The Digicam Market

BUS2001 Group Work

Innovation: Digicam

1.1 Introduction

2.1 The Pre Digicam market

2.2 The Sony Mavica Digital Camera

2.3 The Risks Associated

3.1 The Current Market

1.1 Throughout this report we will be analysing the impact of a particular innovation that we feel, as a group, has not only innovated its specific market, but modernized and impacted on the way in which we use advanced technology. Our chosen innovation is the digital camera, or DigiCam; a relatively recent advancement in the camera/photography industry. Throughout this report we will use our knowledge of competition to analyse the impact this innovation has had on the industry, explore the nature of competition prior to the innovation of this invention, and examine and critically analyse the effects this innovation has had on the camera/photography industry.

In an information society where technology seems to be driving our society forward, it is essential for multinational corporations to spend vast sums of their supernormal profits on research and development, with the glimmer of hope that they will stumble upon the next significant innovation in their chosen industry. Enabling them to keep pushing society forward and exploiting the consumers' need to keep up to date with this ever increasing technological culture, and to increase their profit margins!

2.1 The Pre-Digicam Market

When talking about the photography market it is inevitable to talk about the company which invented popular photography in 1888, Kodak. In the 1980's Kodak held about two thirds of colour film sales worldwide. It had managed to establish itself as the largest company in the photography business during the 20th century, being one of the most recognised company names in the world. With the introduction of Japanese competitors such as Fuji undercutting costs, Kodak's traditionally high margins shrank dramatically (Dobbin, B 2003). Competition increased and forced Kodak to cut costs and think of innovations. This situation was aggravated by the introduction of the digital camera, which is as close to consumer electronics as it is to the camera and hence opens the market to new entrants. It was possible for firms to enter the market that had never operated in the photography market - PC and printer manufacturers.

The first consumer apt digital camera was the Sony Mavica launched in 1981 by Sony, which used exchangeable discs to record image. It was Kodak though who developed the first megapixel sensor in 1986 and launched a series of devices with it. Another step towards digitalizing photos was taken when Kodak invented the Photo-CD, where images where copied on a CD from film. Nevertheless it these were only small steps, which weren't pursued - Kodak relied primarily on its film business, fighting digital technology with aggressive marketing. As had happened before to IBM and the surge of personal computers, Kodak was too confident in its position as a market leader and it wasn't until 2001 when film sales started to decline that it realized how dangerous the new technology was. The firm started to release digital very good models, while other competitors, such as Sony - which had the early mover advantage, Canon, Olympus and newer ones like HP started to reduce margins for these new models. Digital cameras soon became a commodity. Kodak's reliance on China as a big market for film was in vain, since it went digital as fast as the rest of the world. Consequently Kodak had to reduce costs at a large scale and tried to shift from its traditional film business to digital, cutting 27,000 jobs and investing heavily in digital technologies.

The company's late reaction, bad focus on its core business (not film but capturing moments) and slow movement in the new market made it lose its dominant position to Sony, Canon and others (Hamm, S. and Symonds, W. C. 2006). These firms were innovative and more versatile than Kodak, creating one new product after another at low costs.

2.2 The Sony Mavica

Now Sony have always been at the forefront of the consumer electronics industry creating products and improving components as the new technology allowing their existence improves. The Sony Mavica was originally the brand name given to Sony's still video cameras. These cameras appeared in 1981 and operated by recording an image to a single frame of video. In order to view such images the magnetic disk that was used for storage had to be played back on a repeating loop. This method of storage and playback however limited the pixel quality of the image to that of the "paused" video frame and transferral of said image required a digital capture card. The process clearly required refinement and simplification if these cameras were ever going to become the standard.

Sony duly noted the limitations of their Mavica's and in 1997 released the all new Mavica. The 2 models that first hit the streets were the FD-5 and the FD-7 with the latter incorporating a 10x digital zoom feature unavailable in the FD-5. These new camera saved their images onto a 3.5 inch floppy disk and in a market where floppy disk drives were the standard on most home PC's this new compatibility brought digital imaging to the masses. This new ability to take photos and transfer them to a PC simply by taking the disk out of the camera and into the PC allowed anyone to develop and edit their own photo, largely due to the new standardised compression formats JPEG and MPEG. The combination of new technology and the pure simplicity of its use made the Mavica's runaway bestsellers (Imaging Resource Online Magazine).

Sony were not done yet however, with Panasonic and Iomega hot on their heels with both competitors offering a disk media storage system in their digital cameras, Sony was forced to either provide the consumer with the best product or risk losing market share to its competitors. Sony retaliated with the new Mavica CD. This camera stored its images onto writeable or even rewriteable 3-inch CDs allowing for a whopping 156Mbs of storage on each. This development really secured the top spot that its predecessor had established forging the Sony