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The Analysis of Price Declines Factors – The Digital Still Camera Industry Case -

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  • Munehiko Itoh

    (Kobe University)

Abstract

Commoditization refers to the phenomenon where prices are declining so rapidly that market competitors are unable to earn a reasonable profit even though the market is expanding and there is strong demand. This sort of commoditization can be observed in many digital device industries, but in this paper, by taking up digital still camera industry, a representative digital product, and analyzing the specifications and prices of approximately 560 models brought to market from 1995 to 2003, we analyze that a rapid decline in price is occurring, and reveal their causes. Our analysis reveals that the modules used in digital camera designs are remarkably uniform, the industry is becoming horizontally specialized, due to new market entrants developing similar platforms made up of components with the same specifications, and price declines are occurring because product specifications between competing companies are becoming homogenous.

Suggested Citation

  • Munehiko Itoh, 2006. "The Analysis of Price Declines Factors – The Digital Still Camera Industry Case -," Kobe Economic & Business Review, Research Institute for Economics & Business Administration, Kobe University, vol. 50, pages 17-31, February.
  • Handle: RePEc:kob:review:feb2006::v:50:p:17-31
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    File URL: http://www.rieb.kobe-u.ac.jp/academic/ra/researchseries/review.html
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    Keywords

    Modularization; horizontal industrial structure; platform; digital device;

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • M11 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Production Management

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