five year average of 27.90%.
- Autodesk: Software and service design is what Autodesk, Inc. does. Autodesk 360 cloud services, AutoCAD civil 3D and LT, 3Ds Max, Maya, and Revit are some of its products. The company also offers digital media and entertainment, which includes tools for digital sculpting, modeling, animation, effects, rendering, and compositing for design visualization, visual effects, and game production. John Walker established the business in April 1982, and its main office is in San Rafael, California, USA.
Its revenue grows from US$2.05 billion in 2018 to US$4.40 billion in 2022 and it makes net loss of US$(567) million and US$(81) million in 2018 and 2019 respectively but then recovered and makes net profit of US$215 million,US$1.21 billion and US$497 million in 2020, 2021 and 2022 respectively.
In the fiscal year 2021, the Architecture, Engineering and Construction segment of Autodesk achieved the company’s largest revenue, estimated at roughly US$1.6 billion. In that year, the AutoCAD and AutoCAD LT division produced about US$1.1 billion.
- Amazon Web Services: The largest online seller of books, clothes, electronics, music, and many more products, Amazon was started in 1994. Over the years, Amazon has expanded its service portfolio, which now also includes Amazon Web Services (AWS),. AWS has become more crucial to the cloud services sector as a result of the increased interest in cloud computing and the disruption they are producing across numerous industries, which has resulted in huge revenue for Amazon. From the start in 2006 to 2021, AWS’s revenue going beyondUS$62 billion.Its revenue increase from US$4.46 billion in 2014 to US$62.20 billion in 2021 and US$80.10 billion in 2022
Adobe Threat of New Entrants
Market Size Growth: The cloud industry witnessed a snowball effect, making it one of the most significant investment opportunities for the retail and IT giants. Market expansion may draw large IT giants to that area of the market. Cloud system infrastructure services (IaaS) and cloud application infrastructure services (PaaS) are predicted to expand at rates of almost 31% and 26%, respectively, while the entire market for cloud applications services (SaaS) is predicted to increase at a rate of 16% annually in 2022. By 2022, it is anticipated that each of these cloud service segments will generate revenues of US$177 billion (SaaS), US$110 billion (PaaS), and US$120 billion (IaaS).
- Capital Investment: Adobe and Autodesk, which dominate specialized markets niche but require relatively little capital expenditure, have total assets of US$25.98 billion and US$8.61 billion, respectively, according to the Forbes Global 2000 companies 2022 list. It may encourage new players to enter the market.
Adobe Bargaining Power of Suppliers
- Major players in the market: The purchasing power of Adobe Systems’ suppliers is average. The majority of the hardware components that Adobe Systems buys come from several sources, including processors and memory. Since they have the ability to set higher prices for their goods, these suppliers have some negotiating leverage. However, since Adobe Systems is a well-known business with a sizable client base, suppliers could be less inclined to haggle over rates. Additionally, since Adobe Systems is a significant participant in the market, suppliers can be inclined to provide discounts in order to keep their clientele. The business bought hardware components from its vendors for US$2.9 billion, according to Adobe’s 2018 Annual Report. Furthermore, Adobe’s overall revenue for the fiscal year was US$9.03 billion, indicating that hardware-related expenses account for a sizable amount of the business’s expenses.
Adobe Bargaining Power of Buyers
- Branding: Although Adobe sells products in a specific niche and has a high brand worth of US$92.83 billion, its clients still favor Adobe above the competitors because of the exceptional quality of its products.
- Largest Market share in graphics niche:A third of users of this category of product choose Adobe Photoshop, making it the most widely used graphics and photo editing software in 2022. The market also features other prominent Adobe products like Creative Suite and Creative Cloud.
Adobe Threat of Substitute Products or Services
- Accessibility and Affordability of Cameras: One of the factors propelling the picture editing software market is the improvement in tools and the falling cost of cameras. The market for graphics and editing software will expand faster as a result of this development in technology and the expanding Smartphone market. In 2023, the Smartphone’s market will generate US$0.48 trillion in revenue. The market is expected to grew by 2.22% yearly (CAGR 2023-2027).
- Largest market share by few players: Hubspot, Active Campaign, and Adobe Experience Cloud accounted for slightly more than 50% of the market as of December 2022 and were the top three marketing automation systems selected by international industry professionals. Out of the three, Hubspot is thought to be utilized by close to 35% of clients, which is twice as many as customers using the other two systems combined. The grip on market by few player will reduce chances of substitute product.
References
- Adobe,profile, Forbes
- Adobe,profile, ForbesGlobal2000
- Adobe,profile, Fortune500
- Adobe Net Income 2010-2022 | ADBE at MacroTrends
- Annual revenue of Adobe Inc. from 2004 to 2021(in million U.S. dollars) at Statista
- Annual global revenue of Adobe Inc. from fiscal year 2018 to 2021, by segment(in billion U.S. dollars) at Statista
- Five-year annual revenue growth rate and average net profit margin of leading software companies worldwide as of 2020 at Statista
- Autodesk,profile, Forbes
- Autodesk Inc.’s revenue in FY 2021, by segment(in million U.S. dollars) at Statista
- Autodesk Inc.’s net revenue from FY 2011 to FY 2021(in million U.S. dollars) at Statista
- Net Income of Autodesk Inc. from FY 2011 to FY 2019(in million U.S. dollars) at Statista
- Wall Street markets, Audtodesk
- Market share of the leading marketing automation solution providers worldwide as of December 2022 at Statista
- Values of the top 20 technology brands worldwide in 2021(in billion U.S. dollars) at Statista
- Computer graphics and photo editing software market share worldwide in 2022, by product at Statista
- Smartphones – Worldwide at Statista
- Amazon Web Services – Statistics & Facts atStatista
- Global net revenue of Amazon from 2014 to 2022, by product group(in billion U.S. dollars) at Statista